On Thursday, April 12, the California Supreme Court issued its long-awaited opinion in Brinker Restaurant Corp., et al. v. Superior Court,i a wage and hour dispute regarding meal and rest breaks for restaurant employees. The decision has important implications for parties disputing class certification in California courts.
DLA Piper Labor and Employment group has also issued a companion alert, available here which summarizes the Court’s key holdings in the wage and hour context and provides practical tips for employers.
Trial courts must resolve threshold merits issues only when they are dispositive of the class certification inquiry
The trial court in Brinker certified three subclasses of current and former Brinker employees. The Court of Appeal reversed, finding that the trial court erred as a matter of law by certifying the subclasses without first resolving legal disputes over the elements of plaintiffs’ claims. ii On review, the Supreme Court explained that the Court of Appeal went too far. “[T]rial courts are not obligated as a matter of law to resolve threshold disputes over the elements of a plaintiff’s claims, unless a particular determination is necessarily dispositive of the class certification question.”
The Court emphasized the procedural nature of the certification inquiry. In language sure to be used by parties moving for certification, the Court wrote “resolution of disputes over the merits of a case generally must be postponed until after class certification has been decided.”
Citing cases like the United States Supreme Court’s recent decision in Wal-Mart Stores, Inc., v. Dukes, iii the California Supreme Court acknowledged that determining whether the requirements for certification are met will often require resolution of issues closely tied to the merits. For example, determining whether plaintiffs can prove an element of a claim on a classwide basis “can turn on the precise nature of the element and require resolution of disputed legal or factual issues affecting the merits.” Nonetheless, the Court wrote, “[s]uch inquiries are closely circumscribed.”
The Court also emphasized the deference granted to trial courts making certification decisions. “The decision to certify a class rests squarely within the discretion of the trial court, and we afford that decision great deference on appeal, reversing only for a manifest abuse of discretion…A certification order generally will not be disturbed unless (1) it is unsupported by substantial evidence, (2) it rests on improper criteria, or (3) it rests on erroneous legal assumptions.”
Certification and class-wide preclusive benefits
The California Supreme Court supported its decision, in part, by emphasizing the preclusive value of merits decisions favoring defendants following certification. To resolve merits disputes before rejecting class certification, the Court wrote, “places defendants in jeopardy of multiple class actions.” “It is far better from a fairness perspective to determine class certification independent of threshold questions disposing of the merits,” permitting defendants who subsequently prevail on those merits to obtain preclusive benefits against a class.
This aspect of the Brinker decision arguably fails to consider the practical realities of class litigation. While some defendants may prefer certification prior to a merits victory, it is far from clear that “fairness” requires a court to address certification prior to the resolution of a legal or factual dispute. Indeed, the recent amendments to Federal Rule of Civil Procedure 23 acknowledge the need for flexibility in this regard in class actions in federal court. As the advisory committee explained, prior to the amendments, Rule 23 “neither reflect[ed] prevailing practice nor capture[ed] the many valid reasons that may justify deferring the initial certification decision.”iv The advisory committee also explained that “[t]he party opposing the class may prefer to win dismissal or summary judgment as to the individual plaintiffs without certification and without binding the class that might have been certified.” For example, a defendant may prefer to avoid the cost of litigating class certification and giving notice to the class if a claim can be quickly dismissed or adjudicated and is unlikely to be asserted by subsequent plaintiffs.
Justice Werdegar’s concurring opinion
Justice Kathryn Werdegar authored not only the unanimous majority opinion in Brinker, but also a concurring opinion joined only by Justice Goodwin Liu. The Court determined that its resolution of a merits issue – employer obligations regarding meal breaks – rendered the meal-break subclass overinclusive as certified. The Court therefore remanded the case to the trial court to reconsider class certification in light of the Court’s merits decision. Justice Werdegar’s concurring opinion states that its intent was to give the trial court guidance on remand.
Brinker argued that it was not required to force employees to take meal breaks, and the questions whether or not employees did so and why created individual issues precluding certification. Justice Werdegar characterized the resulting individual issues as questions of damages rather than liability. “We have long settled that individual damages questions will rarely, if ever, stand as a bar to certification,” she wrote. She also opined that such individual questions may be resolved through use of “[r]epresentative testimony, surveys, and statistical analysis…to render manageable determinations of the extent of liability.”
The concurrence, however, appears to conflict with the US Supreme Court’s Dukes decision on this point. This is true regardless of whether the concurrence is correct that individual issues raised by Brinker related to damages – a questionable proposition in itself – rather than liability. “A district court must usually conduct additional proceedings to determine the scope of individual relief,” at which point a defendant “will have the right to raise any individual affirmative defenses it may have, and to demonstrate that the individual applicant was denied an employment opportunity for lawful reasons.”v The US Supreme Court in Dukes expressly disapproved the use of statistical sampling to address the manageability issues raised by such affirmative defenses to individual claims: “[A] class cannot be certified on the premise that Wal-Mart will not be entitled to litigate its statutory defenses to individual claims.”vi
In any event, it is noteworthy that Justice Werdegar wrote both the majority opinion and a concurrence that did not attract the support of a majority of Justices. This suggests that the concurring opinion is probably not a reliable indicator of the views of the Court’s majority.
The class action dimensions of the Brinker decision are a mixed bag. On the one hand, the Brinker decision provides putative class plaintiffs with some favorable soundbites regarding pre-certification merits disputes and underestimates the need for flexibility in the timing of certification. On the other hand, it makes plain that trial courts err as a matter of law when they fail to resolve threshold merits disputes that are dispositive of class treatment. Defendants opposing class certification therefore should pay close attention to certification arguments that are susceptible to dispute as a merits issue – such as the construction of statutes or contracts – and present the issue to a court as one it must resolve before further evaluating the propriety of class treatment.
For more information about the Brinker decision and its impact on your business, please contact:
i __ P.3d __, Cal., Apr. 12 2012.
ii Brinker Rest. Corp. v. Superior Court, 165 Cal. App. 4th 25, 80 (2008)
iii 564 U.S. __, 131 S.Ct. 2541 (2011).
iv FED. R. CIV. P. 23 advisory committee’s note (2003 amendments).
v 564 U.S. __, 131 S.Ct. 2541, 2561 (2011).