DURAN v. U.S. BANK NATIONAL ASSOCIATION

Appellant’s Answer Brief on the Merits

Cal.December 28, 2012

SUPREME COURT FILED DEC 28 2012 Case No.: 8200923 IN THE SUPREME COURT . Frank A. MecSuire Clerk OF THE STATE OF CALIFORNIA Deputy- SAM DURAN, MATT FITZSIMMONS,individually and on behalf of other membersofthe general public similarly situated, Plaintiffsand Respondents, VS. ~ US. BANK NATIONAL ASSOCIATION, Defendant andAppellant. Review of a Decision ofthe Court ofAppeal, First Appellate District, Division One, Case Nos. A125557 and A126827, Reversing Judgment and Decertifying Class in Case No. .2001-035537 Superior Court of the State of California, County of Alameda Honorable Robert B. Freedman, Judge Presiding ANSWERBRIEF ON THE MERITS TIMOTHY M. FREUDENBERGER(Bar No. 138257) ALISON L. TSAO (Bar No. 198250) KENTJ. SPRINKLE (Bar No. 226971) CAROTHERS DISANTE & FREUDENBERGER LLP 601 MontgomeryStreet ‘Suite 350 San Francisco, California 94111 Telephone: (415) 981-3233 . Facsimile: (415) 981-3246 Attorneys for Defendant and Appellant U.S. BANK NATIONAL ASSOCIATION Case No.: 8200923 IN THE SUPREME COURT OF THE STATE OF CALIFORNIA SAM DURAN, MATT FITZSIMMONS,individually and on behalf of other members of the general public similarly situated, Plaintiffs and Respondents, VS. U.S. BANK NATIONAL ASSOCIATION, Defendant and Appellant. Review ofa Decision of the Court ofAppeal, First Appellate District, Division One, Case Nos. A125557 and A126827, Reversing Judgment and Decertifying Class in Case No. 2001-035537 Superior Court of the State of California, County of Alameda _ Honorable Robert B. Freedman, Judge Presiding ANSWERBRIEF ON THE MERITS TIMOTHY M. FREUDENBERGER(Bar No. 138257) ALISON L. TSAO (Bar No. 198250) KENTJ. SPRINKLE(Bar No. 226971) CAROTHERSDISANTE & FREUDENBERGER LLP 601 MontgomeryStreet Suite 350 San Francisco, California 94111 Telephone: (415) 981-3233 | Facsimile: (415) 981-3246 Attorneys for Defendant and Appellant U.S. BANK NATIONAL ASSOCIATION TABLE OF CONTENTS Page INTRODUCTION..0oee eeccsessseseestesseesecsceseseecsessesssssesessaecsecseesseeseseesenses l STATEMENTOF THE ISSUES... cccceccsccsseesseseesessceseeesseessessesscessneas 6 STATEMENTOF THE CASE... ccccscsssessssssssscecececesseessecseesesesseeseesesees 8 A. The BBO Position. .......csssssscsssssesssssecsessssessessescessessssssesesseees 8 B. Certification ProceedingS ........cccccccesseseessessessescesseseresseeees 11 A. Plaintiffs’ Counsel Cycled Through Four Uninjured Class Representatives .........ccccceseeeees 1] 2. Initial Certification Briefing .........c.cceeeseseeeeeeeeees 11 3. Four Of The Parties’ Declarants Submitted Multiple, Inconsistent Declarations ........cccccccesssssessscsseeseesecssseeeseeseens veseteee 12 4, Initial Certification Order .0.......cccccccecseesseetseeessseaes 14 C. The Trial Court Summarily Dismissed The Administrative And Commission Sales EX€MPtiONs 0.00... cceeecccescecesesscessesseseseeseseseesseceseesessseseeeseeenes 14 D. Pre-Trial Proceedings...........ccscsesseseesecseeseesesseesseeeenesseeseees 15 1. The Trial Court Formulated A Trial Plan Without Expert Endorsement..........ccccceseeeeeees 15 2. Plaintiffs Dismissed All Legal Claims And Remedies...csceeseseeeeeeeeeeseeeesseeseeeaseaes 17 3. The Trial Court Altered The RWG COMPOSItION ....... cee eeceeeeseeeeeeseessececsssseesseesesesesensecsees 17 4, USB’sFirst Decertification Motion........0......c0000 18. E. Phase I Trial 0...ceecccscsscsscecesseseecsecseesesseessecsessecseeescseeses 19 594115.10 TABLE OF CONTENTS(cont.) Page 1. RWGTestimony sssuevevscessaveceessssuustessssstasusessssivessesen 19 a. Several RWG Members Previously Admitted They Were EX€MPt 0.0... eeeeeceeeseeeceseteeseeceseesseeaeeesaeeaeens 20 ~ (1) Chad Penza oo... eececsseesccesseeeneeens 20 (2) StevenBradley...20° (3) Nancy McCarthy... ceccceeseceeees 21 (4) Adney Koga...cecceseesesessceesseeesseees 22 b. Several RWG MembersTestified That They Did Not Work Over 8 Hours Per Day Or 40 Hours Per WEE] 0... eeeeeeeeeeneceeeeteeeececeeseeecsseeaseeenseeeaeeens 23 c. Some RWG Members’ Duties And Activities In Non-Class Positions Were Used To Find Liability And Calculate Recovery............... 23 d. Some RWG Claims Should Have Been Barred By Equitable Considerations.0.......eeeceeetesseeecsseseeeesseeeesetens 24 2. Manager Testimony 0.0... cceeeeeseseceeeeeseeeeesseeeseeeaees 25, 3. USB’s Motion For Judgment And Due Process Motion ..........:ccccsssceseecesseeseeesseesseesseeesseessees 26 F. Phase J Statement Of Decision (“SOD”) ..0.....cccceceseeeeee 27 G. The Trial Court Excluded Plaintiffs’ Survey EVIGCNCO... cee eeeceeesccesceeessceesecesseceseeseeeseseessseseseeseesecsssecetees29 H. —USB’sSecond Decertification Motion 0.0.0...cesses 30 i 594115.10 TABLE OF CONTENTS(cont.) Page 1. Phase ID Trial... eccccccsscesceceseeeeseseeeeeeceessevsseessecsesesseesees 30 WS. PhaseII Statement Of Decision ............:cccccecceseseseseeesseneees 32 K. Court OfAppeal Decision 00.0...ei eeceeeeeeeeeeteeeeenseeeeenees 33 ARGUMENT...ecsuseeseeseesncaecsnecseeneesseeeseeedssesseaeesneeeasecsneenseesneesses 35 I. THE COURT OF APPEAL PROPERLY REVERSED THE DENIAL OF USB’S SECOND DECERTIFICATION MOTION.......ccccccccscsssecsteeseeeeeeseesseeeneesesens 35 A. Standard OfREVieW .......ccccceccssesseeseeseeseeseeseeeseeeesseesseseeses 35 B. The Court OfAppeal Did Not Disturb TheTrial Court’s First Two Certification Rulings ...0.....cece35 C. The Court OfAppeal Properly Reversed The Second Decertification Motion Ruling Because The EvidenceIntroduced And Excluded At Trial Demonstrated The Individual Nature Of ~The Exemption Inquiry .......cccccccccsessessesesesseseesesseeesssseaes 37 1. Class Treatment Is Proper In Wage And Hour Cases Only Where Liability May Be Determined As To The Entire Class Based On A Uniformly Applicable Policy Or Practice That Violates The LAW oe eeeeeceesecescceeessceensceseeeseecseeeaneccatsaceeeeeeaeeaes beeen 37 2. Courts Have Uniformly Found Outside Salesperson Misclassification Claims Revealing Varying Amounts Of Time Outside The Office Inappropriate For Class Treatment .0.........:ccecccccsseesseeceeseesseeesseesseeeeseesas 39 3. The Court OfAppeal Properly Held That 594115.10 The Trial Court Relied On Improper ill 594115.10 TABLE OF CONTENTS(cont.) Indicia Of Commonality In Concluding ‘A Classwide Liability Determination Was Possible ............cccccccceccccsessssesseceeeecess Contrary To Plaintiffs’ Argument, The Trial Court Did Not Rely On “Substantial Evidence Of Widespread Misclassification,” And Even If It Had, This Would Not Support The Use Of Representative Testimony Here............... USB’s Second Decertification Motion Conclusively Confirmed USB Had No CommonPolicy Requiring BBOs To Spend The Majority Of Their Time INS1de oo... eeeseeesceseeseeeeeseeeeeseeeeesseestenseeses a. The Trial Court Expressly Found That There Was No Common POLICY oe ee eeeeeeeeeeeeeedeecesceeeeeseeneess b. The Trial Court Did Not And Could Not Find That The BBO Position Was Incapable of Being Performed In An Exempt Manner The Trial Evidence Confirmed The Individualized Nature Of The Exemption INQUITY ooo.eeeeeeeeteeeeeeaeeeeecenenereneeareaeees a. The Trial Yielded Evidence Of Material Variation In Time Spent Outside The Bank........eee b. The Trial Revealed Individualized Credibility Issues Bearing Directly OnLiability... iv seeeeeeeenseees 40 sesssess46 becseeeseeeetens 49 seceseeeseeeeaee 49 seeeseesaeeenee 50 eteaseeneeeseee 52 veeessevseeeaee 53 aseneeeeees 4 Il. 594115.10 TABLE OF CONTENTS(cont.) Page c. The Trial Evidence Confirmed The Need ForIndividualized Analysis OfUSB’s Reasonable Expectations Defense...........ceccceseseeeeeees 57 d. The Trial Evidence Revealed Additional Individualized Issues — Relating To Improper Membership In The Class And Unique Defenses Applicable To Certain Class Members...........cccccseceseserseeees 60 7. The Trial Court Should Have Granted USB’s Second Decertification Motion............0.00. 60 THE COURT OF APPEAL PROPERLY. DETERMINED THAT THE TRIAL PLAN WAS UNCONSTITUTIONAL, AND THAT THE COURT’S USE OF STATISTICAL SAMPLING AND REPRESENTATIVE EVIDENCE WAS - IMPROPER........ccccecessesessscceteesseesscstesseeeeesteeteneneeeneeeeseeteeeeeeeeneneees 64 A. The DueProcess Implications Of The Trial Plan Are Reviewed De NOvo ....cccccccssccesssssccssssscerscsnssseessssessscanees 64 B. Courts Interpreting California’s Unique Misclassification Laws Have Uniformly Rejected Sampling And Representative Evidence To Determine Classwide Liability ...........0000.0.... 65 1. Sav-On Addressed Only The Class Certification Phase And Did Not Discuss The Propriety Of Class Action Trial PrOCECUIES.........ceeseessesecesssessessecesesseesesensheseeeeeeeseteess 68 2. Bell [lI \s Limited To Estimating . Classwide Damages And Provides No 594115.10 TABLE OF CONTENTS(cont.) Support For The Trial Plan Adopted Here To Determine Classwide Liability ......... Plaintiffs’ Reliance On Dicta Discussing The Idea OfStatistical And Representative Evidence Does Not Support The Trial Plan Here...cece The U.S. Supreme Court’s Rejection Of “Trial By Formula” In Wal-Martv. Dukes Is Applicable Here..........cccteseeeseee FLSA Misclassification Claims Do Not _ Involve California’s Uniquely Quantitative Exemption Analysis And Provide No Support For Sampling Or Representative Evidence Here oo...eee The Trial Plan And Classwide Findings Were Statistically Invalid And Unconstitutional...eee77 l. Plaintiffs’ Own Expert Confirms The Trial Plan And Resulting Judgment Were Statistically Invalid .......aa seeeeessaesessseereeteseeneeees The Classwide Liability Finding Was Improper Because There Was No Basis To Conclude That 100% OfThe Class Was Misclassified ..............c:cccseseeeeeeeeececeeceeeees “The Experience OfRWG Chad Penza” Confirms The Impropriety Of TheTrial Plan And Classwide Liability Findings.......... The Gerrymandered, Non-Random RWG Sample Violated Basic Statistical vi Page beeeneees 69 beseeeees 71 beeeeees 73 eseeeeee 75 ecesaees 77 beseeseee 80 seseeeaee 83 TABLE OF CONTENTS(cont.) Page Principles, Rendering Any Classwide Findings Impropet..........cccccesceescceseeseeseesseeeeseeeeaeees 84 a. The RWG Sample Was Not Random And Suffered From Haphazard Substitutions, . Eliminations And Selection Bias............“ae 8D b. The RWG Sample Size Was Too Small To Generate Meaningful Estimates .0......ccccccessscceeeseeceeeseceeecssesaeeeseseeees 88 5. The Flawed Trial Plan Failed To Comply With Bell LID cee cesccesssecescceceesesecseceesaceneeeeeseenseaes 89 a. The Trial Court Improperly Relied On Bell I/’s “Bolstering FactOLs.” ...cccscscscsscsessessesesessseeees ceeaeseaeacsens vee 89 b. The Excluded Hearsay Survey Does NotBolster The Unconstitutional 43.3% Margin Of Errors... ceeeceecececessseeeeeeeecenecesensesceceessessaes 93 6. The Trial Court’s Finding That Plaintiffs’ Experts Were “Credible And Persuasive” Is Not Germane To The Issues On Appeal.o......cee cc eeeeeeesecseeseeeeetecereeseeeeeees 95 D. The Trial Court’s Exclusion OfUSB’s ' Exculpatory Evidence Was An Unconstitutional Due Process Violation...........c.cccccccsssecssseecececececceecctensneserenss 96 1. Plaintiffs’ Contradictory Contentions Ultimately Confirm The Court Of Appeal’s Due Process Conclusions..........ccccccceeeeee 96 Vil 594115.10 Ill. 594115.10 E. TABLE OF CONTENTS(cont.) Federal And State Authorities Overwhelmingly Confirm USB’s Due Process Right To Challenge Individual Claims And Present Individual Defenses At Trial... cccccccecccceesessessssecssseceeccesssesevesseeeesaaes 98 Plaintiffs Do Not Cite To Any Authority That Actually Supports Their Contention That USB Has No Due Process Right To Challenge Individual Misclassification CaM oo... eeeeceeseeeseeeneceeeeeeceneeeaeeeessaeeseeesecseenneenees 101 The Trial Court’s Refusal OfUSB’s Requests To Call Absent Non-RWG Class Members And Exclusion Of USB’s Contrary Declaration And Deposition Evidence Violated Due PLOCESS .....ccccesseessseseseceesesccecseseceesesseereeeescesseueearsseees 104 The Due Process Analysis In Connecticut v. Doehr Confirms That The Trial Plan Violated Due Process And That The Judgment Must Be Reversed................. 108 Plaintiffs’ “Waiver” ArgumentIs Specious........veveseeesseen 109 STATISTICAL SAMPLING AND REPRESENTATIVE EVIDENCE ARE PARTICULARLY UNSUITABLE IN THIS UCL CLASS ACTION FOR RESTITUTION 00.eeetseeteeteeees 113 A. To Prove Classwide Liability Under The “Unlawful” Prong OfThe UCL,Plaintiffs Must Prove Liability As To Each Class Member Under Applicable Labor Code Provisions ..............:cc0 113 Vili TABLE OF CONTENTS(cont.) B. Plaintiffs Are Not Entitled To An Award Of Restitution Under The UCL For Any Class Member Who WasProperly Classified 0.0.0.0... 117 C. Plaintiffs Cannot Recover Restitution Under The UCL For Class Members Without Proof That They Worked Any Overtime...........cccccccscsseeeeseees 119 D. Plaintiffs Failed To Present Evidence Sufficient To Support The Amounts OfRestitution AWaArded ooo ccecccceseeessscncesessecccccececeeceeceecececesecenecseseseceetensess 124 IV. PLAINTIFFS’ STRAINED “PUBLIC POLICY” ARGUMENT THAT THE COURT OF APPEAL’S DECISION WOULD EVISCERATE MOST CLASS ACTIONSIS AN EXAGGERATION THAT ATTEMPTS TO CHANGE THE SUBSTANTIVE LAW TO ACCOMMODATE A PROCEDURAL TOOL wo.ecececcccssccscsecesseseeeceneneesesseeseseeessesseeseeeseaesessetseeaeessasseeaeeeee 128 A. Representative Testimony In This Case Would Sacrifice Substantive Law In Favor Of The Class Action Device .i......cecccecsccccsssssccsesssscececsrsseescerenecsees 128 1. USB’s Constitutional Due Process Right Cannot Be Eliminated BecauseItIs Time-Consuming Or Inconvenient...............00c0 131 2. Plaintiffs Presume That Class Treatment Is Proper Here With Fallacious, Circular REASONING... eee eeceeeseeeeeseeeceseeeseeseeseesesesenstenseseeenes 131 3. Plaintiffs Misapply The Use Of Statistical Sampling In “Pattern And Practice” EmploymentDiscrimination CASES oes eee ceeceeseceeeenceeeescessecseeescerseeeseeesesseeeenseseeesas 133 ix 594115.10 TABLE OF CONTENTS(cont.) Page B. Plaintiffs Exaggerate The Impact Of This Case............... 136 1. Plaintiffs Offer No Evidence Supporting Their Speculation Of The Supposed Dangers Of Individualized Mini-Trials................. 136 2. Representative TestimonyAnd Statistical Evidence, As Well As Other | Trial Management Tools, Remain Viable In Appropriately Certified Class Actions.............. 137 3. The Potential Impact Of This UCL Class Action On Other Labor Code Class Actions Is Limited ........ccccccceesessecessessesessseeseees 139 V. IF THE COURT OF APPEAL’S UNANIMOUS OPINION IS NOT AFFIRMED, THEN THIS COURT SHOULD REMAND TO THE.COURT OF APPEAL, NOT THE TRIAL COURT..0...ccccccecescssesscsesesessessesesscsssnenesas 140 CONCLUSIONoccecceeccscesseseseeseesecasecesecsecsecsessssaeesesesecsessssssaesaseasees 142 594115.10 TABLE OF AUTHORITIES Page(s) ' State Cases Aguilarv. Atlantic Richfield, 25 Cal.4th 826 (2001)..........eteeeees 114, 124 ALUIns. v. Super. Ct, 51 Cal.3d 807 (1990)... eeeeseeeeenesese seeteeeseees 120 Alch v. Sup. Ct., 122 Cal-App.4th 339 (2004). eeseenteteeseseeteeseeneees 134 Arenas v. El Torito Rests., 183 Cal.App.4th 723 (2010) .....eecceeeeeseeees 62 Ariasv. Superior Court, 46 Cal4th 969 (2009)... ceeeecesseessstseeseeesseeees 74 Bank ofthe West v. Super. Ct., 2 Cal.4th 1254 (1992) sesesasesneessenacereteees 115 _- Bartold v. Glendale Fed. Bank, 81 Cal.App.4th 816 (2000) sessessssseneveceet 35 Bell v. Farmers Ins. Exchange, 115 Cal.App.4th 715 (2004)...passim Brinker v. Super. Ct., 53 Cal.4th 1004 (2012) c.ccccsssessssssssseessessssseesees passim Californiansfor Disability Rights v. Mervyn:S, 39 Cal.4th 223 (2006) oeeeeeeseeeseneesseetseeeseeees eceeseeaeeneesesenesenenes Lassasseeeeesreetaaes 119 Cel-Tech Communications Vv. L.A. Cellular Tel. .Co., 20 Cal.4th 163 (1999) oo ecccsesssesessseseeesesesssesssseesesesteceeseeeasecsesesens 114 City ofSan Jose v. Superior Court, 12 Cal.3d. 447 (1974).............. passim Cohenv. DirectTV, Inc., 178 Cal.App.4th 966 (2009) secenseeeeaeesseveeeeeeeees123 Colgan v. Leatherman Tool Group, Inc., 135 Cal.App.4th 663 (2006)occeee ceeeetecenecteeteeeeeeeeseesees seseeeseecsseeessaseesoeaee 120, 124, 125 Collins v. D.J. Plastering. 81 Cal.App.4th 771 (2000)... ceeeeseeeeeee98 Columbia-Geneva Steel v. Indus. Accident CommmS Cal.App.2d 862 (1953)......... sensnegaeucastserceobeseontonsseneeatatsuseansseseseesas 98 Comm. on Children’S Television v. Gen. Foods5 Corp.» 35 a © Cal.3d 197 (1983) vice ecscssescsceeseececessesesecesenessaeseeseseeeseeessserenseeas 115 XI 594115.10 TABLE OF AUTHORITIES(cont.) Page(s) Cont ‘| Airlines v. McDonnell-Douglas, 216 Cal.App.3d 388 (1989)voeceeccscssesesscescsesscscscvessescssscssssesessssseseeseceseasenssetteeseseeeseneseees 94 Cortez v. Purolator Air Filtration Products Co., 23 Cal.4th 163 (2000) wo. eeceeeeeteeereees seseeeteenees esusessussscesesecesaesaccesssseensans passim Day v. AT&T, 63 Cal.App.4th 325 (1998) oo... cescesesesceecseesseeeeens 119, 125 Dep’t ofFish & Game v. Super. Ct., 197 Cal.App.4th 1323 (2011).sieeve eseesneesneesecsuseesesueccsseenssneesseoneareeaeeeassutesateaecunesesonetanteneaataas 35 Dunbarv. Albertson’s, 141 Cal.App.4th 1422 (2006)............ 42, 48, 65, 84 Feitelberg v. Credit Suisse First Boston, LLC, 134 Cal.App.4th, 997 (2005) .ocececccsccseecscestsensseeseaeneeseerseerteeeees 70 Fletcher v. Sec. Pac. Nat’l Bank, 23 Cal.3d 442 (1979)veces 115, 120 Ghazaryan v. Diva Limousine, Ltd., 169 Cal.App.4th 1524 Grimshaw v. Ford Motor Co., 119 Cal.App.3d T57 (1981) oeeeeeeceeeeees 94 Hamwiv. Citinational-Buckeye Invest. Co., 72 Cal.App.3d AO2 (1977) viceecscscecscsereseeeeseseeacesseecsecsecaeeeseeseeeetsenateseaeeeseseesessensens 132 Hernandez v. Mendoza, 199 Cal.App.3d 721 (1988)....:ccccseeseessescesees 126 Hongsathavij v. Queen ofAngels Med. Ctr., 62 Cal.App.4th L123 (1998)oeeesecestseseeesecssesesaeceseneeeeeesessseaesseeseseeesusasensessueass 91 Hypertouch V. Superior Court, 128 Cal.App.4th 1527 (2005)......... 64, 114 In re Cheryl H., 153 Cal.App.3d 1098 (1984)oececeeeecsseeeeseeesseengeee DA In Re TobaccoII Cases,46 CalAth 298(2009) .esscsssssesntseiceie passim In Re: Vioxx Class Cases, 180 Cal.-App.4th 116 (2009)... 116, 123 | Janik v. Rudy, Exelrod & Zeiff, 119 Cal.App.4th 930 (2004)...ee74 594115.10 TABLE OF AUTHORITIES(cont.) Page(s) Johnson y. Aetna Life Ins., 221 Cal.App.2d 247 (1963)...cesseseeeee 94 Johnson v. Ford Motor Co., 35 Cal.4th 1191 (2005)..cccccessccesssseseeees 99 Keenerv, Jeld-Wen, 46 CalAth 247 (2009) sessssssssssssssesesssisnsssevesseen 112 Kellerv. Tiwesday Morning, 179 Cal.App.4th 1389 (2009)wu. 36, 38, 62 Kobzoffv. L.A. County Harbor. 19 Cal.4th 851 (1998)...| veceatevees 98 KoreaSupply Co. v. Lockheed Martin Corp., 29 Cal.4th 1134 (2003) -.eeseeeeseseeees veseeseeasecsestsesansseeaesadeateneeseeaseteeseeeseees 119, 120, 139 Korsak v. Atlas Hotels, 2 Cal.App.Ath 1516 (1992)ws94 | | Kraus v. TrinityMgmt. Servs., 23 Cal.4th 116 (2000)... beceetseteseeseseeees 120 Leslie G. v. Perry, 43 Cal.App.4th 472 (1996) ssssscsssssssssssessssssssssssssscsseee 91 Luque v. McLean, 8 Cal.3d 136 (1972) seecccsssesseesesutetinscicosinsie 94 Massachusetts Mutual Ins. Life Co. v. Superior Court, 97 Cal.App.4th 1282 (2002).........eteessesscseescssecesaceneaeetieesesenaceesseecses 116 Mesecher v. County ofSan Diego, 9 Cal.App.4th 1677 (1992)... 1 Morgan v. Wet Seal, Inc., 210 Cal.App4th 1341 (2012).......38, 46, 49, 72 Mosesian vy. Pennwalt, 191 Cal.App.3d 851 (1987) c.csssscssessssseescsssessssses94 Norgart v. Upjohn Co., 21 Cal.4th 383 (1999). beseceeee seseeeneeessenses beceeeees 112 Ohiov. Barron, 52 Cal.App.4th 62 (1997) cecccsssssesssssssesssssssesesseseesssseee 64 Osuna v. Wal-Mart, 2004 WL 3255430 (Ariz. 2004)... ccecceseseeceseseseees 100 Palo & Dodioniv. Oakland, 19 Cal.App.2d 739 (1947) veesssssesssessnenne 124 People ex rel. Lockyerv. RJ Reynolds Tobacco Co., 116 CalApp-4th 1253 (2004) vccccsccssssssessssssseecsssssvsessssucsessssecessssssssseees 94 Xiil 594115.10 TABLE OF AUTHORITIES(cont.) Page(s) People ex. rel. Lockyer v. Fremont Life Ins. Co. , 104 Cal.App.4th 508 (2002) occcccccecesecesesseseeesseeeeees seevetaceeneeessens 122 People v. Ault, 33 Cal.4th 1250 (2004) seeeasesesaeeaessneeesseeseeaeeeertaeateaeenatense 94 People v. Brown, 8 Cal.4th 746 (1994). esceeeseteeseeteeeseeetetnesnteessseesees 94 People v. Campos, 32 Cal.App.4th 304 (1995) ..ccccescssssessssssessestessseees 95 People v. Catlin, 26 Cal.4th 81 (2001) weessevenderacsaeeesseoeseneee 95 People v. Coleman, 38 Cal.3d 69 (1985) .oeeeececeeteesseseeeaeeseteeeseseensce 94 -People v. Gardeley, 14 Cal4th 605 (1996)...seceeeeteeeeeateseseeeeseseeesseseseaneneed 91 People v. Kelly, 17 Cal.3d 24 (1976) sseeeeesnvensseeonesuinecssuirceennneenannatesssaa 66 People v. Leahy, 8 Cal.4th 587 (1994)... cccssecsesessecesssssecsessescsscssssscesers 66 People v. Riccardi, 54 Cal.Ath 758 (2012) ...cccecccssccssssssssccssestsceeseesceecees 94 | People y, Sandoval, 206 Cal.App.3d 1544 (1989) ....csssceesssesessesceeees 98 People v. Simon, 25 Cal.dth 1082 (2001) sesvanecessesssssusasssssesersesveseeseeesten 112 Pfizer v. Sup.Ct., 182 Cal.App.4th 622 (2010) .o..ceeccceeeseeeeeee 121, 123 PG&E v. Zuckerman, 189 Cal.App.3d 1113 (1987) .ecccccscceseseecessesceesseees 91 Pineda v. Bank ofAm., 50 Cal.4th 1389 (2010). eceeeeceeeeesstseetenenenes 120 Pratav. Super. Ct., 91 Cal.App.4th 1128 (2001) uw...betseeeesoeeeeees 120 Ramirez v. Yosemite Water, 20 Cal.4th 785 (1999)... 39, 40, 57, 75 Reese y, Wal-Mart, 73 Cal.App.4th 1225 (1999).sessesssssesssetestusssstseneesssee 63 Richmondv. Dart Indus., 29 Cal.3d 462 (1981) .cccecesessesseseesesssesseseee 129 Roddenberry v. Roddenberry, 44 Cal.App.4th 634 (1996) veecssecesssseessseees 91 XIV 594115.10 TABLE OF AUTHORITIES(cont.). | Page(s) Salvasv. Wal-Mart Stores, Inc., 452 Mass..337 (2008) .....cccceeceseesceeees 134 Sav-On Drug Stores, Inc. v. Superior Court 34 Cal.4th 319 (2004) oeeeecscesssssneeelecsesseseccsssssessecsrsessessssvsessucsserascersesseeacass passim Sevidal v. Target Corp., 189 Cal.App.4th 905 (2010) cooccsseeesee 121 Silva v. Block, 49 Cal.App.4th B45 (1996).ce ceceeesetecneesseeeseesstsesssecsaes 137 Soderstedt v. CBIZ S. California, 197 Cal.App.4th 133 (2011)42, 63, 74, 130 Sotelo v. Medianews Group, 207 Cal.App.4th 639 (2012) ....ecceseeeeeeee 29 Telles Transp., Inc.v. WCAB, 92 Cal.App.4th 1159 (2001)... | 1] Tucker y. Pacific Bell Mobile Servs., 208 Cal.App.4th 201 | (2012) eeeeeecereersseetesseseseens seeseeeeeeraceeeeecatesssreenescesteeneeaee 115, 116, 123 Walsh vy. LKON,148 Cal.App.4th 1440 (2007) .oeeceeeeeeseeeeeee vestacenees passim Whitfield v. Roth, 10 Cal.3d 874 (1974) ..c.cccscccssscscsscsesssseceeteseeesees 94,95 Federal Cases Anderson v. Mt. Clemens Pottery, 328 U.S. 680 (1946)...esses beseeeens 126 Aquilino v. Home Depot, U.S.A., Inc., 2011 U.S.Dist. LEXIS 15759 (D.NJ. 2011)ee cccecccccsssssessssscsecsssssssessesscsscssssesacseeneeesseve 7 Arch v. Am. Tobacco Co., 175 F.R.D. 469 (E.D.Pa. 1997) veces 100 Basco v. Wal-Mart Stores, 216 F.Supp.2d 592 (E.D.La. 2002)... 101 . Beauperthuy v. 24 Hour Fitness, 772 F.Supp.2d 1111. (N.D.Cal. 2011) coc ccecceccsesssccsesssseessessseeesecsesecssesseecsseeseaversatareasears 49 Beauperthuy, 772 F.Supp.2d L111 (N.D.Cal. 2011).eee77 Brady v. Deloitte & Touche, 2012 U.S.Dist. LEXIS 42118 (N.D.Cal. 2012)...eesevssesesvavseeseeeessesseesavesvesesseeeassseeacanes 36, 62 XV 594115.10 TABLE OF AUTHORITIES(cont) Page(s) Broussard v. Meineke Disc. Muffler Shops, 155 F.3d331 (4th Cir. 1998) oessaseaseaceaeeeseeaeeesaeesesaeeeeaeeneeteeeceseaaeesneateaswee LOL Casida vy. Sears Holdings Corp., 2012 U.S.Dist. LEXIS. - . 111599 (E.D.Cal. 2012) vocecceecsessesesessseseees sesseesesesscsssesteusevenee 75 Christopher v. SmithKline Beecham Corp., 132 S.Ct. 2156 © (2012) .eeececessesesesscsesescssescsssscsussssesssscsesscsescscasscsvsussescsesesscseensacarans 129 Connecticut v. Doehr, 501 US.1 (1991).eceeceeeees ... 34, 108, 109,.131 Cooper Indus. v. Leatherman Tool Group, 532 U.S. 424 (2001) vee eceesseecececessesceeeseseesesseseeseesssessceesecsessesessecsecrscsussleceaneneees 64 Cruz v. Dollar Tree Stores, 2011 U.S.Dist. LEXIS 73938 (N.D.Cal. 2011) ..ccccesesscsssessessesessssesscssessssesresbesnsnsatssees 36, 37, 62, 74 © Dilts v. Penske Logistics, 267 F.R.D. 625 (S.D.Cal. 2010)...eee: 71 Frahm vy. Equitable Life Assur. Soc., 137 F.3d 955 (7th Cir. 1998) ooecceecccesecssssesssteesetseetecteseeeeeees seeaeeeeeenenteeneessecteseceentareesheeeee 63 Gales v. Winco Foods, 2011 U.S.Dist. LEXIS. 96125 ND.Cal. 2011) ee eeeeecesteeesceeneesesesesseeeeneseeseseesenienensateereseseseeaes 42 Hilao v. Estate ofMarcos, 103 F.3d 767 (9th Cir, 1996) levtetttterssessees 13, 74 Inre Chevron, 109 F.3d 1016 (Sth Cir, 1997) oo. ececcccsessecsseeeesseesseens 100 Inre Fibreboard Corp., 893 F.2d 706 (5th Cir, 1990) voces 100 Inre SimonILitig., 211 F.R.D. 86 (E.D.N.Y. 2002) ..occccceseccscsseeeeeeeee 103 In re Tyson Foods, 694 F.Supp.2d 1372 (M.D.Ga. 2010)vce71 In Re Wells Fiargo Home Mortgage Overtime Pay Litig., 268 F.R.D. 604 (N.D.Cal. 2010) ..ceccesccscsccessesssssevescsesstesesereseseeeees passim In Re: High-Tech Employee Anti-Trust Litigation, 856 XVI 594115.10 TABLE OF AUTHORITIES(cont.) Page(s) F.Supp.2d 1103 (N.D.Cal. 2012)...veseeeeee sesstsvvetesseeeeees 120, 126 International BrotherhoodofTeamsters v. United States, 431 US. 324 (1977) oeecceeseeccesessessecssescsseessssenseaeees sesesseeeseteeeeneeeeeease 134 Jimenez v. Domino’s Pizza, Inc., 238 F.R.D. 241 (C.D.Cal. : 2008) seessseseacaeseseneeseasscseseseenssesessseasessessssessesseceasusssseaseaseeneaty 54, 60, 65 Johnsonv. Big ILots Stores, Inc., 561 F.Supp.2d 567(E.D.La. 2008)...Seeeeesaesensesesasescsecersceecsevseeaneseesecsaneessecdesaeeseeseeenseeasceeees 77 Johnson v. GMRI, 2007 U.S.Dist. LEXIS 52062.D.Cal. 2OO7) voecescescscscecesccesesescseecseesesescseseseseeeecseesseecssessecsucsasesseceas 125, 126 Kurihara v. Best Buy, 2007 U.S.Dist. LEXIS 64224 (N.D.Cal: QOO7) ecceceesesctecsesseseeccsgecsseeeseseeessenseessecsecsesesseecsesecsesscussssessassavaces 100 Maddock v. KB Homes, 248 F.R.D. 229 (C.D.Cal. 2007) .cececceeeeenenees 40 Marlo v. UPS, 639 F.3d 942 (9th Cir. 2011) occeeeeteeee 36, 38, 49, 62 Mevorah y, Wells Fargo Home Mortg., 571 F.3d 953 (9th. Cir. 2009)oeecseseestseceeessessssscessescsessesseseseeeseessnecsessessssccsussasavereas 40 Morgan v. Family Dollar Stores, 551 F.3d 1233 (11th Cir. 2008) seeeeeeeeaseceseeseussaseseaeeesaasecesneceaeeassedeesessessateessuesesaeeseeseteeseaes 76, 1 Mullane v. Central Hanover Bank, 339 U.S. 306 (1950) v.eccescceceesecsseesees 98 Ornelas v. United States, 517 U.S. 690 (1996) ....ccecccescesccssssssssesceeccesenes 64 Ostrofv. State Farm Mut. Auto. Ins. Co., 200 F.R.D. 521 oo (D.Md.2001)........sessesseseeceseesessnensaesssaueceseeesesaesesesseesaeessseausesstersuaree 75 Ruggles v. Wellpoint Inc., 272 F.R.D. 320 (N.D.N-Y. 2011) voces 75 Scott v. Raudin McCormick, Inc., 2010 U.S.Dist. LEXIS 130061 (D.Kan. 2010) ooeeeseseecesseseesesseseceseseeecesesacsessetsecseaaes 77 XVil §94115.10 , TABLE OF AUTHORITIES. (cont.) Page(s) Spainhowerv. U.S. Bank Nat’! Assoc., 2010U.S.Dist. Lexis 46316 (C.D.Cal. 2010)cccceesesseceeccnesenecaceeeetseseteneaeaseeees 43, 49 "Sterling v. Velsicol Chem. Corp., 855 F.2d 1188 (6th Cir. 1988) oeeccccecssscseasescsaeseeecseeeaeeessnecseacsesesesecsesseseesesseessaesesesseeases 100 Tate-Small v. Saks Inc., 2012 U.S.Dist. LEXIS 76081 (S.D.N.Y. 2012)voceceecceteccnceceescseseseeseeecssseeseseesssecsesesescesessanses 75 Tourgeman v. Collins Fin. Servs., 2011 U.S.Dist. LEXIS - | 122422 (S.D.Cal. 2011) vei cesecccsseseesesseeseeessssesseseeesecsecsessesseesnes 121 Vinole v. Countrywide Home Loans, 571 F.3d 935 (9th Cir. 2OO9) veccsccsccsessessseecesessccetecseessessssssessscseleseseeecsssaeeatesesecseacseess passim Wal-Mart Stores v. Dukes, 131 S.Ct. 2541 (2011) ccecsesscssseecssssesceeen passim _ Whiteway v. FedEx Kinkos, 2009 U.S.Dist. LEXIS 127360 © (N.D.Cal. 2009).seesevesssecaueceaesesusseesaeessesssessaesaneaeeseesaecseseeeaees 36, 49, 62 Wong v. AT&T, 2011 U.7Dist. LEXIS 125988 €.D.Cal. QOL) eeccecesctesscssseseeseceeetecsnesseseeeseeeesseseesssssesseesseeaseaeeesv.12, 74, 82 Statutes California Business and Professions Code Section 17200..2, 114, 115, 117 California Business and Professions Code Section 17203 eseeeeeenseees .. passim California Business and Professions Code Section 17204.............. 114, 115 California Business and Professions Code Section 17500.....scsseesseesee 115 | _ California Code of Civil Procedure Section 382 Leeeecccessscessssseseerseeeeeee117 California Evidence Code Section 1200 .....ccccccccscsiecscsscssesesescsecsssessenes 94 California Evidence Code Section 1220 cecsccssssssssssssssessssssssesssssssesssseee 105 California Labor Code Section 1194(a). cecceeseeeceeeeesbeevaeeeessecteessesenees 130. XVili 594115.10 TABLE OF AUTHORITIES(cont.) California Labor Code Section 203 ....cceccccscsessseseseeseseeseneeeesesesnees 130 California Labor Code Section 218.5 oo... eeeesscscesseeeeseeeeeeeeaeeseeeneasenenes 130. Rules California Rule of Court 8.528(C) ....cccccccccccsssecssteceeseceesseesteaeensesssaseeenees 141 Federal Rule of Civil Procedureo beseeees 74 Federal Rule of Civil Procedure 23(a)(2) sevsesssastsensesserassucsstecsssessesess 74, 75 Federal Rule of Civil Procedure 23(b)(2) sscessuseessusessuesssssueeatesssssssessaseseee 74 Federal Rule of Civil Procedure 23(b)(3) .....cceccssssssscesssessscsesseseeseeseaes 74, 75 Regulations | 8 Cal. Code Regs $1 1040(2)(M) veesssseseeessen seseeeeacenseenseesssscessaessesatscensieesess 39 Other Authorities DLSE Op.Ltr. 1998.09.08 ooeeseescscessescesssseesesesseseeseneesateeeesteneeeeeres 39 | Nagareda, Richard, Class Certification in the Age of Aggregate Proof, 84 N.Y.U.L. Rev. 97 (2009)...eee 132, 134 XIX 594115.10 INTRODUCTION This case is one of the only misclassification class actions that has been tried to judgment in California. As such, it is uniquely situated to reveal the dangers of forcing a procedural device that relies on common proof wherethe defense hinges on individualized issues. Thetrial court erroneously maintained class treatment despite an overwhelming predominance ofindividualized issues that rendered classwide liability and recovery determinations impossible. In doing so, the trial court trampled over U.S. Bank’s due process rights. Thetrial court then “extrapolated” liability and recovery findings from an undersized and gerrymandered sample to absent class members while ignoring basicstatistical principles and without any proofthat the sample testimonywas “representative,” culminating in a constitutionally andstatistically impermissible judgment. To affirm any part of the trial court’s judgment would require dramatically altering established substantive law solely to accommodate the class action device, a practice long prohibited by this Court. City ofSan Jose v. Superior Court, 12 Cal.3d. 447, 462 (1974). In light of the glaring statistical and due processerrors infecting this case and the lack of any common proofon the key disputed liability issue, the Court of Appeal properly applied existing law and longstanding principles to reverse the judgmentand decertify the class. The Courtof Appeal’s decision should be affirmedin all respects. In their complaint, Plaintiffs alleged that U.S. Bank (“USB”) misclassified all of its California Business Banking Officers (““BBOs”) as exempt from overtime. BBOs are non-branch employees responsible for marketing and selling bank products to small business customers within their assigned geographic areas. They set their own marketingstrategies, sales techniques, and working hours. USB asserted that BBOs were exempt from overtime requirements, relying primarily on the outside 1 594115.10 salesperson exemption. Attrial, Plaintiffs pursued only a claim underthe Unfair Competition Law, Business and Professions Code Section 17200 et seq. (“UCL”), premised on “borrowed”alleged Labor Code violations. The principal disputed liability issue was where BBOsspent a majority oftheir work time: inside or outside ofUSB property. Approximately one-third of the260 class membersstated in declarations under penalty of perjury that they spent the majority of their work time outside USB property, rendering them exempt from overtime requirements, and four former class representatives similarly confirmed at deposition that they spent the majority of their work time outside USB property. However, USB was precluded from presenting any of this evidenceattrial. Instead, the trial court deviseda trial plan thatlimited the trial evidence to a 21-class member sample (the “Representative Witness Group”or “RWG”). The trial court excluded any evidencerelating to all other 239 class members as “irrelevant.” Based on the RWGtestimony, and without any expert support, the . trial court “extrapolated”a blanketliability finding to the rest of the class and then identified an “average” amount of weekly overtimeto apply to all class members. While both parties’ experts agreed that there was no statistical basis for assuming that 100% ofthe class was misclassified and that-the estimate ofweekly overtime carried an astounding 43.3% margin of error, the trial court deemedits “classwide”liability finding uniformly applicable and determinedthat the inaccurate overtime estimate was acceptable. Althoughplaintiffs never proved misclassification nor overtime hours for every class member, the court awarded recoveryto all class members, averaging over $57,000 per person. USB was never permitted to challenge any non-RWGclaims,or present evidence from those knownto have been properly classified. 