Breach of Contract Cases

Crystal Salvas & another vs. Wal-Mart Stores, Inc. Middlesex. May 7, 2008. September 23, 2008. Present: Marshall, C.J., Greaney, Ireland, Spina, Cowin, Cordy, & Botsford, JJ. Labor, Wages. Evidence, Expert opinion, Business record. Practice, Civil, Class action, Statute of limitations. Rules of Civil Procedure. Contract, Performance and breach, Damages. Limitations, Statute of. In a putative class action alleging that the defendant employer wrongfully withheld from certain employees compensation for time worked and denied or cut short rest and meal breaks to which the employees were entitled, the judge abused his discretion in allowing the defendant’s motion to exclude as unreliable the testimony of the plaintiffs’ expert reconstructing and summarizing the defendant’s timekeeper records, where the business records at issue satisfied all of the requirements to be afforded the usual presumption of reliability, and the expert’s methods for reconstructing and summarizing the contents of the records were uncontested [356-360]; further, the defendant’s arguments concerning the admissibility of conclusions that the plaintiffs’ expert drew from the defendant’s records went to the weight of the evidence, not its admissibility [360-361], Discussion of the standard applicable to determining whether a judge’s decision to certify or decertify a class constituted an abuse of discretion. [361] Discussion of the predominance requirement of Mass. R. Civ. P. 23 (b) in class actions. [361-364] A Superior Court judge abused his discretion in allowing the defendant’s motion to decertify a class of current and former hourly workers employed by the defendant in Massachusetts for more than a ten-year period, where the essential factual questions of liability rested on a sufficient constellation of common issues to bind the class members together, and where the judge imposed inapposite and onerous burdens of proof on the plaintiffs. [364-372] In a civil action brought by members of a class of the defendant’s present and former employees alleging that the defendant deprived them of their meal periods, the judge properly concluded that G. L. c. 149, § 100, did not create a private right of action for such deprivation [372-373]; however, the judge erred in granting summary judgment in favor of the defendant, where the lack of a private right of action under that statute did not bar the plaintiffs’ claim that the defendant violated a contractual duty to provide meal periods to the plaintiff class [373-375], In a civil action seeking class certification for claims of unpaid wages under G. L. c. 149, § 148, the plaintiffs failed to show that the limitations period should equitably have been tolled based on a theory of fraudulent concealment [375-376], but did establish a disputed issue of material fact on the question whether a reasonable person in the position of a class member would have known or could reasonably have been expected to know that he or she was being denied compensation [376-378]. Civil action commenced in the Superior Court Department on August 21, 2001. Following certification of a class, motions for exclusion of certain expert testimony, for decertification of the class, and for partial summary judgment were heard by Thomas R. Murtagh, J., and questions of law were reported by him to the Appeals Court. The Supreme Judicial Court granted an application for direct appellate review. Carolyn Beasley Burton, of California, & Robert J. Bonsig-nore for the plaintiffs. Charles R. Eskridge, III, of Texas, & Donald R. Frederico (Kathryn P. Hoek with them) for the defendant. Ben Robbins, Martin J. Newhouse, & Jo Ann Shotwell Kaplan, for New England Legal Foundation & another, amici curiae, submitted a brief. Shannon Liss-Riordan, Hillary Schwab, Philip J. Gordon, Audrey R. Richardson, & Catherine K. Ruckelshaus, for Massachusetts Employment Lawyers Association & others, amici curiae, submitted a brief. Elaine Polion, on behalf of themselves and all others similarly situated. Marshall, C.J. In this putative class action, the named plaintiffs are former employees of the defendant, Wal-Mart Stores, Inc. (Wal-Mart), who were paid by the hour (hourly employees). On behalf of themselves and others similarly situated they allege that Wal-Mart wrongfully withheld compensation for time worked and denied or cut short rest and meal breaks to which they were entitled. The plaintiffs appealed from a Superior Court judge’s allowance of summary judgment on certain counts of their complaint and also filed an application for direct appellate review. The judge reported the case to the Appeals Court. See Mass. R. Civ. R 64, as amended, 423 Mass. 1410 (1996), and G. L. c. 231, § 111. See also note 40, infra. Wal-Mart also filed an application for direct appellate review. We granted both applications. In essence we are asked to determine (1) whether the judge abused his discretion by (a) allowing Wal-Mart’s motion to exclude the