Class Action Defense Cases–Otsuka v. Polo Ralph Lauren: California Federal Court Certifies Class Action Against Polo Ralph Lauren Holding Rule 23 Requirements For Labor Law Class Action Had Been Satisfied

Jul 15, 2008 | By: Michael J. Hassen

Complaint Alleging Labor Law Violations Granted Class Action Status because Overriding Issues Involved Company Policies and Practices and Class Action Treatment was Superior to Other Means of Resolving Disputes California Federal Court Holds

Plaintiffs filed a putative class action complaint in California state court against their former employer, Polo Ralph Lauren, alleging labor law violations; specifically, the class action complaint alleged that in the 28 stores operated by defendants in California, defendants failed to provide rest breaks or pay for off-the-clock time, failed to pay overtime by misclassifying employees as commissions salespeople exempt from such pay, and improperly reduced earnings on future commissions if salespeople failed to meet certain sales requirements. Otsuka v. Polo Ralph Lauren Corp., 251F.R.D. 439 (N.D.Cal. 2008) [Slip Opn., at 1-2]. The complaint identified not only a main class, but two subclasses – one for misclassification and one for arrearages. The class action alleged further that defendants’ California stores used a single employee handbook, and that “defendants’ policies and practices are standardized throughout California in both retail and outlet stores.” Id., at 2. Defense attorneys removed the class action to federal court, id., at 1-2. Plaintiffs moved the district court to certify the litigation as a class action, id., at 1. Defense attorneys “vigorously” objected to class action treatment, id., at 5. The federal court granted the motion, concluding that “defendants’ arguments primarily dispute the merits of plaintiffs’ claims and raise questions of act that will not be resolved at this juncture,” id.

With respect to numerosity, the main class identified in the class action complaint encompassed more than 5,000 employees; the subclasses, however, consisted of 49 members and 69 members, respectively. Otsuka, at 5. Defendants argued these subclasses failed to satisfy the numerosity requirement, id. The federal court disagreed, noting that under Ninth Circuit authority class actions with “as few as 39 members may be sufficiently numerous under the right circumstances.” Id., at 5-6 (citation omitted). Similarly, the district court found that commonality clearly existed as to the main class identified in the class action complaint, id., at 6, and it rejected defense challenge to the subclasses because it attacked the merits but failed to demonstrate that common questions existed within the subclasses, id., at 6-7. With respect to typicality, defense attorneys argued that the claims on the named plaintiffs were not typical with respect to the misclassification subclass because after the lawsuit had been filed defendants performed a reconciliation and compensated them for overtime not previously paid. Id., at 7-8. The court found that this did not render them unqualified to serve as typical class representatives because (1) they may establish that they are entitled to additional overtime pay, and (2) their claims that defendants acted unlawfully by failing to perform annual reconciliations. Id., at 8. With respect to adequacy of representation, the district court rejected the technical objection made by defendants to one of the named representatives, id., at 8-9. Thus, the federal court found that the Rule 23(a) requirements for class action treatment had been met.

With respect to Rule 23(b)(3), defendants argued that common questions did not predominate but “support[ed] this contention primarily by advancing argument that either address[ed] the legal merits of plaintiffs’ claim or contest[ed] plaintiffs’ factual allegations.” Otsuka, at 10. The court recognized that individual questions may exist as to certain matters, but that they were secondary to the larger question of whether defendants’ policies were actionable. Id., at 10-11. The court concluded at page 11 that “as to the main class, common questions predominate over individual questions.” The predominance prong was thus satisfied, because the district court found also that common questions predominated for the subclasses as well. _See id._¸ at 12. With respect to the superiority prong, defendants argued that class members “could easily bring small claims actions or file complaints with California’s Department of Labor and Standards Enforcement,” id., at 12; the federal did not dispute this, but found that it was more efficient and less costly to resolve the claims by way of class action, id., at 12-13. Accordingly, the court granted the motion to certify the litigation as a class action, id., at 13.

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