594115.10 Althoughthe tria] court nominally invoked “statistics” as a method to managethe classtrial, it ignored statistical principles in practice. Unable to endorse the court’s procedures, Plaintiffs’ statistical expert presumed that the entire class was misclassified only because the court had so decreed, and concededthat the numerical estimate of “average” hours worked by the RWGandthe attendant 43.3% margin of error were the best he could do given the imprecise findings of the trial court. The results of the ill-conceivedtrial plan were striking. One class member, Nick Sternad, received an award of over $450,000 even though (1) he executed a declaration stating he was primarily engaged in exempt outside sales activities; (2) he testified at deposition that he spent approximately three years as a BBOprimarily engaged in other exempt duties; and (3) the trial court prohibited USB from ever presenting evidence of Sternad’s duties or from challenging his entitlement to recover. See 20CT5603-5627; Trial Exhibit (“TE”) 1058, 1276. The judgment also | awarded approximately $160,000 to the four formerclass representatives, who Plaintiffs’ counsel removedafter they affirmed their exemptstatusat deposition, and nearly $6 million to the approximately 70 declarants whose uncontroverted testimony wasthat they were properly classified. For over 90% ofthe class, the trial court never required any showing of entitlement to recover. Presented with this record, the Court of Appeal unanimously reversed the judgment and decertified the class. The Court ofAppeal was persuaded by the Wells Fargo I opinion, which could not locate any case in which a court permitted a plaintiff to establish non-exemptstatus of class membersin an outside salesperson misclassification class action using representative testimony andstatistical sampling, particularly where there was no companywidepolicy or procedure that dictated where class members were to spendtheir time. Slip.Op. 51, 72-74. The Court of 3 594115.10 Appeal was dismayed not only by the trial court’s unprecedented use of sampling to determineliability, but also byits failure to observe foundationalstatistical protocols and lack of adherence to any scientific methodology, as manifested by the “troubling” 43.3% margin of error associated with the classwide overtime recovery. Slip.Op. 45-47. The Court of Appeal concluded that the judgment had to be reversed because of the trial court’s near-wholesale exclusion of probative relevant evidence in the interest of efficiency, which was a violation ofUSB’s due process rights. This evidence, if admitted and believed, not only barred many class members from recovering but might have defeated classwideliability entirely. Slip.Op. 46-47. Finally, the Court of Appealruled that thetrial court abusedits discretion by denying USB’s second decertification motion, which amply demonstrated that individual issues predominated the liability determination for each class member, rendering continuedclass treatment improper. Slip.Op. 71-74. Although Plaintiffs suggest that the Court of Appeal created a new rule for class actiontrial procedures, longstandingclass certification and due process principles alone required reversal and decertification. The Court of Appeal created no rule suggesting that a class action defendant alwayshasa generalized right to present any defense against every class . member. Rather, the Court of Appeal confirmed the fundamentalprinciple that even in a class action, a court must manageindividualissues, not ignore them. Plaintiffs propose a model for how class actions “should”betried, suggesting that a liability phase addressing a defendant’s “practices” and “expectations” should generate a “classwide”liability presumption, followed by a “damages”phase, during which a defendant may challenge class members’ entitlement to recover. Notably, Plaintiffs’ hypothetical model bears no resemblanceto the trial in this case, which consisted of a 4 594115.10 Phase I classwideliability and average recovery finding based on a sample set and followed by a PhaseII “battle of the experts” for the singular purpose of extrapolating the sample findings to the remainderofthe class. Thetrial plan was always premised on reaching a classwide judgment and award without permitting USBto challenge individual entitlement to recovery at any point. The problem with this plan was that there were no common policies or practices capable of resolving classwide liability and no common evidence from which to calculate classwide recovery. Plaintiffs posit ominous questions for this Court to resolve, claiming that the Court of Appeal’s decision would severely limit or even end California wage and hourclass actions. Plaintiffs grossly exaggerate. First, Plaintiffs made the unusualtactical decision to dismissall legal claims for damages and penalties before trial and instead pursued the distinct and limited equitable remediesofrestitution and injunctive relief provided under the UCL. Thus, this case’s resolution need not have a controlling effect on Labor Code class actions. Furthermore, unlike the vast majority of class actions, this case wastried, rather than settled, and thetrial record here demonstrated that no remotely workable method for determining liability was ever devised due to the specific factual dispute at issue. Most critically, whether or not a class action defendant has a due processright to raise a defense separately as to each class memberin a class action is not a question raised by this case. The scope of a defendant’s due process right to present a particular defense is determined by the substantive law and the facts of each case, not by the procedural vehicle utilized. Commonissues capable of resolution in a single stroke through commonevidence can be litigated on a commonbasis, and class actions are intended to resolve such issues. However, certifying a class does not convert an individualized issue into a commonone, and Plaintiffs’ insistence that they must be permitted to prove liability on a commonbasis because this is a class action misses the 5 594115.10 mark. One ofthe questions the Court must answeronthis record is whether, where USB’s affirmative defense necessarily hinged on individualized facts and liability could not be proved by “common” evidence, USBhadthe right to present that defense on an individualized basis. This case presents the rare instance wherea trial court exercisedits discretion to certify a class even thoughthe primary issue to be tried—where individual employees spenttheir time—could not be proved on a common basis. The results of the first phase of trial showedthat the statistical methods Plaintiffs hoped to rely upon failed miserably to support any classwide liability determination or recovery calculation. Becausethefirst phaseoftrial revealed no evidence capable of rendering a common resolution and instead proved that individual issues were unmanageable, decertification was required. Thetrial court’s decision to instead forge ahead witha trial plan designedto insulate the “classwide”liability finding from the voluminouscontrary evidence proffered by USB wasan abuse of discretion, and this Court should affirmthe decision of the Court of Appeal in full. - STATEMENT OF THE ISSUES Plaintiffs’ presentation of the issues is misleading and,as a result, USBrestates the actual issues before this Court as follows: (1) A defendant’s right to raise affirmative defenses to individual claims in this UCL class. action. | The issue is not whether, “[i]n a wage and hour misclassification class action, does the defendant have a due processright to assert its affirmative defense against every class member?” Opening Brief (“OB”)1. Rather, in a wage and hour misclassification class action based on the 6 594115.10 outside salesperson exemption broughtas a violation of the UCL, where there is no commonpolicy or practice requiring employees to spend a majority oftime inside the employer’s facilities and employees are given unfettered discretion to carry out their job activities in a manner and at _ locations of their choice, and wherethe employer has evidencethat at least approximately one-third of the class was properly classified as exempt (including that of the first four class representatives), does the employer havea dueprocessrightto raise individualized defenses against class members’ claims? (2) The propriety ofclass treatment here. The issue is not “can a plaintiff satisfy the requirements for class : certification if a defendant has a due processright to assert its affirmative defense against every class member?” OB1. Instead, if the evidence shows that determining liability for each class memberinvolvesresolution of numerousfactual issues and credibility determinations that vary for each class member, is class treatment appropriate? (3) The useofstatistical sampling and representative evidence. Theissueis not “can statistical sampling, surveys and other forms of representative evidence be used to prove classwideliability in a wage and hour misclassification case?” OB1. Instead, the true question is: were sampling and representative evidence permissible to prove classwide liability in this wage and hour misclassification case where there was no commoncorporate policy or practice that impacts the liability analysis for all class members? 594115.10 (4) Appellate review issues. This issue is not “[w]hen an appellate court reviews a class action judgmentand an order denying class decertification, does the appellate court prejudicially err by (a) applying newly-announcedlegal standards to the facts and then reversing the judgment and the class order without providing for a new trial and/or (b) reweighing the evidence instead of reviewing the judgmentand order underthe substantial evidence standard of review?” OBI. In reality, the correct issue is did the Court of Appealapply the proper standard of review whenit determined that (1) the de novo standard of review applied to determine whetherthe trial plan met constitutional due process standards; and (2)thetrial court had abusedits discretion in making erroneous legal assumptions and applying incorrect legal criteria that gave _ undue emphasis to USB’s uniform classification of the job position, and assumedthat liability determinations for the class could be based on the findings of the undersized, manipulated, and unrepresentative RWG sample group? STATEMENTOF THE CASE A. The BBO Position.’ The BBOs’primary duty is to create and execute sales strategies that maximize their ability to.sell loans, lines of credit, and other financial products to small businesses. See, e.g., TE6; 20RT568-569; 42RT2903, 2917-2918; 49RT3894; 61RT4974-4980. In that role BBOsare expected to meet with prospective and existing customersat their business locations, ' Theposition at issue was previously titled Small Business Banker (“SBB”). After a merger in 2001, the position was renamed “Business Banking Officer” (“BBO”). 42RT2940-2941; 61RT4974-4975. 594115.10 network at community events, and develop relationships with referral sources — activities that require BBOs to work outside of USB’s premises. Id.; 8CT2173, 2297-10CT2694; 21RT633-635; 22RT899, 913-918; TE1000-1001; 24RT1058; 29RT1503; 46RT3586. USB expects BBOsto spend 80% oftheir time on these “outside sales activities.” TE6; 43RT2982; 60RT4895-4896; 62RT5030-5031. Contrary to Plaintiffs’ assertion, BBOs are not “branch employees” and nothing in the record suggests the otherwise. See, e.g., 42RT2903- 2904, 2912; 49RT3894-3896. USB has no commonpolicy or practice that tied BBOsto any specific branch or required BBOsto spend a majority of their time inside USB’s facilities. Rather, nearly every function of a BBO can be, and frequently is, performed outside USB facilities, which is evidenced by the fact that nearly one-third of the class confirmed that they spent over 50% oftheir time engaged in sales outside the Bank, rendering them properly exempt. TE1000-1001, 1006, 1017, 1025-1063, 1087, 1095- 1137, 1184-1187, 1206-1278; 68CT20174-20188; 8CT2171-2181; 8CT2297-10CT2694. Although USBpresented evidencethat it expected BBOs to spend the majority of their time outside Bank property, the trial court concluded that USB “did not care” where BBOsspent the majority of their time. 64RT5119-5122, 5132-5135; 71CT21009. Therefore, no commonpolicy or practice exists to show how everyonein the class spent their time or to establish the realistic expectations defense with commonproof. Rather, BBOsare incentivized to work autonomously to achievetheir sales goals and desired levels of compensation because they are paid on a salaried basis with the ability to earn uncapped commissions on products they sell. See TE3, 9, 10, 14-16. BBOs work largely unsupervised, come and go as they please, and havethe discretion to set their schedule to carry out their job activities in the manneroftheir choice. 8CT2173-2176; 8CT2178-2179; 9 594115.10 8CT2297-10C1T2694; 22RT803-804, 811-812; 25RT1151-1152; 27RT1244; 29RT1400-1401; 31RT1723, 1799-1800; 32RT1880; 33RT1977-1978; 36RT2255-2257; 38RT2429-2430; 44RT3171; 45RT3347-3348: 47RT3634; 49RT4049-405 1; 52RT4371-4372. The amountoftime BBOs spend outside the Bank varies day-to-day, week-to-week, and at various points during each quarter. See, e.g., 31CT8932-8935, 9011-9012, 9043-9045, 9069-9072; 32CT9223-9224; 62CT18405-18408; 40RT2611-2612, 2694-2696, 2714-2715; 38RT2424- 2426; 20RT577,; 30RT1673-1676; 33RT1960-1961; 46RT3463-3466, 3473-3474. The amount of time BBOsspent on outside sales also varied fromquarter to quarter and year to year. See, e.g., 46RT3463-3466; 31CT9084-9085; 36RT2244-2246. BBOs made differing and individual decisions regarding how muchtimeto spend on various tasks, depending upon numerousfactors. See, e.g., 30RT1674-1675 (Anderson’s duties varied daily in response to customer needs); 34RT2046, 2097, 2101-2102; 31CT9049-9056, 9059-9060 (Morales spent 1-10 hours per week on in- person cold calls, additional time at civic functions, and unspecified time traveling to/from client meetings out of the office); 53RT4481-4483 (Dampier expected 10-15 outside appointments per week); 31CT9079-9080 (Wheaton spent 90% ofhis time outside the branch on Tuesdays, Wednesdays, and Thursdays, spent over 60% ofhis time outside the branch on Fridays, and spent moreofhis time inside on Mondays); 31CT9032- 9036 (Parker’s hours worked and duties performed varied from day-to-day, depending on the numberofbranches she was covering, deals pending, whattime in the quarter it was, and whether she wasdoing different product focus, meetings, or sales “blitzes”). Thus, while BBOs may perform the same broad job duties, there is tremendousvariation in the amount of time that each BBO choosesto spend on individual tasks as well as where those tasks are performed, which largely dependsonclient needs, 10 594115.10 as well as the BBO’s personal preferences and sales approach. Within that context, at least one-third of the class members confirmed that they used their time in a way that rendered them properly exempt. B. Certification Proceedings. 1. Plaintiffs’ Counsel Cycled Through Four Uninjured Class Representatives. Amina Rafiqzadafiled this action in 2001, alleging that USB misclassified BBOs as exempt employees. 1CT1-16. Rafiqzada alleged (1) - violations of the Labor Code for misclassification, failure to pay overtime, and associated penalties; (2) conversion; and (3) violation of the UCL. Jd. Oneyearlater, Plaintiffs’ counsel replaced Rafiqzada with three new class representatives (Vanessa Haven, Abby Karavani, Parham Shekarlab). | 3CT529-545. Before movingfor certification, Plaintiffs’ counsel substituted in two new class representatives, Sam Duran and Matt Fitzsimmons. 16CT4447-4462. All four prior namedplaintiffs, who were represented by Plaintiffs’ counsel at deposition,testified that they spent a majority of their time outside ofUSB branches engaged in sales activities. 68CT20174-20188. | 2. Initial Certification Briefing. In January 2005, the parties filed simultaneous motions concerning class certification. 6CT1602-1629; 7CT1783-1821. Requesting denial of class certification, USB submitted 83 declarations from putativeclass 2 On September8, 2004, the court ordered that a curative notice be issued to putative class members dueto Plaintiffs’ counsel’s unethical communications with putative class members. 3RT59-60, 90-95; 4CT1079-1080, 1087-1090; 5CT1123-1125 (BBO Kit Skelton declared that Plaintiffs counsel told her she could be entitled to $45,000 if she claimed to have been misclassified). However, the court never issued any such notice. 11 594115.10 members who described their job duties. Of these declarants, 75 stated they regularly spent more than half their time outside ofUSB branches engaged in sales activities. 7CT1804; 8CT2172-2173; 8CT2297-10CT2694. 3. Four Of The Parties’ Declarants Submitted Multiple, Inconsistent Declarations. Four of the 75 individuals who executed declarations supporting USB’s positions subsequently reversed their prior statements under penalty of perjury and submitted contradictory declarations for Plaintiffs. Plaintiffs argue, without any factual support, that the existence of conflicting declarations from these class members proved that USB’s attorneys had obtained these declarations “under false pretenses.” OB18. In fact, the credibility issues raised by these conflicting declarations were never _ resolved, either at the certification stage orat trial, providingillustrations of the myriad individualissues that the trial court ignored from certification through the entry ofjudgment. | For example, Angela Bates executed one declaration indicating that she was exempt and a subsequent onefor Plaintiffs making contrary claims. The USBattorney who spoke with Bates informedherthat the attorney represented USB and explained that Bates could make any changes she wished. 1CT(Supp)265-266. To the extent Bates’ second declaration is believedat all, it irreparably undermineshercredibility as to both declarations, since Bates asserts that she saw no neédto carefully review a declaration to confirm its truth if she trusts the drafting attorney and believes that attorney represents the employees. 1CT(Supp)218-219. Sylvia Bacalot likewise executed one declaration supporting USB’s position and later executed a contrary declaration for Plaintiffs. Bacalot’s second declaration carefully avoids everstating that the contents ofherfirst declaration differ from what she told USB’s attorney. Instead, Bacalot merely states that herfirst declaration contradicts the information in her 12 594115.10 second declaration and the information in her first declaration was “incorrect.” 11CT3079-3080. Bacalot’s second declaration changed her story to one more consistent with her financial interests in a recovery. 83CT24698. USB’sattorney made clear that Bacalot could change her declaration, and Bacalot maderevisions, initialed every page, and signed the declaration under penalty of perjury. 15CT4116. Bacalot’s first - declaration accurately sets forth what Bacalot told USB’s attorney. 15CT4116-4122.° Although Plaintiffs suggest that the court believed the later declarations submitted by Plaintiffs and disbelieved the earlier declarations submitted by USB,in fact the court admitted all the proffered evidencefor the purpose of ruling on certification and declined to make any findings 3 Plaintiffs also reference Debra Schnell and Ken Rattay: Schnell contradicted her first declaration and submitted a second declaration alleging misconduct by an attorney with the firm representing USB. However, the USB attorney Schnell alleges she spoke with never contacted Schnell or any putative class membersin this case. 1CT(Supp)293. Schnell’s false allegations regarding an attorney she never spoke with irreparably damagehercredibility. In Schnell’s second declaration, she simply disavowsherprior statements and asserts her financial interest in a recovery. There is no credible evidence USB engagedin any misconduct. Rattay submitted two declarations, one confirming his exemptstatus and a second attempting to support his entitlement to recover a substantial sum of money. 83CT24702 (court awarded Rattay over $270,000). USB’s attorney informed Rattay that he represented USB and made changesto an initial draft declaration at Rattay’s request, and Rattay signed the declaration under penalty of perjury without seeking further revisions. 10CT2620-2626; 11CT3113-3114; 12CT3462-3463. Rattay later claimed that he provided the USB attorney with false information to complete the interview process more quickly, but could not explain how his allegedly false statements would have furthered that goal. 12CT3457-3460; SCT1228. 13, 594115.10 with respect to the weight to be afforded to the parties’ declarationsor their reliability. 16CT4534.4 4. Initial Certification Order. The court ultimately certified a class of “all employees who worked for [USB] in California as either a [BBO or SBB], at any time between December 26, 1997 and September 26, 2005.” 16CT4474, 4521, 4652, 4654; 83CT24649. Although USBpresented evidence indicating that BBOs’ duties varied day-to-day and week-to-week, and that BBOsspent varying amounts oftime inside/outside of USB’s property, the court rejected USB’s argument that a BBO’s exemptstatus and entitlement to recovery required an individualized, fact-intensive analysis. C. The Trial Court Summarily Dismissed The Administrative And Commission Sales Exemptions. In September 2005, Plaintiffs filed a motion for summary adjudication (“MSA”) on two ofthe three exemptions USB asserted: the administrative exemption and the commission sales exemption. 17CT4758-4769. The court granted Plaintiffs’ motion on the commission sales exemption. With respect to the administrative exemption, the court permitted USB to depose 10 additional class members. 19CT5452-5457. * One ofPlaintiffs’ declarants, Nicole Raney, claimed that a USB attorney asked her to sign a declaration that she disagreed with and refused to sign, demonstrating that BBOswerefree to decline to sign declarations for USB. Contrary to Raney’s implausible descriptions, a USB attorney met with Raney, discussed her workin detail, prepared a declaration, and faxedit to Raney with a letter instructing Raney to refrain from signing the statement it if was not accurate and to request any necessary revisions. 1CT(Supp)275-290. A second USBattorney followed up and sent Raney another copy ofthe draft declaration. 1CT(Supp)273. When Raney indicated she did not wantto take the time to go through revisions, the - attorney ended the call. 1CT(Supp)273. Neither attorney pressured Raney in any way to sign a declaration. 1CT(Supp)273, 276-280. 14 594115.10 Nine depositions were taken, and two ofthose deponents confirmedthat they performed administratively exempt duties. 19CT5590-5593, 20CT5600-5671.° Nevertheless, the court granted Plaintiffs’ motion on the administrative exemption on the ground that administratively exempt duties wereatypical for BBOs. 20CT5845-5848. Four of the nine BBOs deposed in connection with the limited discovery permitted on the administrative exemption confirmed at deposition that they regularly spent a majority of their time outside bank property engaged in sales activities during some or all of their tenure as BBOs. 31CT9000-9001, 9011-9012, 9079-9080, 9084-9085. Thetrial courtalso ruled that California law does not permit “tacking” of exempt duties under multiple exemptions in orderto meet the 50% threshold for exempt time, and that it was therefore unnecessary to consider whether any BBOsmight have spent a majority of their time engaged in exemptduties if their total exempt time under multiple exemptions was considered. 19CT5454-5455; 20CT5843. Hence, even as to the 21 RWG memberswhotestified at trial, USB was not permitted to fully challenge their exempt status because it was precluded from introducing testimony that they were properly classified under the administrative exemption, or a combination of the administrative and outside salesperson exemptions. 45CT13298; 79CT23514. D. Pre-Trial Proceedings. 1. The Trial Court Formulated A Trial Plan Without Expert Endorsement. The parties engaged in monthsofbriefing and conferences regarding a trialplan. 8RT203-207; 20CT5852-22CT6289; 23CT6557-6613. USB proposed determiningliability and damages through individual mini-trials > Plaintiffs appear to concedethis point. OB29. 15 594115.10 using special masters, a class action device specifically referenced in Sav- On Drug Stores, Inc. v. Superior Court, 34 Cal.4th 319, 340 n.12 (2004). - 2CT(Supp)349-351; 20CT5896; 21CT5917-5929. Plaintiffs advocated using a survey and pilot study to determine an appropriate sample size, followedbytrial of sample cases and then a “damages” phase. 20CT5853- 5867; 21CT5917-5957. . In September 2006, the court declared its intent to use “representative testimony”at trial, requested briefing as to the appropriate sample size, and stated that a sample size larger than 50 “is too high.” 21CT6163-6166; 1ORT233-235. USB objected that the contemplated use of “representative testimony” was improper, but maintained, in response to the court’s direction to propose a sample size, that any sample, if used at all, ought to contain at least 50 class members. 21CT6181-22CT6208; 22CT6228-6230. In October 2006, the court declared, without any expert endorsement, that the sample fortrial would consist of 20 randomly selected class members andfive alternates to determine classwideliability — and damages, referring to them as the “RWG.” 22CT6243, 6289; 2CT(Supp)397. The court later deemed Duran and Fitzsimmons part of the RWGand eliminated one randomly-selected RWG member whoignored a subpoenato appearattrial, resulting in a sample of 21. 83C1T24626-24627. Asoriginally formulated, the court’s trial managementplan called for determining liability and alleged hours worked for each RWG,and an overtime average for the group in Phase I. Following these anticipated mini-trials for theRWG,the trial plan called for evidence during Phase IT regarding the propriety ofextrapolating the PhaseI findings with respect to 16 594115.10 liability and recovery to any non-R.WGclass members.° 23CT6615; 71CT20988; 77CT22983-22986. 2. Plaintiffs Dismissed All Legal Claims And Remedies. Plaintiffs voluntarily dismissed their legal claims and proceeded only on the equitable UCL claim to avoid a jury trial. 2CT(Supp)390-394; 22CT6290-6293; 23CT6618. The Third Amended Complaint (“TAC”)’ filed November 30, 2006 dismissed the conversion claim, Labor Code claims, requests for punitive damages andstatutory penalties. 23CT6619- 6632. The court struck all references to “damages” and “disgorgement” because the only available remedies under the UCLarerestitution and — injunctiverelief. 25CT7180-7182. | 3. The Trial Court Altered The RWG Composition. Following the dismissal of legal claims, the court ordered a second class notice allowing class membersto opt out of the action despite USB’s objection that a second opt-out period would compromise the randomness 6 Later, between Phase I and PhaseII,the trial court indicated that it no longer intendedto follow its original plan and instead made a “classwide” liability determination before hearingany expert testimony. 79CT23514. At that point, the trial court re-formulated the remaining phaseoftrial as intended to determine only extrapolation of “recovery” for individual class members. 83CT24623. ’ The court permitted Plaintiffs to assert new meal/rest break claimsin the TACbut denied certification of those claims five days beforetrial. 25CT7181-7182; 38CT11088-11098. In its Statement of Decision, the court applied the wrong standard to the named Plaintiffs’ remaining individual meal/rest break claims by assessing whether USB “ensured”that Duran and Fitzsimmonstooktheir breaks. 71CT21000-21001; 21RT664; 29RT1549-1556. Brinker v. Super. Ct., 53 Cal.4th 1004, 1017 (2012). The court also erred by awarding Duranrecovery for three violations per day on his meal/rest break claims. 83CT24636-24638; UPS v. Super. Ct., 196 Cal.App.4th 57, 60 (2011). 17 594115,10 of the RWG becauseindividuals selectedto testify might opt out to avoid participating in the trial. 12RT256; 23CT6571-6574, 6614-6616, 6633- 6634; 25CT7341-7353. Nine additional class members opted out, including fourofthe initially-selected RWG members. 25CT7285-7290. Twoofthe four RWG members whoopted out had previously testified that they spent a majority of their time engagedin sales activities outside of USBproperty, and Plaintiffs’ counsel persuaded them to opt out, given their knowntestimony favorable to USB. 25CT7306-7314, 7322-7326, 7333-7340; TE1115; 31CT9000-9001, 901 1-9012; 46RT3501-3509, 3562; 52RT4410-4411; 53RT4465. USB moved to have them reinstated as RWG witnesses, which the court denied. 25CT7298-7319; 26CT7430-7431. The court also eliminated one RWG memberbecause Plaintiffs’ counsel represented that he did not perform BBO job duties despite holding the BBO title. 18RT431-434; 38CT11124-11128; 45CT13297. 4. USB’s First Decertification Motion. USB filed a Motion to Decertify the Class in March 2007, arguing that the RWG and MSAdepositions, coupled with approximately 70 class member declarations previously submitted, demonstrated that myriad individual issues (bothasto liability and damages) predominated. 29CT8429-30CT8613, 8733-32CT9278. Before the decertification motion hearing, the Court ofAppeal, in Walsh v. IKON, 148 Cal.App.4th 1440, 1448, 1462 (March 28, 2007), confirmed the impropriety of certifying a class of employees where the employerasserted the outside salesperson exemption and established that determination ofliability turned on how each individual performedhis job duties. 32CT9362-9379. The court denied the motion. 38CT11089-11098. | 18 594115,10 E. Phase I Trial. PhaseI ofthe trial began in May 2007. 45CT13215. The parties did not dispute that BBOs performed sales work, and the primary issue attrial was where each RWG memberspent the majority of his/her work time each week, along with the hours each individual worked and the nature of USB’s expectations for the BBO position. USBsoughtto call all individualclass membersin light of the individual nature ofthe primary issue onliability, but the court prohibited USB from calling any non-RWG class member unless that individual supervised an RWG member. 21CT5926; 38CT11164-11171; 44CT12975-12978; 45CT13194-13203, 13298. The court also prohibited USB from introducing any declarations signed by non-RWGclass members. 18RT448-449; 48CT14258-14276; 55CT16129- 16143, 16146, 16164-16165; 64RT5124-5128. Thetrial court denied USB’s motionin limine seeking to require testimony from all originally selected RWGwitnesses to remedy the non-random selection process utilized by the court. 43CT12550-12606; 45CT13286.. Plaintiffs called the RWG membersas witnesses in Phase I. USB called 18 witnesses, consisting primarily of Sales Managers who supervised the RWGs,as well as impeachment witnesses, USB’s Human Resources ManagerLinda Allen, and Payroll Manager Timothy Bruzek. Phase I required 40 court days, concluding in September 2007. 48CT14245; S55CT16144. 1. RWGTestimony. The trial evidence showedthat each RWG member’s entitlement to recover depended on numerousintricately detailed factual issues. 19 594115.10 a. Several RWG Members Previously Admitted They Were Exempt. (1) Chad Penza Chad Penza signed two declarations under penalty of perjury stating that he spent a majority of his time outside of branch locations engaged in sales activities and confirmed the accuracy ofthose declarations at one | point during trial. TE1000-1001; 22RT883-885, 887-888, 899-903; 23RT979-991. Penza told another USB employeethat the secret to his success as a BBO wasthe significant amountoftime he spentoutside the Bank meeting with new customers and networking, and that he increased his efficiency by scheduling multiple appointments back to back when outside bank property. 44RT3186-3188; 46RT3493-3496 ; see also 60RT4906-4911, 4920-4922 (former sales manager Hector Zatarian corroborating Penza was mostly outside forat least his first five quarters). Penzalater changedhistrial testimony, claiming to have spent the majority of his time inside the branch. 22RT893-895; 23RT983. Penza _ nevertestified that anyone at USB knew the contents of either declaration or requested Penza to sign them. Penza neverrecantedhis admissionthat he spent at least the first two weeks as a BBO outside the branches and the trial court found he wasproperly classified during thistime. 22RT849-850, 891-895; 71CT21005. (2) Steven Bradley Steven Bradley executed a declaration confirming that he spent the majority of his time outside the Bank engagedin sales activities. TE1087. Bradley agreed the information wastrue and accurate when he executed the declaration and admitted he signedit voluntarily, without any pressure. 40RT2671-2673. Bradley also admitted that he providedall the information contained in his declaration to an attorney representing USB, 20 594115.10 that he was provided an opportunity to review the declaration for accuracy, andthat he understood USB would use his declarationin this litigation. 40RT2674-2680. At his deposition three months before trial, Bradley testified his manager told him he needed to spend the majority of his time outside the Bank“in the market” engaged in sales. 40RT2685-2696. Bradley admitted he received the BBOjob description, and that he spent the majority of his time outside the Bank, passing out fliers, meeting with customers, and conducting in-person cold calls. Id.; 42RT2834-2840; see also 47RT3671-3674 (corroborated by Regional Manager). At the time he was deposed, Bradley had rebuffed attempts by Plaintiffs’ counsel to contact him. 42RT2855-2857. Attrial, Bradley’s testimony completely changed. He denied being told of USB’s expectations or receiving a job description. 40RT2685-2689. He further denied that he spent the majority of his time outside the Bank. The reason for this complete change of testimony washisalleged “faulty memory” that was “refreshed” by expense reimbursementrecords, which Bradley admitted do not reflect all of the outside sales activities he performed or the amountoftime he spent outside the Bank. 40RT2689, 2706-2708, 2713-2717; 42RT2846-2855. When askedattrial to provide an estimate of the amountoftime he spent outside the Bank, Bradley “candidly” replied that he could not provide an estimate and admitted that it was “an imprecise process.” 40RT2713-2716. (3) Nancy McCarthy Nancy McCarthy started her employment with USBas a personal banker. She later became a SBB so that she would not be “tied to the office,” and would have more flexibility to meet with customers outside the Bank. 29RT1622-1623, 1593-1594. McCarthy stopped working as a SBB over seven years prior to her testimony, yet claimed to have entirely new 21 594115.10 “recollections”at trial that differed dramatically from her deposition testimony just several monthsbefore. McCarthy’s former manager Ashil Abhat informed McCarthy, both before and after she became an SBB,that the position required McCarthyto be out in the market, engaged in sales activities, 75-80% ofthe time. 29RT1620-1621; 62RT5043-5051, 5031-5033, 5035-5038. At her deposition, McCarthy admitted that more often than not she spent more thanhalfher time as a SBB outside the Bank engagedin sales activities. 29RT1635-1637. Attrial, McCarthy inexplicably recanted her prior deposition testimony and “suddenly recalled” that she in fact never spent more than half of her time outside the Bank in any week. 29RT1610- 1613, 1625-1637. McCarthy did not review any documents between her deposition andtrial. The only intervening factor between her deposition and trial testimony was that McCarthytalked to Plaintiffs’ counsel. 29RT1625. McCarthy provided no explanation whyshe affirmed, three different times during her deposition, that she spent the majority of her time outside the Bankin nearly half of her tenure as a SBB,and yet reversed her testimonyattrial. (4) Adney Koga Adney Koga admitted priorto trial that he was properly classified as an exempt employee. Koga executed a declaration under oath affirming that he spent 55% of his time as a BBO engagedinsales activities outside the Bank. TE1017; 36RT2237-2238. Koga reviewedthe declaration two weeks before signing it, and never requested any revisions. 36RT2225, 2238-2242. Attrial, Koga tried to escape this binding admission by claiming (1) the percentage of time reflected in the declaration he signedis wrong; and (2) Koga knew it was wrongat the time hesignedit, butfelt “pressured” to execute the declaration. These reasons lacked any 22 594115.10 evidentiary support. 36RT2267-2268. Specifically, Koga admitted that it was possible and even likely, that he provided the attorney who interviewed him with all of the substantive information in the declaration, and previously admitted that all of the information in his declaration was truthful and accurate, but attempted to recant only the percentage oftime he spent outside the Bank. 36RT2221-2243, 2274-2277. Koga had no explanation for providing false information tothe attorney and no explanation as to why he signed an inaccurate declaration. There is no evidence anyone pressured, misled, or coerced Koga into signing the declaration. TE1016-1017; 35RT2203-2207; 36RT2225-2239; 49RT3949-3951. Other class members whosigned declarations stating they spent the majority oftime outside the Bank denied feeling any “pressure,” and denied the belief that USB’s attorneys represented them, as Koga contended. See, e.g., 40RT2671-2673; 46RT3566-3568; 52RT4456- 4460. b. Several RWG MembersTestified That They Did Not Work Over 8 Hours Per Day Or 40 Hours Per Week. Several RWG members, including Lindeman, Bradley, and Gediman,testified they generally worked 8 hours a day and 40 hoursa week, or less, and thus, have not been injured. 42RT2858-2860, 2883- 2884; 26RT1219-1220, 1223-1224, 1236-1238; 33RT1978-1983. Cc. Some RWG Members’ Duties And Activities In Non-Class Positions Were Used To Find Liability And Calculate Recovery. Petty performedthe duties of a Business Banking Relationship Manager, managing existing customerrelationships (rather than bringing in new business through outside sales), but wastitled a “Business Banking Officer” due to a merger. 25RT1108-1109, 1127-1133; 26RT1171-1172; 23 594115.10 48RT3839-3845, 3881-3884; 29CT8541-8542; TE1080; 25RT1096; 26RT1161; 42RT2940-2941; 48RT3 837-3846, 3854; 56RT4674-4677; 61RT4972-4975, 4993-4995. Petty was also barred from recovery because he signed release ofall claims against USB. TE1081-1082. Nevertheless, the trial court ruled that Petty’s duties (spending a majority of time inside, albeit performing a different job) and hours would be “extrapolated”to the class. 71CT21005-21006. In his last three months as a BBO, Matt Gediman wasanacting Sales Manager. Althoughhis official title remained “BBO,”his duties of supervising and managing a team of BBOs“took priority over anything else [he] did.” 26RT1191, 1254-1260. Despite Gediman’s exempt, non- BBO duties duringthis period, the court included Gediman’s “overtime” hours as an acting Sales Manager(the only “overtime” Gediman ever worked) to computethe “average”for the RWG, which wasthen extrapolated to the class. 71CT21001. | d. Some RWGClaims Should Have Been Barred By Equitable Considerations. USBpresented evidence showing that certain class members should be precluded from recovering in this equitable action because they engaged in resume fraud, made false statements under oath, and knowingly failed to disclose their potential overtime claim in this action in bankruptcy proceedings. Duran, in an employment application that he signed underpenalty of perjury, described his position at USB as “outside financial sales” yet maintainedat trial that he spent the majority of his time inside. TE1083; 29RT1528-1548, 1556-1562. On that same application, Duran willfully misrepresented the salary he earned as a BBO. 29RT1531-1540. Duran blamedthis lie on advice allegedly received from David Vallecillo, his 24 594115.10 headhunter. Vallecillo, a third-party witness, testified he never instructed Duranto lie. 52RT4378-4382. Jonathan Vu admitted he lied on his employment application and resume submitted to USB, claiming to have a bachelor’s degree, when he never obtained any college degree, and also admitted to material omissions in application documents designed to concealprior terminations and poor performancein order to obtain higher pay. 32RT1847-1873; TE44, 1075G. Pollard and Morales were aware oftheir potential overtime claims against USBat the time they filed their personal bankruptcy actions, but failed to disclose such claims as assets. TE37, 1003, 1013-1015, 1079; 25RT1076-1082; 34RT2052-2075. Morales was aware ofher potential claim against USB becauseshefiled another putative class action asserting claims similar to those raised here, but claimed the namedplaintiff was another person sharing her name. When USB subpoenaed her former attorney to testify, Plaintiffs successfully quashed the subpoena based on the attorney-client privilege even though Moralestestified she did not retain the attorney orfile the action. 34RT2055-2059; 48CT14075-14076, 14182- 14220, 14229. 