Anyone questioning whether the Supreme Court’s decision in Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541 (2011), has had an impact need look no further than the decision in Alakozai v. Chase Investment Services Corp., Case No. CV 11-09178 SJO (JCx) (C.D. Cal. Oct. 6, 2014).   The Alakozai matter was a wage and hour case in the Central District of California. The plaintiffs, who were financial advisors selling securities and other financial products, contended that they were misclassified as exempt and sought overtime under state and federal law and penalties for missed meal breaks under California law.  They moved to certify a class of approximately 1,000 other financial advisors.  Particularly in California, this is the kind of case that one would have expected to be certified virtually as a matter of course only five years ago, but the post-Dukes outcome was very different.

As to the merits, the defendant relied on several exemptions, including the administrative and commissioned sales exemptions under state and federal law, and the federal exemption for highly compensated employees.  The number of exemptions, and their detailed requirements, alone would prove a problem for the plaintiffs.

The District Court cited Dukes at the outset of its opinion, and went on to deny certification for a number of reasons.

First, the court analyzed each of the exemptions separately.  Interestingly, the court found that commonality existed as to some, but not others.  Of course, the defendant only needed to prevail on one exemption to avoid liability, so the lack of commonality as to even one could have justified denying certification of the class.  In any case, for many of the same reasons, the court found that the plaintiffs could not establish predominance or superiority.

Perhaps the most interesting part of the court’s opinion relates to the issue of adequacy of representation under Rule 23(a)(4).  While challenges to this element are less common, the defendant argued that the plaintiffs could not be adequate representatives because of their personal bankruptcies and the court agreed.  It noted that they had not disclosed the claims in their bankruptcy filings, and, in a related issue, questions existed whether the claims were theirs to assert or actually property of the bankruptcy trustee.

The district court ultimately denied certification for all of these reasons.  The decision is significant not only for its application of Dukes, but also for its rejection of named plaintiffs with bankruptcy filings that failed to disclose their claims.  Because such situations are not uncommon, there may be many other instances in which certification may be denied based on the lead plaintiffs’ conduct in bankruptcy court.

The bottom line:  A representative plaintiffs’ failure to disclose his or her claim in bankruptcy may ultimately defeat certification.