News & Events

Jennifer Weidinger Published in ASCDC’s Verdict Magazine

October 7, 2014

Duran V. U.S. Bank: Developing a Trial Management Plan that Highlights Individual Defenses in Class Actions and the Problems Associated with Statistical Sampling in Class Certification and Trial
September 2014 | By Jennifer Weidinger

On May 29, 2014, the California Supreme Court issued its long-awaited decision in Duran v. U.S. Bank. In a unanimous decision, the Supreme Court affirmed the appellate court’s reversal of a near $15 million class action judgment, and set forth substantive standards for trial courts to follow to determine whether class certification is appropriate in the face of significant individual questions, especially those involved in an employee misclassification claim. The trial court’s refusal to admit defense evidence relating to class members outside the sample group had inappropriately impaired the defendant’s ability to present a defense, as a class action trial management plan “must permit the litigation of relevant affirmative defenses, even when these defenses turn on individual questions.” Further, while statistical sampling can be an appropriate way to assess liability and damages in some wage and hour class actions, the trial court’s acceptance of the plaintiff’s approach to sampling was “profoundly flawed” because, among other things, the sample size (1) was too small; (2) was not random; and (3) involved an “intolerably large” margin of error of 43.3%.

A trial plan that relies on statistical sampling must be developed with expert input and must afford the defendant an opportunity to impeach the model or otherwise show its liability is reduced. Duran is the first case to consider the now prevalent use of statistical evidence by class action parties at the class certification stage and at trial, and represents a significant victory for California employers in defending wage and hour class actions.

I. Background.

A. The trial court certified a class based on plaintiffs allegations of unpaid overtime, attributed to misclassification as exempt employees under the outside salesperson exception.

Defendant U.S. Bank National Association (USB) USB was a nationwide financial services provider who operated over 130 branches in California. Plaintiffs were USB employees who worked as business banking officers (BBOs). BBOs sold bank products, including loans and lines of credit, to small business customers, and their primary job was to cultivate new business. USB had classified the BBO position as exempt from overtime compensation, primarily based on the outside salesperson exemption in Labor Code §1171.2. This exemption applies to employees who spend more than 50 percent of the workday engaged in sales activities outside the office. (Ramirez v. Yosemite Water Co. (1999) 20 Cal.4th 785 (Ramirez).) Plaintiffs alleged the BBOs at US Bank were misclassified.

At support of class certification, Plaintiffs provided declarations for 34 current and former BBOs. In turn, USB provided declarations from 83 putative class members, 75 of which stated they typically spent 50% or more of their workday engaged in outside sales. Despite opposition by USB, the trial court certified the class, relying on Sav-On Drug Stores, Inc. v. Superior Court (2004) 34 Cal.4th 319 (Sav-On). The trial court found common questions of law and fact predominated over individual issues based on evidence that: (1) the BBO position was standardized; (2) USB classified all BBOs as exempt without examining each employee’s duties or work habits; and (3) USB failed to train or monitor BBOs to ensure that exemption requirements were satisfied. The class was ultimately defined as all California-based BBOs who worked overtime for USB at any time during the period from December 26, 1997 until September 26, 2005. The total class was 260 employees. USB’s writ of mandate related to the certification was denied.

B. The trial court crafted a trial management plan based on a small sample of random class members’ experiences, which would then be extrapolated to the whole class, and entered judgment for close to $15 million based on the fiction that every class member had been misclassified.

Approximately one year post-certification, the parties presented competing trial management plans. Plaintiffs’ initial plan was to divide the class into 20-30 groups and have special masters conduct individualized evidentiary hearings on liability and damages. As an alternative, Plaintiffs proposed a random sampling, as set forth by their expert Richard Drogin, in which the entire class would be surveyed (notably no such survey was ever done). USB objected, submitting a declaration from its expert, Philip Gorman, who opined that reliance on such a small sample size presented a high risk of error, and that the survey would still likely be biased due to the probability that any properly classified employees would not participate in the survey. USB proposed the parties each select an equal number of class members for the trial sample.

The trial court rejected USB’s proposal, and enacted an alternative plan of its own devising, that the trial court (literally the clerk of the trial court) would select a random sample of 20 class members, known as the representative witness group, to testify at trial. The trial would be broken down into two phases: (1) liability; and (2) restitution. Any findings on liability would then be extrapolated to the remainder of the class. USB again objected that an attempt to extrapolate liability from representative testimony would violate due process, noting that there was “no precedent for using random sampling to establish liability in a class action involving the outside sales exemption.” The trial court proceeded with its own trial plan and the RWG.