2. Manager Testimony. USB’s witnesses confirmed that BBOs were expected to spend a majority of their time outside and that guidelines, including the 2002 job description, reflect that BBOs should be spending a majority of their time outside. TE6; SORT4159-4160; 43RT2982; 46RT3584-3586; 60RT4894- 4896, 4939-4940; 62RT5030-503 1, 5047-5048; 42RT2917-2924; 43RT3117-3119; 44RT3151; 49RT3902-3914, 3941-3942, 3953-3954; 47RT3616, 3636-3647; 45RT3223-3225, 3230-3238; 52RT4359-4364, 4397-4398; 55RT4558-4559. The witnesses also testified to methods they devised for reinforcing the expectation, including Ted Biggs’ “15-3-1-1” 25 594115.10 model to explain that a BBO should make an average of 15 customer contacts per week (normally resulting in three applications, one loan approval, and one fundedloan) and that following this model would lead to spending approximately 30 hours per week outside. 49RT3902-3914; S51RT4231-4232; 52RT4366-4367. Biggstestified that up until 2002 USB had only a 2% market share in California and that BBOs accordingly needed to be outside meeting mainly with potential new customers, both to — generate new sales and to increase brand recognition in the marketplace. 49RT3897-3899, 3920-3927. The court precluded USB’s witnesses from testifying regarding their application of the outside time expectation to any BBOs who were not RWG members. 49RT3934-393 5, 4168-4169; 26RT1250-1251. USB’s witnessesalso testified to their percipient knowledge ofRWG members performing the BBO job consistent with the outside time expectation. See Slip.Op. 22-25; see, e.g., 5S0CT14770-14774. USB’s witnesses confirmed that BBOs worked widely varying hours, and that no information existed permitting one to determine one BBO’s hours based on someoneelse’s experience.® | 3. USB’s Motion For Judgment And Due Process Motion. After Plaintiffs rested their Phase I case-in-chief, USB filed a Motion for Judgment contending Plaintiffs failed to carry their burden of * Plaintiffs contendthattrial evidence provides anecdotal evidence supporting the “damages” estimate. OB8. In fact, the cited testimony, from USB Sales ManagerPat Collins, was obviously limited since she supervised only a limited number of BBOsandstated only that some BBOs worked between 40-60 hours per week. 7CT1739-1741; see also 51RT4247-4250. However, even as characterized by Plaintiffs, Collins’ testimony reflects huge variation, rather than uniformity, in individual BBOs’ hours worked, and confirmsthat the “damages”estimate failed to provide any useful estimate at all. See also 50CT14774-14775. 26 594115.10 establishing a UCL violation and failed to establish entitlement to restitution. 45CT13333-13351; 48CT14161-14179. Plaintiffs argued that they only needed to prove a rough estimate because the court could infer the amount of damages by “just and reasonable inference.” 46CT13499. The court denied USB’s motion. 48CT14242; 54CT15851-15855. USB also filed a Due Process Motionsetting forth additional objections to the restrictive trial plan and exclusion of USB’s evidence in Phase I, which the court denied. 48CT14256-14276; 55CT16129-16142, 16164-16165. F. Phase I Statement Of Decision (“SOD”). The parties submitted post-trial briefs and at the post-trial hearing, the court indicated its intent to find classwide liability in Plaintiffs’ favor, departing from its earlier stated intention of hearing testimony in Phase IJ regarding whether the PhaseI findingsas to liability and recovery could be extrapolated to the class. 50CT14776-14842; 51CT14955-15023; 55CT16173-16177; 64RT5124. The court directed Plaintiffs’ counsel to prepare a proposed SOD. 55CT16241. The court heard argument regarding the contents of Plaintiffs’ Proposed SOD, to which USB raised numerous objections. 56CT16520-16615; 58CT17139-17140, 17147- 17175; 59CT17330-17386. Plaintiffs requested that the court include a finding indicating that the non-RWG declarations that had been excluded would not have been afforded any weight due to their “circumstances of preparation.” The court explicitly refused to make that finding, and Plaintiffs conceded that their proposed finding had been “over-inclusive.” 65RT5297-5302.” At no point did the trial court ever make any finding ’ Plaintiffs nevertheless falsely represented to the Court of Appeal andto this Court that the trial court did makethe finding they initially requested. See, e.g., OB, 18 (falsely stating that finding in the Phase I SOD applied to declarations that were not even admittedat trial); see also Respondents’ (Continued...) 27 594115.10 with respect to the credibility of any of the 72 non-RWGclass member declarations that USB soughtto introduce. . The court acknowledged the likelihood that an outside time expectation existed at USB but suggested that it was not “consistently” communicated and expressed its conclusion that USB “did not care where the Class members spenttheir time...."” 64RT5118-5120. USB submitted proposedadditional findings excluding non-worktime from calculation of alleged overtime hours, most ofwhich the court denied. 59CT17318- 17328, 17566-17581. On July 18, 2008, the court entered its Order re SOD for PhaseI. 60CT17704-17738. USB filed objections thereto and pointed out that Plaintiffs’ asserted “average” weekly overtime for the RWGhadillogically increased from 11.29 to 11.87 hours per week after the court directed Plaintiffs to accountfor a small portion of class members’ non-worktime. 61CT18155-18175. Over USB’s objections, the court adopted Plaintiffs’ assertion that the RWG worked 11.87"! overtime hours per week. 71CT21008, 21046-21049. Although no evidence was presented during Phase I as to the “representativeness” of the RWG,the court found the RWG members“typical and representative of the entire class and validates (...Continued) Br., filed October 22, 2010 in Court of Appeal at 8-11, 19-20, 23, 45-47, 94, 99-100 (same); USB’s Reply filed February 14, 2011 in Court of Appeal at 40-50. In fact, the trial court simply found that the circumstances ofpreparation were relevant in assigning weight to the declarations of three RWG members admitted at trial. 71CT20991. . ‘0 The court later explainedthat the “thrust”ofits Phase I findings and the “key to the case, in the Court’s view,” wasthat the court believed “that it was completely irrelevant to the bank where [BBOs] spenttheir time as long as... market share wasincreased....” Slip.Op. 28 n.38; 65RT5307. "' Plaintiffs later recalculated their asserted average as 11.86 hours in Phase II, which the court adopted. 83CT24516. 28 594115.10 [sic] the viability of the use of the [RWG]process aspart ofthetrial of a wage and hourclass action.” 71CT20998-20999. The trial court denied injunctive relief (the primary remedy available under the UCL) andrejected Plaintiffs’ requests to revisit the issue. In Re Tobacco II Cases, 46 Cal.4th 298, 319 (2009) (“Tobacco IT’) (injunctive relief is primary remedy under UCL;restitution is ancillary); 55CT16175-16176; 60CT17603-17604, 17737-17738; 71CT21018-21019". . | G. The Trial Court Excluded Plaintiffs’ Survey Evidence. Since June 2006, Plaintiffs advocated using a survey as a trial managementtool. 20CT5852-5857. The court expressed doubt about the usefulness of a survey and, by October 2006,indicated that using representative testimony would “obviate” the need for any survey. 1O0RT222-226; 11RT239-241. After PhaseI, Plaintiffs’ counsel conducted a survey of non-RWGclass members without the knowledge or consent of USBor the court. The court subsequently permitted Plaintiffs to augment their expert disclosures to identify this new area of potential testimony, but cautioned that such efforts and expenses might be wasted since the proposed evidenceviolated the trial plan. 65RT5269-5270. Before Phase II, the court granted USB’s Motion to Exclude the Survey Evidence. ” During PhaseI, the trial court ordered USB to produce branch alarm records and security logs and to produce a PMK totestify about those records. 46CT13484-13486; 49RT3956-4038. Thetrial court ultimately agreed that the alarm records and security logs “would likely not produce sufficient evidence probative of hours worked.” 71CT21013; 65RT5339- 5343. Although Plaintiffs suggest that the court drew an “adverse inference” based on USB’s failure to maintain hours workedrecords for employeesclassified as exempt (OB17), nothing in the record indicates - what inference was supposedly drawn based on that fact, and no adverse inference could be drawnsince that inference would depend on assuming an obligation to maintain records for exempt employeesbased solely on the pendency of a misclassification suit. See, e.g., Sotelo v. Medianews Group, 207 Cal.App.4th 639, 650 (2012) (rejecting attempt to “bootstrap”a requirement to maintain records based on pendencyofsuit). 29 594115.10 60CT17622-17655; 61CT18136-18149, 18152; 71CT21053-21070; 78CT23228; 79CT23516. H. —USB’sSecond Decertification Motion. USBfiled a second Decertification Motion after Phase I. On September 30, 2008, the day before the beginning of PhaseII, the court denied the motion based on the belief that the trial plan including extrapolationto all class members ofan unrebuttable classwide liability finding based on Phase I eliminated the need for determining individual employees’ actual activities, alleged hours worked, or eligibility to recover. 69RT5497-5499, 5501; 62CT18394-18440; 70CT20780-208 14; 78CT23227-23228. I Phase II Trial. The PhaseII trial began October 1, 2008. 78CT23224-23225. USB again soughtto call all individual class members, including the four former namedplaintiffs and approximately 70 class member declarants, and also soughtto introducetheir deposition testimony and sworn declarations, but the court excluded this evidence. 71CT21031-21045; 73CT21500-21510; 75CT22259-22277; 79CT23516; 70RT5526-5528. The court granted Plaintiff's motion in limine No. 17 to prevent USB from referencing any . evidence regarding liability other than the trial court’s Phase I SOD. 79CT23514. The court also excluded evidence proffered by USB showing that some class members hadactually held non-exemptpositions during the class period on thebasis that such evidenceviolatedthetrial plan. 72CT21270-21499; 70RT5519-5526. These class members nevertheless recovered additional “overtime” for periods when they were already classified as non-exempt and for which time records existed to show they either did not work overtime or were already paid for overtime worked. 81CT23920-23923; 84RT6620-6622. 30 594115.10 Plaintiffs called statistician Richard Drogin and accountant Paul Reganto testify during Phase II. 78CT23224-23226, 23230-23234. USB called Payroll Manager Bruzekto testify regarding class member job history and compensation, its ownstatistical expert, Andrew Hildreth, Ph.D., and accountant, Joe Anastasi (to rebut Regan’s testimony), to testify regarding the implications of the Phase I findings and the lack of any basis to extrapolate those findingsto the class. 79CT23494-23495. Drogin testified regarding the theoretical value of random sampling in predicting facts about a population. Drogin concededthat the court did not use his proposedtrial plan and that he could not providea statistical basis for the court’s classwideliability finding. 72RT5642-5653. In fact, Drogin conceded that he could not offer an opinion on the validity of the court’s classwide liability finding and that he relied on the Phase I SOD for that point. Drogin admitted that the sample was not random, but disagreed with USB’s experts on the overall effect of the non-random sample, including the effect of allowing RWG membersto select out of the sample through the second opt-out period. Drogin testified that he believed the “bolstering” factors identified in Bell vy. Farmers Ins. Exchange, 115 Cal.App.4th 715, 756 (2004) (“Bell IIT’), were present. Drogin declined to endorse the results of thetrial plan, including the margin oferror, as sufficiently accurate, instead indicating that he believed that was for the court to decide. 74RT5809-5811; see also Slip.Op. 30-35 (summarizing Drogin’s trial testimony). Dr. Hildreth testified that determining liability and recovery through valid statistical methods was not workable on the facts of this case. See, e.g., 71CT20948-20953; TE1295; 81RT6378-6400. Hildreth agreed with Drogin that the sample was not random, but disagreed with him regarding some ofthe effects of the non-random sample, including the impact of the second opt-out, which introduced sampling error. See id.; see also 31 594115.10 81RT6334-6353. Hildreth agreed with Drogin that there wasnostatistical basis to conclude that 100% of the class was misclassified and that, even ignoring the sampling errors and assumingthat all 21 membersofthe sample were misclassified, up to 13% - a substantial portion of the population - could still have been properly classified. See, e.g., 72RT5633- 5643; 71CT20941-20953; TE1295. However, sampling errors could not be ignored and 13% was actually not a valid assumption. Hildreth disagreed with Drogin that the “bolstering” factors from Bel/ I] were present. See TE1295; 81RT6330-6366; 82RT6422-6439; 83RT6550-6558. In contrast to Drogin’s refusal to endorse the results of the court’s trial plan as | sufficiently accurate, Hildreth testified that the results of the trial plan, particularly the 43.3% margin oferror, were unacceptable from statistical standpoint. 80RT6295-6300; see also Slip.Op. 36-38. J. Phase II Statement Of Decision. After the completion of testimony, the court ordered Plaintiffs to propose a Phase II SOD with their post-trial brief and ordered USBto file any objections thereto with its post-trial brief. 79CT23518; 80CT23794- 23833; 81CT23940-24023, 24092-24122. After a hearing on the PhaseII post-trial briefs, the court adopted, in virtually all respects, Plaintiffs’ proposed SOD,including Plaintiffs’ expert’s admission that the estimate of weekly overtime for the classcarried a 43.3% margin oferror (+/- 5.14 hours). 81CT24172. Judgment was entered May 20, 2009, awarding Plaintiffs and the class over $8.9 million as “restitution” of unpaid overtime compensation and over $5.9 million in prejudgmentinterest at a rate of 10% per year. 83CT24650-24651. The recovering class members included the four prior namedplaintiffs and the approximately 75 declarants who admitted they were properly classified as exempt. 32 594115.10 USB movedfor a newtrial, arguing that the trial proceedings and the practical nature of the “damages” awarded (based on estimates) did not comport with the equitable nature of Plaintiffs’ UCL claim, and that USB had been unconstitutionally denied a jurytrial. 86CT25422-25440. The court denied USB’s motion. 86CT25507-25508. USBtimely filedits Notice of Appeal on July 17, 2009. 86CT25542-25543. K. Court Of Appeal Decision. — On February 6, 2012, the Court of Appealfiled its unanimous published opinion, agreeing with USBthatthe trial plan wasfatally flawed, reversing the judgment and decertifying the class. Slip.Op. 1. Nearly half of the Court of Appeal’s 60-page opinion consists of a detailed description of the factual history of this case, including descriptions of the evidence that was admitted (and excluded) pursuantto the trial plan. Plaintiffs gloss over these important details in an attempt to present only policy arguments ~ about the purported future of“all” class actions instead of addressing what actually occurred in this class action. However, the Court ofAppeal carefully reviewed the extensive recordin this case, which revealed numerouserrors and trial plan that “constituted a miscarriage ofjustice.” Slip.Op. 74. The Court ofAppeal determined that the “innovative procedural tools” utilized by the trial court failed by neglecting to adhere to sound statistical principles and sacrificing USB’s due process right in the name of expediency, andthat the individual issues ultimately could not be managed on a classwide basis. Slip.Op. 40-41, 59-60, 73. The Court of Appeal concludedthat the trial plan suffered from a litany of errors not present in Bell III, noting that thetrial plan here failed to adhereto basicstatistical principles andthat the “troubling” 43.3% margin of error far exceeded the 32% margin oferror rejected as unconstitutional in Be// 77. The Court of 33 594115.10 Appeal also concludedthatthe trial court “hobbled [USB]inits ability to proveits affirmative defense” by prohibiting USB’s presentation of relevant evidence by limiting evidence to the RWGonly, which barred USB from presenting evidence that “could have defeated plaintiffs’ class action claim entirely.” Slip.Op. 45-47. The Court of Appeal’s application of established case law led it to the unavoidable conclusion that representative sampling was inappropriate _ in this class action trial of the outside sales exemption whereliability depends on an employee’s individual circumstances. Slip.Op. 47-51. Applying the balancing test for identifying constitutional due process violations, articulated in Connecticut v. Doehr, 501 U.S. 1, 10 (1991), the Court of Appeal held thatthetrial in this case did not satisfy due process. Therisk that USB was compelled to pay moneyto absent plaintiffs who werenot entitled to recovery and the risk of a high margin oferror outweighed any of the other applicable factors. “A trial in which one side is almost completely prevented from makingits case does not comport with standards of due process.” Assuch,the trial court erred by constructing a trial plan that unfairly prevented USB from defending itself in the name of expediency. Slip.Op. 59-60. The Court ofAppeal held that the trial court abusedits discretion in denying USB’s second motion to decertify, holding that the trial court erred in thinking that it could find classwide misclassification by extrapolating the RWGfindingsto the entire class. Slip.Op. 67-72. Plaintiffs’ theory wasthat USB’s expectation was solely that the employees would meetsales goals and had no expectation as to how the goals were to be met. The Court of Appeal reasonedthatit is this very assertion that weighs against class certification. With discretion as to how to perform the job comesthe likelihood of substantial differences in how and where each class member spent his or her time, which counsels against the idea of common proof. 34 594115.10 Slip.Op. 73. Without reaching the issue of whetherthetrial court’s earlier certification decisions were erroneous, the Court of Appeal determined that by the time USBpresented its second motionto decertify, the trial court had already attempted to managethe individual issues andfailed. In such a context, where the class action must “splinter into individualtrials,” class treatment is inappropriate. Slip.Op. 71-73. Accordingly, denying decertification after Phase I was an abuse ofdiscretion, and the Court of Appeal decertified the class. Slip.Op. 73-74. ARGUMENT I. THE COURT OF APPEAL PROPERLY REVERSED THE DENIAL OF USB’S SECOND DECERTIFICATION MOTION. A. Standard Of Review. A ruling on a motion for decertification is reviewed for an abuse of discretion. Walsh, 148 Cal.App.4th at 1451. However, “[t]his deferential standard of review... is inapplicable if the trial court has evaluated class certification using impropercriteria or an incorrect legal analysis.” Ghazaryan v. Diva Limousine, Ltd., 169 Cal.App.4th 1524, 1530 (2008). A “trial court’s ruling must be reversedif its findings are not supported by substantial evidence, if impropercriteria were used, or if erroneouslegal assumptions were made.” Dep't ofFish & Game v. Super. Ct., 197 Cal.App.4th 1323, 1333 (2011). “If the trial court failed to follow the correct legal analysis..., an appellate court is required to reverse... even though there may be substantial evidence to support the court’s order.” Bartold v. Glendale Fed. Bank, 81 Cal.App.4th 816, 828 (2000). B. The Court Of Appeal Did Not Disturb The Trial Court’s First Two Certification Rulings. In the Court of Appeal, USB challenged the rulings on Plaintiffs’ original certification motion, USB’s pre-trial motion for decertification, and USB’s 35 594115.10 second decertification motion brought after Phase I. The Court of Appeal did not reach thefirst two rulings, but reversed the denial of USB’s second decertification motion, rendered after monthsoftrial confirmed the individualized nature of the liability inquiry. Contrary to Plaintiffs’ argument, the Court ofAppeal did not decertify solely due to the flawed trial plan, but rather becausethe record through the completion of Phase I still contained no evidencethat liability was subject to common proof. Thus, even allowing the trial court the widest possible discretion by not reversing the earlier certification rulings, the Court of Appeal foundthat the trial court relied on improperindicia of commonality in maintaining class treatment when,even after months oftrial, the record revealed no common method for addressing liability and “the only way to determine with certainty if an individual BBO spent moretime inside or outside the office would be to question him or her individually.” Slip.Op. 58, 71-72. Under these circumstances, decertification is proper. See, e.g., Walsh, 148 Cal.App.4th at 1456; Keller vy. Tuesday Morning, 179 Cal.App.4th 1389, 1391 (2009); Marlo v. UPS, 639 F.3d 942, 948 (9th Cir. 2011); Cruz v. Dollar Tree Stores, 2011 U.S.Dist. LEXIS 73938, *2 (N.D.Cal. 2011); Brady v. Deloitte & Touche, 2012 U.S.Dist. LEXIS 42118, *16-21 (N.D.Cal. 2012); Whiteway v. FedEx Kinkos, 2009 U.S.Dist. LEXIS 127360, *8-11 (N.D.Cal. 2009). 36 594115.10 C. The Court Of Appeal Properly Reversed The Second Decertification Motion Ruling Because The Evidence Introduced And Excluded At Trial Demonstrated The Individual Nature Of The Exemption Inquiry. 1, Class Treatment Is Proper In Wage And Hour Cases Only WhereLiability May Be Determined As To The Entire Class Based On A Uniformly Applicable Policy Or Practice That Violates The Law. To support class treatment, Plaintiffs must prove that there is an ascertainable, manageable class and a well-defined community ofinterest among class members, such that class litigation is a superior method of resolving the dispute. Walsh, 148 Cal.App.4th at 1450. To do SO, a plaintiff must prove, among other things, that commonissues of law or fact predominate over issues uniqueto individual class members. Jd. The court must consider the plaintiff? s legal theory and the defendant’s affirmative defenses, and certification is improperif an affirmative defense raises predominant individual issues. Jd. “Amongthe issues central to the predominanceinquiry is whetherthe case,if tried, would present intractable management problems.” Cruz, 2011 U.S.Dist. LEXIS 73938at *11. Class actions are generally appropriate only “if the defendant’s liability can be determined by facts commonto all membersofthe class.” Brinker v. Super. Ct., 53 Cal.4th 1004, 1022 (2012). In the wage and hour context, this generally requires a “uniform policy consistently applied to a group of employees [that] is in violation ofwage and hour laws.” Jd. at 1033, 1051-1052. Thus, Brinker found class treatment proper on a rest break claim because the employer’s universally-applied policy facially violated California law. Jd. at 1033. Certification was inappropriate on the plaintiffs’ off-the-clock claim because there was no uniform companywide policy or “common method of proof”to establish liability, thus requiring 37 594115.10 liability to be established in an “employee by employee fashion.” Jd. at 1051-1052; see also Morgan v. Wet Seal, Inc., 210 Cal.App.4th 1341, 1364-1368 (2012) (class certification denied on expense reimbursement claim in absence of commonpolicy or other commonproofto establish liability). Theprinciples reiterated in Brinker are also consistent with Wal- Mart Stores v. Dukes, 13 1 S.Ct. 2541 (2011), which this Court cited with approval. Dukes explained that commonality “requires the plaintiff to demonstrate that the class members ‘have suffered the same injury’” based on a “common contention” that is “capable of classwide resolution—which means that determination ofits truth or falsity will resolve an issue thatis central to the validity of each one of the claims in one stroke.” Jd. at 2551. Dukes further emphasized: What mattersto class certification... is not the raising of common ‘questions’—even in droves—butrather the capacity of a classwide proceeding to generate common answers apt to drive the resolution ofthe litigation. Dissimilarities within the proposed class are what have the potential to impede the generation of common answers. Id. (emphasis original) (citation omitted); see also Brinker, 53 Cal4th at 1022 n.5. Even wherea trial court initially certifies a class, if subsequent proceedings reveal unmanageable individualissues, the court should decertify. Sav-On, 34 Cal.4th at 335; see also Walsh, 148 Cal.App.4th at 1456 (decertifying class); Keller, 179 Cal.App.4th at 1391 (same); Marlo, 639 F.3d at 948 (same). 38 594115.10 2. Courts Have Uniformly Found Outside Salesperson Misclassification Claims Revealing Varying Amounts Of Time Outside The Office Inappropriate For Class Treatment. Under California law, an outside salesperson is one “who customarily and regularly works more than half the working time away from the employer’s place of business” engaged in sales duties. IWC Wage Order No. 4-2001; 8 Cal. Code Regs §11040(2)(M). The reasons for excluding an outside salesmanare fairly apparent. Such salesmen,to a great extent, work[] individually. There are no restrictions respecting the time he shall work and he can earn as muchoraslittle, within the range ofhis ability, as his ambition dictates. In lieu of overtime, he ordinarily receives commissionsas extra compensation. He works away from his employer’s place of business, is not subject to the personal supervision ofhis employer, and his employer has no way of knowing the numberofhours he works per day. To apply hourly standards primarily devised for an employee on a fixed hourly wage is incompatible with the individual character of the work of an outside salesman. Vinole v. Countrywide Home Loans, 571 F.3d 935, 945 n.10 (9th Cir. 2009); DLSE Op.Ltr. 1998.09.08 (outside salespersons generally “set their own time, and they’re on the road, they call on their customers... [R]arely [does the employer] know whatthey’re doing on an hour-to-hourbasis.”). The aboverationale for the outside sales exemption squarely applies to BBOs. Whether an employee qualifies for the outside sales exemption turns, “first and foremost,” on “how the employee actually spendshis or her time.” Ramirez v. Yosemite Water, 20 Cal.4th 785, 802 (1999). Ramirez further recognized that an employee might try to evade an exemption through substandard performanceand, accordingly, even if the employee spent most of his or her time inside the employer’s place of business courts 39 594115.10 must consider whetherthat practice diverged from the employer’s realistic expectations of the job. Jd. Courts analyzing certification in outside salesperson cases where liability turned on how muchtime an employee spent outside the office have uniformly held that this individualized inquiry precluded class treatment in the absence of a commonpolicy suggesting class members were required to spend the majority of their time inside. See Walsh, 148 Cal.App.4th at 1460-1461; Mevorah v. Wells Fargo Home Mortg., 571 F.3d 953, 956-959 (9th. Cir. 2009)(“Wells Fargo I’); In Re Wells Fargo Home Mortgage Overtime Pay Litig., 268 F.R.D. 604, 611-613 (N.D.Cal. 2010) (“Wells Fargo IP’); Vinole, 571 F.3d at 946-947; Maddock v. KB Homes, 248 F.R.D. 229, 245-248 (C.D.Cal. 2007); see also Brinker, 53 Cal.4th at 1032, 1053-1054, n.2, 3 (citing Walsh with approval). 3. The Court Of Appeal Properly Held That The Trial Court Relied On Improper Indicia Of Commonality In Concluding A Classwide Liability Determination WasPossible. In initially granting class certification, the court reasoned that the BBOposition was“standardized” based on USB’s uniform classification of the position andits alleged failure to train or monitor BBOs regarding the exemption requirements: [T]he record contains substantial evidence that defendant treated BBOs... alike, regardless of whether such treatment was appropriate under the law. Plaintiffs have substantial evidence that defendantclassified all BBOs... as exempt, and did so without any inquiry (let alone any individualized inquiry) as to any particular employee’s job duties, hours worked, performance or any other factor. This apparent policy, defendant’s apparent failure to train or monitor BBOs... to ensure that the exemption requirements would be or were being satisfied, and the apparent standardization of the BBO... position all create substantial issues of fact and 40 594115.10 law that are common among class membersandthat are likely to rest on ‘a commonthread of evidence’ class-wide. 16CT4619. Plaintiffs also alleged that USB had commonhiring and training procedures, sales incentive plans, job descriptions, performance appraisal standards, and that BBOsshared similar general sales duties. 6CT1616-1621, 1626-1627. Nowheredid thetrial court find that USB had a uniform policy (express or de facto) requiring BBOsto spend the majority of their work time inside the Bank, nor did Plaintiffs even argue this in moving for class certification. 6CT1604-1629; 13CT3556-3575. In denying USB’s first decertification motion priorto trial, the trial court reiterated its reasoning, relying on USB’s uniformclassification of BBOsas the “fundamental” evidence ofthe “standardization”of the position: Assetforth in the original class certification order, fundamental toPlaintiffs’ overtime claims is the assertion that Defendantclassified all BBOs as exempt, and did so without any inquiry as to any particular employee’s job duties, hours worked, performance or any other factors, and this assertion was supported by substantial evidence submitted by Plaintiffs in support of their original motion for class certification. 38CT11094 (emphasis added)"; see also 32CT9428. As with the original certification order, the trial court did not find that USB had a common policy requiring BBOsto spend the majority of their time inside, nor did Plaintiffs allege any such policy. 38CT11094; 32CT9422-9456. While the policies relied upon bythe trial court may constitute evidence of “commonality” in an abstract sense, they are not evidence of commonality that could facilitate a “common answer”on where any orall 13 All further emphasesare added unless otherwise noted. 41 594115.10 BBOs spent their work time, rauch less whetherthe entire class was misclassified. See, e.g., Wells Fargo II, 268 F.R.D. at 611 (uniform classification and standard policies insufficient for certification because nonerelate to proving where class members spenttheir time); Vinole, 571 F.3d at 946 (same); Soderstedt v. CBIZ S. California, 197 Cal.App.4th 133, 153 (2011) (‘[A]n individualized inquiry is necessary even where the alleged misclassification involves application of a uniform [classification] policy, because the policy may properly classify some employees as exempt, but not others.”); Walsh, 148 Cal.App.4th at 1461; Dunbarv. Albertson’s, 141 Cal.App.4th 1422, 1427 (2006); Gales v. Winco Foods, 2011 U.S.Dist. LEXIS 96125, at *27-*35 (N.D.Cal. 2011). Wells Fargo II, another outside sales exemption case,is particularly instructive. There, the defendant uniformly classified the employees, and the class members had commonjob descriptions, uniform training, the same primary goal(selling mortgages), uniform job expectations, similar compensationplans, and standardized employee evaluation standards. 268 F.R.D. at 611. The court denied certification, reasoning that none ofthis commonproof could provide a classwide answeron the pivotalliability issue—how muchtime class membersspent outside the office. The court explained that the only conceivable type ofpolicy that would replace the need for such an individualized analysis would be a commonpolicy requiring the class membersto spend mostoftheir time inside the office. Absent such a policy, the court “would need to conduct‘inquiries into how much time each individual [employee] spent in or out of the office....’” Id. Accordingly, the court held that individual issues predominated and class treatment wasinappropriate. Id. Similarly, in Vinole, the court deniedcertification of a proposed class ofloan consultantsclassified as exempt under the outside sales exemption. 571 F.3d at 946-947. Despite evidence ofmany commonly 42 594115.10 applicable policies, including the uniform classification of the employees, individual inquiries to determineliability remained necessary because none ofthe policies, singularly or collectively, required the class membersto spend the majority oftheir time in or out of the office, especially where the class members had discretion to determine how and whereto perform their job duties. Id.; see also Spainhower v. U.S. Bank Nat’l Assoc., 2010 U.S.Dist. LEXIS 46316, *11-*12 (C.D.Cal. 2010) (discretion on activities negated possibility of commonproofonliability). As in Wells Fargo II and Vinole, there was no evidence before the trial-court that USB had a commonpolicy requiring BBOsto spend the majority of their work time inside. Instead, BBOshad discretion to determine how and whereto do their jobs and USB did not track how much _ time wasspentinside versus outside. Not surprisingly, the evidence before the trial court showed substantial material variation among class members regarding their outside time. At each stage ofcertification briefing, USB presented declarations of 75 BBOsand deposition testimony of the four prior named plaintiffs showing that these BBOsspent the majority of their work time outside the | Bank onsales duties.’* Former namedplaintiff Haventestified that she | spent 80% ofher time “outside the branch knocking on doorstrying to sign | 4 With the exception of declarations by three RWG witnesses admitted attrial, no credibility finding was ever made asto the other BBOdeclarations. To the extent Plaintiffs speculate that USB’s declarations should be discounted because current employees fear retaliation, that contention toois logically flawed. See Wongv. AT&T, 2011 U.S.Dist. LEXIS 125988, *16 n.12 (C.D.Cal. 2011) (court will not look with “jaundiced eye” at defense declarations of current employees, who are no morelikely to “curry favor”or fear retaliation with employer than former employeesare likely to have an “axe to grind”or “tainted by the possibility of monetary gain.”) ~ 43 594115.10 people up.” 68CT20180-20181. Similarly, Rafiqzadatestified that she | spent 60% ofher time “performing [her] duties as a small business banker outside the branch.” 68CT20176. Shekarlabtestified unambiguously that he spent 80-90% ofhis time “outside the branch” and “in the field”calling on prospects. 68CT20184. Karavanitestified that she spent 60-80% of her time “outside the branch selling” and “calling on businesses.” 68CT20187. Plaintiffs effectively conceded these prior named plaintiffs were exempt, | substituting in new namedplaintiffs to replace the four uninjured representatives.’ Nonetheless, they recovered $160,000 under the Judgment. Plaintiffs supplied 37 BBO declarations (less than half that presented by USB)stating these BBOs spent the majority of their time inside the Bank. 6CT1461-1462; 11CT3062; 13CT3648. | In support ofits first decertification motion filed priorto trial, in addition to the evidence discussed above, USB submitted additional deposition testimony ofRWG and non-RWGclass members admitting that the time they spent outside the Bank materially varied from week to week, quarterto quarter, and year to year—and that some spent the majority of their time outside the Bank for someorall of their employment. See Statement of the Case above. e RWG Bradleytestified that on average he spent 60-65% of his time outside andthat he spent more time outside at the beginning of each quarter and more time inside toward the end of each quarter. 31CT8933-8935. 'S Although Plaintiffs have argued that the testimony was ambiguous because USBprovided no definition of the term “outside sales,” even a cursory review ofthe actual testimony reveals that the deponents werenot asked how muchtime they spent on allegedly ambiguousoutsidesales, but rather how muchtime they spent outside the branch. As such, there is nothing ambiguous about the testimony andit has never been refuted. 44 594115.10 e RWG McCarthytestified that for over half her tenure she spent the majority of her time outside. 31CT9195, 9197- 9198. . e RWGPenzastated that he initially spent “100%”ofhis time outside, but that this percentage decreasedas he shifted from an in-person approach to an over-the-phone approach. 36CT10685-10690. e Non-RWGRoberson admitted that in the first year of his employment, he spent most of his weekly work time outside the Bank, but that later he spent more timeinside. 31CT9084-9085. ¢ Lewis and MacClelland (original RWG members who opted out at Plaintiffs’ counsel’s urging) both admitted that throughouttheir time as BBOsthey spent the majority of their time outside. 31CT9000-9001, 9011-9012. Indeed, Plaintiffs admitted in opposing USB’s first decertification motion that certain class members spent more than half of their time outside the Bank during portions of their BBO employment. 