The case is a hybrid collective action under the Fair Labor Standards Act (pdf) and opt-out Rule 23(b)(3) class action asserting state-law wage-and-hour claims. The plaintiffs—a group of home satellite-dish installers who were paid by the job rather than by the hour—sued their employer for allegedly failing to ensure that they were paid the federal minimum wage and time-and-a-half for overtime work. The district court initially certified the collective and class actions, but decertified them after seeing the plaintiffs’ trial plan. The Seventh Circuit affirmed.
There’s a lot to like about the decision:
- The court holds that the standard for certifying an opt-in collective actions is the same as the standard for certifying an opt-out class action under Rule 23. That’s great news for employers. Other courts have held that the standard for certifying collective actions is more lenient—in our view, more loosey-goosey—than the requirements of Rules 23(a) and (b)(3). See, e.g., O’Brien v. Ed Donnelly Enters., Inc., 575 F.3d 567, 584-85 (6th Cir. 2009).
- The Seventh Circuit approved of the district court’s decision requiring the plaintiffs to submit a “specific plan for litigating the case” as it had been initially certified. Such a request is “reasonable,” the court explained, “given the difficulty of trying a class action.” The court’s approval of this growing trend of requiring plaintiffs to submit detailed trial plans benefits defendants in all types of class actions; such plans often smoke out individualized issues and make clear that the proposed class would be hopelessly unmanageable at trial.
- Because the trial plan submitted by class counsel confirmed that calculating damages would require individualized inquiries, the Seventh Circuit held that the class was properly decertified. That’s great news: Many courts have disregarded individualized issues as to damages by invoking the mantra that they pose no obstacle to class certification. These courts, of course, virtually never have to try these cases, which almost invariably settle after certification. But the Seventh Circuit recognized that “2341 separate evidentiary hearings” on damages—one for every technician—“might swamp the Western District of Wisconsin with its two district judges.” And although it’s “realistic” to assume that the defendant “would settle” rather than try the class action, “class counsel cannot be permitted to force settlement by refusing to agree to a reasonable method of trial should settlement negotiations fail.”
- The Seventh Circuit rejected the plaintiffs’ proposal to prove damages by presenting testimony from 42 “representative” class members—a practice permitted by a few other courts (such as the Sixth Circuit in O’Brien). The Seventh Circuit explained that the sample was not randomly selected in a statistically sound way. And the court added that even if the sample had been random, “this [approach] would not enable the damages of any members of the class other than the 42 to be calculated.” Extrapolating from these class members’ experiences would result in undercompensating some workers and overcompensating others. At bottom, the Seventh Circuit explained, the plaintiffs were “ask[ing] the district judge to embark on a shapeless, free-wheeling trial that would combine liability and damages and would be virtually evidence-free so far as damages were concerned.”
- Finally, the Seventh Circuit reminded plaintiffs that they must explain why their proposed collective or class action is superior to an enforcement action by the Department of Labor. Defendants in other types of class actions can cite this language when faulting plaintiffs for failing to seek other types of regulatory or administrative relief.
I do have one quibble with the decision. The Seventh Circuit noted in dicta that the class might have been certified had the plaintiffs been seeking declaratory or injunctive relief instead of damages. That doesn’t make sense to me. In explaining the thorny individualized questions that must be answered to determine damages, the Seventh Circuit makes clear that a number of them in fact go to injury. For example, converting an employee’s per-job rate into an hourly wage might demonstrate that he or she is being paid above the federal minimum wage. Some efficient workers might not have worked overtime. And some workers may have underreported their hours not because of any pressure from their employer, but because they wanted to appear especially efficient and thus worthy of promotion. These workers not only have suffered no damages, they are not injured—which negates liability. Individualized issues as to liability should preclude certification regardless of the type of relief the plaintiffs seek.
Nonetheless, Espenscheid is a great win for employers and class-action defendants in general.
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