Allstate Adjusters May Pursue Class Action On State Law Overtime Claims, Court Rules

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By Kevin McGowan

Sept. 3 — A federal district court didn't abuse its discretion by certifying a class of about 800 current and former claims adjusters who allege Allstate Insurance Co. violated California law by having them work unpaid off-the-clock overtime hours, the U.S. Court of Appeals for the Ninth Circuit ruled Sept. 3.

The Ninth Circuit denied Allstate's interlocutory appeal. It said the district court properly applied Rule 23(a) of the Federal Rules of Civil Procedure to find named plaintiff Jack Jimenez raised common questions about whether adjusters generally worked overtime without pay because of Allstate's “unofficial policy” of discouraging the reporting of overtime, the company's failure to reduce adjusters' hours after reclassifying them as hourly employees, and its treatment of their pay as “salaries” for which overtime was an “exception.”

Allstate argued that the district court didn't comply with Rule 23(a)(2) because answers to the common questions it identified won't resolve classwide liability, as required by Wal-Mart Stores Inc. v. Dukes, 131 S. Ct. 2541, 112 FEP Cases 769 (2011).

“The close connection between the common questions noted by the district court and the legal test it must apply to determine whether plaintiffs can make out an off-the-clock claim under California law means that these are precisely the kind of common questions that Rule 23(a)(2) and Dukes require,” Judge Gould wrote.

The identified common questions are capable of resolving classwide liability issues “because of their close relationship with the three prongs of the underlying substantive legal test” for off-the-clock claims, the Ninth Circuit said.

An employee proves a California off-the-clock claim by showing he or she performed work without receiving compensation, the defendants knew or should have known the employee was doing so, and the “defendants stood idly by,” the court said. The identified common questions would help prove that test, the court said.

“The close connection between the common questions noted by the district court and the legal test it must apply to determine whether plaintiffs can make out an off-the-clock claim under California law means that these are precisely the kind of common questions that Rule 23(a)(2) and Dukes require,” Judge Ronald M. Gould wrote.

Due Process Not at Risk

Allstate argued that the district court's plan to rely on statistical sampling among class members to determine liability would violate its due process rights.

But the Ninth Circuit said the U.S. Supreme Court's qualms about statistical sampling in Dukes arose in a proposed Rule 23(b)(2) class action and when considering claims under Title VII of the 1964 Civil Rights Act, which “explicitly includes affirmative defenses relating to motive and alternative explanations.”

The Supreme Court said in Comcast Corp. v. Behrend, 133 S. Ct. 1426 (2013), that individualized determinations of certain questions were necessary to comply with due process.

But “none of the problems identified by Dukes or Comcast exist in the district court's certification order here,” Gould wrote. “Since Dukes and Comcast were issued, circuit courts including this one have consistently held that statistical sampling and representative testimony are acceptable ways to determine liability so long as the use of those techniques is not expanded into the realm of damages.”

The district court here “was careful to preserve Allstate's opportunity to raise any individualized defense it might have at the damages phase of the proceedings,” Gould wrote. “It rejected the plaintiffs' motion to use representative testimony and sampling at the damages phase, and bifurcated the proceedings.”

“This split preserved both Allstate's due process right to present individualized defenses to damages claims and the plaintiffs' ability to pursue class certification based on the common questions of whether Allstate's practices or informal policies violated California law,” Gould said.

Judges N. Randy Smith and Edward R. Korman joined in the decision.

The R. Rex Parris Law Firm represented the plaintiffs. Seyfarth Shaw represented Allstate.

To contact the reporter on this story: Kevin McGowan at kmcgowan@bna.com

To contact the editor responsible for this story: Susan J. McGolrick at smcgolrick@bna.com

Text of the court opinion is available at http://www.bloomberglaw.com/public/document/Jack_Jimenez_v_Allstate_Insurance_Company_Docket_No_1256112_9th_C.