Last week, the U.S. Supreme Court granted a petition for certiorari in Tyson Foods, Inc. v. Bouaphakeo. Tyson Foods presents two issues with the potential to make the case enormously important for class action litigation: (1) May a class action be certified where liability and damages will be determined with statistical techniques that presume all class members are identical to the average observed in a sample; and (2) May a class action be certified where the class contains hundreds of members who were not injured and have no legal right to recover?
Tyson Foods is a wage-and-hour action brought by current and former “gang-time” employees at Tyson’s facility. Multiple times during each shift – when the shift began, before and after lunch, and at the conclusion of the shift – employees had to put on and take off various items of sanitary and protective clothing and equipment: so-called “donning and doffing time.” The plaintiff’s theory was that the defendant’s “K-code” system for paying employees for donning and doffing time systematically underestimated the time taken by the process, and therefore underpaid the employees. The employees filed claims under the Fair Labor Standards Act and the Iowa Wage Payment Collection Law. The district court certified the FLSA action as a collective action and the IWPCL action under Federal Rule 23 despite finding “some very big factual differences among hourly employees.”
Following the Supreme Court’s decision in Wal-Mart Stores, Inc. v. Dukes, the defendant filed a motion to decertify the Rule 23 class. Plaintiffs opposed decertification, arguing that they could show liability with a time study by their expert, who had observed average donning/doffing time for a small sample of several hundred of the defendant’s employees. Plaintiffs’ expert conceded that his measurements included employees who performed different jobs and donned and doffed different equipment, and that the result was “a lot of variation.” He further admitted that he had allowed employees to “self-select” into his study; he hadn’t selected workers from a variety of jobs, or ensured that his sample had included the same proportion of knife-wielding and non-knife wielding employees as the defendant’s entire workforce. Nevertheless, the court denied the motion to decertify, and the case proceeded to trial. At the close of plaintiffs’ case, the defendant moved once again to decertify, or grant judgment as a matter of law, on the grounds that plaintiffs had not proved that all class members were injured. The court denied the motion, and ultimately a verdict for plaintiffs was returned.
A divided panel of the Eighth Circuit affirmed, holding that because the defendant had a specific company policy and the employees “used similar equipment,” the inference from the statistical study’s mean to the class was allowable. Judge Beam dissented, emphasizing the substantial factual differences among individual employees. The defendant’s petition for rehearing en banc was denied by a vote of six to five, with Judge Beam once again dissenting.
The Supreme Court’s decision in Tyson Foods – which we expect late in 2015 or early in 2016 – has the potential to significantly rein in abuse of the class action device. The Supreme Court originally condemned “trial by formula” four years ago in Dukes, pointing out that when plaintiffs’ entire liability case consists of a statistical study of the class, defendants are generally stripped of the opportunity to present individualized defenses – a clear violation of the Due Process Clause. But in the years since Dukes, the Circuits have varied in the degree to which they have restricted trial by formula. Tyson Foods also presents a separate issue which frequently arises in “trial by formula” cases – class definitions so expansively written as to include hundreds if not thousands of individuals who haven’t been injured, and therefore would have no right to bring a lawsuit of their own. The inclusion of such individuals, of course, both makes class certification seem more appropriate than it necessarily should be, and inflates the eventual settlement and/or judgment. A decision reversing the Eighth Circuit in Tyson Foods might go a long way to restoring balance and fairness to class action litigation.