Shortly after, USB moved to decertify the class, citing new case law and deposition testimony of several class members, arguing individual issues predominated. USB’s statistician, Andrew Hildreth, identified several problems with the representative witness group, including the small size of the sample, the selection bias, and the multiple “non-response” errors. Importantly, Hildreth found that there was no basis for the court to conclude the entire class had been misclassified. Despite this, the trial court proceeded on, further denying USB’s motion in limine that sought to include testimony by employees outside of the representative witness group, and USB was officially barred from presenting evidence of work habits/ hours of any such employees. Phase 1 of the trial lasted 40 days.

In Phase Two of the trial, USB again sought to include deposition testimony and declarations of employees outside the representative witness group. The court denied the request, as inconsistent with the Phase 1 of the trial. Plaintiffs moved in limine to prevent USB from introducing any evidence pertaining to liability because that question had been resolved in the court’s statement of decision for phase one. Plaintiffs’ statistics expert, Richard Drogin opined that the Phase One findings of liability and average weekly hours of unpaid overtime could be reliably projected to the whole class because they were based on a random sample. Taking the court’s indicated findings for Phase One, with adjustments for vacation time and other breaks in service, Drogin calculated a weighted average of overtime for the representative witness group at 11.87 hours per week, 12 with a margin of error of plus or minus 5.14 hours at a 95 percent confidence interval. The relative margin of error for the overtime estimate was plus or minus 43.3 percent.

The trial court granted the motion, noting that the purpose of Phase One had been to resolve USB’s class-wide liability for misclassification. The trial court effectively barred any challenge to its Phase One decision that all class members were misclassified as exempt and all were entitled to overtime compensation, in the face of due process argument proffered by USB.

The court ultimately entered a judgment against USB for nearly $15 million. This was only the second misclassification case in California certified as a class action and tried to verdict.

II. The Supreme Court’s Decision.

USB appealed the judgment and the appellate court reversed. The appellate court distinguished an earlier case approving the use of representative testimony in an overtime class action, Bell v. Farmers Ins. Exchange (2004) 115 Cal.App.4th 715, in that Bell utilized sampling at the trial of damages only, not liability.

In affirming the appellate court’s decision, the Supreme Court found that the appeal highlighted difficult questions about how individual issues can be successfully managed in a complex class action, and that the trial court had an obligation to consider the manageability of individual issues in certifying a class action. The Duran court found the trial court ignored individual issues, effectively “hamstringing USB’s ability to defend itself.” There were fatal flaws in the trial plan’s implementation of statistical sampling as proof of USB’s liability to the class.

Trial courts have the obligation to decertify a class action if individual issues prove unmanageable, (Sav-On 34 Cal.App. at 335) and the trial court should have considered these at the certification stage, including any statistical proof a party anticipates will weigh in favor of granting class certification. Notably, the Supreme Court rejected plaintiffs’ characterization of class actions as creating a requirement that the trial court fashion a way to resolve the parties’ dispute through common evidence: “plaintiffs assert, ‘[i]t would be inconsistent with the requirement of common evidence’ for the employer to be permitted to litigate its exemption defense against individual class members,” but, the Court held, “plaintiffs‘ argument rests on a false assumption. Class actions do not create a ‘requirement of common evidence.’ Instead, class litigation may be appropriate if the circumstances of a particular case demonstrate that there is common evidence.” (Emphasis in original.”

III. Lessons Learned from the Duran decision Relevant to Opposing Class Certification.

A. Prepare a strong trial plan early on in the litigation.

The Supreme Court’s emphasis on the need for a workable trial plan prior to class certification is particularly significant, given the trend of class action claims in California. The court noted that according to the Administrative Office of the Courts, 89% of class actions that are certified settle prior to trial, compared with 15% of cases where class certification was denied, creating a clear disadvantage to defendants after the certification stage.

Plaintiffs have urged trial courts to certify based on a (mis)reading of the Supreme Court’s decision in Brinker Restaurant Corp. v. Superior Court, 53 Cal.4th 1004 (2012). Many trial courts, accepting plaintiffs’ arguments, have concluded that almost any claim can be certified if any essential element of plaintiff’s theory of relief appears to be susceptible of common proof; regardless of whether the aspect of the case that may be subject to common proof will really predominate in resolving the case as a whole, in light of the material issues to be tried that are, in fact, subject to individualized differences. Duran, however, indicates that class treatment is inappropriate where individualized differences make proceeding as a class all the way to judgment unfair or unmanageable—even if one central liability question might manageably be proved on a class-wide basis.

