Tenth Circuit Affirms Refusal To Certify Sex Discrimination Class

Posted by Greg Mersol on January 24, 2013

Hilti, Inc. sells power equipment for use in construction sites.  A quick trip through its website (http://www.us.hilti.com) reveals tools most people wouldn’t have in their home workshops, such as 1100-watt demolition hammers, gas-powered fasteners, and cordless drywall screwers.  Given this product mix, as one might expect, an important part of its sales consists of direct marketing to contractors at their worksites.  So, how can a company in that line of business best select its sales force?

In Tabor v. Hilti, Inc., Case No. 11-5131 (10th Cir. Jan. 15, 2013), the court addressed the issue of whether the company’s method for selecting employees for “Account Manager” positions that would actually visit construction customers discriminated against women.  Hilti initially hires sales staff as inside sales representatives, who primarily provide sales and customer support by telephone.  The company made decisions whether to promote such representatives to Account Manager positions through a process called “Global Develop and Coach Process”, or “GDCP.”

The core of the GDCP system was the assignment of a ranking to the employee, ranging from P1 (meaning readiness for promotion) through P5 (meaning the employee was ineligible for promotion).  The system also took into account factors such as the employee’s willingness to relocate and their career goals.

The plaintiffs were two female inside sales representatives who sought unsuccessfully to become Account Managers. They brought suit under Title VII challenging the company’s failure to promote them.  They cited statements made in job interviews reflecting stereotypes about the ability of women to relate to men in construction sites as well statistical evidence that the GDCP had a disparate impact on women.  The district court granted summary judgment in the employer’s favor, and also denied certification of a class of approximately 300 women who sought to become Hilti Account Managers.

On appeal, the Tenth Circuit issued a split decision.  Most of the opinion focused on the individual claims of sex discrimination by the two lead plaintiffs.  It ultimately concluded that the district court had improperly granted summary judgment on most of their claims, relying largely upon the evidence of discriminatory statements during job interviews.  The court also largely accepted the plaintiffs’ statistical evidence regarding the disparate impact of the GDCP.

The court’s opinion in that regard is a little curious.  The court cited with some approval the 20% or 4/5 rule described in the EEOC guidelines, although other courts have found the test to carry less weight. See Isabel v. City of Memphis, 404 F.3d 404 (6th Cir. 2005) (rejecting result under 20% rule in favor of appropriate statistical analysis).  After citing the test, however, the court notes that the plaintiffs’ statistician had conducted a proper regression analysis reflecting that the promotion rate for males was 60% higher than for females, so the reference to the 4/5 rule was likely irrelevant.

Although the court found questions of fact justifying reversal of summary judgment, the remainder of the opinion largely favored the defendant.  Even though the court reversed as to one plaintiff, it noted that her disciplinary history might very well result in summary judgment being granted against her again.

As to the class certification issue, the Tenth Circuit affirmed the district court’s refusal to certify the class in light of the decision in Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541 (2011).  Given that the court spent almost 35 pages of its opinion analyzing the plaintiffs’ individual claims, it is not surprising that the court found that there was no commonality.  It concluded that the decisions, including the development of the GDCP score, were made on an individual basis with largely subjective criteria and different factors went into each decision.  Even if the plaintiffs had established commonality, the court found that the class issues, despite the statistical problems with the GDCP, did not predominate under Rule 23(b)(3).  The court therefore found that the decision to deny certification was proper.

The bottom line:  Even with statistical evidence and company policies alleged to have disparate impact, Dukes makes it difficult to certify classes when individual issues are still in play.

 

 

New Jersey Court Denies Certification of Large Sex Discrimination Class in Light of Dukes

Posted by Greg Mersol on January 03, 2012

In Dukes v. Wal-Mart Stores, Inc., 131 S. Ct. 2541 (2011), the Supreme Court held that it was error to certify a class of 1.6 million women alleging sex discrimination in employment. But what about a smaller, yet still enormous class?

