Wal-Mart Stores, Inc. v. Bailey

• Decision Date: 27 May 2004
• Docket Number: No. 49A02-0306-CV-511.,49A02-0306-CV-511.
• Citation: 808 N.E.2d 1198
• Parties: WAL-MART STORES, INC., Wal-Mart d/b/a Sam's Club, Marie Ward and Nathan Clark, Appellants-Defendants, v. Berdita L. BAILEY and Sue Rhodus, Individually and on behalf of all others similarly situated, Appellees-Plaintiffs.
• Court: Indiana Appellate Court

808 N.E.2d 1198

WAL-MART STORES, INC., Wal-Mart d/b/a Sam's Club, Marie Ward and Nathan Clark, Appellants-Defendants, v. Berdita L. BAILEY and Sue Rhodus, Individually and on behalf of all others similarly situated, Appellees-Plaintiffs.

No. 49A02-0306-CV-511.

Court of Appeals of Indiana.

May 27, 2004.

Rehearing Denied August 3, 2004.

Robert K. Stanley, Ellen E. Boshkoff, Edward E. Hollis, Baker & Daniels, Indianapolis, IN, Attorneys for Appellants.

Matthew W. Lampe, Jones, Day, Reavis & Pogue, Columbus, OH, Of Counsel.

James A. Knauer, Jay P. Kennedy, William Bock, III, Reynolds B. Brissenden, Kroger Gardis & Regas, LLP, Indianapolis, IN, Attorneys for Appellees.

OPINION

SULLIVAN, Judge.

Wal-Mart Stores, Inc. appeals from the trial court's order certifying a class of current and former employees in the State of Indiana for claims asserted by Berdita Bailey,¹ a former Wal-Mart employee. The main issues presented by Wal-Mart for our review are; (1) whether the class definition improperly includes class members who have no standing in the litigation, and (2) whether the trial court erred in concluding that common issues predominate and that a class action is superior to other methods of adjudicating the controversy.

We conclude that the issue of whether the class definition includes individuals who have no standing in the litigation is dispositive, but because the other issues present concerns which may arise upon remand, we address those in turn.

We reverse and remand.

Bailey is a former Wal-Mart employee who now claims that she was subject to a corporate policy at Wal-Mart which caused her to work off the clock and be uncompensated for her time. The facts disclose that Wal-Mart's general policy is that new employees receive a handbook when they are hired. The handbook warns employees against working when not clocked in, tells them that they are entitled to rest and meal breaks, and informs them that they may request written time adjustments if their time is not correctly recorded by their time cards. Wal-Mart policy is that for every seven hours an employee works, the employee should receive two fifteen minute rest breaks and a one hour meal break.² Employees are to be paid during their rest breaks but not during their meal breaks. It also appears that Wal-Mart expects its stores to reduce labor costs each year by two-tenths of a percent from the prior year's figures.

The management structure of Wal-Mart is such that the retail operations are broken down into operating divisions, each of which is headed by a divisional manager. Each division is made up of a number of regions headed by regional managers who oversee a number of districts, each of which has its own district manager. Approximately five to seven stores constitute a district. Each store is headed by a store manager. The compensation for store managers is based in large part upon a manager's ability to reduce costs and increase the profitability of a store. A large percentage of the costs which a manager can control are labor costs. According to one former manager, labor costs make up 70% of the costs within a store manager's control.

Bailey claims that because Wal-Mart has instituted the management and payment structure in place, it has forced managers to adopt or condone wrongful cost-saving practices and encourage hourly employees to work off the clock and through rest and meal breaks. She alleges that employees are faced with the dilemma of having more work to do than can be completed in a shift, but Wal-Mart policy is to limit overtime. As a result, she contends that employees must clock out and continue to work without pay. Moreover, she claims that employees are not given rest and meal breaks or are called back to work before their break is over. Evidence demonstrated that some store managers edit employee time records to show that breaks were taken or that individuals clocked out without ever confirming with the employee that the break was taken or whether they left work at a certain time. Finally, Bailey alleged that employees have been locked in stores overnight and the stores were not opened on time the following morning.³

