This discretionary appeal concerns whether the class action proceedings in this case improperly subjected Appellants to a "trial by formula." The trial court certified the class, a jury rendered a divided verdict, and the Superior Court affirmed in part and reversed in part. We now affirm.
Appellees brought various class action claims against their former employers, Wal-Mart Stores, Inc., and Sam's Club (hereinafter "Wal-Mart"), based on policies and conduct pertaining to rest breaks and meal breaks. Appellees asserted that Wal-Mart had promised them paid rest and meal breaks, but then had forced them, in whole or in part, to miss breaks or work through breaks, and also to work "off-the-clock," i.e., to work without pay, after a scheduled shift had concluded.
The jury trial of this class action alleging systemic wage and hour violations spanned six weeks, resulting in a voluminous record. Appellees called eighteen fact witnesses and three expert witnesses during their case-in-chief. The parties' examinations of Appellees' expert witnesses took six full days of trial (September 11, 12, 13, 19, 20, and 21). Additionally, lengthy arguments were conducted during trial but outside the hearing of the jury on Wal-Mart's motions to strike portions of the testimony of Appellees' experts. Ultimately, the jury rendered a verdict in favor of Wal-Mart on all claims relating to meal breaks but in favor of Appellees on all claims relating to rest breaks and off-the-clock work. The amount of the judgment ultimately entered on the verdict was $187,648,589.
Braun v. Wal-Mart Stores, 616 Pa. 354, 47 A.3d 1174 (2012).
The issue accepted for review requires this Court to address: (1) whether Wal-Mart was subjected to a "trial by formula"; and (2) whether Appellees were thereby improperly relieved of their burden to produce class-wide common evidence on key elements of their claims. Notwithstanding Wal-Mart's inclusion of the phrase "purported class action" in the issue presented for review, the propriety of the certification of the class in the first instance is not before the Court in this appeal. Notably, however, much of Wal-Mart's challenge to the method of trial is premised upon its contention that the class never should have been certified because Appellees did not present sufficient, class-wide "common" evidence of contract formation, breach, or unjust enrichment. Moreover, Wal-Mart asserts that the trial court's class certification, the jury verdict, and the Superior Court affirmance all improperly relied upon "sham statistics and baseless extrapolations of [Appellees'] expert witnesses, Drs. Baggett and Shapiro[,]" regarding "Wal-Mart's time clock and cash register records." Appellants' Brief at 27, 30. In short, Wal-Mart asserts that Appellees' statistical and extrapolation evidence was flawed in that it failed to show "that class members, on a class-wide basis, missed breaks, took shortened breaks or worked off-the-clock." Id. at 18-19.
More specifically, Wal-Mart claims that the time clock and cash register records did not show that employees had been forced to miss breaks or work off-the-clock, and that Appellees' expert analysis reaching the opposite conclusion was based on faulty assumptions that failed to account for the actual practices of Wal-Mart and its employees. Specifically, Wal-Mart claims that the analysis regarding rest breaks failed to account for "voluntary" missed breaks, and that the analysis regarding off-the-clock work failed to account for the alleged fact that it was not uncommon for cashiers to log into and operate cash registers under another employee's name. Thus, Wal-Mart asserts that the class was overbroad, that appellees had not shown proper proof of Wal-Mart's liability as to each "purported" class member, and that Wal-Mart had been subject to a "trial by formula" that denied Wal-Mart its right to due process in violation of Pennsylvania law.
The Superior Court's slip opinion in this case is 211 pages long, and thoroughly details the evidence presented at trial. We set forth here only those facts necessary for resolution of the single issue raised on appeal, in which Wal-Mart challenges the method by which the trial was conducted.
Wal-Mart employees (characterized as "associates" in Wal-Mart's employee handbooks
Prior to February 10, 2001, Wal-Mart employees were required to clock out and clock back in for each rest break, i.e., employees were required to "punch" or "swipe" a time clock at the beginning and end of every rest break. Beginning in 1999, Wal-Mart conducted approximately ten regional internal audits that indicated widespread rest break violations, such as missed breaks, breaks that were too long, or breaks that were too short. In 2000, Wal-Mart conducted the "Shipley Audit," which was national in scope and included an examination of time clock and cashier log-in records. The Shipley Audit revealed that in one week, across 127 Wal-Mart stores, including five in Pennsylvania, more than 60,000 rest break violations had occurred. The Shipley Audit showed that an average of two rest breaks per week per employee were either missed or shortened at every store. The results were reported to top-level Wal-Mart executives, and on February 10, 2001, Wal-Mart eliminated its policy requiring employees to clock out and clock back in for each rest break.
In both seeking certification of the class and litigating their case at trial, Appellees presented the expert opinions of statisticians L. Scott Baggett, Ph.D., and Martin M. Shapiro, Ph.D., who had analyzed Wal-Mart's own business records regarding hours worked, breaks taken, and wages paid to each employee, as well as the results of the Shipley Audit.
