DURAN v. U.S. BANK NATIONAL ASSOCIATION

Respondents’ Petition for Review

Cal.March 19, 2012

—_ SUPREME COURT FILED AOR vas DQUUE 28 MAR 19 2012 IN THE SUPREME COURT Frederick K. Ohtrich Clerk OF THE STATE OF CALIFORNIA Deputy SAM DURAN, MATT FITZSIMMONS,individually and on behalf of other members of the general public similarly situated, Plaintiffs and Respondents, Vv. U.S. BANK NATIONAL ASSOCIATION, Defendant and Appellant. Petition for Review of a Decision of the Court of Appeal, First Appellate District, Division One, Case Nos. A12557 and A126827, Reversing Judgment and Decertifying Class in Case No. 2001-035537 Superior Court of Alameda County Honorable Robert B. Freedman PETITION FOR REVIEW ELLEN LAKE (SBN 47636) EDWARD J. WYNNE(SBN 165819) Law Offices of Ellen Lake J.E.B. PICKETT (SBN 154294) 4230 Lakeshore Avenue Wynne Law Firm _ Oakland, CA 94610-1136 100 Drakes Landing Road, Suite 275 (510) 272-9393 Greenbrae, CA 94904 Appellate Counsel (415) 461-6400 Attorneys for Plaintiffs and Respondents ‘ SAM DURAN, MATT FITZSIMMONS & No. S 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, Vv. U.S. BANK NATIONAL ASSOCIATION, Defendant and Appellant. Petition for Review of a Decision of the Court of Appeal, First Appellate District, Division One, Case Nos. A12557 and A126827, Reversing Judgment and Decertifying Class in Case No. 2001-035537 Superior Court of Alameda County Honorable Robert B. Freedman PETITION FOR REVIEW ELLEN LAKE(SBN 47636) EDWARDJ. WYNNE(SBN 165819) Law Offices of Ellen Lake J.E.B. PICKETT (SBN 154294) 4230 Lakeshore Avenue Wynne Law Firm Oakland, CA 94610-1136 100 Drakes Landing Road, Suite 275 (510) 272-9393 Greenbrae, CA 94904 Appellate Counsel (415) 461-6400 Attorneys for Plaintiffs and Respondents SAM DURAN, MATT FITZSIMMONS ISSUES FOR REVIEW 000... cecceeceseceeceeseeeceeeseceesrseesaseaeeeeeeasaseseseseesees 1 INTRODUCTION 00...cece eee eect eeenscsesesenssesesseseeseessessessesessessensesesseeens2 STATEMENT OF THE CASE...cece eesesererseeseeeeeeecesaecneeeeeeraeeeesseenees 6 The Complaint Alleged Misclassification and Failure to Pay Overtime. Plaintiffs Presented Extensive Evidence in Support of Class Certification... ceeccscccesseeseeeeaceeacensceesaeeessneseeeersneraeeeneeeaes 6 In Opposition to Class Certification, Defendant Filed Declarations Obtained by Fraud.............cccccccessseeeeeeeeerceeeeeesneesseteasenes 7 The Trial Court Certified the Class, Finding That Common Questions of Law and Fact Predominated .............cccceeeseeeeseeeeeteeees 8 The Trial Court Formulated a Trial ManagementPlan After Seeking USB’s Input Without Success...ccc eceeeseeeneeeeeeeessreeeenes 9 Plaintiffs Dismissed Their Legal Claims and Proceeded Only Under the UCL. Four RWGs Opted Out .......eeeeeeteteteeeeenees 11 At Trial, All the RWGsTestified They Spent a Majority of Their TimeInside Bank Properties...........cccecceceseessseeeeneeeeeteaeetssceeesnanecseaee 12 Muchofthe Defense Evidence FavoredPlaintiffs ..............ceceeeees 13 The Statement of Decision Found the Class Was Non-Exempt....... 13 The Trial Court Denied Defendant’s Second Decertification MOtiOr —_ieaccccccasecseccccecececceceecccucceuesececccsuacecersusessensunesseecesucseeess 15 In PhaseIJ, the Court Determined the Overtime Compensation Dueto the Class After USB Rejected Alternative Proceduresto Reduce the Margin of Error ..........cccceccccccssccesseceeeseeceesseeeesseeesseeeeenes 15 The Court of Appeal Reversed the Judgment and Decertified the Class, Finding USB Had a Due Process Right to PresentIts Defense Separately as to Each Class Membet.........eceeeseseeeeteeeees 18 ARGUMENTo.oo cecceesessescneesscecnerseeeeseassesseceaesecaaesseenessssessevaeesaeneveneenerae 19 I, REVIEW SHOULD BE GRANTED TO ADDRESS THE COURT OF APPEAL’S UNPRECEDENTED RULING THAT A CLASS ACTION DEFENDANT HAS A DUE PROCESS RIGHT TO DEMAND AN INDIVIDUALIZED DETERMINATIONOFITS EXEMPTION DEFENSE FOR EVERY CLASS MEMBER, A RULING THAT WOULD EVISCERATE MANY CLASS ACTIONSoececeeeeseeereeseesneeteetneeenees 19 I. REVIEW SHOULD BE GRANTED TO DECIDEIF CLASS LIABILITY MAY BE BASED ON . STATISTICAL SAMPLING AND OTHER REPRESENTATIVE FORMSOF EVIDENCE...25 II. REVIEW SHOULD BE GRANTED BECAUSE THE COURT OF APPEAL’S OPINION REVEALS A NEED FOR MORE GUIDANCEAS TO THE STANDARDS OF APPELLATE REVIEW 0...cece eesteesieneeeeneteeeeeaeens29 CONCLUSION|.ecccecssceseeeneeseeesceessceseseaeesaeseceascesaseasesessestssesaeeatenas 33 ii Table of Authorities _ Cases. Bell v. Farmers Ins. Exchange (2004) 115 CalApp.4th 715...cecccceeneeeeneeeeeereneeneeeees 9, 21, 22, 24,27 Brinker Restaurant Corp. v. Superior Court (2008) 165 Cal.App.4th 25, review granted October 22, 2008 (S166350)....... SeeeusceesscessecnacecseneDesecececsenecesareeseaeesecaeeceeeeaeesseeeesessaeeseeseesateass 1 Capitol People First vy. Department ofDevelopmental Services . (2007) 155 Cal.App.4th 676.......cccccccessseencesseceseeeceeeteeaseeecsereeteneessneeeres26 Dilts v. Penske Logistics LLC (S.D. CA 2010 ) 267 F.R.D. 625 occ eccccceccceecnceeesnetsceeeseeeaeecneeenseeesenetees 27 Dunbarv. Albertson’s, Inc. (2006) 141 CalApp.4th 1422ceeccceccsecceneceeeseeeseeneesseseeseneessseesees20 Gentry v. Superior Court (2007) 42 Cal.4th 443 oo. iccccccscessseeceseesseeeeeseessrecsressesenessressnees 22, 33 In re Simon II Litig. (E.D. N.Y. 2002) 211 F.R.D. 86 ooo ccccccceeceseceneesecneeteeesnevseeneeessaeeaes26 In re Wells Fargo Home Mortg. Overtime Pay Lit. (9" Cir, 2009) 571 F.3d 953 veccccccsccssecsesesersscsvsesecseserssssssessecssssnssteevsveeeeess20 In re Wells Fargo Home Mortg. Overtime Pay Lit. (N.D. Cal. 2010) 268 F.R.D. 604 oo eecccccecceceneceneeseeeneeesesenenneeneeeeeeeeees20 International Brotherhood ofTeamsters v. United States (1977) 431 U.S. 324 oie cceccccceceeseesneesneceaeeeeeeeeseesseeenseeeeaeessesaeseaeeeneeeaes 26 Jimenez v. Domino’s Pizza, Inc. (C.D. Cal. 2006) 238 F.R.D. 241 ecccccccccccceseceeeseesseteeeeseseeeneeesseeaes20 Reyes v. Board ofSupervisors (1987) 196 CalApp.3d 1263 oo. ccceeccccesesceesneeesseceeessececsseecseeeeeneeesesenes26 Richmond v., Dart Industries (1981) 29 Cal.3d 462occcecceecseceneeeseesseeceseeseesseseecsseseaseaeenaeeseeeees 24 Sav-On Drug Stores, Inc. v. Superior Court | (2004) 34 Cal.4th 319.icccsccccssseecccsesesersscesesssseesssseseesesseeeesaes passim Stephens v. Montgomery Ward (1987) 193 CalApp.3d 411 oo. cccccseseeeesseesseceeeeeesseeeersstseeseeeeneeees26 ill Wal-Mart Stores, Inc. v. Dukes (2011) 564 U.S. [180 L-Ed.2d 374, 131 S.Ct. 2541) ow.220, 21 Walsh v. Ikon Office Solutions, Inc. (2007) 148 Cal.App.4th 1440...cccceeseceseceeceeeseeeseessesseeeseseeeeessens20 Washington Mutual Bank, FA v. Superior Court (2001) 24 Cal4th 906.0... ceeecscececeeeesseeseeneeeseseeeaeeceeesaeseaeeeeeseaeees 29, 33 Weisenburg v. Cragholm (1971) 5 Cal.3d 892.0.ccecccesceceseeceneceeceeeaeeeeeeeessesesseeeeeseersneeeasens30 Other Authorities Banks & Aubrey, How to Conduct a Wage and Hour Auditfor Exemptions to Overtime Laws, West HR Advisor (March/April 2005, VOL. 11, NO. 2.) occ eeccccscecseessecseeeeesseessesensceseseceseceeesseaeecaeensesseeecseesaesaeeees 28 Cotter, Pivotal new ruling on managementofclass actions (2/14/2012) SF Daily Journal.........cccccceccccscsecssscceessccecessecsescesseceaeeceesssessasseeessetecesseessnes 5 Duran v. US Bank: Aftershocks of Wal-Mart v. Dukes (2/24/2012) www.law360.com/articles/308271/print?section=classaction.............0 5 Eisenberget al., Cal. Prac. Guide: Civil Appeals & Writs (The Rutter Gp. 2011) cee eceeeeceeestesseeeeeceeeseeeceseessececsecnetenesseceaeevseceeseeseeeeeseeeeasenes30 King & Muraco, Classwide Determinations of Overtime Exemptions: The False Dichotomy Posed by Sav-On and a Suggested StSolution (2006) 21 The Labor Lawyer 257 .....cccccccscccsccssseseeteceensesesseeeseens eesananeees 28 Sumers, Appellate ruling could dampen employmentclass actions - (2/8/01) SF Daily Journal .......cccccccccccsscesssesseesseeeseesseceseecsseceesuteesescsesentes 5 iv ISSUES FOR REVIEW This case presents the following issues for review: 1. In a wage and hour misclassification class action, does the - defendanthaveadueprocessright to assert its affirmative defense against every class member? 2. Can a plaintiff satisfy the requirements for class certification if a defendant has a due process right to assert its affirmative defense against every class member? 3. Can statistical sampling, surveys and other forms of representative evidence be used to prove classwide liability in a wage and hour misclassification case? 4. When an appellate court reviews a class action judgment and an order denying class decertification, does. the appellate court prejudicially err by (a) applying newly-announced legal standards to the facts and then reversing the judgmentand the class order without providing for a newtrial and/or (b) reweighing the evidence instead of reviewing the judgment and order underthe substantial evidence standard of review? These issues — or variations on them — are now pending before this Court in Brinker Restaurant Corp. v. Superior Court (2008) 165 Cal.App.4th 25, review granted October 22, 2008 (S166350). Review in this case is sought on both a grant-and-hold and a plenary basis. INTRODUCTION In the course of disapproving thetrial plan for this class action, the court of appeal reached two unprecedented conclusions. First and fundamentally, it concluded that a-defendant had a due processright, in a class case, to insist on an individualized determination of its exemption defense for every class member. Second, it found that class liability may rarely, if ever, be based on statistical sampling or other forms of representative evidence. While theoretically a new trial plan might address these issues (“we need not speculate as to whether a workable trial plan could have been devised to account for these individual inquiries....it 1s doubtful that such a plan could be successfully implemented”(slip opinion (“slip op.’”], p. 73)), the court elevatedits trial plan holding to a black-letter . constitutional and class certification doctrine: “The trial court’s denial of the second motion to decertify was based on the erroneous legal assumption ‘ that a finding of liability due to misclassification could be determined by extrapolating the findings based on the RWG [random witness group] to the entire class.” Slip op., p. 72 There is no basis under California law for either of the conclusions reached by the court of appeal. Instead, relying primarily on dicta from federal class action cases and a substantive law holding in a federal Title VII employment discrimination class action, the court imposed an extraordinarily heavy class certification and trial burden on plaintiffs in California class.actions.. Instead of focusing on the commonissues that might be proved in a class case, subject to a deferential abuse of discretion standard of review, the court’s new due process right to individualized defenses would make individual issues paramount, precluding class adjudication in most cases. For the fortunate rare case that could meetthis new class certification standard, trial would likely be an unmanageable succession of repetitive mini-trials of each class member’s claim. In this case, plaintiffs showed that such mini-trials would likely take two years for the 260-memberclass. While the court of appeal could have written a narrow decision limited to the perceived errors in developing the trial plan, it did not. It went further, indicating not only that any trial in this case would likely fail its due process and sampling tests, but also decertifying the class as well. The court did not rule on whether a new trial and new class certification decision were even permissible in this case although those issues were raised in a petition for rehearing. Moreover, its analysis of the alleged - defects in the trial plan was infected by its reweighing of the evidence and its failure to apply the required substantial evidence standard of review in reviewing the factual findings ofthetrial court, The court of appeal’s decision creates a split of authority with many __ of this Court’s decisions, but particularly with Sav-On Drug Stores, Inc. v. . Superior Court (2004) 34 Cal.4th 319. Sav-On emphasizedthetrial court’s broad discretion to certify a class action based on its findings regarding common issues, and specifically rejected the contention that a defendant “ employer’s claim that some ‘class members may be exempt would necessarily prevent class certification. Sav-On also enthusiastically embraced the use ofstatistical sampling and other representative techniques as valid methods of proof of both liability and damages in class cases. Aboveall, Sav-On urged trial courts to be “procedurally innovative” in certifying and managing class actions. /d. at 339. Trial courts “must be accorded the flexibility to adopt innovative procedures” in class actions, Say-On teaches. Ibid. The impact of the court of appeal’s decision in this case has been swift and widespread, with lower courts and the defense bar seizing upon its perceived implications. In Puchalski v. Taco Bell Corp.,a certified wage and hour class action that was in its second week of trial when the Duran decision issued, the Court of Appeal for the Fourth District, Division 1, responding to a writ, ordered the trial court to “consider Duran ... and exercise its discretion whether to reconfigure or decertify the class.” Taco Bell Corp. v. Superior Court, No. D061344 (Feb. 8, 2012). Trial courts around the state are being asked to decide, based on Duran, whether class certification should be denied or reversed or whether a particular trial plan - denies due process. See, e.g., Martinez v. JATCO, Inc., Alameda Sup Ct. No. RG08-397316 (Dec’n Feb. 22, 2012); Nilsson v. Longs Drug Stores, -Inc., Santa Barbara Sup. Ct. No. 1304153 (Def’t’s Proposed Lit. Plan), filed March 2, 2012; Kairy v. Supershuttle International, Inc., N. D. Cal. No. 3:08-CV-02993-JSW(BZ), Jt. Case Mgt. Statement, filed March 2, 2012. Defense commentators have called Duran a “game-changer for California class actions” (Duran v. US Bank: Aftershocks of Wal-Mart v. Dukes (2/24/2012) www.law360.com/articles/308271/print?section=classaction) and have opined that the decision “is likely to influence every phase of wage and hourclasslitigation.” Cotter, Pivotal new ruling on management of class actions (2/14/2012) SF Daily Journal, p. 3. One management-side attorney predicted that under Duran,class certifications would drop by 95 percent. Sumers, Appellate ruling could dampen employment class actions (2/8/01) SF Daily Journal, p.4. This Court should grant review to decide these crucial issues, which are being addressed every day in courts around the state, as wage and hour litigation continues to grow and expand. The lower courts andlitigants need guidance on whether Duran is indeed a “game-changer for California class actions” or whether its broadly-phrased principles are inconsistent with existing California class action law. STATEMENT OFTHE CASE In this factual statement, we set forth the facts consistent with the substantial evidence rule, resolving credibility disputes and inferences in favor of plaintiffs, the prevailing parties below. The court of appeal disregarded thetrial court’s findings, often accepting defense evidence the trial court had rejected and rejecting evidence the trial court had credited. Plaintiffs raised this issue in a petition for rehearing, which was denied without relevant modification. The Complaint Alleged Misclassification and Failure to Pay Overtime. Plaintiffs Presented Extensive Evidence in Support of Class Certification. The complaint alleged that defendant failed to pay overtimeto its Business Banking Officers [“BBOs”], who were misclassified as exempt . employees. under the outside sales exemption, which is met under California law only if employees customarily and regularly spend more than half their working time in sales activities away from the employer’s place of employment. 1 CT 1-16;42 RT 2939-2940; 6 CT 1682-1683; Cal. Code Regs., tit. 8, § 11040(1)(C), (2)(M). In support of their motion for class certification, plaintiffs filed declarations from 37 current and former BBOs. The declarations stated that BBOsspendthe vast majority of their time engagedin sales activities, spend more than half their work time inside Bank properties and work more than 40 hours per week. 6 CT 1460-1601, 11 CT 3077-3083, 13 CT 3664- 3672. Plaintiffs also submitted deposition excerpts from USB managers, which established the following: BBOswork 40-60 hours per week, selling ~ bank products. 7 CT 1739-1741:6 CT 1664, 1668. USB has always classified BBOs as exempt. USB has standardized hiring, training, and evaluation procedures for BBOs (6 CT 1649-1654, 1678, 1680; 7 CT 1738) but has never tracked or kept records of how muchtime they work outside Bank property. 6 CT 1656, 1687-1689, 7 CT 1742-1743. BBOsare not evaluated, disciplined, or compensated based on where they spend their work time but only on whether they meet or exceed their sales goals. 6 CT 1667, 7 CT 1729-1730, 1736, 1739, 1746-1747. USB’s job descriptions for the BBO position have never stated that they are expected to spend more than 50% of their working time outside Bank premises. 6 CT 1670- 1671, 1674-1677, 7 CT 1757-1765. In Opposition to Class Certification, Defendant Filed Declarations Obtained by Fraud. Defendant’s opposition to certification included standardized declarations from numerous BBOs, who claimed they regularly spend more than half their time performing sales activity outside the office. 9 CT 2302- 10 CT 2694. There was evidencethat the Bank used fraudulent methods to solicitand draft many BBO declarations. Four class members repudiated the declarations that defendant hadfiled in their names and submitted new declarations in support ofplaintiffs. 9 CT 2325-2328, 9 CT 2308-2311, 10 CT 2649-2651, 10 CT 2620-2625. A fifth BBO’s declaration described ’ ‘how a Bank attorney had attempted to get her to file a false declaration, which she refused to do. 13 CT 3664-3668. The Trial Court Certified the Class, Finding That Common Questions of Law and Fact Predominated. After reviewing nearly 3400 pages of evidence and written argument and holding a lengthy hearing, the trial court granted plaintiffs’ motion for class certification and denied defendant’s opposing motion. The court found: (1) the class was ascertainable and numerous; (2) commonquestions of law and fact predominated over individual questions; (3) the named plaintiffs’ claims were typical of the class; and (4) the namedplaintiffs and class counsel would adequately represent the class. 16 CT 4528-4535, 5 RT 115-153. On the commonality issue, the court found that there was sufficient evidence that the BBO position was standardized throughout the Bank so that USB’s realistic expectations and the actual requirements of the job would be susceptible to common proof. The court also found that USB classified all BBOs as exempt without any individualized inquiry as to any employee’s job duties or monitoringto ensure that exemption requirements were being satisfied. The court concluded “there exists a classwide commonality of interest making class treatment a superior method of - resolving this dispute.” 16 CT 4533, internal quotations omitted. The Trial Court Formulated a Trial Management Plan After Seeking USB’s Input Without Success. A year before the start of trial, the court began to develop trial plan. It directed the parties to meet and confer and to submit proposals on trial management. 8 RT 204-207. Relying on the declaration of Dr. Richard Drogin, a noted statistician, plaintiffs proposed that the parties’ experts jointly prepare a survey to be administered to class members concerning where they spent their time and how many hours they worked. After the survey, a random group of witnesses would be selected for further discovery and testimony. The results of the testimony from the random sample would be applied to the class as a whole. 20 CT 5853-5858, 5863-5875. The proposal was modeled after the approach used in Bell v. Farmers Ins. Exchange (2004) 115 Cal.App.4th 715. Defendant’s only proposal was that the court appoint special masters to hold individual trials of liability and damages for allclass members. USB steadfastly opposed any plan based on a survey or on representative testimony. 2 CT Supp. 349-351; 20 CT 5891-21 CT 5906. The court announced that it was preliminarily inclined to adopt a trial plan consistent with plaintiffs’ proposal. The court ordered theparties _ to meet and confer and to file a joint statement concerning areas of agreement and disagreementonthetrial plan before the next conference, to be held in September 2006. 21 CT 5911-5915. The parties’ joint statement revealed complete disagreement. Plaintiffs continued to espouse a plan based on a surveyplus representative testimony. Defendant objected to any plan that did not involve individualtrials of liability and damages for each class member. 21 CT 5916-5929. At a hearing a month later, the court proposed to select a random numberof class members — perhaps 20 — to testify at trial, with the findings on liability and damagesto be extrapolated to the rest of the class. 10 RT 221-238. The court’s proposal was modeled on plaintiffs’ trial managementplan. The only reason the court proposed to omit the survey was that defendant “strenuously and vigorously” opposedit. 10 RT 222, 225. Before finalizing the plan, the court urged the parties to meet and confer about many topics, including possible use of a survey and the numberofrandom witnesses. 10 RT 234-237; 21 CT 6163-6166. The meet and confer went nowhere because USB continuedto insist on individual hearings onliability and damages for each class member. After reviewing the parties’ responses, the court announced that 20 class members, randomly chosen, along with the two plaintiffs, would testify in Phase I of the trial. These witnesses were called the Representative Witness Group or “RWGs.” 11 RT 240, 248-249; 22 CT 6241-6245. The 10 court randomly selected 25 names (20 witnesses and 5 alternates) from amongall the class members. 12 RT 266-267; 22 CT 6289; 71 CT 20988- 20989. Plaintiffs Dismissed Their Legal Claims and Proceeded Only Under the UCL. Four RWGsOpted Out. After plaintiffs announced their intention to dismiss their legal claims under the Labor Code and proceed to a benchtrial on their equitable claim under the Unfair Competition Law (22 CT 6290-6317), the court allowedplaintiffs to file a third amended complaint (23 CT 6618-6632) but ordered that class members be notified and given a second opt-out opportunity. 23 CT 6614-6616, 6633-6638. Nine class membersoptedout, including four RWGs,leaving a total of 261 class members. 25 CT 7285- 7286, 7290, 12 RT 266-267. Two RWGs who opted out were Michael Lewis and Sean MacClelland, who by then held USB management positions. 25 CT 7334, 7338. USB moved to reinstate Lewis and MacClelland as RWGs, claiming they opted out before they learned they were RWGs. 25 CT 7304-7318. Plaintiffs demonstrated that Lewis and MacClelland and all other RWGs were immediately informed of their selection. 25 CT 7376-7377, 7395, 7397. The court refused to reinstate Lewis and MacClelland as RWGs. 26 CT 7430-7431. 11 _ At Trial, All the RWGsTestified They Spent a Majority of Their Time Inside Bank Properties. Phase I of the trial lasted 41 trial days. Plaintiffs presented testimony from 21 of the 22 RWGs, whoall testified they performed exclusively sales duties (22 RT 790; 27 RT 1353-1354), worked more than 40 hours per week, and spent more than 50% of their work time inside Bank property. All testified that the Bank had never informed them, orally or in writing, that the majority of their work should be “outside” the Bank. E.g., 71 CT 20998-21007; 19 RT 517, 539-540; 21 RT 699, 711; 22 RT 839, 848-849; 28 RT 1434-1437; 30 RT 1649, 1656; 31 RT 1749, 1752- 1754; 32 RT 1827-1831; 40 RT 2611, 2622, 2628-9, 2668-2669; 41 RT 2736-2737, 2752, 2758-2759, 2802." The RWG testimony provided additional evidence that USB had submitted false employee declarations in opposition to class certification. Chad Penza, Adney Koga and Steven Bradley testified that the USB declarations submitted in their names were filled with untrue statements which they had not made andthey had signed the declarations out of fear for their jobs. 22 RT 878-880, 886; 23 RT 957-976; 36 RT 2231, 2237- 2238, 2267-2268; 40 RT 2669, 2716-2718. In pre-trial depositions, a few RWGs hadtestified that they spent most of their work time outside the Bank. Attrial, all the RWGstestified they worked a majority of time inside. In explaining the change, some RWGsnoted that they now hadaccess to travel reimbursement records that provided clarity about their activities. 33 RT 2017-2020; 38 RT 2389- 2390, 2441-2442; 40 RT 2667-2669, 2714-2715, 42 RT 2841-2843. Other RWGstestified that after being deposed, they had thought about their work 12 Muchof the Defense Evidence FavoredPlaintiffs. The defense case consisted of testimony from 18 witnesses, almost all USB managers. Muchofit was favorableto plaintiffs. oe Ted Biggs, Western Regional Manager for Small Business, testified he was unaware of any mandatory policy that BBOs spend a majority of their time outside Bank property. 49 RT 4046-4047. Ross Carey, Division Manager for the Western States with responsibility for the Small Business Banking Organization, confirmed that USB does not track where BBOs spend their work time and that there is no compliance program to ensure they are outside most of the time. 43 RT 3022-3023, 3042. Linda Allen, Human Resources Manager, testified there was no ongoing audit program to ensure that BBOs are properly classified as exempt. 58 RT 4810. Patricia Ann Farley, District Manager for the East Bay Area (45 RT 3217), | stated that BBOsare evaluated and rewarded based on whether, not where, they meettheir sales goals. 45 RT 3239, 3286-3289. The Statement of Decision Found the Class Was Non-Exempt. The trial court’s Statement of Decision [“SOD”] found that the RWGs’ testimony was credible and persuasive and was not rebutted by defense evidence. 71 CT 20998. It concluded that every RWG worked overtime hours and spent more than half of his/ her work time inside Bank locations. 71 CT 21016. It also found that the RWGs were “typical and experiences more carefully. 29 RT 1612-1613, 31 RT 1710-1711, 1734. 13 representative of the entire class” and their testimony validated the trial managementplan. 71 CT 20998-20999. The SOD stated that defendant had failed to meet its burden of proving that the BBOs were within the outside sales exemption. 71 CT 21016-21017. The SOD further found that the employees’ practices did not diverge _ from USB’s reasonable expectations because “the only expectation U.S. Bank had for its BBOs was that they hit their production goals.” 71 CT 21008. “[A]s long [as] BBOssatisfy their sales production goals, they are meeting the Bank’s expectations even if they spendlittle or no time out of the branch,” the SOD declared. 71 CT 21009. “Defendant has never had a policy or requirement for BBOsto be outside of bank locations more than half of their work time.” 71 CT 21010. Significantly, the SOD foundthat it wasnotrealistic for BBOs to spend more than half their work time outside bank locations because many aspects of the job could only be performed inside bank facilities. 71 CT 21008-21016. The SOD concluded that the class was misclassified as exempt and was therefore owed overtime compensation in amounts to be determined in Phase I]. The court found that, on average, the RWGs worked 11.87 overtime hours per week. 71 CT 21018. 