Bad Sampling Nixes $15 Million Wage Class Verdict

The California Supreme Court unanimously overturned a $15 million wage and hour class action verdict for loan officers at U.S. Bank National Assoc., saying a “profoundly flawed” system was used to select a sample of plaintiffs for trial.

The verdict in the case would have allowed an average recovery of $57,000 per person for the 260 class members.

But the high court said the sample of plaintiffs used for the test trial was based on a small group and the trial judge then found the entire class had been misclassified as exempt from overtime pay.

The court said not only did the trial verdict have to be reversed and an entire new trial undertaken, but the defense may also seek a new decision on certification of the class.

“As even the plaintiffs recognize, this result cannot stand,” wrote Justice Carol Corrigan.

“The trial court’s flawed implementation of sampling prevented USB from showing that some class members were exempt and entitled to no recovery,” she said.

Statistical sampling may provide an appropriate means of proving liability and damages in some wage and hour class actions, but the “court’s particular approach to sampling here was profoundly flawed,” she said.

USB has 130 branches in California. Its business banking officers sell products including loans and lines of credit to small business customers and it is their job to cultivate new business.

USB had classified the jobs as exempt from overtime, primarily because of the state law exemption for outside salespeople.

The class of employees sued in 2001 and after much wrangling a class was certified in 2005, with roughly 200 members.

Plaintiffs proposed a random sampling of class members to conduct an initial trial and to be the focus of discovery.

If the bank was liable, an expert would aggregate classwide damages to be determined in phase two of the trial.

There was no precedent for use of a random sampling to establish liability in a class action, according to Corrigan.

The bank objected to the sampling at each step and sought to decertify the class.  The bank’s expert said simply drawing a random sample was not enough to produce an unbiased and accurate estimate about the entire class.  He also suggested the sample size, 20 people, was too small.

“The court’s decision to extrapolate classwide liability from a small sample, and its refusal to permit any inquiries or evidence about the work habits of [bank salespeople] outside the sample group, deprived USB of the ability to litigate its exemption defense,” Corrigan said.

Although initial plaintiff selection was random, later changes were not made randomly, she said.

In a separate concurrence, Justice Goodwin Liu said the representative witness group for the trial was not selected at random but in a manner biased in plaintiffs’ favor.  The trial judge also tolerated a margin of error at the damages phase that was “undoubtedly too large,” he said.

Case Duran v. US Bank National Assoc. No. S200923


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