Class Action Countermeasures : Class Action Lawyers & Attorneys : McGuireWoods Law Firm : Complex Litigation, Mass Torts

 Last week, Senator Al Franken (D-Minn) proposed a bill that would partially reverse the Supreme Court's opinion in Wal-Mart Stores, Inc. v. Dukes.

According to Senator Franken's press release, the Equal Opportunity Employment Restoration Act (good title) would add a section 4201 to 28 U.S.C.:

Section 4201(a) creates a new judicial procedure – called “group actions” – that workers can use when bringing employment discrimination cases. The requirements for establishing a group action are the same as the pre-Dukes requirements for maintaining a class action under Rule 23 of the Federal Rules of Civil Procedure—namely, clarifying that the merits of the case need not be proven to certify the group action.

Section 4201(b) provides that group actions can be used regardless of whether the group is challenging an objective employment practice, a subjective employment practice, or a mixed employment practice (such as the use of a written test to qualify for an interview). It also provides that employers’ written anti-discrimination policies can be considered as a defense to certification only insofar as the employer demonstrates that the policy actually has been implemented in practice.

Section 4201(c) says that the group actions authorized by this section are subject to the same procedural requirements as class actions authorized by Rule 23. These include notice and opt-out requirements. This section also preserves the application of the Class Action Fairness Act and the availability of appeals.

Section 4201(d) says that courts can use statistical analyses and any other procedures they deem necessary to provide justice to prevailing plaintiffs.

The bill has a number of cosponsors, but is unlikely to pass a heavily Republican House of Representatives. Nonetheless, it's worth considering what the effects of the bill would be if it were passed as is.

And it's hard to tell what those effects are, because the bill as proposed seems pretty confused about Rule 23 practice. (This is not surprising. It was apparently drafted in conjunction with civil rights leaders rather than Rule 23 experts, so it makes sense that it might not be all things to all people.) The largest sources of confusion:

• It appears unclear what the law is surrounding "merits inquiries." Class actions, even Title VII class actions, have traditionally allowed inquiries into the merits to the extent they overlap with the rigorous analysis required by Rule 23.  And, in fact, most judicial circuits except the Ninth had already reached the conclusion that the Supreme Court did in Dukes.
• It claims that Rule 23 requirements will apply, but seeks to remove the latest clarifications to the commonality requirement. It's not clear how this will work out in practice. One of the largest potential problems is that class actions face is that, if there are not truly common issues, class trial gets extremely messy. This was the experience that informed the Dukes opinion on commonality; it seems kind of silly to pull back from it unless the legislators don't intend for there to actually be trials of Title VII actions.
• It would make labor and employment cases even more complicated. There are already "collective actions" under the Fair Labor Standards Act, and controversy over how they interact with Rule 23.

None of these issues, should they arise, are reasons for panic. They're more just, well, inelegant. Rule 23 works as well as it does because it applies equally across various different kinds of lawsuits, and because, over time, courts have figured out how it actually works in real cases. Taking a outlier case like Dukes and building a bill around it is a great way to create lots of unforeseen consequences in litigation.

So it appears that the primary benefit of this bill is rhetorical: it allows Democratic legislators to claim that they are standing up for civil rights, while not really standing a chance of amending Rule 23 in any significant way. Instead, they can claim that they tried to address the primary talking points of Dukes critics, and were stymied.

So Senator Franken's proposal is a competent political tactic, but would make for a lousy solution to civil rights problems.

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After Dukes, many commentators bemoaned that the class action was dead. At the very least, many argued (as did some last week at DePaul Law School's Symposium on Class Action Rollback) that the Title VII class action is likely on its last legs.

If so, no one told the plaintiffs' counsel prosecuting McReynolds v. Merrill Lynch, Pierce Fenner & Smith (7th Cir. 2012), where the Seventh Circuit just reversed denial of a class seeking injunctive relief and certification of a class for the purpose of determining whether disparate-impact discrimination had occurred against African-American brokers.

