By Joseph R. Ashby

A recent decision from the U.S. District Court for the Northern District of California highlights the potential difficulties for a party who contends that individual issues predominate based on arguments that there are flaws in the statutory interpretation underlying the plaintiff’s claims.

In Magadia v. Wal-Mart Associates, Inc., 2018 WL 339139 (N.D. Cal. Jan. 9, 2018), the district certified three classes. In opposing class certification, Walmart did not dispute that the Rule 23(a) factors were met, but contended the classes should not be certified because the predominance and superiority requirements of Rule 23(b)(3) were not satisfied. Id. at *5–6. Walmart contended that for certain claims, individual questions predominated because the plaintiff’s claims were based on flawed theories of statutory interpretation.

Background

The plaintiff in Magadia worked as a non-exempt employee at a Walmart store in San Jose, California and asserts three claims based on alleged violations of the California Labor Code. 2018 WL 339139, at *1–3. For each claim, the plaintiff sought the certification of a corresponding class.

First, the plaintiff alleges Walmart’s payment of meal period premiums violates California Labor Code § 226.7(c) because Walmart pays the meal period premiums using employees’ base rates of pay without consideration of “whether the employee has also earned non-discretionary incentive pay during the same pay period.” 2018 WL 339139, at *2. For the alleged violation of § 226.7(c), the plaintiff sought the certification of the following class:

All current and former California non-exempt retail store employees of [Wal-Mart] who received non-discretionary remuneration, including “MYSHARE INCT,” and was [sic] paid any meal period premium payments in the same period that the non-discretionary remuneration was earned, at any time between December 2, 2012, through the present.

2018 WL 339139, at *4.

Second, the plaintiff alleges that when non-exempt Walmart employees earn overtime and “non-discretionary remuneration,” Walmart’s policy is to pay the “additional overtime wage” with an “OVERTIME/INCT” entry on the employee’s pay statement. Id. at *2–3. The plaintiff alleges this violates the requirement of California Labor Code § 226(a)(9) for “employers to furnish ‘semimonthly or at the time of each payment of wages’ an ‘accurate itemized statement’ that shows, inter alia, ‘all applicable hourly rates in effect during the pay period and the corresponding number of hours worked at each hourly rate by the employee.” 2018 WL 339139, at *3 (quoting California Labor Code § 226(a)(9)). For the alleged violation of § 226(a)(9), the plaintiff sought the certification of the following class:

All current and former California non-exempt employees of [Wal-Mart] who received “OVERTIME/INCT,” at any time between December 2, 2015, through the present.

2018 WL 339139, at *4.

Third, the plaintiff alleges when his employment with Walmart ended, the “Statement of Final Pay” Walmart provided him violated California Labor Code § 226(a)(6) because it did not include start and end dates for the “Statement of Final Pay.” 2018 WL 339139, at *3. For the alleged violation of § 226(a)(6), the plaintiff sought the certification of the following class:

All former non-exempt employees who worked for [Wal-Mart] in the State of California and whose employment terminated (whether voluntarily or involuntarily) at any time from December 2, 2015 to the present.

2018 WL 339139, at *4.

Analysis

For the meal period premiums class, Walmart contended individual questions predominated because there would need to be determinations of whether the meal period premiums were legally required, meaning that Walmart had not provided a compliant meal period “as opposed to a mere clocking error or voluntary meal period disruption by the class member.” Id. at *7. Walmart had a policy of automatically paying meal period premiums based on employee time punches, along with a process that investigated meal period premiums to determine if other remedial steps were needed. Id. at *2.

The court relied on the Ninth Circuit’s decision in Abdullah v. United States Security Associates, Inc., 731 F.3d 952 (9th Cir. 2013), and held that although determining whether Walmart had provided a compliant meal period would present individual questions, Walmart had “not demonstrated that such individualized inquiries will predominate over the common legal question presented by Plaintiff’s meal period premium claim.” 2018 WL 339139, at *8. The court explained that similar to the defendant in Abdullah, Walmart’s policy of investigating each meal period premium meant that Walmart already had the records to determine if the payment of a meal period premium “was prompted by an actual failure by Wal-Mart to provide a compliant meal period.” Id.

For each of the three classes, Walmart also contended that the claims the plaintiff alleged were based on faulty theories of statutory interpretation. For the meal period premiums class, Walmart contended California Labor Code § 226.7(b) does not require the inclusion of incentive pay in the payment of meal period premiums. 2018 WL 339139, at *8. For the overtime wage statement class, Walmart contended California Labor Code § 226(a)(9) only requires an employee’s applicable hourly rate on wage statements and Walmart includes that on wage statements. 2018 WL 339139, at *9–10. For the final wage statement class, Walmart contended California Labor Code § 226(a) is satisfied if an employee’s regular pay cycle pay statement has pay period information and Walmart includes pay period information on regular pay cycle pay statements. 2018 WL 339139, at *10. The court rejected each of these contentions as a potential basis for defeating predominance because the court concluded these were merits questions that were not necessary to determining class certification. Id. at *8–10. The court explained this most fully in analyzing the meal period premiums class, stating that:

Rule 23 grants courts no license to engage in free-ranging merits inquiries at the certification stage.” [Amgen Inc. v. Conn. Ret. Plans & Trust Funds, 133 S. Ct. 1184, 1194–1195 (2013).] Thus, “[m]erits questions may be considered to the extent—but only to the extent—that they are relevant to determining whether the Rule 23 prerequisites for class certification are satisfied.” Id. at 1195. Wal-Mart’s argument that Plaintiff asserts an incorrect interpretation of California Labor Code § 226.7(b) raises a merits question that is completely unrelated to whether any of the Rule 23 requirements have been met in the instant case.

2018 WL 339139, at *8. This component of the court’s analysis provides a ready example of the potential difficult a defendant opposing class certification may confront if a key component of the basis for defeating class certification is that the claims to be certified rely on flawed theories of statutory interpretation. For a defendant confronted with a putative class action where the defendant has a basis to contend that the plaintiff’s claims are based on flawed theories of statutory interpretation, the Magadia decision suggests such a defendant may need to pursue those arguments through an affirmative motion instead of raising them in opposition to class certification. Moreover, because of the ways in which a decision certifying a class can alter the dynamics in class action litigation, the Magadia decision suggests such a defendant may need to pursue an affirmative motion that presents the court with an opportunity to rule on the statutory interpretation question before the court reaches the question of class certification.