7 The SOD refused to admit Bank-drafted declarations and deposition excerpts from class members who were not RWGs. 71 CT 20991. The court concluded that “the weight to be given to these declarations must be | adjusted because of their actual authorship, the circumstances of 14 preparation and internal inconsistencies and ambiguities.” The evidence was not offered until after defendant had rested its case and the evidence would be inconsistent with the trial plan and rulings on motionsin limine. The Trial Court Denied Defendant’s Second Decertification Motion. After the Phase I trial, USB filed a second decertification motion, contending that the evidence at trial and the BBO declarations showed variations among the class members that required individual determinations. 62 CT 18394-18440. The court denied the motion as an “effort to modify the findings and conclusions reached in the SOD.” 78 CT 23227. It found it was appropriate to apply the Phase liability findings to the class as a whole and that doing so did not violate defendant’s due process rights. 78 CT 23227-23228. In PhaseII, the Court Determined the ‘Overtime Compensation Dueto the Class After USB Rejected Alternative Procedures to Reduce the Margin of Error. Phase II of the trial was to determine the overtime owed to absent class members. 83 CT 24623. Before the start of Phase II, USB complained that extrapolating the 11.87 average overtime figure from Phase I to absent class members would produce a 43 percent margin of error. The trial court immediately addressed this contention by holding a hearing to discuss alternative procedural methods that would avoid the large margin of error. The court proposed manyalternatives, including requiring all class members to prove their overtime claims in mini-trials or 15 a claims procedure; admitting survey evidence by the parties’ experts; and permitting the parties, with their experts, to design a joint protocol for gathering new data for overtime calculations. 83 CT 24630. USB rejected all the alternatives and proposed no other procedures, insisting — as always — that it was entitled to trials on both liability and damages for eachclass member. 69 RT 5489-5497. With this waiver by USB,Phase II proceeded as originally planned, with expert witnesses testifying about the data from PhaseI. Plaintiffs presented two expert witnesses, Dr. Drogin, and Paul Regan,a certified public accountant. Dr. Drogintestified in detail that both phases of the trial management plan were valid. He stated that the 20 class members who were randomly selected were representative of the class; including the twoplaintiffs did not prejudice USB because they reduced the aggregate overtime calculation; and USB’s other challenges to the randomness of the RWG group werestatistically invalid. He opined that the average weekly overtime finding from Phase I could reliably be extrapolated to the entire class despite the 43 % margin of error. This was so because the RWG group was randomly selected, there was a very high response rate among the RWGs (21 out of the 22 testified), there was no measurement error, the data was supported by auxiliary and anecdotal - evidence, the data was not highly skewed, the calculation was not an afterthought, and other procedures were considered. 70 RT 5549-5563, 71 RT 5613-5619, 72 RT 5633-5634. Paul Regantestified how he calculated 16 . . the overtime due to each class memberand to the class as a whole. 74 CT 5843-5848, 75 RT 5849-5874. Thetrial court found that plaintiffs’ experts were both “credible and persuasive,” and possessed “significant experience” in their respective . fields and as testifying experts on wage and hour matters. 83 CT 24624. By contrast, the court stated that defendant’s experts were “not persuasive,” they provided testimony that was “not credible,” they had “no relevant experience” as testifying expert witnesses, they were “unwilling and/or unable to offer any opinions on thecritical issues,” and their opinions were “irrelevant, based on faulty assumptions and misstatements of relevant fact and law, and consequently of no appreciable value.” Jbid. Accordingly, the Statement of Decision for Phase II largely utilized the evidence presented by plaintiffs’ experts. 83 CT 24621-24645. The.SOD found, with a 95% level of confidence, that the class worked 11.86 overtime hours per week, an adjustment of .01 hours from the earlier calculation. 83 CT 24626. Although that calculation had a relative margin of error of 43%, the court found it reliable based on the factors to which Dr. Drogin testified. 83 CT24626-24630. The SOD concluded that the trial methodology was “the best procedure available under the facts of this case taking into consideration manageability issues and the parties’ due processrights.” 83 CT 24631. Judgment was entered for $8,953,832 in unpaid overtime compensationfor plaintiffs and the class, plus an additional $5,966,097 in 17 prejudgment interest. Plaintiffs Duran and Fitzsimmons were awarded additional compensation forfailure to receive meal and rest breaks. 83 CT 24650-24652. The Court of Appeal Reversed the Judgment and Decertified the Class, Finding USB Had a DueProcess Right to Present Its Defense Separately as to Each Class Member. The court of appeal ruled that the trial management plan wasfatally flawed. The court held that the trial court did not follow established statistical procedures in adopting the plan and, more fundamentally, deprived USBofits due process right to present evidenceofits affirmative defense with regard to each of the 260 class members. The court also held that statistical sampling and other representative evidence cannot be used to proveliability on a classwide basis. The court reversed the judgment and ordered the case decertified as a class action on the ground that, by the time USB filed its second decertification motion, the RWG procedures employed bythe trial court had already severely impinged on USB’s right to prove its exemption defense as to the 239 absent class members. It remanded the matterto the trial court to reconsider the two plaintiffs’ meal and rest break claims. Plaintiffs petitioned for rehearing. They argued that the case should be remanded for a new trial and a new hearing on class certification; the court of appeal had improperly reweighed the evidence in violation of the 18 substantial evidence rule; and the appellate court had failed to make any ruling regarding the overtime judgments of the two plaintiffs and the other RWGs. The court modified its opinion to direct the trial court to rule on the overtime judgments of the plaintiffs and RWGs but otherwise denied rehéaring. ARGUMENT I. REVIEW SHOULD BE GRANTED TO ADDRESS THE COURT OF APPEAL’S UNPRECEDENTED RULING THAT A CLASS ACTION DEFENDANT HAS A DUE PROCESS RIGHT TO DEMAND AN INDIVIDUALIZED DETERMINATION OF ITS EXEMPTION DEFENSE FOR EVERY CLASS MEMBER, A RULING THAT WOULD EVISCERATE MANYCLASS ACTIONS. This case warrants review to address the unprecedented rule announced by the court of appeal — that a defendant in a class action has a due processright to assert its affirmative defense as to every potential class member. Slip op. 48-49. Although the court purported to restrict that right to circumstancesin whichliability for unpaid overtime depends on an employee’s “individual circumstances” (id.), every defendant in a class actionclaims thatliability depends on the “individual circumstances”of the class members. See, e.g., Sav-On Drug Stores, Inc., supra, 34 Cal.4th at 331 [employer asserted that “actual tasks performed by class members and the amountof time spent on those tasks vary significantly from manager to manager and cannot be adjudicated on a class-wide basis.”]. Thus, the 19 purported limitation on the court’s far-reaching ruling is no limitation atall. No California:case has ever before held that such a due process right exists, and the court of appeal cited no persuasive authority for its constitutional holding. Instead, the court purported to base its due process rule on California and federal cases involving the denial of class certification or the decertification of a class under an abuse of discretion standard. E.g., Jimenez v. Domino’s Pizza, Inc. (C.D. Cal. 2006) 238 F.R.D. 241; Walsh v. Ikon Office Solutions, Inc. (2007) 148 Cal.App.4th 1440; Dunbar v. Albertson’s, Inc. (2006) 141 Cal.App.4th 1422; In re Wells Fargo Home Mortg. Overtime Pay Lit. (9" Cir. 2009) 571 F.3d 953; In re Wells Fargo Home Mortg. Overtime Pay Lit. (N.D. Cal. 2010) 268 F.R.D. ~ 604. None of the cited cases held there was a due process right to _. individualized determination of the defendant’s affirmative defense. Rather they — and particularly the California decisions, Walsh and Dunbar — were anchored in the broad discretion afforded a trial court in deciding whether to certify or decertify a class. The other authority cited by the court of appeal for a due process right to litigate against each class member was Wal-Mart Stores, Inc. v. Dukes (2011) 564 U.S. __ [180 L.Ed.2d 374, 131 S.Ct. 2541], which involved a challenge to the certification of a multi-million-member nationwide class in a Title VII discrimination case. The U.S. Supreme 20 Court reversed the class certification in part because the employer would be entitled to litigate its statutory defenses to individual claims. The Supreme Court’s condemnation of a “Trial by Formula” approachto litigating Title VII discrimination cases was based ona specific provision ofthe Title VII ‘statute, not On a constitutional mandate, although Wal-Mart had advanced a broad due process argument. Thus, Wal-Mart also fails to support the existence of a due process right to litigate the employer’s affirmative defense against each class member. The court of appeal opinion paid no attention to the well-established principle, recognized in its own decision in Bell vy. Farmers Ins. Exchange (2004) 115 Cal.App.4th 715, that an employer’s interest in a misclassification case is only in “its total or aggregate liability to the plaintiff class for unpaidovertime compensation” (id. at 752), not in which individuals are exempt or non-exempt. This means, contrary to the assumption underlying the court’s due process analysis, that a trial court does not have to determine whether each class member was properly classified in order to calculate the employer’s classwide liability. Rather, using representative testimony, the court can calculate. the employer’s aggregate liability to the class based on a determination of the percentage of the class that is non-exempt and the overtime compensation owedto the non-exempt class members. See Section II, infra. 2] The court of appeal’s newly-created due process right would spell doom for most class actions, particularly in overtime cases, where, as this Court has emphasized, class actions are crucial to ensure effective enforcement of state labor laws. Gentry v. Superior Court (2007) 42 ‘Cal.4th 443, 459-462 [class actions “needed to assure the effective enforcement of statutory polices’]; Sav-On, supra, 34 Cal.4th at 340 {California public policy encourages use of class action device in overtime cases]; see Bell, supra, 115 Cal.App.4th at 745 [class actions justified if alternatives offer only “random and fragmentary enforcement” of wage laws]. If a defendant has a constitutional right to litigate liability for each individual class member, this would greatly reduce the value and efficacy of class actions, which are predicated on theassumption that not every class member will testify and that common issues can be decided based on representative evidence. A plaintiff would be hard-pressed to establish that common questions of law or fact predominate and that a class action is superior to alternative means of adjudication when the employercaninsist, on the basis of class member declarations drafted by its own attorneys, that some class members may be exempt and therefore liability for each class member must be separately determined. The required “flexibility” and “discretion” accorded to trial courts (Sav-On, supra, at 339) would be 22 destroyed by the rigid due process rationale. Requiring individualized determinations for every class member would also threaten the validity of = a class litigation in many otherfields, including consumer, product liability and construction defect cases Even in cases where, somehow,the trial court did certify a class, under the due-process analysis of the court of appeal, the proceedings would bog down into hundreds or thousands of mini-trials in which the employer sought to disproveliability for each of the class members. This case demonstrates the practical consequences of the due process holding. Even after class certification, defendant USB steadfastly maintained that it wasentitled to litigate liability and damages separately for each of the 260 class members. Plaintiffs pointed out that, at the rate it took to try the cases of the 21. RWGs.—two. days per RWG — it would take 520 days (roughly two years) to determineliability and damages for each of the 260 class members. The court of appeal blithely responded, “[W]e have never advocated that the expediency afforded by class action litigation should take precedence over a defendant’s right to substantive and procedural due process.” Slip op., p. 59° ° To illustrate the potential consequences of the Duran decision, in Puchalski v. Taco Bell, supra, the class action currently under way, the defendant is contending that Duran allowsit to call all 375 absent class members to testify by means of a notice to appear served on plaintiffs’ 23 The court of appeal’s apparent rule that there cannot be acertified -class where someclass membersmay be unable to establish liability is flatly inconsistent with California authority. In Sav-On, this Court specifically rejected the defendant’s argumentthatclass certification should be denied unless ‘the plaintiff could prove that the entire class was non- exempt. Noting that the employer bears the burden of proving its affirmative defense that an employeeis exempt, the Court stated: “Were we to require as a prerequisite to certification that plaintiffs demonstrate defendant’s classification policy was, as the Court of Appeal put it, either ‘right as to all members of the class or wrong as to all members of the class,’ we effectively would reverse that burden.” _ 34 Cal.4th at 338. Likewise in Richmond v. Dart Industries (1981) 29 Cal.3d 462, the Court held that class treatment was appropriate despite opposition to the case by about 10 percent of the putative class. And in "Bell, supra,\115 Cal.App.4th 715, the fact that 9 percent ofthe class had no claim for overtime did not preclude the court of appeal from affirming the validityof class certification. The appellate court’s decision in this case creates a dangerous precedent that threatens to undercut California’s well-developed class action principles and the wage and hour protections which depend on those counsel, with the penalty of dismissal for any whofail to appear. 24 principles. Review should be granted to address this new precedent. Il. REVIEW SHOULD. BE GRANTED TO DECIDE IF CLASS LIABILITY MAY BE BASED ON STATISTICAL SAMPLING AND OTHER REPRESENTATIVE FORMSOF EVIDENCE. The court of appeal strongly suggestedthatstatistical sampling and other forms of representative evidence could not be used to determine classwide liability and that such evidence was permissible,if at all, only at the damages stage. The court stated: “As we have shown above,courts are generally skeptical of the use of representative sampling to determine liability, even in cases in which plaintiffs have proposed using expert testimony and statistical calculations as the foundations for setting the sample size.” Slip op., p. 52. See also id., p. 62 [“use of thissampling procedure to determine both liability and monetaryrecovery appears to be entirely unprecedented”]; id., p. 61 fn. 72 [quoting law reviewarticle: “[U]nder current law samplingis a practical option only at the damagesstage.” This view is contrary to Sav-On, which approved the use of expert statistical and other representative evidence as a method of classwide proof: “California courts and others have in a wide variety of contexts considered pattern and practice evidence, statistical evidence, sampling evidence, expert testimony, and other indicators of a defendant’s centralized practices in order to evaluate whether common behavior towards similarly situated plaintiffs makes class 25 “certification appropriate.” 34 Cal.4th at 333. Sav-On cited numerous other state and federal cases in which representative evidence was usedto satisfy the commonality element in class certification or to establish classwide liability and damages. Jd. at 333 and fn. 6. The cited cases, which covered many different topics, included International Brotherhood of Teamsters v. United States (1977) 431 U.S. 324, 337-340 [statistics bolstered by specific incidents are “competent in proving employment discrimination”]; Reyes v. Board of Supervisors (1987) 196 Cal.App.3d 1263, 1279 [class certification was erroneously denied in welfare benefits case where county’s illegal procedure could be proven by, inter alia, “a sampling of representative cases’’]; Stephens v. Montgomery Ward (1987) 193 Cal.App.3d 411, 421 [class certification was supported by statistical data in employment case];. In re Simon II Litig. (E.D. N.Y. 2002) 211 F.R.D. 86, 146-151 [tobacco case held that aggregate proof is “consistent with the defendants’ Constitutional rights and legally available to support plaintiffs’ state law claims”’]. In the eight years since Sav-On, many other courts have held that statistical methods can be used to prove classwide liability. In Capitol People First v. Department of Developmental Services (2007) 155 Cal.App.4th 676, the court of appeal reversed the trial court’s denial of 26 _, certification and ruled that the “use of sampling or statistical proof’ had been improperly “restricted.” Jd. at 313. By “discarding out of hand appellants’ pattern and practice evidence, the trial court’turned its back on methods of proof commonly allowedin the class action context,” the court stated. “Over the years, numerous courts have approved the use of statistics, sampling, policies, administrative practices, anecdotal evidence, deposition testimony andthelike to prove classwide behavior on the part of defendants.” /d. at 316. Likewise, in Dilts v. Penske Logistics LLC (S.D. CA 2010 ) 267 F.R.D. 625, a California federal court granted class certification in a California wage and hour case, reasoning that statistical sampling and representative testimony were acceptable methods to prove liability and damages in a class action. “[I]t is. quite plain to the Court that statistical sampling is appropriate in cases like this one” and is an “acceptable method” to prove liability in a class action, the Dilts court stated, citing Sav-On andBell. Id. at 638.° Two recent legal articles by management lawyers strongly support > The court of appeal criticized plaintiffs’ reliance on Dilts, noting that Dilts stated that the use ofstatistical sampling was an acceptable method of proof “at least when paired with persuasive direct evidence.” Slip op., p. 638, ital. in slip op. Contrary to the court’s implication, there was a substantial amount of “persuasive direct evidence” presented in this case and discussed in the Statement of Decision I. See 71 CT 21008-21017. 27 the use of representative testimony to make classwide liability determinations in misclassification cases without individualized liability determinations for each class member. The articles were filed with the Court of Appeal but are not mentionedin its opinion. In Classwide Determinations of Overtime Exemptions: The False | Dichotomy Posed by Sav-On and a Suggested Solution (2006) 21 The Labor Lawyer 257, two attorneys from the management firm Littler Mendelson proposed a modelforlitigating cases in which,as here, the class members’ exempt or non-exemptstatus turned on how they performed their job. The modelis very similar to the trial plan in this case. The authors suggested that the court hold mini-trials involving a randomly-selected sample of class members, determine the properclassification status for each sampled class: member and determine the amount of overtime regularly worked for each sampled employee found to be non-exempt. Jd. at 269- 270. The sampled class members would be awarded overtime based on the results of their individual mini-trials. Compensation for the absent class members would be determined by extrapolating the average overtime worked by the randomly selected class members who are found to be non- exempt. See also How to Conduct a Wage and Hour Auditfor Exemptions to Overtime Laws, published in West HR Advisor (March/April 2005, Vol. 11, No. 2.) [employers can conduct classification audits by taking a 28 “random sample ofthe job incumbent population” and then generalizing the results to the rest of the employees]. 4 The court of appeal’s decision thus is a sharp retrenchmentfrom the general use and acceptance ofstatistical sampling and other forms of ' representative evidence to prove classwide liability. Review should be granted to addressthis split in authority. lll. REVIEW SHOULD BE GRANTED BECAUSE THE COURT OF APPEAL’S OPINION REVEALS A NEED FOR MORE GUIDANCEAS TO THE STANDARDS OF APPELLATE REVIEW. The court of appeal’s opinion contravenes this Court’s precedents concerning appellate review in two important ways. First, the opinion, after reversing the judgment and decertifying the class, appears to preclude a new trial and a new hearing on class certification in this case. The disposition section of the opinionis silent on this point, specifying a limited remand to deal with a few individualissues. The court refused to clarify this ambiguity when it was presented in plaintiffs’ petition for rehearing. Refusal to permit a newtrial, with a new certification decision, would beerror. Under Washington Mutual Bank, FA v. Superior Court (2001) 24 Cal.4th 906, when an appellate court reverses a class certification order based on erroneous legal assumptions, it must remandto the trial court to 29 “consider afresh” whether class certification should be granted under the correct legal assumptions. 24 Cal.4th at 928. “These are all determinations that the trial court should makein the first instance.” bid. Remandis required becauseit is the trial court that retains broad discretion to wéigh the class certification factors and to make factual findings and draw inferences on which the certification decision depends. Sav-On, supra, at 326-332. Moreover, as a general rule, an unqualified reversal of a judgment vacates the appealed judgment, places the case in the same procedural posture as if the judgment had never been entered, and leavesall issues to be readjudicated anew. Weisenburg v. Cragholm (1971) 5 Cal.3d 892, 896. “Retrial [is] ordinarily required” unless the appellate opinion establishes a contrary intention. Eisenberg et al., Cal. Prac. Guide: Civil Appeals & Writs (The Rutter Gp. 2011) 4 11:65. Retrial is the default outcome even if the appellate court does not expressly state that the matter is remanded for retrial. [bid. | Nothing in the opinion’s legal analysis should logically preclude a new trial or a new class certification determination.. The court of appeal reversed the judgment because the trial court allegedly “resort{ed] to an unproven statistical sampling methodology that denied USB the right to properly defend the claims against it.” Slip op., p. 73. The court did not 30 state that such an error would recur in the event of a new trial. Indeed, it refused to speculate “as to whether a workable trial plan could have been devised ....” Ibid. Consequently, plaintiffs should be given the chance to retry the case, with a new classcertification decision, under whateverlegal standards apply on remand. The secondissue relates to the standard of review which the court of appeal utilized as it described the facts. The court largely reweighed the evidence, in violation of the substantial evidence rule, without any acknowledgment that it was doing so. This was most evident in its discussion of the expert statistical testimony. The trial court had found that plaintiffs’ experts, Drogin and Regan, were “credible and persuasive” and “possessed significant experience” in their respective fields and as experts in wage and hour cases while USB’s experts, Hildreth and Anastasi, were “not persuasive” and “not credible” and provided opinions based on “faulty assumptions and misstatements of relevant fact and law, and consequently of no appreciable value.” 83 CT 24624. Nevertheless, the court of appeal credited the opinions of the defense experts over those of the plaintiffs’ “experts on important issues, such as whether the RWGs were randomly selected. It described Hildreth as ‘‘an expert in the area of inferential 31 statistics.” Slip op., p. 11.7 -Moreover,the trial: court found that its trial methodology was “the best procedure available under the facts of this case taking into consideration manageability issues and the parties’ due process rights” (83 CT 24631), noting that USB failed to proposea trial plan for Phase I or II other than mini-hearings for every class member. Thetrial court modeled its trial plan on plaintiffs’ proposal, which was supported by Dr. Drogin’s declaration, but omitted a survey because USB “strenuously and vigorously” opposed it. 10 RT 222, 225. This type of weighing is appropriately reserved to the trial court. Sav-On, supra, 34 Cal.4th at 339- 340. The court of appeal, however, excused — indeed, lauded — USB’s uncooperative litigation tactics and thus improperly overrode the trial court’s findings anddiscretionary decisions. Slip op., pp. 45-47,° Review should be granted to provide guidance to ensure that * For example, the opinion concludedthat the statistical sampling was not random because “a comparatively high number of RWG members opted out before trial.” Slip op., p. 46. That was Hildreth’s opinion, whereas Drogintestified that the randomness of a sample is not affected by opt-outs. 73 RT5751-5754. The opinion found there was measurementerror because several RWG witnesses testified to a range of hours. Slip op., p. 66. Drogin and Regan testified that it was statistically proper to use the midpoint of the range. 71 RT 5579, 5683-5684; 75 RT 5883-5884. > “!We do not agree USB waivedits objection to specific aspects of the plan byits ‘total opposition to statistical methodology. Nor doesit follow, even if USB did resist efforts to cooperate, that the trial court was compelled to use the methodology it ultimately selected.” Slip Op., p. 47. 32 appellate courts comply with Washington Mutual regarding disposition after reversal and with Sav-On regarding the deference due to the trial court under the substantial evidence and abuse ofdiscretion standards. CONCLUSION For the reasons discussed herein, plaintiffs respectfully request the Court to grant review in this case to promote the strong state public policies which favorthe right to receive overtime pay andthe use ofclass actions to enforce that right. Gentry, supra, 42 Cal.4th at 456, 462; Sav-On, supra, 34 Cal.4th at 340. Both public policies are seriously undermined by the court of appeal’s opinion. Dated: March 19, 2012 Respectfully submitted, -LAW OFFICES OF ELLEN LAKE WYNNE LAW FIRM By: CL, 4A4t~ Ellen Lake, Counsél for- Plaintiffs/Respondents Sam Duran, Matt Fitzsimmons 33 CERTIFICATE OF WORD COUNT I certify that this petition for review contains 7,516 words, as counted by Microsoft Word, the word-processing program used to prepare it. jf 4 'Sf ff) Gf Lh ,{ i California employees are generally entitled to overtime pay for work of more than eight hours a day and 40 hours per week. (See, e.g., Lab. Code, § 510; Cal. Code Regs., tit. 8, § 11040 et seq.) There are, however, several classes of employees who are exempt from overtime laws, such as outside salespersons. * Labor Codesection 1194, subdivision (a), authorizes an employee whoreceived less than the applicable legal minimum wageor overtime compensation to seek recovery from his or her employer. services or use of facilities.”