Summary
denying expansion of class period between complaint and motion for certification because plaintiffs offered no reason why expansion was necessary and never explained why they never amended the complaint to reflect the new class period
Summary of this case from Curry v. Kraft Foods Global, Inc.Opinion
2:06-CV-00225-PMP-PAL.
June 20, 2008
ORDER
Currently before the Court is Plaintiffs' Motion for Class Certification of the First Phase Cases (Doc. #89) with supporting exhibits (Doc. ##91-93). The motion seeks to certify a class for each state in the following first phase cases: McFarlin v. Wal-Mart 2:06-CV-00228 (Alaska); Hall (Nancy) v. Wal-Mart 2:05-CV-01099 (Nevada); Luce v. Wal-Mart 2:06-CV-00232 (South Dakota); and Jackson (Dora) v. Wal-Mart 2:06-CV-00229 (Delaware).
Also before the Court are Plaintiffs' Motion to Strike Portions of Declaration and Report of Joan Haworth Filed in Support of Wal-Mart's Opposition to Class Certification of the First Phase Cases (Doc. #201), and Defendants' Motion to Strike New Opinions by Dr. Shapiro and Motion for Leave to File Surreply (Doc. #235).
I. BACKGROUND
This multi-district litigation arises out of allegations that Defendants Wal-Mart Stores, Inc., Wal-Mart Associates, Inc., Sam's West, Inc., and Sam's East, Inc. systematically failed to pay their hourly employees for all time worked. Plaintiffs brought suit in various districts and the actions have been transferred to this Court by the Judicial Panel on Multi-District Litigation for coordinated and consolidated pre-trial proceedings. Generally, Plaintiffs allege Defendants altered employees' time records by "shaving" time off employees' hours worked through several techniques, including altering the employees' time records to make it appear the employees' workdays ended one minute after their meal period concluded, deleting overtime hours the employees worked in excess of forty hours per work week, deleting employee time clock punches so employees would not be paid for hours worked, altering employee records to make it appear they took meal periods when they did not, and failing to pay employees for all reported time. Plaintiffs bring a variety of claims, including breach of contract, breach of the covenant of good faith and fair dealing, conversion, unjust enrichment, and violation of state statutory wage, hour, and record keeping provisions. In their Complaints, Plaintiffs identify the purported class as:
All current and former hourly-paid employees of Wal-Mart Stores, Inc. in the [relevant State] and all current and former hourly-paid employees of Sam's West, Inc. in the [relevant State] from January 1, 1997 to the present whom Defendants failed to compensate for all hours worked and who were not provided accurate itemized wage statements, excluding: 1) all employees who hold or held salaried positions; and 2) all personnel managers.Hall, Compl. (Doc. #1) at 5; Jackson, Compl. (Doc. #1) at 4;Luce, Compl. (Doc. #1) at 5; McFarlin, Am. Compl. (Doc. #30) at 5 (same except also excludes from class employees whose jobs are legally exempt from entitlement to overtime pay).
Plaintiffs contend class certification is appropriate because the unlawful practices about which Plaintiffs complain are the result of Wal-Mart's centralized management strategy and policies, occur at all Wal-Marts nationwide, and common questions predominate over individualized questions. Plaintiffs contend class certification also is appropriate because they can prove their claims using Wal-Mart's own corporate admissions, audits, memos, testimony, and payroll records.
Wal-Mart undisputably has official policies in place regarding compensation and rest breaks. Wal-Mart's stated policy is to pay employees for all time worked and Wal-Mart has policies regarding when employees are entitled to paid rest breaks. Pursuant to Wal-Mart policy PD07, if an associate works more than three hours but less than six hours, the associate is entitled to one fifteen-minute paid break. (Pls.' Mot., Ex. 24.) If the associate works over six hours, the associate is entitled to two fifteen-minute paid breaks. If an associate works over six hours, the associate also is entitled to an unpaid meal break of thirty or sixty minutes. Supervisors are not to interrupt an associate's rest break, and if the break is interrupted, the associate is entitled to be compensated for the time plus be allowed an additional compensated break. Although revised over the years, PD07's substance has remained the same throughout the relevant time period.
According to Plaintiffs, Wal-Mart's corporate strategy is based on aggressive cost control as a means to generate profit. Plaintiffs contend that because labor is a large and controllable expense, Wal-Mart aggressively monitors from its headquarters (the "Home Office") each store's expenses, particularly payroll expenses. Wal-Mart sets up a preferred schedule of hours for employees to work for each store based on past history of sales and a target percentage of payroll cost in relation to sales (the "Preferred Hours Budget"). It then requires each store manager to schedule actual hours less than the Preferred Hours Budget and come in .02% less in expenses than the prior year, regardless of actual staffing needs in the particular store.
Because employees swipe their time in and out through an electronic system which both the store manager and the Home Office can monitor through a variety of reports, the store manager and the Home Office can monitor payroll on a daily basis. Such reports include the Timeclock Archive Report, which shows every hourly employee's time punches for each shift, and the Timeclock Punch Exception Report, which shows punching anomalies, referred to as "exceptions" (i.e., an uneven number of punches, missed or short lunch or rest breaks, etc.). To reconcile time punch exceptions, the manager is supposed to speak with the employee and, where necessary, complete a Time Adjustment Request ("TAR") to fix any errors. If a manager's store is exceeding recommended hours/payroll expenses in a given week, he or she is contacted by the district or regional manager and advised in sometimes very strong terms to get the costs under control.
Dating back to 1989, Wal-Mart has conducted internal audits and received other reports indicating store managers were altering employees' time records to lower payroll expenses. The problem has persisted, with reports every few years documenting problems with payroll integrity. Plaintiffs contend that although Wal-Mart knew it had these problems, it continued to apply pressure on store managers to lower payroll expenses without applying any pressure or implementing any management systems or controls to ensure store managers were not altering employee time and payroll records to meet the Home Office's expectations and requirements.
Additionally, Wal-Mart ties store manager compensation to profitability, allowing a manager to substantially increase his salary based on incentives. According to Plaintiffs' expert, Dr. Thomas A. Kochan, store managers in such a system learn that meeting expenses is rewarded and failing to comply with labor laws and policies is not punished. Plaintiffs contend such incentives make managers understaff their stores while at the same time requiring employees to finish all their work before they leave, but refusing to permit overtime. Plaintiffs allege employees consequently miss breaks or work off the clock to complete their work, resulting in uncompensated work. Because Wal-mart rewards store managers for meeting expense requirements and does not punish them for wage law violations, Plaintiffs contend Wal-Mart's centralized policies cause the wage law violations.
Plaintiffs' other expert, Dr. Martin Shapiro ("Shapiro"), analyzed Wal-Mart's payroll records to determine for each store he analyzed every one-minute clock-out, every instance in which Wal-Mart deducted unpaid break time from employees who had earned but did not receive paid break time, and missed paid rest breaks. Additionally, Shapiro cross-referenced Wal-Mart's payroll records with its Point of Sale databases, which include information regarding when a certain employee is logged into a cash register. By comparing the employees' time punches with when they were checked into a register, Shapiro claims he can evaluate how much time those employees worked off the clock (i.e., they were logged into a cash register to work but were not swiped in as being on the clock for payroll purposes).
