Cutler v. Wal-Mart Stores, Inc.

MEREDITH, Judge. Former employees of Wal-Mart and Sam’s Club stores in Maryland who claimed they were deprived of benefits and pay for work performed filed a putative class action suit against Wal-Mart Stores, Inc., the parent company of Wal-Mart and Sam’s Club. The employees’ motion for class certification was denied by the Circuit Court for Prince George’s County on the ground that the employees failed to show that common issues predominate over individual issues. The case was later dis ¹⁸¹ missed by the circuit court because, absent class certification, the named plaintiffs’ claimed damages did not meet the $5,000 threshold for civil cases filed in circuit court.

On appeal, the employees argue that the circuit court abused its discretion in denying the motion for class certification. 1 Because we conclude that the circuit court did not abuse its discretion in finding that individual issues predominate, and such finding provided a legally sufficient basis to deny class certification, we shall affirm the judgment of the circuit court and need not address appellants’ arguments regarding evidentiary issues and due process. I. Facts and Procedural History Wal-Mart and its subsidiary, Sam’s Club, are nationwide retail chains. 2 Appellants Cutler and Pittman were formerly employed by Wal-Mart in positions paying an hourly wage. On April 23, 2002, these two former employees filed suit against Wal-Mart, seeking to assert a class action. The complaint identified the proposed class of plaintiffs as “all current and former hourly-paid employees of Wal-Mart ¹⁸² Stores, Inc. (including Wal-Mart Stores, Sam’s Club and Supercenters) in the State of Maryland from April 12, 1999 to the present[.]” The class excluded salaried employees, customer service managers, pharmacists and personnel managers.

At the time of the circuit court’s decision in this case, the potential class consisted of more than 60,000 former and present Wal-Mart employees. The complaint alleged that Wal-Mart had engaged in a “systematic and clandestine scheme” that deprived its hourly employees of rest breaks and meal breaks, and thereby under-compensated hourly employees for the total number of hours worked. The complaint contained the following ten counts: 1) breach of contract for failure to pay wages for off-the-cloek work; 2) breach of contract for failure to provide rest and meal breaks; 3) unjust enrichment/restitution; 4) promissory estoppel; 5) breach of implied covenant of good faith and fair dealing; 6) failure to pay timely wages in violation of Maryland labor statutes; 7) failure to pay all wages earned prior to termination in violation of Maryland labor statutes; 8) failure to pay overtime wages in violation of Maryland labor statutes; 9) conversion; and 10) negligent misrepresentation. In support of their contentions, the employees relied primarily on the Wal-Mart Associate Handbook (“the Handbook”) that is provided to all hourly employees upon their hiring.

The Handbook, which is uniform for all Wal-Mart stores, details corporate policies, operating procedures, and employee benefits determined by Wal-Mart’s corporate headquarters in Bentonville, Arkansas. Cutler and Pittman asserted that the Handbook “embodied the terms of their employment,” and that Wal-Mart breached the terms of the employment contract by failing to provide promised rest breaks and meal breaks and by failing to compensate hourly employees for work performed “off the clock”, i.e., not reflected in the employees’ time records. The Handbook, however, contains two disclaimers. One disclaimer states: “This handbook is a guide, not a legal contract.” The second disclaimer, which is part of an acknowl ¹⁸³ edgment that each employee must sign, states: “This handbook is intended solely as a general information guide---The policies and benefits in this handbook are for your information and do not constitute terms or conditions of employment. ...

This handbook is not a contract.” The acknowledgment form each employee must sign contains the following attestation: I have received and read this handbook as well as this Acknowledgment and ... I fully understand the contents of both as they relate to my employment with Wal-Mart. I understand that the information contained in this handbook are [sic] guidelines only, and are in no way to be interpreted as a contract. Cutler and Pittman argue that, despite the disclaimers, the Handbook, along with the documents setting forth Wal-Mart’s corporate policies, operate to form an employment contract, and that Wal-Mart’s failure to provide certain benefits described in the Handbook constitutes an actionable breach of contract.

The portion of the Handbook addressing rest breaks and meal breaks provides: Associates will be provided break and meal periods during their scheduled work shift. Associates are paid for up to two break periods per work shift. No associate should work over six hours without taking at least a 30-minute meal period. Remember to clock in and out for meal periods.

