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Jennifer Hearn, Individually and v. Rite Aid Corporation

March 27, 2012

JENNIFER HEARN, INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED, PLAINTIFF-APPELLANT/ CROSS-RESPONDENT,
v.
RITE AID CORPORATION, A CORPORATION OF THE STATE OF DELAWARE, AND RITE AID OF NEW JERSEY, DEFENDANTS-RESPONDENTS/ CROSS-APPELLANTS.



On appeal from the Superior Court of New Jersey, Law Division, Sussex County, Docket No. L-429-06.

Per curiam.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Argued December 6, 2011

Before Judges Carchman, Fisher and Baxter.

Plaintiff Jennifer Hearn -- the putative representative of a class composed of assistant managers (ASMs) employed at Rite Aid pharmacies -- appeals the trial judge's denial of class certification. Because the record demonstrates the presence of common issues of fact and law, the trial judge erred in permitting the inevitable minor differences in each ASM's work experiences to override the efficient disposition of the larger common issues through class certification. Moreover, the judge disregarded the policy favoring the class action device, particularly in instances where class members likely do not have sufficient financial resources to pursue their claims on an individual basis against a defendant possessing superior resources.

I

On August 7, 2006, plaintiff filed a complaint against Rite Aid Corporation and Rite Aid of New Jersey (hereafter collectively "Rite Aid") alleging violations of the New Jersey Wage and Hour Law (WHL), N.J.S.A. 34:11-4.1 to -67, and the New Jersey Law Against Discrimination (LAD), N.J.S.A. 10:5-1 to -42.*fn1

Plaintiff later amended the complaint to include allegations on behalf of all individuals employed by defendants as ASMs since May 14, 2006.

In May 2010, plaintiff moved for class certification and a few months later moved to amend the class definition to include co-managers of Brooks/Eckerd, an entity purchased by Rite Aid in 2007. Plaintiff relied upon the certifications of twelve former ASMs. In August 2010, Rite Aid filed a cross-motion to strike the twelve certifications, claiming they conflicted with deposition testimony taken from the certifying individuals. On September 13, 2010, defendants also moved for an order striking plaintiff's motion to amend the class definition to include co-managers employed by Brooks/Eckerd. By order entered on November 1, 2010, the trial judge denied: class certification; plaintiff's motion to amend the class definition; and defendants' motions to strike.

We granted plaintiff leave to appeal the denial of class certification and granted defendant leave to cross-appeal the denial of its motions. We now reverse the denial of class certification and remand for further proceedings in conformity with this opinion.

II

In determining whether the trial judge mistakenly exercised his discretion, Iliadis v. Wal-Mart Stores, Inc., 191 N.J. 88, 121 (2007), consideration must be given to the principles that govern applications for class certification and the nature of plaintiff's cause of action.

A

The class action device -- an exception to the rule that litigation is conducted by and on behalf of individually-named parties -- furthers the goals of judicial economy, cost-efficiency, and convenience, and provides a vehicle for the consistent treatment of class members. Id. at 103-04. A class action also "equalizes" adversaries when, as here, a proposed class consists of individuals with small claims. Ibid. Accordingly, Rule 4:32 is liberally construed in favor of certification and a plaintiff is to be afforded every favorable view of the record and complaint. Id. at 96, 103.

Rule 4:32 provides the general requirements for certifying a class action. The class must be so numerous that joinder of all parties is impracticable; there must be questions of fact or law common to the class; the claims or defenses of the representative must be typical of the claims or defenses of the class; and the representative must fairly and adequately protect the interests of the class. R. 4:32-1(a).

In addition, the action must fit one of three alternative class action types. Applicable here, Rule 4:32-1(b)(3) 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 order to make a predominance and superiority finding, a court must consider

(A) the interest of the 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 in concentrating the litigation of the claims in the particular forum; and (D) the difficulties likely to be encountered in the management of a class action.

[R. 4:32-1(b)(3).]

In determining whether the class representative has established predominance, courts should consider: the number and significance of common questions; whether the benefits of a class action outweigh the problems of individual actions; and whether there is a common nucleus of operative facts. Iliadis, supra, 191 N.J. at 108. Predominance does not require that all issues be identical among class members or that each member be affected in precisely the same way. Id. at 108-09. It is not required that there be "the absence of individual issues or that the common issues dispose of the entire dispute." Id. at 108. Individual issues and individual defenses do not foreclose a finding of predominance. Id. at 112.

In determining "superiority," a court must consider other available options for adjudication. Id. at 114-15. Lack of financial wherewithal is an important factor, as well as whether the value of each member's claim is "nominal." Id. at 115. The court should also consider whether the administrative framework of the wage collection division "may prove arduous." Id. at 116.

At the certification stage, the court is not entitled to decide the ultimate factual issues but must accept as true all the allegations in the complaint. Lee v. Carter-Reed Co., L.L.C., 203 N.J. 496, 505 (2010). A court must undertake a "rigorous analysis" to determine whether there is "predominance and superiority." Carroll v. Cellco P'ship, 313 N.J. Super. 488, 495 (App. Div. 1998) (internal citations omitted).

B

Plaintiff's claim is based on the WHL, which provides that an employee shall be paid one-and-one-half times his or her salary for any hours worked beyond forty hours per week, but a person employed in a "bona fide executive, administrative, or professional capacity" is not entitled to overtime pay, N.J.S.A. 34:11-56a4, and therefore qualifies for the "executive exemption." Plaintiff claims that she and the putative class members worked in excess of forty hours per week but were not paid overtime; the validity of the claim turns largely on whether they fall within the executive exemption.

At the time of the trial judge's ruling,*fn2 in order to qualify for the "executive exemption," the employer was required to establish that the employee: (1) has the primary duty of managing; (2) directs the work of two or more employees; (3) hires and fires other employees, or has a voice in hiring, firing, or advancement of other employees; (4) regularly exercises discretionary powers; (5) devotes less than twenty percent of work time to non-exempt work or less than forty percent if employed by a retail or service establishment, provided that, while performing the non-exempt tasks, the employee continues his or her managerial role and supervises two or more employees; and (6) is compensated on a salary basis at a rate of at least $400 per week. Marx v. Friendly Ice Cream Corp., 380 N.J. Super. 302, 311 (App. Div. 2005). Whether the employee satisfied the first of these factors -- that management is the employee's primary duty -- required consideration of: the employee's relative freedom from supervision; the frequency of the employee's exercise of discretion; the relative importance of the employee's managerial and non-managerial tasks; the time spent on managerial duties; and the employee's salary relative to the wages of workers supervised. [Id. at 313.]

Until recently, state regulations did not define managerial duties. In Marx, supra, 380 N.J. Super. at 312-13, we looked for guidance in 29 C.F.R. § 541.102. That analytical approach has now been shown to be entirely correct because the recently-adopted N.J.A.C. 12:56-7.2 expressly calls for the application of those federal regulations in determining WHL disputes.*fn3 We need not determine whether or to what extent the new regulation, N.J.A.C. ...


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