Sullivan Univ. Sys. v. McCann

THE SULLIVAN UNIVERSITY SYSTEMS, INC. APPELLANT v. MARY E. MCCANN, INDIVIDUALLY AND ON BEHALF OF OTHERS SIMILARLY SITUATED APPELLEE

NO. 2020-CA-000118-ME

Commonwealth of Kentucky Court of Appeals

SEPTEMBER 18, 2020

NOT TO BE PUBLISHED

APPEAL FROM JEFFERSON CIRCUIT COURT

HONORABLE OLU A. STEVENS, JUDGE

ACTION NO. 10-CI-001130

OPINION

AFFIRMING

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BEFORE: GOODWINE, K. THOMPSON, AND L. THOMPSON, JUDGES.

GOODWINE, JUDGE: Mary E. McCann ("McCann") was formerly employed as an admissions officer by The Sullivan University Systems, Inc. ("Sullivan"). McCann filed an action against Sullivan alleging that she and members of a putative class of admissions officers were entitled to recover unpaid overtime wages under the Kentucky Wage and Hour Act ("KWHA") codified in KRS¹ Chapter 337. The Jefferson Circuit Court granted McCann's motion for class certification. Sullivan appealed. After careful review of the record, finding no error, we affirm.

BACKGROUND

On February 18, 2010, McCann filed her class action complaint and jury demand, alleging Sullivan failed to pay overtime compensation in violation of KRS 337.285, KRS 337.050, and the Fair Labor Standards Act ("FLSA"). The class definition included:

All natural persons, at any time during the five year period preceding the filing of the Complaint through the filing of a motion for class certification, who have been or are currently employed as Admissions Officers for the Defendant and any of its Assumed Name Corporations including, but not limited to, Sullivan University College of Pharmacy, Sullivan College of Technology and Design, Sullivan University Global E-Learning, Dale Carnegie Kentuckiana, International Center for Dispute Resolution Leadership, Sullivan University (Louisville Campus, Lexington Campus, and Ft. Knox Campus), Louisville Technical Institute (Maine Campus and Marine Campus), The National Center for Hospitality Studies, Institute for Paralegal Studies, Spencerian College (Louisville Campus and Lexington Campus), and Interior Design Institute.

Record ("R.") at 370. McCann requested, for herself and all class members, compensatory damages, attorneys' fees and costs, and injunctive relief to prevent Sullivan from underpaying admissions officers in the future.

In March 2010, Sullivan removed the case to federal court. The United States Department of Labor ("USDOL") investigated McCann's federal claims and filed a complaint based on the USDOL's findings in federal court seeking backpay and injunctive relief from Sullivan. McCann voluntarily dismissed her own federal claims later that year to avoid conflicting outcomes with the USDOL's case.

The federal court remanded McCann's state claims back to the Jefferson Circuit Court in October 2011. Because the USDOL case was ongoing, McCann waited to take any further action in the Jefferson Circuit Court until the USDOL case was resolved to avoid conflicting outcomes or waste resources with duplicative efforts. On February 18, 2012, Sullivan settled the USDOL federal claims, agreeing to classify admissions officers as "non-exempt" and to provide backpay during the period from August 7, 2009 to November 13, 2011.

After the USDOL settlement, McCann pursued the class's state claim in the Jefferson Circuit Court to secure remedies covered by her earlier-filed suit and its shorter statute of limitations reaching back to February 18, 2005. McCann's original counsel withdrew after the settlement, and McCann retained hercurrent counsel in August 2013. McCann then filed her motion to certify class for her state claims in October 2013. The circuit court initially denied the motion because the court was under the impression that KRS 337.285 did "not permit certification of class actions." R. at 201. The Supreme Court of Kentucky disagreed, reversing the order and remanding the case to the circuit court.

On remand, Sullivan again moved to certify the class or, alternatively, compel discovery in January 2018. The circuit court followed our Supreme Court's direction and applied the facts of this case to CR² 23 and certified the class in July 2018. Sullivan appealed, arguing the circuit court abused its discretion in certifying the class because its order did not contain sufficient findings under CR 23.01 and 23.02. This Court held the circuit court did not include enough analysis to determine whether the circuit court abused its discretion. As such, this Court vacated the circuit court's order and remanded for detailed factual findings and legal conclusions under CR 23.01 and CR 23.02.

On remand for the second time, McCann renewed her motion to certify the class and tendered a proposed order. Sullivan again opposed McCann's motion, arguing the proposed class did not meet the requirements under CR 23.01 and CR 23.02, and language in the proposed order made findings on the merits infavor of McCann. The circuit court entered McCann's proposed order certifying the class action on January 6, 2020. Sullivan appealed.