° (Cal. Code Regs.,tit. 8, § 11040, subd. 2(M),italics added.) . The BBOclassification was created after USB merged with another bank in 2001, whenan existing small business banker (SBB)position was redesignated with the BBO title. A May 1997 job description states that SBB’s were responsible for “developing and managing small business banking customerrelationships by advising on andselling a wide range offinancial services to include: credit, deposit, cash management and other applicable bank products and services.” Personsin this classification were also responsible for “growing the business through prospecting, networking, cross-selling and relationship managementin order to develop and expandthe relations with [USB].” SBB’s were encouragedto “build strong customerrelationships and analyze data to determine the customer’s business needsand financial condition.” This job description wasessentially retained when the BBOposition wascreated in 2001. However, a 2002 job description specifies that more than 80 percent of a BBO’s time should be spent on 997“Outside Sales Activity.” Of the five functionslisted in the job description underthis heading, several are required to take place outside branch offices.® PROCEDURAL HISTORY I. The Complaint On December26, 2001, Amina Rafiqzada, acting on behalf of herself and other similarly situated current and former USB employees, filed a class action complaint * While Labor Code section 1171 uses the term “outside salesman,” the regulation that is the primary focusofthis opinion uses the term “outside salesperson.” For the sake of consistency, we will use the term “outside salesperson.” ® For convenience,this opinion will use the BBO abbreviation to refer to both SBB’s and BBO’s, with exceptions madein reference to individual plaintiffs. 7 USBdoes not maintain any documents showing the daily or weekly hours worked by BBO’s. 8 For example, BBO’s are expected to consult with customers and prospects at their place of business “in order to understand their current business practices and identify their financial goals and needs.” BBO’sare also expected to represent the bank at various civic and community functions, and to conductjoint outside sales calls with other branch employeesat potential customers’ places of business. against USB. The complaint alleges Rafiqzada had been employed as an SBB,andthat USB improperly classified her and other SBB’s as “exempt” thereby denying them compensation for overtime hours in violation of Labor Code section 1194. The complaint contains three causesofaction: (1) violation of the Labor Codefor misclassification and failure to pay overtime, (2) violation of Businessand Professions Code section 17200, and (3) conversion. On February 26, 2003, a first amended complaint (FAC) wasfiled, removing Rafiqzada as the namedplaintiff, and substituting Vanessa Haven, Abby Karavani, and Parham Shekarlab as the namedplaintiffs. The amended complaint alleges the same causes of action as the prior complaint. On March 28, 2003, USBfiled its answer to the FAC. USB generally denied the allegations of the complaint and asserted 31 affirmative defenses. As its seventh affirmative defense, USB claimed the proposed class members were, at all relevant times, properly classified as exempt employees for overtime purposes under California law. IT. Contested Class Certification | On January 6, 2005, plaintiffs filed a motiontocertify the case as a class action.”® - The motion was supported by declarations from 34 current and former BBO’s who indicated they regularly worked overtime hours and spentless than half their work time engagedin sales-related activities outside of branch offices. That same day, USB filed a motion seeking to deny class certification. As part of its motion, USB claimedclass certification should be denied becauseplaintiffs could not establish that common issues predominate. USB also contended the namedplaintiffs were nottypical of the class becauseall four of the current and former namedplaintiffs ” While USB claimed BBO’s wereproperly classified underthree different exemptions, the primary issue at trial was the application of the outside salesperson exemption from overtime wages. 1° Code of Civil Procedure section 382 authorizes class action lawsuits “when the question is one of a commonorgeneralinterest, of many persons, or when the parties are numerous, andit is impracticable to bring them all before the court... .” had admitted, at depositionsor in interviews, facts establishing they were properly classified as exempt employees under the outside salesperson exemption. In its motion, USBincluded declarations signed by 83 putative class members who described their job duties. Ofthese declarants, 75 stated they regularly spent more than half their time engagedin salesactivities outside USB branchoffices. On March 14, 2005, plaintiffs’ counsel filed a second amended complaint (SAC), substituting two newclass representatives, Sam Duran and Matt Fitzsimmons, in place of the previously namedplaintiffs. The SAC contains the same causesofaction as the prior complaints, and adds new allegations asserting Labor Code violations for failure to provide mealand rest break periods. (See Lab. Code, § 226.7.) On March 16, 2005,thetrial court granted plaintiffs’ motion for class certification and denied USB’s motion to denyclass certification.” On April 29, 2005, thetrial court filed an amended and corrected orderafter coehearing regardingits certification rulings. The order defines the class as ‘all current and former California-based salaried employees with thetitle “small-business banker” (SBB’s) and/or “business banking officers” (BBO’s) employed by defendant any time between December 26, 1997 and April 28, 2005.’ »12 The order states the court found the proposedclass to be both ascertainable and numerous, and that common questions of law and fact predominated over individual legal or factual disputes.° "! Whenthe case wascertified, the class contained 282 class members. Bythe time ofjudgment, the class consisted of 260 members. ? Subsequently, the latter date was extended to September 26, 2005. 5 On June 22, 2005, this court denied USB’spetition for writ of mandate challengingthetrial court’s decision to certify the class action. (A1 10059) TI, Summary Adjudication ofTwo Exemption Affirmative Defenses On September 30, 2005,plaintiffs filed a motion for summary adjudication on USB’saffirmative defenses that the BBO’s were exempt from overtime laws underthe administrative and the commissioned salesperson exemptions." On February 17, 2006, thetrial court filed its order granting plaintiffs’ motion for summary adjudication as to the commissioned salesperson exemption. The court deferred ruling on the administrative exemption to allow USB an opportunity to conduct a limited amount of discovery relevant to its opposition. On May23, 2006,thetrial court granted plaintiffs’ motion for summary adjudication as to the administrative exemption, finding the evidence showed the performance of administratively exempt duties was atypical for BBO’s. IV. Pretrial Proceedings A. The Trial Management Plan Is Selected ‘On June 22, 2006,plaintiffs submitted trial setting conference brief. In response to USB’spretrial proposal to assign all class membersto groupsof20 to 30 in order to conduct individualized evidentiary hearings before special masters, plaintiffs, citing to Sav-On Drug Stores, Inc. v. Superior Court (2004) 34 Cal.4th 319, 337 [17 Cal.Rptr.3d 906, 96 P.3d 194] (Sav-On), asserted that USB “has no due process right to assert its affirmative defense against every class memberin a class action.”!> Instead, plaintiffs proposed a “phasedtrial plan using surveys and random sampling.” i Employees are administratively exemptif they “(1) perform ‘office or non-manual work directly related to managementpolicies or general business operations’ of the employerorits customers, (2) ‘customarily and regularly exercise[] discretion and independent judgment,’ (3) ‘perform[] under only general supervision work along specialized or technicallines requiring special training’ or ‘execute[] under only general supervision special assignments andtasks,’ (4) [are] engagedin the activities meeting the test for the exemptionat least 50 percent of the time, and (5) earn twice the state’s minimum wage.” (Eicher v. Advanced Business Integrators, Inc. (2007) 151 Cal.App.4th 1363, 1371 [61 Cal.Rptr.3d 114], quoting Cal. Code Regs., tit. 8, § 11040, subd. 1(A)(2).) California’s overtime pay requirements also do not apply to employees whose earnings exceed one and one-half times the minimum wageif more than one-half of their compensation consists of commissions. (Cal. Code Regs., tit. 8, § 11040, subd. 3(D).) 'S It appears plaintiffs were referring to the following passage in Sav-On: “Contrary to defendant’s implication, our observation in [Ramirez v. Yosemite Water Co. (1999) 20 Cal.4th Underplaintiffs’ plan, the trial would have proceededin three phases: (1) Task identification and classification, (2) use of a class-wide survey followed by the selection of a random sampleofplaintiffs who would be made the subjects ofthe trial, and (3) damages. The survey instrument would “question the class members about the amount of time class members spentout ofthe branch and the amountoftime spent on sales or sales related activities out of the branch.” Plaintiffs included a declaration from their expert statistician Richard Drogin,in which he proposeda statistical methodology for assessing both liability and damages. | On September7, 2006, the parties filed a joint case managementandtrial managementstatement in which USBnotedits objectionsto plaintiffs’ proposed use of a survey to gather data from whicha representative sample of class members would then be selected to determineliability and potential damagesfor the entire class. USB claimed plaintiffs’ proposed methodology wasstatistically unreliable, and wasinfeasible given the amountoftime remaining before trial. USB also argued the proposed procedure would violate its due processright to assert its affirmative defense against each individual class member who sought to recover damages.”° On September13, 2006, a case management conference was held in which the trial court, on its owninitiative, proposed the idea of taking a sample of20 plaintiffs selected on a random basisto testify at trial. The court suggested this method would be 785 [85 Cal.Rptr.2d 844, 978 P.2d 2]] that whether the employeeis an outside salesperson depends‘first and foremost, [on] how the employeeactually spendshis or her time’ [citation] 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.” (Sav-On, supra, 34 Cal.4th 319, 337, italics added.) We do not read this passage as applyingto the trial phase of _ a class action lawsuit. '© USBalsofiled a supplemental brief detailing its due process objectionsto plaintiffs’ proposed methodology. In large part,USB relied on our then-recent opinion in Dunbar vy. Albertson’s, Inc. (2006) 141 Cal.App.4th 1422 [47 Cal.Rptr.3d 83] for the proposition that surveys, sampling, and otherstatistical data could not be usedto infer that all class members were improperly classified becausethecritical inquiry in exemption cases turns on how each individual employee actually spenthis or her work time. preferable to conducting a survey, due to the possibility that bias might infuse the survey process. On October 6, 2006, USB submitted a brief in which it again arguedthat representative testimony could not befairly utilized in this case because it would violate USB’s dueprocessrights. USB further noted that the only California case relied on by plaintiffs in support ofthe use ofrepresentative testimony in an overtime case (our opinion in Bell v. Farmers Ins. Exchange (2004) 115 Cal.App.4th 715 [9 Cal.Rptr.3d 544] (Bell II1)), involvedthe issue of class action damagesonly, and not liability. USB stated that if a representative sample were to be used, USB must be permittedto call witnesses of its own choosing in order to meet its burden of proof. USB submitted another declaration from Gorman, whopointed outthe possibility of “sampling error” ifa small number of randomly selected class members were to be used to determine whether the entire class had been misclassified as exempt. Gorman further noted that even after the liability phase it wouldstill not be possible to determine which nonsampled class members would be entitled to compensation. At a hearing held on October 11, 2006, the trial court confirmed its intent to use a random sample of 20 class membersto testify as representatives for the class. To choose the representatives, the court proposed putting the namesofall the potentialclass members into a “hat” and drawing 20 names, along with 5 additional namesto serve as alternates in case any ofthe initially selected plaintiffs were unavailable. Plaintiffs’ counsel then informed the court that he intended to dismiss the SAC’s legal claims and proceed to benchtrial under section 17200 only. B, Second Opt-out Notice After a hearing in whichthe trial court granted plaintiffs leave to dismiss the legal claims,the court required a second opt-out notice be sent to the class notifying it of the dismissal.’’ The court clerk then drew from a batch ofindex cards containing the names of each class member and compiled list of 20 class representatives and 5 alternates. On November9, 2006, plaintiffs filed a motion to amend the SAC to include allegations that USB failed to provide meal and rest break periods to class members, and to conform the complaintin light of the dismissalofits legal claims. On November 28, 2006, the parties submitted a joint case managementandtrial management statement.’® USB asked that the secondopt-out notice be sent without additionalopt-out rights, noting that giving class members another opportunity to opt out “would [give] incentive [to] those who have been randomly selected to opt out based on their unwillingness to participate in the legal proceedings.” On November29, 2006,the trial court granted the motion to amend the SAC. On November30, 2006, plaintiffs filed their third amended complaint (TAC). The TACasserts a single causeofaction for violations under Business and Professions Code section 17200.’ Thebases for the Business and Professions Code section 17200 claim are alleged violations of Labor Code sections 204 (payment ofwages), 216 (refusal to pay wages due), 226.7 (meal andrest periods), 1194 (overtime), 1198 (maximum hours), and 1199 (failure to comply with labor laws). . ” During the hearing, USB’s counsel acknowledgedthere is no right to a jury ina trial of section 17200 claims. 18 Tn the statement, USB reminded thetrial court that it had “repeatedly objected to the use of ‘representative’ testimony and extrapolationin the trial of this matter becauseit is unconstitutional and violates due process.” ? Section 17200 prohibits three types of wrongful business practices: any (1) unlawful, (2) unfair, or (3) fraudulent business practice or act. (People ex rel. Bill Lockyer y. Fremont Life Ins: Co. (2002) 104 Cal.App.4th 508, 515 [128 Cal.Rptr.2d 463].) “With respect to the unlawful prong,‘[v]irtually any state, federal or local law can serve as the predicate for an action’ under section 17200. [Citations.] ‘ “[I]n essence, an action based 6n [section 17200] to redress an unlawful business practice ‘borrows’violations of other laws and treats these violations, when committed pursuantto [a] businessactivity, as unlawful practices independently actionable under section 17200 et seq. and subject to the distinct remedies provided thereunder.” ’ [Citations.]” (Ubid.) C. Results ofSecond Round ofOpt-outs On January 9, 2007, USBfiled a trial management conference statement. USB reported that Steven Dias, one of the 20 randomly selected class members, had since opted out of the lawsuit. USB asserted that any memberofthe 20-person group who choseto opt out after receiving the second opt-out notice should be required to provide deposition andtrial testimony in order to preserve the representative nature of his or her testimony andto ensurestatistical reliability of the extrapolation process. On January 29, 2007, USB filed its answer to the TAC. On February 6, 2007, USB filed a motion regarding the status of the 20-person random witness group (RWG) members. USBaskedthetrial court to allow four RWG members, who had by now opted out of the action, the opportunity to opt back in. USB claimed the witnesses had decided to opt out because they felt they were properly classified as exempt employees, and becauseplaintiffs’ counsel allegedly encouraged them to avoid involvementin the lawsuit.2” USB argued the representative nature ofthe RWGwas compromised because witnesses whose testimony would have supportedits affirmative defense were now omitted from the representative group. A declaration provided by USB’s statistical expert Phillip Gorman noted that while 4 of the 20 RWG members had elected to opt out, only 5 of the remaining 250 absent class members had done so. Thus, a much smaller percentage of non-RWGplaintiffs had opted out (2 percent), relative to the RWG, which saw a 20 percentopt-out rate. Gormanstated that removing these 4 witnesses would undermine the accuracy of any extrapolation process. In opposition to USB’s motion,plaintiffs submitted a declaration from Drogin, whoopined that substituting the alternate RWG members for the four opt-out plaintiffs would be statistically acceptable as there was “no reason to infer that the sampleis not ?° Tn their declarations, two of these formerplaintiffs, Sean MacClelland and Michael Lewis, claimed they were unaware they had been selected for the RWG whenthey opted out. Lewis stated plaintiffs’ counsel called him several times to encourage him to opt outof the case. MacClelland reported plaintiffs’ counselleft intimidating messages on his answering machine. In opposition, plaintiffs submitted a letter dated November2, 2006, in which both witnesses were informed they had been randomly selected to “have yourcase tried in this case.” 10 representative, or that there is any bias in the sample.” He remarkably concluded that “as long as the set ofpersons selectedto testify at trial includes those in the original random selection made by the court, andis restricted to those in the class, the testifying group will be a random sample ofthe class. Under these conditions, the results determined by the court for those testifying can be reliably projected to the class as a whole.” He deemed Gorman’s statements to the contrary to be both incorrect and irrelevant. On February 16, 2007,the trial court denied, without prejudice, USB’s motion to allow Michael Lewis and Sean MacClelland to opt back into the lawsuit, noting that the issue ofwhether these witnesses would be allowedto testify should be addressedattrial. On March 1, 2007, plaintiffs filed a motion for class certification of the meal and rest break claims. Theyalso filed a motion to compel further responsesto special interrogatories, requests for production of documents, and requests for admissions. D. First Motion to Decertify the Class On March 22, 2007, USBfiled its opposition to plaintiffs’ motion for class certification of the meal/rest break claims. USBalsofiled a motion to decertify the class action. In its motion to decertify, USB contended Proposition 64 requires each class memberto prove “injury in fact.”*_ USBalso arguedthat then-recent case law affirmed the need for individualized inquiry in exemption cases. In connection with this argument, USBrelied heavily on Walsh v. IKON Office Solutions, Inc. (2007) 148 Cal.App.4th 1440, 1456 [56 Cal.Rptr.3d 534] (Walsh), in which the Court of Appeal upheld an order decertifying a subclass of account managers in a wage and hourdispute. USB also included a declaration of Andrew Hildreth, an expert in the area ofinferentialstatistics, whoopinedthat “proceeding with the sample of 20 class members randomly selected by 7! USB arguedthat Proposition 64 (adding Bus. & Prof. Code, § 17203), which passed in November 2005, should be interpreted to mean that in order to have standing all class members must be shown to have lost money or property as a result of a defendant’s alleged unlawful activity, not just the namedplaintiffs. The trial court noted that this issue was then under review by our Supreme Court, and concluded USB hadnot presented any binding authority in support of its argument. The Supreme Court subsequently held the new standing requirement appliesto the class representatives only, and not to absent class members. (/n re Tobacco II Cases (2009) 46 Cal.4th 298, 306 [93 Cal.Rptr.3d 559, 207 P.3d 20].) 1] the court to determinethe results for the entire population (class) would, from statistical perspective, be highly inaccurate and unrepresentative.” On May16, 2007,the trial court filed its order denying USB’s motion for decertification and denying plaintiffs’ motion to certify the meal/rest break claim. The order does not discuss either Walsh or Dunbar, and doesnot assess the issues raised by Hildreth’s declaration.Instead, the court indicated it was unpersuaded by USB’sclaim that individualized inquiries predominated over common questions with respect to liability. V. Motions in Limine On May 18, 2007, the parties filed their motions in limine. In their motion in limine No. 11, plaintiffs sought to exclude the introduction of testimony or declarations from, or evidence or argumentrelated to, any non-RWG BBO. Plaintiffs claimed the introduction of such evidence “would debase the trial and destroy the court’s representative witness trial plan.” Motion No. 11 was granted over USB’s objections. In granting the motion,thetrial court indicated it would allow USBtocall any percipient witnesses for impeachment purposes, but would not allow non-RWGclass membersto increase the “bank of data” from which expert witnesses would ultimately draw their conclusions. In arriving at this decision, the court appears to have relied on Bell IIT, noting it had re-read that case with interest “becauseof its detailed discussion and approvalofthe trial managementplan.” In its motion in limine No. 3, USB soughtto require plaintiffs to rely on the testimonyofall the witnesses originally selected for the RWG,to the extent they were willing to testify. The motion essentially claims the composition of the RWG members had been altered so muchsince.the timeofits original selection that it now lacked representative integrity. The court denied this motion. 2 We note the pleadings and attachments generated by this motion are voluminous. 12 In its motion in limine No. 4, USB sought to exclude testimony regardingthetrial court’s methodology of sampling. The motion reiterated USB’s claimsthat the trial plan, particularly with respect to the issue of class-wideliability, failed to comport with the standardsset by our opinion in Bell I/I because it was unreliable, was not generally acceptedin the scientific field, and was not supported by a report from any expert witness. Thetrial court denied this motion and declinedtorevisit its trial management plan. Thecourt also ruled the two namedplaintiffs would be allowedto testify and to be present during the entire trial. VI. Phase I ofthe Trial Theliability phase (Phase I)ofthe trial began on May 24, 2007. All but one ofthe RWG members appearedattrial. They testified that they had spent morethan half of their work time inside bank offices and had worked varying amounts of overtime. We summarize the relevant testimony of some ofthese witnesses. | A. Plaintiffs’ Case 1. Matt Fitzsimmons. _ Matt Fitzsimmons, one of the two namedplaintiffs, was a BBOfrom April 2003 to March 2004.”* Hetestified that when he was hired he wasnot told of any expectation as to the amountoftime he was to spend outside bank property. Nor washe told he was entitled to an off-duty meal break. During his time with USB,he never saw a job description for the BBO position. Fitzsimmonstypically arrived at the bank at 8:30 a.m. Twodays a week he would leave by 5:30 p.m.to pick up his daughter from day care, and the other three days he would leave between 6:00 and 6:30 p.m. On most weekends he would spend twoor three hours folding flyers to send to prospective customers. He estimated he generally worked about 45 to 50 hours a week. He was nevertold to spend most of his time outside the 3 Fitzsimmons acknowledged having received a class action settlement of $8,000 as a result of a lawsuit involving business banking officers who had worked at Bank of America, his employer prior to working for USB. 13 bank. He estimated he worked inside branch offices 75 to 80 percent of the time, with the balance spent outside. There was never a week whenhe spent moreofhis time outside as opposed to inside. He also never received a 30-minute meal period in which he wasrelieved of all duties. | On cross-examination, Fitzsimmonstestified that everything he did as a BBO was aimed towards selling USB’s products and meeting his quarterly sales goals. He believed he was expected to work inside banklocations because the managers at two ofthe branches he was assigned to would ask him to come and workat their offices. His supervisor stated in a performance evaluation that he met his “ramp-up”sales goals in his first two quarters but met only 73 percent ofhis goals in the third, and final, quarter that he worked for USB. Fitzsimmons acknowledged he wasoneofthe poorer performing BBO’sin his supervisor’s group during his third quarter. His supervisor advised him to make 15 client appointments per week,a strategy that normally results in three loan applications and one loan approval, thereby securing one loan funded per week. Two weeksafter his evaluation he applied for a job at Citibank. One of the reasonsheleft USB wasbecause he could not work the numberofhours he believed the bank expected him to. 2. Chad Penza Chad Penza was a BBO from October 2001 through March 2005. Hetestified that initially he worked from 7:00 a.m. to around 5:30 p.m. After a few months, he began working from 6:00 a.m. to 6:30 p.m. or 7:00 p.m. He also workedat least three weekends a month, on both Saturday and Sunday, from around 7:00 a.m. to about 12:00 noon. Mostofhis time was spent calling potential clients on the telephone. From January 2002 to the end of his employment, he estimated he wasin the office at least 80 percent of the time. He was nevertold to spend most ofhis time outside bank property. After his initial ramp-up period, his quarterly sales figures ranged from $5 million to $10 million. At one point, he was the most successful BBO in the entire company. On cross-examination, Penza acknowledged he had signed a declaration for USB shortly after he started working as a BBO. In the declaration, he stated he was outside of 14 the office 75 percent of the time. He testified he felt compelled to sign the declaration because he wasa relatively new employeeat the time. He admitted he provided all the information in the declaration to the attorney who interviewed him. Healso signed another declaration in May 2004 in which hereaffirmedhis prior declaration. When he signed the second declaration he had several commissions at stake. He chose to work longer hours because he wantedto be the top producerin the country and achieve the numbersthat his supervisors wanted.”4 On-redirect, he denied telling USB’s attorney he had ever spent around 75 percent of his working hours outside of the bank.” 3. Troy Petty Troy Petty worked for USB from 1997 to 2001. He became a USB employee after the bank he worked for merged with USB. At his former bank,his job title was “commercial loan officer.” His job duties did not change when he became a USB employee. His employment with USB ended whenheretired. During his time with USB,he wasnevertold to spend most of his time outside the branchoffice. Petty would make about 5 to 20 sales calls per week at customers’ and potential customers’ places of business. He estimated on average he spent 75 percent of his time inside the office. He spent no more than 35 percentofhis time outside the office in any given week, or abouttwo orthree hours per day. Attrial, he testified that he worked 50 to 60 hours per week. In his deposition, he had stated he worked 50 hoursin a typical week. 4 Karen Racusin,a regional sales manager, testified for USB andstated that she participated in meetings in which Penza discussedhissales strategies. He never stated that he spent the majority of his time inside his office making telemarketing calls. Based on the number of loan applications that he turned in, and his statements abouthissales strategies, she understoodthat he wasout ofthe office the majority of the time. 8 Nancy McCarthy, a former SBB,alsotestified as an RWG member. At deposition, she stated that she spent half her timeinside the office and half her time outside the office. She also estimated she wasoutside the office more than half the time during 40 of the 75 weeks she was an SBB. Attrial, she testified on direct that she consistently spent 80 percent of her time inside and 20 percent outside. She explained the discrepancy between her deposition testimony and her trial testimony by saying sheinitially had guessed as to how she spent her time, and only after the deposition did she start “breaking down” whatshe did on a typical day. 15 On cross-examination Petty conceded he was expected to work eight hours a day only, and his manager never required him to keep certain hours and nevertold him what to do with his work time. USB’s counsel introduced the job description for the “commercial banking relationship manager”and attempted to show Petty actually held this position, and was not an SBB. Petty admitted he had never beenclassified as an SBB.”