Case Title: Iliadis v. Wal-Mart Stores, Inc.

Citation: 

Docket Number: a-69-06

State: new-jersey

Court: New Jersey Supreme Court

Date: 2007-05-31T00:00:00Z

Document:
SUPREME COURT OF NEW JERSEY A- 69 September Term 2006 MICHELLE ILIADIS and ANGELA NELSON-CROXTON, individually on behalf of themselves and all others similarly situated, Plaintiffs-Appellants, v. WAL-MART STORES, INC., a Delaware Corporation, SAM S CLUB, an operating segment of Wal-Mart, Inc., DERRICK ZIMMER and GLEN SPENCER, Defendants-Respondents, and and presently unidentified JOHN DOES 1 through 10, Defendants. Argued April 5, 2007 Decided May 31, 2007 On appeal from the Superior Court, Appellate Division, whose opinion is reported at 387 N.J. Super. 405 (2006). Judith L. Spanier, a member of the New York bar, argued the cause for appellants (Hanlon & Niemann, attorneys; Ms. Spanier and Christopher J. Hanlon, of counsel and on the briefs). Michael K. Furey argued the cause for respondents (Riker, Danzig, Scherer, Hyland & Perretti, attorneys; Mr. Furey and Sandi F. Dubin, on the briefs). Mark Hanna submitted a brief on behalf of amicus curiae United Food and Commercial Workers Union District Council of New York and Northern New Jersey (Davis, Cowell & Bowe, attorneys). David R. Kott submitted a brief on behalf of amicus curiae New Jersey Business & Industry Association (McCarter & English, attorneys; Mr. Kott, Adam N. Saravay and Edward J. Fanning, Jr., of counsel and on the brief). CHIEF JUSTICE ZAZZALI delivered the opinion of the Court. The named plaintiffs, former hourly employees of defendant Wal-Mart Stores, Inc., allege in their class-action complaint that Wal-Mart, through centralized control over business operations, denied them earned rest and meal breaks and forced them to work off-the-clock. In seeking to represent a state-wide class of similarly-situated Wal-Mart hourly employees, plaintiffs claim that defendant engaged in widespread conduct in contravention of published corporate policy, statutory law, and administrative regulations. Citing concerns about the manageability of the litigation, the trial court denied class certification to the proposed class of approximately 72,000 current and former Wal-Mart employees. The Appellate Division affirmed. In this appeal, we must determine whether the putative class of current and former employees may be certified pursuant to Rule 4:32-1. We find that common questions of law and fact predominate over individualized questions and that the class-action device is superior to other available methods of adjudicating this dispute. We therefore reverse and remand for the entry of an order certifying the class. By allowing this manageable litigation to proceed, we permit a class of hourly, retail employees to unite and -- on an equal footing with their adversary - to seek relief for their small claims that arise from defendant s alleged violation of contractual promises, statutory enactments, and regulatory mandates. [Iliadis v. Wal-Mart Stores, Inc., 387 N.J. Super. 405, 418-19 (2006).] We granted plaintiffs motion for leave to appeal, 188 N.J. 570 (2006), and permitted the New Jersey Business & Industry Association (NJBIA) and the United Food and Commercial Workers Union District Council of New York and Northern New Jersey (UFCW) to submit amicus curiae briefs. [Ibid. (quotation omitted).] See also Deposit Guar. Nat l Bank of Jackson, Miss. v. Roper, 445 U.S. 326, 339, 100 S. Ct. 1166, 1175, 63 L. Ed. 2d 427, 440 (1980) ( Where it is not economically feasible to obtain relief within the traditional framework of a multiplicity of small individual suits for damages, aggrieved persons may be without any effective redress unless they may employ the class-action device. ). When one inflicts minor harm across a dispersed population, the defendant is, as a practical matter, immune from liability unless a class is certified. Stephen C. Yeazell, Civil Procedure 966 (5th ed. 2000). This Court, therefore, has been hesitant to provide defendants procedural shelter through a restrictive reading of the class-action rule. In Riley, supra, we observed: If each victim were remitted to an individual suit, the remedy could be illusory, for the individual loss may be too small to warrant a suit or the victim too disadvantaged to seek relief. Thus the wrongs would go without redress and there would be no deterrence to further aggressions. [61 N.J. at 225.] Accord In re