This afternoon the California Supreme Court issued its highly anticipated decision in the Duran v. U.S. Bank, N.A. case. In a unanimous decision (with one concurring opinion), the Supreme Court affirmed the Court of Appeal’s decision to reverse a $15 million trial court judgment in favor of U.S. Bank (USB) loan officers who alleged they had been misclassified under the outside salesperson exemption. The Supreme Court held that the trial court’s approach to conducting the trial was “profoundly flawed” and ordered a new trial for both liability and restitution. The Court further provided that the trial court could entertain a new class certification motion.
At the trial level, the court certified a class of 260 plaintiffs and ultimately ruled that USB was liable to the entire class. The trial court determined the amount of USB’s liability to the class as a whole by extrapolating the average overtime reported by a sample of 21 plaintiffs. The trial court did not permit USB to introduce evidence about the work habits of individuals outside that small sample. The Court of Appeal reversed the trial court in a relatively scathing decision, and the Supreme Court affirmed the Court of Appeal. The Supreme Court noted that, while statistical sampling can be an appropriate way to assess liability and damages in some wage and hour class actions, the trial court’s approach to sampling was “profoundly flawed” because, among other things, the sample size (1) was too small, (2) was not random, and (3) involved an “intolerably large” margin of error of 43.3%.
The Supreme Court also held that the trial court’s refusal to admit evidence relating to loan officers outside the sample group inappropriately impaired USB’s ability to present a defense, and specifically held that a class action trial management plan “must permit the litigation of relevant affirmative defenses, even when these defenses turn on individual questions.”
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