As evidence that Wal-Mart knew about these violations, but did nothing to correct them, Plaintiffs assert that Wal-Mart previously had a policy of requiring all employees to swipe in and out for paid breaks. After Wal-Mart was sued regarding rest break violations, Wal-Mart changed its policy so that employees no longer would swipe in and out for rest breaks. Plaintiffs contend this shows Wal-Mart was attempting to prevent employees from obtaining evidence of missed breaks. Wal-Mart states it changed the policy because other similar companies did not require employees to punch in and out for paid rest breaks, the time was compensated anyway so the swipes were unnecessary, and employees complained they wasted their break time walking to and from the time clock.
In their Motion for Class Certification, Plaintiffs deviate from the description of the class alleged in their Complaints and identify the class as:
all current and former hourly-paid employees of Wal-Mart Stores, Inc. in this State and all current and former hourly-paid employees of Sam's West, Inc. in this State from January 1, 1989, excluding: 1) all employees who hold or held salaried positions; and 2) all personnel managers.
(Doc. #90 at 20). Plaintiffs argue that under the relevant Rule 23 factors, class certification in each case is appropriate.
Defendants respond that Wal-Mart undisputably has lawful policies in place regarding paid breaks, overtime, and working off the clock, and that Plaintiffs' Complaints concern deviations from these policies by particular store managers in particular instances. Defendants thus contend class-wide relief is inappropriate because Wal-Mart's class-wide policies are not the source of Plaintiffs' alleged injuries.
Additionally Defendants argue Plaintiffs' expert evidence is flawed and therefore cannot support certification. Defendants offer their own expert reports in response which criticize Shapiro's methodology. According to Defendants, Shapiro's statistical analysis of Wal-Mart's payroll records is flawed because it makes no attempt to review the circumstances of each payroll exception to determine whether that exception is accurate and actually reflects the employee's behavior. For example, Defendants argue not every one minute clock out represents unpaid time for the employee. Rather, it could reflect actual hours worked by the employee if the employee left early for some reason or accidentally swiped in and out in quick succession. Alternatively, some stores used one minute punches as a "place holder" swipe where an employee forgot to swipe out. The employee then would be notified and the problem corrected. Defendants note Shapiro's statistical analysis does not examine whether corrections were made to compensate the employee, which sometimes were done up to five weeks after payroll closed. Consequently, even an inaccurate one minute clock out may have been corrected later, but Shapiro's statistical analysis would not reflect that correction.
The swipe in/swipe out situation is not included in Shapiro's analysis. Shapiro analyzed only management inserted one minute clockouts.
With respect to missed breaks, Defendants argue the statistical analysis does not show times when employees actually took their break even though they did not punch in and out for it. With respect to the comparison of time punches to cashier log-ins, Defendants argue that employees often use cash registers under other employees' log-ins and Wal-Mart has experienced problems with time synchronization between the Point of Sale database and the time clock, and thus it cannot be determined from the records alone whether a particular cashier worked off the clock. Defendants present numerous affidavits from Wal-Mart employees in the four relevant states indicating they took breaks without punching in or out, used registers logged in under other employees' names, voluntarily failed to take breaks without any request or duress from management, and did not work off the clock.
Plaintiffs contend Wal-Mart's evidence on this point is misleading because Shapiro analyzed only registers for which a particular employee was responsible for the till. Thus, it is unlikely employees would use the same register under another employee's login because neither the employees nor Wal-Mart would be able to determine who was responsible for a shortage in the till.
With respect to one minute clockouts, Defendants conducted a study which showed that the one minute clockout occurred in 1,381 instances out of over 21 million swipes during one two-week pay period for 37 stores. Defendants contacted the relevant store managers to explain why the one minute clockout occurred. Of those one minute clockouts identified, Wal-Mart contends 35% were accurate because the associate in fact did not work after clocking in, there was a swiping error, or other errors were made that subsequently were corrected. The other instances required further investigation to determine what happened. Consequently, evidence of a one minute clockout is not in and of itself evidence an employee was denied compensation. Plaintiffs argue this study is flawed because Defendants contacted the very store managers who inserted the one minute clockout without talking to the affected associates to determine whether the clockout was proper. Further, Plaintiffs note that even if the study is accurate, 65% of the clockouts are unexplained with no evidence the employee was compensated for lost time.
Defendants contend the payroll records alone cannot show class-wide liability, and further argue that because determining what happened with respect to each payroll exception will require investigating whether the employee actually worked that time and was paid for it, individual issues predominate and class certification is inappropriate. Defendants also argue that deciding the case on statistics without such individual inquiry would violate Defendants' due process rights.
Defendants raise additional issues, such as the fact that no named class representatives worked for Defendant Sam's Club and thus no class can be certified with respect to Sam's Club. Defendants also take issue with Plaintiffs' reformulated definition of the class. In the original Complaints, the class period was from 1997 forward, but in the motion to certify it purports to go from 1989 forward. Additionally, in the Complaints, the class is defined as all hourly employees whom Defendants failed to fully compensate, but in the motion it simply refers to all hourly employees. Further, Defendants contend Plaintiffs have broadened the scope of claims in this case, despite earlier representations to the MDL panel and this Court that this case was narrowly focused. Defendants assert Plaintiffs previously disavowed any claims in this case regarding missed breaks or off the clock work but now they are attempting to assert such claims through class certification.
Plaintiffs move to strike the opinion of Defendants' expert, Joan Haworth ("Haworth"), arguing she relied on materials an expert in the field would not rely on, and thus her opinion is not reliable. Plaintiffs argue the affidavits Defendants present were obtained by Wal-Mart's attorneys from hand-selected employees, and that Defendants have admitted that many of the declarants would not qualify as class members. Plaintiffs argue Haworth's reliance on the declarations renders her opinions unreliable because the declarations have obvious bias built in and are not reflective of the proposed class.
Defendants move to strike evidence raised for the first time by Plaintiffs in their reply brief, including the new declaration of Plaintiffs' expert, Dr. Shapiro. Alternatively, Defendants seek leave to file a surreply including a supplemental expert report of Dr. Haworth to address the new issues contained in Plaintiffs reply memorandum.
II. PRELIMINARY ISSUES
A. What Law Applies
The four first phase cases at issue arise in districts located within the Third, Eighth, and Ninth Circuits. Because these cases ultimately will be remanded for trial to the transferor districts and because class certification may be reviewed at any time before judgment under Federal Rule of Civil Procedure 23(c)(1)(C), Defendants argue the Court should apply the law of each transferor circuit in determining class certification. However, the law relating to class certification is fairly consistent within all three circuits and the law of the Ninth Circuit would apply to two of the four first phase cases. Therefore, the Court will apply the law of the Ninth Circuit in assessing Plaintiffs' Motion for Class Certification. To the extent the law of the Third and Eighth Circuits diverge, the Court will consider it to determine whether any difference in the law of the respective transferor circuits would affect the outcome of the issue of class certification.
B. Sam's Club
Defendants argue that no class can be certified as to Defendants Sam's Club because no named class representative in the first phase cases ever worked for Sam's Club. Plaintiffs acknowledge this deficiency, but argue no Sam's Club class representative is necessary because of the close alignment between Wal-Mart and Sam's Club. Alternatively, Plaintiffs request time to name Sam's Club class representatives.
To establish Article III standing in a class action, at least one named plaintiff must have standing in his own right to assert a claim against each named defendant. Warth v. Seldin, 422 U.S. 490, 499 (1975). The Court therefore will deny Plaintiffs motion for class certification of the first phase cases as to Defendant Sam's Club.