In Bell v. Lockheed Martin Corp., Case No. 08-6292 (RBK/AMD) (Dec. 14, 2011), the United States District Court for the District of New Jersey addressed the sex discrimination claims of a much smaller class of 17,000 women in a case claiming gender discrimination in promotions and compensation. The class was but 1 percent of the size of the putative Dukes class.

Lockheed Martin provides information technology services to the United States government. The plaintiffs, like the plaintiffs in Dukes, sought to assert Title VII claims for alleged sex discrimination in promotions and compensation. Like the plaintiffs in Dukes, they alleged that women were promoted more slowly than men and paid less for comparable positions. They also claimed that a "word of mouth" means of announcing potential positions for advancement had a disparate impact on women. Given that during the pendency of the case (until last summer) the plaintiffs in Dukes had had scored substantial successes, not surprisingly the Lockheed plaintiffs appear to have patterned their claims and arguments after those raised in Dukes.

Lockheed moved the court to deny certification before the plaintiffs actually moved to certify the class, an increasingly common strategy. By the time of the court's ruling, the case had been pending for three years and there had been extensive discovery.

Given the similarities with the Dukes case, it is not surprising that the district court's analysis tracks that of the Supreme Court in that case. The court first addressed the issue of whether the plaintiffs could pursue a class under Rule 23(b)(2). To get around the Dukes Court's clear holding that such claims should not be certified when there are claims of individualized relief (such as back pay), the plaintiffs argued that they would not seek compensatory or punitive damages. The district court, however, quoting Dukes, found that the individualized claims of back pay alone meant that Rule 23(b)(2) did not apply.

Of equal importance, the court also found that there was no commonality under Rule 23(a)(2). The plaintiffs sought to avoid Dukes' application by asserting that they were asserting a disparate impact claim pursuant to the Supreme Court's earlier splinter decision in Watson v. Fort Worth Bank & Trust, 487 U.S. 977 (1988). Again, however, the court found that the alleged discriminatory practices giving rise to the claimed disparate impact were "substantially similar" to those alleged in Dukes. Further, it rejected the plaintiffs' statistical showing, finding that they could not demonstrate, for example, the there was "discriminatory bias on the part of the same supervisor." Dukes, 131 S. Ct. at 2551.

Finding the case to be governed by Dukes, the Court denied certification.

The Bottom Line: Most lower courts appear to be following Dukes. Defendants are being successful in opposing certification when the plaintiffs cannot identify a single individual or practice that they claim demonstrates a viable class.

Court Certifies Class of Black New York City Firefighters In Remediation Phase of Case

Posted by Greg Mersol on June 27, 2011

A recent case from the Eastern District of New York reflects that race discrimination class actions can be brought, and also reflects the type of claim which will likely still survive in the wake of last week's Supreme Court decision in Wal-Mart Stores, Inc. v. Dukes, 564 U.S. ___ (2011). (See our June 20 post on the Dukes decision). It also reflects some of the special issues that will continue to arise when employees of differing interests are included in a single class.

In United States v. City of New York.pdf Case No. 07-CV-2067 (June 6, 2011), the United States Justice Department challenged a test and related procedures used by the New York City Fire Department on the grounds that they had a disparate impact on minority applicants. During the course of the case, a black firefighters group known as the Vulcan Society successfully intervened and sought class certification, claiming a pattern and practice of race discrimination under Title VII and seeking to represent applicants who had been hired, but whose hire had allegedly been delayed as a result of the testing procedure. No, the Vulcan Society had nothing to do with Mr. Spock, but was a clever reference to the Roman god of things related to fire. In 2009, the District Court, following the grant of certification on the issue of liability only, found that the testing procedures did discriminate.

In a 48-page opinion issued on June 6, 2011, the court granted the Vulcan Society's motion to certify with respect to the remedial phase of the case, but with conditions. Interestingly, the City of New York did not appear to oppose certification per se, but did focus on the fact that the proposed class included both applicants and those who were hired. The City apparently agreed that the class was proper under Rule 23(b)(2) in that the primary goal was equitable or injunctive relief. The Dukes decision would likely have little effect on the accuracy of these positions because the resolution of one issue, the validity of the test, would resolve the entire case.