32CT9430-9432 (acknowledging that Bradley was 80%-90% outside the majority of every quarter, Vanderheyd spent the majority of her time inside some weeks and outside others, Pham’s outside time ranged from 50%-75%, and Wheaton was outside duringall but his first six weeks as a BBO). Both Plaintiffs’ admission, and the evidence USB submitted in support of the motion, directly disprove Plaintiffs’ bold, unsupported statement that “every single” class member who was deposed confirmed they were “misclassified at some[ ] time during their employment andall but two were misclassified the entire time.” OB29. This was only a small subset of anecdotal evidencein the record demonstrating wide variance from BBO to BBO regarding time spent 45 594115.10 outside, and alone precluded class treatment. Had USB beenable tocall all class members, the variation would be even more pronounced. See Walsh, 148 Cal.App.4th at 1455-1456 (declarations and deposition testimony revealing material variance in time spent outside office precluded class treatment in outside sales exemption case because each class member would need to be questioned regarding his/her outside time); Morgan, 210 Cal.App.4th at 1363-1364 (absent a company-wide unlawful policy, where plaintiffs instead rely on anecdotal evidence to demonstrate violations, the employer’s contrary anecdotal evidence is equally relevant to show the absence of any common classwide proofofliability). The trial court nonetheless maintained class treatment, erroneously focusing on non- dispositive commonpolicies to support a classwideliability determination. Thetrial court’s misplaced focus was an abuse ofdiscretion. 4. Contrary To Plaintiffs’ Argument, The Trial Court Did Not Rely On “Substantial Evidence Of Widespread Misclassification,” And Even If It Had, This Would Not Support The Use Of Representative Testimony Here. Plaintiffs attempt to re-characterize the trial court’s certification rulings, injecting reasoning Plaintiffs hope to be more defensible on review. Although the actual rulings contain no such language or reasoning, Plaintiffs describethetrial court’s certification rulings as being based on “substantial evidence of widespread misclassification.” This is simply false. The only “widespread”or “standardized” evidence cited by thetrial court were USB’s uniform classification and similar commonpolicies having nothing to do with the amount of time BBOsspentinside or outside. the Bank. 16CT4619-4621; 38CT1 1093-11094. 46 594115.10 To the extent there was evidence beforethe trial court suggesting some class members were misclassified—byvirtue of Plaintiffs’ BBO declarations and deposition testimony—this evidence did not suggest that these BBOs’ experiences resulted from any commonpolicy requiring BBOs to spend the majority of their time inside, nor didit suggest that these BBOs were “representative” of other class membersin termsoftheir outside time. Thus, even if the trial court believed there was sufficient evidence of misclassification to support class treatmentinitially, that determination did not relieve the court of the duty to manage individual issues to account for properly classified BBOs(and to discern who those class members were). Sav-On, 34 Cal.4th at 335-337 (even if class treatment is deemed appropriate, individual issues must still be managed; disputes over how an employee spends his time tend to generate individualized issues); Walsh, 148 Cal.App.4th at 1462 (evidence of deliberate or de facto widespread misclassification does not preclude a finding that individual employees qualified for exemption). | Several courts have squarely rejected sampling and representative testimony to determineliability in outside sales cases where the dispute centers on how muchtime an employee spends away from the employer’s property andthere is no standard policy on this issue. Wells Fargo II specifically considered and rejected the plaintiff's argumentthat individual inquiries could be averted through random sampling to determine whether all or a portion of the class qualified for the outside sales exemption, and . thereafter extrapolating the findings to the rest of the class: Assumethat the court permitted proof through random sampling of class members, and that the data, in fact, _ indicated that one out of every ten [class members] is exempt. How wouldthe finder of fact accurately separate the one exempt [class member] from the nine non-exempt[class 47 594115.10 members] without resorting to individual mini-trials? Plaintiff has not identified a single case in which a court certified an overbroad class that included both injured and uninjuredparties... In fact, the court has been unable to locate any case in which a court permitteda plaintiff to establish the non-exempt status of class members, especially with respect to the outside sales exemption, throughstatistical evidence or representative testimony. 268 F.R.D.at 612. Vinole also rejected the notion that individual inquiries could be avoided with sampling or representative testimony. “These arguments are not persuasive in light of our determination that Plaintiffs’ claims require a fact-intensive, individual analysis of each employee’s exemptstatus.” Vinole, 571F.3d at 947 (“Plaintiffs’ claims will require inquiries into how muchtime each individual [employee] spentin or out of the office.”) Likewise, in Dunbar, the court explained the problem with trying to make classwideliability determinations based on non-dispositivecommon policies and despite evidence of material variation amongclass members on time spent on exempt duties: In this case, the Court cannot determine whether Defendant’s policy of designating GMsas exemptis unlawful in the abstract. If the Court found that the policies were appropriate as applied to 70% ofthe GMsand inappropriate with respect to the remaining 30%,that finding would not permit the conclusion that the policies were unlawful. The hypothetical finding would indicate that the policies are applied to too many employees and lead the Court to visit the issue of ascertaining which employeesare in the 70% that should be in the class and which are in the 30% that should not be in the class. 141 Cal.App.4th at 1428. Simply put, evidence that some class members may have been misclassified does not establish the existence of common proofthat other, muchless all, class members were also misclassified. Where no commonpolicy or systematic practice requires class members to 48 594115.10 spend the majority of their time inside, individual inquiries are unavoidable to determine how muchtime each employee spent inside versus outside, rendering representative forms ofproof unhelpful. See Morgan, 210 Cal.App.4th at 1365-1369 (representative testimony, surveys orstatistical analysis inappropriate where “thefact of liability,” as opposed to the “extent of liability,” depends on individualized evidence); Marlo v. UPS, 251 F.R.D. 476, 486 (2008) (decertifying class where plaintiff was unable “to provide common evidence to support extrapolation from individual experiences to a class wide judgment that is not merely speculative”); Whiteway, 2009 U.S.Dist. LEXIS 127360 at *10; Spainhower, 2010 U.SDist. LEXIS 46316 at *11-*12; Beauperthuy v. 24 Hour Fitness, 772 F.Supp.2d 1111, 1130-1131 (N.D.Cal. 2011) (representative testimony unhelpful where evidence “show[ed] that for every manager whosays one thing about his or her job duties and responsibilities, another says the. opposite”). Because this Court has never authorized sampling or representative evidence as a means of concealing individualissues, thetrial plan’s use of “representative” testimony wasinvalid and failed to justify continued class treatment, making decertification appropriate here. 5. USB’s Second Decertification Motion Conclusively Confirmed USB Had No CommonPolicy Requiring BBOs To Spend The Majority Of Their Time Inside. , a. The Trial Court Expressly Found That There Was No CommonPolicy. Asin thepre-trial certification briefing, Plaintiffs failed at trial to provide any evidence of any common USBpolicy uniformly requiring BBOsto spend the majority of their work time inside the Bank. Instead, Phase I amounted to 21 mini-trials of BBOstestifying as to their individual work experiences. Thetrial court then madeindividual liability and 49 594115.10 recovery determinations based on the respective facts applicable to the individual RWG memberin question. No testifying BBO had knowledge regarding the workactivities or hours of any other BBO, and no evidence demonstrated that one BBO was“representative” of any other. Indeed, the trial court expresslyfound that USB did not have any uniform policy requiring class members to spend the majority of their time either inside or outside the Bank, determining that USB “did not care where the Class membersspenttheir time,” and “never had a policy or requirement for BBOsto be outside of bank locations more than half of their work time.” 71CT21009-21010. Thetrial court believed that “it was completely irrelevant to [USB] wherethese folks spenttheir time” and viewedthat fact as “the key to the case.” 65RT5307; see also 71CT21013. The trial court’s findings underscorethe fact that the central issue of liability in the case was not susceptible to commonproofand,as a result, there was no valid basis for extrapolating RWGtestimonyas to time spent outside the Bank to absent class members. Slip.Op. 58, 71-73. However, the trial court erred when it found that the Jack of a commonpolicy necessarily resolved the case in Plaintiffs’ favor classwide, and on that basis erroneously denied decertification. . b. The Trial Court Did Not And Could Not Find That The BBO Position Was Incapable of Being Performed In An Exempt Manner. Contrary to the findings described above,Plaintiffs contend that the trial court found that the nature of the BBO position madeit “unrealistic” for any BBOto spend the majority of his or her time outside the Bank. There are numerous problems with Plaintiffs’ argument. First and foremost, any purported finding regarding whatall class members could or could not do must be severely discounted by the fact that the finding was based solely on the limited evidence allowed under the 50 594115.10 myopictrial plan. The erroneously excluded evidence showing that a huge portion of the class did perform their jobs in an exempt manner undermines the validity of any finding that it was somehow “unrealistic” for BBOsto spend the majority of their time outside the Bank. 67CT19627, 19713- 19881, 19928-68CT20188. In ruling on USB’s second motion for decertification, the court made no finding that BBOscould not spend the majority of their time outside the Bank or that it was unrealistic for them to do so. 78CT23227-23228. Second,the trial court did apparently believe, based on the severely restricted evidence it allowedattrial, that a uniform expectation for BBOs to spend the majority of their time outside the Bank was “unrealistic” based on thetrial court’s determination that most BBO duties “could be” performedinside the Bank andthe fact that several BBOstestified that they regularly spent the majority of their time inside the Bank. See 71CT21015- 21016. Thus, read in context, the trial court’s finding on this point related only to the Bank’s realistic expectations defense,"* not to determining how all class members actually spent their time. However, neitherthetrial court’s finding that USB did not consistently communicateits outside time expectation, norits finding that a uniform outside time expectation was “unrealistic,” can rationally be interpreted as a finding that all BBOs, or even all RWGs,actually spent a majority of their time inside. Indeed, the trial court’s individualized findings as to the amountoftime each of the 21 RWGspent outside the Bank would be inexplicable had the trial court 16 The trial court also found that USB failed to consistently communicate an outside time expectation to BBOs. 71CT21012; 64RT5120; 65RT5309- 5310; see Section I.C.6.c, below. S1 594115.10 actually found that the position was only capable of being performed by spending the majority of time inside the Bank.’” Third, had the trial court found that the BBO position was incapable of being performed in an exempt manner, presumably the court would have granted Plaintiffs’ request for injunctive relief, the primary remedy under the UCL,and ordered USBto treat BBOs as non-exempt. The court instead denied injunctive relief, finding that it lacked evidenceas to the ongoing treatment of BBOs,a finding that would makenosenseifthe court had found the position categorically incapable of being performed as an exemptoutside sales position. 71CT21018-21019. 6. The Trial Evidence Confirmed The Individualized Nature Of The Exemption Inquiry. ~ As noted above, PhaseI ofthe trial was essentially 21 mini-trials (each lasting approximately two days), along with testimony of USB | management witnesses. OB41. Determining liability for each RWG member depended on numerousindividual issues, including (1) admissions by class membersthat the amount of time they spent outside the Bank materially varied over time, (2) credibility issues stemming from prior inconsistent statements by class members regarding their outside time, (3) — individualized issues relating to USB’s realistic expectations defense, (4) individualized issues relating to whether certain BBOs, while technically holding the “BBO”title, actually performed different roles, and (5) individual issues arising from additional defenses applicable to specific: ” Thetrial court acknowledged that RWG Penzaspent the majority of his time outside the Bank for at least a small portion of his employment, belying any argumentthatthe trial court found that the position could only be performed by spending a majority of one’s time inside the Bank. 71CT21005. 52 594115.10 class members. Because no method was ever devised for even attempting to address these issues for over 90% of class members, class treatment was improper. a. The Trial Yielded Evidence Of Material Variation In Time Spent Outside The Bank. Thetrial revealed that the amountoftime particular BBOsspent outside the Bank varied widely from week to week, suggesting that in some weeksthey spent the majority of their time outside the Bank even if in other weeksthey spent the majority of their time inside. For example, Bradley testified that his outside selling time varied from week to week based onthe number of appointments he had and that he spent much moretime in the beginning of the quarter out “beating the bushes” to make new sales. See 40RT2713-2716. Vanderheyd similarly admitted that her outside time “totally varied based upon the week”and that, some weeksshe spent the majority of her time outside the Bank selling whereas other weeks she spent the majority ofher timeinside the Bank. See 38RT2422-2428; see also 30RT1673-1681 (Anderson’s sales activities and outside time varied on a daily and weekly basis; some weekshe spent a majority of his time outside the Bank andothers inside); 33RT1960-1962; 46RT3482-3491 (Lindeman’s outside time varied over time; he initially spent too much time inside, but eventually heeded his supervisor’s.advice to increase his outside time). | . Likewise, the amount of time Penza spent outside the Bank materially varied over time. Penza always admitted that he spent a majority of his time outside for at least two weeks of his employment but he provided estimates ranging from 75% outside to 80% inside in his various descriptions of the rest of his employment. TE1000-1001; 22RT838-839, 849-850, 883-909; 60RT4906-4923 (Penza’s supervisor confirmed he spent 53 594115.10 mostofhis time outside for at least the first year of employment but later increased his telemarketing and other inside sales activities). Thetrial evidence also revealed that time spent outside the Bank varied substantially by BBO. Four RWGwitnesses signed declarations prior to trial admitting that they customarily spent the majority of their weekly work time performing sales duties outside the Bank. TE1000-1001, 1006, 1017, 1087. At least two other RWG witnesses,McCarthy and Bradley, admitted at deposition that they spent the majority of their time outside the Bank most, if not all, weeks. 42RT2834-2840; 40RT2671- 2673, 2694-2696, 2715-2718; 29RT1635-1637. Original RWG member MacClelland,testifying as a supervisor of certain RWGsafter being removed from the RWG,stated that he too regularly spent the majority of his weekly work time as a BBO outside the Bank. TE1115; 52RT4419- 4421, 4456-4460. The extreme variation (over time and by individual) in the amount of time RWG membersspentoutside, including variation as to whetherthe majority of that time was inside or outside, established that the liability inquiry was necessarily individualized andthat thetrial evidence provided nobasis for determining whether any non-RWG BBO spent most of his/her timeinside or outside. b. The Trial Revealed Individualized Credibility Issues Bearing Directly On Liability. Thetrial evidence reflected numerouscredibility issues affecting the liability determination for individual BBOs. Individualized credibility issues affecting liability suggest that class treatment is inappropriate. Walsh, 148 Cal.App.4th at 1459 (inconsistent testimony by individual class membersas to time spent on exempt duties “underscores the likelihood that adjudicating the outside salesperson exemption will be best accomplished on an individual basis”); Jimenez v. Domino ’s Pizza, Inc., 238 F.R.D. 241, 54 594115.10 251-252 (C.D.Cal. 2006) (“[T]hese determinations necessarily require inquiries into credibility relating to why certain managers spent more or less time on the various tasks. Because these questions and issues of proof are $0 individualized, the Court cannot say that the common question presented predominates.”) | Four RWG members (Penza, Bradley, Koga, McCarthy) who testified at trial that they regularly spent the majority of the weekly work time inside the Bank were confronted with prior inconsistent declarations and/or deposition testimony where they admitted that they spent the majority of their weekly work time outside the Bank most, if not all, weeks. TE1000-1001; TE1087; TE1017. These witnesses provideddiffering, highly individualized explanations for contradicting their prior sworn statements. See, e.g., 22RT838-839, 849-850, 881-909; 23RT977-991 (Penza said he signed the declarations because he was a “brand new” BBO and/or hada lot of outstanding commissions, though admitting he had been a BBOforeight months whenhe signed the first declaration and for two years when he signed the second, but admitted that no one threatened his commissionsifhe did not sign the declarations and he had no knowledge that anyone at USB even knewthe contents of the declarations); 35RT2203-2215; 36RT2221, 2225-2228, 2230-2231, 2235-2242, 2244, 2274-2275 (Koga claimed hefelt “pressured”to sign the declaration but failed to explain how anyonepressured him); 40RT2671-2706, 2713-2716, 2667-2670; 42RT2834-2857 (Bradley blamedhis inconsistent admissions _ on “faulty” memory that was allegedly refreshed at trial by expense records. that he admitted did not reflect all outside time); 29RT1613, 1625-1630, 1635-1637; 31RT1706-1711 (McCarthy failed to explain why she affirmed three different times during deposition that she spent most weeksoutside, but claimed the opposite at trial). 55 594115.10 Thetrial also revealed credibility issues stemming from RWG members’ false statements on employmentapplications regarding the nature of the BBOposition, and from supervisor testimony refuting individual RWGs’ testimony as to the amountoftime they spent outside the Bank. See, e.g., TE1075A; 29RT1528-1531; 2ORT580-583; 55RT4565- 4579; cf. 39RT2558-2565. Thetrial court confirmed the existence of these individualized credibility issues: The Court certainly concurs with the defendant’s argument that substantial questions were raised as to the credibility of certain of the Representative Witness Group, RWG witnesses. The prevalence of false or misleading employment applications cannot be ignored. Likewise the conflict between trial testimony and declarations attained from RWG witnesses by defense counsel in pretrial stages [and] at deposition testimony complicate the fact-finding process. 71CT20991. As USB arguedin its second decertification motion (see 62CT18410-18416), the existence ofthese credibility issues affecting the right of individual RWG membersto recover confirmed that analogous issues would also need to be addressedfor the class membersfalling outside the tiny portion of the class for whom thetrial court allowed evidenceat trial. As the Walsh court explained in decertifying a class based in part on credibility issues: [This apparent inconsistency in the witnesses’ accounts... underscoresthe likelihood that adjudicating the outside salesperson exemption will be best accomplished on an individualbasis. After all, the credibility of each witness and the weight to be given his or her testimony is a matter for the trier of fact, who would consider each witness’s trial testimony, inconsistencies in prior testimony or declarations, and any explanation for the change in testimony. The fact that a jury might have to decide which of[the witness’s] versions to believe does not suggest that questions of fact or law common to the class predominate over individualized issues. 56 594115.10 148 Cal.App.4th at 1459. While the court’s findings acknowledged that individual credibility issues were “substantial” and that such problems “cannot be ignored,”the trial court did just that by determiningliability on a classwide basis without addressing those issues for the vast majority of class members. c. The Trial Evidence Confirmed The Need For Individualized Analysis Of USB’s Reasonable Expectations Defense. Therealistic expectations defense, if proven, prevents an employee from prevailing on an overtime claim even though the employee did not spend his work time primarily engaged in exempt duties. Ramirez, 20 Cal.4th at 801-802. In assessingthe defense, courts examine “whether the employee’s practice diverges from the employer’s realistic expectations, whether there was any concrete expression of employer displeasure over an employee’s substandard performance, and whether these expressions were themselvesrealistic given the actual overall requirements of the job.” Id. Thetrial evidence, along with pre-trial evidence submitted in connection with certification and decertification briefing, revealed that at least 19 class members (including 3 RWG witnesses) admitted being told that USB expected them to spend the majority of their time on sales activities outside the Bank. 9CT2303, 2330, 2370-2371, 2382,2423-2424, 2429, 2432, 2440, 2457, 2523, 2543, 2575, 2583; 10CT2616, 2666, 2676; see also 40RT2683-2689; 37RT2327-2330; 27RT1304-1305; 45RT3249, 3254-3267. Thetrial evidence further revealed that notwithstanding this expectation, certain class membersfailed to do so. For example, Tobola, who wasa personal bankerprior to becoming _ a BBO,admitted at deposition that his supervisor, MacClelland, told him the BBOposition was, unlike the personal banker position, not a desk job, 57 594115.10 and that as a BBO he was expected to spend the majority of his time outside the Bank. 37RT2328-2329; 52RT4359-4360. After Tobola was hired, MacClelland met with Tobola regularly and reinforced USB’s expectations, reminding him that to be successful he needed to spend his time primarily on outside sales activities. 52R4360-4368. Tobola failed to meet these expectations, and MacClelland placed him on a formal action plan requiring Tobola to conduct more outside sales meetings each week. 37RT2318, 2328-2330, 2341-2342; 49RT3946; 52RT4364-4367, 4393- | 4402. Tobola admitted he had failed to conduct the minimum number of outside sales meetings required underhis action plan and failed to spend enough time outside the Bank “conjuring” up business. 37RT2336-2343. Tobola eventually concededhis failure as a BBO andtransferred back to his former desk position as a personal banker. See id. Machado,also a personal banker prior to becoming a BBO,testified that she was repeatedly told to spend a majority ofher time on sales activities outside the Bank, but instead she spent the majority of her time as a BBOinside. 27RT1304-1305; 45RT3249, 3254-3267. As a reminder of the outside time expectation, Machado was required each week to participate in “Tigger Tuesdays,” a day structured to model the recommendedtypical day of a BBO “bouncing” from outside appointment to appointment (20% inside the Bank and 80% outside the Bank). 45RT3232-3238. Machado failed to meet the expectation dueto her personalpreferences. Having been a personal banker, she was accustomed to spendingall of her time inside the Bank, selling Bank products to existing customers. 45RT3218-3220, 3261-3263; 27RT1266. Machado also had a telemarketing/direct mail backgroundandpreferred focusing on these tactics rather than outside sales activities such as meetings at customerlocations. 27RT1289, 1301. After one quarter, Machado 58 594115.10 resigned,telling her supervisor that the BBO position wasnot the right job for her. 45RT3260-3268. Notwithstanding this and USB’s managers’ testimony,thetrial court rejected USB’s realistic expectations defense as to all class members because thetrial court believed USB’s managers were “not consistent” in communicating to class members the expectation to spend the majority of their time outside. 71CT21009; 64RT5120; 65RT5309-5310. Thus, the. trial court apparently concluded that the Bank’s managers had to “consistently” communicate the outside sales expectation companywidein order for it to apply to any class member, notwithstanding the undisputed testimony that numerous managers did communicate the expectation’? and that many BBOs were aware of the expectation. Thetrial court’s view that the employer’s expectation must be uniformly conveyed to every class memberfor the defense to apply to any class memberis improper. Indeed, the court’s finding that the expectation was inconsistently communicated underscores the need to examine the defense on an individualized basis. As discussed above, to the extent the trial court also foundthat USB’s expectation was “unrealistic,” that finding was tainted by the fact that the trial court unconstitutionally precluded USB from presenting evidence as to how over 90% of the class spent their time, including evidence that many BBOsspent the majority of their time outside the Bank—demonstrating that it was indeed “realistic” for BBOsto do so. 18 The trial court found USB’s managers“credible and, indeed, personable.” 64RT5120. 59 594115.10 d. The Trial Evidence Revealed Additional Individualized Issues Relating To Improper Membership In The Class And Unique Defenses Applicable To Certain Class Members. The evidence revealed additional defenses to particular RWG members’ claims. Petty was assigned the BBOjobtitle, but actually performed the job of a Business Banking Relationship Manager. 25RT1108-1109, 1 127-1133; 29CT8541-8542; TE1080. Gediman spent the last three months of his employmenttitled a BBO but performing the duties of an Acting Sales Manager—duties that were managerially exempt—and did not work overtime before assuming those duties. 26RT1191, 1204-1206, 1254-1260. Pollard and Morales both filed for personal bankruptcy andfailed to disclose their potential claimsin this case as assets, despite being aware of the claimsat the time they filed for - bankruptcy. TE37, 1003, 1013-1015, 1079; 25RT1076-1082; 34RT2052- | 2075; see Jimenez, 238 F.R.D.at 252 n.10 (bankruptcy issues presented individualized issues as to class memberstanding to sue, weighing against class certification). The existence of these individual issues further confirmed the need to manage analogousliability issues for the 239 non- RWGclass members. Thetrial court never made any such effort and instead ignored these issuesso as notto affect the RWG data “extrapolated” to the entire class and without any mechanismfor evaluating defenses applicable to any non-RWGclass member. 7. The Trial Court Should Have Granted USB’s Second Decertification Motion. The Court of Appealruled that, in denying USB’s second decertification motion,the trial court abusedits discretion by relying on improperindicia of commonalityand erroneously assuming that a 60 594115.10 determination of liability and restitution could properly be made by extrapolating findings from the RWGto the remaining 92% ofthe class. Slip.Op. 47-48, 57-58, 68-69, 72-73. The Court of Appeal wasright. At the time of USB’s second motionfor decertification, the trial court had all of the Phase I evidence before it. The fact that the court found that the 21 RWG,based ontheir individual mini-trials, spent the majority of their time inside the Bank did not negate the individualized nature of the inquiry or provide a lawful basis for extrapolating the experiences ofthose 21 class membersto therest of the class. The trial court abusedits discretion in ruling that the flawedtrial plan justified maintaining class | treatment despite its express finding of the lack of a relevant common policy and the evidence, presented again in support of USB’s second decertification motion, that, at minimum, nearly a third of the class was exempt, and that individualized issues affecting liability remained unaddressed for over 90% ofthe class. Plaintiffs argue that the trial court relied on “substantial evidence of misclassification” in denying USB’s second decertification motion. The trial court itself never said this, and the trial court’s order simply referred back to its prior certification rulings and cited its SOD, which in turn likewise referred back to the prior certification rulings. 78CT23227-23228. Thus, the “commonality” underlying all of the trial court’s certification orders was nothing more than USB’s uniform classification of the position, uniform job descriptions, training, incentive plans, evaluation standards, and the fact that USB did not track how much time BBOsspentinside versus outside USBproperty. Even if the trial court believed, without stating, that there was “substantial” evidence of misclassification, that fact remained insufficient to justify continued class treatment because any such misclassification stemmednot from any uniform USBpolicy, but rather from individual class members’ decisions as to how to perform their jobs. 61 594115.10 Given the substantial evidence demonstrating that many BBOsin fact spent the majority of their time outside, there simply had to be a mechanism to individually assess liability. The trial plan utterly failed to do so, and absent any method for managingthe individualliability issues, decertification was mandated. See, e.g., Walsh, 148 Cal.App.4th at 1456; Keller, 179 Cal.App.4th at 1391; Marlo, 639 F.3d at 948; Cruz, 2011 U.S.Dist. LEXIS 73938 at *2; Brady, 2012 U.S.Dist. LEXIS 42118, at *16- 21; Whiteway, 2009 U.S.Dist. LEXIS 127360 at *8-11. This Court’s opinion in Sav-On supports the Court of Appeal’s decision. Sav-Onheld that class certification may be appropriate where there are commonissues stemming from evidence of widespread deliberate or defacto misclassification. Sav-On, 34 Cal.4th at 329. Accordingly, the trial court in Sav-On did not abuseits discretion in granting class certification where there was evidence of several uniformly applicable employerpolicies and the primary disputed issue bearing onliability was classifying tasks as exempt or non-exempt, not determining how muchtime class members spent on exempt tasks. Jd. at 329-331. The Court in Sav-On emphasized that even after certification, individualissuesstill must be managedand, if they prove unmanageable,the court should decertify. Jd. at 335-337. Here, with no commonpolicy upon which classwideliability could be détermined, the need for an individualized inquiry to determineliability is inescapable, and class treatment would be tantamount to 260 mini-trials. In these circumstances, continued class treatment is unmanageable and inferior to individuallitigation. See, e.g., Brinker, 53 Cal.4th at 1052 (Court of Appeal! properly vacated certification where “no substantial evidence points to a uniform, companywide policy” and proofofliability “would have had to continue in an employee-by-employee fashion’); Arenas v. El Torito Rests., 183 Cal.App.4th 723, 732 (2010) (“Ifa class 62 594115.10 299action ‘will splinter into individualtrials,’” class treatmentis inappropriate); Soderstedt, 197 Cal.App.4th at 157 (class action unmanageable where necessary individual inquiries on the exemption issue could require 146 mini-trials). As Plaintiffs acknowledge, “at the rate it took to try the cases of the 21 RWGs—twodays per RWG—it would take 520 days (roughly two years) to determine liability and damages for each of the 260 class members.” Pet. for Review 23; OB41. This is not a manageable proceeding,noris it superior to individual claims, particularly given the sizeable individual recovery (an average of over $57,000 per person)” at issue. See Frahm v. Equitable Life Assur. Soc., 137 F.3d 955, 957 (7th Cir. 1998) (“Individual rather than class litigation is the best way to resolve person specific contentions when the stakes are large enough to justify individual suits.”); Soderstedt, 197 Cal.App.4th at 157-58; Reese v. Wal-Mart, 73 Cal.App.4th 1225, 1232, 1238 (1999)(certification properly denied where“plaintiff will be fully compensated should he prevail..., with damagesofno less than $1,000 as well as paymentof his attorney fees.”). Plaintiffs’ failure to provide any common method for proving liability therefore precludes class treatment, and the Court of Appeal properly decertified the class. Because decertification necessarily invalidates the class proceedings and judgment, this Court can affirm the Court ofAppeal’s disposition without any need to addressthe specifictrial procedures adoptedin this case. $15 million judgment/260 class members = $57,692.31 avg.class memberrecovery. 63 594115.10 IL. THE COURT OF APPEAL PROPERLY DETERMINED THAT THE TRIAL PLAN WAS UNCONSTITUTIONAL, AND THAT THE COURT’S USE OF STATISTICAL SAMPLING AND REPRESENTATIVE EVIDENCE WAS IMPROPER. A. The Due Process Implications Of The Trial Plan Are Reviewed De Novo. The Court of Appeal properly applied de novo review in evaluating whetherthe trial plan complied with due process, noting that both parties agreedthis is the proper standard. Slip.Op. 40. Although appellate courts review ordinary trial managementdecisions for abuse ofdiscretion, questions of whether a procedure met with due process are reviewed de novo. Hypertouch v. Superior Court, 128 Cal.App.4th 1527, 1536-1537 (2005); Bell IH, 115 Cal.App.4th at 751-758; see also Ohio v. Barron, 52 Cal.App.4th 62, 67 (1997); Ornelas v. United States, 517 U.S. 690, 691 (1996); Cooper Indus. v. Leatherman Tool Group, 532 U.S. 424, 436 (2001). Plaintiffs’ reliance on the “substantial evidence” standardis contradicted by their agreement at the Court of Appealthat the “de novo” standard of review wasproper for evaluating whetherthetrial plan and resulting judgment complied with due process. Respondents’ Br. 62. Here, de novo review involves considering all of the evidence presented in connection with the trialmanagementplan, including evidence excluded by the trial court, which impacted the constitutionality of the procedure imposed. 64 594115,10 B. Courts Interpreting California’s Unique Misclassification Laws Have Uniformly Rejected Sampling And Representative Evidence To Determine Classwide Liability. The Court of Appeal’s rejection of sampling and representative evidence in this case is not, as Plaintiffs suggest, “at odds with the growing acceptance ofscientific statistical methodology in judicial decisions and scholarship.” OB33. Courts have uniformly disapproved class treatmentin cases involving California’s outside sales exemption where the dispute centered on whether class members spend a majority of time outside, rejecting representative evidence and sampling as ineffective tools for dealing with disputes about where and how individuals spenttheir time. See, e.g., Jimenez, 238 F.R.D. at 252-253 (“[rlepresentative testimony will not avoid the problem that the inquiry needs to be individualized;” surveys andstatistics not helpful because each employee’s timeuse maydiffer, rendering class action trial unmanageable); Walsh, 148 Cal.App.4th at 1451-1452 (“individual hearings on both liability and damagesare required for each” class memberin outside sales exemption case); Dunbar, 141 Cal.App.4th at 1432 (“The court impliedly rejected... proposals [touse sampling, surveys or subclasses] in concluding that findingsas to one grocery manager could not reasonably be extrapolated to others given the variation in their work.”). Thedistrict court in Wells Fargo II likewise rejected representative evidence andstatistical sampling as a way to determine classwideliability when dealing with the outside sales exemption because there was no way to separate injured from uninjured class members and no “average” could be derived to determineliability. 268 F.R.D. at 612-613. In Vinole, the Ninth Circuit likewise rejected the use ofstatistical or sampling evidence: 65 594115.10 Plaintiffs’ claims will require inquiries into how muchtime each individual HLC spent in or out of the office and how the HLCperformedhis or her job; all of this where the HLC was granted almost unfettered autonomyto do his or her job.... Plaintiffs argue that these trial burdens could be mitigated through the use of “innovative procedural tools” such as questionnaires, statistical or sampling evidence, representative testimony, separate judicial or administrative mini-proceedings, expert testimony,etc... These arguments are not persuasivein light of our determination that Plaintiffs’ claims require a fact-intensive, individual analysis of each employee’s exempt status. 