The case bears some superficial similarities to Dukes. The plaintiffs alleged racial discrimination, and sought injunctive relief. But, unlike the Dukes plaintiffs, they alleged only disparate-impact discrimination (which does not require proof of intent, and does not allow recovery of damages), and did not seek back-pay as relief, at least at this stage. (Earlier iterations of the class proposal did.)

The lower court denied plaintiffs' class certification proposal several times. However, in denying certification of plaintiffs' most recent class proposal, the district court had said that the question of whether it could, at the very least, certify a class solely to determine whether there was sufficient commonality to justify an injunction against disparate impact was "crying out" for appellate review.

The Seventh Circuit obliged. Much of the opinion is given over to procedural wrangling over whether a plaintiff may appeal the denial of an amended motion for class certification after the court had already denied the original motion. The more interesting result, however, comes after Judge Posner resolves that issue in favor of the plaintiff.

Obviously a single proceeding, while it might result in an injunction, could not resolve class members’ claims. Each class member would have to prove that his compensation had been adversely affected by the corporate policies, and by how much. So should the claim of disparate impact prevail in the class-wide proceeding, hundreds of separate trials may be necessary to determine which class members were actually adversely affected by one or both of the practices and if so what loss he sustained—and remember that the class has 700 members. But at least it wouldn’t be necessary in each of those trials to determine whether the challenged practices were unlawful. Rule 23(c)(4) provides that “when appropriate, an action may be brought or maintained as a class action with respect to particular issues.” The practices challenged in this case present a pair of issues that can most efficiently be determined on a class-wide basis, consistent with the rule just quoted.

(Emphasis added.) Judge Posner also noted that the usual concern about bet-the-company litigation was not present in this case.

Merrill Lynch is in no danger of being destroyed by a binding class-wide determination that it has committed disparate impact discrimination against 700 brokers, although an erroneous injunction against its teaming and account distribution policies could disadvantage it in competition with brokerage firms that employ similar policies—though we have no information on whether others do.

And he concluded that overall, the benefits of issue certification in this case likely exceeded the costs.

We have trouble seeing the downside of the limited class action treatment that we think would be appropriate in this case, and we conclude that the district judge erred in deciding to the contrary (with evident misgivings, however).

So does this herald an era of widespread issue certification? Probably not. As Judge Posner notes throughout his opinion, there are a number of special circumstances in this case. Among them are the fact that the class is willing to seek injunctive relief, and to postpone any ruling on damages or back pay. For this set of plaintiffs, who have been litigating for years, this makes sense. But a plaintiff's lawyer looking to file a new lawsuit might not be willing to put in a substantial upfront investment without a promise of monetary recovery if he wins. Moreover, the Merrill Lynch plaintiffs challenged two specific policies--teaming (allowing brokers to form teams, which apparently resulted in some de facto segregation) and account distribution (whose subjective criteria appeared to result in discriminatory distribution of accounts)--that were not counterbalanced by an explicit nondiscrimination policy like the one in Dukes.  Assuming that companies are taking the Supreme Court's hint that an explicit antidiscrimination policy can make it harder to make a common issue out of a "subjective" policy, this may have presented a rare opportunity.

Nonetheless, Judge Posner's opinion provides a rare example of how a plaintiff might actually structure a request for issue certification. And for that reason alone, it is well worth the defense attorney's attention.

(Hat tip to George S. Robot, who brought the--literally--fresh-from-the-press opinion to the DePaul Symposium, and graciously shared much of the backstory with the participants.)

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 In 2004, five women applied to be paramedics with the Chicago fire department, a demanding job with a demanding application process. While they were otherwise qualified, these five women, for whatever reason, did not pass the city's physical ability test. After they were removed from the city's eligibility list, they sued the city in Ernst v. City of Chicago (2012 U.S. Dist. LEXIS 1003 (N.D. Ill. Jan. 5, 2012)), alleging that the test violated Title VII.

If that were the whole story, there would be no reason for me to write about it. But in 2011, three years after they filed their original lawsuit and almost a year after fact discovery had closed, the plaintiffs sought to amend their lawsuit to turn it into a class action.