Cadillac, supra, 93 N.J. at 435 (finding, in case where individual claimants suffered modest damages, that without certification, wrongs would go without redress ); see also Philip Stephen Fuoco & Joseph A. Osefchen, Leveling the Playing Field in the Garden State: A Guide to New Jersey Class Action Case Law, 37 Rutgers L.J. 399, 423-24 (2006) (arguing that New Jersey s class-action rule eliminates any safe harbor for defendants who inflict small damages on diffuse population). [R. 4:32-1(a).] Here, the Law Division concluded that those requirements were satisfied, and the parties do not challenge that finding. In addition to those general prerequisites, the class applicant must also satisfy the requirements of one of the three alternative types of class actions described in Rule 4:32-1(b). The present appeal implicates Rule 4:32-1(b)(3), which requires that: questions of law or fact common to the members of the class predominate over any questions affecting only individual members, and that a class action is superior to other available methods for the fair and efficient adjudication of the controversy. (Emphasis added). In making the predominance and superiority assessments, a certifying court must undertake a rigorous analysis to determine if the Rule s requirements have been satisfied. Carroll v. Cellco P ship, 313 N.J. Super. 488, 495 (App. Div. 1998) (quoting Gen. Tele. Co. of the Sw. v. Falcon, 457 U.S. 147, 161, 102 S. Ct. 2364, 2372, 72 L. Ed. 2d 740, 752 (1982)). That scrutiny requires courts to look beyond the pleadings [to] . . . understand the claims, defenses, relevant facts, and applicable substantive law. Ibid. (quotation omitted). Although class certification does not occasion an examination of the dispute s merits, Olive v. Graceland Sales Corp., 61 N.J. 182, 189 (1972); see also Castano v. Am. Tobacco Co., 84 F.3d 734, 744 (5th Cir. 1996) (noting unremarkable proposition that the strength of a plaintiff s claim should not affect the certification decision ), a cursory review of the pleadings is nonetheless insufficient. The rigorous analysis requirement means that a class is not maintainable merely because the complaint parrots the legal requirements of the class-action rule. Yeazell, supra, at 969. Accordingly, an examination of the predominance and superiority requirements -- the disputed issues in this appeal -- must include consideration of the following factors: the interest of members of the class in individually controlling the prosecution or defense of separate actions; the extent and nature of any litigation concerning the controversy already commenced by or against members of the class; [and] . . . . the difficulties likely to be encountered in the management of a class action. [R. 4:32-1(b)(3). See footnote 3 ] The trial court found that factors (A) and (B) weighed in plaintiffs favor. However, the trial court declined to certify the class based on the final and most disputed factor: manageability. Therefore, we now consider the predominance and superiority requirements, and then, because of their importance in the present litigation, we address the manageability concerns raised by the trial court. [Id. at 422-23.] We rejected General Motors arguments and affirmed the class certification entered by the trial court. We explained that General Motors misconstrue[d] the nature of class action proceedings. Certification as a class action does not limit a defendant s rights to pursue any defense on any of a plaintiff s claims . . . [C]ertification merely permits litigation of common issues on a class basis before litigation of individual issues. Id. at 438. In light of the record and consistent with In re Cadillac, we find that plaintiffs here satisfied Rule 4:32-1(b)(3) s predominance requirement. In finding that common questions predominate, however, we do not limit Wal-Mart s defenses nor diminish its procedural safeguards and rights. Rather, in defending itself, Wal-Mart may argue that employees voluntarily worked through rest or meal breaks for myriad personal reasons, may contend that the conclusions of Baggett and Shapiro are flawed, may question the credibility of the July 2000 internal audit, and may advance any other relevant contentions. We are confident that, on remand, the trial court and parties counsel can resolve the practical challenges presented by this litigation s individualized questions of law or fact. Plaintiffs-Appellants, v. WAL-MART