testimony of the plaintiffs’ principal expert, Dr. Martin Shapiro, as unreliable, and (b) allowing Wal-Mart’s motion to decertify the class of approximately 67,500 current and former hourly workers employed by Wal-Mart in Massachusetts for more than a ten-year period; and (2) whether the judge erred in granting summary judgment to Wal-Mart on all of the plaintiffs’ claims concerning meal breaks, as well as certain of the plaintiffs’ claims under the payment of wages law, G. L. c. 149, § 148, for failure to compensate the plaintiffs for the time they worked. For the reasons set forth below, we vacate the judge’s orders. We conclude, inter alla, that the judge abused his discretion in allowing Wal-Mart’s motions to exclude the testimony of the plaintiffs’ expert and to decertify the class. We further conclude that the judge erred in granting partial summary judgment to Wal-Mart. We remand the case for the entry of an order certifying the class and for further proceedings consistent with this opinion. 1. Facts.' Wal-Mart is a national mass-merchandising retail chain headquartered in Bentonville, Arkansas (home office), with stores located throughout Massachusetts. The operations of individual Wal-Mart stores, including payroll controls, are directed by corporate-wide policies established, disseminated, and carefully controlled by the home office. The central labor policies and payroll controls relevant to this litigation include the following. Wal-Mart policy required all hourly employees (called “associates” by Wal-Mart) to adhere to stringent timekeeping procedures, including clocking in and out at the beginning and end of each shift and at other prescribed times. Wal-Mart’s uniform timekeeping requirements were communicated to hourly employees from their first day of work and consistently throughout their employment at Wal-Mart through, among other channels: an employee handbook intended for every hourly employee nationwide, oral and written materials presented in orientation sessions designed by the home office that newly hired hourly employees were required to attend, oral and written “coaching” (disciplinary) actions, and posters and other materials posted near store time clocks and elsewhere throughout Wal-Mart stores. The timekeeping instructions given to hourly employees embodied the substance of two corporate-wide Wal-Mart policy directives applicable uniformly to all hourly employees. The policy directives were known internally as PD-07 and PD-43. PD-07 provided that, unless otherwise required by State law, all hourly employees were entitled to one paid, fifteen-minute rest break for every three hours of consecutive time worked (to a maximum of two rest breaks), and an unpaid meal break of at least thirty minutes for work in excess of six consecutive hours. A version of PD-07 in effect until February 10, 2001, stated that hourly employees “whose break or meal period is interrupted to perform work would receive compensation for the entire period at their regular rate of pay and be allowed an additional break or meal period.” Until that date, PD-07 required employees to clock in and out for both rest and meal breaks. Thereafter, employees were required to clock in and out for meal breaks but not for rest breaks. Neither PD-07 nor any other Wal-Mart policy directive has ever expressly permitted hourly employees to waive breaks. PD-43 stated that hourly employees should never be required to work “off-the-clock,” that is, work when the employees’ hours are not being recorded for compensation. The same policy directive also generally prohibited employees from working overtime. PD-43 obligated store managerial personnel to investigate every instance where it was determined that an employee worked off-the-clock and to complete a working off-the-clock notice, to be signed by the supervisor or manager, the employees, and a “witness” who was required to be a salaried employee. Wal-Mart repeatedly warned its hourly employees that they would be subject to an escalating series of disciplinary “coaching,” including termination, for violating company policy concerning breaks and off-the-clock work. The plaintiffs introduced numerous policy directives and other internal documents, as well as affidavits and deposition testimony, specifying that Wal-Mart’s policies regarding work breaks (as well as its policies regarding off-the-clock work) were, in the words of an internal Wal-Mart memorandum, among the company’s “non-negotiables.” The day-to-day responsibility for ensuring that hourly employees followed company timekeeping policies fell on individual store managers. For store managers, the responsibility for payroll came with considerable pressure from the home office to boost profits by, among other things, minimizing labor costs, one of the corporation’s largest controllable expenses. Store managers were rewarded for keeping payroll costs low. Conversely, if they exceeded Wal-Mart’s stringent labor cost guidelines, they