Does expert evidence need to be admissible at trial before a judge can base a class certification decision on the evidence? A Ninth Circuit panel said “no” while a divided court recently declined to review the panel’s decision en banc.
Facts of the Case
Two registered nurses (“RNs”) filed a class action complaint against their former employer, Corona Regional Medical Center, alleging that Corona violated California wage laws in several ways, including the failure to pay wages for all hours worked, to pay overtime wages or all overtime hours worked, to provide RNs with off-duty meal and rest periods, to pay timely wages upon the termination of employment, and to provide accurate wage statements.
The RNs filed their lawsuit in state court. Corona removed it to federal court. The RNs asked the federal district court to certify subclasses as to each category of wage violation. The court denied that motion on several grounds, including its determination that the RNs’ financial injuries were not typical of those suffered by class members. In reaching that decision, the court decided that certain expert evidence offered by the plaintiffs was not admissible under federal law, and that the plaintiffs therefore failed to demonstrate any injury at all.
The RNs appealed. The Court of Appeals for the Ninth Circuit reversed the district court’s order. The court based its ruling in part on the conclusion that the RNs were entitled to rely on evidence to demonstrate typicality that would not be admissible at trial.
To establish the typicality of their injuries, the RNs submitted a declaration prepared by a paralegal employed by their law firm. The paralegal reviewed payroll records and determined that Corona “rounded” the time shown on time cards to the nearest quarter hour.
Using a sampling of timesheets, the paralegal compared the time for which Corona paid its employees to the time they actually worked, as recorded on time cards. The paralegal concluded that over hundreds of shifts, Corona’s rounding practice undercounted one RN’s time by eight minutes per shift and undercounted the other RN’s time by six minutes per shift.
The RNs did not submit declarations until after Corona challenged the paralegal’s declaration. Nor did the RNs have a payroll expert or statistician prepare the analysis on which they relied. Had their counsel taken those steps, the legal issues raised on appeal would likely have been avoided.
The district court concluded that the paralegal’s analysis was not admissible because:
- the paralegal was a lay witness who had no personal knowledge of the data that he analyzed;
- the opinions that the paralegal offered were “technical” and “specialized” and thus could only be offered by an expert witness; and
- the paralegal was not qualified to provide expert testimony.
Since the paralegal’s analysis was based on the kind of arithmetic a high school graduate should be competent to perform, the district court’s conclusion that the paralegal’s opinions were based on “technical” or “specialized” knowledge is doubtful. The larger question, however, is whether evidence of typicality must be admissible at trial before it can satisfy the requirements of class certification.
Evidence Required for Class Certification
Class certification decisions require the district court to analyze facts. The Ninth Circuit cautioned that the analysis does not require a “mini-trial.” A trial determines the merits of claims asserted by plaintiffs. Courts decide whether to certify a class without deciding the merits of class claims.
Accordingly, the appellate court deemed it a matter of common sense that the “formal strictures” of a trial, including the rules of evidence, should not necessarily constrain the court’s determination of whether the facts support bringing the case to trial as a class action. “Inadmissibility alone,” the court held, “is not a proper basis to reject evidence submitted in support of class certification.”
The court acknowledged that the Fifth Circuit requires all evidence in support of class certification to be admissible, while the Third and Seventh Circuits require expert evidence to be admissible. The Eighth Circuit, on the other hand, noted that the limited decision to certify (or not) a class is a preliminary determination made early in the case, usually before the conclusion of merits discovery. For that reason,the Eighth Circuit allows courts to rely on evidence to certify a class that might not be admissible to prove the merits of a claim.
Since evidentiary uncertainty is inevitable at the certification stage and since a class can always be decertified later, the Ninth Circuit agreed with the Eighth Circuit that the Daubert standard applies to the evaluation of evidence proving the merits of a case, not to the preliminary decision to certify a class.
Formalism v. Justice
At least as applied to the facts of this case, the decision was in fact based on common sense. The paralegal’s statistical analysis may not have satisfied Daubert because it was not accompanied by an explanation of the methods used to extract data, but it is fair to assume that the methodology would be fairly obvious to anyone who examined the spreadsheets that the paralegal created from the payroll data. If data was cherry-picked, one would expect the defense to point that out by submitting its own analysis using a different sampling of the data.
The appellate court concluded that the district court’s reliance on “formalistic evidentiary objections” prevented it from considering evidence that “likely could have been presented in an admissible form at trial.” For example, the plaintiffs responded to Corona’s objections by presenting declarations that authenticated the payroll data — the accuracy of which Corona never challenged — but the district court rejected the declarations as “new evidence.” The only thing new, however, was the authentication of the payroll data, not the payroll data itself.
The appellate court noted that the district court’s “narrow approach” told it nothing about whether the typicality requirement was actually satisfied, and thus prevented the court from determining whether allegations about Corona’s violation of California wage laws should most efficiently be resolved in a class action. In essence, the district court elevated evidentiary formalities over justice.
Using a paralegal to crunch data was not an ideal way to present evidence to the court. Still, the plaintiffs were certainly capable of giving admissible testimony that “we weren’t paid for all the hours we worked,” which is all it would have taken to demonstrate that they — and employees like them — were harmed by wage violations. That they did so only after Corona challenged the admissibility of the payroll analysis they presented hardly seems like a sufficient justification to deny an entire class of employees the opportunity to prove that Corona cheated them out of the full wages they earned.
The Ninth Circuit recently denied a petition to rehear the appeal en banc (that is, to have the entire court consider the issue), but five judges dissented from the denial. The dissenting judges believed that circuit precedent, the prevailing view in other circuits, and “the Supreme Court’s clear guidance” compel the conclusion that expert evidence must pass the Daubert test of admissibility before it can be considered in support of a certification motion.
The dissenters were incredulous that the other judges were willing to accept the calculations of a mere paralegal, whether or not the calculations were probably correct. The dissenters devote a footnote to their assumption that the paralegal’s simple arithmetic had to be supported by expert testimony, despite ample precedent for the proposition that arithmetical calculations that most reasonably intelligent people could make, and that most jurors could understand, need not be made by experts.
The Ninth Circuit’s decision results in an apparent circuit split that may be resolved by the Supreme Court if Corona petitions for review. In the meantime, prudent attorneys who need to present statistical evidence in support of certification motions would be well advised to hire a payroll expert, an accountant, or a statistician to derive conclusions from payroll records or other data compilations. Whether or not an expert is strictly necessary (and in some circuits, an expert’s testimony is vital), employing the services of an expert in a wage claim should significantly improve the odds that a court will certify a class.