On 22 March 2016, in Tyson Foods, Inc. v. Bouaphakeo, the US Supreme Court affirmed a lower court’s decision to allow plaintiffs to use statistical evidence based on a representative sample of the plaintiffs’ employment-related activities at issue in the case to show that liability presented a classwide issue that was appropriate for litigation in a class action context. The Court declined to declare a categorical rule permitting or disallowing the use of statistical sampling at the class certification stage, but held instead that “[i]ts permissibility turns not on the form a proceeding takes—be it a class or individual action—but on the degree to which the evidence is reliable in proving or disproving the elements of the relevant cause of action.”
Tyson Foods dealt with a claim by workers in a meat processing plant that they were denied overtime pay under federal and state law for the time they spent putting on and taking off certain protective equipment. The workers used statistical evidence to estimate the amount of time these activities took. In ruling that this evidence was allowed, the Court explained that “where representative evidence is relevant in proving a plaintiff’s individual claim, that evidence cannot be deemed improper merely because the claim is brought on behalf of a class.” The Court was also persuaded by the fact that the evidence was used to “fill an evidentiary gap created by the employer’s failure to keep adequate records” and was therefore the only practical way to present evidence as to the employer’s liability. In addition, the Court distinguished Wal-Mart Stores, Inc. v. Dukes, a case from 2011 holding that a statistical sample could not be used to establish a class claiming gender discrimination. The Court in Tyson Foods explained that, in contrast to this case, the employees making up the putative class in Wal-Mart were not “similarly situated” and therefore could not have used the statistical evidence even if they had brought individual suits.
While Tyson Foods addressed an issue that does not arise in the typical securities class action (where investors that bought their shares during the class period are generally viewed as similarly situated for purposes of a class action), the Court explained more generally that “[t]he fairness and utility of statistical methods in contexts other than those presented here will depend on facts and circumstances particular to those cases.” The factors discussed in Tyson Foods will therefore help guide future determinations in a broad range of cases as to whether the use of statistical evidence is appropriate. For example, statistical evidence is commonly used for purposes of determining whether a disclosure revealing the defendant’s alleged misstatement caused the defendant company’s stock price to drop, as well as in other ways related to the calculation of the plaintiffs’ damages. Parties can now be guided in these areas by the Supreme Court’s pronouncements in Tyson Foods as to the proper use of statistical evidence.
For more information on business cases currently before the Supreme Court, please see our client note at: http://www.shearman.com/en/newsinsights/publications/2016/03/some-observations-on-the-impact-of-justice-scalias