C. Changing of the Class Definition and Claims Asserted
Defendants correctly contend that Plaintiffs have altered the class time period and definition by lengthening the period from 1997 in the Complaints to 1989 in the Motion for Class Certification, and changing the class definition to include all Wal-Mart hourly employees instead of just those who have uncompensated time. Additionally, Defendants note that Plaintiffs' arguments regarding class certification go beyond the conduct alleged in the Complaints. Defendants assert Plaintiffs have represented in prior proceedings that these claims were "narrower" than other cases and did not include missed paid rest breaks or off the clock uncompensated work, but in the Class Certification Motion, Plaintiffs attempt to add in those types of claims. Plaintiffs do not attempt to justify their expansion of the class other than to state the Court can modify the class definition at the certification stage.
Pursuant to Rule 23(c)(1)(C), the Court may alter or amend a certification order at any time before final judgment. Usually, however, this device is used to tailor a proposed class definition that is too broad. The cases Plaintiffs cite involve narrowing a class, rather than expanding the applicable class period. Plaintiffs have presented no authority that a plaintiff can bring a claim for a certain class period in the complaint and then attempt to expand the class period by eight years in the certification motion. Moreover, Plaintiffs cite no new facts uncovered during certification discovery which would warrant expanding the class period in this case. Neither do Plaintiffs explain why they never previously moved to amend their original complaints to expand the applicable class period. The Court therefore must reject Plaintiffs' Motion for Class Certification to the extent it seeks to expand the class time period and class definition beyond the parameters contained in Plaintiffs' Complaints.
D. Collateral Estoppel
Defendants contend Plaintiff Nancy Hall should not be able to re-litigate class certification in Nevada because a similar action was brought in state court, Monica Hall v. Wal-Mart, and the state court denied certification. The parties thereafter stipulated to a dismissal of the Nevada State action. Defendants acknowledge there is no authority for the proposition that one plaintiff attempting to bring a class action and moving for certification in state court results in issue preclusion for another plaintiff bringing a similar action and seeking class certification in federal court.
To determine the preclusive effect, if any, of the Nevada state court's decision in Monica Hall, the Court must look to Nevada rules of issue preclusion. See 28 U.S.C. § 1738 (a state court's judicial proceedings "shall have the same full faith and credit in every court within the United States . . . as they have by law or usage in the courts of such State . . . from which they are taken").
Nevada uses a three part test for applying issue preclusion:
(1) the issue decided in the prior litigation must be identical to the issue presented in the current action; (2) the initial ruling must have been on the merits and have become final; and (3) the party against whom the judgment is asserted must have been a party or in privity with a party to the prior litigation.State, Univ. Cmty. Coll. Sys. v. Sutton, 103 P.3d 8, 16 (Nev. 2004) (quotation omitted). The parties do not cite, and the Court is not aware of any Nevada law delineating the preclusive effect of an order from one of its courts denying class certification. However, Nevada has looked to the Restatement (Second) of Judgments to inform its law on preclusion issues. See Edwards v. Ghandour, 159 P.3d 1086, 1094 (Nev. 2007); Univ. of Nev. v. Tarkanian, 879 P.2d 1180, 1191-92 (Nev. 1994).
a. Identical Issues
Under Nevada law, issue preclusion "may apply `even though the causes of action are substantially different, if the same fact issue is presented.'" LaForge v. State, Univ. Cmty. Coll. Sys. of Nev., 997 P.2d 130, 134 (Nev. 2000) (quoting Clark v. Clark, 389 P.2d 69, 71 (Nev. 1964)). Consequently, a court must review the record "scrupulously" to determine whether an issue is identical to issues previously litigated to ensure only those issues actually addressed and litigated are precluded. Kahn v. Morse Mowbray, 117 P.3d 227, 235 (Nev. 2005). Among the factors a court may consider in deciding whether an issue in the two proceedings is the same include whether a substantial overlap between the evidence or argument exists between the two proceedings; whether the issue in the second proceeding involves applying the same rule of law as in the prior proceeding; whether pretrial preparation and discovery in the first action reasonably would be expected to have embraced the matter sought to be presented in the second proceeding; and whether the claims in the two proceedings are closely related. Restatement (Second) Judgments § 27 cmt. c (1982).
Beyond the fact that the unrelated Plaintiffs in both cases share a common last name, the issues between the Monica Hall litigation and the Nancy Hall litigation also appear to be substantially the same. Monica Hall attempted to bring a statewide class action in Nevada against Wal-Mart (but not Sam's Club) on behalf of all current and former hourly employees who worked off the clock and were not compensated for their time. The complaint was filed in Nevada state court in 1999 and purported to cover all such employees for the time period stretching back to the applicable statute of limitations. Included among the allegations are off the clock work, failing to permit meal and rest periods, altering time records, and failing to pay for the work performed. During the oral argument of the class certification motion in state court, counsel for Monica Hall made similar arguments and relied on similar statistical analyses based on Wal-Mart's payroll records. Monica Hall raised at least some similar claims as Plaintiff Nancy Hall brings in this action, including quantum meruit and unjust enrichment. However, the claims are not completely identical. In this action, Plaintiff Nancy Hall also alleges conversion and violation of a Nevada statute requiring employers to pay minimum wage. These claims were not litigated in the Monica Hall case.
Pretrial discovery and preparation in Monica Hall's state court action embraced many of the same issues regarding Wal-Mart's centralized policies on wage control and missed breaks, at least for the applicable time period in that action. In this action, Nancy Hall's Complaint covers a substantially greater period of time, however, and consequently discovery and trial preparation would involve different evidence for a class period of 1997 to the present as opposed to the one in Monica Hall's state court action which covered from the relevant statute of limitations to 1999. As a result, the Court finds that Monica Hall's state court action could not preclude certification of a class of individuals later than 1999, because that state court action did not purport to bring a claim for such individuals.
b. Final Ruling on the Merits
Under Nevada law, a judgment pursuant to a stipulation of the parties does not have issue preclusive effect. See Willerton v. Bassham, by Welfare Div., State, Dep't of Human Resources, 889 P.2d 823, 827 n. 6 (Nev. 1995) (modifying Geissel v. Galbraith, 769 P.2d 1294, 1296 (Nev. 1989) to clarify that a prior stipulation-based judgment has claim preclusion effect, but does not have issue preclusion effect). The common issue must have been "actually decided and necessary to the judgment in the earlier suit." Tarkanian, 879 P.2d at 1191. Further, Nevada's rules on issue preclusion are "not concerned with interlocutory rulings." Bull v. McCuskey, 615 P.2d 957, 960 (Nev. 1980),overruled on other grounds by Ace Truck Equip. Rentals, Inc. v. Kahn, 746 P.2d 132 (Nev. 1987).
The Restatement (Second) of Judgments is less demanding regarding finality. The Restatement allows for the possibility that a prior decision of an issue may be final for issue preclusion purposes without awaiting final judgment. Restatement (Second) Judgments § 13 cmt. g. However, the Restatement suggests that before giving such preclusive effect, the court should determine whether the prior decision "was adequately deliberated and firm, even if not final in the sense of forming a basis for a judgment already entered." Id. The Restatement suggests as factors to consider in deciding whether to give issue preclusive effect to a prior ruling whether the parties were fully heard, whether the court supported its decision with a reasoned opinion, and whether the decision was subject to appeal. Id.
