In an unpublished memorandum disposition, Sepulveda v. Wal-Mart Stores, Inc., 2008 WL 1868333 (Apr. 25, 2008), the Ninth Circuit partially reversed an order denying class certification, holding that the district court correctly denied certification under Rule 23(b)(3), but applied the wrong standard in denying certification under Rule 23(b)(2). The underlying suit alleges misclassification of certain Wal-Mart assistant managers as exempt from California overtime laws, and it includes a UCL claim. See Sepulveda v. Wal-Mart Stores, Inc., 237 F.R.D. 229 (C.D. Cal. 2006).
The Ninth Circuit remanded for the district court to reconsider class certification under Rule 23(b)(2). The memdispo reads, in its entirety:
Plaintiffs, current and former Assistant Managers of Defendant, Wal-Mart Stores, Inc., appeal the district court’s order denying their motion for class certification. We have jurisdiction under 28 U.S.C. § 1292(e) and Federal Rule of Civil Procedure 23(f).
The district court misapplied Ninth Circuit precedent when, relying on its conclusion that Plaintiffs’ claims for monetary relief were non-incidental, it denied class certification under Federal Rule of Civil Procedure 23(b)(2). See Molski v. Gleich, 318 F.3d 937, 949–50 (9th Cir. 2003) (refusing to adopt the incidental damages approach set forth by the Fifth Circuit in Allison v. Citgo Petroleum Corp., 151 F.3d 402 (5th Cir. 1998)). The district court must focus on the intent of the Plaintiffs in bringing suit. Id. at 950. We therefore hold that the district court abused its discretion in denying class certification. See Sw. Voter Registration Educ. Project v. Shelley, 344 F.3d 914, 918 (9th Cir. 2003) (en banc) (per curiam).
On remand the district court shall reconsider class certification under Federal Rule of Civil Procedure 23(b)(2), and, in the alternative, also reconsider using Rule 23(c)(4) to certify specific issues under the Rule 23(b)(2) standard. See Society for Individual Rights, Inc. v. Hampton, 528 F.2d 905, 906 (9th Cir. 1975). In reconsidering these issues, the district court may find the California Supreme Court’s decision in Gentry v. Superior Court, 42 Cal. 4th 443, 457–59, 462, 464–65 (2007), instructive.
The district court did not abuse its discretion in denying class certification under Federal Rule of Civil Procedure 23(b)(3), and we therefore affirm that portion of its order. Each party shall bear its own costs on appeal.
REVERSED in part; AFFIRMED in part.
The Ninth Circuit cited some of the most pro-class-action parts of Gentry. For example, in the middle of page 462 of Gentry, the Supreme Court wrote:
We also agree with the Bell court that “class actions may be needed to assure the effective enforcement of statutory policies even though some claims are large enough to provide an incentive for individual action. While employees may succeed under favorable circumstances in recovering unpaid overtime through a lawsuit or a wage claim filed with the Labor Commissioner, a class action may still be justified if these alternatives offer no more than the prospect of ‘random and fragmentary enforcement’ of the employer's legal obligation to pay overtime.” (Bell, supra, 115 Cal.App.4th at p. 745, quoting Vasquez, supra, 4 Cal.3d at p. 807.) “By preventing ‘a failure of justice in our judicial system’ (Linder v. Thrifty Oil Co. (2000) 23 Cal.4th 429, 434), the class action not only benefits the individual litigant but serves the public interest in the enforcement of legal rights and statutory sanctions.” (Bell, supra, at p. 741.) In other words, absent effective enforcement, the employer's cost of paying occasional judgments and fines may be significantly outweighed by the cost savings of not paying overtime.
Gentry, 42 Cal.4th at 462. And here is what the Supreme Court said at pages 464-65:
It is true that an employee may seek administrative relief from overtime violations with the Labor Commissioner through a “Berman” hearing procedure pursuant to [Labor Code] sections 98 to 98.8. (Added by Stats.1976, ch. 1190, §§ 4-11, pp. 5368-5371.) But a losing employer has a right to a trial de novo in superior court, where the ruling of the Labor Commissioner's hearing officer is entitled to no deference. (§ 98.2, subds. (b), (c); Murphy v. Kenneth Cole Productions, Inc. (2007) 40 Cal.4th 1094, 1116 (Murphy).) Thus, Berman hearings may result in no cost savings to the employee. Moreover, in Bell, in rejecting the same argument, the court considered a declaration by a former chief counsel of the DLSE, who stated that “ ‘[r]equiring two thousand or so class members to go through individual “Berman” hearings would obviously be extremely inefficient as compared to a single class action. Also, a deluge of claims would simply outstrip the resources of the DLSE ... impacting not only these claimants but others unrelated to this suit.’ ” [*465] (Bell, supra, 115 Cal.App.4th at p. 746, 9 Cal.Rptr.3d 544.) In short, Berman hearings are neither effective nor practical substitutes for class action or arbitration.
Id. at 464-65. I think we know where the Ninth Circuit wants the district court to go on remand.