CALIFORNIA CLASS ACTION LAW

The court in Adoma v. University of Phoenix, Inc., No. CIV. S-10-0059 LKK/GGH, 2010 WL 3431804 (E.D. Cal. Aug. 31, 2010 (slip op.) held that even where plaintiff’s proposed method of “reconstructing records of hours worked . . . will be imperfect”, plaintiffs may rely on “a few representative inquiries whose results will be extrapolated to the class.”

The court also faced an interesting reversal in the usual roles with plaintiffs seeking federal jurisdiction under CAFA and defendants opposing.  Plaintiffs sought class certification on state law wage and hour claims. Id. *1.  The district court previously declined to exercise jurisdiction over plaintiffs’ federal Fair Labor Standards Act claims, pursuant to the first-to-file rule since a case was already proceeding in the Eastern District of Pennsylvania.  Id. Since the complaint only asserted supplemental jurisdiction as a basis for jurisdiction over the remaining state law claims, the court considered subject matter jurisdiction. Id. The court concluded that it had jurisdiction over the state law claims pursuant to the Class Action Fairness Act, 28 U.S.C. § 1332(d), and it granted plaintiffs’ motion for class certification under Fed. R. Civ. P. 23(b)(3).

Background

Plaintiffs worked as Enrollment Counselors for one or both defendants.  Id. Plaintiffs alleged (1) “off-the-clock” unpaid overtime;  (2) the wrong hourly rate for overtime on the theory that the value of tuition waivers should have been included in the rate of pay calculation; (3) missed meal periods; and (4) waiting time penalties and inaccurate pay stubs.

At least two other suits were filed claiming that the University of Phoenix failed to fully pay enrollment counselors for overtime work. Id. One was certified in the Eastern District of Pennsylvania as a nationwide FLSA collective action.  Id. The Northern District declined to exercise jurisdiction over the FLSA claims, instead transferring them to the Eastern District.  The second case was settled on an individual basis.  Id. *2.

CAFA Jurisdiction

Under the Class Action Fairness Act, 28 U.S.C. § 1332(d), the “district courts shall have original jurisdiction of any civil action in which the matter in controversy exceeds the sum or value of $5,000,000, exclusive of interest and costs, and is a class action in which … any member of a class of plaintiffs is a citizen of a State different from any defendant; . . .”   28 U.S.C. § 1332(d)(2). Defendants are citizens of Arizona and the named plaintiffs are citizens of California.  Id. *2.

The remaining issue was whether the $5,000,000 amount in controversy requirement was satisfied. Id. *2.  As recited by the court, under CAFA, the court aggregates potential class members’ claims, 28 U.S.C. § 1332(d)(6) and jurisdiction is proper unless there is a “legal certainty” that the claim is for less than this amount. St. Paul Mercury Indem. Co. v. Red Cab Co., 303 U.S. 283, 289 (1938);Singer v. State Farm Mut. Auto. Ins. Co., 116 F.3d 373, 375 (9th Cir. 1997).

In a reversal of the usual roles, plaintiffs argued for CAFA jurisdiction, and defendant opposed.  The potential class included well over one thousand members.  Plaintiff alleged that the produced evidence already showed “off-the-clock” overtime for class members in excess of $4,700.  Id. Plaintiffs’ also claimed statutory waiting time penalties, of up to the statutory maximum of $4,000 per employee for a sub-class estimated to include 500 to 700 employees.  Id. Defendants argued that plaintiff was entitled to no more than $1,750 in waiting time penalties. Id. The court held that “Despite this dispute, at least the lesser amounts are ‘in controversy.’” Id. The court reasoned that even the reduced figures of plaintiff’s damages, if typical and aggregated.  Id. *3.  “While plaintiffs may fail to prove damages for class members in excess of these amounts, the amount ‘in controversy’ for these claims exceeds the statutory threshold.” Id.

Class Certification

Plaintiffs sought certification under (b)(1) or (b)(3). The court held that (b)(1) was inapplicable but that class certification was warranted under Rule 23(b)(3), finding predominance, commonality, and typicality as to each of the five state-law claims for which plaintiffs sought class certification. Id.

Plaintiffs contended that they would prove off the clock time using records in an Avaya phone system, which allegedly tracked when Enrollment Counselors were available to receive calls.  Id. *4.

Defendants argued that the system’s records are poor indicators of the time an employee spent working. Id. *5.  First, defendants argued that the login/logout times are inadequate because employees sometimes login before they begin doing work, often forget to logout, the phone system is sometimes inoperative, and when employees work from non-standard locations they can be prevented from logging in and out.  Id. Plaintiffs argued that rather than relying on login/logout times, they can look at records of calls made in combination with the aux codes to determine what work an employee was actually doing and when . Id. The court summarized that:

“[T]here are reasons to think that any method of reconstructing records of hours worked using the Avaya system will be imperfect. Recognition of these imperfections invites individualized inquiries into their scope. Plaintiffs acknowledge this problem, but contend that the reliability of the Avaya system, and plaintiffs’ proposed use thereof, may be demonstrated using a few representative inquiries whose results will be extrapolated to the class. Plaintiffs rely principally on Hilao v. Estate of Marcos, 103 F.3d 767 (9th Cir. 1996).