In § 41, the Restatement discusses when a person who is not a party to an action may be barred even though not a litigant to the prior action. Among the possibilities is a member of a class action even if he is not a class representative. However, the Restatement limits that situation to when the court approves the class action. Restatement (Second) Judgments § 41(1)(e), cmt. e illus. 8. Thus, it is not clear that the Restatement would approve binding a putative class member to a ruling denying class certification. Because Nevada often looks to the Restatement, it also may look to these sections to determine the preclusive effect of a denial of class certification.
In the Monica Hall litigation, the state trial court stated on the record at a hearing that it would decline class certification for failure to show predominance or superiority. The parties thereafter stipulated to a dismissal. Consequently, this Court finds that Nevada law as presently articulated likely would hold the Monica Hall litigation would have no issue preclusive effect in the present litigation because it is a stipulated dismissal, the denial of class certification was not "necessary" to the final judgment, and class certification is a non-final, interlocutory decision. See Nev. R. Civ. P. 23(c)(1) (indicating a decision on class certification "may be conditional, and may be altered or amended before the decision on the merits"). Further, even if Nevada looked to the Restatement to soften its stance on finality, it is not clear under the Restatement that putative class members are bound by a ruling refusing to certify a class.
c. A party or in privity with a party to the prior litigation
Plaintiffs argue that unless and until a class is certified, putative class members are strangers to the litigation and consequently cannot be bound by any determinations made in the case. Binding non-parties to such a decision raises due process concerns. On the other hand, finality and forum shopping concerns counsel in favor of not letting separate but similarly situated plaintiffs make repeated attempts at class certification in essentially the same case. Arguably, putative class members should be bound by a prior state court ruling where the proposed class representative adequately represented their interest in attempting to certify the class in state court. Here, however, it is not clear that the state court in the Monica Hall case made an express finding in denying certification that in fact the class representative adequately represented the class such that preclusive effect should attach to the putative class members in this action. The Court concludes that Nevada law counsels in favor of not giving preclusive effect based upon theMonica Hall state court action.
E. Motion to Strike Haworth's Opinions (Doc. #201)
Plaintiffs move to strike those portions of Dr. Haworth's opinions that rely upon the declarations from Wal-Mart employees comprising exhibits K through S to Wal-Mart's opposition to class certification. Plaintiffs argue that by relying on these declarations, Haworth's opinions do not rest on reliable principles and methods, and these declarations are not the type of evidence reasonably relied upon by experts because Wal-Mart's attorneys drafted the declarations, the declarants knew the declarations were being obtained for their employer's use in litigation, and Wal-Mart refuses to disclose how it selected the declarants or obtained declarations from them. Additionally, Plaintiffs argue Haworth treats the declarations as representative of the class but in fact Wal-Mart has disclosed that many of the declarants are current salaried managers or hourly personnel managers who would be excluded from the class. Further, Haworth states she relied on employee interviews, but Wal-Mart has not disclosed anything about the interviews, such as how they were conducted, by whom, or how they selected the employee to be interviewed.
Defendants respond that the employee declarations are not meant to be a "survey" or a representative sample of the class. Rather, they are just illustrative examples of possible alternative explanations for Shapiro's conclusions. Defendants argue Haworth did not use the declarations to generate statistical data to extrapolate to a larger population of Wal-Mart employees. Rather, she used the declarations only to illustrate potential alternative explanations for the payroll data. Further, Defendants argue that the fact that its attorneys crafted the declarations is not unusual and does not render the declarations biased or unreliable. Finally, Defendants argue the fact that the declarations were obtained in the employee/employer relationship does not render them unreliable absent some evidence of coercion. Defendants note that Plaintiffs have not presented any evidence in the form of employee depositions suggesting the declarations were coerced in the first phase cases.
Plaintiffs have provided deposition testimony and an affidavit from two employees from other, non first-phase cases who since have retracted their declarations. One employee said that she was a paycheck to paycheck employee, was told she was selected to give a declaration because she knew what to say and what not to say, and she felt intimidated and would have agreed to anything the Wal-Mart lawyer wanted her to say. The other employee stated that the Wal-Mart attorney prepared the declaration, omitting large parts of his statements, and the statements that were included were misleading and incomplete. When he objected, he claims the Wal-Mart attorneys stated they represented Wal-Mart and would only want to include favorable information in the declaration.
Pursuant to Federal Rule of Evidence 702, expert testimony must be "the product of reliable principles and methods." Under Rule 703, the testimony may be based on facts or data that are not independently admissible, so long as the evidence is "of a type reasonably relied upon by experts in the particular field." The party seeking to admit expert testimony bears the burden of proving its admissibility. Lust By Through Lust v. Merrell Dow Pharm., Inc., 89 F.3d 594, 598 (9th Cir. 1996).
Haworth does not seek to present the declarations as a professional survey or create a competing statistical analysis based on the declarations. Rather, she uses them as demonstrative examples of possibilities Shapiro did not consider in his analysis. Plaintiffs admit Shapiro considered and rejected similar explanations for the payroll data. While the purported inherent bias or relative statistical insignificance of the number of declarations may be fodder for cross examination of Haworth at trial, her reliance on the employee affidavits does not render her opinions inadmissible as unreliable. This is particularly so because Plaintiffs expert, Shapiro, apparently looked at the same possible explanations for time clock exceptions. As a result, the Court will deny Plaintiff's Motion to Strike Portions of the Declaration and Report of Joan Haworth (Doc. #201).
F. Motion to Strike Shapiro's New Opinions and File a Surreply (Doc. #235)
By this Motion, Defendant moves to strike "new" opinions contained in Dr. Shapiro's supplemental declaration which accompanies Plaintiffs' Reply memorandum. Defendants further request that if the Court considers these new opinions of Dr. Shapiro, Defendants should be permitted to file a Surreply and Dr. Haworth's second report (Doc. #336, Ex. SS).
Shapiro's declaration reflects a new analysis which was not part of his initial report. The Court will not consider this new analysis in assessing Plaintiffs' Motion for Class Certification. Hence, the Court will grant Defendants' Motion to Strike and will deny Defendants' Motion to file a Surreply (Doc. #235).
III. CLASS CERTIFICATION
The Court may certify a class under Federal Rule of Civil Procedure 23 only if:
(1) the class is so numerous that joinder of all members is impracticable; (2) there are questions of law or fact common to the class; (3) the claims or defenses of the representative parties are typical of the claims or defenses of the class; and (4) the representative parties will fairly and adequately protect the interests of the class.
Fed.R.Civ.P. 23(a). In addition to these requirements, the plaintiff also must show it has satisfied at least one of the three conditions in Rule 23(b). Fed.R.Civ.P. 23(b). Rule 23(b) requires the party seeking certification also to show: (1) the prosecution of separate actions would create a risk of inconsistent adjudications or individual adjudications dispositive of the interests of other members not a party to those adjudications; (2) the party opposing the class has acted or refused to act on grounds generally applicable to the class thus making appropriate injunctive or declaratory relief with respect to the class as a whole; or (3) the questions of law or fact common to the class predominate over questions affecting only individual class members and a class action is superior to other available methods for adjudicating the controversy. Fed.R.Civ.P. 23(b). The party seeking certification bears the burden of showing Rule 23's requirements are satisfied. Dukes v. Wal-Mart, Inc., 509 F.3d 1168, 1176 (9th Cir. 2007).