Why did they wait so long? It's hard to say. It could be that it took a year for their lawyers to process the discovery received and notice classwide patterns (unlikely, Title VII cases that challenge policies or tests are common candidates for class-action treatment). It could be that their lawyers just hadn't thought of it (also unlikely, since the court repeatedly praised their performance in the case). Or it could be that adding class allegations was a negotiating tactic to bring a three-year lawsuit to some kind of resolution. The court itself was flummoxed, finding nothing that could "persuasively account for the extended delay."

Whatever the reason, the City of Chicago opposed the amendment, arguing that the delay was prejudicial, in no small part because it would have to reopen discovery. The plaintiffs pooh-poohed the alleged prejudice, and argued that the City could not seek discovery of absent class members in any case. They also argued that, because they were challenging a City policy, it was already on notice that the case was a good candidate for class treatment.

The court disagreed. It observed that, given the lead plaintiff's attorney's exemplary conduct of the case to that point, there was no way she could have missed the possibility the case could make a class action, meaning that the delay was particularly inexcusable. It also pointed out that the defendants might well be entitled to discovery from other class members on a showing of good cause. And it observed that

it cannot be denied that the transformation of the case into a class action would raise entirely new issues of certification, notice, and the other complex issues that are a part of class actions and this after the individual claims have already moved three years closer to ultimate resolution of the case.

Then, in a conclusion that quoted both Henry VI Part I ("Defer no time, delays have dangerous ends") and Twelfth Night ("In delays there lies no plenty"), the court denied the motion to amend.

Motions to amend are usually easy for plaintiffs to win, so the fact that they lost in this case should offer a few lessons for class-action litigators. Here are a few:

1. Long delays can in fact be prejudicial; a fact worth remembering when plaintiffs make eleventh-hour amendments.
2. Class actions are big and complicated. Reminding the court of that fact--even during "easy" motions--almost always helps the defendant.
3. The better you are at prosecuting (or defending) your case, the more the court will come to expect from you.
4. If nothing else, it never hurts to brush up your Shakespeare.

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 In a decision that has already garnered massive press coverage and commentary the Supreme Court yesterday granted certiorari in the case that will be known as Wal-Mart v. Dukes. The 9th Circuit's opinion affirmed certification of the largest-ever employment class action. (Too large, in Wal-Mart's opinion.)

The Supreme Court will not review all of the issues involved in the petition for certiorari. It has limited itself to Wal-Mart's Question 1 (roughly: when can plaintiffs seek Rule 23(b)(2) certification for a class seeking money damages), and has ordered briefing on an additional question:

"Whether the class certification ordered under Rule 23(b)(2) was consistent with Rule 23(a)."

So what does all this mean? In the short term, not too much. Argument is in the spring, the opinion is expected sometime mid-summer. Through that time, Ted Olson's team at Gibson Dunn & Crutcher, Brad Seligman's team at The Impact Fund (not to mention many, many, amici) have their work cut out for them. There may also be some increased motion to stay activity in labor class actions. Defense counsel are going to want to stay litigation in case the Court rules that 23(b)(2) class actions cannot support monetary damages like those the plaintiffs seek. Plaintiffs' counsel are likely to fight hard against those stay requests; any classes they can certify (and get through Rule 23(f) review) before the Dukes decision comes out will be difficult to reverse.

Longer-term, it's difficult say at this point. Court-watching is even more like Kremlinology than plaintiff-watching. The fact that the Court has eschewed the various statutory and Constitutional arguments the defendants raised indicates that it may be more interested in narrowing the scope of any decision it issues. (Although the Rule 23(b)(2) issue is controversial enough.) But the fact that the Court has ordered briefing on the separate question of whether the certified class met the Rule 23(a) requirements (numerosity, commonality, typicality, and adequacy) indicates that Wal-Mart's general framing of the class as simply too large to certify may have some traction.

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Many apologies for providing you all with just a linkdump for my Tuesday entry, but I'm lying in bed with a triple-digit fever.  Still, there are certainly other legal blogs that do a thoughtful job of covering class-action issues, and I'm lucky that several of them have great entries right now.