Duran therefore will aid defendants who craft a well prepared trial plan at the certification stage to show a preliminary assessment of variability, and to demonstrate that individual issues swamp common issues to render a class action unmanageable.

B. Present individualized defenses to class claims.

Defendants should be prepared to vehemently counter any purported representative showing by the plaintiff, using concrete examples backed by affirmative evidence. For example, in disputing allegations of misclassification, defendants should present direct evidence demonstrating individualized differences among putative class members in what job duties they perform and how much time they spend on those duties. This evidence can include putative class member declarations, employer self-audits, surveys, studies, and even video evidence.

Moreover, employers who rely on the outside sales exception can take a preventative approach before the onset of litigation by performing self-audits or interviews, which ensures that employees are meeting the 50%-plus test on a consistent basis; if they are not, the employer will be able to help the employees amend his or her workload or to reclassify the employee as non-exempt if necessary. These self-audits can be used both to oppose class certification and to support the employer’s defense at trial.

Duran plainly supports the standard that if the trial court cannot conduct a fair trial on the class claims, while allowing employers the ability to assert affirmative defenses (and evidence) as to the class, certification should be denied. This standard applies not only to misclassification allegations, but all wage and hour claims.

C. Attack inadequate and unqualified statistical methods.

Defendants will benefit from early (and often) opposition to biased or incomplete sampling, both at the certification stage and pre-trial, or statistical evidence that lacks expert approval. The Duran court made a point to reference USB’s repeated objections to Plaintiffs’ proposed samplings and expert’s opinions. Utilizing expert analysis, defendants can impeach plaintiff’s statistical model of proof and focus the trial court on affirmative defenses, especially if it includes individualized evidence. Statistical methods may not be compatible with the nature of plaintiff’s claims, and defendants should not hesitate to question plaintiff’s sample size and expert’s analysis. Samples must be supported by a party’s liability expert, must be statistically appropriate and capable of producing valid results with a reasonable margin of error, and must be random. Duran illustrates the misuse of statistical evidence in class litigation, where the margin of error was unreasonably high, 43%, and incompatible given the individualized claims.

Plaintiffs will no doubt claim the Supreme Court did not wholly preclude the use of sampling and surveys in class litigation; but Duran imposes restrictions on this practice. If statistical evidence is to be used as part of a trial plan for managing a complex class action, methods to be employed by class counsel must be presented, evaluated, and scrutinized early in the life of the case, and in any event no later than the hearing on class certification. Trial courts are not permitted to assume that the use of statistical methods will serve as a solution to unmanageability issues that would arise if each class member’s differing circumstances were explored at trial.

As wage and hour class actions continue to arise in California, Duran presents a clear message from the judiciary that class litigants must acknowledge, and adhere to, due process in class certification proceedings and trial. The guidelines provided in Duran provide substantial support for defendants who can present individualized evidence when faced with class claims, and will reward defendants who can present this evidence early on in litigation.

Jennifer Weidinger is an Associate at Pettit Kohn Ingrassia & Lutz’s Los Angeles office. Ms. Weidinger’s practice focuses primarily on employment and retail litigation.

Click here to view the full issue of ASCDC’s Verdict Magazine Volume 2.

Shannon Finley Joins Pettit Kohn’s Employment Team

September 18, 2014

Pettit Kohn Ingrassia & Lutz is pleased to announce the addition of Shannon Finley as an Associate to the firm’s San Diego team. Shannon earned her J.D. from the University of San Diego School of Law and graduated cum laude from the University of California, Los Angeles, where she obtained a dual Bachelor of Arts degree in History and in Classical Civilization. Shannon’s practice will focus primarily on employment & labor matters.

9/22 – 9/26/14: Pettit Kohn Supports Dress for Success San Diego

September 17, 2014

Pettit Kohn Ingrassia & Lutz has partnered with the San Diego Paralegal Association (SDPA) and the Filipino American Lawyers of San Diego (FALSD) to host a Women’s Suit Drive benefiting the local non-profit Dress for Success – San Diego. The suit drive will be held from September 22 – 26 from 8:00 am to 5:00 pm.

Please follow these guidelines for acceptable items to donate: Interview appropriate women’s attire, current style, clean, ready-to-wear skirt suits, pant suits, separate slacks, skirts, neutral blouses, gently used purses, and costume jewelry. Also, unopened and/or original packaging items: hosiery (large sizes), cosmetics, hair brushes, skin care products, nail polish, and perfume.

The majority of their clients are ages 23-30. Cash donations are gratefully accepted for the purchase of special size clothing. Donations are tax deductible and receipts will be provided. To view the event flyer click here.