Associates should not be required nor requested to perform work during their break and/or meal periods. Associates whose break or meal period is interrupted to perform work will be compensated at the appropriate rate of pay and may be provided an additional break or meal period. In addition to the statements in the Handbook, a Wal-Mart corporate policy document titled “PD-07” also addresses rest breaks and meal breaks. PD-07 provides that Associates who work fewer than three hours in a shift do not receive a rest break, but employees who work three to six hours in a shift receive one fifteen-minute rest break, and employees who work more than six hours in a shift receive two fifteen-minute ¹⁸⁴ rest breaks.

PD-07 also states that any employee who works more than six hours in a shift “will be provided a meal period.” Wal-Mart policy dictates that meal breaks must last at least thirty minutes, but that, with the supervisor’s permission, meal breaks may last up to an hour. Although employees are supposed to be compensated for the prescribed fifteen minute rest breaks, they do not receive compensation for meal breaks. The provision of PD-07 which addresses Wal-Mart’s official policy regarding the interruption of an employee’s rest break or meal break by a supervisor or manager states: Supervisors and Managers may not require nor request Associates to perform work during their break and meal periods, except in extreme emergencies where no other Associate is available. Hourly Associates whose break or meal period is interrupted will receive compensation for the entire period at their regular rate of pay and will be allowed an additional break or meal period.

In addition to their claims that they were deprived of rest breaks and meal breaks, Cutler and Pittman allege that they were required to do work off the clock, in violation of the provision in PD-07 stating that managers should not request employees to work during breaks “except in extreme emergencies,” and in violation of Wal-Mart’s policy that employees should not perform work while off the clock. Wal-Mart’s corporate policy regarding off-the-clock work is stated in a document titled “PD-43,” which provides that “[n]o Wal-Mart Associate should perform work for the Company without compensation.... It is a violation of the law and Company policy to work off the clock. Associates who do work off the clock will be paid for such time, and the Coaching policy will be used to correct the problem.” 3 In order to electronically document time worked and breaks taken, Wal-Mart employees are required to swipe electronic ID cards when beginning or ending work periods or meal ¹⁸⁵ breaks.

Prior to February 10, 2001, employees were required to swipe in and out for paid breaks as well. The swipe data is used for payroll generation, and is subject to review and adjustment. Appellants’ complaint asserted that supervisors regularly used their power to adjust time records in a manner that deprived employees of pay for hours actually worked and compensation for missed breaks. On May 23,2003, Cutler and Pittman filed a motion for class certification, defining the class as all employees of Wal-Mart in Maryland from April 12, 1999, through May 23, 2003, excluding salaried and managerial employees.

A hearing on the class certification motion was held May 5, 2004. On June 8, 2004, the circuit court issued a memorandum and order denying the motion. In its written memorandum of opinion, the circuit court “assume[d] without finding” that the appellants met the requirements of Maryland Rule 2-231(a), which lists the following four prerequisites for certification of a class action: One or more members of a class may sue or be sued as representative parties on behalf of all only if (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. Bypassing analysis of whether appellants satisfied these four prerequisites for class action certification listed in Rule 2-231(a), the circuit court instead focused its analysis on whether each count of the complaint met the additional criteria for class actions set forth in Rule 2 — 231 (b)(3).

Rule 2-231(b)(3) requires that, “in addition” to the prerequisites listed in Rule 2-231(a), the court must also “find[ ] that the 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.” ¹⁸⁶ As to the first two counts of the complaint, alleging breach of contract, the circuit court found, based on the disclaimers in the Handbook, that there was no written contract for employment. Citing Hrekorovich v. Harbor Hospital, 93 Md.App. 772 , 614 A.2d 1021 (1992), cert. denied, 330 Md. 319 , 624 A.2d 490 (1993), the circuit court explained that if any employment contracts existed, they could not be based on the uniform Handbook distributed to all of Wal-Mart’s hourly employees in Maryland. As a consequence, in order to prosecute the employees’ breach of contract claims, “testimony will vary as to how [each employee’s] contract was formed, the terms of the contract, and whether any such contract existed.” The court further found that appellants’ proffered expert testimony (drawing general conclusions based upon analysis of WalMart’s time-clock records and a survey of employees inquiring about missed breaks and unpaid, off-the-clock work) was insufficient to “cure these individual discrepancies” among the employees regarding the formation and terms of the potentially thousands of implied contracts created under circumstances unique to each individual employee. With respect to count three of the complaint, appellants’ unjust enrichment claim, the circuit court noted that “[t]he measure of damages for unjust enrichment is the known gain to the defendant,” and that “evaluation would require individual assessments of whether or not any benefit was conferred and accepted, retained, or even known to [Wal-Mart].” The court noted that count four of the complaint, which alleged promissory estoppel, would “require[] proof of reliance upon a clear and definite promise.” The court further observed: “Reliance varies from individual to individual and consequently individual, not common, issues predominate here.” The court concluded that the claims asserted in count ten, alleging negligent misrepresentation, were not appropriate for class certification for the same reasons as those in count four.

