To the surprise of giant Allstate Insurance, the Ninth Circuit recently upheld class certification of a group of California claims adjusters who allegedly worked unpaid overtime since 2005.  The panel’s opinion on interlocutory appeal in Jimenez v. Allstate Insurance Co., No. 12-56112 (Sept. 3, 2014) is available here.

The facts presented in the Jimenez matter are ever so slightly different than the traditional wage and hour claim.  In 2005, Allstate made the decision to shift claims adjusters from exempt status to hourly employees for its 13 offices in California.   It is unclear whether the claims adjusters were aware of the nature of the change, as the freshly minted hourly employees did not keep track of their hours.  Instead, the claims adjusters worked 40 hours a week on what sounds like the honor system, and when the 40 hours had been exceeded the adjusters applied for overtime approval with their local office.  As a result of the less than scientific nature of the time keeping, Allstate argued that class certification was inappropriate because each potential class member would have to undergo an “individualized determination” of eligibility for overtime pay and the amount of overtime pay itself. 

The Ninth Circuit rejected Allstate’s argument and upheld certification finding that the common question of whether there was an “unofficial policy” of denying overtime payments while requiring work predominated over any individualized issues regarding potential individual damages.   Affirming the district court judge, the panel found class treatment was a “superior method” of adjudication because the question of liability could be resolved through sampling methods, while leaving the potentially difficult issue of individualized damage assessments for later determination.

The result is not a surprise under the Federal Rule’s loose “commonality requirement.”  The commonality requirement requires that the claims of the potential class members “depend upon a common contention” such that “determination of its truth or falsity will resolve an issue that is central to the validity of each claim in one stroke.”  Mazza v. Am. Honda Motor Co., 666 F.3d 581, 588 (9th Cir. 2012) (internal citations omitted).  Commonality merely requires a single significant question of law or fact be shared amongst the group.  The test can often boil down to a single phrase:  would resolution of the common question assist to drive the resolution of the entire litigation?

Here, the liability elements of the wage and hour claim were used to determine whether resolution of those individual elements would drive resolution of the litigation.  In so doing, the Ninth Circuit reaffirmed that “damage calculations alone cannot defeat class certification.”  Brinker Rest. Corp. v. Superior Court, 273 P.3d 513, 546 (Cal. 2012), quoting Yokoyama v. Midland Nat’l Life Ins. Co., 594 F.3d 1087, 1094 (9th Cir. 2010).  The panel also tipped its hat to the Seventh Circuit’s Judge Posner who succinctly stated that “[i]t would drive a stake through the heart of the class action device… to require that every member of the class have identical damages.”  Butler v. Sears, Roebuck and Co., 727 F.3d 796, 801-802 (7th Cir. 2013).  

The Jimenez litigation has potential to result in a significant damage figure for Allstate.  It will be interesting to keep an eye on how the liability and damages portion is bifurcated and if counsel is able to achieve an acceptable settlement with the apparent differences for the class members on the backend.