United States: Reading Tea Leaves From Today's U.S. Supreme Court Arguments In The Tyson Foods Class Action

The U.S. Supreme Court heard arguments today in Tyson Foods, Inc. v. Bouaphakeo, No. 14-1146 (U.S. Nov. 10, 2015). Many pundits believe the case has enormous implications for workplace class action litigation, as the case frames the potential issue of whether plaintiffs' attorneys are permitted to conduct a "trial by formula" — that is, a class-action trial at which the defendant is not permitted to litigate its statutory defenses to individual claims. Indeed, many have seen the case as potentially covering three key class action questions, such as: (i) the Supreme Court might clarify the limitations on the use of statistical techniques to establish damages and liability under Rule 23; (ii) the case poses particular significance in the wage and hour context, because it provides the opportunity for the Supreme Court to weigh in for the first time as to the standards that apply to certification of collective actions under the Fair Labor Standards Act ("FLSA"); and (iii)  it provides an opportunity for the Supreme Court to address the constitutional argument that an award of monetary damages to uninjured class members is impermissible.

The transcript of today's oral argument is here.

While the Tyson Foods case has the potential to be a "game-changer" in the class action world, the Justices' questioning at today's hearing suggests that the case may well be resolved on narrower grounds.

In sum, the "tea leaves" from the argument raise the prospect that the case will be resolved without any broad class action pronouncements.

Background To The Case

Employer groups have argued that preventing an employer in a class action from raising otherwise available defenses to the claims of individual class members violates class action rules and due process, and conflicts with the Supreme Court's seminal decision in Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541 (2011).  The Tyson Foods case involves a class consisting of 3,300 employees who claim they were paid insufficient overtime wages. The plaintiffs' attorneys introduced evidence purporting to show how many minutes of off-production-line work (e.g., putting on protective gear and later taking it off) the "average" employee undertook in a typical week.

The plaintiffs' expert calculated the workers' average time putting on and taking off protective gear, although actual changing time varied greatly among class members. The expert videotaped 744 employees and calculated averages based on donning, doffing, and walking times. The judge at the trial level certified the class on that basis. Ultimately, after trial, the  jury awarded the $5.9 million lump-sum verdict in favor of the certified class; however, this was significantly less than the amount plaintiffs' experts had calculated by averaging the donning, doffing, and walking time spent by about several hundred members of the class.

On appeal, Tyson Foods argued that plaintiffs' use of averaging constituted impermissible "trial by formula" under Wal-Mart Stores Inc. v. Dukes, and cannot be relied on to certify a class under Rule 23 of the Federal Rules of Civil Procedure. However, the U.S. Court of Appeals for the Eighth Circuit affirmed the grant of class certification in a 2 to 1 decision, even though the trial-by-formula prevented the defendant from demonstrating that many individual members of the plaintiff class worked no overtime at all.

On June 8, 2015, the Supreme Court agreed to hear the case, and the parties and a significant number of interested groups – employers, advocacy groups, and others – filed amicus briefs. Siding with Tyson Foods as amici are Wal-Mart Stores, other businesses, a wide array of business associations, several conservative or libertarian legal advocacy organizations, and a group of professors.

The workers are supported — in addition to the federal government — by labor unions and their federations, liberal advocacy groups, several workers' justice advocacy organizations, and professors of law, economics, and social science.

Philosophic Debate Over The Utility Of Class Action Litigation

The Tyson Foods case is playing out in the vortex of a philosophical debate. To several of the Justices, class actions are akin to blunt instruments for forcing companies to settle to avoid the cost of a trial, even if they might win on the merits, and as an easy way to pay exorbitant fees to class action attorneys.  To other Justices, the litigation system is working precisely as it is intended, and plaintiffs' class action lawyers are simply holding companies accountable when there may be no better mechanism to do so for instances in which individual claims are small, but the overall value to the class is potentially in the millions of dollars.

The U.S. Government has entered the case on the workers' side. On the absence-of-injury defense to the claims of some class members, the government supports an argument made by the workers that Tyson Foods forfeited any objection on this point by failing at the trial to exclude such workers from the action and for opposing a trial plan that would have excluded them from sharing in any award of damages.

The Tea Leaves From The SCOTUS Argument

Predicting outcomes based on questioning at the SCOTUS oral argument is a hazardous business.

At a high-level, however, several Justices appeared to side with workers and expressed sympathy for the plaintiffs' argument that since Tyson Foods kept no records of the time spent preparing for slaughter and processing assembly lines, they could rely on older precedent permitting such averaging notwithstanding the holding in 2011 in Wal-Mart.

In particular, Justices Kennedy, Sotomayor, Ginsburg, Kagan, and Breyer expressed skepticism of the positions of Tyson Foods, and their questioning challenged any Rule 23 implications to the defense arguments. As Justice Kennedy asserted in the first two minutes of the defense presentation, "I just don't understand your arguments...."

The plaintiffs' side also encountered some rough sledding in questions from Chief Justice Roberts and Justices Alito and Scalia, with Justice Alito commenting that the distribution of the verdict was almost impossible "in other than a very slap-dash fashion."

The Interesting Turn In The SCOTUS Hearing

In Anderson v. Mt. Clemens Pottery, 328 U.S. 680 (1946), the Supreme Court held that preliminary work activities, where controlled by the employer and performed entirely for the employer's benefit, are properly included as working time under the Fair Labor Standards Act. Further, where the employer has failed to keep accurate or adequate records, the law does not deny recovery on the ground that the employee is unable to prove the precise extent of uncompensated work. Hence, an employee has carried his burden if he proves that he has in fact performed work for which he was improperly compensated and if he produces sufficient evidence to show the amount and extent of that work as a matter of just and reasonable inference. This 1946 case took on significant importance in today's SCOTUS argument.

Relying on the part of Mt. Clemens Pottery in which the Supreme Court decided that evidence of the average time spent on a task could be used to determine damages under the FLSA if the employer did not keep records of actual time worked, several Justices questioned whether the averaging done by plaintiffs' expert might be proper because Tyson Foods had not kept records of the exact time spent by each class member putting on and taking off each specific article of gear. On this point, Tyson Foods argued that Mt. Clemens Pottery only applied to the damages phase and should not be extended to a determination of liability. These questions, however, may well portend that the ultimate ruling in the case will be anchored in the meaning of Mt. Clemens Pottery in a class context.

Implications For Employers

The Supreme Court has been issuing seminal rulings on class action issues with increasing frequency  — first in Wal-Mart in 2011, and then in 2013 in Comcast Corp. v. Behrend, 133 S. Ct. 1426 (2013). The future ruling in the Tyson Foods case also has the potential to shape the class action playing field and affect employers' litigation strategies for opposing class certification generally, as well as other trial issues. At the same time, the "tea leaves" from today's hearing also leaves open the possibility that the decision will not break new ground on broad class action issues.

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