Supreme Court left unresolved questions in Tyson

The U.S. Supreme Court recently held in Tyson Foods Inc. v. Bhouphakeo, 2016 DJDAR 2742 (March 22, 2016), that a party may use representative evidence to establish class-wide liability, provided the same evidence could be used to establish liability in an individual action. On first glance, Tyson appears to be a victory for the plaintiffs' bar, who long sought clarification regarding the so-called "trial by formula" approach. The court, however, declined to reach an equally important question regarding standing that leaves the door open to future attacks by class action defendants.

Background

In Tyson, a group of employees alleged that the company violated the Fair Labor Standards Act (FLSA) by failing to compensate them, or the other 3,344 employees, for overtime worked. The group contended that Tyson failed to compensate its employees for "donning and doffing time" spent putting on and removing certain protective gear they were required to wear on the job, which would push their hours over the legal threshold for overtime.

Prior to trial, the district court certified the FLSA claims as an opt-in collective action and the state-law claims as a Federal Rule of Civil Procedure 23(b)(3) class action. Because Tyson did not keep records of each employee's donning and doffing time, the plaintiffs relied on representative evidence, derived from videotaped observations and employee time records, to calculate the amount of uncompensated work performed on a class-wide basis.

The jury returned a special verdict awarding $2.9 million to plaintiffs based in part on the representative evidence. Tyson moved to set aside the verdict, arguing that individual variations in donning and doffing times precluded certification under Rule 23(b)(3)'s requirement that "questions of law or fact common to class members predominate over" questions affecting only individual class members. Both the district court and the 8th U.S. Circuit Court of Appeals rejected Tyson's arguments. Tyson then filed a petition for writ of certiorari, and the Supreme Court agreed to hear the case.

A Win for Class Action Plaintiffs

The questions before the Supreme Court were: (1) whether plaintiffs could use the representative evidence to prove that the legal claims were common and a class proceeding is proper; and (2), whether class certification is proper if it contains class members who haven't been injured and do not have standing under Article III of the Constitution. The court, in 6-2 opinion, ruled in favor of the employees on the first question, but was unable to settle the second question.

Justice Anthony Kennedy, writing for the six-member majority, held that the studies could be used to prove Tyson's liability. The court rejected the argument, advanced by Tyson and some of its amici, for a categorical exclusion of representative or statistical evidence in class actions, and refused to "establish general rules governing the use of statistical evidence ... in all class-action cases." The court reasoned that the use of such evidence to establish class-wide liability "will depend on the purpose for which the evidence is being introduced and on 'the elements of the underlying causes of action.'" A key question, the court noted, is whether "each class member could have relied on [the statistical evidence] to establish liability if he or she had brought an individual action"; if so, "that [evidence] is a permissible means of establishing the employees' hours worked in a class action." The court found that because Tyson had not obeyed its legal duty to keep records on how much each worker had worked as overtime, a study would have been a valid method of proof in each employee's individual action. The court reasoned that the same must be true in a class action.

Turning to the question of whether the verdict against Tyson should be set aside on the theory that a class member who had not been injured would collect damages, the majority opinion declined to decide the issue because the company had changed its argument as the case unfolded. At least three justices, however, suggested that it would violate Article III to award relief by lump sum absent assurance that no uninjured class members would receive damages. Chief Justice John Roberts wrote a separate opinion to express his concern that it would likely be impossible to remove uninjured class members from the class and that "a lump-sum jury award cannot overcome the limitations placed on the federal courts by the Constitution." In the same vein, Justice Clarence Thomas, joined by Justice Samuel Alito, dissented, contending that the majority's conclusion "created an unacceptable risk that Tyson would be held liable to a large class without adequate proof that each individual class member was owed overtime."

Stones Left Unturned

While the court indicated that plaintiffs can use statistical evidence to prove class-wide liability, it remains unclear how far the court is willing to expand the bounds of the "trial by formula" approach. The unavailability of information about specific plaintiffs was key to the court's analysis. If such evidence were available, would the court reach the same conclusion? And the holding will ultimately be of limited utility if the evidence on which the "trial by formula" relies is insufficient. As the court noted, Tyson did not challenge the employees' experts' methodology under Daubert and, consequently, there was no basis on which to conclude that it was legal error to admit the studies.

In passing on the second issue, the court acknowledged that "the question whether uninjured class members may recover is one of great importance." Indeed, just one day after the court issued its opinion, Wal-Mart and Wells Fargo, whose certiorari petitions in two other cases had been on hold pending a ruling in Tyson, submitted supplemental briefs asking the court to answer this question. Thus, curious litigants may not need to wait long for guidance on the second question regarding standing.

Crystal Lopez is an attorney in Blank Rome's Los Angeles office. She focuses her practice on class action defense, with an emphasis on consumer fraud and privacy claims. She can be reached at ECLopez@BlankRome.com.

Harrison Brown is an attorney in Blank Rome's Los Angeles office. His practice encompasses a wide range of business litigation and class action defense, with an emphasis on consumer fraud and privacy claims. He can be reached at HBrown@BlankRome.com.