Plaintiffs do not attempt to certify under Rule 23(b)(1).
At the class certification stage, the Court must consider evidence which goes to the requirements of Rule 23, even if the evidence also may relate to the underlying merits of the case.Dukes, 509 F.3d at 1177 n. 2. The issue now before the Court, however, is not whether Plaintiffs can prove the allegations in their Complaints, but whether Plaintiffs can present sufficient evidence to satisfy Rule 23's requirements. In re Linerboard Antitrust Litig., 305 F.3d 145, 152 (3d Cir. 2002).
A. Rule 23(a)
1. Numerosity
Rule 23(a)'s "numerosity" requirement is met where the party seeking certification shows the class is "so numerous that joinder of all members is impracticable." Fed.R.Civ.P. 23(a)(1). "`[I]mpracticability' does not mean `impossibility,' but only the difficulty or inconvenience of joining all members of the class.'" Harris v. Palm Springs Alpine Estates, Inc., 329 F.2d 909, 913-14 (9th Cir. 1964) (quoting Advertising Specialty Nat'l Ass'n v. FTC, 238 F.2d 108, 119 (1st Cir. 1956)). Defendants do not contest numerosity, and it is clear Plaintiffs meet this requirement because each state has thousands of current and former Wal-Mart workers. 2. Commonality
Rule 23(a)'s second requirement is that common questions of fact or law exist. The class need not share in common all questions of fact and law. Dukes, 509 F.3d at 1177. Rather, common legal issues with divergent facts or common facts with disparate legal remedies may satisfy the commonality requirement.Id. "The commonality test is qualitative rather than quantitative — one significant issue common to the class may be sufficient to warrant certification." Id. The Ninth Circuit construes the commonality requirement "permissively." Staton v. Boeing Co., 327 F.3d 938, 953 (9th Cir. 2003). In the context of a Title VII gender discrimination pattern and practice suit, the Ninth Circuit held that the plaintiffs could establish commonality by raising an inference of class-wide discrimination through the use of statistical analysis. Dukes, 509 F.3d at 1180.
Plaintiffs argue the commonality requirement is met because common questions include: (1) whether Wal-Mart violated state wage and hour statutes by failing to pay employees the minimum wage for all hours worked; (2) whether Wal-Mart violated state hour and wage statutes as a result of failing to pay employees all earned compensation; (3) whether Wal-Mart's electronic timekeeping system deducted unpaid break time from its employees when they were owed paid break time; (4) whether Wal-Mart employees are entitled to equitable or injunctive relief; (5) whether the discovery rule and/or fraudulent concealment toll the statute of limitations; and (6) whether Wal-Mart's business records objectively can establish Wal-Mart routinely did not pay employees for all time worked. Plaintiffs contend Wal-Mart's centralized policies support a finding of commonality.
With respect to particular causes of action, Plaintiffs contend the breach of contract claims have commonality because it will be a common question whether Wal-Mart's handbook creates a contract based on Wal-Mart's standardized orientation and handbook. With respect to conversion, Plaintiffs argue common questions will include what property rights employees have in the time records. Plaintiffs contend the unjust enrichment claim will have the common question of whether Wal-Mart unjustly obtained the benefit of its employees' unpaid labor. Plaintiffs also contend it is a common question whether to toll the statute of limitations because despite knowing about violations, Wal-Mart did not advise its employees about the problems and in fact engaged in a media campaign to deny it engaged in any wrongdoing.
Defendants argue Plaintiffs fail to establish commonality because each instance of a time clock exception must be resolved on an associate-by-associate basis. Plaintiffs' alleged common issues are in fact just broad generalities that cannot be answered on a class basis because they involve fact-intensive inquiries for each putative class member that may result in different answers for each class member. Defendants challenge Plaintiffs' two experts, particularly the statistical analysis by Dr. Shapiro. Specifically, Defendants note that Shapiro's analysis can demonstrate only exceptions, but makes no effort to investigate whether the records accurately reflect employees' time worked or whether the employee was compensated later for any unpaid work.
As for specific causes of action, Defendants note that questions such as whether there was a meeting of the minds for contract formation will require individual inquiry, as will whether Wal-Mart unjustly retained a benefit for unjust enrichment, or whether Wal-Mart retained possession of class members' wages for conversion. Wal-Mart also notes its defenses, such as the statute of limitations, will require individualized inquiries such as whether particular class members reviewed the Time Archive Report when they picked up their paychecks and when they first suspected they had uncompensated work time.
The Court finds Plaintiffs have established commonality. Plaintiffs allege common policies emanating from the Home Office caused payroll manipulation over a widespread period of time over many stores in each state. Plaintiffs have presented evidence in the form of Wal-Mart's own internal memos, audits, reports, and communications regarding a company-wide policy of centralized wage cost control enforced through detailed computer records and daily and weekly communications from the Home Office. Plaintiffs also have presented statistical evidence of missed rest breaks, unauthorized management edits to employee time, and a uniform timekeeping system that did not credit employees for missed break time. Plaintiffs also have presented anecdotal evidence of missed breaks, one minute edits, and off the clock work. Wal-Mart's efforts at showing lack of commonality generally go to the weight of Plaintiffs' evidence, such as challenges to Shapiro's statistical analysis, rather than its admissibility. Further, Wal-Mart's arguments on the topic are stronger with respect to whether common issues will predominate rather than whether there are any common issues at all.
3. Typicality
In assessing whether a proposed class representative's claims are typical, the Court must consider whether the injury allegedly suffered by the named plaintiffs and the rest of the class resulted from the same alleged conduct of the defendant. Dukes, 509 F.3d at 1184. A class representative's claims need not be substantially identical to other members' claims. Id. Rather, typicality is satisfied if the named plaintiff's claims are "reasonably coextensive with those of absent class members. . . ." Id. (quotation omitted). Minor differences in the nature of the specific injuries class members suffered do not defeat typicality. Armstrong v. Davis, 275 F.3d 849, 868-69 (9th Cir. 2001).
Plaintiffs contend they meet the typicality requirement because each named representative worked for Wal-Mart as an hourly employee during the class period and thus was subject to Wal-Mart's uniform policies. Defendants argue the named representatives are not typical of the class because Hall did not include her claims against Wal-Mart in her bankruptcy filing and therefore should be precluded from pursuing them; McFarlin testified he received all his rest breaks; Jackson testified she's never been asked to work off the clock; and Luce testified he was paid for all the hours he worked at Wal-Mart. However, he also testified he missed breaks and complained about it.
With respect to McFarlin, Luce, and Jackson, it is not clear there must be a named representative who suffered each kind of pay deprivation for the representatives' claims to be typical of the class. The thrust of the Complaints is that Wal-Mart's centralized policies caused payroll manipulations. Typicality is not necessarily destroyed because store managers used different mechanisms against employees to achieve these goals. As inArmstrong, minor differences in the type of injury suffered does not defeat typicality. Even if Plaintiffs needed to name a representative for each type of uncompensated time, the Court could give Plaintiffs the opportunity to name, for each Complaint, at least one named representative for each type of alleged misconduct.