° He signed a releaseofall claims when hereceived his severance package. 4. Matthew Gediman Matthew Gediman was a BBO from April 2005 until December 2006. At the time oftrial, he was still employed by USBasa district sales manager. As a BBO, he was nevertold that he was required to spend mostofhis time outside the bank, and he spent the majority of his time inside his office. His hours ranged between 30 to 50 hours per week. He rarely worked more than 40 hours per week or more than eight hours per day. 5. Sam Duran Sam Duran, the other namedplaintiff, was a BBO from April 2003 to March 2004. He wasnottold he was required to spend mostofhis time outside of the branch office. In a typical day, he would goto the office, check his e-mail and voice messages, return phonecalls, review loan packages,follow up with customers to get documents, and work on loan or line renewals for existing customers. He estimated that he worked 45 hours a week. He was nevertold that he was expected toarrive at a particular time and he was given flexibility to leave the office to meet with a client, go to doctor’s appointments,or pick up his children from school. Whenhe wasoutside the office, Duran would meet with customers, pick up documents and review them for completeness, and conductsite inspections. He estimated he spent about 70 percentof his time inside the office. He would also workat 26 Petty’s supervisor David Greinertestified that Petty’s position wasinitially designated “business banking officer” and was later changedto “relationship manager.” The SBB position was not part of Greiner’s group at USB. and Petty was not an SBB. The primary focus of Petty’s job was on managing and growinghis existing portfolio, and not on seeking outside sales. 16 least three hours on weekends. He understood that he could take a half-hour meal break when he wanted to. He would take 10- to 30-minute meal breaks, but believed he was expected to be available for work during lunchtime. He left USB voluntarily because he wasfrustrated with the difficulties in getting loans approved through the underwriting process. | On cross-examination, Duran stated he generally tried to have one meeting with a client outside the branch per day, and sometimeshe had twoorthree such meetings. The meetings wouldlast anywhere from five minutes to three hours, although three hours was very unusual. It would generally take between 15 and 30 minutes to travel from his branch to a customer’sor a prospect’s place ofbusiness. He did notrecall telling USB’s attorney in July 2003that he spent, on average, 60 percentofhis time outside the office.” Duran received a signing bonus when he accepted the position with USB. The bonus was conditioned on his remaining employed with USB for 12 months. Heleft before the 12-month period was up and did not return the bonus. In early 2004, his supervisor counseled him aboutthe deficit in his loan production. She told him that he was expected to conduct 15 quality in-person sales calls on a weekly basis. He did not recall if she told him that these calls should take place at prospects’ places of business. Hefailed to meet this requirement andresigned shortly after a focused counseling session with his supervisor. Duran also admitted he falsified his USB salary figure when he applied for his next job. He claimed his head hunter told him to lie. The head hunter, David Vallecillo, testified that he contacted Duran about an employment opportunity with another bank. He denied telling Duran to falsify his salary information on the job application. 7 Pat Collins, one of Duran’s supervisors testified that she informed her BBO’sthat they would be interviewed by USBattomeys for this lawsuit. None of them indicatedto herthat they felt pressured into signing declarations. 17 6. Brett Lindeman Brett Lindeman began working for USB in May 2005 as a BBOandwasstill epployed at the time oftrial. When he washired he wastold the job wasa sales position involving new loans. He was nevertold that he would be expected to spend the majority of his time outside USB properties. Hetestified he typically works about 40 hours a week. There are times when he works more than40 hours a week,buthe was not able give an accurate estimate as to how often this occurs. Once or twice amonth he takes a call from a client on a weekend. Thesecalls last anywhere from twoor three minutesto 40 minutes. More than half of his meetings with clients take place inside his branch office. He estimatedthat he spends the majority of his time inside USB branches and offices. | Lindeman stated he doeshit his sales goals, but not in every quarter. He has never been told that he is expected to work more than 40 hours per week. At his deposition, he said it was “completely plausible” that there were weeks when he spent more than half his time outside of the office. Attrial, after viewing his mileage claim records, he stated that he believed he regularly spent more time inside USB properties than outside. 7, Adney Koga At the timeoftrial, Adney Koga was employed by USB as a BBO. He was a BBOin California from July 2004 to April 2006. He left USB for a time and came back as a personal banker in October 2006. He became a BBOagain in February 2007 in the state of Arizona. He was never informed that he was expected to spend mostofhis time outside the bank as a BBO. After he was hired, Koga underwenta three-month training period. He spent about one month shadowing a BBO. Duringthis period he would work from about 9:00 a.m. to about 6:30 or 7:00 p.m. As a BBO in California, he estimated he worked on average about 9 hours a day and about 45 hours a week. He estimated that he spent most of his time inside the branch, as opposed to at a customer’s place of business. He was never counseled by any of his supervisors that he should spend more ofhis time outside of the bank location. 18 Koga had signed a declaration for USB prior to trial. At trial he denied ever having told USB’s attorney that he spent 55 percent of his time outsideofthe office. On cross-examination, Koga admitted he did not make any changesto his declaration even though a coverletter instructed him to correct any inaccuracies. He was not promised ~ any benefit in exchangefor signing the declaration and his job was not threatened in any way by anyoneat USBifhe refusedto sign it. Deposition testimony was introduced in whichhestated he told USB’sattorney that he spent 55 percentofhis time outside of the office making salescails. Kogatestified he had discretion and control over his daily work schedule. He had noset timeto arrive at or leave work and no oneevertold him the numberofhoursthat he needed to work in a given day or week. He did not report his daily working hours to his manager. | 8 Steven Bradley Steven Bradley worked for USB as a BBO from March 2003 to July 2004, and again from May to August in 2006. When he washired, he wastold the job involved sales and that he would bepaid partly on a base salary, but the most importantpart ofhis compensation would be derived from the commissions he would get for booking products and services. He wasnevertold he had to spend more than half ofhis time outside bank locations. His normal work schedule was from around 9:00 a.m.to around 5:30 p.m. Sometimes he worked at homeafter he left the branch. He estimated he worked between 40 to 45 hours during the week. He also worked once or twice a month on weekends, spending two to four hours folding flyers. , On cross-examination, Bradley acknowledged he had voluntarily signed a declaration for USB. He admitted the statements contained in the declaration were based on information that he providedto theattorney whointerviewed him,andthat the information wastrue and correctat the time he signed the documentin June 2004.78 8 In the declaration, Bradley confirmedhespentthe majority of his time outside the bank engagedin sales activities. 19 Also, at his deposition, Bradley had stated that on average he spent 60 to.65 percent of his time outside the bank, with as much as 80 or 90 percent ofhis spent time outsideat the start of each quarter. After having reviewed his travel expense reports,he testified at trial that he believed he never spent more than 50 percent ofhis time outside bank property. However, he admitted the expensereports did not reflect the amountoftime he spent performinghis sales duties while outside the branch. He also acknowledgedthere were occasions when he workedoutside ofthe office and did not submit a reimbursement claim. He admitted that on a typical day he worked eight hours, and in a typical week he worked 40 hours. B. USB’s Case 1. Ted Biggs Ted Biggs was the western regional manager for USB’s small business group at the time oftrial. The small business group focuses on borrowers who need loans of between $100,000 to $2.5 million. The primary role of the BBO position is to contact prospects and customersat their places of business to develop new relationshipsorto expandthe existing relationships, with the focus on securing deposits and loans.” BBO’s are expected to be physically outside of bank property when performingtheir sales duties because that is where the customers and prospects are located.*” Biggs developed a tool to communicate his performance expectations to BBO’s. Heuseda stylized eye chart called “15-3-1-1.” The chart was used to explain that if a BBO makesan average of 15 customer contacts a week he or she should come away with three applications. Normally, one loan approval and one funded loan would result from the three applications. By following this model, a BBO would makeor exceedhis or her ? Another USB executivetestified that around 1997 and 1998, key executives at USB decided to compete with major banksby creating the BBO position. The position would be dedicated to selling products, rather than leaving that task as the third or fourth option of branch employees. At the time, USB had a one-and-a-half percent share of the California market. 30 According to a USB executive,this strategy was important because USB did not advertise, so BBO’s wererelied on to spread the bank’s name through community meetings, groups, and activities. 20 sales goals. This sales strategy was communicated to all of his regional managers, sales managers, and BBO’s. In Biggs’s experience, in-person sales calls take from one and a halfto two hours. This means that up to 30 hours per week should be spent with prospective customersat their places of business under the 15-3-1-1 model. A site visit could count as one ofthe 15 meetings, provided the BBO actually met with the customer during the visit. Because USB hasa small share of the market in California, BBO’s need to obtain most oftheir business from new customers. In Biggs’s experience, BBO’s need to spend a majority of their time outside bank property engagedin sales activities in order to achieve their loan production goals. BBO’s are also expected to engage in networking activities outside the bank. They are also required to do site inspections to make sure the customer’s businessis operational andto verify that any collateral is in good condition. BBO’swerenot required to work a specific number of hours per week or per day. When Biggs wasaskedifhe had ever concluded a particular BBO wasnot spending sufficient time outside the bank, the trial court barred this testimony because the incident did not involve an RWG member.”’ Biggsdid testify that several of the RWG members did not meet their sales goals. These included Duran and Fitzsimmons. He also noted that he was a family friend of Koga, who neversaid he felt pressured to sign a declaration for USB. Biggs testified that mileage reimbursementrecords do not reveal the actual amount of time a BBO spentoutside of bank property during any given day or week. The records only state how many miles a BBOtraveled and possibly the destination. In his opinion, the 2002 BBOjob description reflects that BBO’s will be spending the majority of their time outside. 3! The trial court issued similar rulings on this point during the testimony of other USB managers. 21 2. Michael Lewis At the timeoftrial, Michael Lewis wasa district manager for USB. Hestarted out as a BBOin June 2004, and becamea sales managerin June 2005. As we notedearlier, he was initially selected for the RWG,but opted outby the time oftrial. Hetestified he never wantedto be a part of the case, and had optedoutafter plaintiffs’ counsel telephoned andtold him he had already been chosen as a witness but could optoutifhe didn’t want to participate. When he opted out he did not know his testimony would have been extrapolated to the whole class, and he was upset when he learned he could not give his testimony. As a sales manager, Lewis’s duties were to support, train, and educate the BBO’s underhis supervision, and to assist them if they had questions about analyzing financial . statements and submitting loan applications. He also instructed them on how to “drum up” more business. Hewentout on joint sales calls with his BBO’s two to four times a week. These calls would last an hour and a half to two hours, excluding travel time. He specifically told his BBO’sthat it is more effective to go to a customer’s place of business, rather than to make appointmentsat the branch. Consistent with the trial court’s ruling on plaintiffs’ motion in limine No. 11, the court prevented Lewis from testifying as to the percentage of time he spent outside bank | property when he was a BBO. Further, the court essentially prohibited him from testifying as to whether the non-RWG BBO’s underhis supervision spent most of their time engagedin salesactivities outside the bank. The court also barred him from testifying as to whether he had everdisciplined a non-RWG BBOforfailing to spend sufficient time outside of bank property: “The only evidence that is meaningful to the court on that subject [discipline for something other than failing to meet sales goals] because of thestructure ofthe trial are members of the [RWG]. If this witness has percipient knowledge ofdisciplining members of the RWG,then J am interested in hearing... . [I]fnot, no.” | Lewis supervised Gedimanfora little over a year. Lewis instructed Gediman to spend more time out ofthe office in order to be more successful, but he did not 22 specifically say that he was expected to spend morethan halfofhis time outside. During the first quarter he supervised Gediman, Lewis estimated Gediman spent 60 to 70 percent ofhis time outside the office. During the second quarter it was 55 to 60 percent. During the third quarter, as Gediman’s production wasstarting to slip, Lewis encouraged him to engage in moresales-relatedactivities outside ofthe office. Gediman told him that he never worked more than 40 hours a week. Lewis also supervised Lindeman for approximately three months.Initially, Lindeman spent too muchtime telemarketing inside the branch and was not meeting his goals. He became moresuccessful when he followed Lewis’s advice and began spending more time outside bank property. Lewis met Chad Penza in July 2004 at a BBO conference. Atthat time, Penza was the number one BBOinthe nation. Penza told Lewis that his strategy was to meet with prospectsat their place ofbusiness, and that BBO’s should also meet with realestate brokers to get leads. Penza neversaid that the secret to success in the BBO position was to spend most of one’s time cold-calling from the office. On cross-examination, Lewistestified that when he was a sales managerhe did not keep track ofhow many hours BBO’s worked in a week. Nordid he track how much time any of his BBO’s spentinside or outside USB property. BBO’s are not evaluated based on the numberofhours they work. 3. Pat Collins Pat Collins was a sales manager from February 2003 to September 2005. During that time she supervised Duran.** Whenshe hired Duran,she told him he was expected to spend the majority of his time outside USB bank locations. She testified it normally takes three to four meetings with a customerto close a loan. At some point, Duran informedher that he had met only 14 percent of his quarterly sales goal. She told him he %2 Whenasked whether, based on her review of the weekly activity reports submitted by her BBO’s, she had an understandingas to the numberof sales calls they conducted on a weekly basis, the court restricted her response to members of the RWG. 23 33 quickly and not wait until the last minute,neededto start building his “pipeline meaning he neededto follow the 15-3-1-1 sales strategy and make more outside sales calls. Subsequently, she gave him weekly focused coaching sessions in which shetold him to meet with 10 to 15 prospects or customers on a weekly basis and complete profiling forms for each sales call. Based on her conversations with him andhis assigned branch managers, along with her review of his weekly activity reports, Collins believed he wasoutofthe office a majority ofthe time. Eventually Duran was placed on a performanceaction plan. He resigned shortly thereafter. Collins testified she did not know how much time any BBOspentinside or outside USB property during any given work week. 4. Sean MacClelland At the time oftrial, Sean MacClelland was a regional sales manager for USB’s Northern California business banking section. He started with USB as a BBO and workedat that position for about a year. He then becamea sales manager and supervised about seven or eight BBO’s. About once or twice a week he would join one of his BBO’s on an outside salescall. Sales calls with prospective customers would last from one to three hours on average. He encouraged his BBO’s to conductcalls at a prospect’s place of business. Hetold them their primary responsibility wasto be out in the field generating loan sales. Like Lewis, MacClelland was preventedby the trial court from testifying as to whether he spent most ofhis time outside the office when he was a BBO. MacClelland told his BBO’s that they were expected to spend the majority of their time outside of bank property engaged insales activities. This expectation was given to him by Biggs, and he reinforced this expectation in periodic contacts with BBO’s under his supervision. Getting outside the bank builds a rapport with the customer,is a fraud 33 The weekly pipeline reports prepared by BBO’s show the numberoftelemarketing calls and appointments they make, and their prospective loans. A report will identify the type of prospective loan, the dollar size of the loan, and the location where the loan will be booked. The purpose ofthe pipeline report is to forecast when a loan will book, and for BBO’s to show progress towardstheir loan goals. 24 prevention technique, and creates an opportunity to cross-sell products and generate more referrals from prospective customers. MacClellandtestified that Koga had some successful quarters, buthad others where he did not meet his goals. MacClelland counseled him to be more focused on getting appointments, generating leads, and going to networking events during slow periods. Koga never told him he was uncomfortable interviewing with USBattorneys about the lawsuitor filling out a declaration. 5. Hector Zatarain Hector Zatarain began working as a sales manager at USB in March 2001. He supervised Chad Penza. Foratleast the first year and a half ofPenza’s employment, he spent the majority ofhis time outside the office. After that time, he began spending the majority of his time inside the office. Zatarain did not know of other BBO’s whospent the majority oftheir time inside their office and still made their production goals. He did not discipline Penza for being inside the office, but he did tell him that he was working too hard. C. Motionfor Judgment On July 25, 2007, after plaintiffs had completed the presentation oftheir case, ‘USBfiled a motion for judgment under Codeof Civil Procedure section 631.8. In the motion, USB claimedplaintiffs were required to have proved that each and every BBO had been misclassified and had worked unpaid overtime hours. USB also contended the evidence showed several class members were properly classified and/or did not work overtime. | On September20, 2007, the trial court denied the motion for judgment. In its tentative ruling, the court stated its use of the RWG asthe basis fortrying the lawsuit had been “authorized” by our decision in Bell 17. 34 On November 14, 2007,thetrial court filed its order after hearing, denying USB’s motion for judgment. In recountingthetrial, the court stated: “For this purpose 25 names were randomly drawn from the class of whom 20 were to serve astrial witnesses . . . on behalf of the class an approach authorized by [Bell I7].” The court notedplaintiffs’ case was “problematic” due to the 25 D. Posttrial Proceedings On October 25, 2007, thetrial court issued an order regarding closing briefs that, in part, prohibited USB from referencing the four former namedplaintiffs’ depositions as well as the declarations USB had sought to admit. On November5, 2007, USBfiled a “due process motion for briefing and additional argumentre phase one evidence,” askingthe trial court to issue a new ruling regarding the evidence excludedby the October 25, 2007 order.*® On December4, 2007,the trial court filed its order rejecting USB’s due process motion.*® Ata hearing also held on this date, the court articulated its finding in favor of plaintiffs on the issue of liability. The court focused primarily on USB’s expectationsas to whether BBO’s should spend the majority of their workday outside ofthe office: “(T]he Court is compelled to reach the conclusion that the employer, through its descending hierarchy of managers, did not care where the Class membersspenttheir time as muchas they cared aboutthe goal of getting new businessor, for that matter, retaining old businessat the least cost to the bank. [{] .. . [§] It is striking to the court thatifthe bank’s expectation was that more than 50 percent of the class members’ time was to be spent outside bank property, that there is not clear specific expression of . . . this expectation in the record.” Thetrial court remained steadfastin its position not to hear proffered BBO’s from the defense to challengeplaintiffs’ version of the facts. As to USB’s protests regarding the denial of its due process motion, the court again referred counsel to Bell III. impaired credibility of certain RWG members who hadsignedprior inconsistent declarations, or whohad madewillful misrepresentations about their employmentor education history, sometimes while under penalty of perjury. 35 USB asserted the deposition testimony of the four prior namedplaintiffs was admissible as party admissions under Evidence Codesection 1220. USBalso argued that the deposition testimony and the 70-plus class memberdeclarations were admissible under Evidence Code section 1230 as prior statements of unavailable witnesses, and as statements againstinterest because the declarations rendered their claims invalid. 36 In its order denying the motion,the trial court observed: “Defendant’s lack of enthusiasm for the trial managementplan is already preserved for appellate review.” 26 E. ProposedPhase I Statement ofDecision On April 8, 2008, USB filed its objections to the proposed Phase I statement of decision thatthe trial court had orderedplaintiffs to prepare. USB’s papersincludea declaration prepared by Hildreth, who raised several concerns regarding the proposed statement’s computation of the average numberofovertime hours worked per week by each ofthe testifying witnesses. On May7, 2008,plaintiffs filed an ex parte motion to amendits expert declarations to include,in part, testimony regarding a telephonic survey of class members that their survey expert Jon Krosnick had conducted after the close of Phase I. Thetrial court granted the motion, noting it was not making an advance determination as to whetherthe results of the survey would be admitted in evidence. On July 10, 2008, USB filed a motion to exclude Krosnick’s survey evidence. On August 4, 2008,plaintiffs submitted their opposition to USB’s motion to exclude the new survey evidence. The opposition includes a declaration ofDrogin, stating the trial court’s finding that the RWG members were improperly classified as exempt could be “reliably projected to the whole class” since the ruling was based on a “random” sample. He quantified the average weekly unpaid overtime hours at 11.87 hours, with a margin oferror ofplus or minus 5.14 hours under a 95 percent confidence interval.7’ Though the margin oferror was large, he deemedthree otherreliability factors worked in favor ofplaintiffs: (1) the high response rate among the RWG members,(2) the absence of measurement error because “weare actually sampling the court’s findings, which by definition, becomea fact after the ruling is made,” and (3) Krosnick’s survey evidence, which showed the average overtime hours worked by RWG members appeared 37 “Confidence intervals are a technical refinement, and ‘confidence’is a term ofart. For a given confidence level, a narrower interval indicates a more precise estimate. For a given samplesize, increased confidence can be attained only by widening the interval. A high confidence level alone meansverylittle, but a high confidence level for a small interval is impressive,indicating that the random error in the sample estimate is low.” (1 Kaye & Freedman, Modern Scientific Evidence: The Law and Science of Expert Testimony (2010-2011) § 6:34, pp. 361-363, fns. omitted.) 