Dr. Shapiro testified for Appellees regarding off-the-clock work. Dr. Shapiro stated that he had compared the Wal-Mart time clock, payroll, and rest break computer databases, and found numerous recorded instances of employees actively logged in to cash registers or computer-based learning terminals during times when they had simultaneously been clocked out for a break or had been clocked out of a shift altogether. He added that the total amount of such off-the-clock work hours decreased significantly after Wal-Mart instituted its "lock-out" policy in 2003. Dr. Shapiro had been provided with time clock and cash register log-in data for sixteen Pennsylvania Wal-Mart stores for the period from 2001 to 2006. In his testimony, Dr. Shapiro explained how he had extrapolated from that data to determine the average total number of hours of off-the-clock work performed by all hourly employees at all Pennsylvania Wal-Mart stores during the period from 1998 to 2005. He calculated that the unpaid earnings for all Wal-Mart
Appellees also presented the expert testimony of organizational psychologist and statistician, Frank Landy, Ph.D., who testified that Wal-Mart had promised all its employees, through a variety of means, that paid breaks were a benefit of employment with Wal-Mart, and that its employees understood and expected that all breaks were to be paid breaks. In discussing the Shipley Audit, Dr. Landy testified that Wal-Mart stores had used daily "time adjustment slips" to correct known rest break violation errors. He explained: "Adjustment means that the associate actually comes in and says, no, no, I actually did get my break; I just forgot to swipe in [and] out for [it]." Dr. Landy testified that only approximately 10% of the total number of rest break violations had been corrected through time adjustment slips, which led him to the conclusion that "the magnitude of this problem even after they correct it for honest mistakes is big." See Braun, 24 A.3d at 932 (quoting Dr. Landy's trial testimony).
Appellees also presented the testimony of a number of former and current Wal-Mart employees, who testified that they had regularly been forced to work without taking breaks (or to take shortened breaks) because the stores in which they worked were chronically understaffed. In response, Wal-Mart presented the testimony of a number of current and former employees (all of whom had opted out of the class), who testified that they had never been forced to miss a rest break and had always been paid for the breaks they did take.
During the defense case, Dr. Denise Martin, an expert statistician, testified that she had identified a number of alleged errors in the methods used by Appellees' experts to arrive at their estimated damages computations. Principally, Dr. Martin took issue with Dr. Baggett's premise that an employee's failure to clock out and
In this appeal, Wal-Mart asserts that it was subjected to "trial by formula," a practice disapproved by the United States Supreme Court in Wal-Mart Stores, Inc. v. Dukes, ___ U.S. ___, 131 S.Ct. 2541, 180 L.Ed.2d 374 (2011), and Comcast Corp. v. Behrend, ___ U.S. ___, 133 S.Ct. 1426, 185 L.Ed.2d 515 (2013). The Court notes that Wal-Mart's formulation of the issue accepted for review focuses on the procedural conduct of the trial. Nevertheless, Wal-Mart argues that the class was improperly certified because Appellees failed to prove that questions of law and fact were common to the class, and that common questions predominated over individual issues.
In effect, Wal-Mart's arguments in support of its assertion that the class should not have been certified mirror its arguments in support of the assertion that it was subjected to a trial by formula. Nevertheless, the focus in this appeal should be primarily on the proofs offered at trial and whether the proceeding conducted by the trial court amounted to a trial by formula that relieved Appellees of their burden to produce common evidence on key elements of their claims.
In response, Appellees argue that on the merits, class certification was warranted here, and that Wal-Mart was not subjected to a trial by formula, but rather was faced with a recognized and acceptable style of class action known as "replicated proof," in which the same underlying evidence, if relevant and credible, proves each class member's claim as if each class member had proceeded alone. Appellees' Brief at 18 (citing Liss & Marion v. Recordex Acquisition Corp., 603 Pa. 198, 983 A.2d 652 (2009)). In a reply brief, Wal-Mart largely reiterates the positions in its original brief. Appellants' Reply Brief at 1-25. The Court notes that a number of amicus curiae briefs were also filed in this appeal.
Due process in legal proceedings requires an opportunity to confront and cross-examine adverse witnesses. Goldberg v. Kelly, 397 U.S. 254, 269-70, 90 S.Ct. 1011, 25 L.Ed.2d 287 (1970). As observed by the United States Court of Appeals for the Third Circuit, the validity of an argument challenging the manner in which a trial has been conducted and alleging that it was so highly prejudicial so as to amount to a denial of due process must be measured against the background of the trial as a whole; the complexity of the litigation; the length of the trial; the quantity of evidence received; and, the difficulty of the task that confronted the factfinder. Citron v. Aro Corp., 377 F.2d 750, 752 (3d Cir.1967). The class action mechanism is designed to permit a named individual to proceed to trial on behalf of the class, including him- or herself, and to try all of the class members' claims together to judgment. Samuel-Bassett, 34 A.3d at 34 (citing Pa.R.C.P. 1715(c)).