571 F.3d at 947. While the use ofstatistical sampling to determine classwide damages has been approved in somecases(e.g., Bell II), no California court has determinedclasswide Jiability in an exemption case using sampling. Thetrial court’s unilateral decision to use a 21-person sample to determine classwideliability in this case without statistical authority was unprecedented. Such novel procedures are only acceptable if the proponent makes “a preliminary showing of general acceptance of the new technique in the relevant scientific community.” People v. Kelly, 17 Cal.3d 24, 30-31 (1976); People v. Leahy, 8 Cal.4th 587, 604 (1994). The court adopted a novel and purportedly scientific methodology without any expert evidence supporting its validity, let alone its acceptance by any relevant scientific community, thus violating Kelly. Neither party ever suggested to the court that it could resolve classwideliability using a 21-person sample, nor did any expert endorse the sample size as likely to yield a statistically valid or accurate result. | Courts’ acceptance of scientific methodologies is always dependent on whether the methodology can adequately address the questions presented, consistent with due process and the applicable substantive law. Notably, all of the law review articles cited by Plaintiffs focus on the use of 66 594115.10 statistical sampling in mass tort cases. OB33. While exemptclassification of employees under California law may be proper as to some and improper as to others, the mass tort cases discussed by Plaintiffs’ articles involve alleged misconduct that constitutes a per se “bad act”asto all class members,i.e., exposing class membersto asbestos or misrepresenting the health impact of“light” cigarettes. The role of sampling in these masstort cases is to determine the degree ofharm suffered — not to determine whether the underlying conduct was unlawfulin the first place. None of | these articles address the situation presented by this case, where the exempt classification is not a per se “bad act” and the propriety of each employee’s : . qe . . 20 exemptclassification turns on individualized evidence. ® Plaintiffs cite two additionallegalarticles, neither of whichis relevant. OB36 n.4. In Class Determinations ofOvertime Exemptions: The False Dichotomy Posed by Sav-on and a Suggested Solution, 21 The Labor Lawyer 257 (2006), two lawyers proposed a rudimentary random sampling plan for misclassification cases whereby a trier of fact could find classwide — liability existed if at least 75% of the sample members were found to be misclassified. Id. at 272-273. The article suggests that if the plaintiffs win 75% of such mini-trials, that a court might somehow conclude“that each class member has a 75% chance of being nonexempt.” Jd. at 272. This proposal ignores the problem where potentially 25% ofthe class is properly classified. This poorly-reasonedarticle identifies no legal authority for ignoring an employer’s constitutional rights and allowing uninjured persons a windfall recovery. Nor doesit articulate any statistical support for the crude assumption that the “chances of being misclassified” are the same for the entire class regardless of the samplesize. _ Plaintiffs also cite to an article suggesting that employers can conduct internal audits using samples to assess their ownclassification compliance, an entirely different exercise from levying a multi-million dollar judgment. How to Conduct a Wage and Hour Auditfor Exemptions to Overtime Laws, West HR Advisor, Vol. 11, No.2 at 1, 8 (2005). A company’s desire to periodically evaluate itself internally is not subject to the same considerations, i.e., due process, as court proceedings that seekto deprive a litigant of property. 67 594115.10 1. Sav-On Addressed Only The Class Certification Phase And Did Not Discuss The Propriety Of Class Action Trial Procedures. In Sav-On, this Court upheldclasscertification in a misclassification case because the predominantissue in dispute was “task classification” (i.e., whether certain identical tasks are ‘managerial’ or ‘non-managerial’), a legal interpretation that could resolve classwide liability. 34 Cal.4th at 329-33 1. Courts may consider representative evidence and “other indicators of a defendant’s centralized practices in order to evaluate whether common behavior towards similarly situated plaintiffs makes class certification appropriate.” Id. at 333. Where no centralized practice exists to resolve classwide liability, such evidence is unhelpful. See Wells Fargo I, 268 F.R.D. at 611. If individual issues prove unmanageable,thetrial court retains the right to decertify. Sav-On, 34 Cal.4th at 335. Sav-On did not hold that the trial court could simply ignore individual issues attrial. Sav-On does not support Plaintiffs’ argument that a defendant has no right to assert its affirmative defense against every class memberattrial. | While Sav-On holdsthat a certification proponent in an overtime class action does not have to prove the entire class is nonexemptas a prerequisite to certification, it did not address, muchlessset, the standards for a class action trial. Slip.Op. 6-7 n.15. Sav-On dealt with and allowed for certification, so long as individual issues can be effectively managed. The ~ trial court’s trial plan here did not manage individual issues; it ignored them by barring USB from presenting scores of relevant evidence. 68 594115.10 2. Bell III\s Limited To Estimating Classwide Damages And Provides No Support For The Trial Plan Adopted Here To Determine Classwide Liability. Plaintiffs’ reliance on Bell IJ is misplaced. Plaintiffs argue that Bell II’s endorsementofrepresentative testimony to establish damages suggests that representative testimony may be usedto establish liability here. Plaintiffs further suggest Bell IT stands for the proposition that a defendant’s interest in a misclassification case is only in its “total aggregate liability to the plaintiff class” for unpaid overtime and “not in which individuals are exempt or non-exempt.” OB42. The Court of Appeal (which also issued Bell I/D) rejected these arguments, explaining that “Be// JI is manifestly inapposite.” Slip.Op. 42. Plaintiffs’ argument that the Court of Appeal misunderstood its own prior opinion cannot be credited. Bell II did not involvea trial ofliability, which had already been established on summary judgment. The only issue was the amount of damages“and not whetherthe plaintiff employees had a right to recover damagesin thefirst place.” Slip.Op. 45. Furthermore, in Bell II, the sample was formulated with the participation of the parties and their experts to agree on an appropriate sample size and an acceptable margin of error” (+/- 1 hour, or just over 9%). 115 Cal-App.4th at 722- 71 Margin oferroris a statistic expressing the amount of random sampling error ina sample. See, e.g., 71CT20933-20935; TE1295. The larger the margin oferror, the less faith one should have that the sample’s reported results are close to the “true” figures for the entire population. See, e.g., 71CT20934. Plus-or-minus (“+/-’”’) the numberofhoursis referred to as the “absolute” margin of error. Margin oferror is also expressed using a percentage, whichis called the “relative” margin of error. 71CT20933- 20935, 20960. Therelative margin of error is determined by dividing the (Continued...) 69 594115.10 723. Here, the trial court chose a trial methodology not endorsed by either party or their experts, arbitrarily using a 21-person sample without any scientific basis, and without considering the desired level of accuracy. The trial court also introduced response bias and non-random elements, including by allowing testimony of the two namedPlaintiffs to be extrapolated to the class. This led to a classwide judgment with a 43.3% margin oferror, far exceeding the unconstitutional estimate for double-time damages in Bell II]. 115 Cal.App.4th at 757. - The Court of Appeal rejected the trial plan here becauseit outright precluded USB from presenting evidence to prove its exemption defense whereas, in Bell III, the defendant had not been precluded from presenting evidence to contest damages. 115 Cal.App.4th at 757-758(“Weagree that "the trial management plan would raise due processissuesifit served to restrict [the employer’s] right to present evidenceagainstthe claims...”).”” (...Continued) absolute margin of error by the estimated weekly hours as follows: 0.9/9.4=0.096. Bell IH, 115 Cal.App.4th at 723-724; 73R1T5734-5735. 2 Plaintiffs cite to the fact that class certification was upheldin Bell IIT even though 9% ofthe class “did not claim overtime” (because they did not — work overtime). OB28. Bell III simply held that class certification may still be appropriate even though class members may needto individually prove their damages(orthe lack thereof). Bell IZ, 115 Cal.App.4th at 743- 744. Bell II did not say that individual issues did not have to be managed simply because a class was certified. Jd. Notably, in Bell III the 9% of uninjured class members did not recover. Here, by contrast, the trial plan provided no meansfor determining which class members were or were not misclassified and allowed uninjured members to recover substantial sums. This result is contrary to black letter class action law holding that if an individual would not be entitled to recover in an individualsuit, the result should not differ simply because the individual pursues the same claim through a different mechanism. Feitelberg, 134 Cal.App.4th, 997, 1018 (2005); Brinker, 53 Cal.4th at 1050-1051 (reversing certification of class that by definition included individuals with no claim). 70 594115,10 3. Plaintiffs’ Reliance On Dicta Discussing The Jdea Of Statistical And Representative Evidence Does Not Support The Trial Plan Here. Plaintiffs rely on dicta andcases engaging in speculative discussion of the idea of representative evidence, including the non-binding and inapposite case, Dilts v. Penske Logistics, 267 F.R.D. 625 (S.D.Cal. 2010). Dilts involved a uniformly improper companypolicy, where the employer automatically deducted 30 minutes from total work hours every day, regardless ofwhether employees actually took meal breaks. Dilts is not a misclassification case and the Dilts court had no occasion to consider how statistical or representative testimony might adequately manage the question of how class membersspenttheir time. The Court of Appeal properly distinguished Dilts, noting that it was a class certification phase case where the court merely allowedfor the “possibility” that the plaintiffs might be able to come up with an acceptable trial plan involving representative testimony. Slip.Op. 60-61. Dilts was not tried and summary adjudication was subsequently granted for the defendant onliability in Dilts, obviating any need for a trial managementplan. Plaintiffs also rely on one selectively-quoted excerpt from Justice Werdegar’s concurring opinion in Brinker encouraging “the use ofa variety of methodsto enable individual claims that might otherwise go unpursued to be vindicated” and suggesting that “[r]epresentative testimony, surveys, and statistical analysis all are available as tools to render manageable determinations of the extent ofliability.” 53 Cal.4th at 1054; OB35. Plaintiffs’ reliance on this non-binding dicta is unfounded. This Court had no occasion to consider representative evidenceorstatistical sampling in Brinker, which involved meal and rest break claimsat the class certification phase,notattrial. 71 594115.10 Plaintiffs ignore Justices Werdegar’s preceding comments, where she observedthat “[i]n almost every class action, factual determinations [of damages]... to individual class members must be made.” Brinker, 53 Cal.4th at 1054. However, “[f]or purposes of class action manageability, a defense that hinges liability vel non on consideration of numerous intricately detailed factual questions, as is sometimes the case in misclassification suits, is different from a defense that raises only one or a few questions andthat operates not to extinguish the defendant’s liability but only to diminish the amount of a given plaintiff's recovery.” Id. Furthermore,Plaintiffs conflate classwide liability and damages because the terms “extent of liability” and “aggregate liability,” do not refer to determining whether a defendant has committed an unlawfulact, i.e., the fact ofliability. See Morgan, 210 Cal.App.4th at 1368-1369. Thus, Plaintiffs’ bald assertion that“a trial court can use representative testimony to calculate the employer’s aggregate liability to . the class based on a determination of the percentage ofthe class that is non- exempt” is without any support. OB42. Plaintiffs’ suggestion thata trial court can accurately determine “the percentage ofthe class that is non- exempt” without questioning each class memberin a case like this is nonsensical. If Plaintiffs actually mean the percentage of the class that “might” be misclassified based on a sample estimating the portion ofthe class who was misclassified, this only underscores the problem with representative evidence in this case. “A principal reason for rejecting ‘statistical sampling’ for at least some purposesis that it forces an employer to attempt to defend against what an employee probably did (as ‘revealed’ by statistics) as opposed to being able to address or confront what he or she actually did, which is what it would be allowed to do were the case brought individually as opposedto as part of a class action.” Wong v. AT&T, 2011 72 594115.10 U.S.Dist. LEXIS 125988, n.18 (C.D.Cal. 2011) (applying California law) (emphasis in original). . 4, The U.S. Supreme Court’s Rejection Of “Trial By Formula” In Wal-Mart v. Dukes IsApplicable Here. The U.S. Supreme Court’s reasoning and rejection of a “Trial by Formula”in Wal-Mart v. Dukes is applicable here and confirmsthat this trial plan was improper. The U.S. Supreme Court ruledthatplaintiffs seeking class treatment must not merely allege “common questions,” but must identify issues with a common answer,that will “drive the resolution of the litigation.” Dukes, 131 S.Ct. at 2551. The plaintiffs liability theory of gender discriminatory promotional practices, which was based upon a policy of de-centralized and discretionary decision-making, provided no common answerbecause “demonstrating the invalidity of one manager’s use of discretion will do nothing to demonstrate the invalidity of another’s.” Id. at 2554. As aresult, the defenses were necessarily individualized and a trial by a sample set of class members was improper because “a class cannot be certified on the premise that [the employer] will not be entitled to litigate its statutory defenses to individual claims.” Id. at 2561. Plaintiffs deny that Dukes impacts this case by focusing on immaterial distinctions.” OB43-44. The fundamental problem in Dukesis *3 Plaintiffs previously relied upon Hilao v. Estate ofMarcos, 103 F.3d 767 (9th Cir. 1996). The Court of Appeal correctly distinguished Hilao. See Slip.Op. 62-63. The U.S. Supreme Court’s decision in Dukes effectively overruled Hilao by rejecting the “Trial by Formula” as an acceptable method for “managing”individualized issues. See 131 S.Ct. at 2550, 2561. Even if it remained good law, Hilao is a self-described outlier where the trial methodology was admittedly “unorthodox”but justified its holding based on the “extraordinarily unusual nature” of the case: egregious human rights violations involving claims for summary execution, torture and kidnapping by the Marcos regime. Hilao, 103 F.3d at 786. Even Hilao (Continued...) 73 594115.10 the samehere: the company-wide policies alleged do nothing to answerthe question ofwhether they resulted in violations as to individual class members. Accordingly, multiple courts, including the Court of Appeal, below, have held that Dukes is persuasive in evaluating class treatment of California misclassification claims. See Slip.Op. 52-54 & n.65; Cruz, 2011 U.S.Dist. LEXIS 73938 at *12; Wong, 2011 U.S.Dist. LEXIS 125988at *13 (“Whereasthe ‘crucial question” in Wal-Mart Stores was ‘Why was I ~ disfavored?,’ here the crucial question[] [is] “Am I (or was I) exempt or non-exempt?’”). Here, Plaintiffs’ theory of proffering USB’spolicies of exempt classification and BBOdiscretion does nothing to provide a common answer, i.e., was the exemptclassification proper as to each class member? No single proceeding can answerthiscritical question. Plaintiffs’ attempt at distinguishing Dukes becauseit dealt with certification of back pay claims under Rule 23(b)(2) similarly fails. California courts look to the standards prescribed by Rule 23 for guidance in whetherto certify a class. Soderstedt, 197 Cal.App.4th at 147 n.2; Janik v. Rudy, Exelrod & Zeiff, 119 Cal.App.4th 930, 943 (2004); Arias v. Superior Court, 46 Cal.4th 969, 989 (2009) (Werdegar, J., concurring). California class action rules are analogous to Rule 23(b)(3) cases and each Rule 23 case is subject to Rule 23(a)(2)’s commonality requirement, which the Supreme Court clearly stated was the “crux” ofDukes, and from which the Supreme Court’s commonality analysis flowed. Dukes, 131 S.Ct.at 2550-2551. Where a court finds insufficient commonality for Rule 23(a)(2) purposes, it must conclude, afortiori, that commonissues do not (...Continued) acknowledged that the defendant’s “due process claim doesraise serious questions” andthat “at least one circuit has expressed ‘profound disquiet’ in somewhat similar circumstances.” Jd. at 785 (citing In re Fibreboard Corp., 893 F.2d 706, 710 (Sth Cir. 1990)). 74 594115.10 predominate. See Ostrofv. State Farm Mut. Auto. Ins. Co., 200 F.R.D. 521, 530 (D.Md. 2001); Casida v. Sears Holdings Corp., 2012 U.S.Dist. LEXIS 111599, *36 (E.D.Cal. 2012) (“the Rule 23(a)(2) ‘commonality’ factor relies upon a more lenient standard than the related requirement under Rule 23(b)(3).”). 5. FLSA Misclassification Claims Do Not Involve California’s Uniquely Quantitative Exemption Analysis. And Provide No Support For Sampling Or Representative Evidence Here. FLSAcases discussing representative evidence do not support the. trial plan here. California’s “primarily engaged”test for exempt status differs from the federal “primary duty”test in that the California exemption is quantitative whereas the federal standard is qualitative. See, e.g., Ruggles v. Wellpoint Inc., 272 F.R.D. 320, 343-344 (N.D.N.Y. 2011); Tate- Small v. Saks Inc., 2012 U.S.Dist. LEXIS 76081, *9-*10 (S.D.N.Y. 2012). This Court expressly rejected the FLSA’s application to California’s outside sales exemption, confirming that the California exemption hinges on the highly individualized question of whethera particular employeeis spending over 50% ofhis time engaged in exempt work in a given week. Ramirez, 20 Cal.4th at 797-801. The difference of 1% of an employee’s worktimecantilt the result entirely. In contrast, under the federal “primary duty” test, employees sharing a commonjob description and responsibilities will likely have the same “primary”or “most important” job duty, notwithstanding possible variations in the percentages of time spent on specific duties. Accordingly, FLSA misclassification cases do not provide a roadmap for making classwideliability determinations in California misclassificationtrials. Furthermore, USB is unaware of any FLSA misclassification case where a defendant employer attempted to challenge individual claims at 75 594115.10 trial,but was denied the right to do so, even in cases where “representative” evidence was approved as a means of evaluating employees’ “primary duty.” For example, Plaintiffs cite Morgan v. Family Dollar Stores, 551 F.3d 1233 (11th Cir. 2008), a collective action in which store managers sued for misclassification under the FLSA. In Family Dollar, the class members’ primary duty was performing manuallabor rather than exempt managerial duties and they hadlittle discretion in their jobs. Jd. at 1270- 1273. Despite using representative testimonyattrial, the Family Dollar court did notrestrict the defendant’s right to introduce evidence from other class members. See id. at 1277-1278 (the defendant did not pursuethis option, however). Further, Family Dollar permitted the employerto take 250 depositions of class members and to serve interrogatories on every remaining class member. Jd. at 1244. In contrast, here, the trial court limited pre-trial discovery to the RWGandprohibited the introduction of any “non-RWG”evidenceattrial, over USB’s repeated objections and attempts to do so. While there may be cases where the employer wishes to challenge a much smaller group of class membersfor cost or other reasons, this is not such a case, given the substantive law, the evidentiary record, and USB’s desire to defenditself against these significant individual claims. Here, USB hasdirect evidence to challenge the claims of nearly one-third of the class and a well-founded belief that cross-examination of the other non-RWGclass members will reveal they too were properly classified. Another important distinction from Family Dollaris that the employer kept “extensive payroll records that broke down, week-by-week, how many hours each of the 1,424 store managers worked,” and therefore, “there was no need for such numerical approximation” as to damages. Id. at 1279. Classwide recovery was not calculated based on “representative” testimony, but was instead based on detailed time records for each class 76 594115.10 member. Thus, Family Dollar’s application is limited, at most, to FLSA cases with similar factual circumstances. See, e.g., In re Tyson Foods, 694 F.Supp.2d 1372, 1380 (M.D.Ga. 2010). | FLSA misclassification collective actions are also distinguishable from California misclassification cases because:(a) they are “opt-in” class actions, meaningthat all of the class members affirmatively elect to participate after hearing aboutthe claims alleged; and (b) the court has to determine, at two separate stages, that the opt-in class membersare “similarly situated,” which involves a rigorous assessmentofthe similarities between class members’ employment experiences and the potentially applicable defenses. See Family Dollar, 551 F.3d at 1260-1265. Regardless, even FLSA misclassification class actions are routinely decertified if, as here, individualized issues and defenses will render a class _ trial unmanageable. Beauperthuy, 772 F.Supp.2d 1111, 1132-1133 (N.D.Cal. 2011); Aquilino v. Home Depot, U.S.A., Inc., 2011 U.S.Dist. LEXIS 15759, #28 (D.N.J. 2011); Scott v. Raudin McCormick, Inc., 2010 U.S.Dist. LEXIS 130061, *15-*17 (D.Kan. 2010); Johnson v. Big Lots Stores, Inc., 561 F.Supp.2d 567, 568 (E.D.La. 2008) (court decertified after trial due tolack of commonality). . C. The Trial Plan And Classwide Findings Were Statistically Invalid And Unconstitutional. 1. Plaintiffs’ Own Expert Confirms The Trial Plan And Resulting Judgment Were Statistically Invalid. Plaintiffs falsely assert that the trial court’s plan was “modeled on plaintiffs’ trial management plan.” OB11-12. Plaintiffs’ expert, Drogin, ~ confirmed thathis proposed trial plan “was not used in this case.” 72RT5648-5653; TE1282. Thetrial plan’s only commoncharacteristic with Drogin’s proposal wasthat it involved randomly selecting at least some members of the sample. 72RT5649-5653. 77 594115.10 Plaintiffs also overstate Drogin’s testimony as “supporting”the trial plan. Drogin merely used the data obtained in Phase I from the RWGto attempt to estimate “average” overtime hours for all 260.class members. Drogin testified his calculations were the “best estimate” that he could make based on the “available data.” 71RT5613, 5619. Drogin deferred to the court’s decision to use Phase J findings to calculate classwide recovery and acknowledgedthat his estimate was limited by the quality of the underlying data. See id. He avoided comparing the inaccurate process here to the scientifically rigorous and “statistically appropriate” process utilized in Bell IH. 115 Cal.App.4th at 724. Drogin admitted that Bell Iincluded detailed information regarding daily hours worked per week by the sample membersandthat daily “calendars were constructed” from their testimony. TART5796-5799. | Drogin also admitted that the court never sought his opinion asto the appropriate sample size neededto achievea statistically acceptable level of accuracy. 74RT5771-5772. The desired level of accuracy is what ought to determine sample size, not convenience. 74RT5771-5776. Drogin admitted that pilot studies,like the one done in Bell II, and not done here, are “often performed in statistical sampling when it’s necessary to get some idea about the variation in the population in order to accurately compute a sample size that would be appropriate for obtaining a predefined level of accuracy.” 7ORT5568. Thetrial plan here was, from its inception, not remotely concerned with obtaining any particular level of accuracy. Drogin nevertestified that the 43.3% margin of error was a sufficiently accurate basis for a $15 ~ million judgment. 74RT5809-5810. He never made any recommendation © to the court concerning an appropriate margin of error. 73RT5734. He merely explained that the estimate was “reliable,” meaning that the degree of inaccuracy was repeatable, so that if additional samples of 21 were 78 594115.10 repeatedly drawn, 95% ofthe time, you would obtain a weekly overtime estimate somewhere within the wide chasm of 6.72 and 17 hours based on the +/-5.14 hour/43.3% margin oferror. 71RT5621-5623: TORT5554- 5556; 74RT5812-5813. . Drogin admitted that a +/-5.14 hour margin oferror is enormous in the context of this case: A “margin of error of 5.14 is fairly insignificant if you are estimating something that’s in the millions. That would be a minuscule fraction of the value, whereasifit’s something that is a lower type of value like here, thenit’s a higher percentage ofthe thing you’re estimating.” 70RT5557. In other words, Drogin testified that it is “accurate” to say that the estimate here had a 43.3% margin oferror, but the estimate itself is not accurate at all. See, e.g., 74RT5808-5810; 74RT5768. However, the court conflated the terms, erroneously assumingthat a | reliable process equates to a sufficiently accurate result. | Addressing whether the RWG sample wastruly “representative” of the class, Drogin again hedged by avoiding stating whether the sample of 21 was adequately “representative.” 72RT5677. Drogin tried to distance himself from his endorsementofthe accurate sampling conducted in Bell IT. 115 Cal.App.4th at 724. In Bell I, after obtaining a margin oferror of +/-0.9 hours (a relative margin of error ofjust over 9%), Drogin testified: “The statistical theory of random samplingstates that the resulting samplingis likely to be representative of all class members and therefore any estimates computed from the sampleare likely to be close to the corresponding value for the entire population. Thus we have a high degree of confidencethat the average overtime hours per week is very close to the value for all Class members.” 74RT5807. Drogin never reached the same conclusion here and validated neither thetrial plan, nor the resulting estimate upon whichthe erroneoustrial court judgment wasbased. 79 594115.10 2. The Classwide Liability Finding Was Improper Because There Was NoBasis To Conclude That 100% Of The Class Was Misclassified. Both parties’ experts agree there wasnostatistical basis to conclude that “100% of the class was misclassified” and thus, there is no basis for the classwideliability finding. Drogin admitted he had “no idea what wasin the court’s mind” whenthe court issued its finding that all class members were misclassified. 72RT5645-5653. Drogin agreed with USB’s expert, Dr. Hildreth, that, even assuming the sampling plan was designed and conducted perfectly, establishedstatistical principles demonstrate that 13% of the class may havebeenproperly classified.“ In Drogin’s own words: If you observe a random sample of 20 from a population of 260 and the random sample of 20 all have the same value for the characteristic you’re measuring, which in this case they were misclassified, then you cannotsay for certain that all — that all of the people in the class were misclassified... I noted in Dr. Hildreth’s report a similar result... you can make the statement that you’re 95 percent confident that the percentage of misclassified employees in the Class is at least 87 percent. In other words, 87 percent is a lower boundforthe confidence interval associated with that result from the sample. 72RT5633-5634. Drogin thus confirmed that he could not provide any statistical basis — and that he had nofactual or personal knowledge — to conclude that “100%”ofthe class was misclassified. 72RT5642. In other words, Drogin agreed that even if all 21 RWG members were determined 4 This calculation assumes classwide liability could be “estimated,” and the existence of a properly gathered, random,and representative sample. Since those assumptions do not apply here, the 13% estimate is invalid and understates the actual uncertainty. 81RT6376-6377, 63 86-6387; TE1295- 1299. 80 " 594115.10 to be misclassified, statistical principles (the “hyper-geometric distribution”) indicate that up to 13% ofthe class (as many as 33 class members of the remaining 239) may nonetheless be properly classified. 71CT20948-20953. Further, USB disagrees that the 21 RWG were misclassified because it was improperly precluded from presenting evidence that they were exempt under the administrative exemption or by tacking the administrative and outside sales exemptions. 45CT13298; 79CT23514. | Plaintiffs crudely distort statistical terminology by asserting that “the margin of error was 13%, a figure equivalent to the margin of error in Bell.” OB47. This is extremely misleading. The 13% “margin of error”is not remotely related to damages and is not comparable to the approximately 9% margin of error achieved in Bell [77 in estimating average overtime hours, i.e., damages. Thus, the proper comparison between the approximately 9% margin oferror in Be// [JJ and the margin oferror here is the 43.3% associated with Drogin’s estimated “average” overtime hours worked by the RWG. To get anywhere near the 9% margin oferror achieved in Bell I[I here, you would need to question the entire class (based on the variability of the responses just from the RWG). 71CT20961; TE1295. Moreover, the 13% “margin of error” is meaningless and untethered to reality since there was extensive specific defense evidence that at least one-third (or 33%) ofthe class was properly classified. The “13% margin of error” referenced here applies to the attempts to “estimate”liability as a binary (exempt/non-exempt) proposition. Thisis entirely different from estimating average overtime hours, a “continuous” variable theoretically ranging from zero to 128 hours. Attempting to estimate exemptstatus as an all-or-nothing variable relies upon different statistical formulas than those used to estimate average overtime hours worked. 80RT6305-6306. Plaintiffs compare apples to oranges when they 81 594115.10 conflate the conceded 13% margin oferror” ontheir “classwide”liability finding with the 9% margin oferror for the overtime hours damages estimate in Bell III. | | Any attempt to use Drogin’s testimony to support classwideliability relies on circular reasoning, since Drogin’s testimony confirms that he relied on the trial court’s classwide liability finding, as opposed to any statistical basis, and that he would offer no opinions concerning classwide liability. 72RT5644-5653; 74RT5830. Unlike Bell II, which permitted classwide damages to be approximated because classwideliability was already established, the question of which membersofthe class can or cannot establish a claim forliability in the first instance cannot be “approximated” or otherwise presumed whenliability hingeson individual employees’ actual activities. See Wong, 2011 U.S.Dist. LEXIS 125988 at *30-*31 n.18 (rejecting statistical sampling whereit forces an employerto attempt to defend against what an employee probably did (as “revealed” by statistics) as opposed to what he/she actually did). Unlike thetrial court, Drogin believed the question ofliability (exempt status) could only be determined on anindividualized inquiry as to each class memberandhis only proposal on classwideliability involved obtaining information from all class members. 72RT5647-5653; TE1282. Dr. Hildreth’s unrefuted testimony confirmsthat it was not possible to conclude, based onstatistical sampling, that all absent class members were misclassified. See, e.g., 81RT6378-6400; 71CT20948-20953; TE1295. Thus,thereis no statistical basis for any classwideliability finding and the Court of Appeal properly reversedthetrial court’s judgmentin its entirety. 5 See prior footnote. 82 594115.10 3. “The Experience OfRWG Chad Penza” Confirms The Impropriety Of The Trial Plan And Classwide Liability Findings. Attempting to salvage the unfounded classwideliability finding, Plaintiffs assert that “[t]he trial court found instructive the experience of RWGChadPenza,the top-producing BBOin the entire company.” OBSO. Penzais neither typical nor “instructive” ofhow any other BBOs performed their jobs. Moreover, even Penza was foundto be properly classified for at least a portion of his employment. Plaintiffs also ignore the fact that Penza signed two separate declarations, both confirming his exemptstatus. TE1000-1001; 23RT979-991. Thus, Penza exemplifies how absentclass members might also have been properly classified.”® | Penza’s “experience” also confirmsthat significant individual credibility issuesare critical in this case involving large individualclaims. Thetrial court’s erroneous judgment awards Penza well over $400,000. 83CT24698. While Penzafirst confirmed at trial the accuracyofhis declarations, helater changedhistrial testimony. 23RT983.7’ Penza attempted to distance himself from his prior declarations, claiming he was a “new BBO”whenhe signedhisfirst declaration (although he had been a BBOfor three quarters and was a top producer) and that he had a lot of commissionsat stake two years later when he signed his second declaration 6 Penzaalso highlights the issue ofthetrial court’s erroneous summary adjudication of the commission sales exemption raised by USB,but not reached, in the Court of Appeal. See Slip.Op. 6. There is evidence suggesting that Penza was exempt under the commissioned sales exemption during at least some quarters, since he earned high commissions, receiving somesix-figure incentive payments in addition to a substantial basesalary. 7 Two USB managementwitnesses refuted Penza’s testimony. 44RT3186- 3188; 46RT3493-3496; 60RT4907-4912, 4919-4923. 83 $94115.10 (if believed, establishes his motivation to lie for financial gain). 23RT979- 991. However, he never recanted his admission that he spent most of his time outside for at least his first two weeks as a BBO. 22RT849-850, 891- 896; 71CT21005. Thetrial court had no basis to conclude that Penza’s experience was “typical” of any other BBO.Ironically, Plaintiffs argue that Penza’s “example”as the top-producing BBOin the entire company somehow supports the conclusion that all class members spent the majority of their time inside the Bank. OB50. However, if Penza is such a good example, and is deemedto be “representative” ofthe class, then the logical inference is that some portion of the class wasalso properly classified for at least someportion oftheir employment, unraveling the erroneousfindingthat 100% of the class was misclassified. See Dunbar, 141 Cal.App.4th at 1431 (exemption determined on week-by-weekbasis). Instead, the court ignored. this finding for extrapolation purposes and deemed “100% ofthe class”to be misclassified 100% ofthe time. 71CT21018; 83CT24516; 76RT5921- 5922; cf 71CT21005. This logical inconsistency underscoresthe fact that the week-by-week exemption analysis under California law prohibits any “extrapolation”ofliability findings here from oneindividualto others. 81RT6393-6396; Dunbar, 141 Cal.App.4th at 1426-1427, 1431-1432. 4, The Gerrymandered, Non-Random RWG Sample Violated Basic Statistical Principles, Rendering Any Classwide Findings Improper. Both parties’ statisticians testified that non-randomly selected individuals cannot be included in a random sample. 81RT6382-6384; 7ORT5561-5563; 74RT5815-5817. Additionally, the trial court allowed numerous impropereliminations and substitutions within the RWG. Dr. Hildreth demonstrated (and Drogin largely agreed) that thestatistical implications of these various errors compromised any potential 84 594115.10 “representativeness” that may have been present in the original, randomly selected RWG. See, e.g., 71CT20941-20948; TE1295; see also 74RT5802- 5806. Althoughthetrial court relied upon Bell III as the purported basis for its sampling plan, “the procedures [ ] approved in Bell III are only superficially similarto the proceduresutilized in the present case.” Slip.Op. 45. The record confirmsthat“the trial court here did not follow established statistical procedures in adopting its RWG-basedtrial methodology.” Slip.Op.45. | | Having recognized that the 43.3% margin of error renders the classwide recovery estimate unsalvageable, Plaintiffs now attempt to preserve only the classwideliability finding in hope of obtaining a remand order with a do-overlimited only to (re)estimating “damages.” OB62. Plaintiffs contend that “the existing sample need not be discarded, but can be supplemented by the testimony ofadditional randomlyselected class “members.” Id. However, the RWGsample is neither random nor representative, and no classwide conclusions can properly be based upon the testimony or findingsrelating to this group of 21 class members. a. The RWG Sample Was Not Random And Suffered From Haphazard Substitutions, Eliminations And Selection Bias. The RWG wastainted by selection bias because the trial court’s methodology caused the final sample to include only those who chose to participate. 