Representative Inquiries May Be Used

The Ninth Circuit in Hilao upheld certification of a class of “[a]ll current civilian citizens of the Republic of the Philippines, their heirs and beneficiaries, who between 1972 and 1986 were tortured, summarily executed or disappeared while in the custody of military or paramilitary groups.” Id. *6 (citing Hilao, 103 F.3d at 774).  To determine compensatory damages, the Hilao district court used “a statistical sample of the class claims.” Id. *7 (citing Hilao, 103 F.3d. at 782).

The court randomly selected 137 of the 9,541 potentially valid claims, which was determined to be a statistically significant sample. Id. A special master then deposed these claimants and their witnesses, to determine (1) whether the claimant had been subjected to torture, summary execution, or disappearance as defined by the jury instructions, (2) whether this harm was caused by the Philippine military or paramilitary, and (3) whether the harm occurred within the period at issue. Id. Based on these individual assessments, the special master recommended average compensatory damage awards for subclasses experiencing each type of injury. Id. at 783. The special master’s findings as to the 137 individuals and to subclasses were presented to and largely adopted by the jury. Id. at 784. Thus, the 137 individuals received individualized compensatory damage awards and the remaining 9,404 class members received average awards. Id. at 784 n. 10.

In Hilao, the Ninth Circuit recognized that “serious questions” as to whether this method comported with due process, but nonetheless concluded that due process was provided. Id. (citing Hilao, 103 F.3d at 786). “The defendant’s interest was in the aggregate amount of damages; thus, provided that the average was properly calculated, it was of no consequence to defendant that some plaintiffs would have been entitled, in individual adjudications, to more or less than this average.” Id. (citing Hilao, 103 F.3d at 786). The Ninth Circuit concluded that plaintiffs had an “enormous” interest in the use of averages since individual adjudications were infeasible; and the Hilao court concluded that balancing these interests under Connecticut v. Doehr, 501 U.S. 1, 10-11 (1991) and Mathews v. Eldridge, 424 U.S. 319 (1976), the method did not offend the Due Process clause. Id.

The court in Adoma cited the Ninth Circuit’s recent en banc opinion in Dukes v. Wal-Mart, affirming the continuing validity of Hilao.Dukes v. Wal-Mart, 603 F.3d at 625-27:

Dukes upheld certification of a class of hundreds of thousands of female Wal-Mart employees bringing claims of sex discrimination under Title VII. In concluding that the class was manageable, the court explained that “Because we see no reason why a similar procedure to that used in Hilao could not be employed in this case, we conclude that there exists at least one method of managing this large class action that, albeit somewhat imperfect, nonetheless protects the due process rights of all involved parties.”  Id. at 627.

Id. *7.

The court concluded that “the types of arguments are common to all class members” and that “Hilao appears to permit a representative inquiry to determine the magnitude of these effects, and at this stage, the court cannot distinguish Hilao.” Id. *8.  The court also found that the “question of whether the Avaya system gave defendants at least constructive knowledge of the employee overtime is a common question.”  Thus it concluded that common questions predominate.

Order

The court thus granted plaintiffs’ motion for class certification, defining the classes as follows:

1. All current or former Enrollment Counselors who worked at least one week in the State of California for either The University of Phoenix, Inc. or Apollo Group, Inc. at any time between April 5, 2005 and August 13, 2010. (“California Overtime Class”) and (“California Meal Break Class”) and;

2. All current or former Enrollment Counselors who received at least one paycheck statement for work performed in the State of California for either The University of Phoenix, Inc. or Apollo Group, Inc. at any time between April 5, 2008 and August 13, 2010. (“California Paystub Class”) and;

3. All current or former Enrollment Counselors who worked at least one week in the State of California for either The University of Phoenix, Inc. or Apollo Group, Inc. at any time between April 5, 2006 and August 13, 2010 whose employment ended at least once during that same time period. This class includes current employees who worked during the covered time period, ceased working, and then began employment again. (“California Waiting Time Class.”)

4. The term “Enrollment Counselors” includes employees with the job title of “enrollment counselor” as well as any other nonexempt employee who utilized the Avaya phone system’s Automatic Call Distribution system to receive calls relating to enrollment.

Id. **11-12.

Judge

Senior District Judge Lawrence K. Karlton.

By CHARLES H. JUNG