A recent decision of a California appellate court (and other similar decisions around the country) could help convince insurers that wage and hour class and collective actions, particularly those in California, can be profitably underwritten and insured.

The Duran Decision

On February 6, 2012, in Duran et al v. U.S. Bank National Association, the Court of Appeal, First District, California, relying on the U.S. Supreme Court’s decision in Dukes v. Wal-Mart Stores, Inc.,¹decertified a wage and hour class action brought against USB and reversed the judgment of a trial court that had awarded the plaintiffs $15 million.

The class action claim was brought by 260 current and former USB business banking officers, who alleged that they were classified by the bank as outside sales personnel and exempt from California’s overtime laws, resulting in unlawfully being denied overtime pay. The plaintiffs brought a class action lawsuit, alleging violations of the California Labor Code and Section 17200 of the Business and Professions Code. The plaintiffs also alleged conversion.

The trial court granted class certification. USB appealed, arguing that the trial court’s trial management plan, which included use of a random sample of 20 class members to testify as representatives for the class, denied it of its constitutional due process rights in that the plan prevented USB from defending against the individual claims for over 90 percent of the class.

Relying on Dukes v. Wal-Mart, the California appellate court reversed the trial court’s decision on grounds that “representative sampling studies did not justify certification.” According to the court, “trial by sampling” is a violation of the defendant’s due process rights to challenge each class member’s claims.