71CT20943-47; TE1295; 81RT6334-6354. The originally selected trial witnesses had two choices: they could(1) participate in discovery andtrial or (2) drop out of the case and avoid participation. These options differ from thoseofall other absent class members, whose opt-out decisions were unrelated to the prospect of mandatory participation in trial. 71CT20945; 81RT6334-6354. Notably, the opt-out ratefrom the originally selected RWG members was 20%,ten times higher than the opt- 85 594115.10 out rate for all other absent class members(less than 2%). 71RT5624- 5626; 71CT20944-20948; 81RT6334-6354. Drogin suggested that it was acceptable toallow originally random witnesses to select themselves out of a sample, but was impeached by his own testimony in Bell II. 74RT5802-5804 “Question: Isn’t it a fact it’s equally as important that sample members not be allowed to get in the sample as it is that they not be allowed to get out of the sample? Answer: That’s correct.”). Drogin’s feeble explanation that the opt-outs from the sample can be ignored becausethey are “no longera part of the population” is nonsensical, since their own choice to “leave the population” wastied to their decision of whetheror not to participate as a trial witness. Drogin admitted that the composition of the originally drawn random sample was altered by opt-outs and he had nobasis to assumethe opt-outs were random. 71RT5624-5626. The astronomically high opt-out rate of the original RWGreveals that the remaining sample wasnot “representative” of the class. 81RT6342-6347, 6376-6382. Further selection bias resulted when the court removed Smith from the RWGbecause his duties were apparently different from other BBOs’. 71CT20946; TE1295; 81RT6342-6353. The trial court failed to consider that Smith also provided data inferable to the remainderofthe class, since his performance of differing duties suggests that other absent class membersalso performeddiffering duties. 71CT20946-20948. The court also ignored the fact that RWG memberPetty signed a release preventing him from recovering in this case. 71CT21005-21006. Despite Drogin’s testimony that random selection means the sample tends to be “representative” of the population, he provided nostatistical basis for excluding Smith, or for selectively extrapolating Petty’s claimed hours worked but ignoring his release. These errors undermined any usefulness 86 594115.10 of the RWGdata for extrapolation purposes. 71CT20941-20948; TE1295; 81RT6349-6366. Thetrial court also included the twoself-selected named Plaintiffs in the sample.”® 71CT20998-20999. Drogintestified there wasnostatistical basis for including non-random data points (like Duran and Fitzsimmons) in the random sample. 70RT5561-5563; see also TE553; 74RT5815-5817 (Drogin concededthat a properstatistical sample uses an unbiased method for selecting the sample); 72RT5669-5678 (Drogin could not determine that Duran and Fitzsimmonswererepresentative of the class). The trial court acknowledgedit was acting contrary to establishedstatistical principles but declared itself to be the “final arbiter of what is representative of the class” and claimedit was not boundbystatistical principles because it could simply “deem”individuals to be “representative.” 83CT24627; see also 81RT6366-6367. Inso holding, the court abusedits discretion.” Finally, RWG memberBryant refused to appearat trial. This fact, statistically speaking, was a “non-response”andthetrial court should have 8 Contrary to Plaintiffs’ false characterization, the trial court was not granting any request by USB whenit included Duran and Fitzsimonsas non-random RWG members. In fact, USB requested that the court require testimony from all current and formerclass representatives as part of any attempt to use purportedly “representative” evidenceattrial, but the court denied USB’s request, refusing to permit testimony by the four prior named plaintiffs, all ofwhom previously testified that they were exempt. 11RT244-247; 22CT6201-6202. The court granted Plaintiffs’ alternative request to include Duran and Fitzsimons only as non-random RWG members. 11RT245, 249. , ”» The trial court suggested that even thoughit wasstatistically improper to include Duran and Fitzsimmons,this error did not matter because removing them would cause the sample “average” amount of overtimeto increase. 83CT24627. However, it was undisputed that exclusion of the two non- random namedPlaintiffs from the sample would also increase the margin of error to at least 47%. 810123972; TE1297; 81RT6370-6373. 87 594115.10 inferred that some proportion ofthe class, if called to establish entitlement. to recovery, would also not show up to establish a claim. 81RT6353-6354; 71CT20941-20942, 21000; see also 73RT5756-5761 (Drogin admitted non- appearance was a non-response and could not explain disregardingits implications). However, the trial court selectively decided not to extrapolate Bryant’s non-appearance, despite finding that the RWG was “representative”ofthe class.” In summary,the trial court underminedthe entire point of a “representative” sample by refusing to extrapolate any information from the RWGthat was unfavorable to a finding of classwide liability. Because the RWGsample was not random,it cannot reasonably be considered “representative” of the class and any classwide findings premised on the RWGmust be reversed, for both liability and recovery. b. The RWG Sample Size Was Too Small To Generate Meaningful Estimates. In addition to the RWG sample being an inadequate basis for any classwide liability determination, the sample size here wasalso too small to make any useful statistical inferences regarding hours worked. Two fundamental statistical principles-the Law of Large Numbers and the Central Limit Theorem for sample means—dictate that a sample size must generally be 30 or greater to provide a viable estimate for the underlying population unless the population data is known to be normally distributed (i.e., follows a bell curve). 71CT20938-20939; TE1295; 80RT63 12-6322. Drogin agreed with these principlesand that the population data was not known to be normally distributed. 74RT5765-5771. * The judgment awards Bryant over $50,000. 83CT24699. 88 594115.10 The sample of 21 was too small even to serve as a pilot study from which one could estimate the population standard deviation for determining average hours worked. See Bell III, 115 Cal.App.4th at 722-723 (Drogin proposeda pilot study of 50 individuals to determine appropriate sample size for full study); 80RT6309-6310, 6312-6322; 82RT6408-6415. Despite his contrary testimony and recommendationsin Bell IZ, Drogin provided no justification for ignoring the samestatistical principles here. 5. The Flawed Trial Plan Failed To Comply With Bell U1. Thetrial plan here bears no resemblance to the procedures employed in Bell II. See Slip.Op. 45-47. It bears repeating that a 43.3% margin of error reflects inaccuracy that reaches “constitutional dimension.” Bell I, 115 Cal.App.4th at 756-757 (32% margin of error extremely inaccurate and unconstitutional). The 43.3% (or +/- 5.14 hour) margin of error meansthat, with the samelevelofstatistical probability, the estimated average numberof overtime hours for the class (with another 21 person sample) could just as easily be 6.72 hours per week, instead of 11.86! Under Bell LI, this outrageouslevel of inaccuracy is not acceptable in any context and cannot serve as the basis for a $15 million judgment against USB. a. The Trial Court Improperly Relied On Bell IPs “Bolstering Factors.” The trial court attempted to justify its judgmentand the extraordinary 43.3% margin of error by relying on single line ofdicta from Bell II: “Thereliability of an estimate subject to a large margin of error might conceivably be bolstered by evidence of a high responserate, probable distribution within the margin of error, absence of measurement 89 594115.10 error, or other matters.” 115 Cal.App.4th at 756; 83CT24520-24525.7 Of course, that phrase followed the Bell IZ court’s rejection of a 32% margin of error as to the double-time calculation. Jd. These.“bolstering” factors were not present here and, even if they were, could not salvage a 43.3% margin oferror. Thetrial court erred in concluding that the response rate was an “extremely high” 95% because “21 out of 22 RWGstestified.” 83CT24622, 24628. In fact, six of the original randomly selected 20 RWG membersfailed to testify. Thus, the actual response rate is 14 out of 20, or 70%. 22CT6289; 71CT20960-20961; TE1295; 70RT5559; 81RT6334- | 6353; 82RT6455-6456; 83RT6550-6558. As confirmedbya scientific text Drogin relied upon, “An important task for the investigator is to carefully and completely define the population before collecting a sample.” TE552; T4RT5815-5817, 5826; 81RT6340-6347. Thus, removing individuals from the population after collecting the sample is improper. Here,the actual response rate of 70% is not high, Drogin’s testimony contradicts his own definition of “response rate,” and, even if the response rate had been 95%, it could not remedy a 43.3% margin oferror. Significant measurementerror also infected thetrial court’s estimate of the “average” overtime hours. Drogin defined measurementerroras “a 3! Seeking support in Bell II for its erroneoustrial plan, the court also asserted that “Alternative Procedures Were Considered.” 83CT24630- 24631. However, thetrial court refused to adopt USB’s proposal to (1) decertify or (2) conduct mini-trials before special masters for all class membersto accountfor the lack of common evidence to determineliability and recovery. See, e.g., 20CT5896; 21CT5917-5929; 2CT(Supp)349-35 1; 69RT5495-5497. No other procedure could render a constitutionally or statistically acceptable outcome, and the purported consideration of alternative procedures does notjustify the refusal to adopt any valid procedures. 90 594115.10 kind of mistake or error that can occur in samplings or surveys where you mismeasure something in a systematic way.” 70RT5560-5561. Measurementerror occurs when “your device for measuringis too rough, it’s too crude, or... [t]he process for determining the correct value for an elementthat is observed in a sample is done incorrectly.” 73RT5742. Here, measurement error occurred when Drogin “interpreted” the data in the trial court’s SOD, speculating about the “average” hours worked by RWGwitnesses who gave only crude ranges of “average” hours worked per week. Admitting that the trial court’s findings provided insufficient detail about the units being measured, Drogin used a speculative “midpoint assumption,” applying the midpoint of any range of hours given by each RWGeven though there was vo evidence regarding the frequency that each | RWGworked any particular number of hours within that range. 72RT5688-5692; 73RT5741-5744; 71RT5613, 5619. His arbitrary | decision to use midpoints is “too rough” and “too crude”to estimate the correct value for average hours worked by each RWG. While all trial plan issues are subject to a de novo standard of review, Drogin’s midpoint assumption cannot even constitute “substantial - evidence”since it is based on speculation and assumptions not supported by the record. See Hongsathavij v. Queen ofAngels Med. Ctr., 62 Cal.App.4th 1123, 1137 (1998); PG&E v. Zuckerman, 189 Cal.App.3d 1113, 1135 (1987). An expert’s opinion testimony “cannotrise to the dignity of substantial evidence” where the expert bases his conclusion on speculative, remote or conjectural factors. Leslie G. v. Perry, 43 Cal.App.4th 472, 487 (1996); Roddenberry v. Roddenberry, 44 Cal.App.4th 634, 651 (1996). “Like a house built on sand, the expert’s opinion is no better than the facts on which it is based.” People v. Gardeley, 14 Cal.4th 605, 618 (1996). 91 594115.10 Finally, the RWG data was highly skewed, meaningthat individual membersofthe sample disproportionately impacted or “skewed” the calculation because of extreme values. This problem wasexpressly avoided in Bell III due to the sufficiently large sample of almost 300 individuals. 115 Cal-App.4th at 755 (“the elimination ofthe largest claimants, asserting claims for unpaid hours worked over 25 hours per week, would have a negligible impact on the average weekly figure.”). In contrast, Drogin admitted that here, extreme values significantly impacted the “average,” including the average hours of Penza andPetty, which were, respectively, five and three times more than any other RWG member, skewingthe distribution to create an estimated “average” that was 30% higherthan it otherwise would be, dramatically inflating the total judgment. 82RT6444-6445. Thestatistical probability of another class membersharing the same hours-worked data as Penzais less than one in a billion, making his “representativeness” of other class members highly suspect. TE1292, 1297; 78RT6113-6116; 81RT6369-6374. Removing just Penza™from the calculation reduced the total recovery amountto the class by between 19% to 26%, or $2.2 million to $2.6 million, after the effect of prejudgmentinterest. 78RT6109-6131, 6153-6154; TE1292,pp. 4-9. Where one RWGhad such an undue impact on the classwide “average,”the sample was skewed andstatistically improper. Drogin downplayedthis fact by repeating an abstract mantra on the benefits of random selection. See, e.g., 74RT5812-5813, 5786-5789. However, Drogin’s explanation of the term “skewed” data makes no sense: “Every person hasat least some overtime, so in that sense the data is not 2 USB does not advocate thatPenza or Petty should have been “removed” from the RWG sample. USB simply highlights Penza’s undue-impact on the sample “average”to illustrate the flaws of an undersized sample. 92 594115.10 askew as it was in Bell for the double-timecalculation.” Compare 71RT5615-5616 with 74RT5783 (Drogin testifies that “skewed data” means “it’s nonsymmetric with a large frequency on oneside, either low or high.”). 82RT6443-6446. The RWGdata was skewed, but even the absence of such skew cannot salvage the 43.3% margin oferror. b. The Excluded Hearsay Survey Does Not Bolster The Unconstitutional 43.3% Margin Of Error. Plaintiffs briefly reference Drogin’s testimony that “he had relied on a survey by Dr. Jon Krosnick, an expert on surveys, whosecalculation of overtime hours worked by class members was consistent, indeed higher, than Drogin’s calculation.” OB21. After Phase I ended, USB and the court learned that Plaintiffs had conducted an unauthorized survey ofnon-RWG class members. See 58CT17061-17072. USB brought multiple motions to exclude the survey evidence,all of which were granted. 65RT5267-5270; 67RT5439-5443; 60CT17622-17655; 61CT18136-18149, 18152; 71CT21053-21070; 78CT23228; 79CT23516. However,attrial, despite acknowledging that USB’s “objection [to the survey evidence]is a fair objection,” and that it would excludeall survey evidence, the court erroneously allowed Drogin totestify that he “relied upon” the excluded survey, thereby sneaking in unreliable and unproven non-RWGevidencein favor of Plaintiffs’ arguments. 70RT5440-5548. The court then relied on the survey as purported evidence regarding the probable distribution of hours worked by non-RWGclass members, despite excluding the survey as a violation ofthetrial plan. 83CT24628-24629. The court compounded this error by denying USB theright to conduct any discovery regarding the survey, including how it was designed, whoparticipated, and the actual ‘results, because it was “outside the trial plan” and thus not relevant. 61CT18144-18147; 69CT20306-20383; 67RT5439-5442; 68RT5465-5473, 93 594115.10 5483-5485; 70RT5523-5525. The court applied the trial plan unevenly, using it to deny USBtheright to discovery on Plaintiffs’ survey yet relying on the same survey evidence to “bolster” the judgment. No evidencein the record supports any reliance on the survey, for any purpose. | Besides violating the trial plan, the survey was inadmissible hearsay proffered as evidence ofthe truth of the actual hours purportedly worked by non-RWGclass members. Evid. Code §1200; People ex rel. Lockyerv. R.J. Reynolds Tobacco Co., 116 Cal.App.4th 1253, 1269 (2004); Luquev. | McLean, 8 Cal.3d 136, 147-48 (1972); Korsak v. Atlas Hotels, 2 Cal.App.4th 1516, 1525-26 (1992) (excluding hearsay survey because experts may notrelate the out-of-court statements of the survey as independent proofof a fact); People v. Coleman, 38 Cal.3d 69, 92 (1985) (“while an expert may give reasons on direct examinationfor his opinions, including matters he considered in forming them, he may not underthe guise of reasons bring before the jury incompetent hearsay evidence.”) (overruled on other grounds in People v. Riccardi, 54 Cal.4th 758, 824 n.32 (2012)). Expert witness testimony of “reliance” on inadmissible hearsay cannotbe usedto provethe truth ofthe hearsay statements. In re Cheryl H., 153 Cal.App.3d 1098, 1120 (1984) (overruled on other grounds in People v. Brown, 8 Cal.4th 746, 763 (1994); Johnson v. Aetna Life Ins., 221 Cal.App.2d 247, 252 (1963); Mosesian v. Pennwalt, 191 Cal.App.3d 851, 860 (1987) (not properto reveal the content of a consulting expert’s hearsay opinion) (overruled on other grounds in People v. Ault, 33 Cal.4th 1250, 1272 (2004)); Cont’l Airlines v. McDonnell-Douglas, 216 Cal.App.3d 388, 414 (1989); Whitfield v. Roth, 10 Cal.3d 874, 894-895 (1974)(rule allowing experts to testify regarding the basis of their opinion is not intendedto be a “channel” to introduce improper hearsay); Grimshaw 94 594115.10 v. Ford Motor Co., 119 Cal.App.3d 757, 788-789 (1981); People v. Catlin, 26 Cal.4th 81, 137-138 (2001). | Consequently, the court erred by permitting Drogin to testify regarding the contents and details of the excluded survey. Whitfield, 10 Cal.3d at 894-895; People v. Campos, 32 Cal.App.4th 304, 308 (1995). The excluded hearsay survey cannotbolster the 43.3% margin oferror, nor can it be considered for any purpose. ~ 6. The Trial Court’s Finding That Plaintiffs’ Experts Were “Credible And Persuasive” Is Not Germane To The Issues On Appeal. Plaintiffs make muchofthetrial court’s findings that Plaintiffs’ experts were “credible and persuasive” and that USB’s experts werenot, in the trial court’s view. OB48. These findings are not germaneto the issues presented on appeal, particularly becausePlaintiffs’ experts agreed with USB’sexperts on critical issues. For example, Drogin agreed with Dr. Hildreth that there wasnostatistical basis to conclude that “100% ofthe class was misclassified” andthatthe restitution estimate resulted in (at least) a 43.3% margin oferror. Plaintiffs incorrectly contend that the Court ofAppeal disregarded the substantial evidence rule. OB49. However, the Court of Appealdid not 33 The trial court also referenced other inadmissible “anecdotal” evidence to “bolster” the inaccurate result obtained, including testimony of three USB Sales Managers regarding the hours they worked as BBOsorthe hours they believed their BBOs had worked. 83CT24629. This data was not contained in any of the PhaseI findings, nor wasit presented as evidence in Phase II. Moreover, the court’s selective reference to these witnesses’ testimony ignores the fact that the sales managers who worked as BBOs also attested that they spent the majority of their time outside the Bank as BBOsand weretherefore properly classified, rendering their hours worked irrelevant. See, e.g., TE1113, 1115; 46RT3440-3441; 52R1T4455-4461. 95 594115.10 “rely on” USB’sdefense expert testimony, but instead concludedthatthere wasinsufficient evidence of any kind to adequately support the trial plan and judgment, after evaluating whether the procedures imposed complied with due process. While the Court of Appeal included a detailed description of the evidence presented by both sidesattrial, including expert evidence,it applied the proper standards of review throughout, including a proper de novo review ofthe constitutionality of the procedures and evidentiary restrictions imposedbythe trial court (which were not proposed or endorsed by any expert). D. The Trial Court’s Exclusion Of USB’s Exculpatory — Evidence Was An Unconstitutional Due Process Violation. 1. Plaintiffs’ Contradictory Contentions Ultimately: Confirm The Court Of Appeal’s Due Process Conclusions. ‘Plaintiffs make contradictory statements as to what it meansfor a defendant to have a due processright to challenge individual claims. Plaintiffs’ position ultimately confirms that the Court ofAppeal properly concluded that USB’s due process rights were violated. Atthe trial court and the Court of Appeal, Plaintiffs took a hardline position that USB had noright to challenge individual claims beyondthe 21 RWG membersat any point. Despite the evidence that certain class members were properly classified, Plaintiffs hid behindthetrial plan, asserting that once a trial judge decides to proceed with representative evidence, no exculpatory evidence outside the sample groupis allowed at trial. Plaintiffs now assert that while a defendant’s due process right to challenge individual claims may be limited “during the liability phase,” “It]o the extent the defendant seeks to litigate entitlement to relief (or extent of damages) for individual class members,that would occurin the remedial 96 594115.10 phaseoftrial.” OB38-39; see also OBS, 31, 36, 60-64. This statement makes no sense. A defendant’s due processrights are not limited to a particular phaseat trial. Furthermore, Plaintiffs are unsuccessfully attempting to fit this unprecedented and unconstitutionaltrial procedure into the context of “well-established class action procedure,” even though this trial was the first of its kind in the misclassification context. OB58; see also OB32, 37. Nevertheless, Plaintiffs’ statement indicates agreement that USBhasa right to challenge individual class members’ “entitlement to relief’—i.e., thefact ofliability—at least at some pointin thetrial |proceedings. In acknowledging that “[t]he defendant has the burden of production and proofto establish that particular class members were exceptions to the classwide finding,” Plaintiffs implicitly concede that USB must have a right to challenge individual claims. OB59. However, Plaintiffs immediately follow this concession by stating that “even then, a defendant in a misclassification case does not have an unlimited right to call each class membertotestify.” OB39. Plaintiffs’ contradictory assertionsreach critical conflict when Plaintiffs argue that “[a]t the remedial phase, the defendant may only contest entitlement for class members whomit can prove were exceptions to the illegal practice or for whom it has defenses not resolvedat the liability stage of the action.” OB63. Incredibly, Plaintiffs state that a defendant may do exactly what USB attempted to do here and was denied: “USB cannot merely assert a particular class member was exempt or demand that each class memberindividually establish his/her entitlement to relief ... [i]t will have the burden to produce evidence and prove, despite — the trial court’s findings that the BBO job wasinherently a non-exempt inside sales job, that a specific class member was exempt because he performed the BBO duties predominantly outside.” OB63-64. Plaintiffs’ 97 594115.10 argument thus confirms that USB had a right to present individualized defenses and evidence to refute individual claims. The problem is that Plaintiffs circularly argue that the class action status dispenses with any obligation to resolve individualissuesattrial. Plaintiffs present doomsday arguments about the purported dangersofthe time required to cross-examination individual class members, as if such “inconveniences”justify compromising a defendant’s due processrights. The law is clear that where liability depends on individual questions, the defendant’s due process right extends to presenting evidence or challenging assertions for each class member. There is no legal authority limiting a | defendant’s due processright to a particular phase oftrial or particular claims within a class. 2. Federal And State Authorities Overwhelmingly Confirm USB’s Due Process Right To Challenge Individual Claims And Present Individual Defenses At Trial. “The fundamental requisite of due process of law is the opportunity to be heard.” Mullane v.Central Hanover Bank, 339 U.S. 306, 314 (1950). The right is recognized whenevera defendant is required to pay money. See, e.g., Kobzoffv. L.A. County Harbor, 19 Cal.4th 851, 857 (1998) (awardof costs); People v. Sandoval, 206 Cal.App.3d 1544, 1550 (1989) (restitution in criminal action). There is no dispute that sworn admissions by class membersthat they performed exempt duties constitute admissible, highly relevant evidence in a misclassification case. The court’s refusal to _ consider this voluminous evidence andrefusal to allow USBto call non- RWG membersattrial denied USBits right to be heard andto rebut individual claims. This due process violation requires reversal of the judgment. Columbia-Geneva Steel v. Indus. Accident Comm ‘n, 115 Cal.App.2d 862, 865 (1953); Collins v. D.J. Plastering, 81 Cal.App.4th 98 5941 15.10 771, 777-778 (2000) (reversible error to deny defendanttrial on all parts of claims againstit). Class actions “are provided only as a meansto enforce substantive law” and do not changethe law. City ofSan Jose, 12 Cal.3d at 462. The trial plan impermissibly soughtto alter substantive law in the name of convenience and “manageability.” As this Court observed, “[t]he superficial adjudications which class treatment here would entail could deprive either the defendant or the members of the class—or both—ofa fair trial. Reason and the constitutional mandates of due process compelus to deny sanction to such a proceeding.” Jd. In Sav-On,this Court also recognized that when parties aggregate individual claims into one action, the procedural vehicle for challenging those claims must still manage, not compromise, a defendant’s rights: Individual issues do not renderclass certification inappropriate so long as such issues may effectively be managed.... And ifunanticipated or unmanageable individual issues do arise, the trial court retains the option of decertification. 34 Cal.4th at 334-335 (2004) (citations omitted). This Court again emphasized this right in Johnson v. Ford Motor Co., 35 Cal.4th 1191, 1210 (2005), citing Sav-On, holding that “[i]n a class action, once the issues commonto the class have been tried, and assuming someindividual issues remain, each plaintiffmuststill by some means prove up his or her claim, allowing the defendant an opportunity to contest each individual claim on any ground notresolvedin the trial ofcommon issues.” Id. This Court expressed concern that “[h]ere, the Johnsons, as individual plaintiffs, proved only the facts of Ford’s tortious transaction with them, yet they sought and obtained disgorgementofFord’s estimated earnings on a thousand or moreother transactions without proof that each of the others wasalso tortious.” 35 Cal.4th at 1210. The same problem is 99 594115.10 presented here, where the court considered proof pertaining to only 21 class members’ misclassification claims, and erroneously concludedthat 239 other class members had been misclassified without a shred of evidence pertaining to their actual duties performed (or hours worked). Such an approachis contrary to law andis unconstitutional. Dueprocess requires that a defendant receive the opportunity to present defenses that depend upon individualized issues. See, e.g., In re Fibreboard, 893 F.2d 706, 711-712 (Sth Cir. 1990) (trial plan ofusing 11 class representatives and 30 illustrative plaintiffs rejected, suggestingtrial ' plan would alter substantive state law and impact defendant’s due process rights); In re Chevron, 109 F.3d 1016, 1020-1021 (Sth Cir. 1997) (citing due process concernsin rejecting trial plan calling for representative evidence to obviate need for individual determinations ofliability and damages): Kurihara v. Best Buy, 2007 U.S.Dist. LEXIS 64224, *31 - (N.D.Cal. 2007) (“[d]efendant’s due process interests will be preserved by affording it an opportunity to defend the nature and legality of its company- wide policy, and through individualized analysis related to damages.”); Osuna v. Wal-Mart, 2004 WL 3255430, *7-8 (Ariz. 2004) (denying defendant in wage and hourclass action the “right to examine individual class members and to assert individual defenses, by using formulaic — methodologies to establish liability and damages, would deny[the defendant] its rights to due process and a jurytrial under the United States Constitution. we), Sampling cannot constitutionally determine liability in many class action contexts. See, e.g., Arch v. Am. Tobacco Co., 175 F.R.D. 469, 489 n.21, 493 (E.D.Pa. 1997)(statistical evidence not appropriate to prove damages;also “the use of questionnaires to establish the elements of causation and injury — without cross-examination or rebuttal evidence — would violate defendants’ due process rights.”); Sterling v. Velsicol Chem. 100 594115.10 Corp., 855 F.2d 1188, 1199-1200 (6th Cir. 1988) (criticizing shortcomings and due process flaws of sampling used to assess classwide liability and contingent damages questions). Plaintiffs ignore scores of authorities holding that samplingis particularly unsuited to employment cases which often present numerous individual defenses, as here. See, e.g., Bascov. Wal-Mart Stores, 216 F.Supp.2d 592, 602 (E.D.La. 2002) (“there are a plethora of defenses that will be raised to explain or negate plaintiffs’ allegations that they worked off-the-clock and can only be addressed on an individual basis... and [ ] any amount of damages defendants may be required to pay should be proved and considered on an individualbasis.”); Broussard v. Meineke Disc. Muffler Shops, 155 F.3d 331, 344-345 (4th Cir. 1998) (defendant mustbe allowed “the benefit of deposing or cross- examining the disparate” individuals’ claims); Big Lots, 561 F.Supp.2d at 587-588 (the “efficiency gains[of class treatment] however, cannot comeat the expense of a defendant’s ability to prove a statutory defense without raising serious concerns aboutdue process. Big Lots cannot be expected to comeup with ‘representative’ proof wherethe plaintiffs cannot reasonably be said to be representative of each other.”’). Based on the above authority, USB had a right to defenditself in this action by challenging individual claimsto liability and restitution. By precluding USB from asserting such defenses and evidence, thetrial court violated USB’s dueprocessrights. 3. Plaintiffs Do Not Cite To Any Authority That Actually Supports Their Contention That USB Has No Due Process Right To Challenge Individual Misclassification Claims. . Plaintiffs fail to present any authority that prohibits a defendant from presenting individual defenses within a class action context, and instead rely on a handful of cases involving only the issue of individual challenges 101 594115.10 to classwide damages, as opposed to individualized liability determinations, i.e., “entitlement” to recovery. Regardless, even Plaintiffs’ sparse ~ authorities indicate that, at some pointin any classtrial proceeding, a defendanthas the right to challenge individual entitlement and extent of | recovery. In Bell IT, the issue of liability was decided in summary judgment and defendant was given the opportunity to presentwhatever evidenceit neededto defendits position. Onceliability was established, the case proceeded to the remedial phase where representative evidence was used to calculate damages. The Court of Appeal observed that the defendant employer “reservedthe right to introduce testimony of class members outside the sample, but we find no indication that it pursued this option. It never included individual employeesin its witnesslist or sought to offer their testimonyat trial.” 115 Cal-App.4th at 758. Consequently, the Bell IIT court found “nothing in the record that substantiates [the defendant’s] claim that the trial managementplanrestricted its opportunities to contest the evidence of damagesor to present rebuttal evidence relating to hours workedby individual employees.” Jd. Unlike the defendantin Bell II, USBrepeatedly attempted to introduce testimony from class members outside of the sample to raise individual defenses in both trial phases, and the court repeatedly denied such requests. See, e.g., 18RT445-453; 21CT5926-5927; 45CT13194-13203; 48CT14258-14276; 55CT16129- 16142, 16164-16165; 71CT21031-21038; 75CT22259-22277; 79CT23516; 64RT5124-5129; 76RT5915-5916; 77RT6029-6033. Thus,the trial plan here plainly “restricted [USB’s] opportunities to contest the evidence” of individual class members, both as to liability and alleged hours worked. See Bell IIT, 115 Cal.App.4th at 581. Implicit in Bell II's holdingis that this scenario violates due process. 102 594115.10 Plaintiffs also cite In re Simon IT Litig., 211 F.R.D. 86, 153 (E.D.N.Y. 2002) (‘Simon IP’) for the proposition that “[t]he interest of plaintiffs in avoiding the additionallitigation costs that would arise if defendants were permitted to confront each possible plaintiff at trial is enormous.” OB41. This statement alone does not address whether a defendant has a due processright, or whether ithas been violated.** The Simon II court adequately considered the defendant’s due process concerns and allowed the defendant to present adequate defenses. Simon IT involved allegations of fraud against tobacco companies by consumers who were misled as to the lethal and addictive effects of smoking. In Simon IT, the court did hold that the consumers’ proposed use ofstatistical evidence to establish causation did not violate the manufacturers’ due processrights. 211 F.R.D.at 154. However, as the Court of Appeal correctly observed, “Simon LI is [ ] distinguishable, in part because it involved hundreds of thousands ofpotential plaintiffs. Further, the defendant in that case was not restricted to the sample group membersin presenting its defense: ‘In addition to statistical evidence, parties will be permitted to present to the — jury relevant lay testimony, expert testimony, and documentary evidence— subject to the constraints of the Federal Rules of Evidence and the practical considerations of trial management.’” Slip.Op.64 (citing Simon II at 153- 154). The Court of Appeal further observed that “[i]n Bell IIT, we recited this passage in support of the general proposition that there is—little basis in the decisional law for a skepticism regarding the appropriateness of the | scientific methodologyofinferential statistics as a techniquefor — determining damages in an appropriate case... [w]e did not cite to Simon IT _34 Whateverthe cost of asserting individualized defenses,it is a defendant’s prerogative to choose whetherto assert them, which the court should take into consideration when evaluating manageability. 103 594115.10 in support of the proposition that /iability determinationsin class actions may be madeby extrapolating from a random sample, particularly where the sampling methodology was derived without the benefit of expert statistical advice.” Slip.Op. 64 (citing Bell II, 715 Cal.App.4th at 755). In sum, Plaintiffs have no authority to support their position that USBhasnoright to present individual defenses,orthat it has a right to present defenses at the remedial phase only. All applicable authorities confirm that, regardless of any trial plan, a defendant has a due process right to present individualized defenses where they depend upon individualized issues. 4. The Trial Court’s Refusal Of USB’s Requests To Call Absent Non-RWG Class Members And Exclusion Of USB’s Contrary Declaration And Deposition Evidence Violated Due Process. Thetrial court refused USB’s efforts to: (1) introduce declarations signed by non-RWGclass membersas statements againstinterest; (2) introduce deposition testimony from non-RWG witnessesestablishing that they were properly classified; (3) call all 239 of the other absent class membersto the stand to confront them as to how they spenttheir time; (4) introduce evidence establishing that BBOs were exempt under other exemptions under California law; (5) allow managerial witnessestotestify. about their own BBO experience; and (6) present evidence from managers or others regarding the activities of any non-RWG member. Plaintiffs contend that this exclusion was properbecause it was “a ~ reasonable exercise of discretion that flowed from the court’s decision to use a random sample of representative witnesses,” and that allowingthis evidence “would be unduly cumulative and time-consuming.” OB52. In fact, the evidence was excluded on the groundthat it was “irrelevant” becauseit did not comport with the court’s trial plan. “Unfortunately, 104 594115.10 relevancy was dictated by the court’s trial plan rather than bythetrialitself as it unfolded in the courtroom.” Slip.Op. 54. Thus,the trial court “erred when,in the interest of expediency, it constructed a set of groundrules that unfairly prevented USB from defendingitself.” Slip.Op. 60. Thetrial court prejudicially erred by refusing to admit evidencethat, if deemed persuasive, would haveestablished that at least one-third of the class was properly classified. Instead, the judgment awarded these properly- classified declarants over $6 million. 