The United States Supreme Court's disapproval of "trial by formula" in Dukes was directed at a plan to try a sample set of class members' claims of sex discrimination and, if discrimination was found and the claims were meritorious, to then multiply the average back-pay award to determine the class-wide recovery without further individualized proceedings. Dukes, ___ U.S. at ___, 131 S.Ct. at 2561. To the High Court, this "novel" process would have robbed Wal-Mart (in that case) of its right to litigate its defenses to individual claims, because liability for all but the sample set would never be tried. Id. The United States Court of Appeals for the Sixth Circuit has described the "trial by formula" method disapproved in Dukes as follows:
Davis v. Cintas Corp., 717 F.3d 476, 486 n. 2 (6th Cir.2013).
Similarly, a Magistrate Judge of the United States District Court for the Southern District of New York described the "trial by formula" method disapproved in Dukes in the following terms:
Scott v. Chipotle Mexican Grill, Inc., 300 F.R.D. 188, 191 (S.D.N.Y.2014) (citations and quotation marks omitted).
In this case, contrary to Wal-Mart's assertions, the now-disapproved "trial by formula" process at issue in Dukes was not at work here, because there was no initial or prior adjudication of Wal-Mart's liability to a subset of employees that would then be extrapolated to the rest of the class. Instead, the extrapolation evidence Wal-Mart challenges in this appeal involves the amount of damages to the class as a whole. By contrast, the evidence of Wal-Mart's liability to the entire class for breach of contract and WPCL violations was established at trial by presentation of Wal-Mart's own universal employment and wage policies, as well as its own business records and internal audits. These records were sufficient to support the factfinder's determination that there was an extensive pattern of discrepancies between the number and duration of breaks earned and the number and duration of breaks taken. Both parties had ample opportunity to present evidence to explain these discrepancies, i.e., to show that the discrepancies were or were not evidence of class-wide wage-and-hour violations. Thus, Wal-Mart's claim that it was denied due process fails.
Also, in Dukes, the class-action was brought for alleged violations of Title VII of the Civil Rights Act of 1964, and specifically alleged sexual discrimination in the hiring and promotion of female workers. The evidence in Dukes showed that Wal-Mart had an express policy prohibiting sex discrimination. Importantly, although some Wal-Mart managers applied their own subjective gender biases in making hiring and promotion decisions, some did
In this case, where systemic wage-and-hour violations were asserted, evidence was presented by appellees that, if believed, supported an inference that Wal-Mart managers company-wide were pressured to increase profits and decrease payroll by understaffing stores through the preferred scheduling system, and that these factors, including the managers' annual bonus compensation program, impeded the ability of employees, across the board, to take scheduled, promised, paid rest breaks. The lack of proof of class commonality present in Dukes is not present here.
Turning to Comcast v. Behrend, which Wal-Mart also cites here, the question for review before the High Court in that case was "[w]hether a district court may certify a class action without resolving whether the plaintiff class had introduced admissible evidence, including expert testimony, to show that the case is susceptible to awarding damages on a class-wide basis." ___ U.S. at ___, 133 S.Ct. at 1431 n. 4. In that matter, two million Comcast customers comprised the class alleging various antitrust violations. The Court noted that both the U.S. District Court for the Eastern District of Pennsylvania and the U.S. Court of Appeals for the Third Circuit had perceived no need for the plaintiffs to "tie each theory of antitrust impact" to a calculation of damages. Id. at ___, 133 S.Ct. at 1433. The Court determined that the District Court and the Court of Appeals had entirely ignored the "first step" of a "damages study," which requires "the translation of the legal theory of the harmful event into an analysis of the economic impact of that event." Id. at ___, 133 S.Ct. at 1435 (italics in original) (citing Federal Judicial Center Reference Manual on Scientific Evidence 432 (3d ed.2011)). Because the damages methodology used in Behrend identified damages that were not the result of the specific antitrust violation for which the class had been certified, the High Court reversed the order upholding the class certification. Id. at ___, 133 S.Ct. at 1434-35.
