SAN FRANCISCO—The ruling by an appellate court in California that dismisses a class action wage-and-hour lawsuit by bank employees is expected to lead to a dramatic reduction in the number of class actions filed in the state and could be highly influential nationally, observers say.

Tuesday's decision in Sam Duran et al. vs. U.S. Bank National Assn. relies in part on the June 2011 U.S. Supreme Court decision in Wal-Mart Stores Inc. vs. Betty Dukes.

In Wal-Mart, the high court held that statistical evidence presented by plaintiffs was “insufficient to establish that respondents' theory can be proved on a classwide basis.” It also said anecdotal evidence of 120 affidavits, which it said represented one of every 12,500 class members, was “too weak to raise an inference” of discriminatory personnel decisions.

The plaintiffs in the Duran litigation are 260 current and former business banking officers who allege they were misclassified by U.S. Bank as outside sales personnel exempt from California's overtime laws.

The case, originally filed in 2001, has a convoluted procedural history. It includes a trial court granting plaintiffs' motion for class certification in 2005. In 2006, the trial court said it planned to use a random sample of 20 class members to testify as representatives for the class.

The three-judge panel of the 1st District Court of Appeals of California criticized that approach in its ruling this week. “We agree with USB that the trial plan employed here was seriously flawed,” the appellate court ruled. There was “no statistical foundation for the trial court's initial assumption that 20 out of 260 is a sufficient size for a representative sample by which to extrapolate either liability or damages.”

“The court appears to have arrived at this procedure on its own, without reliance on legal precedent or the advice of expert witnesses,” the appellate court ruled in reversing the lower court's judgment.

Referring to Wal-Mart, the California court said the U.S. Supreme Court found that “representative sampling studies did not justify certification.”

The ruling also says the trial court prevented U.S. Bank from introducing evidence pertaining to nonclass members in its defense.

This “effectively prevented USB from establishing its affirmative defense as to class-wide liability. The record on appeal supports the inference that a large percentage of the absent class member plaintiffs were properly classified and that USB did not owe them any overtime. Thus, there is evidence that in the absence of the error, USB would have received a more favorable result.”

The court said, “In sum, the court erred when, in the interest of expediency, it constructed a set of ground rules that unfairly prevented USB from defending itself.”

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Plaintiff attorney Ellen Lake, who worked with the Greenbrae, Calif.-based-based Wynne Law Firm on the case, said she was disappointed with the decision, and planned to appeal the ruling to the California Supreme Court.

Commenting on the ruling, Thomas R. Kaufman, a partner with Sheppard Mullin Richter & Hampton L.L.P. in Century City, Calif., said the court's “very thorough analysis” of the issue of class certification is consistent with the U.S. Supreme Court's logic in Wal-Mart. The ruling would “knock out 90% to 95% of the class actions that currently would get certified in California,” he said.

Furthermore, he said, while not binding elsewhere, the California ruling will be a “very persuasive authority” in other states, most of which have laws that, like California's are modeled on the federal statute. In addition, “big California decisions tend to be very influential,” he said.

Douglas A. Plazak, a senior attorney with Reid & Hellyer A.P.C. in Riverside, Calif. said he was “thrilled” the “court finally corrected what I believe was the trial court's violation of the due process rights of the defendant, USB, and certainly has cast grave doubt on the ability of plaintiffs to use statistical sampling to demonstrate liability which is, from a constitutional perspective, a very questionable way to prove liability against a defendant.”

The ruling will “definitely severely curtail employee class action lawsuits” in California and also could be influential elsewhere “because it could show other courts for practical standpoint how they should apply Dukes vs. Wal-Mart in their states as well,” Mr. Plazak said.