83CT24698-24704. Plaintiffs contend that the trial court’s exclusion of USB’s declaration evidence was“justified” becauseoftheir “inadmissibility, questionable veracity, and lack of weight” and because they “constituted inadmissible hearsay.” OB52. First, the hearsay rule does not prevent the admission of statements made by a party opponent. Evid. Code §1220. Plaintiffs’ other arguments go to the weight of the declarations, and not whether it was .a due processviolation to exclude them. Finally,it is illogical for the Plaintiffs to claim the declarations were “cumulative” when they are probative as to whether each class memberwas properly classified. The “questionable veracity” of the few conflicting class memberstatements under oath merely raises the question ofwhether these declarants perjured themselves whensigning false declarations or whether they would havetestified falsely at trial, and there is no evidence to question the veracity of the vast majority of USB’s declarations. Plaintiffs also fail to address the deposition testimony of the four prior named plaintiffs, who confirmed their proper exemptclassification but still recovered $160,000 under the judgment. See 68CT20174-20188; 73CT21500-21510; TE1184-1187; 83CT24700-24703. Because the substantive law at issue turns on the actual duties performed by each employee each week, evidence on this issue for each individual cannot be 105 594115.10 “cumulative”: the analogous issue must be resolved to determine the exempt status of each class member. Notably, the three RWG witnesses whosigned declarations had wholly different excuses for contradicting their prior declarations. Thetrial court never made any findings regarding the several other declarants who repudiated their declarations at the class certification stage, and the differing reasons given by the three RWG’sonly underscored the fact that any other class member who attemptedto retract his or her declaration should be called to explain any discrepancy in testimony given under oath. The trial court found that that “the weight to be given to these declarations must be adjusted because of their actual authorship, the circumstances of preparation andinternal inconsistencies and ambiguities,” but expressly limited this holding to the four declarations signed by the three RWG witnesses. 71CT20991; 64RT5 122-5123; 65RT5297-5300. Further, USB’s due process rights were not limited to the declarations. The declarations demonstrate that at least 78 class members were properly classified, andthat many others likely were as well. The due processright in question is to have each individual liability issue determined, with USB being permitted to present evidence and cross- examine each class member’s claim of misclassification, regardless of whetherthe trier of fact ultimately accepts or rejects that evidence. — The unconstitutional error led to $13.9 million in recovery to class members whose claims USB wasdeniedthe right to challenge, despite USB’s repeated requests to do so. See, e.g., 21CT5926-5927; 76RT5915- - 5916; 77RT6029-6033; 55CT16164-16165; 64RT5124; 8CT2173; 8CT2297-10CT2694. The trial court’s judgment would award individual absent class members substantial amounts ofmoney (over $57,000 per person on average) even though USB possesses, and repeatedly sought to introduce, admissible evidence that would prevent, at a minimum, 106 594115.10 approximately one-third of these individuals from any recovery. 83CT24698-24704. Even if class certification had been appropriate (it was not), USB wasstill entitled to present evidence refuting the claims of individual class members. The court’s refusal to admit this highly probative evidence had an enormous impact on USB’soverallliability. However, USB’s right to challenge individual claims was not limited to class members for whom USBpossessedspecific contrary evidence, i.e., signed declarations or prior deposition testimony. Given the independent nature of the BBO position, the mostcritical method of challenging individual claims is through cross-examinationat trial to challenge and probe each class member’s contentions regarding their outside time. Thus, even if the trial court had allowed USBtocall all declarants and deponents, it would still have been prejudicial error to preclude USB fromcallingall remaining class membersto the standattrial. In this case, however, the breadth of concrete evidence excluded bythetrial plan is so staggering that the due processviolation for the exclusion of declarant and deposition evidence alone is unquestionable. By wayofillustration, the Judgment would award the following ~ amountsto individual class members despite denial of USB’s request to introduce evidenceof their sworn admissions refuting their claims for recovery: James Hrundas- $229,874 (TE1041); Cathy Baigent - $152,925 (TE1209); Frank Esposito - $228,506 (TE1034);Arthur Massey - $164,673 (TE1048); Kenneth Nordgren - $137,209 (TE1052); Kenneth Rattay- $270,593 (TE1055); Matthew Roberson - $209,392 (TE1268); Violet Mayle (Ao) - $247,603 (TE1255); Dennis Sarip - $297,147 (TE1270); Nicholas Sternad - $450,064 (TE1058). See 83CT24698-24704. Just these 10 non-RWGclass members accountfor nearly $2.5 million of the judgment, whose recovery underthe judgment wasjustas indefensibleas the money awarded other USB declarants who confirmed their exempt 107 594115.10 status (and whoin the aggregate accounted for $6 million of the judgment) and the first four class representatives (who accounted for $160,000 ofthe judgment). 68CT20174-20188; TE1184-1187. 5. The Due Process Analysis In Connecticut vy. Doehr Confirms That The Trial Plan Violated Due Process And That The Judgment Must Be Reversed. . Thetrial court’s prejudicial denial of USB’s due process right to challenge individual claims required reversal ofthe trial court’s judgment. Courts evaluate whether a procedure violated due process based on three factors established in Connecticut v. Doehr, 501 US. 1,10 (1991). See, e.g., Bell If, 115 Cal.App.4th at 751-752. The Court ofAppeal correctly applied Doehr, and concludedthat “[t]he denial of due process that occurred here” does not withstand appellate scrutiny. Slip.Op. 59-60. The first factor, the private interest affected, is $15 million of USB’s property, a considerable “private interest” by any standard. The second factor is most importanthere, as it looks at “the risk of erroneous deprivation... and the probable value of additional or alternative safeguards.” Doehr, 501 U.S.at 11. Plaintiffs do not dispute that the risk of error here is unprecedented — a 43.3% margin of error. The procedure implementedbythetrial court here failed to approach anyresult that can credibly be called “accurate,” even if a “lenient” standard did apply to restitution, which it does not. Thus, the “risk of error” is certain, and enormous. . Regarding the third Doehr factor, the interest of the state, the Court of Appeal noted that, while “[c]lass action lawsuits are intended to conserve judicial resources and to avoid unnecessarily repetitive litigation,”thetrial plan here “prevented USB from submitting any relevant evidencein its defense as to 239 class members out of a total class of 260 plaintiffs.” Slip.Op. 60. “Whetherthetrial court would have given credence to such 108 594115.10 evidenceis beside the point. A trial in which oneside is almost completely prevented from makingits case does not comport with standards of due process.” Slip.Op. 60. Here, the due process balancing test confirms USB’sright to challenge each class member’s claim, given the average recovery of over $57,000 and many class members standing to recover many hundreds of thousandsof dollars. Unlike a class action involving relatively “small” claims, this case presents dollar amounts of such significance that USB cannot reasonably be denied an opportunity to refute each claim. Thus, under the Doehr factors, the judgment reversal must be affirmed. | | E. Plaintiffs’ “Waiver” ArgumentIs Specious; USB Timely _QObjected To And Preserved All Challenges To The Trial - Plan Before, During And After Trial. Waiver occurs whena party fails to object or agrees to a procedure— not whenit consistently objects to a procedure, as USB did here. Plaintiffs admit that USB objectedto thetrial plan before, during and aftertrial, based on various constitutional andstatistical principles and contending that individualized determinationsofboth liability and recovery are necessary in this case. OB53-59;see, e.2., 18RT445-453: 48CT14258- 14276; 55CT16129-16143, 16146, 16164-16165; 64RT5124-5129; 79CT23516. Yet Plaintiffs now assert that USB “waived”its objections to _ the recovery componentofthetrial plan because USB “refused to agree to any procedures that would have reduced the margin oferror, short of jettisoning the class liability findings and trying every class member’s claim individually.” OB54, 56. This position is untenable. Plaintiffs misstate the trial court’s purported efforts to “respond”to the 43% margin of error after Phase I. OB54-55. Thetrial court issued a tentative ruling denying USB’s second decertification motion and, as an afterthought, mentioned potential “alternative procedures” to address the 109 594115.10 margin of error. 80CT23776-23777. Addressing the margin of error was not, as Plaintiffs suggest, “the purpose of the hearing,” and these comments did not even appearin the court’s final order. 71CT20983-20984; 78CT23208, 23227-23228; 69RT5487-5497. At this hearing, the court briefly discussed the notion of “alternative trial procedures”in light of the horrendous margin of error. 83CT24630. In response, USB again proposed individualized mini-trials for each class memberto determine both liability and restitution because “i]t makes no sense just to deal with only restitution since none ofthose 239 [class members] have... been subjected to examination and havehadtheir cases[tried] onliability” and if “they were properly classified as exempt, obviously they’re not entitled to restitution.” 69RT5496-5497. Thetrial court refused to consider any procedure that would question its classwide liability finding as to any class member and rejected USB’s proposal. 69RT5498-5500. Thetrial court stated that it was “not willing to unilaterally impose an alternative procedure on the parties,” which is nonsensicalsinceall trial proceduresin this case were unilaterally imposed by the court, over USB’s strenuous objections. 83CT24630. Plaintiffs refused to propose any alternative procedure, and the court proceeded with imposingthetrial plan as previously articulated. 69RT5499. Plaintiffs concede that USB repeatedly proposed mini-trial procedures before special masters who could haveresolvedliability and recovery for each class member. OB56; 2CT(Supp)349-351; 20CT5896; 21CT5917-5929: 20CT5891-21CT5905; 21CT6167-22CT6208; 69RT5489-5500. While Plaintiffs correctly observe that USB did not agree to the trial court’s proposed “alternatives,” which denied USBtheright to challenge individualliability determinations, USB did offer an alternative procedure. Thetrial court simply rejected USB’s proposal. See | 69RT5497-5499, USB’s demand for mini-trials cannot be considered 110 594115.10 “waiver” where they (1) were included as one ofthe “innovative procedures” suggested by this Court in Sav-On, 34 Cal.4th at 340 n.12; and (2) comport with due process by allowing USBto raise individual defenses. Plaintiffs’ “waiver” argument wrongly implies that litigants are obligated to “agree” with one another in disputed proceedings. While courts routinely and properly instruct parties to meet and conferto determine whether the parties can agree to resolve disputes or streamline proceedings, “agreement”is never required. That is why wehavetrials. Here, the parties could not agree on whether any “classwide”trial could 2 66proceed in a constitutional manner. Plaintiffs’ “waiver” argumentis particularly absurd here, since the purported requirement of “cooperation” over legitimately disputed constitutional due process wouldplace litigants — in an impossible catch-22. Had USBagreedto the “alternative” procedures proposedby the court, Plaintiffs would argue that USB’s agreement likewise constituted a “waiver”of its objectionsto thetrial plan. Fortunately, the law is clear that no waiver occurs whena party objects to a procedure, as USB did here. Plaintiffs misstate the legal concept of “waiver,” citing inapposite cases. In Telles Transp., Inc. v. WCAB, 92 Cal.App.4th 1159 (2001), a claimant’s counselstrategically decided not to disclose relevant medical recordsat trial. The doctrine of waiver applied because the claimant’s own conduct caused or induced the error. Id. at 1166-1167. USB didnot “purposely exclude” relevant evidence but repeatedly attempted to introduce scores of relevant evidencethat the trial court refused to consider. See also Mesecher v. County ofSan Diego, 9 Cal.App.4th 1677, 1685-1687 (1992) (appellant waived challenge to verdict form because it wasdrafted jointly by the parties, with the express knowledgethat it created a potential inconsistency). USB did not “agree”to any ofthe procedures challenged on appeal. Thetrial court frequently commented that USB had “made an 111 594115.10 excellent record” for appellate review with its numerous due process objections to the trial plan. See, e.g., 64RT5135; 55CT16164-16165; cf Keenerv. Jeld- Wen, 46 Cal.4th 247, 265-266 & n.25, 270 (2009) (failure to timely object to complete polling ofjuror before jury was discharged caused defendantto forfeit right to object to error); ef People v. Simon, 25 Cal.4th 1082, 1103-1104 (2001) (failure to timely object to venue in felony proceeding forfeits right to object to venue). USB did not“forfeit” a time- sensitive opportunity to object to a potential error that could have been easily corrected. Instead, USB steadfastly objected that a “representative” trial procedure was unconstitutional and unfair in this case, whichthe trial court overruled. Norgart v. Upjohn Co., 21 Cal.4th 383 (1999) involved a “consent judgment” entered into only to “hasten its transfer from the trial court to the appellate court” as opposed to being entered to “settle their dispute fully and finally.” 21 Cal.4th at 400-403. The Court held that no “waiver”or “invited error” had occurred given the clearly stated purpose of the stipulated order, explaining that the “doctrine of invited error” exists “to prevent a party from misleading thetrial court and then profiting therefrom in the appellate court.” Jd. at 403. Here, USB did not “misleadthetrial court,” but repeatedly objected and implored the trial court to revise its trial procedure to render a constitutionally valid result. Finally, Plaintiffs cite Bell LT, where the defendant agreed to participate in crafting a statistical sampling procedure to estimate classwide damages and did not pursue the option to introduce testimony ofclass . members outside the sample. Bell II, 115 Cal.App.4th at 758. Consequently, the Bel/ IZ] court found nothing in the record to support the | defendant’s claim that the trial managementplan restricted its opportunities to contest individual damages. Jd. Here, as discussed above, USB repeatedly attempted to introduce testimony from each class member, and 112 594115.10 the court repeatedly denied them. See also 76RT5915-5916; 77RT6029- 6033. Thus, Bell I/I only confirms that USB preserved its objectionsto the trial procedures. Accepting Plaintiffs’ baseless “waiver” argument would create new law inviting serious abuse. Litigants would manufacture opportunities to demonstrate failed lack of “cooperation,” and would then present an 2 66.opponent’s objections to a proposal as waiver. Plaintiffs’ “waiver” argumentessentially suggests that USB was required to agree to formulate its punishment (determining recovery amounts), despite objectingthatit wasinnocent and notliable for any amountin the first place. Litigants are required to comply with court orders, but they are not required to agree to any procedures imposed. Regardless ofthe parties’ agreementor lack thereof, it is ultimately the trial court’s job to fashion and implement a fair and constitutionaltrial procedure. If a procedure adopted by a trial court is inconsistent with law and is challenged on appeal,itis reversible. There is no waiver simply because one party did not agree to and/or propose anotheralternative that the trial court and opponent might have preferred. Il. STATISTICAL SAMPLING AND REPRESENTATIVE EVIDENCE ARE PARTICULARLY UNSUITABLEIN THIS UCL CLASS ACTION FOR RESTITUTION. A. To Prove Classwide Liability Under The “Unlawful” Prong Of The UCL,Plaintiffs Must Prove Liability As To Each Class Member Under Applicable Labor Code Provisions. Plaintiffs incorrectly assert that representative evidence is more suitable in UCL actions (OB44), ignoring the appropriate standards of prooffor liability andrestitution for “unlawful” UCL claims. When applyingthe correct standards ofproof here, Plaintiffs have a greater 113 594115.10 burden to prove their UCL claimsthan if they hadtried their claims under California’s Labor Code. . It is well established that very differentstandards of prooffor liability apply in UCL actions, depending on whether the business practice alleged is unlawful, unfair, or fraudulent.> Here, Plaintiffs present their LaborCode claims under the “unlawful” prong. “By proscribing ‘any unlawful’ business practice, ‘Section 17200 borrowsviolations’ of other laws andtreats them as unlawful practices that the unfair competition law makes independently actionable.” Cel-Tech Communications v. L.A. Cellular Tel. Co., 20 Cal.4th 163, 180 (1999) (citations omitted). Under the “unlawful” prong, a plaintiff must proveall of the elements of the | underlying violation. Aguilar v. Atlantic Richfield, 25 Cal.4th 826 (2001) (in a UCLaction the party seeking equitable relief bears the burden of proof). Thus,in this action, Plaintiffs must prove all elements of a Labor Code violation to establish their UCL claim. By contrast, a “fraudulent” business practice is one in which “members ofthe public are likely to be deceived,” usually by false marketing or advertising. See Tobacco H, 46 Cal.4th at 312. The fraudulent business practice prong is distinct from commonlaw fraud and may authorizerelief “without individualized proof of deception, reliance and injury” where a misrepresentation was material. Jd. at 312, 327. Plaintiffs assert that Tobacco IT supports class treatmentoftheir UCL claim. OB44-45. Plaintiffs misconstrue Tobacco II’s holding, which waslimited to post-Proposition 64 standing requirements under Section *5 Section 17200 of the Business & Professions Code provides in relevant part: “[U]nfair competition shall mean and include any unlawful, unfair or fraudulent business act or practice....” Unless otherwise indicated, statutory referencesin this Section are to the UCL. . 114 $94115.10 17204.%° In TobaccoII, this Court clarified that, at the class certification stage, Section 17204’s standing requirements apply only to class representatives andheld that Proposition 64 did not change the lawofclass actions in any manner. 46 Cal.4th at 313, 315-316, 318. Moreover, Tobacco I “emphasized”that its discussion of causation was limited to UCLactions based on a fraud theory involving false advertising and misrepresentations to consumers. Jd. at 326 n.17 Plaintiffs cite three additional UCL false advertising cases - Fletcher, Bankofthe West, and Committee on Children’s TV*"-to support the finding of classwideliability.*® These cases also involve misrepresentations to consumers, which are not comparable to “unlawful” employee misclassification cases. No analogous inference applies under the Labor Code, because even a uniform classification that is wrong as to some employees may be lawful as to others. Post-TobaccoII decisions confirm that factual questions of reliance by class members, even in false representation cases, remain a proper criterion for examining commonality. Tucker v. Pacific Bell Mobile Servs., 208 Cal.App.4th 201, 227-228 (2012)(citing Cohen, 178 Cal.App.4that °° Proposition 64 was an express directive by voters that not only must a plaintiff satisfy new individual standing requirements of Section 17204, but he or she mustalso satisfy the requirements of Code of Civil Procedure Section 382, which govern class actions. Thus, Proposition 64 placed UCL actions on the same footing as Code of Civil Procedure Section 382 class actions and did not create a lower standard of proof. *” Fletcher v. Sec. Pac. Nat'l Bank, 23 Cal.3d 442 (1979); Bank ofthe West v. Super. Ct., 2 Cal.4th 1254 (1992); Comm. on Children’s Television v. Gen. Foods Corp., 35 Cal.3d 197 (1983). *8 Fletcher and Committee on Children’s Television were brought under Section 17500, knownasthe “false advertising law.” A Section 17500 violation also constitutes a Section 17200 violation, and similar standards are applied to both sections. 115 594115.10 981).°? A class action for fraudulent business practice under the UCLstill | requires a defendant have “engaged in uniform conductlikely to mislead the entire class.” Jd. at 228. “[I]f the issue of materiality or reliance is a matter that would vary from consumer to consumer, the issue is not subject to commonproof, and the action is properly notcertified as a class action.” Td. (citing In Re: Vioxx Class Cases, 180 Cal.App.4th 116, 129 (2009)). In other words, the “rule permitting an inference of common reliance where material misstatements have been madeto a class ofplaintiffs will not arise wherethe record will not-permit it.” Jd. (citing Massachusetts MutualIns. Life Co. v. Super. Ct., 97 Cal.App.4th 1282, 1294 (2002)). _ A proper comparatorto analyzethis case is Cortez v. Purolator Air Filtration Products Co., 23 Cal.4th 163 (2000), the leading authority where — a defendant was foundliable under the UCL for Labor Code violations.” In Cortez, a production worker successfully challenged her employer’s universally-applicable alternative workweek schedule comprised of four 10-hour days. By proving that her employerfailed to adopt the alternative workweek according to required Labor Code protocols,plaintiff showed that the employer’s actions affected not only plaintiff, but all employees subject to the samealternative workweek schedule. Thus,all employees suffered the sameinjury andthe trial court had commonproof showing Labor Codeviolations. 23 Cal.4th at 169-171. Accordingly, the plaintiff met her burden to showliability to each class member. Although Cortez » Tucker found a UCL claim forrestitution inappropriate for class treatment because some phone company customers were unaware of the allegedly fraudulent rounding practice or were unharmedbythe practice because they did not exceedtheir allotted minutes. 208 Cal.App.4th at 228- 229. * Cortez was decided before Proposition 64 passed and therefore proceeded as a “representative” action. 116 594115.10 establishes that UCL restitution maybe available for nonpayment ofwages, Cortez’s result is inapplicable here, where there is no commonproofof a Labor Code violation as to each class member. | Here, Plaintiffs cannot escape the fact that they must comply with the procedural requirements of Code of Civil Procedure Section 382. See §California Business and Professions Code Section 17203. Underthe “unlawful” prong of the UCL,Plaintiffs must proveliability as to each class member under the applicable Labor Code provisions. Most critically here, Plaintiffs must establish that each class memberis misclassified. Absent that showing no liability finding is possible. B. Plaintiffs Are Not Entitled To An Award OfRestitution Under The UCL For Any Class Member Who Was Properly Classified. Plaintiffs repeatedly refer to the amountsthe trial court awardedto class membersas “damages.” In fact, Plaintiffs dismissed their Labor Code claims, which would haveentitled them to seek damages, and instead proceeded on their UCL claimforrestitution. Based on their mistaken notion that they wereentitled to “damages,” Plaintiffs claim that “representative testimony or sampling evidence may be used to determine damages.” OBS. Asdiscussedherein, the Plaintiffs’ burden to prove restitution is very different, and muchstricter, than proof required for damages, and representative testimonyis particularly unsuitable to support a restitution award here. As a threshold matter, UCL restitution is limited to unlawfulacts. See §17203 (authorizing restitution only of money or property “to any person in interest that may have been acquired by means of such unfair - competition”). USB cannotbe liable for restitution under Section 17200 for those class members who were /aw/fully classified as exempt employees. Here, the evidenceat trial focused entirely on the individual work 117 594115.10 experiences of the 21 RWG members, and there was no evidenceattrial as to whether the 239 absent class members were misclassified. Thus, the restitution award to the 239 absent class members was erroneous because there was no evidencethat they were subject to an unlawful business practice. Further, the trial court’s restitution award. was erroneous because there wasaffirmative (excluded) evidence that numerous class members wereproperly classified, and therefore not subject to an unlawful practice. 8CT2173, 2297-10CT2694; TE1000-1001, 1006, 1017, 1025-1063, 1087, 1095-1137, 1184-1187, 1206-1278. a | Perhaps the most egregious example of this group was non-RWG member Nicholas Sternad, whotestified that he performed exempt administrative and outside sales duties. 20CT5603-5627;TE1058. The court dismissed Sternad’s experienceas atypical and refused to considerhis undisputed deposition testimony that he was exempt. 20CT5845-5846; 8RT196-203; Slip.Op. 57 n.70. The trial court nonetheless awarded Sternad nearly half a million dollars as “restitution.” 83CT24703. Plaintiffs fail to explain how non-RWG members like Sternad, who provided sworn testimony that they were properly exempt, could validly receivea restitution award. | In summary,restitution under the UCL is available only to those — class members who were misclassified. Awarding restitution to class members who were lawfully classified, or for whom there was no evidence of misclassification, directly contradicts the express provisions of Section 17203. 118 594115.10 Cc. Plaintiffs Cannot Recover Restitution Under The UCL For Class Members Without Proof That They Worked Any Overtime. Even upon finding of unfair competition, in order to support a restitution award, Plaintiffs must prove that absent class members worked overtime. The goal ofUCLrestitution is to restore plaintiffs to the status quo ante. §17203. While the UCL is meant to protect consumers, primarily through injunctiverelief, it intentionally limits the remedies available. See Korea Supply Co. v. Lockheed Martin Corp., 29 Cal.4th 1134, 1144-1146 (2003) (“While the scope of conduct covered by the UCLis broad,its remedies are limited.”) Damagesare not available under the UCL. Jd. at 1146-1148. The legislative history and judicial interpretation confirms that Section 17203 “operates only to return to a person those measurable amounts which are wrongfully taken by meansofan unfair business practice.” Day, 63 Cal.App.4th at 338-339 (emphasis original). “[T]he notion of restoring something to a victim of unfair competition include two separate components. The offending party must have obtained something to whichit was notentitled and the victim must have given up something which heor she wasentitled to keep.” Jd. at 340 (emphasis original). Once an employee works hours without proper compensation, the employee’s vested interest in unpaid wages mayjustify restitution under the UCL. Cortez, 23 Cal.4th at 177-178. Restitution, unlike damages, allowsa plaintiffto recover only money or property in which he has a vested ownership interest. Californiansfor Disability Rights v. Mervyn’s, 39 Cal.4th 223, 232 (2006); Korea Supply, 29 Cal.4th at 1149 (“The object ofrestitution is to restore the status quo by returning to the plaintiff funds in which he or she has an ownership interest”); Cortez, 23 Cal.4th at 177 (2000) (A UCL action “‘is not an all- purpose substitute for a tort or contract action... [Damages] are not 119 594115.10 available.”); AIUIns. v. Super. Ct., 51 Cal.3d 807, 835 (1990) (whereas damagesare givento a plaintiff to substitute for a suffered loss, “specific remedies[suchasrestitution] are not substitute remediesat all, but an attemptto givethe plaintiff the very thing to which he wasentitled.’’) The UCL does not allow any non-restitutionary monetary awards. Korea Supply, 29 Cal.4th at 1148, 1152; Colgan v Leatherman Tool Group, Inc., 135 Cal.App.4th 663, 696-697 (2006). Instead, UCL _ restitution must be purely restorative. See, e.g., Fletcher v. Sec. Pac. Nat'l Bank, 23 Cal.3d 442, 452 (1979) (approvedrestitution of interest paid by borrowers who were charged undisclosed, higherrates); Kraus v. Trinity Memt. Servs., 23 Cal.4th 116, 126-127, 137 (2000) (restitution of fees actually paid wasproper; trial court has no authority to order defendant to surrenderother profits); Korea Supply, 29 Cal.4th at 1149-1151 (UCL does not permit disgorgementofprofits from one companyto another); Pineda v. Bank ofAm., 50 Cal.4th 1389, 1401-1402 (N.D.Cal. 2010) (Labor Code penalties do not constitute restitution; penalties are punitive, not restorative); Prata v. Super. Ct., 91 Cal.App.4th 1128, 1139 (2001) (representative plaintiffwho refused to pay fees imposed by defendant could not recoverrestitution); In Re: High-Tech Employee Anti-Trust Litigation, 856 F.Supp.2d 1103, 1124 (N.D.Cal. 2012) (speculative higher wagesis not a “vested interest” supporting UCL restitution). Here, any monetary award representing anything other than unpaid wagesactually earned by class members constitutes non-restitutionary damages, which the UCLprohibits. | | Ignoring the above authorities, Plaintiffs assert that restitution is available in a misclassification case without proofthat individual class. membershave a vested interest in the funds awarded.’ Plaintiffs refer to languagein Section 17203, which authorizes courts “to restore to any person in interest any moneyorproperty... which may been acquired’ by 120 594115.10 meansofthe unfair practice. OB45. Plaintiffs misinterpret this language, claiming that it allows them to obtain restitution for class members who may have not worked anyovertime. Plaintiffs’ interpretation contradictsall applicable authority. See Cortez, 23 Cal.4th at 172 (court may “only order restitution to persons from whom moneyorproperty has been unfairly or unlawfully obtained.) In construing the “may have been acquired” language of Section 17203, Plaintiffs misinterpret false advertising cases, where courts have found misconduct by a defendant and likely deception before deciding to awardrestitution. See Tobacco IT, 46 Cal.4th at 312. In these cases, ifa defendant has made a material false representation about a product, the UCLpermits a court to order the return of money obtained through the sale of the falsely advertised item, even whenthere is not individual proof of actual reliance by each class member. Jd. at 327. Notwithstanding, | restitution always requires proofthat (1) the individual was subject to the unfair business practice, i.e., exposed to the false advertisement; and (2) paid moneyfor the product that wasfalsely advertised. See, e.g., Pfizer v. Sup.Ct., 182 Cal.App.4th 622, 632-633 (2010). In addition, restitution awardedis always limited to the amount the person initially paid for the product, or a portion thereof. Thus, the “may have been acquired” standard does not eliminate the most fundamental elementofrestitution as a remedy, whichis to restore funds, or in this case, unpaid wages, to the person who earned them. See also Tourgeman v. Collins Fin. Servs., 2011 U.S:Dist. LEXIS 122422 (S.D.Cal. 2011) (where “there [is] absolutely no likelihood [plaintiffs] were deceived by the alleged false or misleading advertising or promotional campaign[,] [sJuch persons cannot meet the standard of [Section 17203] of having moneyrestored to them becauseit ‘may have been acquired by meansofan unfair practice’”) (citing Pfizer, 182 Cal.App.4th at 631 and 121 | 594115.10 Sevidal v. Target Corp., 189 Cal.App.4th 905, 926 (2010)). For example, in Cortez, it was proven that non-exempt employees were subject to an unlawfulalternative workweek, and time records showedthe specific amount of time worked. Thus, individuals were awarded the amount of unpaid overtime earned. Here, assuming arguendothat an individual was misclassified, restitution is only available to that individual class memberif there is proof that the employee worked overtime hours for which he/she wasnotpaid. Otherwise, there is nothingto restore. Plaintiffs cite to five “fraudulent” or “false advertising” cases for the premise that they do not need to show that absent class members worked overtime hours. OB45. Noneofthe cases involve “unlawful” UCL actions based on Labor Codeviolations, and none analyzed the proof required for classwiderestitution in a UCL action based on alleged nonpaymentof overtime. | FremontLife is the only opinion Plaintiffs cite that discusses an awardofrestitution ordered bythe trial judge. Thetrial judge found that statements made by insurance agents inan annuity policy were “likely to deceive” elderly consumersasto the true terms of the annuity. People ex rel. Lockyer v. FremontLife Ins. Co., 104 Cal.App.4th 508, 531-532 (2002). Thetrial court found the annuity policy misleading “as a whole” and ordered defendantto refund the current accountvalueor the premium, whichever was more, to those customers who were subject to the fraudulent scheme and whopurchased an annuity. Jd. at 532. Thus, the award returned funds acquired by means of defendant’sunfair business practice to those persons whopaid or owned those funds. Fremont Life supports USB’sposition rather than Plaintiffs, because the restitution order was limitedto identifiable, measurable amounts belonging tothe plaintiffs. Plaintiffs also rely upon Tobacco I, which addresses standing and did not discuss the evidence required for absent class members to collect a 122 594115.10 monetary award in the event liability was eventually found. Under established principles, individual class members in Tobacco Iwould need to show that they purchased defendants’ cigarettes before they could recover UCLrestitution. As this Court noted, Tobacco II’s conclusion“has nothing to do with the” disallowal of non-restitutionary disgorgement in Kraus. 46 Cal.4th at 320 n.14. Nothing within Tobacco II supports the © premisethat restitution can be awarded to individual class members without evidence that the overtime pay belonged to each of them. Contrary to Plaintiffs’ position, all post-Tobacco I cases confirm that proof of monies wrongfully obtained from plaintiffs is required for any award ofrestitution. In Cohen v. DirectTV, Inc., plaintiff subscribers sued DirectTV forallegedly falsely advertising that its HD package provided higher quality television service than its basic service. 178 Cal.App.4th 966, 968-969 (2009). Thetrial court denied class certification becausenot all class members had been exposedto the allegedly false advertisements. Id. at 973, 980-982 (“Even pre-Prop. 64 cases only allow inferred reliance where the misrepresentations were commonto all class members. An inference of classwide reliance cannot be made wherethere is no showing that representations were made uniformly to all members oftheclass.”) The Court ofAppeal agreed, stating that “we do not understand the UCL to authorize an award for injunctive relief and/or restitution on behalf of a consumer who was never exposed in any wayto an allegedly wrongful business practice.” Id. at 980; see also In Re: Vioxx Class Cases, 180 Cal.App.4th at 129 (where no commonproofofrestitution exists, class treatment is improper); Pfizer, 182 Cal.App.4th at 632 (“Tobacco II does not stand for the proposition that a consumer who wasnever exposedto an alleged false or misleading advertising or promotional campaign is entitled to restitution.”); Tucker, 208 Cal.App.4th at 228-229 (no restitution if class members not aware of deceptive practice or not injured byit). 123 594115.10 In summary, Plaintiffs are mistaken that the UCL set a “lower” standard that allowsa restitution awardof overtime pay to absent class members without proof that they actually worked any overtime. Instead, the courts have never waveredfrom the standard thatrestitution in UCL cases is limited to restoring funds actually owed to individualplaintiffs whereit is supported by substantive law and substantial evidence. Here, there was no evidence that 239 absent class members were misclassified or worked any overtime. Noneofthetrial testimony provided any information about hours worked by non-RWG members. Additionally, the RWGtestimony cannot support a restitution award for those RWG members who did nottestify to working any quantifiable amount of overtime. See 42RT2881-2884 (Bradley); 26RT1219-1220, 1223-1224, 1236-1238 (Gediman); 33RT1978-1983 (Lindeman). As a matter of law and commonsense,restoration of overtime wages cannot go to these | individuals, and the Court of Appeal correctly reversed the judgment awardingrestitution to them. . . D. Plaintiffs Failed To Present Evidence Sufficient To Support The Amounts Of Restitution Awarded. Plaintiffs had the burdenattrial to prove by substantial evidencethat class members wereentitled to restitution under the UCL. Aguilar, 25 Cal.4th at 875; see also Palo & Dodioni v. Oakland, 79 Cal.App.2d 739, 748 (1947); Colgan, 135 Cal.App.4th at 672." Becauserestitution is limited to restoring funds in which a plaintiff has a vested ownership *! Plaintiffs incorrectly argue that “[i]t is the defendant’s burden at the remedial phase-to produce evidence and provethat... a particular class - memberwasnot subject to this [classwide] pattern and is therefore not entitled to relief.” OBS. This misstates the applicable burden of proof under the UCL, which requires Plaintiffs to prove all elements of the “borrowed” misclassification claim. 