As to Hall, judicial estoppel may operate to preclude an individual from pursuing claims where the individual knew about, but did not disclose, those claims during bankruptcy proceedings.Hamilton v. State Farm Fire Cas. Co., 270 F.3d 778, 783 (9th Cir. 2001). For judicial estoppel to apply, the bankruptcy court must have "accepted" the debtor's previous, inconsistent position. Id. At her deposition, Hall was asked whether she disclosed her claims against Wal-Mart to the bankruptcy trustee or the court and she responded "Uhm, I didn't at that time." (Def.'s Opp'n, Ex. G at 219.) The record before this Court, however, is inadequate to determine whether the bankruptcy court "accepted" her previous position. Although Defendants' judicial estoppel contention may be worthy of future consideration, it does not appear to the Court at this stage that Hall's financial woes render her claims atypical.
4. Fair and Adequate Representation
A plaintiff shows he or she adequately will represent the class by demonstrating the proposed class representative has no conflicts of interest with the proposed class. Dukes, 509 F.3d at 1185. A conflict may arise where the named representative is a supervisory employee and the class includes nonsupervisory employees if there is a substantive issue for which a conflict between these two classes of employees exists.Staton, 327 F.3d at 958-59. In such a case, the plaintiff must offer evidence the supervisory and nonsupervisory employees have coextensive interests or a general policy applies to both. Id. Whether employees at different levels of the internal hierarchy have potentially conflicting interests depends upon the context and the particular claims alleged. Id. If there is a potential conflict, the class may be certified if the named plaintiffs include representatives of each major employee sub-group and the requested relief applies equally throughout the class. Id.
In addition to showing the named representatives have no conflict with the class, the plaintiff must show class counsel is qualified and competent. Dukes, 509 F.3d at 1185. Defendants do not challenge counsel's competency or qualifications.
Plaintiffs contend they meet this requirement because the named representatives share identical interests with the class. Additionally, Plaintiffs contend the named representatives have participated in the suit and are ready, willing, and able to serve as class representatives. The Court agrees and finds the proposed class representatives will fairly and adequately represent the class. Plaintiffs therefore have satisfied Rule 23(a)'s requirements.
B. Rule 23(b)
In addition to satisfying Rule 23(a), a plaintiff also must show at least one of the Rule 23(b) categories applies. Plaintiffs argue they satisfy Rule 23(b)(2) because Wal-Mart's uniform practices deprived employees of earned compensation. Plaintiffs thus contend Wal-Mart acted or failed to act on grounds generally applicable to the class, and Plaintiffs seek declaratory and injunctive relief. With respect to Rule 23(b)(3), Plaintiffs argue common questions of law and fact predominate because Wal-Mart's uniform policies regarding understaffing stores, prohibiting overtime, and demanding managers meet expense requirements caused the violations. Plaintiffs contend class adjudication is superior because it is more efficient, and class members have no other realistic option. Because each class member's claim would be relatively small, the costs would outweigh any one class member's potential recovery. Plaintiffs also argue the Court can certify a "hybrid" class from Rule 23(b)(2) and (b)(3).
Defendants respond that Rule 23(b)(2) does not apply because these actions primarily are for money damages, not injunctive relief. Defendants also argue this case does not represent a case for injunctive relief because Plaintiffs' claims arise out of deviations from Wal-Mart's established policy and thus Plaintiffs cannot show Wal-Mart acted or failed to act generally with respect to the class. Additionally, Defendants note that most of the class would be former employees for whom an injunction would provide no remedy. Finally, Defendants contend they since have taken corrective measures to their time keeping/swiping system that would render injunctive relief unnecessary. For example, Wal-Mart has implemented a system which locks out cashiers from cash registers if they are not also clocked in; created a new position designed to train managers on how to handle uneven swipes by associates; implemented new compliance measures; implemented a notification message to employees telling the employee when adjustments have been made to his time; and undertaken investigation and remedial action regarding one minute clockouts.
Plaintiffs contend that rather than take remedial measures, Wal-Mart continues to violate the law and in fact has taken steps to reduce employees' abilities to show such violations. Plaintiffs note that at about the time Wal-Mart settled a recent class action in Colorado regarding missed rest breaks, Wal-Mart did away with the policy of having employees swipe in and out for breaks so employees no longer would have record evidence to show missed breaks. Plaintiffs also argue that Wal-Mart has deleted checking for missed breaks from its own internal audits procedures. Consequently, Plaintiffs argue the Court cannot infer Wal-Mart has taken sufficient remedial measures that injunctive relief is not warranted.
With respect to Rule 23(b)(3), Defendants argue individual issues predominate because each claim will require a fact intensive inquiry into each alleged instance of one minute clockouts or paid rest breaks to determine whether the records accurately reflect the employees' time, whether corrections were made, whether the employee voluntarily failed to take the rest break, or whether the employee actually took the rest break even though he did not swipe in and out for it. With respect to the causes of action and Defendants' affirmative defenses, Defendants contend individual issues will predominate for much the same reasons. Defendants further argue that permitting Plaintiffs to present statistical evidence without Defendants being able to rebut the evidence through individualized inquiry that may reveal benign explanations for the raw data deprives Defendants of due process. Defendants further argue class treatment is not a superior means of handling the case because each stage of the case would require individual determinations, and class members have an alternative and effective remedy through the relevant state's labor department.
1. Rule 23(b)(2) — Injunctive or Declaratory Relief
Rule 23(b)(2) provides for class certification where the party opposing the class has acted or refused to act on grounds generally applicable to the class thus making appropriate injunctive or declaratory relief with respect to the class as a whole. "Rule 23(b)(2) is not appropriate for all classes and `does not extend to cases in which the appropriate final relief relates exclusively or predominantly to money damages.'" Dukes, 509 F.3d at 1186 (quoting Fed.R.Civ.P. 23(b)(2), Adv. Comm. Notes to 1966 amend.); Zinser v. Accufix Research Inst., Inc., 253 F.3d 1180, 1195 (9th Cir. 2001), amended by 273 F.3d 1266 (9th Cir. 2001). However, the plaintiffs need not seek only injunctive relief so long as the monetary damages are "merely incidental to [the] primary claim for injunctive relief." Zinser, 253 F.3d at 1195 (quotation omitted). "Incidental damages are damages that flow directly from liability to the class as a whole on the claims forming the basis of the injunctive or declaratory relief." Molski v. Gleich, 318 F.3d 937, 949 (9th Cir. 2003) (emphasis and quotation omitted).
The Ninth Circuit has rejected the use of a bright-line rule distinguishing between incidental and nonincidental damages for the purposes of determining whether injunctive relief predominates for Rule 23(b)(2) purposes. Id. at 949-50. Instead, the Court must review the facts and circumstances of each case, focusing on Rule 23(b)(2)'s language and the plaintiffs' intent in bringing the suit to determine whether declaratory and injunctive relief predominate. Id. In making this case-by-case inquiry, the Court may consider whether:
(1) even in the absence of a possible monetary recovery, reasonable plaintiffs would bring the suit to obtain the injunctive or declaratory relief sought; and (2) the injunctive or declaratory relief sought would be both reasonably necessary and appropriate were the plaintiffs to succeed on the merits.Id. at 950 n. 15 (quotation omitted).