The court rejected appellants’ arguments for class certification as to count five, which asserted a breach of the covenant ¹⁸⁷ of good faith and fair dealing, on the ground that proof of a breach of the covenant of good faith and fair dealing is “dependent on the existence of an employment contract for a definite term.” Because the court had already found, for the purpose of evaluating counts one and two, that the Handbook did not constitute a written employment contract and that any contract would have to be proven on an individual basis, the court concluded that individual issues predominated as to count five as well. Counts six, seven and eight contained statutory claims for wages unpaid. The court again found that individual issues predominated, explaining: In these claims, an individual analysis of time records and why such wages were not paid would require an assessment of not only policies within the individual store, but policies within the individual department within the store. This would require a showing of evidence of whether work was performed while not reporting it, whether there was a proper or improper recordation of breaks and/or hours worked, and whether or not the time was ultimately corrected and paid, among other considerations.

The court did not have to address count nine, which alleged conversion, because that count had been dismissed prior to the hearing on the motion for class certification. On November 4, 2004, the employees filed a motion to revise the order denying class certification. On January 24, 2005, the circuit court denied the motion to revise. On June 8, 2005, Wal-Mart filed a motion to dismiss, or in the alternative, for summary judgment.

On August 10, 2005, the circuit court entered an order dismissing the case on the ground that, absent class certification, each of the named plaintiffs’ claims for damages fell short of the $5,000.00 jurisdictional threshold for cases filed in Maryland circuit courts, as set forth in CJP § 4 — 402(D)(1)(I). Cutler and Pittman filed a notice of appeal on August 17, 2005. On appeal, appellants contest only the denial of the ¹⁸⁸ motion for class certification with respect to counts one, two, three, five, six, seven and eight.

II

Standard of Review At the outset, we note that there is no statutory or constitutional right to pursue by way of a class action the various claims that were the subject of appellants’ complaint. Rather, a class action is a procedural device, created by the judiciary’s adoption of a court rule to facilitate management of multiple similar claims. Maryland Rule 2-231 provides that the circuit court may order pursuit of claims by way of a class action if certain requirements are met. 4 ¹⁸⁹ We review the circuit court’s decision to grant or deny class certification for abuse of discretion. Philip Morris v. Angeletti, 358 Md. 689, 726 , 752 A.2d 200 (2000) (hereafter “Angeletti”).

This deferential standard of review is based upon the “recognition that the basis of the certification inquiry is essentially a factual one, and thus deference is due.” Creveling v. GEICO, 376 Md. 72, 90 , 828 A.2d 229 (2003). Review of the circuit court’s determination for abuse of discretion “appropriately recognizes the factual nature of a class certification inquiry and a trial court’s power to manage its docket.” Id. at 91 , 828 A.2d 229 . An appellate court may find an abuse of discretion when “no reasonable person would take the view adopted by the [trial] court, or when the court acts ‘without reference to any guiding rules or principles.’ ” In re Adoption/Guardianship No. 3598, 347 Md. 295, 312 , 701 A.2d 110 (1997) (quoting North v. North, 102 Md.App. 1, 13 , 648 A.2d 1025 (1994)(alter-ation in original)). A reviewing court may also conclude that the circuit court has abused its discretion when “the ruling under consideration is ‘clearly against the logic and effect of facts and inferences before the court,’... ‘or when the ruling is violative of fact and logic.’ ” Id.

(internal citations omitted). The Court of Appeals has also defined “abuse of discretion” as “ ‘discretion manifestly unreasonable, or exercised on untenable grounds, or for untenable reasons.’ ” Touzeau v. Deffinbaugh, 394 Md. 654, 669 , 907 A.2d 807 (2006) (quoting Jenkins v. City of College Park, 379 Md. 142, 165 , 840 A.2d 139 (2003) (emphasis not included)). In reviewing a circuit court’s decision for abuse of discretion, this Court is mindful that “[q]ues ¹⁹⁰ tions within the discretion of the trial court are ‘much better decided by the trial judges than by appellate courts, and the decisions of such judges should only be disturbed where it is apparent that some serious error or abuse of discretion or autocratic action has occurred.’ ” Adoption/Guardianship No. 3598, supra, 347 Md. at 312 , 701 A.2d 110 (quoting Northwestern National Insurance Co. v. Samuel R. Rosoff, Ltd., 195 Md. 421, 436 , 73 A.2d 461 (1950)). In contrast to the deference given to the factual findings and discretionary rulings of the circuit court, however, we review de novo any issues regarding the circuit court’s application of the legal standards for granting or denying class certification.

