No Feasible Trial Plan – No Class Action

This is the take-away from last week's Seventh Circuit's decision in Espenscheid et al v. DirectSAT USA, LLC, et al., (7th Cir. Feb. 4, 2013), 2013 WL 407446. While it is often perilous to predict that a circuit court-level decision will be a game-changer, Judge Posner's latest wage hour opinion is likely to meet expectations.

The plaintiffs in Espenscheid brought an action on behalf of a group of 2,341 technicians who install and repair home satellite dishes in Wisconsin. The complaint alleged various types of "off the clock" unpaid overtime claims. The district court initially certified both a collective action under the Fair Labor Standards Act and a Rule 23 class action for the state law claims, with several subclasses. Shortly before trial, Judge Crabb decertified the classes because of plaintiffs' inability to devise a feasible trial plan that would both promote judicial economy and protect the employer's due process rights.

The Appellate Court's Decision

The Seventh Circuit affirmed. Judge Posner emphasized that it is plaintiffs' burden to develop a workable trial plan: "[I]f class counsel is incapable of proposing a feasible litigation plan though asked to do, the judge's duty is at an end." The court was particularly concerned about the inevitable variance in methods for calculating class members' damages. Judge Posner observed that the different tasks performed by the technicians, who were paid on a piece rate rather than an hourly basis, presented a situation that would "require 2341 separate evidentiary hearings" in a trial that might overwhelm the court. Judge Posner also criticized plaintiffs' proposal to the district court to have 42 individuals testify at trial as "representative" members of the class. Judge Posner chided plaintiffs' counsel for being unable to explain how this group was chosen. He then found that they were, in fact, not representative, and that it would be inappropriate to make any extrapolation from their experiences. The court determined that plaintiffs had asked "the district judge to embark on a shapeless, freewheeling trial that would combine liability and damages and would be virtually evidence-free so far as damages were concerned." 

Judge Posner was typically direct in his description of the plaintiffs' litigation strategy: 

They must think that like most class action suits this one would not be tried – that if we ordered a class or classes certified, DirectSAT would settle. That may be a realistic conjecture, but class counsel cannot be permitted to force settlement by refusing to agree to a reasonable method of trial should settlement negotiations fail.

Like many Judge Posner opinions, Espenscheid is full of interesting observations, written in his inimitable style. Two specific examples stand out. The first is the court's discussion of the difference in the legal standards necessary for certification of collective and class actions. Judge Posner concluded that "there isn't a good reason to have different standards for the certification of the two different types of action, and the case law has largely merged the standards, though with some terminological differences."

The second is Judge Posner's criticism of plaintiffs' counsel for overlooking what he called "a promising alternative to class action treatment" of making a complaint to the Department of Labor. He cited data about the DOL's increased FLSA enforcement efforts, including its recovery of $225 million in back pay in fiscal year 2011. And he pointedly noted that DOL has the ability, in class cases, to supplement employee testimony with the results of its own investigation of the employer.

What the Decision Means for Employers

Employers facing wage hour litigation will find a lot to like in Judge Posner's opinion. The opinion surely confirms the importance of taking a strategic view of the trial plan issue early in the litigation. This is among the first appellate court-level decisions addressing the role of trial plans in wage hour litigation, and will likely be frequently cited in the subsequent development of the law on this point. Beyond that, Espenscheid is a forceful rejection of an unsophisticated proposal to try a wage hour class action through representative testimony. The court's reasoning provides employers with numerous arguments to challenge the way in which many plaintiffs propose to use this device. The opinion is also properly skeptical about the ability of courts to manage class trials in many types of off the clock wage hour cases, where both liability and damages necessarily require individualized determinations based on myriad factors. To that extent, the court's opinion can be seen as a long-overdue recognition by a prominent judge that many off-the-clock cases are simply unsuited for class or collective action treatment. And Judge Posner's view of class certification standards will be frequently cited by employers arguing against the relatively low standard applied by many courts in determining whether it is appropriate to grant conditional certification of FLSA collective actions. 

Perhaps the most intriguing aspect of Espenscheid is Judge Posner's suggestion about plaintiffs' lawyers taking their wage hour cases to the DOL. If widely accepted, Judge Posner's suggestion would not be unalloyed good news for employers. The case law gives DOL considerably more latitude with the use of representative testimony, particularly with respect to the degree of evidence necessary to support class-wide extrapolation under the "just and reasonable inference" standard. Judge Posner's musings may be another portent of a coming shift in emphasis in wage hour enforcement. At our next Third Thursday webinar, scheduled for next Thursday, February 21, we will be discussing several new initiatives underway by the DOL in President Obama's second term.