This is one area where the law in the Circuits at issue may diverge. The Third Circuit, in an unpublished opinion, set forth the test for determining whether damages were secondary to injunctive relief as:
(1) whether such damages are of a kind to which class members would be automatically entitled; (2) whether such damages can be computed by "objective standards" and not standards reliant upon "the intangible, subjective differences of each class member's circumstances"; and (3) whether such damages would require additional hearings to determine.Barabin v. Aramark Corp., 2003 WL 355417, *1-2 (3d Cir. 2003) (unpublished) (also positively citing the Ninth Circuit's decision in Molski). The Eighth Circuit's test is less well-defined, but in one case the Eighth Circuit examined whether the class for injunctive relief was sufficiently cohesive and whether the plaintiffs would have sought injunctive relief even without pursuing a damages claim. In re St. Jude Med., Inc., 425 F.3d 1116, 1122 (8th Cir. 2005). Barabin cites Molski positively and is an unpublished opinion, and St. Jude relies on at least one of the same factors as Molski. The Circuits thus apply somewhat similar tests for determining predominance. Under any Circuit's test, Plaintiffs have failed to demonstrate damages are incidental to their claims for declaratory and injunctive relief.
Assuming without deciding that Plaintiffs can define an ascertainable class which Wal-Mart treated commonly, Plaintiffs' Complaints appear to be concerned primarily with recovery of money damages in the form of unpaid wages, disgorgement of the allegedly unjustly retained benefits Wal-Mart received from the unpaid wages, and punitive damages. Jurisdiction in federal court is premised on the actions having an amount in controversy exceeding five million dollars under the Class Action Fairness Act of 2005. Consequently, it would be difficult to say damages do not predominate. However, it is arguable that for each particular class member, damages are not large and what the employees really want is to enjoin Wal-Mart from its allegedly unlawful practices.
One Complaint, Jackson (Delaware), does not request injunctive or declaratory relief in the prayer for relief, although it does mention it in other parts of the Complaint. Hall mentions injunctive relief in the prayer for relief, along with requests for damages, restitution, disgorgement, and punitive damages. TheMcFarlin Complaint requests injunctive relief in the form of enjoining Wal-Mart from altering employee time records without explicit notice to and consent of the affected employee, along with all the various requests for damages. The Luce Complaint seeks an injunction ordering Wal-Mart to cease and desist from its wrongful policy and practice of manipulating employee time records, along with the various requests for damages.
The Court finds that the dispute between the parties as to how purported remedial measures by Wal-Mart should impact Plaintiffs' entitlement to injunctive relief relates to the merits more than the question of certification. Putting aside this dispute, the Complaints' primary focus is on monetary recovery and some of the deposition testimony by the class representatives also reflects that focus. Plaintiffs seek not only the relatively modest compensatory damages for each class member, but also disgorgement of unjust profits and punitive damages. Damages would not flow to the class as a whole. Rather, the Court would have to determine damages for each class member separately, dependent on that employee's circumstances. Moreover, a large percentage of the class will be former Wal-Mart employees who could not seek injunctive or declaratory relief, as they have no standing to seek such relief. Dukes, 509 F.3d at 1189. For purposes of applying Rule 23(b)(2), the Court therefore concludes that the relief sought by Plaintiffs Complaints is predominantly monetary damages which cannot be characterized as merely incidental to a claim for injunctive relief. Because money damages predominate, the Court will not certify a class under Rule 23(b)(2).
2. Rule 23(b)(3) — Common Issues Predominate and Superiority
Rule 23(b)(3) provides that class certification may be appropriate if the court finds that the questions of law or fact common to the members of the class predominate over questions affecting only individual members, and that a class action is superior to other available methods for the fair and efficient adjudication of the controversy. Rule 23(b)(3)'s predominance inquiry is more rigorous than Rule 23(a)'s commonality requirement. Hanlon v. Chrysler Corp., 150 F.3d 1011, 1019 (9th Cir. 1998). The Rule 23(b)(3) analysis presumes the plaintiff has established common issues of fact or law pursuant to Rule 23(a)(2). Id. at 1022. Under Rule 23(b)(3), the analysis focuses on the relationship between the common and individual issues. Id. Class certification is appropriate when common questions present a significant aspect of the case and a single adjudication can resolve issues for all members of the class. Id.
With respect to superiority, Rule 23(b)(3) lists some factors to consider in determining whether class adjudication is superior:
(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.
In determining superiority, the court must consider these four factors. Zinser, 253 F.3d at 1190. Other considerations include the reduction of litigation costs and promotion of efficiency achieved through class litigation, the availability of realistic alternatives, whether the costs of individual suits outweigh potential recovery, and agreement among the proposed class as to whether class treatment is appropriate. Local Joint Executive Bd. of Culinary/Bartender Trust Fund v. Las Vegas Sands, Inc., 244 F.3d 1152, 1163 (9th Cir. 2001); Valentino v. Carter-Wallace, Inc., 97 F.3d 1227, 1234-35 (9th Cir. 1996).
a. Common Issues Predominate
Wal-Mart argues forcefully that individualized rather than common issues predominate. First, Wal-Mart argues Shapiro's statistical analysis is flawed because he relies solely on Wal-Mart's records to show violations. However, Wal-Mart contends that the records alone cannot tell the whole story. For example, Wal-Mart argues a one minute edit does not necessarily equate to unpaid time if the employee did not actually work after clocking in. Wal-Mart argues employees sometimes erroneously swipe in when checking their time, so a management edit clocking them back out does not necessarily reflect unpaid time. With respect to missed breaks, Wal-Mart argues a missed swipe does not equate to a missed break. It means only that the employee did not swipe in and out. Wal-Mart refers to the employee declarations in which some employees state that sometimes they did not swipe in and out even though they took their break. With respect to off the clock work, Wal-Mart argues that sometimes employees used a register under another employee's login, thus the alleged discrepancy between register logins and being on the clock may be innocently explained. Again, Wal-Mart offers declarations that sometimes employees used registers under another employee's login. Wal-Mart also argues sometimes the time clock and the point of sale database were not precisely coordinated on time.
Second, Wal-Mart argues that because the records alone do not tell the whole story, individual issues will predominate because Wal-Mart will have to ask each class member whether they missed a particular break or worked off the clock in each instance. Third, Wal-Mart argues that if it is not permitted to conduct individualized inquiries, its due process rights will be violated.
Plaintiffs respond that Wal-Mart's business records are presumptively correct and Wal-Mart cannot disavow its own records when it has relied on those records to pay its employees, pay shareholders, file tax returns, and file SEC filings. Further, Plaintiffs argue that Shapiro conducted his analysis on Wal-Mart's finalized records. Because Wal-Mart policy requires managers to question employees regarding exceptions on the payroll records, the individualized inquiry Wal-Mart seeks already has occurred and is reflected in the records. Finally, Plaintiffs argue Wal-Mart's due process rights are not implicated because Wal-Mart has no due process right to individually question each class member and courts routinely permit reliance on business records without cross examination without a due process or confrontation clause problem.
The Court finds that although Shapiro's analysis provides a starting point for identifying possible violations, it does not in and of itself show uncompensated time. With respect to missed breaks, Shapiro's analysis shows only that an employee did not swipe in and out for break. It contains no analysis as to why. For example, the employee voluntarily may have elected to work through a break. Alternatively, the employee could have taken the break but did not swipe in and out for the break. Indeed, Wal-Mart presents affidavits from employees indicating they engaged in such conduct.
As for the one minute clockout, Shapiro's analysis shows only the clockout but does not analyze or investigate the reason for the clockout. A one minute clockout may represent the employee's actual behavior. Wal-Mart conducted its own study showing at least 35% of one minute clockouts correctly reflected the employee's behavior. Further, Shapiro's analysis does not indicate whether, even assuming the one minute clockout deprived the employee of time, Wal-Mart later corrected the discrepancy and compensated the employee fully for the time worked.
