Employers did not necessarily get bad news when the California Supreme Court unanimously ruled last August that class certification was appropriate in Sav-On Drug Stores, Inc. v. Superior Court. The Sav-On decision came out in the middle of McDermott Will & Emery’s defense of a wage-and-hour action brought against Starcrest Products of California, Inc. Our subsequent success in defeating class certification in Williams, et al. v. Starcrest tests the California Supreme Court’s unanimous decision in Sav-On. Although many observers predicted Sav-On would open the floodgates on wage-and-hour class action filings in California, this recent post Sav-On employer victory demonstrates employers have not lost the ability to fight class certification successfully in California.
In Sav-On, plaintiffs claimed Sav-On had misclassified operating managers (OMs) and assistant managers (AMs) as being exempt from the overtime laws. The trial court granted the plaintiffs' motion for class certification, finding there were predominant common questions of fact and law. The Court of Appeal reversed, holding that, because the actual activities performed by the OMs and AMs and the amount of time spent by each on exempt activities varied significantly from individual to individual and store to store, no meaningful generalizations about the purported class could be made.
The Supreme Court agreed with the trial court and rejected Sav-On's argument that whether class members were misclassified depended on individual determinations concerning each class member's job responsibilities. The court accepted the trial court's conclusion that the common issues of which responsibilities were managerial and which were not managerial predominated. Applying an abuse of discretion standard, the court held "a reasonable court could conclude that issues respecting the proper legal classification of AMs and OMs actual activities, along with issues respecting defendant's policies and practices and issues respecting operational standardization, are likely to predominate in a class proceeding over any individualized calculations of actual overtime hours that might ultimately prove necessary."
Plaintiffs in Williams, et al. v. Starcrest relied on Sav-On to convince the trial court their class should be certified. However, Starcrest argued that commonality, the key element to certifying a class, could not be established. Contrary to popular opinion, Williams, et al. v. Starcrest shows that certain principles set forth in the Sav-On decision, if applied appropriately, may be very useful to an employer fighting class certification.
Sav-On confirmed that, where there is a class certification question, discretion still remains with the trial court in deciding whether a class action is "superior to alternate means for a fair and efficient adjudication of litigation." The court did not by any means rule that all wage-and-hour overtime class actions should be certified. The court merely ruled that higher courts must defer to the trial court’s inferences regarding evidence as long as these inferences are not irrational. Therefore, as long as there is a way to convey to the trial court that a class action will not be advantageous, Sav-On will not harm future cases.
The Sav-On court also asserted numerous times that "the focus in a certification dispute is on what type of questions—common or individual—are likely to arise in the action, rather than on the merits of the case." Therefore, to prevent class certification, it is important to bifurcate class issues and avoid arguing the merits of the case. By arguing the merits, time is wasted arguing issues of no consequence to the trial at hand. In fact, by arguing the merits of the case, employers may accidentally infer the case could proceed appropriately as a class action.
Additionally, it is critical to stress case management issues in order to convince the trial court not to certify a class. One instrumental approach in convincing the trial court to not certify the class in Starcrest was expert testimony stating the plaintiff’s individual stories could not be generalized. In Sav-On, the court advised that "California courts and others have in a wide variety of contexts considered pattern and practice evidence, statistical evidence, sampling evidence, expert testimony, and other indicators of a defendant’s centralized practices in order to evaluate whether common behavior towards similarly situated plaintiffs makes class certification appropriate." In Starcrest experts surveyed the class and showed, through statistical analysis, there was too much deviation in the individual information to make meaningful generalizations about a class. Large graphs depicted visually how much deviation there was in a group of individual’s stories. Visuals are impressive and can be useful in convincing a judge that there is enough variation that a class action will not be manageable.
In terms of consequences of the Sav-On decision, the result of the Supreme Court placing such substantial discretion with the trial court affords only one real chance to advocate on a client’s behalf once there is a question of class certification. Be creative in arguing the desired outcome. The Sav-On court ultimately stated class actions are a tool to preserve efficiency, and trial courts are encouraged to be procedurally inventive in order to permit the certification of class actions in order to avoid multiple trials on common issues. Use the court’s green light on judicial creativity in arguments, either against class certification completely or in order to narrow the class definition as much as possible.
Finally, if large companies want to be safe from dangerously expensive class actions, companies should not propound broad categories of exemption. The Sav-On trial court found that "duties and responsibilities of defendant’s OM’s and AM’s were similar in critical respects from region to region, area to area, store to store." Because of this fact, the trial court was able to generalize the employee’s actual activities and experiences and treat them meaningfully as a uniform class. If the operation and policies of Sav-On’s stores had not been so standardized, such a large class of workers could not have as easily been treated uniformly by the court. An individual-by-individual approach to classifying employees will protect against class certification and is more likely to comply with the law. When several stores exist, let local stores make decisions to decrease employer class action vulnerability.
In spite of the initial reaction of most observers to Sav-On, the case is not bad news for employers. Sav-On’s guiding principles suggest creativity in approach may help an employer defeat class certification. In fact, relying on Sav-On can even be integral to this victory.