California Legal Brief

The Rule of **Cortina v. North American Title Company** is that a trial court's authority to delegate matters to a referee without the parties' consent is strictly circumscribed by the California Constitution and Code of Civil Procedure, and a nonconsensual reference of substantial scope and magnitude is entirely unauthorized and requires reversal, under circumstances where wage and hour class action proceedings are referred to a referee over defendant's strenuous objections without meeting the constitutional and statutory requirements for nonconsensual reference.

Appeal from judgment after bench trial in Superior Court, Fresno County.

Defendant Appellant was North American Title Company — the escrow services company that classified employees as exempt from overtime laws and contested the wage and hour class action through a 19-year litigation process.

Plaintiffs Respondents were Carolyn Cortina et al. — current and former employees who alleged misclassification as exempt employees when they claimed entitlement to overtime compensation and meal breaks.

The suit sounded in wage and hour violations under the unfair competition law (UCL). The case involved two certified classes: an "Exempt" class alleging misclassification and a "Nonexempt" class alleging policies preventing overtime reporting.

The key substantive facts leading to the suit were that NATC employed several hundred people as escrow officers and in escrow-related positions from April 2003 through December 2012, with employees working in over 80 offices in 23 counties throughout California. In 2003, most employees were classified as exempt, but NATC conducted a staffing study and in 2004 reclassified certain positions as nonexempt while maintaining some positions as exempt. The plaintiffs alleged systematic misclassification where employees classified as exempt were actually performing nonexempt work and should have received overtime pay.

The procedural result leading to the Appeal: The trial court conducted a bifurcated bench trial, decertified the Nonexempt class after the first phase, ruled against defendant's exemption defenses for the Exempt class, then appointed a referee without parties' consent to conduct the second phase despite defendant's strenuous objections, resulting in entry of a $43 million judgment after years of reference proceedings including live testimony from over 230 class members.

The key question(s) on Appeal: 1. Whether the nonconsensual reference proceedings were authorized under California law. 2. Whether the trial court's management of the first phase of trial violated principles established in Duran v. U.S. Bank National Assn. 3. Whether the Exempt class should have been decertified due to unmanageability.

The Appellate Court held that nonconsensual reference of this scope and magnitude was unprecedented and entirely unauthorized under California Constitution and Code of Civil Procedure, compelling reversal of the judgment. The court also found prejudicial errors in the liability phase, including trial plan contraventions of Duran holdings and misrejection of employer's affirmative defenses on a classwide basis, warranting decertification of the Exempt class and remand for retrial of individual claims.

The case is inapplicable when the parties consent to reference proceedings, when the scope and magnitude of reference is limited and authorized by statute, when proper statistical sampling methodology is used with expert input and random selection, or when employee job duties are sufficiently standardized to permit classwide determination without individual inquiries.

The case leaves open whether new class certification might be appropriate on remand if proper guidelines are followed, the specific requirements for valid statistical sampling in wage and hour class actions beyond the principles stated in Duran, and the precise boundaries of when nonconsensual reference is permissible under California law.