The Behrend Court, did, however, recognize that where a theory of liability is capable of class-wide proof, calculations of damages need not be exact. Id. at ___, 133 S.Ct. at 1433-34. Indeed, as one federal district court has noted, one takeaway from the Supreme Court's decisions in this area is that "the propriety of class certification in wage and hour cases that involve recordkeeping violations should be assessed in light of the relaxed burden of proving damages." Gomez v. Tyson Foods, Inc., 295 F.R.D. 397, 400 (D.Neb. 2013) (citing Behrend and Dukes). It is also well-settled that when an employer fails to keep complete records of hours, employees may prove their hours through representative testimony. Anderson v. Mt. Clemens Pottery Co., 328 U.S. 680, 688, 66 S.Ct. 1187, 90 L.Ed. 1515 (1946), superseded by statute on other grounds. "[E]ven where the lack of accurate records grows out of a bona fide mistake as to whether certain activities or non-activities constitute work, the employer, having received the benefits of such work, cannot object to the payment for the work on the most accurate basis possible under the circumstances." Id. One federal Circuit
Unlike the plaintiffs in Behrend, who failed to translate the legal theory of their harm into an analysis of its economic impact, Appellees here offered data and analysis from Wal-Mart's own business records, including time clock and cashier login data, to support their claim of damages related to systemic wage and hour violations. Wal-Mart responds now, as it did at trial and on direct appeal, that the time clock and cash register log-in data do not necessarily reflect that breaks were missed or shortened. Nevertheless, by advancing this argument, Wal-Mart impliedly acknowledges that its record-keeping has been incomplete, and it cannot now avoid the relaxed burden of proving damages through extrapolation. Mt. Clemens.
The essence of Wal-Mart's appeal is its assertion that the class-action device, in this instance, had "run amok," resulting in a "trial by formula" during which Appellees' requirement to prove the essential elements of their claims as to each class member was eliminated. Appellants' Brief at 18. Indeed, Wal-Mart seems to suggest that the class claims of breach of contract and unjust enrichment could only be properly proven by an individual examination of the 187,979 class members to determine whether each had been promised paid breaks that they were then forced to miss, or partially work through, and whether each had, or had not, been forced to work off-the-clock. Relatedly, Wal-Mart suggests that any determination of damages is only proper on an individual class member basis, and that any tabulation of damages across-the-board would violate due process. The Court disagrees.
There was a single, central, common issue of liability here: whether Wal-Mart failed to compensate its employees in accordance with its own written policies. On that question, both parties presented evidence. Wal-Mart's liability was proven on a class-wide basis. Damages were assessed based on a computation of the average rate of an employee's pay (about eight dollars per hour) multiplied by the number of hours for which pay should have been received but was not. In our view, this was not a case of "trial by formula" or of a class action "run amok." Accordingly, the judgment of the Superior Court is affirmed.
Former Justice McCAFFERY did not participate in the decision of this case.
Chief Justice CASTILLE, Justices EAKIN, BAER and TODD join the opinion.
Justice SAYLOR files a dissenting opinion.
Justice SAYLOR, dissenting.
I agree with Appellants that the trial court implemented, and the intermediate court approved, a severely lax approach to the application of governing substantive law in the issuance and sustainment of an almost two-hundred-million-dollar verdict based on proof which was insufficient to establish liability and damages across a 187,000-member class. Although I take no issue with the majority's observation that the burden of proof may be relaxed to some degree in wage-and-hour cases, see Majority Opinion, at 666-67, the latitude extended in this case is of an untenable magnitude. Here, the Appellee class was permitted to effectively project the anecdotal experience of each of six testifying class members upon thirty-thousand other members of the class at large, to extrapolate abstract data concerning missed and mistimed "swipes" from 16 Pennsylvania stores to 139 others, to overlay discrete data taken from several years' experience across a distinct four-year period, and to attribute a single cause to missed and mistimed swipes, all despite indisputable variations across store locations, management personnel, time, and other circumstances.
Certainly, I am sympathetic to efforts to vindicate the interests of workers with modest claims who may lack the ability and incentive to pursue remedies on an individualized basis. Nevertheless, I remain of the view that the kinds of alterations to substantive law reflected in the majority's relaxed approach to class-action litigation should be the subject of overt consideration in the political branch and should not occur as a byproduct of the application of a mere procedural device by the judiciary. Accord Samuel-Bassett v. Kia Motors Am., Inc., 613 Pa. 371, 466-77, 34 A.3d 1, 58-65 (2011) (Saylor, J., dissenting).
WPCL verdict: $ 49,568,541 Common Law verdict: $ 29,178,873 Statutory Interest: $ 10,163,863 WPCL liquidated damages: $ 62,253,000 WPCL attorney fees: $ 33,813,986 WPCL expenses: $ 2,670,325
Braun, 24 A.3d at 887 (citations to record and footnotes omitted).
In contrast, Wal-Mart's retail expert, Wade Fenn, testified that there was no link between Wal-Mart's managers' bonus compensation program and rest breaks, that Wal-Mart's practices were consistent with other big-box retailers, and that Dr. Landy's testimony regarding hypothetical year-end bonuses had been based on an erroneous comparison of employee hours to store profitability.