With respect to off the clock work, the Shapiro analysis compares timeclock punches to cash register logins to see if an employee is logged into a register at a time they are not logged in for payroll purposes. However, the analysis does not investigate whether this activity is explained by other employees working on a register under another employee's log in, or by time synchronization issues between the register system and the time clock. That possible innocent explanations exist to explain the data is further reinforced by issues relating to Plaintiffs' claims which derive from a wide variety of alleged deviations in the implementation and application of Wal-Mart policies in different situations by local store managers exercising their own judgment.
Furthermore, Shapiro's analysis does not cover certain allegations in the Complaints and Plaintiffs offer no basis for determining class-wide issues on those questions. For example, Shapiro's analysis is limited in time frame, and thus only through extrapolation could show liability for time periods not covered by his analysis. His analysis does not include the so-called "40 hour club" mentioned in the Complaints, which consists of employees whose time over 40 hours management allegedly deleted. Additionally, Shapiro's analysis does not refer to the Complaints' allegations that managers inserted meal periods into the employees' time.
Moreover, an examination of Plaintiffs' claims for breach of contract, breach of the covenant of good faith and fair dealing, conversion, unjust enrichment, statutory wage claims, and punitive damages, as well as Wal-Marts affirmative defenses, compels the Court to conclude that Plaintiffs have failed to show that common issues of law or fact predominate over questions affecting individual Plaintiffs as required to satisfy Rule 23(b)(3). For example, Plaintiffs' breach of contract claims would involve particularized inquiry into contract formation, including such issues as meeting of the minds, breach, and damages. Plaintiffs' conversion claims likewise would involve individualized inquiries into whether Wal-Mart interfered with each class member's possessory interest, causation, and damages. With respect to unjust enrichment, a jury could not determine Wal-Mart actually received a benefit based solely on Shapiro's analysis because without individual inquiry, it would not be known from the records alone whether the employee worked unpaid time. Further, a jury could not determine whether Wal-Mart accepted or knew of the benefit and unjustly retained it without inquiring into whether the employee actually worked uncompensated time. Plaintiffs' statutory wage claims likewise would involve an examination of the particular instances of alleged unpaid work to determine if in fact the employee worked but was not paid.
That common issues do not predominate is reflected in the inadequate class definition Plaintiffs propose. Although not technically a Rule 23 requirement, how to define the class is a key consideration at the certification stage. Rule 23(c)(1)(B) requires an order certifying a class action to "define the class and the class claims, issues, or defenses." Defining the class is "of critical importance because it identifies the persons (1) entitled to relief, (2) bound by a final judgment, and (3) entitled under Rule 23(c)(2) to the `best notice practicable' in a Rule 23(b)(3) action. The definition must be precise, objective, and presently ascertainable." Ann. Manual For Complex Litig., § 21.222.
Generally, it is inappropriate to define a class in such a way that class membership cannot be identified until the merits are resolved. See Ann. Manual For Complex Litig., § 21.222; Hagen v. City of Winnemucca, 108 F.R.D. 61, 63-64 (D. Nev. 1985) (finding class definition insufficient because it would require the court to decide the merits of the claim at the class certification stage to determine who was included in the class); see also Mueller v. CBS, Inc., 200 F.R.D. 227, 233-36 (W.D. Pa. 2001) (declining to certify class consisting of all former employees who were terminated to interfere with their benefits as too indefinite to be certified because determining membership in the class essentially would require a mini-hearing on the merits of each case to determine whether the potential members were terminated to prevent them from acquiring benefits)." "An identifiable class exists if its members can be ascertained by reference to objective criteria." Ann. Manual For Complex Litig., § 21.222.
The class definition in the Complaints refers to employees who Wal-Mart failed to compensate. This class definition fails because it cannot be ascertained through any objective criteria who would be a class member. Additionally, ascertaining whether a person is a class member depends on resolving the merits to determine which employees, if any, Wal-Mart failed to compensate. Consequently, no one would be able to determine who was a class member until it had been determined through individualized inquiry that in fact Wal-Mart had failed to compensate a particular employee.
Common issues do not predominate over individualized inquiries. Plaintiffs therefore have failed to establish class treatment is appropriate in the four first phase cases.
b. Superiority of Class Litigation
Many factors favor class treatment as superior. For example, no one has identified any interest the class members have in individually controlling the prosecution or defense of separate actions. As to the extent and nature of any litigation concerning the controversy already commenced by or against members of the class, these cases already have been consolidated in an MDL action. Class members would realize a tremendous benefit in having one centralized forum for resolving common issues and conducting consolidated discovery. The desirability of concentrating the litigation of the claims in this forum, at least for pre-trial purposes, already has been decided by the MDL panel. With respect to concentrating class proceedings in each state, efficiencies are realized for individual class members. Further, because Plaintiffs have sought certification on a state-by-state basis, the local forum will be able to address Plaintiffs' claims under each state's relevant law.
Further, both Plaintiffs and Defendants realize a tremendous reduction of litigation costs and increased efficiency through class litigation. The costs of individual suits vastly outweigh any potential recovery for each individual class member. There does not appear to be any disagreement from the proposed class as to whether class treatment is appropriate.
Additionally, it is questionable whether there is an available realistic alternative in the form of each state's administrative remedy through the state's labor commissioner or labor division.See Alaska Stat., Tit. 23, Ch. 5 (granting Department of Labor and Workforce Development power to investigate and bring enforcement actions for wage violations); Del. Code, Tit. 19, Ch. 11 (granting Department of Labor enforcement authority over wage violations); Nev. Rev. Stat., Tit. 53, Ch. 608 (granting Labor Commissioner enforcement powers over wage and overtime laws in Chapter 608); S.D. Codified Laws, Tit. 60, Ch. 60-11 (granting Department of Labor enforcement authority for wage violations). Current Wal-Mart employees arguably would not file a claim for fear of retaliation whereas the class action automatically will include them without singling them out for retaliation. Furthermore, Plaintiffs allege that because of the way Wal-Mart surreptitiously altered employees' records and the small amounts involved, many employees may not even be aware they have a claim or will not feel the small amounts involved are worth the hassle, and therefore will not resort to the administrative remedies.
Nevertheless, class treatment is not superior because these actions essentially will amount to mini trials for each class member and each instance of alleged time shaving. As discussed above with respect to predominance, resolving Plaintiffs' substantive claims will involve particularized inquiry into each alleged instance of unpaid time to determine if the time records accurately reflected employee behavior or instead documented an instance of unpaid time the employee worked. The Court therefore will deny Plaintiffs' motion for class certification.
IV. CONCLUSION
IT IS THEREFORE ORDERED that Plaintiffs' Motion for Class Certification of the First Phase Cases (Doc. #89) is hereby DENIED.
IT IS FURTHER ORDERED that Plaintiff's Motion to Strike Portions of the Declaration and Report of Joan Haworth (Doc. #201) is hereby DENIED.
IT IS FURTHER ORDERED that Defendants' Motion to Strike and Motion to file a Surreply (Doc. #235) is hereby GRANTED in part and DENIED in part. The Court grants Defendants' motion to strike Dr. Shapiro's new opinions offered in support of Plaintiffs' reply brief. The Court denies Defendants' request to file a surreply.