As retail titan Wal-Mart seeks to overturn a $187.6 million class action, one of the Pennsylvania Supreme Court justices hearing oral arguments Wednesday in Harrisburg questioned how the class of employees could have proven its case without using the company’s payroll records.
Wal-Mart’s counsel, Theodore J. Boutrous Jr. of Gibson, Dunn & Crutcher in Los Angeles, argued that the payroll records were indeed admissible, but Boutrous argued that smaller class actions could have been brought attacking management practices at the store level or that the class action could have been divided into a two-part process in which the cases were looked at first for "truly common" issues en masse and then second, adjudicated in individual proceedings. Instead, the case was handled in "one fell swoop all mixed together," he said.
Boutrous was responding to Justice Max Baer asking how the class would have been able to go forward with its allegations that it was not properly compensated for missed rest breaks and off-the-clock work.
The plaintiffs argued that Wal-Mart breached contracts with its employees that were created by its handbook in which the retailer stated that employees would receive 15-minute paid rest breaks.
In another exchange with Baer, Boutrous said that the trial judge needed to decide the commonality of the issues in the case and the predominance of common issues in the case at the stage of certifying the class, but the trial judge committed legal error in certifying the class.
Plaintiffs’ counsel, Michael D. Donovan of Donovan Axler, said the payroll records of 52 million shifts were entered into evidence by stipulation and the records were validated by Wal-Mart before employees were paid. The records themselves stated when there were "too few breaks" or "short breaks," Donovan said.
When Justice J. Michael Eakin asked if the record would reflect Donovan’s assertion because "I’m not going to go through 52 million shifts" to corroborate Donovan’s position, Donovan said that the record did corroborate his arguments about the records having been validated by Wal-Mart.
There was a common question subject to a common answer, Donovan said: "What did the records mean?"
The state Supreme Court agreed to hear the appeal from Braun v. Wal-Mart and Hummel v. Wal-Mart on "whether, in a purported class action tried to verdict, it violates Pennsylvania law (including the Pennsylvania Rules of Civil Procedure) to subject Wal-Mart to a ‘trial by formula’ that relieves plaintiffs of their burden to produce classwide ‘common’ evidence on key elements of their claims."
The plaintiffs were relieved of the burden to prove the elements of the causes of action they were prosecuting and Wal-Mart was not allowed to present its defenses, Boutrous argued.
In order to prove that Wal-Mart breached the contracts with employees for paid rest breaks, the plaintiffs did not present the testimony of employees that they were forced to miss rest breaks, but instead presented the testimony of an expert who opined based upon records of employees clocking in and clocking out that any shortened or missed rest breaks were caused by Wal-Mart managers, Boutrous said.
Baer, who was the most vocal questioner during the oral arguments in these cases, said that the meaning of the records was a factual question for the jury. "You had a real shot" at winning on what the records meant, Baer said, but the jury on this particular case did not agree with Wal-Mart.
Allowing the Braun verdict to stand would contravene the Pennsylvania Supreme Court’s ruling last year in Basile v. H&R Block that the confidential relationships between the tax preparer and 600,000 of its customers were too individualized for the members’ claims to get class treatment, Boutrous said.
Allowing the verdict to stand also would be contrary to the U.S. Supreme Court’s decision in Wal-Mart v. Dukes in which those justices rejected "’trial by formula’" of more than 1.5 million female employees alleging a company-wide policy of discrimination, Boutrous said.
"What happened in this case was worse than what happened" in the other two cases, Boutrous said.
Boutrous agreed with Justice Debra Todd that he was not arguing that extrapolation from records could not be appropriate in some class actions, only that in this case that extrapolation was, as Todd put it, "particularly unfair and extreme and not based on the records."
Donovan said that it was not a legal error for the jury to determine if the business records meant what they said. Such a stance is keeping with the reliance that is accorded to business records in Pennsylvania, he said.
Plaintiffs’ counsel argued that the arguments on due process were waived, while defense counsel argued they were not.
Mark A. Perry and Julian W. Poon of Gibson Dunn; William H. Lamb, James C. Sargent Jr. and Maureen Murphy McBride of Lamb McErlane in West Chester, Pa.; and Mark A. Aronchick, Daniel Segal and Michael J. Newman of Hangley Aronchick Segal Pudlin & Schiller also represented defendants Wal-Mart Stores and Sam’s Club.
Judith L. Spanier of Abbey Spanier in New York City also represented the plaintiffs.
Amaris Elliott-Engel can be contacted at 215-557-2354 or email@example.com. Follow her on Twitter @AmarisTLI. •