27 to be lower than that of the class as a whole. Hethen discussed the survey data obtained by Krosnick, which showed the average overtime hours of the surveyed class membersto be 14.391 hours per week, with a margin oferrorofplus or minus 2.121 hours per week using a 95 percent confidence interval. He concluded Krosnick’s study provided corroborating evidence that the RWGestimate wasaccurate. On August 8, 2008, the trial court ruled the survey would notbe admissible as affirmative evidence in PhaseII ofthe trial, but left open the possibility that the survey could comein for rebuttal purposes to impeach evidencethat mightbe offered by USB. F. USB’s Second Motionfor Decertification On August 22, 2008, USBfiled its second motion to decertify the class. USB argued decertification was mandated becausethe evidence adducedat trial demonstrated individualized issues predominatedasto liability and restitution. USB also claimed the evidence showedclass treatment was unmanageable and not superior to individualized proceedings. USBreiterated its reliance on the 70-plus sworn declarations from non- RWG BBO’s attesting that they spent the majority of their work time outside bank property. The motion was denied. G. Statement ofDecisionfor Phase I . After considering extensive briefing and argument regarding disputed issues, the trial court filed its statement of decision on September 22, 2008, a yearafter the conclusion of Phase I ofthetrial.’ The court observed introduction of evidence regarding non-RWGclass members “would beinconsistent with the court’s trial plan and its ruling on plaintiffs’ motion in limine No. 11 and defendant’s motionin limine No.4.” At the sametime, the court noted USB borethe burden ofproof on the application of the outside salesperson exemption. 38 At a hearing on the statement ofdecision,thetrial court stated its view, “perhaps invokingthe vernacular somewhat,” that USBtreated its BBO’s as “cannon fodder.” The court also stated: “II}f you don’t grasp the thrust of the Court’s finding that it was completely irrelevantto the bank wherethese folks spent their time as long asthe [three] percent market share wasincreased, then you’re missing the basic thrust of the Court’s findingsat the end of Phase I. That’s the key to the case, in the Court’s view; grossly over-simplified.” 28 Thetrial court concluded the two namedplaintiffs and the 19 RWG members who testified at trial had been misclassified and hadall worked overtime hours, finding their testimony on these issues “credible and persuasive.” The statement of decision sets forth the amount of overtime eachtestifying BBO claimed to have worked, the dates of their employment, and whether they spent most of their work time inside bank property.”? The statement concludes, “The court finds that the RWGsare typical and representative of the . entire class and validates the viability of the use of the [RWG] processaspart of thetrial management plan of a wage and hourclass action.” The court found USB did not negate the reasonablenessofplaintiffs’ evidence “because it either failed to produce testimony to rebut the RWGwitnesses or those witnesses that it did produce lacked relevant knowledge and there was no proper foundation.” This finding is critical in that USB was prohibited from introducing evidence pertaining to any non-RWG members, evidence that arguably would have shown someclass members wereeither properly classified or did not work overtime. The finding was based, in part, on USB’s failure to obtain testimony from all ofthe immediate supervisors of the RWG members whotestified. The order incorporates Drogin’s assessmentthatthe testifying witnesses worked an average of 11.87 overtime hours per week. VIL, Phase Il ofthe Trial A. Motionsin Limine For PhaseIIofthetrial, plaintiffs filed their motion in limine No. 17, seeking to prevent USB from referencing any evidence regarding liability other than the trial court’s Phase I statement of decision. The motion was based on the premise that the court had already determinedthe entire class was improperly classified as exempt, and therefore ” Troy Petty’s claim for overtime was deemed released by a separation agreement he had previously entered into with USB. Nevertheless, the trial court included the data pertaining to him in the evidence to be used in Phase IJ. Borsay Bryant, a RWG member, did not appear for trial. The court found Bryant had not waived his claim for compensation and that he would be treated like any other nontestifying class memberfor purposes of PhaseII. 29 any contrary evidence would beirrelevant and would necessitate undue consumption of time. Thetrial court granted plaintiffs’ motion. USBfiled its motion in limine No. 11, again seeking to exclude Krosnick’s survey evidence from Phase II. Thetrial court granted this motion, subject to the qualifications in its prior orders regarding the potential use of this evidence for impeachment purposes. USB’s motion in limine No. 12 sought to exclude evidence oftime BBO’s spentin nonclass positions. This motion was based on USB’s contention that two RWG witnesses had occupied nonexemptpositions of banker trainee andBBOtrainee during a ~ portion oftheir employment with USB. Plaintiffs filed their corresponding motion in limine No. 20 to exclude evidenceof any training time allegedly worked by the class members. In opposition, USB arguedthat to allow recovery for time spent in nonclass positions would violate its due process rights. The court grantedplaintiffs’ motion and denied USB’s motion, except to the extent USB wasto offer evidence that overtime wages had been paid, which wouldserveto offset restitution claims. USBalso filed motion in limine No. 13, again seeking to admit the depositions of the former namedplaintiffs and the declarations of the approximately 70 non-RWGclass members. The motion was denied.” B. Plaintiffs’ Case 1. Richard Drogin Drogin wascalled as plaintiffs’ expert witness in the area ofstatistics. As the basis of his opinions, he indicated he had relied on thetrial court’s Phase I statement of decision and the survey report prepared by Krosnick. USB’s counsel made multiple objections to the references to Krosnick’s report, based onthetrial court having granted its motion in limine toexclude evidenceofthe survey. Thetrial overruled the objections, withoutprejudice. 4° USB’s motion in limine No. 14 sought to exclude or require an offer of proof in an Evidence Code section 402 hearingas to the testimony of Miles Locker, designated by plaintiffs to testify on the interpretation of wage and hour lawsby the Division of Labor Standards Enforcement. The court granted the motion. Lockerdid nottestify. 30 Drogin explained that random sampling is a process whereby a subset of a population is selected because “each person in the class had the same chance ofbeing selected.” He noted that the “random nature” of such a selection results in a representative subset that should reflect the traits and characteristics of the population as a whole. Drogin defined variousstatistical terms. The “point estimate” is the number desired to be obtained from a sample, which is then used to predict what the numberwill be for the rest of the population. In the present case, the average numberof overtime hours per weekis the point estimate. The “ratio estimate” is a standard statistical estimator that uses two numbers, here the average numberof overtime hours worked and the numberofweeks worked by the BBO’s. Another wayto think ofthe ratio estimate is that it is a weighted average where the weights are the total weeks worked by each person. Drogintestified the “confidence interval” reflects variations in data and random fluctuation due to sampling. The confidence interval is based on three components, the point estimate, the margin oferror, and the level of confidence. Most statisticians use a 95 percent confidence level. Margin oferror is a “plus or minus” amountthatis associated with the point estimate at a given level of confidence. In this case, Drogin determined the absolute margin of error to be 5.14 hours of overtime per week,relative to a 95 percent confidencelevel. | Drogin explained “standard deviation” is a quantity used to measure dispersion in data. Standard deviation is used to calculate the margin oferror. “Responserate” is the proportion of a sample from whom results have been obtained. In this case, he calculated the response rate at 95 percent because only one RWG member(Borsay Bryant) failed to testify. “Measurementerror” is the error that can occur in samplings if something is mismeasured in a systematic way. Drogin deemed there was no measurementerror in the present case because the data he used was derived from the court’s statement of decision. Drogin testified his understanding wasthat the trial court selected the RWG by pulling their names from a container that held cards with the namesofall the putative 31 class members written on them. This procedure is consistent with a random sample.” Drogin acknowledged the two namedplaintiffs were not part of the random sample. He first calculated the average weekly overtime hour figure for the 19 testifying RWG members, and then for the RWG membersplus the two namedplaintiffs. The figure came out higher when the two namedplaintiffs were excluded from the group. . Drogin said that when he wasretained asthe plaintiffs’ expert in Bell III, his goal was to work with the experts on the opposing side to jointly develop a sampling plan that could be used to get an accurate estimate of overall damages,as liability had already been determined.- He acknowledged that no such joint plan was developedin this case. The only people whotestified in the damages phase in Bell II] were the parties’ three experts. Noauxiliary report, such as the one prepared by Krosnick, was used. Also, there was no disagreement on the average numberofovertime hours worked per week, and no dispute on how to compute damagesusing that number. The only disagreement was whetherthe meanor the median should be used for the purpose of calculating damages. After reviewing the trial court’s Phase I statement of decision, Drogininitially calculated the average overtime as 11.299 hours per week. Helater increasedthe figure to 11.87 hours due to adjustments made for vacation time, and the exclusion of a period of time when one of the RWG BBO’s wason leave.” Drogin arrived at the 11.87 hour figure by totaling the number of overtime hours worked by the 21 BBO witnesses(as set forth in the statement of decision), and dividing that figure by the total number of weeks they all had worked. Ifa witnesstestified to having worked a range of overtime hours, Drogin picked the midpoint. 4! “Tn a random sample, each memberofthe population mustbe equally likely to be selected for the sample, and the chancesofbeing selected must not depend on theselections.” (Wazzan & Sulzer, Statistical Analysis and Interpretation ofData Commonly Used in Employment Law Litigation (Spring 2006) 8 Duq.Bus. L.J., 79, 83.) “2 Drogin did not consider individual days of vacation as shown in payroll data if those days werenot included in the statement of decision. If such days had been included, this would possibly haveledto a different result. However, with respect to the information in the statement of decision, he deemedhis results accurate. 32 Drogin consideredhis calculations to be reliable based on his assumption that the sample was random, while noting “In somesituations you may have a sample, but there are certain factors that could destroy it from being a perfect textbook random sample— for example, ifthere’s any self-selection, if there’s something that wasn’t random ofhow the sample is selected.” He concluded the 11.87 figure could be reliably projected to the absent class members for purposesofcalculating the restitution owed. He noted that whether the confidence interval was too wide was a matter for the court to decide, but that his was the best estimate based on the available data. On cross-examination, Drogin admitted he was aware that 20 percent ofthe originally drawn sample had opted out after they were selected for the RWG, whereas only twopercent ofthe remaining class members had optedout. Heindicated he had no way of knowing why anyone had opted out. Whenaskedif, at a 95 percent confidence interval, there was statistical probability that up to 13 percent of the class could be properly classified even if 21 out of 21 sample members were found to be misclassified, Drogin replied that the 13-percent figure would be “part of the range — the lower range of the confidence interval.” He testified that “the 95 percent confidence interval ranges from 87 percent to 100 percent for the percentage of class members whoare misclassified.” When askedif, “statistically speaking,” wouldn’t this mean that up to 13 percent of the class could possibly be properly classified, Drogin responded:“That’s true.” Drogin clarified that, at any given confidence level, he can makea projection based on variables but that he would not know “as a matter of fact or personal knowledge” whether 100 percent of the class was misclassified or not. Drogin acknowledged that the sampling procedure he had proposed at the outset of this case was not used bythetrial court. One element of his proposal would have included a survey of the amount of time each class memberspent outside the office engagedin sales activities.“* He also acknowledged that he never recommended the BA pilot study was used in Bell ITI, whichis a tool that is often used in statistical sampling to learn about variations in a population in order to accurately determine the appropriate sample 33 inclusion of nonrandomlyselected individuals in the sample. The addition of nonrandomly selected people to a random group couldbias the sample in some way. But in this case, the effect of adding the two namedplaintiffs was actually to lowerthe average overtime figure. Asa statistician, he would not consider two individuals whoare not randomly selected into a sample to be representative of the population as a whole. On the subject of witnesses whotestified they worked an uncertain range of hours per week, Drogin admitted there is no formulaorrule in statistics thatsays the midpoint should be usedif a subject respondswith aninterval instead of a specific number. In arriving at his overtime hour calculation, Drogin calculated weekly overtime only, not daily overtime. Ifa witnesstestified using an open interval rather than a range ofhours, Drogin used 7.5 hours as his or her weekly overtime figure. Drogin explained that the absolute marginoferror is expressed in the units of the estimate, andthe relative margin oferror is the ratio between the absolute margin of error and the estimate expressed as a percentage. Here, the absolute margin oferror for the overtime worked by the sample plaintiffs is 5.14 hours per week, andthe relative margin oferror is 43.3 percent. On redirect, he stated that there is nothing wrong,statistically speaking, with choosing a sample without first determining the desired margin oferror. Drogin agreed with USB’scounselthat, in general, the larger the sample size, the lower the margin of error.’ Drogin also acknowledged the two top workersin the sample grouphere had large values for their overtime hours. Penza’s overtime was calculated at over 5,000 hours, or roughly five times more than the total number of overtime hours worked by the next highest RWG member(apart from Petty). Petty’s figure was calculated at almost 3,000 hours,almostthree times more than the next size needed to obtain a certain predefined level of accuracy. Drogin agreedthata pilot study was not conducted here. On cross-examination, he stated he did not see any problem with the fact that no such study was donein this case, noting these studies can take a long time and “sometimesit’s not practical to do a pilot study.” “4 tn Bell II, his pilot study wasusedto arriveat a reliable estimate regarding the appropriate sample size. The sample size in Bell [IJ was 295 class members out of a population of approximately 2400 individuals. 34 highest member. Drogin also agreedit is statistically improper to allow peopleto self- select or volunteer to becomepart of sample. He opinedthat the sampling methodology used by the court in this case wasstatistically appropriate, even though the sample is not completely random andthe resulting margin oferror is 43.3 percent. 2. Paul Regan Paul Regan testified for plaintiffs as an expert in accounting. His task was to calculate the restitution dueto plaintiffs based on Drogin’s figures. Hetestified that if Duran and Fitzsimmons were removed from the sample group,thetotal restitution owed to the class would have increased by about $41 1,000. On cross-examination,he testified he did not perform any calculations with respect to the margin of error. He also did not extrapolate to the class the two weeks in which Penza wasproperly classified. He did take offtwo weeks from Penza’s recoverable time period. Regan did not exclude time during which USB claimedcertain class members were working in nonexempttraining positions. Nor did he make any deductions for holidays taken by class membersin calculating their recovery.” The total class recovery calculation, including prejudgment interest, was over $14 million. At the close of Regan’s testimony, plaintiffs rested. C. USB’s Defense in Phase IT Thetrial court prohibited USB from presenting evidence showing that someclass members had beenclassified in nonexemptpositions during their tenure with USB. For example, USB offered to show that a class member, while workingin a training position, signed a weekly timesheet verifying his hours and stating he did not work overtime. USB argued that he should not have been allocated overtime pay for the weeks in which he verified he did not work overtime. The court sustainedplaintiffs’ objections to these timesheets on the basis that it violated the trial plan. The court barred USB from 45 USB’s request for judicial notice (filed in A125557 on June 18, 2010) ofplaintiffs’ reply to opposition to motion to remand andplaintiffs’ request for judicial notice (filed in A125557 on July 2, 2010) of the order granting plaintiffs [motion] to remand,both filed in the United States District Court for Northern California, are denied as the materials were not before the superior court and are not necessary for our determinationofthe issues raised on appeal. | 35 introducing any evidence as to class members who may havehad held a BBOtraining position, or evidence that this position represented a distinct, nonexempt classification. The court also prohibited two non-RWG BBO’sfrom testifying. 1. Joe Anastasi Joe Anastasi testified as USB’s expert in forensic accounting He was asked by USBto prepare arebuttal analysis to Regan’s projection of overtime recovery to the class. Anastasi reviewed USB’s records with respect to holidays, vacation, sick leave, and leaves of absence taken by class members during the relevant time period. In preparinghis analysis, he disagreed with Regan’s calculations because Regan did not deduct holiday time for any individual in the class, which overstates the number of workdaysper person by up to 10 days per year. He also disagreed with Regan’s inclusion of hiring bonuses to determine each BBO’s hourly rate of pay. Anastasi prepared a damagescalculation using the low end of the margin oferror, which is 6.73 overtime hours per week. Using the lowest end of the ranges of hours given by RWG members, and using a simple average as opposed to a weighted average, the total overtime award would be $6,141,000. The amount would be reduced to $5,125,000 using the 6.73-hours-per-week figure. Using a seven percentrate ofinterest, Anastasi calculated total class recovery using the 6.73-hourfigure to be $7,226,624, or about half of the total Regan had calculated. In Anastasi’s opinion, undue weight was accorded to Penzain the calculation of a weighted average for the RWG group. Anastasi opined that the data in the trial court’s statementof decision is so imprecisethat it results in arbitrary projections. He testified that one could derive a total of 29 different “bottom lines” based on different assumptions and calculations of the data as provided in the court’s statement of decision. The choice of which “bottom line”to pick is totally arbitrary due to the variability and lack of specificity in the data. 2. Andrew Hildreth Hildreth testified as an expert witness in statistics for USB. In his opinion, the sampling plan chosen by the court wasstatistically unacceptable, in part becausethe size 36 ofthe sample was insufficient for extrapolation purposes. Hestated that simply drawing a random sampleis not necessarily sufficient to provide an unbiased and accurate estimate regarding an underlying population. A samplehasto be sufficiently large, and has to be freefrom bias caused bypotential sampling or nonsampling errors. It also must be undertaken with a focus on the questionsofinterest. Hildreth stressed the importance of defining a population before collecting a sample in order to gauge whether any subsequent changes to the sample are reflective of the underlying population. Hildreth believed selection bias occurred in this case with the second opt-out notice because the RWG members were told they could opt outor stay andtestify at trial, whereas the remainderofthe population was simply given the choice to opt out. This lead to a different behavioral response in that only 2 percentofthe nonsample group opted out, whereas 20 percent of the sample group opted out. As a result the sample suffers from selection bias.*° Hildreth found the inclusion of the two namedplaintiffs in the sample group was another example of selection bias. The two were placed into the sample on a nonrandom basis. Because they were not randomlyselected,thereis nostatistical basis. for considering their testimony as representative of the entire class. When he excluded the two namedplaintiffs from the sample group, Hildreth calculated that the margin oferror increased from 43.3 to 47 percent. He concludedselection bias and measurement errors rendered the sample unrepresentative. Consistent with Drogin, Hildreth testified that even assuming there were no samplingerrors and that every memberof a 20-person random sample was foundto be misclassified, from a statistical standpoint 13 percent of the class might nonetheless be 46 Additionally, Hildreth noted Brian Smith was removed from the sample because he was not a true BBO, suggesting that 5 percent of the remaining class members werealso not true BBO’s. Similarly, Borsay Bryant’s refusalto testify at trial suggests that 5 percent of the remaining class members wouldalso haveelected notto testify. Also, Petty could not recover because he had signed a release, but his data wasstill used to extrapolate to the class. Hildreth stated that for purposes ofproviding representative data one cannotfavor certain characteristics of sample membersover other characteristics. 37 properly classified under a 95percent confidence interval. With a sample of 21, up to 12 percent ofthe class maybe properly classified. With a sample of 19 (here, if the two named plaintiffs are excluded), up to 14 percent ofthe class could be properly classified at a 95 percent confidenceinterval, which would amountto approximately 36 class members. At a 99 percent confidence interval this numbercould increase to 20 percent ofthe class, or 52 class members. Thus, he opined thereis no statistical basis to conclude that 100 percent ofthe class was misclassified.”” Healso explained that the 43.3 percent margin oferror at a 95 percent confidence interval meansthatifthe sample study were repeated multiple times, one would expect to obtain average weekly overtime estimates as low as 6.7 hoursor as high as 17.8 hours 95 percentofthe time. Thetrial court prohibited Hildreth from testifying as to his review ofthe 70-plus BBOdeclarations USB hadobtained, notwithstanding USB’s complaint that Drogin had been permitted to testify concerning the non-RWG survey responses contained in Krosnick’s report. The court indicated it considered USB’s declarations to be unreliable. D. Closing Briefs and Statement ofDecision for Phase II After the close of Phase II evidence,the trial court permitted eachsideto file briefs and objections. A hearing before the court followed. The court issued its decision on May20, 2009. Thetrial court stated its initial finding as follows: “The court finds, with a 95% level of confidence, the best estimate based on all admissible evidenceis that the class worked 11.86 overtime hours per week with an absolute margin of error of approximately plus or minus 5.14 hours and relative margin oferror of approximately 43%.” The court found the total amount of overtimerestitution owedto the class as of October1, 2008, to be $8,953,832. The amount owed to namedplaintiffs Duran and Fitzsimmons 47 Hildreth did not agree with Drogin that the midpoint assumption was reasonable becausethere was no way to know if the BBO’s worked the same numberofhours at the lower end of the range as they did at the upper end of the range. Hildreth opinedthat in order to obtain an estimate with a margin oferrorat plus or minus one hourthe entire class of 260 would needto be sampled. This conclusion wasbased onthe findings associated with the 21 testifying BBO’s. 38 for meal and rest break violations was calculateP*at $25,373. The court included interest at a rate of 10-percent per annum at $5,980,360, for a total award of $14,959,565 owed as ofMay15, 2009. Additionally, the trial court stated that even though the margin oferror as to the numberofovertime hoursis 43.3 percent, ancillary factors identified in our Bell II opinion were present and“serveto bolster the reliability of the estimate.” The court found those factors to be “(1) random selection ofthe sample; (2) high responserate; (3) absence of measurementerror; (4) probable distribution within the margin of error based on auxiliary and anecdotal evidence; (5) data that is not skewed;(6) the calculation ofthe average overtime wasnotan afterthought; and, (7) other procedures were considered.” F. Posttrial Proceedings | In its motion for new trial, USB arguedthetrial court’s refusal to admit non-RWG class memberdeclarations and deposition testimony,and its preclusion of all non-RWG witnesses in USB’s defense case, deprived USB ofits constitutional due process right to a fair trial. On July 17, 2009, the trial court denied USB’s motion for new trial. DISCUSSION I. The Trial Plan Erroneously Relied on Representative Sampling USBraises several challenges to the trial court’s rulings on classcertification as well as to the conductofthe trial. We turn first to the claim that the trial plan violated USB’sright to due process of law. USB contends the court’s strategy of relying solely on the evidence derived from a 21-person sample to determine class-wide liability and restitution violated principles of due process and resulted in a statistically invalid result, as evidenced by the 43.3 percent margin of error in weekly overtime hours. USB also asserts the court infringed on its due process rights when it rejected USB’s efforts to introduce evidence challenging the individual claims of the 239 absent class members. 