STORES, INC., a Delaware Corporation, SAM S CLUB, an operating segment of Wal-Mart, Inc., DERRICK ZIMMER and GLEN SPENCER, Defendants-Respondents, and presently unidentified JOHN DOES 1 through 10, Defendants. JUSTICE RIVERA-SOTO, dissenting. In a thoughtful, detailed and well-reasoned memorandum decision, Judge Ann McCormick denied plaintiffs motion for class certification because they failed to satisfy either the predominance or the superiority requirements of Rule 4:32-1(b)(3). In respect of the predominance requirement, the trial judge reasoned that the factor which presents the impediment to certification of a class in this case is predominance in terms of the manageability of the proposed class. Citing to In re Cadillac V8-6-4 Class Action, 93 N.J. 412, 431 (1983), the trial judge noted that [p]redominance may be found when there exists a common nucleus of operative facts. She explained further that [s]uch a nucleus can generally be found when the potential class, including absent class members, seeks to remedy a common legal grievance. In a predominance inquiry, the focus is whether the proposed classes are sufficiently cohesive to warrant adjudication by representation. The more cohesive the class, the greater the likelihood that absent members can fairly be bound by the decisions on the class representatives claims. Although the commonality requirement may be satisfied by a single shared experience, the predominance inquiry is far more demanding. [(citations and internal quotation marks omitted).] The trial judge found that [t]here are 40 Wal-Mart stores and nine Sam s Club stores in New Jersey and that, [i]n the Wal-Mart stores, there are 90 different hourly employee classifications while, in the Sam s Club stores, there are 100 different hourly employee classifications. Taking issue with the obviously erroneous statistical and anecdotal proofs advanced by plaintiffs, she explained that those proofs do not resolve, however, whether Wal-Mart violated its break policy as to each individual employee or whether the missed break was due to some other reason. Concluding that plaintiffs had failed to demonstrate that the questions of law or fact common to the members of the class predominate over any questions affecting only individual class members, Rule 4:32-1(b)(3), the trial judge highlighted that [t]he class action mechanism is not meant to eliminate the requirement of injury to the individual class members and that [e]ven if all of [p]laintiffs factual and legal arguments were to be accepted, their own statistical analyses show that a not insubstantial number of class members have not been injured. In respect of the superiority requirement, the trial judge explained that Rule 4:32-1(b)(3) also requires that the proponents of a class action must also demonstrate that a class action is superior to other available methods for the fair and efficient adjudication of the controversy. She reasoned that [t]he superiority determination turns on an informed consideration by the court of three factors: (1) the alternative methods of adjudication available for each issue; (2) a comparison of fairness to each member whose interests may be involved with respect to each of the adjudicative methods that may be applied; and (3) a comparison of the efficiencies to be made by application of one adjudicative method over another. [(citing In re Cadillac V8-6-4 Class Action, supra, 93 N.J. at 436).] She explained that when the trial of a claim would involve identical proofs regarding defendant s conduct, and the claim may be prohibitively expensive for an individual to pursue, class action emerges as the superior method of adjudication[,] adding that [u]nder such circumstances, individual actions or test cases become an inferior alternative to the class action because . . . the economics of the situation . . . make it impossible for aggrieved persons to vindicate their rights by separate actions. (citation omitted). In the end, the trial judge concluded that pursuing this case as a class action was not a superior form for resolving the disputes at issue, noting that [i]n this case, however, there is an alternative mechanism that each class member could have pursued. She explained that [e]mployees have the right to submit a claim with the Wage Collection Division of the Department of Labor under the New Jersey Wage and Hour Law and that [t]his is a virtually cost free and efficient remedy for any employee who believes that he or she is aggrieved. (citations omitted). The Appellate Division affirmed. It too concluded that plaintiffs claims failed to satisfy the predominance requirement of Rule 4:32-1(b)(3). Iliadis v. Wal-Mart Stores, Inc., 387 N.J. Super. 