Bailey commenced this action in order to recover damages for time she and other employees worked without compensation. Ultimately, she settled upon several theories of recovery: unjust enrichment, breach of implied contract, conversion, and constructive fraud. She also requested that punitive damages be awarded. Bailey also sought to have the litigation certified as a class action.⁴ Following a hearing, the trial court granted her motion and ordered that the class be defined as "[a]ll current and former hourly employees of Wal-Mart Stores, Inc. (including its operating divisions Sam's Club and Wal-Mart Supercenters) in the State of Indiana during the period August 1, 1998 to present." Appendix at 61. Wal-Mart subsequently sought certification of the order for interlocutory appeal. That motion was granted; consequently, the issue of class certification is properly before this court. See Martin v. Amoco Oil Co., 696 N.E.2d 383, 385-86 (Ind.1998)

(holding that unless trial court certifies Trial Rule 23 determination as final under Trial Rule 54(B), it remains interlocutory), cert. denied 525 U.S. 1049, 119 S.Ct. 608, 142 L.Ed.2d 548.

Class Certification

Whether an action may be maintained as a class action is committed to the sound discretion of the trial court. Northern Indiana Pub. Serv. Co. v. Bolka, 693 N.E.2d 613, 615 (Ind.Ct.App.1998),trans. denied. We review a trial court's ruling on class certification for an abuse of discretion. Id. We will affirm the trial court's order if substantial evidence supports the trial court's exercise of discretion. Id. In this case, the trial court sua sponte entered specific findings of fact and conclusions of law. When the trial court enters such findings sua sponte, the specific findings control only as to the issues they cover, and a general judgment standard applies to any issues upon which the court has not found. Independence Hill Conservancy Dist. v. Sterley, 666 N.E.2d 978, 981 (Ind.Ct.App.1996). We employ a two-tiered standard of review when reviewing specific findings. Harris v. Harris, 800 N.E.2d 930, 934-35 (Ind.Ct.App. 2003),trans. denied. We first determine whether the evidence supports the findings and then whether the findings support the judgment. Id. at 935. In deference to the trial court's proximity to the issues, we will reverse a judgment only when it is shown to be clearly erroneous. Id. A judgment is clearly erroneous when it is unsupported by the findings of fact and conclusions entered on the findings. Id. Although we defer substantially to the trial court's findings of fact, we do not do so as to the conclusions of law. Id. We evaluate questions of law de novo and owe no deference to the trial court's determinations of such questions. Id.

Indiana Trial Rule 23 governs class certifications. The party requesting class certification must prove that the proposed class meets all of the requirements of T.R. 23(A) and at least one of the requirements of T.R. 23(B). Sterley, 666 N.E.2d at 981. In addition to the express requirements for class certification, there is an implicit "definiteness" requirement. Id. A properly defined class is necessary at the outset because a judgment in a class action has a res judicata effect on absent class members. Id. The class definition must be specific enough for the court to determine whether or not an individual is a class member. Id.

Trial Rule 23(A) provides that a plaintiff may sue as a representative on behalf of a class if the following four requirements are met:

"(1) the class is so numerous that joinder of all members is impracticable;

(2) there are questions of law or fact common to the class;

(3) the claims or defenses of the representative parties are typical of the claims or defenses of the class; and

(4) the representative parties will fairly and adequately protect the interests of the class."⁵

Trial Rule 23(B) lists the following three additional prerequisites, any one of which is sufficient to support a class certification:

"(1) the prosecution of separate actions by or against individual members of the class would create a risk of:

(a) inconsistent or varying adjudications with respect to individual members of the class which would establish incompatible standards of conduct for the party opposing the class, or

(b) adjudications with respect to individual members of the class which would as a practical matter be dispositive of the interest of the other members not parties to the adjudications or substantially impair or impede their ability to protect their interests; or

(2) the party opposing the class has acted or refused to act on grounds generally applicable to the class, thereby making appropriate final injunctive relief or corresponding declaratory relief with respect to the class as a whole; or

(3) the court finds that the questions of law or fact common to 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. The matters pertinent to the findings include:

(a) the interest of members of the class in individually controlling the prosecution or defense of separate actions;

(b) the extent and nature of any litigation concerning the controversy already commenced by or against members of the class;

(c) the desirability or undesirability of concentrating the litigation of the claims in the particular forum;

(d) the difficulties likely to be encountered in the management of a class action."

According to T.R. 23(C)(1), a court may redefine a class in order to sustain a lawsuit before a decision on the merits of the claims. Sterley, 666 N.E.2d at 982. In addition, an action may be brought or maintained as a class action with respect to...