48 ‘Also on this day, USBfiled its motion to tax costs. Among the challenges raised, USB contendedthat the $25,125 in expert fees paid to Miles Locker should not be shifted to it because the court had excluded Locker as an expert witness. USB subsequently filed notices of appeal from the judgmentafter court trial and from the award of Locker’s expert witness fees. 39 Weagree with USBthat the trial plan employed here wasseriously flawed and the judgment mustbe reversed. A. Standard ofReview The general standard ofreview ofa trial plan in a class action case is abuse of discretion. (Bell II, supra, 115 Cal.App.4th 715, 751.) Both parties agree we review de novothe legal issue of whethera trial plan violated a party’s right to due process. (Hypertouch, Inc. v. Superior Court (2005) 128 Cal.App.4th 1527, 1537 [27 Cal-Rptr.3d 839].) | We recognize our Supreme Court has encouragedtrial courts to “think outside the box” when managingclass action lawsuits: “For decades ‘[tJhis court has urgedtrial courts to be procedurally innovative’ [citation] in managingclassactions, and‘thetrial court has an obligation to consider the use of . . . innovative procedural tools proposed by a party to certify a manageable class’ [citations].” (Sav-On, supra, 34 Cal.4th 319, 339.) While innovation is to be encouraged,the rights of the parties may notbe sacrificed for the sake of expediency. As we observed in Bell II, “In this areaoflitigation, the California Supreme Court hasin fact ‘challenged thetrial courts to develop “pragmatic procedural devices”to “simplify the potentially complex litigation while at the same time protecting the rights ofall the parties.” [Citations.]’ [Citation.]” (115 Cal-App.4th 715, 747, italics added, fn. omitted.) B. Principles ofDue Process _ The due processclause is “ ‘flexible and calls for such procedural protections as the particular situation demands.’ [Citation.]” (Mathewsv. Eldridge (1976) 424 U.S. 319, 334 [47 L.Ed.2d 18, 96 S.Ct. 893].) In Connecticut v. Doehr (1991) 501 U.S.1, 10 [115 L.Ed.2d 1, 111 S.Ct. 2105] (Doehr), a case involving a prejudgment attachment procedure, the United States Supreme Court set forth a test for determining whether a procedure by which a private party invokes state power to deprive another person of property satisfies due process: “[Fl]irst, consideration ofthe private interest that will be affected by the [procedure]; second, an examination ofthe risk of erroneous deprivation through the procedures under attack and the probable value of additional or alternative 40 safeguards;and third, . . . principal attention to the interest of the party seeking the [procedure], with, nonetheless, due regard for any ancillary interest the government may have in providing the procedure or forgoing the added burden ofproviding greater protections.” (/d. at p. 11; see also Hilao v. Estate ofMarcos (9th Cir. 1996) 103 F.3d 767, 786 (Hilao).)” Dueprocessprinciples are designed to ensure a party is affordedhisor herright to be heard during adversarial proceedings: “ ‘Asthe rubric itself implies, “procedural due process”is simply “a guaranteeoffair procedure.” ’ [Citations.] Hence, we review cases involving adversarial hearings to determine whether, underthe specific facts and . circumstancesofa givensituation, the affected individual has had a fundamentally fair chanceto presenthis or her side of the story.” (In re Nineteen Appeals (Ast Cir. 1992) 982 F.2d 603, 611.) C. Affirmative Defense ofthe Outside Salesperson Exemption Plaintiffs here contended they were entitled to overtime pay under Labor Code section 510 and that USB misclassified them as exempt from this overtime requirement. As an affirmative defense, USB claimed the class members were exempt from overtime laws, relying primarily on the outside salesperson exemption as set forth in Wage Order No. 4 and Ramirez, supra, 20 Cal.4th 785 (Ramirez). The Supreme Court in Ramirez explained that the outside salesperson exemption generally turns on how an employeeactually spendshis or her time, as well as on the employer’s realistic expectations of the job and the extent to which the employee diverges from them. (Ramirez, supra, 20 Cal.4th 785, 790, 802-803.) Ramirez involved In Doehr, a statute permittedplaintiffs in civil suits to obtain ex parte attachments against defendants with a showing so minimal—an avermentbytheplaintiff that the defendantis liable—that it resulted in a “significant risk of erroneous deprivation.” (Doehr, supra, 501 U.S. 1,21.) The court noted the statute enabled one of the private parties to “ ‘make useofstate procedures with the overt, significant assistance ofstate officials,’ ” that involve state action “ ‘substantial enough to implicate the Due Process Clause.’ ”(/d. at p. 11, quoting Tulsa Professional Collection Services, Inc. y. Pope (1988) 485 U.S. 478, 486 [99 L.Ed.2d 565, 108 S.Ct. 1340].) The court concluded that, absent exigent circumstances, the private party’s interest in attaching the property did not justify the burdening ofthe private property owner’s rights without a hearing to determinethelikelihood of recovery. (Doehr, supra, at p. 18.) 4} a single employee suing to recover overtime wagesafter having allegedly been erroneously classified as exempt underthe outside salesperson exemption. (Jd. at p. 790.) The dispute centered on whetherthe plaintiff spent the majority of his time engaged in sales-related activities or in nonexempt delivery duties. (/d. at p. 803.) The court stated that in addressing this exemption, courts “should consider, first and foremost, how the employee actually spendshis or her time.” (Jd. at p. 802.) The court observed that the issue ofwhether an employeeis an outside salesperson “tums on a detailed, fact-specific determination ofthis matter.”* (id. at p. 790.) Arguably, the presentcaseis distinguishable from Ramirez in that there is little dispute as to the sales-driven nature of the BBO’s job duties. In other words, the issue at trial was not whether BBO’s spent the majority oftheir time engagedin sales-related activities. Rather, the focus was on whether BBO’sspent the majority of their time physically outside USB property. Nevertheless, this distinction does not detract from the central issue on appeal, which is whetherthetrial court erred in prohibiting USB from inquiring into the exemptstatus of the absent class members. D. Bell v. FarmersIns. Exchange (2004) 115 Cal.App.4th 715 Plaintiffs cite our opinion in Bell IIT for the proposition that ample.authority exists to support the useofstatistical sampling and representative testimony to determine class- wideliability. They claim our endorsementin Bell III of the use ofstatistical methodsto determine damages in wage and hourclass actions “would apply equally to determining liability.” While the trial court also appearedat various times to rely on our prior opinion as a justification for using the RWGasthe basis for determining USB’s liability to the entire class, Bell IIT is manifestly inapposite. *° The court in Ramirez also recognized that because an employee might attempt to evadethe exemption through substandard performance, courts must also 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.” (Ramirez, supra, 20 Cal.4th 785, 802.) 42 In Bell II, a class of approximately 2,500 claims representatives suedtheir insurance company employer for unpaid overtime compensation. The employer asserted the representatives were exempt from overtime underthe administrative exemption. (Bell Il, supra, 115 Cal.App.4th 715, 720.) This defense wasrejected bythetrial court in an order granting the employees’ motion for summary judgment. (/bid.) On appeal, we upheld the court’s findingthat the plaintiff employees were nonexempt. (Bell v. Farmers Ins. Exchange (2001) 87 Cal.App.4th 805 [105 Cal-Rprt.2d 59].) Thereafter, the employerfiled two unsuccessful motions to decertify the class. (See Bell II, supra,at p. 721.) | Eachside then retained expert statisticians to address the damages phase ofthe trial. As noted previously, the plaintiffs retained Drogin, the same expert used by plaintiffs in the present case. (Bell III, supra, 115 Cal.App.4th 715, 722.) Ata trial managementhearing,the parties agreed to take depositions of a randomly chosen sample of 50 individuals as first step towards determining class-wide aggregate damages based on a representative sampling of class members. (Ibid.) The experts worked togetherto identify the sample sizes associated with preset absolute margins of error, ranging from 30 minutes to two hours of overtime per week. (Jd. at p. 723.) After the trial court suggested a one-hour margin of error would besatisfactory, the parties conducted more depositions and the experts concluded the one-hour margin could be achieved using a sample size of 286 plaintiffs. The parties ultimately deposed a total of 295 individuals and, after agreeing on the employees’ work patterns, the two experts calculated an average weekly overtime figure of 9.42 hours with a margin oferror of 0.9 hours per week, or approximately 9.6 percent asthe relative margin of error.54 ([bid.) A briefjury trial followed in which Drogin and Paul Regan (also retained by plaintiffs in the presentcase) testified for the plaintiffs and the employer’s statistician >! The relative margin of error was determined by dividing the absolute margin oferror by the estimated weekly hours as follows: 0.9/9.4=0.096, or 9.6 percent. (See Bell LI, supra, 115 Cal.App.4th 715, 723-724.) 43 testified for the employer. (Bell III, supra, 115 Cal.App.4th 715, 724.) The employers’ expert presented a case for using a median™ weekly overtime figure of 7.27 hours as opposedto the mean (average)figure of 9.42 hours advocated bythe plaintiffs. The jury returned a special verdict largely along the calculations arrived at by Drogin and Regan, including approximately $1.2 million in damages for unpaid double-time overtime compensation. (Id. at pp. 724-725.) The employer appealed. In Bell III, we noted our task had been madeeasier by the fact that the employer did notchallenge Drogin’s scientific methodologyor his qualifications. (Bell III, supra, 115 Cal.App.4th 715, 747.) Instead, the employer argued that the use of“statistical inference”violated its due process rights by relieving class members of the burden of proving they had worked overtime. (/d. at p. 749.) We rejected this argument: “[S]tatistical sampling does not dispense with proof of damagesbutrather offers a different method ofproof, substituting inference from membership in a class for an individual employee’s testimony of hours worked for inadequate compensation. It calls — for aparticular form of expert testimonyto carry the initial burden ofproof, not a change in substantive law.” (/d. at p. 750.) We performeda balancing analysis under Doehr and found the defendant’s interest was in the proper determination of its overall liability only, and not the amount of damages awarded to any particular class member. (Bell IU, supra, 115 Cal.App.4th 715, 751-752.) We foundtheplaintiffs had a strong interest in using statistical inference to resolve their claimsefficiently. (/d. at p. 752.) Wealso noted the defendant appeared to have conceded during trial managementhearings that a one-hour margin oferrorsatisfied its due process concerns. (/d. at p. 755.) We held the award for time-and-a-half overtime “reflected a level of accuracy consistent with due process under the Doehr balancing test.” (Ibid.) >? The medianis the middle value of a set of numbers arrangedin order ofsize. 44 We cameto the opposite conclusion with respect to the inclusion of double-time hours within the 9.4 average weekly hours ofunpaid overtime work. (Bell III, supra, 115 Cal.App.4th 715, 756-757.) The sample group’s average of 0.37 hours ofunpaid double- time was extrapolated to theentire class, resulting in an absolute marginof error of 0.12 hours, or about 32 percent. The distribution was highly skewed, as only 16 employeesin the sample group accounted for half of the double-time hours. (/d. at p. 756.) While margin of error alone doesnotafford a “bright-line constitutional distinction,”we observedthe parties’ experts had not offered “foundational calculations for the determination of double-time or propose[d] an appropriate class size, marginoferror, or sampling methodology.” (/bid.) Accordingly, we invalidated the double-overtime portion of the damages award. (/d. at p. 757.) | E. The Present Case Does Not Comport With Bell III The procedures we approved in Bell III are only superficially similar to the proceduresutilized in the present case.*4 Again, in Bell III we did not have occasionto considerthe use of a representative sample to determine class-wideliability, since liability was not an issue on appeal. Accordingly, the only issue we addressed wasthe damagescalculationitself, and not whether the plaintiff employees had a right to recover damagesin the first place. And our assessment was based on a record evidencing cooperation and agreement amongthe parties and their counsel. Second, we agree with USBthat the trial court here did not follow established statistical procedures in adopting its RWG-basedtrial methodology. In Bell LY, the size of the representative sample used asthe basis for calculating straight overtime damages was determinedafter extensive calculations had been made by expert statisticians based 53 We noted that a large margin of error “might conceivably be bolstered by evidence of a high responserate, probable distribution within the margin of error, absence of measurementerror, or other matters.” (Bell If, supra, 115 Cal.App.4th 715, 756.) 54 While it has becomeacceptable to use statistical inference in determining aggregate damages in aclassaction suit (e.g., 3 Conte & Newberg, Newberg on Class Actions (4th ed. 2002) § 10:3, pp. 479-482), it also is understoodthat the possibility of error involved in such an approach may exceed constitutional bounds. 45 on surveys of class members and pilot studies. Indeed, we rejected the double-overtime award, in part, because these surveys andpilot studies had failed to consider how to properly calculate such damages. (Bell III, supra, 115 Cal.App.4th 715, 756.) Similar concernsare presenthere, as the trial court chosethe size of the representative group without any consideration as to probable margin of error and withoutthe benefit of any surveysor pilot studies. Third, the expert witnesses in Bell I/I cooperated in manyaspectsrelating tgthe methodology for calculating damages,including agreeing to use the data from the employees’ work schedules andcollaborating to arrive at the appropriate sample size necessary to achieve the one-hour-per-week margin of error. No such cooperation occurred in this case as the expert witnesses never worked together. Fourth, it appears that the sampling donein the Bell IJ] case wasatall times random, unlike here where a comparatively high number ofRWG members opted out before trial, and the trial court allowed evidence from the two namedplaintiffs not randomly chosen to be extrapolated to the entire class. Fifth, the restitution award here was affected by a 43.3 percent margin of error, more than 10 percentage points above the margin oferror for the double-overtime award weinvalidated in Bell II. In absolute terms, the average weekly overtime hourfigure could conceivably be as low as 6.72 hours per week, as opposed to the 11.86 hour figure arrived at here. While we again will not set a bright line for when a margin oferror becomes so excessive as to be deemed unconstitutional, we are troubled by this result.” Finally, another factor present in this case that was not present in Bell Il] involves the repeated restrictions the trial court placed on USB’sability to present arguably relevant evidencein its defense. In BellIJ, we found only a single pretrial ruling that had significantly restricted the employer’s right to contest the plaintiffs’ proofof 55 It also appears that the claims procedures implementedin Bell /// were not used in this case. Rather than requiring absent class members to submit estimates of their average weekly overtime hours, each member was simply awarded the equivalent of 11.86 hours in overtime pay for each week they were employed as BBO’s. 46 damages,a ruling the employer did not challenge on appeal. (Bell III, supra, 115 Cal.App.4th 715, 759.) We also concluded the employer was not prejudiced by the procedures followed in that case. (Ibid.) Unlike Bell II, in which the employer had acquiescedto statistical proof of damages and had waivedthe right to impeach the. employees’ testimonyattrial, (id. at pp. 757-759), USB steadfastly and repeatedly objected to all phases of the trial management plan. Contrary to plaintiffs’ contention, we do not agree USB waivedits objection to specific aspects of the plan byits “total oppositionto statistical methodology.” Nor doesit follow, even ifUSB did resist efforts to cooperate, that the trial court was compelled to use the methodology it ultimately . selected. In sum,plaintiffs’ reliance on Bell I] is misplaced. Here, as we explain further below,the trial court exceeded acceptable due process parameters bylimiting the presentation of evidenceofliability to the testifying BBO’s only. Fundamental due processissues are implicated not only by the unprecedented and inconsistentuse ofstatistical proceduresin the liability and damages phases, but also by the manner in which USB was hobbledin its ability to prove its affirmative defense. Underthe court’s plan, as reinforced by its rulings on motionsin limine and related evidentiary matters, USB wasbarred from introducing manifestly relevant evidence.** This evidence potentially could have greatly mitigated the damages awarded and possibly could have defeated plaintiffs’ class action claim entirely. F. State and Federal Case Law Does Not Support This Use ofRepresentative Sampling USB claims California law precludes class-wide liability determinations based on evidence obtained from a representative sample in employmentcasesalleging misclassification. USB relies on several state and federal wage and hour class action cases for the proposition that surveying, sampling,andstatistics are not valid methods of determining liability because representative findings can never be reasonably °° Plaintiffs acknowledge that USB “consistent with thetrial plan, could not introduce evidence about class members outside the RWG group.” 47 extrapolated to absent class membersin misclassification claims given that time spent performing exempt tasks may differ between employees.” While all the cases cited by. USBinvolverulings on motionsto certify or decertify class actions, they support the | . conclusion that improper procedures were followedin this case. Jimenez v. Domino’s Pizza, Inc. (C.D.Cal. 2006) 238 F.R.D. 241, involved certification under rule 23 of the Federal Rules of Civil Procedure (28 U.S.C.) (Rule 23) on behalfof a class of general managersallegingfailure to pay overtime wages and 58 provide rest or meal periodsin violation of California law. (Jimenez, supra, at pp. 245- 246.) The plaintiffs claimed the employer improperly classified them as executive, administrative, and professional employees though they regularly spent the majority of their time performing nonexemptfunctions, such as preparing food and cleaning the stores. (Id. at p. 246.) The district court deniedcertification, explaining that the plaintiffs’ proposedtrial plan of using surveys and representative testimony to prove misclassification would not avoid the need to conduct individualized inquiries, in part because the employer defendant would have hadtheright “to cross-examine each general manager to determine whetherthereis liability as to that specific person.” (Jd. at p. 253.) This case supports the premise that whenliability for unpaid overtime depends on an employee’s individual circumstances, employer defendants retain the right to assert the exemption defense as to every potential class member. | In Walsh two account managersfiled a class action lawsuit against their former employer. Similar to the presentcase, the defendant in Walsh had allegedly wrongly °7 “The law governing California class actions is comprised of a mixture of federal and state law: California law controls if it exists. Otherwise, ‘ “[i]n the absence of California authority, California courts may look to the Federal Rules of Civil Procedure (FRCP) andto the federal cases interpreting them [citation].” [Citation.]’ [Citation.]” Un re BCBG Overtime Cases (2008) 163 Cal.App.4th 1293, 1298 [78 Cal.Rptr.3d 257].) >8 Class actions in federal court brought under rule 23(a) of the Federal Rules of Civil Procedure (28 U.S.C.) must meetthe following four prerequisites for class certification: “(1) the classis so numerousthat joinder of all members is impracticable; [{]J (2) there are questions of law or fact commonto the class; [{] (3) the claims or defensesofthe representative parties are typical of the claimsor defenses ofthe class; [§] and (4) the representative parties will fairly and adequately protect the interests of the class.” (Fed. Rules Civ.Proc., rule 23(a), 28 U.S.C.) 48 classified these employees as exempt from overtime wage laws underthe outside salesperson exemption. (Walsh, supra, 148 Cal.App.4th 1440, 1445-1446.) After the trial court certified a class action, the employer moved to decertify an account manager subclass, contending common questions of law and fact did not predominate over individual issues. The employer presented evidence that performanceofthe managers” primary functions varied significantly, depending uponterritory, number of customers and job orders, support from customerservice representatives, and the personal approach of each manager. (Id. at p. 1455.) Thetrial court granted the motion to decertify. (/d. at p. 1452.) The Court of Appeal concluded that the Supreme Court’s decision in Sav-On, supra, 34 Cal.4th 319 [reversing a Court ofAppeal decision that had overturned trial court’s class certification order] did notstrip the trial court of its discretion to consider whetherfactual variations among individual employees rendered the class action device an inferior method of adjudicating the claims. (Walsh, supra, 148 Cal.App.4th 1440, 1458.) Again, this case clearly supports the premise that due process principles require individualized inquiries where the applicability of an exemption turns on the specific circumstances of each employee, even in cases where the employer’s misclassification may be willful. In Dunbarthis court affirmeda trial court’s order denying a motion for ~ certification in an overtime wage-and-hourcase involving the executive exemption. The trial court in Dunbar had acknowledged there were issues commonto the putative class of store managers, such as whether stocking shelves and operating cash registers are managerial tasks. However, the trial court indicated that the tasks performed across the eesclass were so dissimilar that it could not ‘reasonably extrapolate findings from the namedplaintiff to the absent class members.’ ” (Dunbar, supra, 141 Cal.App.4th 1422, 1430.) In concludingthetrial court properly considered the manageability of individualized issues, we observed:“It is not sufficient, in any event, simply to mention a procedural tool; the party seeking class certification must explain how the procedure will effectively manage the issues in question, and the plaintiff has failed to do so here.” (/d. 49 at p. 1432.) Again, this case supports the view thatthe use of sampling to extrapolate liability in an exemption context can be problematic.” In In re Wells Fargo Home Mortg. Overtime Pay Lit. (9th Cir. 2009) 571 F.3d 953 (Wells Fargo I), the Ninth Circuit reversed a class certification order, finding the district court had placed undue weight on the defendant’s uniform policy of classifying mortgage consultants as exempt. (Id. at p. 959.) The lower court had found numerous individualized inquiries would be necessary to resolve the matter but ultimately granted certification based on the defendant’s uniform exemption policies. (Jd.at p. 956.) On appeal, the Ninth Circuit held the lower court had erred in relying so heavily on the internal exemption policy in the face of admittedly serious issues regarding individual variations amongtheplaintiffs’ job duties and experiences. (/d. at p. 959.) The reviewing court emphasized that regardless of whether such a policyis in place, “courts must still ask where the individual employees actually spenttheir time” (ibid.) in determining whether overtime laws have been violated. On remandafter the decision in Wells Fargo I, Judge Patel determined class certification was not warranted. (In re Wells Fargo Home Mortg. Overtime Pay Lit. (N.D.Cal. 2010) 268 F.R.D. 604 (Wells Fargo Il). Significantly, for our purposes, the court rejected the plaintiffs suggestion that time-consuming individualized inquiries could be avoided by using random sampling of class members to determine whether the class, as a whole, qualified for any of the asserted exemptions, including the outside salesperson exemption. (Jd. at p. 612.) The court observed:“In orderto adjudicate Wells Fargo’s exemption defenses, especially the outside sales person exemption, a substantial quantity of individual inquiries will be necessary. Although there are someissuesinthis » Importantly, both Walsh and Dunbar were decidedbefore the instant case waslitigated in the trial court, yet neither case was discussedin the rulings by the trial court below. 50 case amenable to commonproof, individual inquiries will predominate over common questions.”(Id.at p. 613,italics added.) . Wefind the opinion in Wells Fargo II to be particularly instructive. In Wells Fargo II, the plaintiffhad hypothesizeda trial scenario in which, out of 30 testifying employees, 27 were found to be nonexemptwith an average of eight hours of overtime per week. Citing this hypothetical, the court concluded the proposed plan was inadequate: “Assumethat the court permitted proofthrough random sampling ofclass’ members, andthatthe data,in fact, indicated that one out of every ten [class members]is exempt. How would the finder of fact accurately separate the one exempt[class member] from the nine nonexempt [class members] without resorting to individual mini-trials? Plaintiff has not identified a single case in which a court certified an overbroadclass that included both injured and uninjured parties... . In fact, the court has been unable to locate any case in which a courtpermitted a plaintiffto establish the nonexempt status of class members, especially with respect to the outside sales exemption, throughstatistical evidence or representative testimony. ... Although ‘the decision to use [statistical sampling] tools is within the discretion of the district court,’ in this case, they would be of extremely limited help to resolving the key issues. [Citation.]” (Wells Fargo II, supra, 268 F.R.D. 604,612,italics added.) G. The Sampling Plan Used Here Was Flawed The procedural flaws anticipated by the state and federal courts in the opinions summarized above appearto have been fully realized in the presentcase. In thefirst place, there wasnostatistical foundation for the trial court’s initial assumption that 20 out of 260 is a sufficient size for a representative sample by which to extrapolate either Rule 23(b)(3) of the Federal Rules of Civil Procedure (28 U.S.C.) allowsa class action to be certified provided a court finds “that the questions of law or fact common to class members predominate over any questions affecting only individual members, and thata class action is superior to other available methods for fairly and efficiently adjudicating the controversy.” *! The court noted thatits analysis might have been different had the plaintiff included a statistical study in support of her motion. (Wells Fargo I, supra, 268 F.R.D. 604,612, fn. 2.) Si liability or damages. Neither party proposed trial plan based solely on the selection of a representative groupofplaintiffs, let alone a group of 20. The court appears to have arrivedat this procedure on its own, withoutreliance on legal precedent or the advice of, expert witnesses. In their brief on appeal,plaintiffs state that the trial court “ultimately adopteda trial managementplan modeled on Dr. Drogin’s proposal.” While Drogin did proposetheuse ofrepresentative testimony from a randomly selected group ofplaintiffs, Drogin did notoffer any advice asto the size of the group. Further, Drogin indicated that the group wasto be selected only after a survey of the BBO’sduties and hours had been conducted.” As we have shown above,courts are generally skeptical of the use of representative sampling to determineliability, even in cases in whichplaintiffs have proposed using expert testimony andstatistical calculations as the foundations for setting the sample size. Here, the trial management plan was lacking in any expert input or principledstatistical foundation.” Wenote whilethis appeal waspending, the United States Supreme Court issued its opinion in Wal-Mart Stores, Inc. v. Dukes (2011) 564U.S.