Background
Approximately 700 employees of North American Title Company brought a class action alleging they were misclassified as exempt from California’s overtime, meal break, and rest period requirements. The case was filed 19 years ago and has generated numerous interlocutory appeals and writ proceedings, including review by the California Supreme Court in North American Title Co. v. Superior Court (2024) 17 Cal.5th 155.
The claims were litigated in a bifurcated bench trial. The class was divided into “Exempt” and “Nonexempt” subgroups. During the first phase, the Nonexempt class was decertified, but the trial court ruled against the employer on certain defenses as to the Exempt class. The court then appointed a referee over the employer’s objection to conduct the second phase, which lasted years and involved live testimony from sample class members along with statistical extrapolation.
North American Title appealed, challenging the involuntary reference, the class certification, the trial methodology including statistical sampling, and the resulting judgment.
The Court’s Holding
The Fifth District Court of Appeal reversed, finding multiple significant errors in the trial proceedings. The court held that the trial court improperly appointed a referee without the parties’ consent for issues that required adjudication by a judge—the involuntary reference exceeded what is permitted under Code of Civil Procedure section 638 for matters requiring a determination of fact. The court also found the reference proceedings were tainted by procedural irregularities.
On class certification, the court applied the framework from Duran v. U.S. Bank National Assn. (2014) 59 Cal.4th 1 and found that the trial court had not adequately addressed predominance and manageability requirements for a misclassification class action involving approximately 400 Exempt class members in diverse escrow officer and title officer roles. The statistical sampling methodology used at trial was flawed because it did not follow a valid statistical model and improperly extrapolated liability from a small sample to the entire class without allowing the employer to rebut individual classifications.
Key Takeaways
- Courts cannot appoint a referee without party consent for issues that require judicial fact-finding, particularly in complex class action trials with contested liability determinations.
- In employee misclassification class actions, the predominance and manageability requirements of Duran must be rigorously applied: statistical sampling must follow valid models, and defendants must be allowed to rebut individual classifications.
- A 19-year class action illustrates the extraordinary difficulty of litigating wage-and-hour misclassification claims to verdict on a classwide basis—reinforcing Duran’s observation that such trial verdicts are “exceedingly rare.”
- Class certification is a continuing obligation: trial courts must monitor manageability throughout the proceedings and decertify if individual issues prove unmanageable.
- Where class members hold diverse job titles and duties, proving uniform misclassification through sampling becomes especially challenging and requires careful statistical methodology.
Why It Matters
This decision is one of the most significant California class action opinions in years, demonstrating just how difficult it is to take a wage-and-hour misclassification case from certification through trial to a sustainable verdict. For plaintiffs’ attorneys, it underscores the need for rigorous statistical methodology and careful attention to Duran’s requirements when pursuing classwide relief. Shortcutting the sampling process or relying on involuntary references to manage an unwieldy case can unravel years of litigation.
For employers, the opinion reinforces that meaningful defenses to class treatment remain viable even after certification, particularly where job duties vary among class members. It also highlights the importance of objecting early and on the record to improper trial procedures, including unauthorized judicial references. The case serves as a roadmap for challenging flawed class action trial plans in the employment context.