405 (App. Div. 2006). Repeating the concerns expressed by the trial judge, the Appellate Division took issue with the quality of plaintiffs proofs, concluding that the expert reports submitted by plaintiffs fail to resolve the individual issues of liability. They fail to account for variability in employee conduct and incorrectly assume that a missed punch is equivalent to a missed break. Id. at 419. Properly acknowledging that, [i]n reviewing a trial court order granting or denying class certification, we are charged with determining whether the trial court abused its discretion[,] the panel explained it was unable to conclude that the trial court s order represents an abuse of discretion[.] Id. at 422. There simply is nothing in the majority s analysis that supports its conclusion that the trial judge abused her discretion in denying class action status to these plaintiffs. What the majority does do -- and movingly so - is emote why, if it were a court of first instance, a case could be made for class action certification under the facts presented. However, the majority s disagreement with the trial judge s determination -- as affirmed by the Appellate Division -- simply does not and cannot rise to the level of an abuse of discretion. Class certification decisions rest in the sound discretion of the trial court. Muise v. GPU, Inc., 371 N.J. Super. 13, 31 (App. Div. 2004). For that fundamental reason, it is clear that [a]lthough the ordinary abuse of discretion standard defies precise definition, it arises when a decision is made without a rational explanation, inexplicably departed from established policies, or rested on an impermissible basis. Flagg v. Essex County Prosecutor, 171 N.J. 561, 571 (2002) (quoting Achacoso-Sanchez v. Immigration and Naturalization Service, 779 F.2d 1260, 1265 (7th Cir. 1985)). Nothing in the majority s analysis can lead to the conclusion that the trial judge s decision was made without a rational explanation, inexplicably departed from established policies, or rested on an impermissible basis. Ibid.; see also In re Senior Appeals Examiners, 60 N.J. 356, 365 (1972) (explaining that determination would be an abuse of discretion if it were made without a rational explanation, inexplicably departed from established policies, or rested on an impermissible basis (citation and internal quotation marks omitted)). On the contrary, any fair reading of the trial judge s decision denying class certification can only conclude that it was rationally explained; that the trial judge explored all of the arguments advanced by the parties, applied all relevant precedent, and rationally concluded that class action certification was inappropriate under the circumstances; that the trial judge did not inexplicably depart[] from established policies; that she explained the reasoning behind her decision; that she noted that [a]t least seven other courts also have denied class action certification in similar lawsuits against Wal-Mart based on the failure to satisfy the predominance criteria (footnote omitted) and that her analysis simply did not rest[] on an impermissible basis. That necessary analysis is absent from the majority s opinion. In the final analysis, I entirely agree with the reasoning and conclusions expressed by the trial judge and affirmed by the Appellate Division. Even if I did not so conclude, I nevertheless cannot find in this record a basis -- any basis -- to support the majority s conclusion that the trial judge abused her discretion when she denied plaintiffs class certification application. For those reasons, I respectfully dissent. SUPREME COURT OF NEW JERSEY NO. A-69 SEPTEMBER TERM 2006 ON APPEAL FROM Appellate Division, Superior Court MICHELLE ILIADIS and ANGELA NELSON-CROXTON, individually on behalf of themselves and all others similarly situated, Plaintiffs-Appellants, v. WAL-MART STORES, INC., a Delaware Corporation, SAM S CLUB, an operating segment of Wal-Mart, Inc., DERRICK ZIMMER and GLEN SPENCER, Defendants-Respondents. DECIDED May 31, 2007 Chief Justice Zazzali PRESIDING OPINION BY Chief Justice Zazzali CONCURRING OPINION BY DISSENTING OPINION BY Justice Rivera-Soto