might lose their bonuses or lose their jobs. According to documents proffered by the plaintiffs, Wal-Mart informed Massachusetts store managers of the precise margins by which their payrolls exceeded the labor cost guidelines and ordered the store managers to cut those payroll costs accordingly. At least since 1989, senior Wal-Mart home office executives have been made aware that, despite the written policy directives to the contrary, store managers were sometimes “[ajltering time cards to decrease reported payroll expenses” and “[ijnstructing associates to work off the clock . . . .” Further, at least since 1998, the home office was aware that some hourly employees “are not receiving scheduled breaks and lunches.” One Wal-Mart payroll audit, known as the “Shipley audit,” dated July 17, 2000, surveyed 128 Wal-Mart stores nationwide. Among other things, the Shipley audit documented that in a two-week period, 127 “[s]tores were not in compliance with company and state regulations concerning the allotment of breaks and meals as 76,472 exceptions were noted.” Wal-Mart was also aware, during the class period, of allegations of “time shaving” by store managers. Two time-shaving techniques in particular feature prominently in this litigation. The first was the insertion by Wal-Mart supervisors of meal break periods into hourly employees’ time records, allegedly when no meal break had in fact been taken. This effectively deprived hourly employees of compensation for the amount of time of the inserted meal break period., The second was a practice known as the “one-minute clock-out,” in which a manager inserted a “clock-out” one minute after the hourly employee had clocked in (either for a shift, or on returning from a break) even though the employee had actually worked for longer than one minute., The plaintiffs, Crystal Salvas and Elaine Polion, averred that, as hourly employees at Wal-Mart during the class period, they worked off-the-clock and were denied rest and meal breaks. The plaintiffs augmented their affidavits with evidence from other hourly employees. This evidence includes, among other things, letters, records of telephone calls to an internal “grass roots” complaint hotline for hourly employees, and other communications to superiors from Massachusetts hourly employees in various Wal-Mart stores throughout the Commonwealth complaining about time-shaving practices and missed rest and meal breaks. Wal-Mart submitted countervailing affidavits from Massachusetts hourly employees stating that they did not work off-the-clock and were not denied rest or meal breaks. Some of the evidence proffered by the plaintiffs consists of an expert’s analysis of Wal-Mart’s business records, which were obtained by the plaintiffs through discovery from Wal-Mart’s home office. See part 3, infra. As noted, the home office closely monitored the payroll activities of all of its stores, including its Massachusetts stores. For example, each store’s electronic time clock, which was programmed and maintained by the home office, transmitted each employee’s time clock punches to the home office every fifteen minutes. Wal-Mart required that payroll and timekeeping data be recorded on a uniform set of forms. Some of these forms factor into this litigation. Among these is Wal-Mart’s time clock exception report (exception report), in effect after 2001. The exception report consists of a list of all hourly employees whose records revealed timekeeping anomalies, such as missed punches at the end of the day or an overly long or overly short lunch period. Managers at each Wal-Mart store are required to investigate every item generated by an exception report. If an exception report showed that an hourly employee had not taken a lunch or a rest break or had otherwise missed a punch, the manager was expected to inquire of the hourly employee and, if a punch or punches had been missed, to complete a time adjustment request (TAR) that both the hourly employee and the manager were required to sign, or later, to use an electronic time adjustment system. Another report, the time clock archive report (archive report), recorded and transmitted to the home office the total number of times each hourly employee swiped in and out during every shift of each pay period, and tallied the hourly employee’s total hours of work recorded for the pay period. Store managers were required to investigate and resolve any discrepancies appearing on the archive report before the payroll was finalized. Hourly employees were required to review and sign off on the accuracy of the archive report prior to receiving their paychecks. Wal-Mart’s time clock punch error report (punch error report) also captured daily punch errors in hourly employees’ timekeeping. The home office would not finalize daily store payroll until the errors on the punch error report were corrected. These reports, along with others, together comprise the business records analyzed by the plaintiffs’ expert, Shapiro, as discussed more fully infra. 