Because the primary issues were not in dispute, most of the opinion concerns the creation and management of subclasses. In a nutshell, the court concluded that while certification was appropriate in the remedial phase, the case would have to be managed through separate subclasses of applicants who were hired and those who were not. Because the Vulcan Society did not represent the non-hired applicants, and because its members had an inherent conflict of interest with those who were never hired, it also found that it could not be an appropriate representative as to the entire class. Interestingly, the court expressed concern whether the United States would adequately make determinations as to the unsuccessful applicants and appointed a Special Master to review their claims. These rulings likely flow from the court's earlier decision that the tests were discriminatory and discriminated against the entire class, and the analysis might have been different under Dukes if the plaintiffs had claimed discrimination arising from issues that were less wide-spread.

The Bottom Line: Testing cases may yet live long and prosper as class actions in the wake of Dukes. Conflicts among the class may make subclasses or other special procedures appropriate.

Seventh Circuit Affirms Denial of Certification in Equal Pay Act/Title VII Gender Case

Posted by Greg Mersol on April 14, 2011

Decades ago, Rolls-Royce drew some attention for contending that its cars did not "break down," but, rather, "failed to proceed."   In a recent case from the Seventh Circuit, a putative class action against that company not only "failed to proceed," but broke down utterly.

In Randall v. Rolls-Royce Corporation.pdf., Case No. 10-3446 (7th Cir. Mar. 30, 2011), two female Rolls-Royce employees brought a putative class action against the company for sex discrimination.  While claims arising from the production of Rolls-Royce luxury cars might have had more panache, their claims actually arose from an Indiana plant that manufactured  aircraft, commercial, and marine engines.  They contended that the plant paid women less money for the same job categories, and also that the company discriminated against them in promotions.  They sought to assert class action claims under both Title VII and the Equal Pay Act, 29 U.S.C. section 206(d)(1) on behalf of 500 women.  Many of the jobs at stake were high-paid, professional positions, earning well in excess of $100,000 per year. (we authored a related blog post on the Randall decision on April 7, 2011).

The district court denied certification and granted summary judgment for the defendants.  It also denied a request from the plaintiffs to permit female employees with stronger claims to intervene. 

The case could have produced interesting issues involving the EPA.  The EPA does not use Title VII's enforcement mechanisms, but instead incorporates those under the Fair Labor Standards Act, which do not provide for class actions.  In light of problems with the lead plaintiffs' claims, however, the court never had to reach those issues.

As to the unequal compensation claim, Rolls-Royce, like many employers, had set broad pay ranges for each class of employees. Within those pay bands, the company made adjustments based on the market demands for employees with particular skills.  In the case of certain positions, the market demands could result in wide variations, even within a salary band.  The company also made pay adjustments based upon performance.  The court ultimately found that while, on average, men made slightly more than women, the named plaintiffs were unable to identify any man that had the same equality of job skills making more than they did, making summary judgment on the EPA claim appropriate.  As to the Title VII claim, the defendant retained an expert who demonstrated that once differences in the actual jobs performed by men and women were accounted for, there was no pay disparity.  One example was the case of personnel officers and aeronautical engineers - while both were of value to the company, the company was required to pay more in the market place for one than the other, and its recognition of that fact was not sex discrimination.  The plaintiffs' expert, the court found, failed to account for these differences and made other errors as well.

The court also dismissed the claims for sex discrimination in promotions based on testimony of the same defense expert.  That expert found that women were actually promoted more quickly than men.

The court likewise denied the plaintiffs' motion to intervene to include women with stronger cases, as that motion was filed four years after the case was filed and only after certification was denied.

