Flawed Sampling Results in Unanimous Reversal of Wage and Hour Class Action

In Duran v. U.S. Bank (59 Cal.4th 1), the California Supreme Court unanimously reversed a plaintiff verdict in a wage and hour class action suit. The court held that the flawed implementation of a statistical sampling trial plan prevented the defendant from demonstrating that certain members of the class were exempt and entitled to no recovery. In the case, the employees claimed they were wrongly classified under a salesperson exemption, preventing them from receiving overtime pay. After certifying the class, the trial court devised a trial plan to determine U.S. Bank’s class liability and damages from a small sample group. After the group testified, the court determined every member of the class to be misclassified by the defendant. When the defendant attempted to present evidence of exempt class members entitled to no recovery, the court refused to consider it. The court then calculated class damages by extrapolating the average overtime reported by the sample group to the whole class. This resulted in a $15 million verdict against the defendant. U.S. Bank appealed, the verdict was unanimously reversed, and the class subsequently appealed to the California Supreme Court.

The Supreme Court affirmed the reversal, decertifying the class, finding a denial of due process and significant errors in the sampling model. First, by refusing to consider evidence of exempt class members, the defendant was denied due process. Secondly, the Court found the statistical sampling significantly flawed; not only was the sampling group not chosen at random, but the high margin of error (43%) used to determine damages could not be relied upon with certainty. The Court did not, however, prohibit using statistical sampling in wage and hour class actions, but emphasized the obligation to address, rather than ignore, remaining individual issues after certification.

The case was affirmed and remanded for a new trial on liability and damages.