124° 594115.10 interest, it must be quantifiable and measurable. Cortez, 23 Cal.4th at 178 (“restitutionary awards encompass quantifiable sums one person owes to another”); Day v. AT&T, 63 Cal.App.4th 325, 338 (1998) (§17203 “operates only to return to a person those measurable amounts whichare wrongfully taken by means of an unfair business practice”) (emphasis original); Colgan, 135 Cal.App.4th at 699. Estimated losses do notconstitute restitution within the meaning of the UCL. See Colgan, 135 Cal.App.4th at 672, 699-700. In Colgan, the class action plaintiffs claimed that the defendant’s “Made in U.S.A.”label violated the UCL’s false advertising provision. The court awarded restitution calculated as 25% of defendant’s gross receipts from the misrepresented products during the class period. Jd. at 676-677. This amount was supposedto represent the difference in value “the consumer believed he or she wasreceiving at the time ofpurchase.” The court admitted that it did “not attempt to trace exact moniespaid by Class members,” but instead “balanced the equities.” Id. Colgan reversed the $13 million restitution award “becausethetrial court had no evidenceto support its computation of the amountofrestitution awarded. Whether or not restitution is an equitable remedy, that remedystill requires substantial evidence to supportit.” Jd. at 672. “Althougha trial court has broad discretion under [the UCL] to grant equitablerelief, that discretion is not ‘unlimited’, and does not extend beyond the boundaries ofthe parties’ evidentiary showing.” Jd. at 700. Similarly, in Johnson v. GMRI, 2007 U.S.Dist. LEXIS 52062 (E.D.Cal. 2007), the plaintiffs attempted to use estimates of losses. The court granted the defendant’s motionto strike plaintiffs’ request for UCL restitution where Plaintiffs could only estimate restitution owed for alleged Labor Code violations. /d. at *10-14. The court reasoned that the sums allegedly owed were not“quantifiable” and hence could notbe the subject 125 594115.10 of a restitution award. Id. Johnson rejected arguments by plaintiffs that (1) disallowing restitution solely because the amounts are unquantifiable would be counter to the UCL’s broad purposes: and (2) the defendant should bear the burden of quantifying the unpaid wages: Plaintiffs fail to establish how the Unfair Competition Law’s broad policy relieves them [of the requirement] to quantify their restitution claims.... Here, plaintiffs’ claims address, as they acknowledge, unquantifiable cash shortages.... Moreover, plaintiffs fail to justify their contention that defendants should bear the burden to quantify plaintitts’ alleged cash shortages. Id. at *11-13. | Recently, in Jn Re: High-Tech Employee Antitrust Litigation, the plaintiffs filed a class action alleging that their employers agreed not to solicit employment of the employees from the other company. 856 F.Supp.2d at 1108-1109. Theplaintiffs sought restitution under the UCL in the form of higher compensation that they would have received absent the alleged agreements. Jd. at 1124-1125 The court dismissed the UCL claim, reasoning that “the salaries Plaintiffs may have been able to negotiate in the absenceofthe alleged conspiracy is an ‘attenuated expectancy’- akin to ‘lost business opportunity’ or lost revenue- which cannotserve as the basis for restitution.” Id. Here, the trial court awardedrestitution to each class member based on the “average” of the midpoint of the ranges of hours workedtestified to by the 21 RWGs. Thetrial court relied on Anderson v. Mt. Clemens Pottery, 328 U.S. 680, 687 (1946) and Hernandez v. Mendoza, 199 Cal.App.3d 721, 727 (1988), claiming that the awardsto absent class members were based on a “just and reasonable inference.” 71CT20997- 20998. These cases apply to legal claims for damages for wage and hour violations under the FLSA and Labor Code. They do notapply to equitable 126 §94115.10 claimsfor restitution under the UCL. Thetrial court cited no authority that a crude estimate of overtime hours workedis sufficient to support an order of restitution. Here, there was no evidence (muchless substantial evidence) at trial regarding overtime hours worked by 239 absent class members. Noneofthese individuals are entitled to a restitution award. Furthermore, those RWG members whoclaimed they worked overtimefailed to provide substantial evidence ofa specific, quantifiable and measurable amount of overtime workedto justify an award of restitution. No RWG member could quantify the actual amount of overtime hours they worked. See 20RT612-618; 2 IRT653-657 (Fitzsimmons); 28RT1436; 29RT1523-1526, 1549 (Duran); 23RT938-939 (Penza); 36RT2257-2262 (Koga); 21RT699-701; 22RT810-811 (Grady); 24RT999- 1003, 1059 (Pollard); 27RT1325-1327 (Machado); 27RT1361-1363, 1405- 1407, 1412-1413 (Jacobs); 29RT1598-1600; 31RT1734-1736 (McCarthy); 32RT1831-1836, 1903-1910; 40RT2594-2595, 2597-2601 (Vu); 34RT2038-2040, 2105-2109 (Morales); 39RT2466-2469, 2554-2558 (Rogers); 41RT2746-2748, 2785-2788, 2795-2796 (Haddow); 31RT1747- 1751, 1763, 1804 (Freeman); 37RT2296-2301, 2333-2334, 2338, 2346- 2348 (Tobola); 30RT1649, 1667, 1685-1687 (Anderson); 38RT23 83-2384, 2430-2431, 2432-2434, 2445 (Vanderheyd); see also 20CT5615 (Non- RWGSternad). . These estimates by RWG members demonstrate wide variation in overtime hours worked, if any, by individual class members. No one BBO worked the same amountof overtime as any other BBO on any given day and/or workweek, or consistently worked the same amountofhours each week. The RWGtestimony further shows that non-RWGclass members mostlikely worked less than the 11.86 weekly overtime hours awardedto them. In the Court ofAppeal, Plaintiffs quibbled that USB had “cherry picked” RWGtestimony,rather than relying uponfindingsofthe court. 127 594115.10 Regardless, Plaintiffs acknowledge that the restitution award to 239 absent class members was premised on an “average” of “estimated” overtime hours allegedly worked by the RWG members. | The court’s use of an “average” necessarily results in many class ~ members recovering for more overtime than they actually worked, and with no wayofidentifying those BBOs. The 43.3% margin oferroralso reflects that BBOs were awarded overtime to which they were notentitled. Whether or not rough approximations might suffice in estimating damages, no such crude guesswork has ever been allowedforrestitution under the UCL. Accordingly, the court’s restitution award of $8.9 million plus prejudgmentinterest, totaling approximately $15 million, violated the remedial limitations of the UCL. Far from supporting Plaintiffs’ position, the unique nature of this pure UCL case confirmsthe validity of the Court ofAppeal’s decision. IV. PLAINTIFFS’ STRAINED “PUBLIC POLICY” ARGUMENT THAT THE COURT OF APPEAL’S DECISION WOULD EVISCERATE MOST CLASS ACTIONSIS AN EXAGGERATION THAT ATTEMPTS TO CHANGE THE SUBSTANTIVE LAW TO ACCOMMODATE A PROCEDURAL TOOL. A. Representative Testimony In This Case Would Sacrifice Substantive Law In Favor Of The Class Action Device. USB does not dispute that wage and hourclass actions serve an important public policy to enforce California’s labor laws. OB39. However,class actions also carry the potential to create injustice. City of San Jose, 12 Cal.3d at 458-459 (class actions may, in certain cases, “preclude a defendant from defending each individual claim toits fullest, | and even deprive a litigant of a constitutional right.”). As a result, the public policy favoring class actions must be balanced against the unjust deprivation of a defendant’s constitutional right to due process. This right 128 - 594115.10 to due process undergirds the foundation of our judicial system and must require something more than paying lip service to an abstract concept but in reality steamrolling overa litigant’s every attempt to procurea fairtrial. No California court has suggestedthat a trial court mustcertify every putative class action simply because there may be a broad public policy encouraging the use ofclass actions. Rather, trial courts are required to properly analyze whether each putative class action is suited for class treatment, and whether individual issues can be managed. A case does not become more appropriate for certification simply becauseit alleges overtime claims. The Court of Appeal understood that class actions “are intended to conserve judicial resources and avoid unnecessarily repetitivelitigation.” Slip.Op. 60. Class actions may be superior where the claims would otherwise be too small to warrant individuallitigation. OB34 (citing Richmond v. Dart Indus., 29 Cal.3d 462, 469 (1981)). However, those _ circumstancesare absent here. BBOsare educated and skilled bankers eaming, on average, over $50,000 in base salary alone and can earn lucrative commissionspotentially exceeding their base salaries.” See, e.z, * As the U.S. Supreme Court recently noted in Christopher v. SmithKline Beecham Corp., 132 8.Ct. 2156, 2173 (2012), the outside salesperson exemption ...1S premised on the belief that exempt employees “typically eamedsalaries well above the minimum wage”and enjoyed other benefits that “‘se[t] them apart from the nonexempt workersentitled to overtime pay.” It was also thoughtthat exempt employees performed a kind ofworkthat “was difficult to standardize to any time frame and could not be easily spread to other workers after 40 hours in a week, making compliance with the overtime provisions difficult and generally precluding the potential job expansion intended by . (Continued...) 129 594115.10 7CT1814; 8CT2040, 2120; 10CT2872-2884, 2886-11CT2901. The average recovery for each class member exceeded $57,000, and manyclass members stood to receive hundreds of thousandsof dollars. 83CT24698- 24704; Slip.Op. 54. Class members also could recover attorneys’ fees and statutory penalties had Plaintiffs’ counsel notchosen to dismiss their Labor Code claimsto procure a benchtrial. See Lab. Code §§1194(a),218.5, 203: | Soderstedt, 197 Cal.App.4th at 157 (2011) (well-paid employees have sufficient monetary incentive to pursue individual claims, and unmangeability of individual issues defeated superiority requirement for _ class action); Brinker, 53 Cal.4th at 1054 (Werdegar, J., concurring) (statistical inference in class action proceedings offers means “to avoid windfalls to defendants that harm many in small amounts rather than a few in large amounts” without clogging courts). These are not the sort of “small” claimants the courts had in mind in seeking to craft collective procedures, since individual misclassification claims seeking such sumsare filed as individual cases every day. It defies reason to say USB cannot challenge these substantial individual claims for over 90% oftheclass, (...Continued) the FLSA’s time and-a-half overtime premium.” Petitioners — each ofwhom earned an average of more than $70,000 per year and spent between 10 and 20 hours outside normal business hours each week performing workrelated to his assigned portfolio of drugs in his assignedsales territory—are hardly the kind of employees that the FLSA wasintended to protect. The sameconsiderations apply to USB’s BBOs, whoearn basesalaries well above the minimum wage and enjoy other benefits relating to both compensation and flexibility. The BBO position is likewise “hardly the kind of employee that” wage and hour laws were “intended toprotect.” 130 594115.10 particularly where USB hadspecific and substantial evidence to challenge their claimed non-exemptstatus. 1. USB’s Constitutional Due Process Right Cannot Be Eliminated Because It Is Time-Consuming Or Inconvenient. Plaintiffs argue that “the required ‘flexibility’ and ‘discretion’ accordedto trial courts...would be destroyed by” the Court ofAppeal’s holding. OB39-40. Plaintiffs’ argumentthat a constitutional right can be dispensed with becauseit is time-consuming or inconvenientis antithetical to our justice system. Due process maybe “rigid” and cumbersome,butit is a necessary safeguard to prevent unjust deprivation ofproperty. Were that not so, such protection would not be provided in our Constitution. “While innovation is to be encouraged,the rights of the parties may not be sacrificed for the sake of expediency.”** Slip.Op. 40. To that end, the Court of Appeal did not articulate a new “due process rule,” but applied well- settled constitutional due process principles, as explained in Doehr, and correctly concluded that USB had been hobbledin its defense where it was prohibited from submitting relevant evidence to defenditself. Slip.Op. 40- 41, 47, 54-60. 2. Plaintiffs Presume That Class Treatment Is Proper Here With Fallacious, Circular Reasoning. Plaintiffs’ argument that a class action defendant does not have a due processrightto litigate itsexemption defense for each class memberis a circular argument because they presumethat class treatmentis properhere, * Although Plaintiffs portray the trial plan here as “procedurally innovative,” this Court never suggested that innovation could elevate “manageability” considerations above fundamentalfairness. ’Innovation” implies getting better results, not simply using “new”or “easy” methods without regard for the quality of the results. 131 594115.10 i.e., that there are common “policies,”“practices,” or other evidence indicating a uniform way that BBOs performedtheir jobs that would obviate the need for individualized inquiries. See Richard Nagareda, Class Certification in the Age ofAggregate Proof," 84 N.Y.ULL.Rev. 97, 103 (2009) (“...arguments for class certification premised on ageregate proof exhibit a deeply troubling circularity...such arguments amountto the justification of aggregation by reference to evidence that presupposes—at least as a matter of economicorstatistical methodology—the aggregate unit whoselegitimacy the court is to determine.”) Ifthe class was properly certified (which it was not), then there should have been a common methodofproofto resolve liability for all class members,andlitigation of individual claims would be unnecessary. However, USB had no commonpolicy or practice requiring BBOs to spend a majority of their time inside Bank premises. Slip.Op. 72-73. BBOs operated under minimal supervision and hadvirtually unfettered discretion to control how and where they spent their workdays. Thecritical liability determination required an individualanalysis, which varied from one BBOto the next. See Walsh, 148 Cal.App.4th at 1456, 1461; Wells Fargo H, 268 F.R.D.at 611-612. Thetrial court acknowledgedthese issues complicated the fact-finding process, but provided no method for dealing with them, other than by ignoring them. Against this backdrop, the Court of Appealcorrectly held that USB should have been given an opportunity to challenge individual claims. Slip.Op. 54-60; see also Hamwiv. Citinational-Buckeye Invest. Co., 72 Cal.App.3d 462, 471 (1977) (“[I]f a class action ‘will splinter into individualtrials,’ common questions do not predominate andthe litigation of the action in the - “ This article was cited favorably by the U.S. Supreme Court in Dukes, 131 S.Ct. at 2551, 2557. 132 594115.10 class format is inappropriate.”) To maintain class treatmentin light of the necessarily individualistic nature of the liability finding would require a change in the substantive law solely to accommodate the class action device, which this Court has repeatedly prohibited. See City ofSan Jose, 12 Cal.3d at 462. Plaintiffs presuppose that all wage and hourclass actions are suitable for class treatment. This is not the case: See Brinker, 53 Cal.4th at 1033, 1051-1052 (reversal oftrial court order on off-the-clock claims upheld because no commonpolicy or method ofproof existed; rest break claims certifiable based on employer’s erroneouslegal interpretation on timing of rest breaks uniformly affecting class members). Inher concurring opinion, Justice Werdegar (who authored Sav-On), recognized that “consideration of numerousintricately detailed factual questions, as is sometimesthe case in misclassification suits,” may impact the manageability of class actions. Id. at 1053-1054 (Werdegar, J., concurring) (citing Walsh). 3. Plaintiffs Misapply The Use Of Statistical Sampling In “Pattern And Practice” Employment Discrimination Cases. | Plaintiffs also argue that because courts have usedstatistical evidence to establish liability in employment discrimination “pattern or practice” class actions brought under Title VII and California’s Fair Employment and Housing Act (“FEHA”), that statistical evidence and “representative testimony” may be usedto establish liability in this misclassification class action brought under California’s UCL. OB37-39. There is no legal authority that “pattern and practice” evidence can be used to establish liability or damages in a misclassification class action for violation of California’s Labor Code, or the UCL premised on a Labor Code violation. Indeed, no “pattern or practice” cause of action exists underthe California Labor Code or the UCL. The use ofstatistical 133 594115.10 evidenceto establish proof of an employer’s “pattern and practice” of discrimination is distinct from drawing an undersized and gerrymandered sample from a class and then using their testimony as a proxy for absent class members, as was done here. . In International Brotherhood ofTeamsters v. United States, 431 USS. 324, 337-338, 342 n.23 (1977), the government presented overwhelmingstatistical evidencethat the employer, a national common carrier, hired virtually no African-American or Hispanic line drivers before the passage of Title VII, and after the passage of Title VI, hired them into allegedly less desirable positions in significantly lower rates than whites even in cities with a significant minority population. As one commentator noted, the employer’s practices “so closely approached outright segregation that the inference of discriminatory intent was virtually inescapable.” | Nagareda, 84 N.Y.U.L.at 152; see also Alch v. Sup. Ct., 122 Cal.App.4th 339, 382-383 (2004)(atpleading stage, plaintiffs’ complaint alleged sufficient facts to proceed with claim for age discrimination class action based on FEHA duein part to employers hiring statistically significant lower numbersof older writers than would be expected given relevant qualified applicant pool). Plaintiffs’ reference to Salvas v. Wal-Mart Stores, Inc., 452 Mass. 337, 357-361 (2008) is inapposite as Salvas is not a pattern and practice case, nor doesit address trial methodologies in wage and hourclass action cases (trial court’s decertification order reversed in action alleging missed/shortened meal and rest breaks and off-the-clock work in part because trial court erroneously excluded Plaintiffs expert testimony that analyzed Wal-Mart’s own time records and other business recordsas basis forclass certification). In other words,the racial or age composition of an employer’s workforce compared to the population may providestatistical proof of an intentionally discriminatory employmentpractice. It does not, however, 134 594115.10 mean that where there are myriad independent factors that impact employmentpractices (here, exempt classification determinations),“trial by formula” may be usedto establish classwide liability in the absence of any centralized policy or practice. See Dukes, 131 S.Ct. at 2561. Plaintiffs’ reliance on Sav-On only highlights its inapplicability here. In Sav-On, the predominant issue in evaluating the managerial exemption was not how muchtime the managers spent on non-exemptduties, but how to classify the “reasonably definite and finite”list of tasks performed byall class members, as either exempt or non-exempt, whichisa legal question subject to classwide resolution. 34 Cal.4th at 330-331. There was no question regarding substandard performance and consequently no concern that individualized facts needed to resolve such questions would overwhelm commonquestions. Jd. at 336. Sav-On, moreover, had an alleged policy that required managers to work more than 40 hours per week and, accordingly, there was no need to determine whether class members workedovertime. Jd. at 327. In contrast here, the predominant liability dispute is the amount oftime BBOsspenteitherinside or outside U.S. Bank premises. This Court in Sav-On recognized that “fajnydispute over ‘how the employee actually spendshis or her time,’ of course, has the potential to generate individual issues.” 34 Cal.4th at 336-337. Most significantly, determining an employee’s exemptstatus based on ““how the employee actually spends his or her time’ did not create or imply a requirementthat courts assess an employer’s affirmative exemption defense against every class member’s claim before certifying an overtime class action.” Id. at 337 (citation omitted). “California courts and others have in a wide variety of contexts considered pattern and practice evidence, statistical evidence, sampling evidence, expert testimony, and otherindicators of a defendant’s centralizedpractices in order to evaluate whether common behavior 135 594115.10 towards similarly situated plaintiffs makes class certification appropriate.” Id. at 333. Plaintiffs notably omit these important qualifiers to Sav-On (see OB38), which limited its analysis to certification rulings and situations where the defendanthad centralized practices that affected class member’s exemptstatus in uniform fashion. Sav-On did not excuse courts from ever assessing individual defenses throughout the case. Rather, it instructed that “if unanticipated or unmanageable individual issues do arise, the trial court retains the option of decertification” (Sav-On, 34 Cal.4th at 335)—which wassteadfastly ignored by thetrial court. B. Plaintiffs Exaggerate The Impact Of This Case. 1. Plaintiffs Offer No Evidence Supporting Their Speculation Of The Supposed Dangers Of Individualized Mini-Trials. Plaintiffs speculate, without evidence, that allowing a defendantto challenge individual claims would expose current employeesto “retaliation . if their testimony displeased their employer.” OB40. Plaintiffs likewise - speculate that “[fJormer employees would bedifficult to locate, would live too far away, would be unable to take time off from their current job or would be too poorto travel to court....” Id. Such arguments are not supportedby the facts. Instead of retaliating, USB promoted several BBOs who were RWG members and whoprovided testimony adverse to the Bank. See, e.g., Gediman (promoted to Sales Manager); Vanderheyd (promoted to Market Trainer). 26RT1191; 38RT2395. Further, virtually all of the testifying RWG were former employees,belying the supposeddifficulties of either locating these individuals or having them cometestify at trial. Only one RWG member, Borsay Bryant, refused to appearattrial and there is nothing in the record indicating why he failed to appear. Moreover, if someone stoodto recover tens or hundreds ofthousands of dollars, there is no reason he should not be 136 594115.10 required to substantiate his claim and have that claim challenged by the | party from whom heis seeking recovery. 2. Representative Testimony And Statistical Evidence, As Well As Other Trial Management Tools, Remain Viable In Appropriately Certified Class Actions. The Court ofAppeal did not hold that representative evidence could never be used in a wage and hourclass action trial. Instead, the Court of Appeal specifically acknowledged representative evidence may be appropriate in some cases. Slip.Op. 61. Similarly, it does not follow from the idea that class actions arise out of the concept of “virtual representation”that statistical sampling and representative evidence are the only meansto prove liability and damagesin class actions orthat these tools are appropriate in all cases. | For example,nostatistical evidence is necessary in false advertising casesif the identical allegedly misleading statement was made toall class members or, in masstort cases such as plane accidentsor the toxic poisoning of a well, a single allegedly wrongful act caused injury to all class members similarly. Further, courts dealing with these types of cases also regularly deny class treatment when individual issues predominate and render the class action device unmanageable. See City ofSan Jose, 12 Cal.3d at 462 (certification order reversed in nuisance action brought by _ property owners against local airport given complexity of individual issues that affected each class member’s potential recovery); Silva v. Block, 49 Cal.App.4th 345, 351-352 (1996)(class allegations dismissed in action against sheriff's department alleging policy of excessive force in use of police dogs because issue of reasonable force would vary based on individual circumstances). 137 594115.10 Hence, Plaintiffs’ argument that the Court of Appeal’s ruling would “threaten class litigation in manyotherfields, including consumer, product liability and construction defect cases” is a gross exaggeration. The Court of Appealrejected such hyperbole,stating “[w]e doubt thesituation is quite this dire. Bell II itself wasa class action involving wage and hour misclassification, suggesting that not all such cases are doomedto failure under current law.” Slip.Op. 58-59. Moreover, Sav-On listed many types of “innovative procedural tools” that a trial court may consider to manageclass actions, such as bifurcation, subclasses, administrative processing, single-issue hearings, separate judicial or administrative mini-proceedings on individualized issues assigned to special masters, and surveys. 34 Cal.4th at 339-340 n.11 & 12. This Court’s itemization of procedural tools for managing class actions meansthat there is no “onesizefits all” procedure. Rather, a trial court must use its best judgment to determine the appropriate tool(s), including decertification where appropriate, to manage the individual issues given the particular facts of each case. However, wherethe use offlawedstatistics and sampling is used not to present evidence of a defendant’s “centralized practice,” but as a way to circumvent a defendant’s ability to present relevant and probative evidence in its defense, statistics and sampling are improper. See Wells Fargo IL, 268 F.R.D. at 611; Vinole, 571 F.3d at 947. This Court never suggested that these tools would be acceptable if they failed to properly manage individualissues or to comport with due process. Based on the record here, class treatment was improper. This does not imply that other cases involving a different factual record would not be amenableto class treatment. Other misclassification cases might present more manageable issues, and other courts might better manage such issues using innovative procedures. Indeed, not every defendant in every class 138 594115.10 action will have the type or breadth of evidence to challenge individual claims, nor will every defendant want to do so for cost or other reasons,. depending on the amounts at stake and other considerations. However, on this record, given USB’s desire to challenge the significant claims individually, maintaining class treatment was improper. 3. The Potential Impact Of This UCL Class Action On Other Labor Code Class Actions Is Limited. Notwithstanding the Court of Appeal’s express limitationsofits holding to this case and cases whereliability determinations require an individual analysis, Plaintiffs argue that the Court of Appeal’s “purported limitation”is “no limitation at all” because “nearly every defendant in every class action claimsthat liability depends on the ‘individual circumstances’ of the class members.” OB37. Plaintiffs’ argument incorrectly frames the issue: it does not matter what defendants “claim,” but what evidenceplaintiffs (as the party bearing the burden ofproof on certification elements) have submitted to prove a predominance of common issues among class members, and what evidence the defendant has submitted to show that a predominanceofindividual issues makesclass treatment improper. Here, the record never contained any method for proving liability with common evidence, meaningliability hinged entirely on class members’ “individual circumstances.” Plaintiffs also ignore that their strategic decision to try this case only as an equitable UCLclass action severely limits its implications to other Labor Codeclass actions. A claim brought under the UCL is not a Labor Code claim with a different label; it is a distinct claim withlimited . remedies. Korea Supply, 26 Cal.4th at 1144-1148. The primary remedy afforded under the UCLis injunctive relief, and restitution is only an ancillary remedy. Tobacco IT, 46 Cal.4th at 319. Here, the trial court denied Plaintiffs’ repeated requests for injunctive relief, so Plaintiffs were 139 594115.10 left with restitution only anddid not even obtain the primary remedy afforded by the sole UCL claim. 55CT16175-16176; 60CT17603, 17737- 17738; 71CT21018-21019. The limited remedy of restitution will not be a factor in Labor Code claims seeking damages, further distinguishing this unusual case from other wage and hourclass actions wherethe plaintiffs do not dismissall legal claims and remediesfortactical reasons. Therefore, the potential reach of this decision is narrow and limited only to those unusual situations where a class action brought to pursue Labor Codeviolations is pursued only under ~ the UCL,with a total abandonmentofall legal relief for damages, penalties, and attorneys’ fees otherwise available under the Labor Code. V. IF THE COURT OF APPEAL’S UNANIMOUSOPINION IS NOT AFFIRMED, THEN THIS COURT SHOULD REMAND TO THE COURT OF APPEAL, NOT THE TRIAL COURT. Plaintiffs’ request that this case be remandedtothe trial court for furthertrial proceedings must be rejected. Plaintiffs’ remand request ignores the numerousappellate issues USBraised that the Court ofAppeal did not reach. These issues include: (1) the trial court granted summary adjudication of the administrative and commission sales exemptions based on severallegal errors, including its ruling that “tacking” of exempt timeis not permitted under California law; (2) the trial court erroneously awarded compensatory damages in a UCL action where only restitution is available, not damages; (3) the trial court improperly converted the equitable UCL claim to a legal claim by awarding legal damages, yet denied USB a jury trial based on the supposedly equitable nature of the claim being tried; and (4) the trial erroneously allocated the burden ofproof on Plaintiffs’ UCL 140 594115.10 claim.** Because eachofthese issues constitutes an independent basis for reversal ofthe trial court’s judgment, if this Court departs from the Court of Appeal’s disposition in any manner, the case must be remandedto the Court ofAppeal for consideration of these additional appellate issues. Cal. Rules of Ct., R. 8.528(c). Furthermore, Plaintiffs request remandto the trial court on the premisethat the trial court should engagein furthertrial proceedings,but leave the “classwide”liability determination intact, with a “presumption” of liability when assessing the activities conducted by the non-RWGclass members. See, e.g., OB58-59, 62-63. No “presumption” of classwide liability can attach to the flawed sample becausethe trial court’s classwide liability determination lacked anystatistical, legal or evidentiary basis. Even the recovery awarded to the 21 RWG members must be reversed because USB wasprecluded from presenting evidenceasto their exempt status underthe administrative exemption or through tacking of the administrative and outside salesperson exemptions, and their recovery is not supported by evidence sufficient to support recoveryofrestitution (the sole remedy available). . . Contrary to Plaintiffs’ argument, the Court ofAppeal was not required to remandthe case to thetrial court for further consideration of whether a newly formulated trial plan could somehow manageindividual “5 USB also challengedthe trial court’s errors in (1) calculating prejudgmentinterest at an annual rate of 10%, rather than the applicable 7% rate and (2) including class members’ non-worktimein calculating the class recovery. The Court of Appeal would need to address these issues even if the trial court’s estimate of recovery were upheld. However, Plaintiffs admit that the estimate of overtime worked “would not sustain the... judgment”and essentially concedethat the trial court’s estimate of recovery must be reversed.. OBS. 141 594115.10 issues, because sufficient commonality does not exist. See, e.g., City ofSan Jose, 12 Cal.3d at 464 n.14 (reversing class certification and rejecting possible amendment of complaint, explaining that “because amendment could not cure the failure of sufficient communityofinterest, affording such opportunity would serve no useful function’); Brinker, 53 Cal.4th at 1051-1052 (affirming decertification ofoff-the-clock class claim and not requiring “reconsideration”of class certification because no common evidence existed to prove those claims). Plaintiffs have always maintained that classwide liability and recovery could be established throughthetrial court’s woefully deficient “RWG?”trial plan. At no pointin this case have Plaintiffs even proposed a methodologyto resolve individualized liability issues, nor couldthetrial court identify any such methodology. Even before this Court, Plaintiffs still have offered no method to resolve absent class members’ claims that would not devolve into a multitude of mini- trials similar to the mini-trials conducted for the RWG. Thus, any remand is futile where the evidence repeatedly confirmedthat liability for each BBOhad to be resolved on an individual basis. CONCLUSION For the foregoing reasons, USB respectfully requests that this Court affirm each of the Court of Appeal’s conclusions, including its reversal of the trial court’s judgmentin its entirety and its order decertifying the class. This Court should also reverse all amounts awarded to theRWGandclass members because the record cannot support a finding of classwideliability or an award of classwiderestitution under the UCL. If this Court departs from the Court of Appeal’s holdings in any respect, the Court should remandthis action to the Court ofAppealfor further consideration of USB’s appeal from thetrial court pursuantto this Court’s opinion, along with full consideration of the other appellate issues raised but not teached by the Court of Appeal in its prior decision. 142 594115.10 Dated: Dec. 20,2012 ©CAROTHERS DISANTE & FREUDENBERGER LLP Timothy M. Freudenberger Alison L. Tsao Kent J. Sprinkle By: Mis){ Align L. Tsao Attorneys for Defendant and Appellant U.S. BANK NATIONAL ASSOCIATION 143 594115.10 CERTIFICATE OF WORD COUNT (Cal. Rules of Court) Thetext of this brief, excluding portions authorized to be excluded by the Rules of Court, consists of 40,856 words as counted by the Microsoft Word word-processing program usedto generate the brief. Dated: December20, 2012 Alison L. Tao Attorneys for Defendant and Appellant U.S. BANK NATIONAL ASSOCIATION 144 594115.10 PROOF OF SERVICE STATE OF CALIFORNIA, COUNTY OF SAN FRANCISCO. I, the undersigned, declare that I am employedin the aforesaid County, State of California. I am over the age of 18 and not party to the within action. My business address is 601 MontgomeryStreet, Suite 350, San Francisco, California 94111. On December20, 2012, I served upon the interested party(ies) in this action the following documentdescribed as: ANSWERBRIEF ON THE MERITS Byplacing a true and correct copy thereof enclosed in sealed envelope(s) addressedasstated on the attached servicelist for processing by the following method: Byplacing such envelope(s) with postage thereon fully prepaid into Carothers DiSante & Freudenberger LLP's interoffice mail for collection and mailing pursuant to ordinary business practice. I am familiar with the office practice of Carothers DiSante & Freudenberger LLPfor collecting and processing mail with the United States Postal Service, which practice is that when mail is deposited with the Carothers DiSante & Freudenberger LLP personnel responsible for depositing mail with the United States Postal Service, such mailis deposited that samedayin a post box, mailbox, sub-post office, substation, mail chute, or other like facility regularly maintained by the United States Postal Service in San Francisco, California. I declare under penalty of perjury underthe laws of the State of | California that the foregoing is true and correct. | Executed on December20, 2012, _ Marshall Gillespie (Type or print name) | L “(Signaturey~ 145 594115.10 SERVICE LIST Edward J. Wynne Esq. J.E.B. Pickett, Esq. THE WYNNE LAW FIRM 100 Drakes Landing Rd., Ste 275 Greenbrae, CA 94904 Lead Counseland Attorney of Record for Plaintiffs and Respondents Judge Robert B. Freedman (Dept. 20) Alameda County Superior Court 1221 OakStreet Oakland, CA 94612 Superior Court Trial Judge Ellen Lake, Esq. LAW OFFICE OF ELLEN LAKE 4230 Lakeshore Ave Oakland, CA 94610-1136 Appellate Counsel and Attorney ofRecord for Plaintiffs and Respondents Brad Seligman, Esq.. LEWIS, FEINBERG,LEE, | RENDAKER & JACKSON,P.C. 476 9th Street Oakland, CA 94607 Appellate Counsel and Attorney of Record for Plaintiffs and Respondents Pursuant to California Business and Professions Code §17200,et seq. Office of the Attorney General455 Golden Gate, Suite 11000San Francisco, CA 94102-7004 Nancy E. O'MalleyDistrict AttorneyALAMEDA COUNTY _1225 Fallon Street, Room 900Oakland, CA 94612 594115.10 146