• Justice Scalia has stayed a Louisiana state court ruling requiring tobacco companies to pay into a $241 million dollar "quit smoking" fund.  His reason: it's "significantly possible" that the Court may overturn the decision on constitutional grounds.  Specifically: “the extent to which class treatment may constitutionally reduce the normal requirements of due process is an important question.”  [SCOTUSblog]
• The Second Circuit has held, in a divisive 2-1 split, that the Alien Tort Claims Act (ATCA) does not apply to corporations. This should have a huge effect on international human-rights class actions.  [Mass Tort Defense]
• Wal-Mart's certiorari petition asking the Supreme Court to review the Ninth's Circuit's Dukes v. Wal-Mart opinion has drawn a number of high-powered amicus briefs.  [WSJ Law Blog]

Come back again on Thursday, when regular content should resume.

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All too often, courts and class-action litigants take the question of commonality for granted.  But, when framed properly, the question of commonality can provide a court with the tools necessary to engage in a truly rigorous analysis of a proposed class.

In his recent essay "Common Answers for Class Certification," noted professor Richard Nagareda takes the Ninth Circuit's recent Dukes decision and uses it as a platform to discuss what commonality really means in the context of a class action. In doing so, he provides an excellent analysis of how defense counsel can frame the question of commonality for courts deciding certification. As he puts it:

This Essay spotlights the crucial conceptual error in Dukes: its premise that the raising of common “questions” suffices for class certification. Properly understood, class certification does not turn upon the mere raising of common questions by way of expert submissions or any other form of evidence. Class certification instead turns on the capacity of a unitary proceeding to yield common answers.

Nagareda also points out that courts taking the alternative approach--looking only at whether the question is common, not whether they advance the litigation with common answers--are not wilfully misreading Rule 23.

The Dukes court acts on an understandable impulse—one whereby the format for adjudication inevitably would synchronize with the aggregate character of the allegations on the merits, at least when those allegations rise to the level of presenting a triable case.

Ultimately, Nagareda locates the issue in the fact that most courts are more used to determining issues on the merits than deciding class certification.

The fundamental problem with Dukes consists of the court’s confusion between the class certification determination and the most familiar type of pre-trial ruling that regulates the respective roles of the court and the fact finder at trial: summary judgment. On the Ninth Circuit’s account, the two are intertwined, such that the court regards itself as duty-bound not to withhold class certification when the plaintiffs have put forward a triable case as to the existence of a company-wide policy of discrimination on Wal-Mart’s part. Yet it is only if such a policy of nationwide scope exists that Wal-Mart has acted “on grounds that apply generally to the class,” so as to make appropriate relief “respecting the class as a whole” within the meaning of Rule 23(b)(2)—the basis for the Dukes certification.

In other words, a common question is not common unless the answer applies to the entire class no matter how it is decided.

What can defense lawyers take from Nagareda's analysis? It's always worth reminding the court of how a class trial would actually proceed. Walking the court through how it would have to decide questions on the merits can highlight where supposedly common questions aren't actually common at all.

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Commonality is rarely the subject of much discussion in class certification. The plaintiff often treats it as a perfunctory hurdle, subsumed into the more difficult questions of predominance (under Rule 23(b)(3)) or cohesiveness (under Rule 23(b)(2)).  But, much like numerosity, commonality is a requirement that may reward careful scrutiny when a defendant opposes class certification.

In Gaston v. Exelon Corp., 247 F.R.D. 75 (E.D. Pa. 2007), a group of African-American employees sued their employer for engaging in various policies (including its promotion and compensation decisions) that they claimed violated Title VII. They sought to represent a class of employees

who have been or may be subjected to Exelon's challenged policies and practices that deny Black exempt employees equal opportunity …

Exelon filed a motion to strike class allegations, which the court granted in part, ruling that no 23(b)(2) class was possible. When the plaintiffs later moved to certify a Rule 23(b)(3) class, the court actually found a number of problems with plaintiffs' class proposal. The class definition was not ascertainable. The named plaintiffs were subject to unique defenses, making them inadequate and atypical representatives. But the fundamental problem the court found was that the proposed common issues were not common.