___,___s[1800 L.Ed.2d 374, 131 S.Ct. 2541] (Wal-Mart). The court reversed a Ninth Circuit order that had affirmed the certification of a class consisting of some 1.5 million female employees who claimed ®? In a footnote, Drogin posed the following scenario: “For example, suppose that results of the questionnaire show 90% of class membersare misclassified as exempt. Further, suppose that the random sample included 50 class members, and 80% of the random sample were misclassified as exempt according to the questionnaire responses,but the court ruled that only 72% of the sample were misclassified. Then, the adjustment factor would be 72%/80% = 0.90andthe resulting estimate of percentage misclassified in the class as a whole would be 90%*(0.90) = 81%.” This is exactly the kind ofcalculation Judge Patel faulted in Wells Fargo II, supra, 268 F.R.D. 604, 612. 63 See 1 Saks, Modern Scientific Evidence: The Law and Science of Expert Testimony (2010- 2011), section 5:17, stating that in orderto yield valid results the size of a sample should be based on three factors: (1) “The homogeneity of the variable to be measured in the population;” (2) “[h]ow narrowly the researcher needs to zero in on the answer”(the desired margin of error), and (3) “[h]ow confident the researcher needsto bethat the obtained range around the population parameters is correct” (the desired confidenceratio). Here, none of these factors was taken into account in connection withthe initial selection of the 20-person RWG. 52 they had suffered discriminatory treatment.” The court found representative sampling studies did not justify certification. Quoting from the dissenting opinion below,the court stated “ ‘(i]nformation about disparities at the regional and national level does not establish the existence of disparities at individualstores, let alone raise the inference that a company-wide policy. of diserimination is implemented by discretionary decisionsat the store anddistrict level.’ [Citation.] A regional pay disparity, for example, may be attributable to only a small set of Wal-Mart stores, and cannotbyitself establish the uniform, store-by-store disparity upon which theplaintiffs’ theory of commonality depends.” (Wal-Mart, supra, 564U.S.___,_ [180 L-Ed.2d 374, 394.) After discussing the trial procedures that apply to pattern-or-practice cases, including the right of a defendantto raise any individual affirmative defenses (Wal-Mart, supra, 564U.S.__,_ [180 L.Ed.2d 374, 399-400), the court took issue with procedures the Ninth Circuit had authorized: “The Court of Appealsbelieved that it was possible to replace such proceedings with Trial by Formula. A sampleset of the class members would be selected, as to whomliability for sex discrimination and the backpay owing as a result would be determined in depositions supervised by a master. The percentage of claims determined to be valid would then be applied to the entire remaining class, and the numberof (presumptively) valid claims thus derived would be multiplied by the average backpay award in the sampleset to arriveat the entire class recovery— without further individualized proceedings. [Citation.] We disapprove that novel project. ... [A] class cannot be certified on the premise that Wal-Mart will not be entitled to litigate its statutory defenses to individual claims.” (Wal-Mart, supra, 564U.S. [180 L.Ed.2d 374, 400, italics added.) The same type of “Trial by Formula”that the U.S. 64 Interestingly, Drogin wasalso involved in the Wal-Mart case: “Drogin conducted his analysis region-by-region, comparing the number of women promoted into managementpositions with the percentage of womenin the available pool of hourly workers. After considering regional and national data, Drogin concludedthat ‘there are statistically significant disparities between men and women at Wal-Mart . . . [and] these disparities . . . can be explained only by gender discrimination.’ [Citation.]” (Wal-Mart, supra,564U.S.__,__—«(180 L.Ed.2d 374, 393.) 53 Supreme Court disapproved of in Wal-Martis essentially what occurredin this case.It is important to appreciate this portion ofthe Wal-Mart opinion wasthe expression of a unanimouscourt. For reasons Judge Patel wisely foresaw, wefind this approach to be untenable. II. The Trial Procedure Denied USB Its Right to Due Process USBclaimsthe trial court’s refusal to allow USB to introduce evidence to challenge the claims ofthe other 239 class membersviolated its due process rights. We agree. A. The Evidence USB Sought to Introduce Was Relevant As outlined above, USB repeatedly attempted to introduce evidence pertaining to non-RWGclass members, including those for whom USBhadoffered specific evidence refuting their potential claims for recovery, such as sworn declarations and/or deposition testimony in which they averred to having spent the majority of their time outside the office. USB notes the judgment awards an average of over $50,000 to each absentclass member, notwithstanding that USB offered evidence that potentially could have prevented, at a minimum, approximately one-third of these individuals from receiving any recovery. The four former namedplaintiffs who testified at their depositions that they spent morethan half their time outside the office (strongly suggesting they were properly classified as exempt), were together awarded over $160,000 in overtime compensation.” Yet the trial court excluded their testimonyat trial on the groundthatit was “irrelevant” because it did not comport with the court’s trial plan. Unfortunately, relevancy wasdictated by the court’s trial plan rather than bythetrial itself as it unfolded in the courtroom. 65 While Wal-Mart is not dispositive of our case, we agree with the reasoning that underlies the court’s view that representative sampling maynotbe used to prevent employers from asserting individualized affirmative defenses in cases where theyare entitled to do so. °6 USB points outit unsuccessfully attempted to introduce the sworn statements it had obtained from 78 class membersrefuting misclassification, members who are nowslated to recover at least $6 million from USB,including prejudgmentinterest. 54 Weagree with USBthat the evidence it sought to introduceis highly relevantin this misclassification case. Under Evidence Codesection 351 “Except as otherwise providedbystatute,all relevant evidence is admissible.” “ ‘Relevant evidence’ means evidence, including evidence relevantto the credibility of a witness or hearsay declarant, having any tendencyin reason to prove or disprove any disputed fact thatis of consequence to the determination ofthe action.” (Evid. Code,§ 210.) “Although proffered evidence may have somerelevance, ‘[t]he [trial] court in its discretion may exclude evidenceifits probative value is substantially outweighedby the probability that its admission will (a) necessitate undue consumption of time or (b) create substantial danger of undueprejudice, of confusing the issues, or of misleading the jury.” (§ 352.) Wereview trial court’s evidentiary rulings for an abuse of discretion.” (Winfred D.v. Michelin North America, Inc. (2008) 165 Cal.App.4th 1011, 1026 [81 Cal.Rptr.3d 756].) The evidence USB soughtto introduce, if deemed persuasive, would have established that at least one-third ofthe class was properly classified. Thus, this evidence USB soughtto introduce is unquestionably relevant and therefore admissible.” “Describing a party’s fundamental right to present evidenceattrial in a civil case, Witkin observes: ‘One of the elementsofa fair trial is the right to offer relevant and competent evidence on a material issue. Subject to such obvious qualifications as the court’s power to restrict cumulative and rebuttal evidence... , and to exclude unduly prejudicial matter [citation], denial of this fundamentalright is almost always considered reversible error. [Citations.]’ [Citation.]... [A] party’s opportunity to call witnessesto testify and to proffer admissible evidenceis central to having his or her day in court.” (Elkinsv. Superior Court (2007) 41 Cal.4th 1337, 1357 [63 Cal.Rptr.3d 483, 163 P.3d 160].) ~ Plaintiffs claim the trial court properly refused to admit the declarations because they lacked credibility in light of “ ‘their actual authorship, the circumstances of preparation and internal inconsistencies and ambiguities.’ ” They also claim USB offered °” The hearsay rule does not prevent the admissionof statements made by a party opponent. (See Evid. Code, § 1220.) 55 the declarations after the close of evidence, and that they had already been excluded in motionsin limine “because of incompatibility with the trial plan.” USB cannotbe faulted for offering the declarationsafter the close of evidence, since they were excluded by the . pretrial rulings. Further, the weight accorded to the declarations could have been — addressedafter the evidence wasintroduced,rather than preemptingits introduction entirely.” Further, to the extent deemed inconsistent with the trial plan, we note our Supreme Court has observed “That a procedure is efficient and movescases through the system is admirable, but even more importantis for thecourts to provide fair and accessible justice.” (Elkins v. Superior Court, supra, 41 Cal.4th 1337, 1366 [marital dissolution proceeding].) We concludethetrial court erred in foreclosing USB the opportunity to raise individualized challenges to the absent class members’claims. _ B. The Error Is Prejudicial “Trial court rulings on the admissibility of evidence, whetherin limine or during trial, are generally reviewed for abuseofdiscretion. [Citations.] “Thetrial court’s error in excluding evidence is groundsfor reversing a judgmentonly if the party appealing demonstrates a “miscarriage ofjustice’—thatis, that a different result would have been probableifthe error had not occurred.’ [Citations.]” (Pannu v. Land Rover North America, Inc. (2011) 191 Cal.App.4th 1298, 1317 [120 Cal.Rptr.3d 605].)” Here, USB wasnot entirely prevented from presenting evidence in support of its defense, but the deprivation was profound. “The erroneousdenial of somebut notall evidence relating to 68 « ‘The term “due process of law” asserts a fundamental principle ofjustice whichis not subject to any precise definition but deals essentially with the denial of fundamentalfaimess, shockingto the universal sense ofjustice.’ [Citation.] ‘ “Thetrial of a case should not only be fair in fact, but it should also appearto befair.” [Citations.] A prime corollary of the foregoing tule is that “A trial judge should not prejudge the issues but should keep an open mind untilall the evidence is presented to him.” ’ [Citation.]” (Jn re Marriage ofCarlsson (2008) 163 Cal.App.4th 281, 290-291 [77 Cal.Rptr.3d 305}.) 6° “Nig judgmentshall be set aside, or newtrial granted, in any cause, on the ground of misdirection of the jury, or of the improper admissionorrejection of evidence, or for any error as to any matter of pleading, or for any error as to any matter of procedure, unless, after an examination of the entire cause, including the evidence,the court shall be of the opinion that the error complainedofhas resulted in a miscarriage ofjustice.” (Cal. Const., art. VI, § 13.) 56 a claim [citations] differs from the erroneous denial of all evidence relating to a claim .... In the formersituation, the appellant must show actualprejudice; in the latter situation, the erroris reversible per se.” (Gordon v. Nissan Motor Co., Ltd. (2009) 170 Cal.App.4th 1103, 1115 [88 Cal.Rptr.3d 778].) In granting plaintiffs’ motions in limine restricting the evidence USB would be allowedto present, the trial court effectively prevented USB from establishingits affirmative defense as to class-wide liability. The record on appeal supports the inference that a large percentage of the absent class memberplaintiffs were properly classified and that USB did not owe them any overtime pay. Thus, there is a reasonable probability that in the absenceofthe error, USB would have received a more favorable result.” In large part, the trial court appears to have relied on the lack of a uniform policy requiring BBO’sto spend the majority oftheir time outside the office. In Vinole v. Countrywide Home Loans, Inc. (9th Cir. 2009) 571 F.3d 935, issued on the same day as its opinion in Wells Fargo I, the Ninth Circuit discussed the types of common proofthat could suffice to establish the predominance of commonissues. While an employer’s “uniform application of an exemption to employees”is one factor, district courts should also consider “whether the employer exercised somelevel of centralized control in the form of standardized hierarchy, standardized corporate policies and procedures governing employees, uniform training programs, and other factors susceptible to common proof.” (Vinole, supra, at p. 946.) In discounting USB’s claims that BBO’s weredirected to 7° USB draws our attention to non-RWG memberNicholas Sternad, whotestified at a deposition that he performed exempt administrative and outside sales duties. At the hearing held on May 23, 2005, the trial court granted plaintiffs’ summary adjudication motion to disallow the administrative exemption. Thetrial court refused to give weight to Sternad’s testimony, apparently believing that his wasan isolated case: “[T]he supplemental evidence showsnothing more than that one employee performed duties and activities not listed on Defendant’s BBO job description nor remotely similar to Defendant’s own expectations of duties and activities for the BBOposition ....” In its supplementalbrief in support of the motion for summary adjudication, plaintiffs claimed Sternad ceasedperforming BBO duties in October 2002. Ultimately, Sternad was awarded about $450,000 (including prejudgmentinterest) as “restitution,” covering the entire period of his employment, from 1997 to the present, includingfor the period after October 2002. 57 spend the majority oftheir time outside their branch offices, the trial court emphasized “the amount ofwork time BBO’sarein or out of bank locations is not monitored or tracked in any way.” If this is the case, however, it follows that the only way to determinewith certainty if an individual BBO spent moretime inside or outside the office would be to question him orher individually. Fundamentally, the issue here is not just that USB was prevented from defending each.individual claim but also that USB was unfairly restricted in presenting its defense to class-wide liability. With that in mind,the cases relied on by plaintiffs are inapposite. Both Longv. Tirans World Airlines, Inc. (N.D.Il. 1991) 761 F.Supp. 1320 [protective order limited discovery of information from plaintiff flight attendants to a representative sample of class members], and Jn re Antibiotic Antitrust Actions (S.D.N.Y. 1971) 333 F.Supp. 278 [states sought recovery for alleged overchargesin the sale ofcertain antibiotics], concerned the damagesphaseofa trial, not the liability phase. Plaintiffs also claim the declarations were properly excluded because manyofthe declarations were repudiated by the BBO’s whosigned them. According toplaintiffs, there was evidencethatfive of the 10 plaintiff declarants referenced by USBinits appellate brief were, in fact, misclassified. That some ofthese declarations were later repudiated by their authors does not meantheyare not relevant to USB’s defense. Further, plaintiffs do not account for the prior four namedplaintiffs who all testified in their depositions that they spent more than half their time outside the office. This evidence, in our view,is both relevant and highly probative as to USB’s affirmative defense. . Plaintiffs declare: “At bottom, this appeal is about whetherthe class action will survive as an effective method to try wage and hour misclassification cases.” We doubt the situation is quite this dire. Bell IJ] itself was a class action involving wage and hour 7”! While we recognizethetrial court believed the overall requirements of the job could not be metif a BBO spent more than half of his or her work timeoutside the office, USB did offer to produce evidence in its defense that could have shownat least some portion of the class was properly classified. 58 misclassification, suggesting that not all such cases are doomedto failure under current law. Plaintiffs also claim it would take 520 days to completea trial of all 260 class" members’ claims, and arguethetrial court here “did exactly what this court and the California Supreme Court have been urging for years” in attempting to efficiently dispose of these claims. To the contrary, we have never advocated that the expediency afforded by class action litigation should take precedence over a defendant’s rightto substantive and procedural due process. C. Application ofthe DoehrTest to the Present Case The denial of due process that occurred hereis sufficient to satisfy the three-part Doehrtest. The private interest at issue here is approximately $15 million in back wages “and prejudgmentinterest that USB is compelled to pay under the judgment. This is clearly a significant interest and thus this factor weighs in favor ofUSB. With respectto the risk of erroneous deprivation through the procedures under attack and the probable value of additionalor alternative safeguards, we conclude thetrial court’s managementofthis case created a high risk that USB will be compelled to pay moneyto absent plaintiffs who may notbe entitled to recovery, either because they generally came within the outside salesperson exemption duringtheir tenure with USB, or because they never worked overtime. Thetrial court forbade USB from introducing evidence as to any non-RWGclass member’s right to recover, notwithstanding the 70- plus declarations that had been signed, under penalty of perjury, by BBO’sattesting they were properly classified. A fair procedure would have allowed USBthe opportunity to inquire into the specific circumstances of these absent class members. Further, even assumingthe entire class is entitled to recover unpaid overtime, the method of determining the restitution owed failed to comport with established statistical principles and resulted in such a high margin oferror as to render the judgmentconstitutionally infirm. With respect to the probable value of additional or alternative safeguards, we can envision procedures that would have lessened the danger of an erroneous result. In striking the double overtime award in Bell II, we noted that under Doehr “the absence of 59 evidence regarding possible alternativesis relevant not only to the risk of error but also to the ancillary governmentinterest in the procedure. The government cannot have an interest in a procedure if superior alternative procedures are available.” (Bell III, supra, 115 Cal.App.4th 715, 756-757.) . | As to the final prong of the Doehrtest, plaintiffs in this case have a stronginterest in obtaining redress from USB. Wealso do not gainsay the substantial.governmental interest in conserving scarcejudicial resources. Class action lawsuits are intended to conserve judicial resources and to avoid unnecessarily repetitive litigation. Efficiencies must be maintained, sometimes resulting in imperfect results. A certain amount of variability can be tolerated. However, the trial managementplan followed here prevented USBfrom submitting any relevant evidence in its defense as to 239 class membersout of a total class of 260 plaintiffs. Whether the trial court would have given credence to such evidence is beside the point. A trial in which oneside is almost completely prevented from making its case does not comport with standards of due process. In sum,the court erred when,in the interest of expediency, it constructed a set of groundrules that unfairly prevented USB from defending itself. These ground rules were the productofthe trial court. We do not suggest that the implementation of any particular additional procedural tool would have satisfied due process. We simply hold that the court, having agreed to try this matter as a class action, denied USB the opportunity to defenditself by flatly foreclosing the admission of potentially relevant evidence. Il. The Authority Relied on by Plaintiffs is Distinguishable Plaintiffs refer us.to Dilts v. Penske Logistics, LLC (S.D.Cal. 2010) 267 F.R.D. 625, 638 (Dilts), in which the district court found the use ofstatistical sampling would be an “acceptable method”to proveliability in a class action. The court in Dilts first noted that “California and Federal courts have not discouraged the use ofstatistical sampling in determining class member damages.” (Ibid.) Asto liability, the court stated “the use of statistical sampling, at least when paired with persuasive direct evidence, is an acceptable method of proofin a class action. [Citation.] Thus, certification will not be denied 60 simply becausePlaintiffs anticipate using representative evidenceat trial.” (Jbid., italics added.) While we do not disagree with the proposition thatstatistical samplingis a tool that may be utilized in appropriate cases,it does not follow thatit was proper for the trial court in this case to limit presentation ofUSB’saffirmative defensesolely to the 21 membersofthe representative group.” Dilts also concerneda case atthecertification stage. The district court in that case had not yet developed or approvedofa particulartrial plan, observing thatat this stage of the proceedings,“the exact details of [the employees’] plan are unnecessary to determine whether commonissues predominate in this matter.” (267 F.R.D. 625, 638.) The court merely allowed for the possibility that the plaintiffs, with help from their expert witness, would be able to come up with an acceptable trial plan based on representative testimony, and found that the use of representative testimony was notperse a violation of the defendant’s due processrights. Ud. at p. 639.)In sum, Dilts does not persuade us that the procedures followedbythetrial court after the initial certification in the present case are satisfactory. 7 «IUInder current law sampling is a practical option only at the damagesstage. There is no conceptual obstacle to using sampling to measureliability, but it would require’a major changein tort law. Tort liability is binary: a defendantis either liable or not, and if liable, the defendant must compensate the plaintiff in full. At best, sampling applied to liability can only provide an estimate of the probability that defendantis liable to any plaintiff in an arbitrarily chosen case. This estimate equals the numberofliability verdicts divided by the total number of sample cases. Thus, sampling could be used to determineliability only if the tort law recognized probabilistic liability measures.” (Bone, Statistical Adjudication: Rights, Justice, and Utility in a World of Process Scarcity (1993) 46 Vand. L.Rev. 561, 597.) 73 In another case from the same district, the court granted a motion to decertify an employment class action that, in part, sought overtime compensation for a subclass of managers. (Weigelev. FedEx Ground Package System, Inc. (S.D.Cal. 2010) 267 F.R.D. 614, 617.) Theplaintiffs proposed to determineliability by use of random sampling of subclass members whose testimony would be extrapolated to the entire subclass of managers. (Jd. at p. 624.) The court noted: “The major problem with this proposalis that it would likely require a large number of testifying witnesses and no clear or easy mannerof determiningliability.” (Jbid.) The court also notedthat the plaintiffs could call fewer witnesses using a reduced level of confidence; however, “as the level of confidence decreases,it becomes increasingly problematic to rely on the results of sampling to extrapolate to the whole class.” (/bid.) The court concludedthat logistical difficulties and uncertain class treatment was not a superior method of resolving the litigation. (Id. at p. 625.) : 61 Plaintiffs also point to several federal cases that we cited to with approval in Bell IIT: In re Chevron U.S.A., Inc. (5th Cir. 1997) 109 F.3d 1016 (Chevron), Inre Simon II Litigation (E.D.N.Y. 2002) 211 F.R.D. 86 (Simon ID), and Hilao, supra, 103 F.3d 767. Those casesalsofail to validate the procedures followed bythetrial court in this case. The class in Hilao was composedofroughly 10,000 Philippine nationals who had - been tortured, summarily executed or “disappeared”by the regime of Ferdinand E. Marcos. (Hilao, supra, 103 F.3d 761, 771-772.) After liability and exemplary damages had been determinedby a jury in the first two phasesofthe trifurcated proceeding,the court permitted compensatory damagesto be extrapolatedto the class as a whole on the basis of 137 claims that were randomlyselected and tried. (/d. at pp. 782-784.) The numberofclaims was chosenafter an expert in statistics testified that the examinationof a random sample of 137 claims would achieve “ ‘a 95 percentstatistical probability that the same percentage determinedto be valid among the examined claims would be applicable to the totality of claimsfiled’.” (/d. at p. 782.) Unlike Hilao, here the trial court used a random sample group to determine liability as well as to determine the foundationalfigures to be used in extrapolating restitution to the entire class. The numberof sample members was chosen withoutthe inputof anystatistical expert. Moreover, USB did not waive any challenge to the computation ofrestitution. The trial court’s use of this sampling procedure to determine both liability and monetary recovery appearsto be entirely unprecedented.” Wealso note that the class here is comprised of 260 members, not the 10,000-plus members in Hilao, suggesting that it would not have been impossible, even within the framework of 74 We note the Supreme Court in Wal-Mart acknowledged Hilao, but ultimately did not findit persuasive: “Finally, the Court of Appeals determinedthat the action could be manageablytried as a class action because the District Court could adopt the approach the Ninth Circuit approved in [Hilao].... The Court of Appeals [in the opinion below] ‘s[aw] no reason whya similar procedure to that used in Hilao could not be employedin this case.’ [Citation.] It would allow Wal-Mart ‘to present individual defenses in the randomly selected “sample cases,” thus revealing the approximate percentage of class members whose unequal pay or nonpromotion was dueto something other than genderdiscrimination.’ [Citation.]” (Wal-Mart, supra, 564U.S._,__ [180 L.Ed.2d 374, 388.) 