Creveling, supra, 376 Md. at 91 , 828 A.2d 229 .

III

Discussion The party seeking class certification bears the burden of proving that the proposed class meets all the requirements of Rule 2-231. Creveling, supra, 376 Md. at 89 , 828 A.2d 229 . The circuit court, in its consideration of a motion for class certification, may not review the merits of the case. Id.

The circuit court must accept as true the named plaintiff’s allegations regarding the elements of class certification, although the court “may look beyond the pleadings to determine whether class certification is appropriate.” Id. While Rule 2-231 (a) sets forth the four threshold prerequisites for class certification — numerosity, commonality, typicality, and adequacy of representation — the Court of Appeals has noted that those four requirements “are necessary but not alone sufficient; a putative class also must fall into one of three subcategories of Rule 2-231 (b).” Id. at 88 , 828 A.2d 229 . In this case, appellants chose to rely on Rule 2-231(b)(3), asserting that common issues of law and fact predominate over individual issues and that a class action is the most fair and efficient method of adjudicating their claims. In ruling on a motion for class certification where the named plaintiffs rely on Rule 2-231(b)(3), a circuit court must make two findings in order to grant class certification: (1) that ¹⁹¹ common issues predominate over individual issues; and (2) that a class action is superior to other methods of adjudicating the claims fairly and efficiently.

Angeletti, supra, 358 Md. at 762 , 752 A.2d 200 . In Angeletti , the Court of Appeals also noted that “the less demanding prerequisite of commonality in Rule 2-231(a) is necessarily subsumed in the more exacting requirement of predominance of common issues over individual questions, found in Rule 2 — 231 (b)(8)Id. at 737, 752 A.2d 200 . In this case, the circuit court assumed, arguendo, that appellants had met the requirements of Rule 2-231(a), and concluded that, even if the four threshold prerequisites were satisfied, appellants could not meet the more stringent requirements of Rule 2-231(b)(3). The circuit court therefore did not reach the issue of whether a class action was superior to other methods of adjudication in this case.

A. Counts One and Two: Breach of Contract Claims With regard to counts one and two of the complaint, the circuit court’s finding that the Handbook did not constitute a contract rendered the issues on those counts necessarily individual in nature. Citing this Court’s decision in Hrehorovich, supra, 93 Md.App. at 793 , 614 A.2d 1021 , the circuit court concluded that the prominent disclaimers in the Handbook precluded a finding that the Handbook could provide a basis for common contractual claims. In Hrehorovich , we said that although “personnel policies may give rise to contractual rights if they are properly expressed and communicated to the employee in a fashion that creates a reasonable basis for the employee’s reliance on the provisions,” disclaimers can effectively prevent such contractual rights from arising. Id. at 793 , 614 A.2d 1021 .

We explained: “[RJeliance on expressed personnel policies and procedures is precluded where those same policies clearly and effectively disclaimed any contractual intent.” Id. at 794 , 614 A.2d 1021 (citing Castiglione v. Johns Hopkins Hospital, 69 Md.App. 325, 339-41 , 517 A.2d 786 (1986), cert. denied, 309 Md. 325, 523 A.2d 1013 (1987)). Accord Bagwell v. Peninsula Regional Medical Center, 106 Md.App. 470, 494 , 665 A.2d 297 (1995) (because of clear ¹⁹² disclaimer in handbook, employee “cannot reasonably assert justifiable reliance on any of the terms of the Handbook”), cert. denied, 341 Md. 172 , 669 A.2d 1360 (1996). In this case, the disclaimers were quite clear. The first, which appears in the “Welcome” section of the Handbook, states: “This handbook is a guide, not a legal contract____ No handbook can cover everything.

The rules and policies in this handbook may change.” The other disclaimer, which states plainly that “this handbook is not a contract,” appears on the final page of the Handbook in an acknowledgment form that new associates must sign, attesting to the following statement: “I understand that the information contained in this handbook are guidelines only, and are in no way to be interpreted as a contract.” The employees argue that, despite the language of the disclaimers, the Handbook does not preclude the finding of an implied contract common to all members of the proposed class. The employees assert that, in addition to the language in the Handbook regarding rest breaks, meal breaks, and off-the-clock work, they rely on the statements in