District Court did not Abuse its Discretion in Decertifying Class Action Alleging Misclassification of Employees based on its Determination that Common Question of Law and Fact did not Exist Ninth Circuit Holds
Plaintiff filed a putative class action against his employer, United Parcel Service (UPS), alleging violations of California’s Labor Code for failure to pay him overtime or to compensate him for missed meal and rest periods. Marlo v. United Parcel Service, Inc., ___ F.3d ___ (9th Cir. April 28, 2011) [Slip Opn., at 5544]. According to the allegations underlying the class action complaint, plaintiff worked as a full-time supervisor (FTS) for UPS from 1999 to 2008, and “worked more than forty hours per week on a regular basis without taking meal or rest-period breaks, or receiving overtime compensation.” Id. Because he was an FTS, UPS classified plaintiff as exempt from California’s overtime law under the executive and administrative exemptions. Id. Plaintiff alleged that he had been misclassified, and sought and obtained an order certifying the litigation as a class action. Id. The district court subsequently granted summary judgment in favor of UPS, but the Ninth Circuit reversed finding that plaintiff “ha[d] raised material issues of fact related to whether the FTS ‘customarily and regularly exercise discretion and independent judgment.’” Id., at 5545 (quoting Marlo v. United Parcel Serv., Inc., 254 Fed. App’x. 568, 568 (9th Cir. 2007)). On remand, however, the district court decertified the class, finding that plaintiff “had failed to establish that common issues of law or fact predominated over individual ones” as required by Rule 23(b)(3). Id., at 5544. A juy returned a partial verdict in favor of plaintiff, finding that the executive and administrative exemptions did not apply to certain supervisorial positions plaintiff held. Id., at 5546. Both sides appealed. The Ninth Circuit affirmed the decertification order, id., at 5544.
The decertification order was based on “doubt regarding the continuing efficacy of a class action in this case.” Marlo, at 5545 (quoting Marlo v. United Parcel Serv., Inc., 251 F.R.D. 476, 480 (C.D. Cal. 2008)). In part, the district court reasoned that “the existence of a uniform policy classifying FTS as exempt is insufficient absent evidence of misclassification,” and that plaintiff “had relied heavily on a survey that was neither reliable nor representative of the class.” Id. (citations omitted). The court explained at 251 F.R.D. at 486,
Plaintiff’s evidence is essentially individual testimony and an exemption policy. Under the circumstances in this case, where Plaintiff alleges that 1200 FTS have been misclassified as exempt employees, Plaintiff had to provide common evidence to support extrapolation from individual experiences to a classwide judgment that is not merely speculative. Plaintiff has not come forward with common proof sufficient to allow a fact-finder to make a class-wide judgment as to the FTS.
Based on this, the district court concluded, “As the Court has found that individual issues predominate in this case, a class action is not the superior method for litigating this matter.” Id., at 5546. The court certified its decertification ruling for interlocutory appeal, but the Ninth Circuit declined the invitation. Id.
Plaintiff argued that the district court erred in decertifying the class. Marlo , at 5546-47. In part, plaintiff argued that the lower court “improperly shifted the burden to him in finding that he had failed to prove misclassification on a class-wide basis.” Id., at 5549. Plaintiff additionally argued that he had, in fact, satisfied the requirements of Rule 23(b)(3), id., at 5550-51. The Circuit Court affirmed, holding that the district court’s decision to decertify did not constitute an abuse of discretion. Id., at 5547.
The Ninth Circuit explained that the predominance requirement of Rule 23(b)(3) requires consideration of several factors, including “(A) the class members’ interests in individually controlling the prosecution or defense of separate actions; (B) the extent and nature of any litigation concerning the controversy already begun by or against class members; (C) the desirability or undesirability of concentrating the litigation of the claims in the particular forum; and (D) the likely difficulties in managing a class action.” Marlo, at 5547. The lower court’s decision was based on its determination that plaintiff “had failed to provide common proof that FTS class members were engaged in nonexempt work.” Id., at 5547-48. (We do not here summarize the requirements of the administrative and executive exemptions advanced by UPS, see id., at 5548-49.)
The Ninth Circuit began by rejecting plaintiff’s claim that the lower court “improperly shifted the burden,” explaining that plaintiff’s argument “conflates the burden borne by the employer concerning the merits with the burden borne by the employee concerning class certification.” Marlo, at 5549. Specifically, while California law places the burden on the employer to establish the applicability of an exemption to the Labor Code’s overtime requirements, Rule 23 places the burden on the plaintiff to establish the requirements for class action certification. Id., at 5549-50 (citations omitted). It was therefore irrelevant whether UPS would bear the burden of proving the merits of misclassification claim at trial, id., at 5550. The Circuit Court found that the decertification order demonstrated that the lower court “recognized that distinction,” and therefore properly placed the burden on plaintiff to satisfy the requirements of Rule 23. Id.
With respect to the propriety of the decertification order, the district court found “Plaintiff has not provided common proof to support a class-wide judgment as to liability.” Marlo, at 5550-51. Based on this, the lower court concluded, “As there is no common proof of misclassification in this case, there is no basis to adjudicate class-wide misclassification and the result is that individualized issues predominate over common ones.” Id., at 5551. Plaintiff argued that he met the burden “by submitting evidence of UPS’s centralized control, and uniform policies and procedures.” Id. But as the Ninth Circuit explained, “a blanket exemption policy ‘“does not eliminate the need to make a factual determination as to whether class members are actually performing similar duties.”’” Id. (quoting In re Wells Fargo Home Mortg. Overtime Pay Litig., 571 F.3d 953, 959 (9th Cir. 2009)). “Specifically, the existence of a policy classifying FTS as exempt from overtime-pay requirements does not necessarily establish that FTS were misclassified, because the policy may have accurately classified some employees and misclassified others.” Id.
The Circuit Court explained that, even though the district court had before it “various documents explaining activities that FTS are expected to perform, and procedures that FTS should follow in issuing staffing assignments and training hourly employees,” plaintiff had failed to explain “how they establish predominance as to these particular exemptions.” Marlo, at 5551. In other words, the policies alone “[did] not establish whether [the employees] actually are ‘primarily engaged’ in exempt activities during the course of the workweek … or whether they ‘customarily and regularly exercise discretion and independent judgment,’” id. (citations omitted). Further, the district court properly required a “week-by-week determination of exempt status.” Id., at 5552. In the end, the Ninth Circuit held that the district court did not abuse its discretion in decertifying the class. Id., at 5553. Accordingly, it affirmed. Id.