Donations can be dropped off Monday – Friday at two locations:

Pettit Kohn Ingrassia & Lutz – Shanon McDonnell (858) 755-8500
11622 El Camino Real, #300, San Diego 92130

Butterfield Schechter & Van Clief LLP – Kristine Custodio (858) 444-2300 x119
10021 Willow Creek Road, #200, San Diego 92131

Dress For Success San Diego helps low income women acquire jobs and build their careers. Their private boutique is an encouraging environment that provides wardrobe and interview preparation services, employment retention programs, and life management consultation. Dress for Success – San Diego has served nearly 8,000 low income women since its inception.

Please share this information with your friends and family who may  have an interest in supporting this clothing drive. Any questions about this event, please contact Shanon McDonnell at (858) 755-8500 or smcdonnell@pettitkohn.com.

We thank you for your support!

San Diego Attorneys Pettit & Kohn Featured in Forbes Magazine

September 9, 2014

Preparation, Commitment, Business Litigation Excellence

In 2006, a group of lawyers decided to open a business litigation firm where commitment – to clients and each other – was the glue and great work was the rule.

From vision to reality: Pettit Kohn Ingrassia & Lutz, nine attorneys in the early days and 35 now, works to resolve disputes for individuals, the smallest of small businesses and the largest of major corporations. This is a firm prepared to fight and ready to go to trial for its clients.

The practice brings significant litigation experience to the dispute and is a passionate advocate, whether the client is the plaintiff or the defendant. Three of the firm’s attorneys are members of the American Board of Trial Advocates, a pre-eminent national association of experienced, highly respected trial attorneys.

Trying Cases to Verdict
“We try cases. And in today’s legal world, not all firms do,” says Douglas A. Pettit, Esq., vice president. “In the early summer, we had four trials in 60 days and obtained very good outcomes.” Such outcomes, he says, are the primary driver behind the firm’s impressive recession-years growth. “We’ve delivered for our clients, and they’re very satisfied.” When Pettit Kohn Ingrassia & Lutz opened, the attorneys worked in areas where they had substantial background – business litigation, employment and labor law, professional liability and retail. Organic growth followed, and as new attorneys joined the firm, its breadth of operations widened. Practice areas now include personal injury, appellate, product liability, real estate, restaurant and hospitality, and transportation. “We’ve grown into new areas where our clients have asked us to handle work for them,” Pettit says. “We’ve handled all types of litigation matters for our clients.”

Developing Clear Arguments
The attorneys get to know their clients and their businesses, learn their goals and strategic plans and work with them as partners, almost like in-house counsel. They develop arguments they can present clearly, sensibly and compellingly to judges, jurors and mediators, but not every case goes to trial. For those that do, Andrew N. Kohn, Esq., chief executive officer, says clients are in good hands. “We’re experienced in the courtroom. We work very hard to make sure what we do is not only in the best interests of the client but within the context of what’s going on with their business. And we’re really prepared.”

Armed with that business-minded approach to its clients’ needs, Pettit Kohn looks forward to its future prospects.

PDF: Forbes – Preparation, Commitment, Business Litigation Excellence

Two Pettit Kohn Attorneys Recognized in Best Lawyers in America 2015

August 20, 2014

Pettit Kohn Ingrassia & Lutz is pleased to announce that two of its attorneys have been selected by their peers for inclusion in the 2015 edition of Best Lawyers in America® in the areas of Legal Malpractice Law – Defendants and Employment Law – Management.

Shareholder and Vice President of the firm, Douglas Pettit, was selected for inclusion in Best Lawyers in America for the fifth year in a row, in the category of Legal Malpractice Law – Defendants. Additionally, Doug was named the Best Lawyers’ 2014-2015 Legal Malpractice Law  “Lawyer of the Year” in San Diego. Only one lawyer in each practice area, in each community is awarded this honor.

For a third year in a row, Thomas Ingrassia, shareholder and co-chair of the firm’s Employment & Labor group, was selected for inclusion in Best Lawyers in America for his work in Employment Law – Management.

Best Lawyers is the oldest and most respected peer-review publication in the legal profession. The 21st Edition of The Best Lawyers in America (2015) includes 52,488 attorneys in 137 practice areas, covering all 50 states and the District of Columbia, and inclusion in this year’s publication is based on more than 5.5 million detailed evaluations of lawyers by other lawyers.

9/4/14: Join Jennifer Lutz at CRA’s Membership Meeting at The Prado

August 13, 2014

Join Jennifer Lutz, co-chair of Pettit Kohn Ingrassia & Lutz’s employment & labor group, at the CRA San Diego Chapter’s “Forward Learning or How I Learned to Love My Attorney” general membership meeting to be held on Thursday, September 4, 2014 at The Prado at Balboa Park.

