It has been more than a year since the Supreme Court’s landmark ruling in Wal-Mart Stores, Inc. v. Dukes, and its impact on wage and hour class actions remains hotly debated.  While plaintiffs’ attorneys have argued that the decision is limited substantively to discrimination cases and procedurally to Rule 23(b)(2) class actions, an increasing number of court rulings have endorsed  the application of Dukes’ commonality and due process holdings to wage and hour claims, at least in state law class actions.  The issues were the focal point last Tuesday when the Ninth Circuit heard oral argument in Wang v. Chinese Daily News.  The Ninth Circuit had previously affirmed the district court’s handling of the case––including its certification of a class under Rule 23(b)(2) and its judgment for the plaintiffs following a jury trial––but the Supreme Court vacated that ruling post-Dukes and sent the case back to the Court of Appeals for “further consideration in light of ... Dukes….”  The Ninth Circuit’s ruling this time around will almost certainly impact Dukes’ application in wage and hour class actions.

Wang took a protracted path to last week’s oral argument.  It began over eight years ago, in March 2004, when three employees of the Chinese Daily News filed a hybrid class action in a California federal district court, alleging violations of both the FLSA and California Labor Code  arising from alleged unpaid overtime and meal and rest break violations.  In 2005, the district judge certified a California class of 200 individuals under Rule 23(b)(2), or, in the alternative, 23(b)(3).  (Rule 23(b)(2) class claims seek equitable relief, such as an injunction, while (b)(3) classes seek monetary relief.  Any plaintiff seeking class certification under either provision must show that there are common questions of law or fact among the putative class members, but a plaintiff seeking a (b)(3) class must also show that those questions predominate over individualized questions and that a class action is superior to other methods of adjudication.)

The newspaper suffered a string of defeats in the ensuing years.  In 2006, it tried and failed to decertify the class.  In 2007, a jury returned a verdict in the plaintiffs’ favor, and in 2008, the district judge entered judgment against the newspaper in the amount of $5.2 million.  Finally, in 2010, the Ninth Circuit affirmed the district court’s handling of the case, including its decisions on class certification and judgment. 

But the case took a turn in 2011, as the newspaper petitioned for Supreme Court review at the end of March, and the Court decided Dukes just a few months later.  As we reported, Dukes tightened the standard plaintiffs must meet to satisfy Rule 23’s commonality requirement and made clear that a defendant has a due process right “to individualized determinations of each employee’s eligibility for backpay,” at least under Rule 23(b)(2).  Because this latter holding—which was unanimous—is based on Constitutional principles, defendants have reasoned that it applies to all class claims, not just discrimination class claims brought under 23(b)(2).  We agree and have argued that both holdings in Dukes apply to wage and hour class actions.  In late 2011, the Supreme Court vacated the Ninth Circuit’s ruling affirming Wang and remanded the case for consideration in light of Dukes—thus, Wang is a clear opportunity to address this issue. 

With Tuesday’s oral argument, the Ninth Circuit undertook its further consideration of Wang.  Having no choice but to concede that their class was not properly certified under Rule 23(b)(2), the plaintiffs argued that certification was nonetheless proper under 23(b)(3).  The newspaper argued otherwise in its briefs, urging that the tighter Rule 23 commonality requirement and due process concerns announced in Dukes applied to the plaintiffs’ Rule 23(b)(3) claims and were not satisfied.  At argument, the Ninth Circuit panel focused on three questions:  (i) how Dukes changes the class certification calculus in Wang, (ii) how the California Supreme Court’s decision in Brinker impacts the meal break issue, and (iii) what evidence the district court should use in deciding certification if that issue is sent back to the lower court for a post-Dukes assessment. These questions may signal the panel’s inclination to rely on Dukes to vacate the district court’s decision certifying a Rule 23(b)(3) class and to remand the case.

Of course, how the Ninth Circuit will rule remains uncertain.  The stakes are certainly high.  But if, as we predict, the court rules that the commonality and/or due process concerns addressed in Dukes apply in Rule 23(b)(3) wage and hour class actions, it will provide employers with new ammunition in their defense against such lawsuits.  Over time, it could force those bringing these lawsuits to narrow the scope of their proposed classes to satisfy Dukes-based concerns.  This would reverse the very troubling decade-long trend of forcing employers to defend wage and hour class claims based on insufficient evidence of commonality and grossly unfair and statistically inadequate representative proof of damages.

A ruling by the Ninth Circuit applying Dukes to Wang’s class claims would also create a split with the Seventh Circuit’s decision in Ross v. RBS Citizens, which is the first and, to date, only federal appellate court decision to assess the application of Dukes in the wage and hour class context.  In Ross, the Seventh Circuit found that Dukes had no impact on a district court’s decision to certify under Rule 23(b)(3) a class of 1,100 individuals, most of whom claimed that they worked off the clock.  The Seventh Circuit found that Dukes’ broad language regarding Rule 23’s commonality requirement has no application outside the case’s exceptional facts––a class of millions asserting discrimination claims that required proof of individual intent.  That court also concluded, in a footnote, that the due process concerns described in Dukes apply only to 23(b)(2) classes, not (b)(3) classes.

Coincidentally, RBS filed a petition for certiorari late last week, seeking Supreme Court review.  While Supreme Court review is rarely granted, the likelihood that it will be granted increases dramatically in the event of a circuit split.  While there is no split in the circuits at this time, a Ninth Circuit ruling in Wang applying Dukes to Rule 23(b)(3) wage and hour class actions would change that and enhance the chances that the Supreme Court will intervene.  We will, of course, keep our readers fully informed as developments arise.