The Supreme Court on Tuesday heard oral argument in Tyson Foods, Inc. v. Bouaphakeo, No. 14-1146, a case that has been closely watched for its potential to narrow the circumstances in which a class action may be certified under Federal Rule of Civil Procedure 23 and a collective action for unpaid wages certified under the Fair Labor Standards Act (FLSA). We previously described this case in prior blog posts. One of us attended the argument, and the other closely reviewed the transcript (pdf). Our combined reaction: The anticipated decision in this case may focus on an FLSA issue and, if so, then it seems unlikely to mark a sea change in the rules governing Rule 23 class actions.

In Tyson Foods, the district court certified a Rule 23(b)(3) class action and FLSA collective action for claims alleging that Tyson Foods had not paid its employees for all time spent donning and doffing protective gear. Plaintiffs sought to prove injury and damages using statistical evidence that averaged donning and doffing time, even though employees used different equipment and it was undisputed that hundreds of employees were not entitled to any additional compensation. A jury found Tyson Foods liable, but awarded only about half of the damages that plaintiffs’ statistical experts had calculated were due.

The Supreme Court granted certiorari to decide two questions with potentially broad application to Rule 23(b)(3) class actions: (1) whether differences among individual class members may be ignored, and a class certified, when plaintiffs use statistical techniques that presume that all class members are identical; and (2) whether a class may be certified if it contains hundreds of members who were not injured and have no legal right to damages. At oral argument, however, it appeared that a number of the Justices—and perhaps a majority—may see the case as hinging on its specific employment-law context under the FLSA.

The United States argued in its amicus curiae brief (pdf) in support of the employees that representative adjudication was proper in Tyson Foods under the Court’s precedent in Anderson v. Mt. Clemens Pottery Co., 328 U.S. 680 (1946). Mt. Clemens, the government argued, established a burden-shifting framework for deciding FLSA cases in which the employer had not kept precise records of the time each employee worked (as Tyson Foods agreed it had not). If a class plaintiff were to show, using a sampling of employees, that unpaid work had been performed, that approximation would be enough to establish a presumption of injury as to all employees, which the employer could rebut only by producing “accurate estimates” of time actually worked. Id. at 694.

Agreeing with the Solicitor General’s contention, Justice Kagan suggested at oral argument that whether Tyson Foods “can proceed as a class [action is] really not the question in this case because of Mt. Clemens,” which establishes “that certain kinds of statistical evidence are completely appropriate in FLSA cases.” Accordingly, Justice Kagan said, “the question * * * before us is not a Rule 23 question, it’s a question of whether this sort of evidence complies with the Mt. Clemens standard.” Similarly, Justice Kennedy suggested that “if this were simply a class action under [Rule] 23,” the problems identified by the questions presented “might be a barrier to certification, but under Mt. Clemens you have a special rule,” which is “the substantive law for [the] FLSA.” In response to Justice Kennedy pressing employees’ counsel to concede “that there is a strong possibility you might not * * * have this class certified * * * under Rule 23, absent Mt. Clemens,” counsel agreed that because of Mt. Clemens, “this is an easier case than a case in which there was not that substantive law difference.” Asked for the same concession, counsel for the United States likewise agreed that under Rule 23 alone the case “would be much closer” and that the case the case “turns on the Mt. Clemens standard,” not “on a freestanding Rule 23 requirement.”

Counsel for Tyson Foods pushed back against suggestions that Mt. Clemens is controlling by pointing out that Tyson Foods involves separate FLSA and Rule 23(b)(3) classes, so that Rule 23 issues could not be avoided, and that Rule 23 does not permit certification where commonality and predominance depend on expert sampling that lumps together “wildly different activities.” And Chief Justice Roberts observed that “it would be an extension of Mt. Clemens to apply it at the liability stage as opposed to the damages stage” (emphasis added).

The Chief Justice and Justices Scalia and Alito appeared less convinced that the Mt. Clemens presumption controls and more willing to address the questions presented as they apply to Rule 23 class certification generally. These Justices each focused their questions on the fact that the jury could not have accepted plaintiffs’ experts’ opinions about the amount of time worked without pay, because the jury awarded only about half of the damages calculated using those statistical averages. Once the jury rejected this expert testimony, Justice Alito asked, “how can you separate the employees who were injured from the employees who were not injured” or “how much time the employees were entitled to” except in “a very slap-dash fashion?” Once the jury rejects plaintiffs’ “average statistics, * * * there’s no way to tell whether everybody who’s going to get money was injured or not,” the Chief Justice added. Even if some sort of allocation could be derived, Justice Scalia expressed skepticism that “you can get a class certified, some of whom have not been injured at all, and wait until the conclusion of the trial for the trial court to determine who has not been injured.” Other Justices (including Justice Kennedy) suggested that Tyson Foods might have waived arguments based on these difficulties by not making a Daubert challenge to plaintiffs’ statistical experts, by objecting to bifurcating the liability and damages phases of the trial, and by not seeking a special jury verdict.

As is often the case when the Justices appear to be closely divided, too much should not be read into oral argument, where the Justices are as likely to be probing each party’s position as signaling their own views. In the event, however, that a majority does regard the special FLSA rule in Mt. Clemens as controlling even the Rule 23-certified state-law claim, and that the Mt. Clemens presumption was triggered by the expert evidence here, the Court could soon turn once again to the same questions presented. The Court has “held” a number of certiorari petitions without acting upon them while it decides Tyson Foods, as we blogged about previously. Among these pending petitions is Dow Chemical Company v. Industrial Polymers, Inc., 14-1091, an antitrust case in which Dow seeks review of a Tenth Circuit decision affirming a $1.1 billion judgment to a class of purchasers of polyurethane chemicals. Dow’s petition cleanly presents important Rule 23 questions about expert approximations and disparate classes full of uninjured and differently injured claimants—questions that in Tyson Foods may have become muddied by the special approach that Mt. Clemens took in employment wage cases. There is no reason to think that Tyson Foods, whatever the outcome, will bring an end to the Court’s interest in getting Rule 23 right.

The post Supreme Court Hears Argument in Tyson Foods v. Bouaphakeo—and a Blockbuster Class Certification Ruling Seems Less Likely appeared first on Class Defense Blog.

Related Capabilities