The event will begin with a networking & continental breakfast at 8:00 a.m. with the legal panel starting at 8:45 a.m.  The program will cover topics, including tip pooling, affordable care act, social media in the workplace, minimum wage, ADA lawsuits, wage & hour and more.

EVENT DETAILS
When:  Sept. 4
Time:  Registration and continental breakfast – 8 a.m.
Meeting:  8:45 a.m.
Where:  The Prado at Balboa Park, 1549 El Prado, San Diego

If you have any questions, contact Jan Borkum at sandiegocra@gmail.com or 619.846.2164.

 

11/13/14: Pettit Kohn Annual Employment Law Symposium

August 12, 2014

Pettit Kohn Ingrassia & Lutz’s 8th Annual Employment Law Symposium will be held on Thursday, November 13, 2014 at the Hilton San Diego Del Mar at 15575 Jimmy Durante Boulevard, Del Mar, 92014. Our employment attorneys will address any new laws and employment changes that HR professionals need to know and how to effectively handle them.

Registration and continental breakfast will begin at 8:00 AM with the program lasting from 9:00 AM to 3:45 PM with lunch included. This year’s program will include:

  • State and federal cases that have been decided in the past year and new California laws impacting wage and hour issues.
  • Significant developments and recent cases regarding employee harassment, discrimination and retaliation issues and how they impact employee management processes and strategies.
  • An overview of recent arbitration-related cases on the state and federal levels, as well as an in-depth analysis of a recent California Supreme Court decision, and tips for drafting arbitration policies.

Registration Fee: EARLY BIRD RATE $175/per person ($200 after 10/24/14)

To Register:

Questions, feel free to call Cathy Johnson or Jennifer Ingrassia at (858) 755-8500 or email events@pettitkohn.com.

Pettit Kohn is the Gold Sponsor for FALSD’s Fundraiser on 8/21

August 5, 2014

Pettit Kohn Ingrassia & Lutz is proud to be this year’s Gold Sponsor for Filipino American Lawyers of San Diego’s (FALSD) Golf Scramble & Happy Hour Fundraiser. The event will be held on August 21, 2014, at Sail Ho Golf Course at Liberty Station. The Golf Scramble will begin at 4:00 pm, followed by a happy hour at 5:30 pm. The cost to attend is $40 (Scramble & Happy Hour) or $25 (Happy Hour only).

Funds raised from the event will go to local law students taking the California Bar.

To RSVP or for information about available sponsorship opportunities, please email Valerie Garcia Hong at vhong@pettitkohn.com.  For more information about FALSD, visit their website at falsd.org.

Golf Scramble & Happy Hour 2014 at Sail Ho Golf Course

David Halm Named Finalist in 2014 Asian Business Awards

July 30, 2014

Pettit Kohn Ingrassia & Lutz congratulates David Halm, managing shareholder of Pettit Kohn Ingrassia & Lutz’s Los Angeles office, who was recently named a finalist in the Los Angeles Business Journal’s 2014 Asian Business Awards.  The award recognizes Asian-owned and managed businesses that are setting the example for excellence throughout Greater Los Angeles.

Click here to view the July 28th supplement.

 

Pettit Kohn Attorneys Obtain Defense Verdict in Professional Liability Case

July 17, 2014

On April 25, 2014, Matt Smith and the professional liability team of Pettit Kohn Ingrassia & Lutz in San Diego, successfully obtained a defense verdict on behalf of their client in a professional liability case. The plaintiffs alleged claims for breach of fiduciary duty, negligence, fraudulent concealment, intentional misrepresentation, and conversion. After sixteen months of litigation and a three-week trial – lead trial attorney Matt prevailed on all counts in favor of his client, with the jury deliberating and returning a defense verdict in less than a day.

According to court documents, the Plaintiffs initially hired the client to help them recover their share of an inheritance that had been wrongfully withheld from them for years. In April of 2008, after months of hard-fought litigation (and over 1,500 hours of work), the client secured a very favorable, multi-million dollar settlement for the Plaintiffs and collected a contingency fee worth more than one million dollars. Several years later, Plaintiffs filed a lawsuit seeking a refund of the contingency fee.

At trial, Matt was able to prove that his client had fully complied with all of his ethical and professional responsibilities and that he was entitled to retain his well-earned contingency fee. This was a very hotly-contested case, involving serious allegations of wrong-doing against the client and the jury verdict represented complete vindication for Pettit Kohn’s client.



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