The Supreme Court hurled a large stone into the pond of employment class action lawsuits when it handed down its decision in Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541 (2011).  Despite being on the books now for almost an entire year, many of the Dukes ripples have still yet to reach shore, forcing courts to weather the waves as they stay afloat.  The Seventh Circuit’s recent decision in McReynolds v. Merrill Lynch, No. 11-3639 (7th Cir. Feb. 24, 2012), is one such example of a court being caught up in the ripples and issuing an unusual opinion regarding a decision not to certify a class.

Keeping with the (apparently) intentional nautical theme to this post, the captain of the McReynolds decision, Judge Richard Posner was presented with all hands on deck in the form of 700 African-American brokers, both current and former employees.   The plaintiffs alleged that the company’s “teaming” and “account distribution” processes had a disparate impact on African-American brokers, as the policies permitted the brokers to form their own sales teams on allegedly biased criteria.

The plaintiffs encountered their first shoal when the district court denied class certification in 2010.  Following the waves generated by the Dukes decision, however, the plaintiffs moved for certification again, which was once again denied.  Like Neptune himself rising from the sea to meddle in the lives of men, however, the district court explicitly advised the plaintiffs to raise an interlocutory appeal under Fed. R. Civ. P. 27(f) to determine how (and if) the Dukes decision should affect the certification issue.  Plaintiffs did so.

In his decision, Judge Posner mulled over the timing of the interlocutory appeal, but ultimately dropped anchor and held that it was timely due to the new developments in the law (specifically, the Dukes decision).  Judge Posner went on to explain that using the Dukes case as means for a renewed motion for class certification may seem “perverse” in light of the fact that the Supreme Court effectively held that where employment discrimination is alleged to have been practiced by local managers, the discrimination does not present a “common issue that could be resolved efficiently in a single proceeding.”

Judge Posner brought the boat around, however, when he explained that unlike Dukes, where there was no company-wide policy at issue, Merrill Lynch’s policies were alleged to be used company-wide.  As a result, the court determined that even if there would have been racial discrimination on the local level (like Dukes), the incremental effect of such discrimination would be efficiently determined on a class-wide basis.

With land in sight, Judge Posner continued and acknowledged that even if plaintiffs were to succeed in their challenge, they would still need to prove their compensation was adversely affected by the corporate policies in individual actions.  Steering dangerously close to the rock, the court reasoned that if the disparate impact claim prevailed, hundreds of smaller trials might result—but, the court salvaged some of the cargo by concluding that “it wouldn’t be necessary in each of those trials to determine whether the challenged practices were unlawful.” 

The Bottom Line: The impact of Dukes is still unsettled, but one respected court has found that, in some circumstances, it supports certification when a single employer policy is being challenged.