148 Litigating CA Wage & Hour Class and PAGA Actions (23rd Edition) Seyfarth Shaw LLP | www.seyfarth.com which a purportedly random sample of twenty class members—plus two of the named plaintiffs—would testify at trial, and the liability and damages findings based on the sample group would be extrapolated to the entire class. After the trial court denied U.S. Bank’s decertification motion, it held a bench trial on U.S. Bank’s exemption defense. During the liability phase, the trial court excluded all evidence concerning BBOs who were not part of the sample group, including U.S. Bank’s evidence showing some class members were properly classified as exempt. Based primarily on the sample group’s testimony, the trial court found the entire class of 260 BBOs had been misclassified. During the damages phase, the trial court adopted the determination of plaintiffs’ expert that class members worked on average 11.87 hours of overtime per week, subject to a 43% margin of error—meaning the actual amount of overtime worked by each BBO could range from 6.7 hours to almost 17 hours per week. Based on that extrapolation, the trial court entered judgment against U.S. Bank in the amount of approximately $15 million. The Court of Appeal reversed, holding that the trial court’s reliance on flawed and unreliable statistical sampling to extrapolate class-wide liability denied U.S. Bank its right to litigate affirmative defenses, and that the high margin of error underlying the damages calculations implicated due process concerns. Additionally, the Court of Appeal held, the trial court abused its discretion in denying U.S. Bank’s decertification motion and ordered the class decertified. 2. The Supreme Court Decision The California Supreme Court, in a unanimous decision, affirmed the Court of Appeal’s judgment in its entirety and ordered a new trial.743 In so doing, the Supreme Court articulated several principles that are significant in connection with certification and trial proceedings in class actions, particularly those in the wage and hour arena. First, and perhaps most significantly, the Supreme Court recognized a defendant’s due process right to “litigate its statutory defenses to individual claims,” a proposition on which lower courts had disagreed. Thus, “any trial must allow for the litigation of affirmative defenses, even in a class action case where the defense touches upon individual issues.”744 Second, while the Supreme Court was careful not to reach a sweeping conclusion regarding whether or when statistical sampling should be available as a tool for proving liability in a class action, it did set forth some concrete guidelines. As an initial matter, any trial plan involving statistical proof must allow the defendant to litigate relevant affirmative defenses, even when they turn on individualized questions, and if the trial plan fails to account for this, then the statistical proof may not be appropriate.745 Moreover, the trial plan must employ valid statistical methodology, which means, among other things: (a) the sample size must be “sufficiently large to provide reliable information about the larger group,” (b) the sample must be random and free of selection bias, and (c) analysis of the sample must yield results within a reasonable margin 743 Id. at 50. 744 Id. at 33. 745 Id. at 35.
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