STANDARD OF REVIEW

We review a trial court's decision to certify a class for abuse of discretion. Nebraska All. Realty Company v. Brewer, 529 S.W.3d 307, 311 (Ky. App. 2017) (citing Sowders v. Atkins, 646 S.W.2d 344, 346 (Ky. 1983)). "The test for abuse of discretion is whether the trial judge's decision was arbitrary, unreasonable, unfair, or unsupported by sound legal principles." Commonwealth v. English, 993 S.W.2d 941, 945 (Ky. 1999). "Under this standard, we review the record and the ruling while giving deference to the trial court's factual findings and rulings because the trial court is in the best position to evaluate the evidence before it." Brewer, 529 S.W.3d at 311 (citing Miller v. Eldridge, 146 S.W.3d 909, 917 (Ky. 2004)).

Furthermore, our analysis may only address certification of the class, and we cannot make a conclusive determination on the merits.

Because of the strict parameters of interlocutory appeals, the only question this Court may address today is whether the trial court properly certified the class to proceed as a class action lawsuit. We must focus our analysis on this limited issue and in so doing scrupulously respect the limitations of the crossover between (1) reviewing issues implicating the merits of the case that happen to affect the class-certification analysis and (2) limiting our review to the class-certification issue itself. Most importantly, "As thecertification of class actions. . . . is procedural, such process cannot abridge, enlarge, or modify any substantive right of the parties." "The right of a litigant to employ the class-action mechanism . . . is a procedural right only, ancillary to the litigation of substantive claims."

Hensley v. Haynes Trucking, LLC, 549 S.W.3d 430, 436-37 (Ky. 2018) (footnote omitted).

ANALYSIS

Although not raised by Sullivan, we must address the threshold matter of whether the class definition is proper. A class definition is an improper fail-safe definition when it "predicates inclusion of class members on the ultimate finding of liability that the court must make." Id. at 449. An example of a fail-safe definition is "[a]ll truck drivers who are entitled to the prevailing wage." Id. Here, the class definition is not fail-safe because it includes all supervisors who worked for Sullivan as admissions officers during the relevant time period and is not dependent on ultimate liability. As such, the class definition was proper and does not warrant decertification.

On appeal, Sullivan argues the circuit court abused its discretion in certifying the class for the following reasons: (1) the circuit court improperly found for McCann on the merits; (2) the proposed class does not meet the requirements under CR 23.01 and 23.02; and (3) the class definition is overly broad.

First, Sullivan argues the circuit court improperly found for McCann on the merits. As discussed in the standard of review, our review is limited to "whether the trial court properly certified the class to proceed as a class action lawsuit." Hensley, 549 S.W.3d at 436. At this stage, "Rule 23 grants courts no license to engage in free-ranging merits inquiries at the certification stage. Merits questions may be considered to the extent - but only to the extent - that they are relevant to determining whether the Rule 23 prerequisites for class certification are satisfied." Id. at 437 (footnotes omitted) (quoting Amgen v. Connecticut Retirement Plans & Trust Funds, 568 U.S. 455, 465-66, 133 S.Ct. 1184, 185 L.Ed.2d 308 (2013)). "Stated differently, Rule 23 'requires a showing that questions common to the class predominate, not that those questions will be answered, on the merits, in favor of the class.'" Id. (quoting Amgen, 568 U.S. at 459).

Sullivan takes issue with specific language in the circuit court's order. First, the order states that admissions officers had "very little discretion" in performing their jobs. R. at 369. Sullivan argues this was a merits determination because it amounts to a finding that admissions officers were not properly classified as exempt under the administrative exception to the overtime pay requirement of the KWHA. Second, the order states that admissions officers were "required to work a minimum of 40 hours a week" and "regularly work[ed] wellover the minimum of 40 hours a week." R. at 369. Sullivan argues this language constitutes a finding that all admissions officers were entitled to overtime pay. Third, the circuit court's order states that Sullivan "did not keep track of work hours properly." R. at 369. Sullivan argues the circuit court ignored the sign-in and sign-out sheets on which local admissions officers recorded their time.

Despite Sullivan's arguments to the contrary, the circuit court did not rely on these statements in its legal analysis under CR 23.01 and CR 23.02. Although we might have phrased these factual findings differently, we are satisfied that the circuit court properly considered the facts at hand only to the extent relevant in determining...