The Seventh Circuit affirmed.  Judge Posner, writing for the majority, analyzed the strategy employed by both parties.  His frank post-mortem provides a nice primer of the strategic concerns of both sides in such a case, and that discussion alone makes it worthwhile to read the opinion .  He noted that the plaintiffs had moved for certification under Rule 23(b)(2), a decision he described as a "risky strategy" given the more limited notice and opt-out rules.  On the flip side, he questioned whether the company should even have opposed the motion given the weakness of the lead plaintiffs' claims since it could have obtained a no-opt-out judgment as to the entire class.  Given the unpredictability of litigation, we are not sure this might be the best strategy, irrespective of Judge Posner's otherwise pragmatic opinion.  He concluded  that the proper course for the plaintiffs would have been to seek certification under Rule 23(b)(3), requiring notice to the class and giving potential class members the opportunity to opt out and to pursue their own, stronger claims, if they believed they had one.

Even had the plaintiffs filed such a motion, the Seventh Circuit's opinion makes it obvious that certification would have been properly denied.  The court criticized the plaintiff's counsel for the "almost imperceptible pace" of their prosecution of the case. Infused throughout the opinion was also concern over a class being bound by an unfavorable judgment due to the questionable cases of the named plaintiffs.

The court also criticized the late effort to have plaintiffs with stronger cases intervene, commenting:  "Intervention shouldn't be allowed just to give class action lawyers multiple bites at the certification apple, when they have chosen, as should have been obvious from the start, patently inappropriate candidates to be the class representatives."

The Bottom Line:  Not every case is a class action.  Plaintiffs seeking to pursue classes to bolster weaknesses in their own claims may find themselves worse off.  Statistical experts for both sides must perform an apples-to-apples analysis comparing the right groups of employees.

EEOC Must Attempt Conciliation of Class-Wide Claims Before Litigating Them

Posted by Greg Mersol on September 28, 2010

Litigation involving the EEOC and class-type claims differs significantly from those brought by individual class members.  As the Supreme Court recognized in EEOC v. Waffle House, 534 U.S. 279 (2002), because of the governmental interest in rooting out discrimination, many of the rules that might limit claims brought by individuals may not apply to litigation brought by the EEOC.  This issue may arise, for example, in the case where a putative class member has signed an arbitration agreement and could not pursue claims on his or her own behalf, but the agreement may not bar action by the Commission.  Similarly, the EEOC, because it technically does not represent the individual employee, may not be bound by some of the strictures that might govern counsel for an individual plaintiff.

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A Late Addition to the Roster: Paycheck Fairness Act Finally Appears in the Senate

Posted by Jeffrey Vlasek on September 15, 2010

With the Senate a mere four weeks away from adjournment for campaign season, Senate Majority Leader Harry Reid turned a few heads when he reintroduced the Paycheck Fairness Act (S. 3772) to the legislative calendar on September 14th.  The Act, which earlier this summer President Obama called a “common sense bill,” is intended to update and strengthen the Equal Pay Act of 1963, which made it illegal for employers to pay unequal wages to men and women who perform substantially the same work.  The House of Representatives passed the Act over a year ago, in January 2009, but the Senate has never voted on the legislation. 

On its face, the Act purports to ensure that women can obtain the same remedies for sex-based pay discrimination as those available to victims of race-based and national origin discrimination, as well as prohibiting employer retaliation against employees who disclose their salaries, and improve wage data collection.  Section 3(a) of the Act would also clarify that an employer relying on a “factor other than sex” defense must show that: 1) the defense is based on a bona fide factor, such as education, training, or experience; 2) the factor is job-related for the position in question; and 3) the factor is consistent with business necessity.  In short, it aligns employers’ affirmative defenses for such claims so that they now echo those under Title VII.

For those readers presently wondering why this article is appearing on an employment class action blog, the reason (and the devil) is in the details: Section 3(c) of The Paycheck Fairness Act would allow Equal Pay Act class actions to proceed under the opt-out provisions of Rule 23(b)(3), effectively putting Equal Pay Act plaintiffs in the same position as other alleged victims of pay discrimination.  Proponents of the Act hail this as the bill’s greatest achievement—but their endorsement simply overlooks the existence of other laws that would provide largely the same relief.  While it is true that the recovery of punitive and compensatory damages is limited by the Equal Pay Act’s recovery of only back pay (and liquidated damages for willful violations), a plaintiff under the Equal Pay Act would typically also allege a violation under Title VII, with the accompanying EEOC or private action.  The remedies available with that combination of charges would cover the spectrum intended with the Paycheck Fairness Act, thus rendering the class action provisions of the Act somewhat…redundant.

