We have reported recently in this space on the certification of state wage and hour claims. Judge Gergel recently continued with this trend, certifying a class of Jamaican workers at the Kiawah Island Golf Resort who contend they weren’t paid enough by the Resort. See Moodie v. Kiawah Island Inn Co., LLC, No. 2:15-cv-1097 (D.S.C. Aug. 24, 2015). Defendants argued that the differences in class members were such that the court would have to certify six classes, but the Court rejected that notion, saying the argument stemmed from a “novel proposition that Plaintiffs must propose [a] separate class for every claim in the complaint.” Immediately following that, Judge Gergel gave a nod to “issue certification” in dicta, citing the language of Rule 23(c)(4) without wrestling with the difficulties looming in a surface analysis of that question, something which we have dealt with before here. The Court found that the legality of deductions made from the wages of the putative class was “central to the validity of each one of the claims,” and rejected the defense argument that a conflict arose by virtue of the representation of former employees by current employees. Citing Gunnells v. Healthplan Servs., Inc., Judge Gergel also rejected the argument that difficulties in determining damages resulted in a predominance problem for the class. In so holding, the Court did not grapple with the numerous cases post-Gunnells, including Comcast and its progeny that illustrate how individual damages issues can threaten the viability of class relief. In certifying the class, the Court paid particular attention to the difficulties associated with some 500 workers filing individual claims, noting that “class members are residents of a foreign country, likely to have limited financial resources, unfamiliar with the U.S. Court system, and have relatively small claims.”
In an “opt out” class action, sending notice to class members following class certification is not only routine, but required by due process. But does a district court have the right to order notice prior to a decision on class certification? In Gardener v. GMAC, Inc., No. 14-208 (4th Cir. Aug. 6, 2015), both the district court and the Fourth Circuit “assumed for the sake of argument” that Rule 23(d)(1)(B) provides the trial court with that authority. But each declined to accept the plaintiffs’ argument that the facts warranted such notice. Observing that pre-certification dismissal does not amount to res judicata of the absent class members’ claims, Judge Diaz concluded that the district court’s decision not to order notice before it granted summary judgment fell well within the court’s discretionary powers. The panel’s decisions suggests that unnamed class members’ interests must be “compelling” in order to justify pre-trial notice.
As the saying goes, one person’s trash is another person’s treasure. Judge Diaz issued a decision yesterday pertaining to five class actions concerning coalbed methane gas, long thought to be a “dangerous waste product,” but later discovered to be an energy resource and the source of a “distinct mineral estate.” The Fourth Circuit granted Rule 23(f) review and held that “class certification in this case was manifestly improper.” The Court emphasized, in its holding, that to sustain a class, “the party must present evidence that the putative class complies with Rule 23;” pleading a class does not suffice. The Court said that the certification decision was an abuse of discretion for two reasons: (1) “it failed to rigorously analyze whether the administrative burden of identifying class members in the ownership cases would render class proceedings too onerous” and (2) the court “improperly lowered the burden of proof the plaintiffs must satisfy to demonstrate compliance with Rule 23(a)(1)’s commonality requirement.” The panel emphasized that “a class cannot be certified unless a court can readily identify the class members in reference to objective criteria,” noting that the proposed classes raise “serious ascertainability issues.” In a footnote, the Court observed that the district court should address whether the class could be defined without designating a “fail-safe class,” something we have discussed in this post. The Court remanded on the commonality issue, noting that the district court must determine whether ownership can be established under a Virginia precedent; if not, there is “no way for the district court to answer the ownership question on a common basis.” The Fourth Circuit also concluded that the district court had abused its discretion under Rule 23(b)(3), noting that “the mere fact that the defendants engaged in uniform conduct is not, by itself, sufficient to satisfy” the predominance requirement. In addition, the Court cautioned the district court about certifying individual contract claims, something that is hard to do, and about ignoring individual statute of limitations issues. The panel also provided tutorial advice to the district court about potential predominance of state-law issues, always a challenge in certification proceedings. Although the Court reversed the district court, it did not hold that a class action could never proceed in the case – leaving that decision to the district court on remand.
Courts have understandably been reluctant to certify a class consisting of “persons who are injured by the defendant” or “individuals to whom the defendant is liable,” i.e., a class definition that depends on the outcome of the case. Such a “fail-safe” class is unfair to defendants: if defendants win the case, there is no class that is bound by the result because the class consists solely of victors.
A West Virginia judge recently denied a former Dollar General employee her bid for class certification, finding the proposed class was fail-safe and therefore improper. Stephanie N. Paulino filed a class action lawsuit against Dollar General in 2012, alleging the company violated the West Virginia Payment and Collection Act (“WPCA”) when it failed to pay her final wages within 72 hours of her termination. The putative class was defined as all former West Virginia Dollar General employees who were “involuntarily terminated” and who were “not paid their final wages within 72 hours of termination.”
According to Judge Groh, the putative class was an impermissible “fail-safe” class because membership depended on Dollar General’s ultimate liability to each employee under the WPCA. Members could either win their WPCA claims and join the class, or lose and be excluded from the class.
The Fourth Circuit hasn’t weighed in directly on the “fail-safe” class issue, but district courts, including in the District of South Carolina, have flatly prohibited such definitions. Melton v. Carolina Power & Light Co., 283 F.R.D. 280 (D.S.C. 2012)
The class also failed to meet Rule 23’s commonality, typicality, predominance, and superiority requirements. Judge Groh found that the Court would have to engage in an individualized analysis to determine whether a member could even qualify for the class. Specifically, the Court would have to determine, at minimum, three threshold questions: Did the former employee resign, or was he fired? When did Dollar General terminate the former employee (including both the time and the date)? When did Dollar General disburse the former employee’s final wages? The court held that these initial questions require a substantial, fact-intensive, individualized investigation.