2. Procedural history. On August 21, 2001, two former WalMart hourly employees filed a complaint against Wal-Mart alleging multiple causes of action in implied-in-fact contract, tort, and Massachusetts wage statutes for wrongful failure to compensate hourly employees for time worked and to provide them with rest breaks and meal breaks to which they were entitled. The plaintiffs sought to represent a class of approximately 67,500 current and former Wal-Mart hourly employees who worked at forty-seven Wal-Mart stores in Massachusetts during the class period. In January, 2004, a Superior Court judge allowed the plaintiffs’ motion to certify the class. See Mass. R. Civ. P. 23 (a) and (b), 365 Mass. 767 (1974). Wal-Mart appealed from the decision to the Appeals Court. In June, 2004, a single justice of the Appeals Court vacated the class certification order and remanded the matter to the Superior Court. Among other things, the single justice concluded that the Superior Court judge had erroneously side stepped his obligation to determine whether the statistical proffer that the plaintiffs proposed as a justification to proceed on a class rather than an individual basis was “reliable enough to be admissible” and whether its admission would infringe Wal-Mart’s rights of due process. The single justice faulted the motion judge for failing to “give careful consideration” to whether, in light of the tactical decision by the named plaintiffs to waive any claim under G. L. c. 149, § 148, in order to avoid removal to Federal Court, they could adequately represent the class. Following the single justice’s order, and after they claimed to have discovered new evidence of Wal-Mart’s allegedly wrongful labor practices, the plaintiffs renewed a motion previously denied to amend their complaint a second time to add a claim for violation of G. L. c. 149, § 148. They also made a second motion for class certification. A second Superior Court judge allowed the motion to amend the complaint., On remand of the class certification issue, the judge who allowed the initial certification motion declined to revisit his findings concerning predominance and concluded that the plaintiffs had met their burden of proving the requirements for class certification for their claims under G. L. c. 149, § 148. Thus, in December, 2004, he again certified the class, now expanded to cover claims under § 148. Two years later, on September 21, 2006, a third Superior Court judge allowed in part and denied in part a motion by Wal-Mart for partial summary judgment. Specifically, the judge allowed Wal-Mart’s motion on all claims concerning missed, interrupted, or shortened meal periods, on the ground that, because meal breaks were unpaid, the plaintiffs would be unable to show harm for meal breaks that were shortened or eliminated. As for the claims predicated on missed, interrupted, or shortened rest breaks, the judge granted summary judgment on the counts alleging breach of the implied covenant of good faith and fair dealing (count three), unjust enrichment (count four), promissory estoppel (count five), and conversion (count six). In addition, the judge allowed Wal-Mart’s motion to shorten the class period to between August 21,1998, and December 31, 2005 (shortened class period), on the remaining § 148 claim (count nine), on the ground that defining the class period to begin earlier would violate the three-year statute of limitations under § 148. See G. L. c. 149, § 150. Thus, what remained of the plaintiffs’ second amended complaint after summary judgment was (1) the breach of implied contract claim (count one) for failing to provide or compensate the plaintiffs for their earned rest breaks; (2) at the plaintiffs’ election, the breach of implied contract claim (count two) or the unjust enrichment claim (count four) for failure to provide compensation for off-the-clock work, and (3) damages, including treble damages, (a) under G. L. c. 151, § 1A, for failure to pay overtime (count seven); (b) under G. L. c. 151, § l, for failure to pay minimum wage (count eight); and (c) under G. L. c. 149, § 148, for failure to provide compensation for certain off-the-clock work, limited to the shortened class period (count nine). On November 7, 2006, the same Superior Court judge who had ruled on the motion for partial summary judgment allowed an earlier filed motion by Wal-Mart to exclude the testimony of the plaintiffs’ expert, Shapiro, and to decertify the class, a decision we discuss in detail infra. The judge stayed both decisions pending resolution of the questions he reported to the Appeals Court. We granted both parties’ application for direct appellate review. We consider first the judge’s decision to allow Wal-Mart’s motion to exclude the plaintiffs’ expert and to decertify the class. We begin with the portion of that motion seeking to exclude Shapiro’s expert testimony as unreliable. 3. The plaintiffs’ expert witness, a. Standard of