Critics are also quick to point out that its provisions allowing prevailing plaintiffs to recover compensatory and punitive damages without “caps” could put small employers out of business (a particularly sore subject given the current economic times).  In addition, opponents point out that the Act could have a detrimental effect on companies attempting to hire new employees and promote existing ones by complicating the procedures and removing the flexibility in providing for pay demands. 

The bottom line:  With many of the “loopholes” in the Equal Pay Act already filled through attentive lawyering, this introduction of the Paycheck Fairness Act to the Senate with only a month before adjournment smacks more of legal grandstanding than a true attempt to streamline the present law.

 

The Dukes Decision Does Not Apply To Overtime Misclassification Claims

Posted by Greg Mersol on June 16, 2010

In the weeks following April 26, 2010, en banc decision of a deeply divided Ninth Circuit in Dukes v Wal-Mart Stores.pdf, 603 F.3d 571 (9th Cir. 2010), plaintiffs have predictably argued that the opinion justifies the certification of classes of virtually any size, including those in the overtime/misclassification arena. The case, however, does not apply to such claims by its own terms.

The Dukes case involved a pattern and practice claim under Title VII of the 1964 Civil Rights Act (“Title VII”), 42 U.S.C. §§ 2000e et seq., for gender discrimination in pay and promotions. The plaintiffs’ claims were bolstered by statistical evidence allegedly showing that while two thirds of the hourly Wal-Mart associates were women, only one third of managers were female, and by similar evidence that pay disparities existed in some stores as well as expert and anecdotal evidence regarding discriminatory conduct. The plaintiffs also made a showing, the court found, that Wal-Mart had a uniform personnel and management structure throughout its stores (a factor frequently absent in overtime cases), extensive centralized corporate control over its stores (ditto), and gender disparities in every domestic region of the company. Id. at 600. Relying heavily on the “abuse of discretion” standard of review, a bare majority of the court upheld the district court’s decision to certify the class.

The Dukes decision, however, contains nothing suggesting that large overtime classes should be certified. First, of course, the Ninth Circuit was reviewing the certification decision under an abuse of discretion standard, and even under that lenient benchmark fully five of the eleven judges believed it to be erroneous. The opinion thus is far from a ringing endorsement of the decision to certify, and nothing in the majority or dissents suggests that certification would have survived a less lenient review.

Second, the claim at issue in Dukes bore no relationship to overtime claims. Indeed, the majority took care to emphasize that the plaintiffs’ claims were those for an alleged pattern and practice of gender discrimination under Title VII, claims that by definition required no individual inquiry. Id. at 619, n. 41. It chided the dissent for what it described as a “misguided” concern for individual inquiries in that context. Id.

There is, of course, no such thing as a “pattern and practice” claim under the Fair Labor Standards Act or under any state overtime law that we are aware of, and particularly in misclassification cases both state and federal courts have emphasized the need for an individual inquiry regarding the duties of the putative class members. Thus, the text of the Dukes opinion reflects that the case was decided under a statute under which the individualized inquiry mandated in the overtime context was irrelevant. Further, nothing in Dukes suggests any misgivings about its prior holdings in the Wells Fargo.pdf and Vinole.pdf cases, in which the court rejected the certification of overtime classes far smaller than the class alleged in Dukes.

The Bottom Line: The Dukes case does stand for the proposition that a district court in the Ninth Circuit may not abuse its discretion by certifying a large uniform class in a Title VII pattern and practice case in the face of strong statistical evidence of gender discrimination . However, it sheds no light on whether a court should certify an overtime class of individuals working in a range of functions across different facilities when, by law, an individualized inquiry is required.