In fact, the court took a Goldilocks-like approach to commonality (that is, if Goldilocks hadn't liked the baby bear's stuff either). It found that the proposed common issues were either too broad, too narrow or just plain irrelevant. What do I mean by too broad? As the court put it:

[P]laintiffs' first proposed question is “whether PECO's performance evaluation policy or practices negatively impact Class members.” Id. Were a question of this sort suitable to demonstrate commonality, that requirement would become a puff of smoke. Plaintiffs could simply propose the ques- tion “has employer discriminated against class mem- bers” and always meet the commonality requirement. Obviously, something more is necessary.

As for too narrow:

Other supposedly common questions that plaintiffs identify apply only to a small fraction of the proposed class. The question “whether Class members are less likely to be promoted into intermediate- or high-level salary grades than are otherwise-similar White employees,” for example, only applies to class members who were eligible for a promotion into those grades.

And finally, the court found that the remaining common questions had no bearing on the case itself.

Other questions, such as “whether Class members are less likely to be in high-level salary grades,” are simply irrelevant to a Title VII suit. As we discussed above, it is not sufficient for plaintiffs merely to identify a disparity in the representation of black employees in higher salary grades. They must also identify a pattern or practice of employment decisions during the class period that has resulted in this disparity.

What does this analysis mean for defendants? Despite the traditional view that commonality is a low hurdle for the plaintiff to clear, it is still worth challenging when the only common questions have nothing to do with the heart of the case.

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While I was on my self-imposed editing hiatus (shameless plug: The Class Action Playbook  comes out in September), the Ninth Circuit handed down its en banc opinion in Dukes v. Wal-Mart. The court worked overtime to tie its opinion to the specific facts and arguments in front of it, which may prevent some generalizing about the opinion. (Not that that has ever stopped legal pundits.)  

First, some background: Dukes is a Title VII sex-discrimination case. The plaintiffs alleged that, as women, they received less money for comparable work, and that they were passed over for promotions within the company. Their complaint sought injunctive relief, “back pay” (technically monetary relief, although some courts have held that, as restitution, it does not fall under Rule 23(b)(3)) and punitive damages. The trial court certified a class under Rule 23(b)(2). Wal-Mart appealed, challenging the trial court’s finding of commonality and its reliance on plaintiffs’ statistical expert. A 3-judge panel upheld the certification. Wal-Mart asked for en banc reconsideration, leading to this opinion.

The Ninth Circuit’s slip opinion is 137 pages, 95 of which constitute the majority opinion. Given the procedural history of the case, as well as the presence of concurrences and an impassioned dissent, the opinion is not a model of clarity. Nonetheless, the trial court reached a few basic conclusions that will likely occupy class-action lawyers.

• First, it reaffirmed the need for a “rigorous analysis” of Rule 23’s requirements, one that may overlap with the merits of a given case.
• Second, it upheld certification of class claims – including for “back pay” – under Rule 23(b)(2).
• Third, it held that a court may rely on a plaintiff’s statistical evidence to find commonality, even if that evidence is contested by the defendant.
• The Ninth Circuit did not rule on whether the proposed trial plan violated Wal-Mart’s due process rights. But it did speak approvingly of the trial in Hilao v. Estate of Marcos – a class action from the 1990s brought by a class of Filipino torture victims that relied heavily on statistical evidence – as one way to bring a class trial.

What does this opinion mean for class-action strategy?

• Plaintiffs are likely to continue to seek certification under Rule 23(b)(2) when possible, which means that defendants should become well-versed in the “cohesiveness” requirement.
• Specific Daubert-based challenges to questionable statistics are more important than ever.
• And defendants (particularly in the Ninth Circuit) would do well to review opinions on how courts have conducted classwide trials in the past.

While I have no inside knowledge on whether Wal-Mart intends to appeal this decision, the fact that it comes from the Ninth Circuit means there is a stronger-than-usual chance that the Supreme Court will grant certiorari to address the issues.

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