62 _ this class action lawsuit, to conduct some type ofindividualized inquiries as to each plaintiff's entitlement to damages. Chevronis also not favorableto plaintiffs. That case concerneda tort claim for industrial pollution ofa residential subdivision. Thetrial plan “providedfor a unitary trial on the issues of ‘generalliability or causation’ on behalf of the remaining plaintiffs, as well as the individual causation and damageissuesofthe selected plaintiffs, and ordered the selection ofa bellwether group ofthirty (30) claimants, fifteen (15) to be chosen bythe plaintiffs and fifteen (15) to be chosen by Chevron.” (Chevron, supra, 109 F.3d 1016, 1017.) The goalofthis trial “was to determine its liability, or lack thereof, in a single trial and to establish bellwether verdicts to which the remaining claims could be matchedfor settlement purposes.” (/bid.) The Fifth Circuit found the district court’s plan to be invalid. (Chevron, supra, 109 F.3d 1016, 1021.) The court wasparticularly concerned that the district court’s trial plan was “devoid of safeguards designed to ensure that the claims against Chevron ofthe non-represented plaintiffs as they relate to liability or causation are determined in a proceedingthat is reasonably calculatedto reflect the results that would be obtained if those claims were actually tried.” (Jd. at p. 1020.) Instead, the court found the procedure created potential liability to 3,000 plaintiffs “by a procedure that is completely lacking in the minimallevelofreliability necessary for the imposition of suchliability.” (/bid.) The court focused its concern on the nonrepresentative nature of the bellwether sample group. (/d. at pp. 1020-1021.) | While the trial court here did not follow the trial plan faulted in Chevron,it still failed to comport with thereliability standards annunciated in that decision. Here,the sample used as the basis for the RWG wasnot a true random sample becauseit included the two namedplaintiffs, who were not selected as part of the initial sample. Nor can we say with confidence that the sample wasa “statistically significant” one, in that the 20- person figure wasselected bythe trial court with no input from any expert witness asto 63 its representativeness for extrapolation purposes.’ Accordingly, we must disagree with plaintiffs’ assertion that“the trial plan in the instant case properly applied well-accepted principlesofstatistical inference and representative testimony.” SimonIZ is also distinguishable, in part because it involved hundredsofthousands of potential plaintiffs. (Simon II, supra, 211 F.R.D.86, 153.) Further the defendantin that case wasnotrestricted to the sample group members in 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 andthepractical considerationsoftrial management.” (Jd. at p. 154.) Thedistrict court recognized that “Experts have developed appropriate modeling techniques for reachingstatistically significant and reliable conclusions.” (/d.at p. 153.) In Bell III, we recited thispassage in support ofthe general proposition thatthere is “little basis in the decisional lawfor a skepticism regarding the appropriatenessofthe scientific methodology ofinferential statistics as a technique for determining damages in an appropriate case.” (Bell III, supra, 115 Cal.App.4th 715, 755, italics added.) We did not cite to Simon I in support of the proposition that Jiability determinations in class actions . may be made byextrapolating from a random sample,particularly where the sampling methodology was derived withoutthe benefit of expert statistical advice. IV. The 43.3 Percent Margin ofError USBclaims the results obtained in the present case are so unreliable as to render the judgment unconstitutional, emphasizing the 43.3 percent margin of error. We note the spread between Drogin’s high-end and low-endestimates for the number of weekly overtime hours worked per employeeis 10.28 hours.”® Setting aside issues of whether 75 “tow many cases need to be sampled? This dependsin large part on the variability of the population. The more diverse the population, the larger the sample must be in orderto reflect the population accurately. The more homogeneousthe population,the fewer cases that need to be sampled.” (Saks & Blanck, Justice Improved: The Unrecognized Benefits ofAggregation and Samplingin the Trial ofMass Torts (1992) 44 Stan. L.Rev. 815, 842.) 76 The absolute margin oferror here (11.86 minus5.14) equals 6.72 (low range); 11.86 plus 5.14 equals 17.00 (high range); 17.00 minus 6.72 equals 10.28. If the 6.72 low range figure is 64 the sampling method wasinvalid as a meansofproving liability, a due process violation is clearly implicated where the method for determiningrestitution has the potential to increase a defendant’s aggregate liability by close to double that which would be warrantedifthe low end of the margin were applied. (See Bell II, supra, 115 Cal.App.4th 715, 751-753; Hilao, supra, 103 F.3d 767, 786.) USBclaimsthetrial court’s reliance on the factors we mentioned in dicta in Bell IT, when wedeclined to create a bright-line rule for when a margin of error becomes unconstitutional, are not present here and could not salvage the result obtained here even if they were. As noted above,in Beil II] we stated: “The reliability of an estimate subject ; toa large margin of error might conceivably be bolstered by evidence of a high response rate, probable distribution within the margin of error, absence ofmeasurementerror, or other matters.” (Bell III, supra, 115 Cal.App.4th 715, 756.) Thetrial court found a high responserate in that 19 out of the 20 RWG memberstestified, there was no measurement error because the court’s findings were “facts” that Drogin extrapolated from, and because the inadmissible Krosnick survey servedas the basis for determining probable distribution. First, USB correctly notes that the passage in Be// IJJ quoted aboveisdicta. Second, the passage presupposesthe use of acceptedstatistical principles in arriving at the initial result. Here, acceptable statistical principles were not followed in Phase I of this trial and it is undisputed that the findings obtained therein were used asthe basis for the restitution calculations in Phase II. Regardless of whether Drogin accurately extrapolated his results from the data contained in the statementof decision,it is the underlying dataitself that is constitutionally suspect.” doubled, the result is 13.44 hours, or only 1.58 hours higher than the hourly figure used to compute the award made here. Wealso note the spread between the high and low rangeis almostas large as the 11.86 hour figure used to compute plaintiffs’ recovery. ™ See Chevron, supra, 109 F.3d 1016, 1020-1021 [‘Our substantive due process concernsare based on the lack of fundamental fairness contained in a system that permits the extinguishment of claims or the imposition of liability in nearly 3,000 cases based uponresults ofa trial of a non- representative sampleofplaintiffs. Such a procedureis inherently unfair when the substantive 65 Additionally, USB claims the response rate was not “extremely high” because six of the original randomly selected RWG membersdid not respond, namely,the four members whoopted out after the secondopt-out notice was sent, Smith (who was removed bythe court), and Borsay Bryant (whodid nottestify). USB also claims there was measurementerror because several RWG witnessestestified to having worked a range of hours without specifying how often they workedat either the high or the low end of that range, and there was no admissible evidenceas to probabledistribution of hours worked by non-RWG members. Wefind these arguments compelling. “Underlying the contemporary reliance on themethodology of inferential statistics is a recognition that ‘[e}xperts have developed appropriate modeling techniques for reachingstatistically significant and reliable conclusions.’ [Citations.]” (Bell II, supra, 115 Cal.App.4th 715, 754.) Here, the plan used bythetrial court was not based on appropriate modeling techniques as developed by experts. As in the flawed double-time award in Bell IJ, the “parties’ experts did not offer foundational calculations for the determination of double-time or propose an appropriate class size, margin of error, or sampling methodology.” (/d. at p. 756.) The results achieved here thus donotreflect a statistically significant and reliable methodology. Accordingly, the judgment must be reversed. Thetrial court’s error was prejudicial as there was evidence in the form of deposition testimony, as well as the pretrial declarations obtained by USB,that a substantial portion of the class was properly classified as exempt. Forall the reasons stated above we conclude the judgment musttherefore be reversed. In light of our decision, we need not address USB’s other arguments in favor of reversing judgment. We must, however, address the issue of whetherthe trial court erred in certifying this case as a class actioninitially or in maintaining it as such by denying USB’s two motions rights of both plaintiffs and the defendant are resolved in a mannerthat lacks the requisite level of confidencein the reliability of its result.”] 66 to decertify. We concludethetrial court abused its discretion in denying USB’s second motiontodecertify. | V. The Trial Court Erred In Denying USB’s Second Motion to Decertify USB contends that the trial court abused its discretion in certifying the class of BBO’s in 2005, andin later denying the motions for decertification USB filed in 2007 and 2008. USBclaims the court’s rulings were in error because the law and the evidence in this case rendered class treatment inappropriate as “individual issues predominated and were unmanageable.” It claims it was harmed “because the court improperly proceeded on a class basis and subjected USBtoits statistically invalid and unconstitutionaltrial plan that erroneously and improperly resulted in an adverse $15 million judgment.” A. Class Certification and the Standard ofReview Class actions are authorized whenthere is a question of “commonor general interest, of many persons, or when the parties are numerous, andit is impracticable to bring them all before the court, one or more may sue or defendfor the benefit ofall.” (Code Civ. Proc., § 382.) While class actions “offer a means of avoiding ‘repetitious litigation’ [citation] and ‘a multiplicity of legal actions dealing with identical basic issues ...” [citation]” (Bell II, supra, 115 Cal.App.4th 715, 741) by greatly expediting the resolution ofclaims, class actions can create possibilities for injustice in an individual case. (City ofSan Jose v. Superior Court (1974) 12 Cal.3d 447, 458 [115 Cal.Rptr. 797, 525 P.2d 701] (City ofSan Jose).) Class certification is appropriate when thereis “(1) . . . a sufficiently numerous, ascertainable class, (2) ... a well-defined community of interest, and (3) [proof] that certification will provide substantial benefits to litigants and the courts,i.e., that proceeding as a class is superior to other methods. [Citations] In turn, the ‘community of interest requirement embodies three factors: (1) predominant common questions of law or fact; (2) class representatives with claims or defenses typical of the class; and (3) class representatives who can adequately representthe class.’ [Citation.]” (Fireside Bank v. Superior Court (2007) 40 Cal.4th 1069, 1089 [56 Cal.Rptr.3d 861, 155 P.3d 268]; Sav- On, supra, 34 Cal.4th 319, 326.) 67 Commonissues predominate when they would be “the principal issues in any individual action, both in termsoftime to be expended in their proof and oftheir importance... .” (Vasquez v. Superior Court (1971) 4 Cal.3d 800, 810 [94 Cal.Rptr. 796, 484 P.2d 964].) “[T]he community ofinterest requirementis not satisfied if every memberofthe alleged class would be requiredto litigate numerous and substantial questions determining his individual right to recover... .” (City ofSan Jose v. supra, 12 Cal.3d 447, 459.) OurSupreme Court hasstated:“ ‘The ultimate question in every case of this type is whether. . . the issues which maybejointly tried, when compared with those requiring separate adjudication, are so numerousor substantial that the maintenance of a class action would be advantageousto the judicial process andto thelitigants.’ [Citations.]” (Lockheed Martin Corp. v. Superior Court (2003) 29 Cal.4th 1096, 1104— 1105 [131 Cal.Rptr.2d 1, 63 P.3d 913].) | A trial court’s rulings on class certification are reviewed for abuseofdiscretion. (Sav-On, supra, 34 Cal.4th 319, 326.) “ ‘Becausetrial courts are ideally situated to evaluate the efficiencies and practicalities ofpermitting group action, they are afforded great discretion in granting or denyingcertification. ... [Accordingly,] a trial court ruling supported by substantial evidence generally will not be disturbed “unless (1) impropercriteria were used [citation]; or (2) erroneous legal assumptions were made [citation]” [citation]... . “Any valid pertinent reason stated will be sufficient to uphold the order.” ’ [Citations.]” (Ud. at pp. 326-327.) B. Decertification While USB contests all the certification decisions made bythe trial court, we focus on the denial of USB’s second motion to decertify, which wasfiled after the completion of PhaseI ofthetrial. A trial court alwaysretains the option of decertification. (Lazar v. Hertz (1983) 143 Cal.App.3d 128, 144 [191 Cal.Rptr. 849].) Decertification may become appropriate in cases where variances in admissible evidence cast serious doubtsas to the prevalence of commonissuesaffecting liability. (See Ali v. U.S.A. Cab Ltd. (2009) 176 Cal.App.4th 1333, 1350 [98 Cal.Rptr.3d 568] [“Whenvariations in proof of harm require 68 individualized evidence, the requisite community ofinterest is missing and class certification is improper.”]; compare with Bufil v. Dollar Financial Group, Inc. (2008) 162 Cal.App.4th 1193, 1207, 1208 [76 Cal.Rptr.3d 804] [certification appropriate where employer had policy of prohibiting certain employees from taking breaks].) The three-factor community of interest analysis applies equally to an order decertifying a class as well as an order granting certification. (See Walsh, supra, 148 Cal.App.4th 1440, 1450-1451 [order decertifying subclass].) If individualized issues arise out of a defendant’s affirmative defense, the predominance factor can be defeated: “In examining whether commonissuesoflaw or fact predominate, the court must consider theplaintiffs legal theory of liability. [Citation.] The affirmative defenses of the defendant must also be considered, because a defendant maydefeatclass certification by showingthat an affirmative defense would raise issues specific to each potential class memberandthat the issues presented by that defense predominate over commonissues.” (Ud. at p.1450.) C. Examples ofDecertification Rulings In Keller v. Tuesday Morning, Inc. (2009) 179 Cal.App.4th 1389, 1391 [102 Cal.Rptr.3d 498], a trial court had certified a class action lawsuit filed by store managers alleging the defendant had wronglyfailed to pay overtime wages. Twoyearslater, the court granted a motion to decertify the class, finding that individual issues predominated over commonissues. (Jbid.) In support of its motion to decertify, the defendant had introducedastatistical analysis based on the declarations of 45 managers indicating they spent anywhere from 10 to 100 percent of their work time on managerial tasks. (/d. atp. 1394.) In granting the motion to decertify, the trial court observed “the question of mandated managementpolicies was subject to classwide proof, yet the amountof time a managerspent performing these acts and his orher exercise of discretion are matters of individual inquiry.” (Id. at p. 1396.) The appellate court sustained the decision to decertify the class, finding the lower court’s conclusions were supported by substantial evidence. (/d. at p. 1399.) 69 Other appellate courts have found decertification appropriate in similar circumstances. In Marlo v. United Parcel Service, Inc. (9th Cir. 2011) 639 F.3d 942 (Marlo), the district court decertified a class action lawsuit after it determined the plaintiff had not provided “ ‘commonproofto support a class-wide judgmentas to liability...’ [Citation.]” (Jd. at p. 948.) The putative class was comprised of full-time supervisors, who had allegedly been misclassified under the executive and administrative employee exemptions. (Jd. at p. 944.) Four yearsafter certification, the district court decertified the class on the groundthat the plaintiff had failed to establish predominance under rule 23(b)(3). (Marlo, supra, at p. 944.) Theplaintiff had relied heavily on an annual employee survey conducted by the employer, which the court found “was neither reliable nor representative ofthe class.” (Id. at p. 945.) The court also found individual testimony and evidence of the exemption policy was insufficient to allow a fact-finder to make a class-wide judgment. (Jbid.) | On appeal, the Ninth Circuit concluded the district court had not erred. (Marlo, supra, 639 F.3d 942, 949.) The appellate court noted the existence of a common classification policy did not necessarily establish the entire class was misclassified “becausethe policy may have accurately classified some employees and misclassified others.” (Id. at p. 948.) The court also cited to our decision in Dunbar in concluding the district court did not err in requiring a week-by-week determination of exemptstatus. (Marlo, supra, at p. 948.) An additional survey of 160 class members was also deemed “ ‘unrepresentative, unreliable, and [having] essentially no probative value’ ” because the survey’s designer could not state whether the sample wasrepresentative of the class. (Id. at p. 949; see also Walsh, supra, 148 Cal.App.4th 1440, upholding decertification of the ~ account managersubclass.) D. Sav-On DrugStores, Inc. v. Superior Court(2004) 34 Cal.4th 319 In response to USB’s argumentattheinitial certification stage that commonality did not exist because Ramirez requires an individualized analysis to determine whether an employee is properly classified as exempt, the trial court stated that the Supreme Court’s opinion in Sav-On “dissecting the merits” of Ramirez was the “complete answerto that 70 argument.” In decidingto certify the class, the court relied heavily on USB’s company policy ofclassifying BBO’s as exempt, and also on evidencethatit failed to train and monitor its employees regarding their exemptstatus. The Supreme Court did consider Ramirez in its subsequent opinion in Sav-On. In Sav-On, twosalaried drugstore managersfiled a class action against their employer, arguing that the defendant had misclassified them under the managerial exemption based on their job title and description, without reference to their actual work. In seeking to certify the class, the plaintiffs offered evidence suggesting putative class members were obligated to perform nonexempt work during morethan half of their workdays and were thus entitled to overtime pay. (Sav-On, supra, 34 Cal.4th 319, 324-325.) On review, the Supreme Court found substantial evidence supportedthetrial court’s conclusionsthat “deliberate misclassification was defendant’s policy and practice”andthat “classification based on job descriptions alone resulted in widespread de facto misclassification.” (Sav-On, supra, 34 Cal.4th 319, 329.) Emphasizing the great deference givento a trial court’s certification order, the opinion concluded the court had not abusedits discretion in certifying the class. U/d. at pp. 329, 331.) In so ruling, the court found Ramirez inapposite not just because that case did not involve the managerial exemption, but also because Ramirez did not involve a class action claim. As the court in Sav-On observed, “we did not even discusscertification standards [in Ramirez], let alone change them.” (Sav-On, supra, at p. 336.) The court concluded: “Accordingly, Ramirez is no authority for constrainingtrial courts’ ‘great discretion in granting or denying certification’ [citation] or... for applying a particular set of ‘factors’ wheneverplaintiffs in an overtime case seek class certification.” (/bid.) By the time USBfiled its second decertification motion, the RWG procedures employedbythe trial court had already severely impinged on USB’s right to proveits exemption defense as to the 239 absent class members. “A class action may be maintained even if each member mustindividually show eligibility for recovery or the amount of damages. But a class action will not be permitted if each memberis required to ‘litigate substantial and numerousfactually unique questions’ before a recovery may 7] be allowed. [Citations.] ... ‘[I]fa class action “will splinter into individualtrials,” common questions do not predominate andlitigation of the action in the class formatis inappropriate. [Citation.]’ [Citations]” (Arenas v. El Torito Restaurants, Inc. (2010) 183 Cal.App.4th 723, 732 [108 Cal.Rptr.3d 15].) Asthe Supreme Court stated in Sav-On, “if unanticipated or unmanageable individual issues doarise, the trial court retains the option of decertification.” (Sav-On, supra, 34 Cal.4th 319, 335.) When USBfiled its second motion to decertify, it had already maderepeatedefforts to introduce evidence pertainingto its affirmative defense. Thus,this case is further distinguishable from Sav-On, wherein the court stated that because the burden ofproofis on the employer, it was not equitable to require plaintiffs to demonstrate that the entire class was nonexemptattheinitial certification stage. (/d.at p. 338.) Thetrial court’s denial ofthe second motion to decertify was based on the erroneous legal assumptionthat a finding ofliability due to misclassification could be determined by extrapolating the findings based on the RWGto the entire class. As we have demonstrated, this conclusion was legally unsound because the methodology employed bythetrial court was legally unsound; it violated USB’s right to present relevant evidencein its defense. E. The Trial Court Erred in Relying on USB’s Uniform Classification ofBBO’s USBalso claimsthat the trial court gave excessive weightto its finding that USB classified all BBO’s as exempt and did so without any inquiry as to “any particular 2718employee’s job duties, hours worked, performance or any other factor.”"” We agree that the court erred in focusing on USB’spolicies. 78 USBalso claimsthetrial court abusedits discretion in extending certification to a class that included numerous BBO’sit claims are not entitled to restitution under section 17200. USB contends individuals lack standing to sue unless they have suffered an injury in fact and lost moneyor property as a result of the alleged unlawful business practice. USB contends individualized issues exist as to whether each class membersuffered injury, and as to whether some class members were barred from seekingrelief regardless of alleged injury. We need not address this argument. 72 In Spainhowerv. U.S. Bank National Association (C.D.Cal. Mar. 25, 2010 Nos. 2:08-CV-00137-JHN-PJWx, 2:08-CV-00645-FMC-PJWx) 2010 U.S.Dist. Lexis 46316, the district court denied a motionto certify a class action of in-store bank managers. The defendant (the same defendantasin the present case) contendedthe putative class members were exempt from overtime pay and meal andrest requirements under the executive, administrative, and outside sales exemptions. (/d. at pp. *2—*3.) After discussing Vinole, Wells Fargo I, and Wells FargoII, the court foundtheplaintiffs had failed to establish questions of fact commonto the class predominated over questions affecting only individual members, as required under rule 23(b)(3) of the Federal Rules of Civil Procedure (28 U.S.C.). (Spainhower, supra, at p.*11.) Theplaintiffs, as in this case, asserted the defendant’s expectation was solely that the employees would make their branch goals, and the bank “had no expectation as to how those goals were to be met.” (Ibid.) Asthe district court recognized, “It is Plaintiffs’ own argument that weighs against class certification. With substantial discretion as to how to operate one’s branch comesthe likelihood of substantial differences in how each memberofthe proposedclass spent his or her workday. Theselikely variances weigh against the notion that common proof would establish how each employeeactually spenthis or her time or what percentage of each employee’s work wasspent in exempt versus nonexempt activities.” (id. at pp. *11-*12.) Atthis juncture, we need not speculate as to whether a workable trial plan could have been devised to accountfor these individual inquiries. In view of the many courts that have considered this problem at the classification stage, it is doubtful that such a plan could be successfully implemented. Here, the trial court attempted to manage the individualissuesin the first phase ofthis trial by resorting to an unprovenstatistical sampling methodology that denied USB the right to properly defendthe claims againstit. As we have demonstrated, the plan fell short. Accordingly, we conclude the failure to grant USB’s second motionto decertify was an abuseofdiscretion. “Under the abuse of discretion standard, ‘a reviewing court should not disturb the exercise ofa trial court’s discretion unless it appears that there has been a miscarriage of 73 justice.’ [Citation.]” (Cristler v. Express Messenger Systems, Inc. (2009) 171 Cal.App.4th 72, 80.) We have already concludedthatthetrial court’s trial management plan constituted a miscarriage ofjustice. Accordingly, the class is ordered decertified. DISPOSITION The judgmentis reversed. We further order the case decertified as a class action. The order awarding expert witness fees for Miles Lockertoplaintiffs is reversed.”” The matter is remanded to the trial court to reconsider the two named plaintiffs’ meal andrest break period violation claimsin light ofthe Supreme Court’s soon-to-be-issued ruling in Brinker Restaurant Corp. v. Superior Court (2008) 165 Cal.App.4th 25, review granted October 22, 2008 (S166350). Costs on appeal are awarded to USB. ” Tn light of our ruling, USB’s request for judicial notice (filed in A126827 on Aug.2, 2010) of plaintiffs’ refusal to withdraw Locker as an expert witness is denied. 74 Dondero,J. Weconcur: Marchiano,P.J. Margulies,J. DURANvy. U.S. BANK NATIONAL ASSOCIATION, A125557 & A126827 Trial Court Alameda County Superior Court Trial Judge Honorable Robert B. Freedman For Defendant and Appellant CARLTON DiSANTE & FREUDENBERGER LLP Timothy M. Freudenberger, Esq. Alison L. Tsao, Esq. Kent J. Sprinkle, Esq. For Plaintiffs and Respondents Ellen Lake, Esq. WYNNE LAW FIRM Edward J. Wynne, Esq. J.E.B. Pickett, Esq. DURANv. U.S. BANK NATIONAL ASSOCIATION, A125557 & A126827 Court of Appeal First Appellate District FILED MAR 08 2012 Filed 3/6/12 CERTIFIED FOR PUBLICATION Diana Herbert, Clerk by. Deputy Glerk IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA FIRST APPELLATE DISTRICT Q DIVISION ONE O“a OL SAM DURANetal, A125557 & A126827 Plaintiffs and Respondents, (Alameda County v. Super. Ct. No. 2001-035537) U.S. BANK NATIONAL ASSOCIATION, ORDER MODIFYING OPINION Defend «Appell AND DENYING REHEARING efendant and Appetant. [NO CHANGEIN JUDGMENT] THE COURT: It is ordered that the opinion filed herein on February 6, 2012, be modified in the following particulars: 1. On page 74, at the endofthe first paragraph ofthe Disposition, footnote 80 is added, which will read: . Thepartiesin their briefs on appeal did not address the status of the award of overtimerestitution to the named plaintiffs and the individual RWG membersin the eventof a reversal of judgment. This remainsanissue forthe trial court. There is no changein the judgment. The petition for rehearing is denied. Date: March 6, 2012 MARCHIANO, PJ. Marchiano,P.J.