Workplace Class Action Blog

Show Me the Money: The EEOC Secures Post-Trial Damages Victory In Religious Discrimination Case

Posted in EEOC Litigation

thBy Gerald L. Maatman Jr. and Howard M. Wexler

In EEOC v. Consol Energy, Inc. et. al., Case No. 1:13-CV-215 (S.D. W. Va. Aug. 21, 2015), a jury found in favor of the EEOC in its claim brought under Title VII that the employer denied an employee a religious accommodation involving an exemption from using a biometric hand scanner. Prior to trial the parties filed motions in limine concerning certain issues relating to damages, which was held in abeyance pending trial. Id. at 1. Given the EEOC’s trial verdict, the Court then decided the motions and what damages (other than compensatory which was awarded by the jury) should be awarded. Id. at 2. For good measure, the Court also entered a significant injunctive relief award.

The ruling ought to be required reading for any corporate counsel and human resources professional dealing with EEOC litigation issues.

The Court’s Decision On Damages

With respect to monetary damages, the parties disagreed concerning the level of back and front pay the Charging Party should receive. Namely, the EEOC argued that the pension benefits the Charging Party received should not be used as an off-set to any back or front pay award as they are collateral (not paid directly from and entirely by the employer, rather, by a third source). Id. at 3. The collateral source rule provides that compensation from a collateral source should be disregarded in assessing damages.  The employer argued that as the pension plan was 100% employer funded, it is a non-collateral source, and as such, should off-set any economic damages the Charging Party receives. Id. at 4.

The Court agreed with the EEOC and held that the pension benefits are a collateral source as “there has been no evidence that the fund is meant to be used as an indemnifying fund for potential litigation that is not in an employer’s favor” and “there has been no evidence that the applicable collective bargaining agreement contains a provision contemplating a set-off of benefits received in a case such as the one at hand.” Id. at 7.

The employer also argued that the Charging Party’s back and front pay award should be limited as he failed to adequately mitigate his damages. Id. at 11. Namely, that he failed to seek similar employment in the coal mining industry (he only attended a single job fair and didn’t seek similar employment as he did not want to lose his pension payments) and that he failed to apply for available openings in the coal industry that he was “likely aware.” Id. at 12.

The Court found that the Charging Party reasonably mitigated his damages given the limited available positions in the coal mining industry, his personal economic circumstances (he had a wife and two grandchildren to support at the time) and although he was skilled in certain industries, he was limited by his education for higher-paying jobs in his area as well as by his age. Id. at 18-20.

Given the Court’s ruling on damages, it awarded the Charging Party (before interest) $586,860.74 in economic damages. Id. at 39.

The Court’s Decision On Injunctive Relief

The EEOC also sought a company-wide permanent injunction that would dissolve after three years and prohibit the following:  any requirement or rule for the use of a biometric hand scanner will be in conformity with Title VII as long as absent undue hardship on the defendants; provide a complete exemption as an alternative for persons who need such an exemption as a reasonable accommodation; and provide training to all management personnel regarding Title VII within 60 days of the injunction being entered. Id. at 25. In support of its request, the EEOC argued that once a plaintiff prevails in a Title VII case, “injunctions are presumptively appropriate.” Id.

The Court agreed with the EEOC and issued the permanent injunction it sought as “defendants have not met their heavy burden of proving that future discrimination will not occur.” Id. at 33. Although the Court noted that the employer had taken steps to eradicate any discrimination, that is not enough to warrant a denial of the injunction. Id. at 33. Furthermore, the Court found the scope of the injunction reasonable as it targets religious discrimination based on precedential case law and the biometric hand scanning device – which was at issue in the underlying lawsuit. Id. at 35.

Implications for Employers

This decision serves as a good primer on the factors that courts will rely upon in determining what damages are available (and, even if available, should be reduced). Although the Court ruled in favor of the EEOC in this case, employer access to specific types of claimant information can make a critical difference in mounting key defenses, testing claimant credibility, and limiting available damages.

Readers can also find this post on our EEOC Countdown blog here.

Seventh Circuit Provides Guidance On Fairness Of Class Action Settlement Agreements And Fee Awards

Posted in Settlement Issues

00-money-bagBy Christopher M. Cascino and Gerald L. Maatman, Jr.

In In Re Southwest Airlines Voucher Litigation, Case No. 13-3264 (7th Cir. Aug. 20, 2015), the U.S. Court of Appeals for the Seventh Circuit upheld a fee award to class counsel in a class action that resulted in a “coupon settlement” – a settlement in which the defendant agrees to issue coupons to the class members.  In upholding the fee award, the Seventh Circuit also discussed the propriety of a number of settlement provisions and practices that are frequently at issue in class action settlement negotiations.  While not a workplace class action, this decision should be of interest to any employers who are involved in class action litigation because it provides guidance about how courts in the Seventh Circuit and beyond will view certain class action settlement provisions and practices.

Case Background

Southwest Airlines issued vouchers to its “Business Select” passengers that could be redeemed for one free in-flight alcoholic beverage.  Some passengers saved their beverage vouchers so they could use them on later flights.  In August 2010, Southwest Airlines announced that these vouchers could only be used on the flight covered by the “Business Select” ticket.  The plaintiffs filed a class action against Southwest Airlines for breach of contract, unjust enrichment, and violations of state consumer fraud laws.

The district court dismissed the unjust enrichment and consumer fraud claims as being preempted by the Airline Deregulation Act.  The parties subsequently agreed to settle the remaining breach of contract claim on a class-wide basis.  Under the terms of the settlement, Southwest Airlines agreed to provide all class members with a  voucher that was good for one free in-flight alcoholic beverage and further agreed to pay class counsel $3 million in attorneys’ fees.  The parties also agreed on a “clear-sailing” clause that provided that Southwest Airlines would not object to the attorneys’ fee request up to the agreed-to amount, and further agreed to a “kicker” clause, which provided that, if the district court were to reduce the fee award, the reduction would benefit Southwest Airlines rather than the class.  The parties also agreed on limited injunctive relief that would constrain how Southwest could issue vouchers in the future.

Several class members objected to the class settlement, focusing primarily on the fee award.  They argued that the settlement was a “coupon settlement” within the meaning of the Class Action Fairness Act (“CAFA”), and that therefore the fee award needed to be a percentage of the value of the vouchers actually redeemed by class members.  As such, they contended that class counsel sought inflated fees to the detriment of the class. They further argued that the settlement agreement was unfair because it contained the “clear-sailing” and “kicker” clauses, which manifested the lack of a fair and adequate settlement.

The district court agreed that the CAFA applied, but held that attorneys’ fees nonetheless could be calculated using the lodestar method of determining attorneys’ fees.  Under this method, fees are calculated by multiplying the hours spent on litigation by a reasonable hourly rate and then adjusting the award based on various factors, such as whether the work was taken on a contingency basis and the quality of the result.  Using this method, the district court awarded $1,649,118 in attorneys’ fees.  The district court further held that the “clear-sailing” and “kicker” clauses did not render the settlement agreement unfair because the class was receiving what amounted to the full value of their claims.  Both class counsel and several class members appealed that decision.

The Seventh Circuit’s Decision

The Seventh Circuit agreed with the district court that the CAFA applied because, in the Seventh Circuit, a voucher is considered to be a coupon.  Southwest Airlines, at 7.  It then considered whether the district court correctly concluded that the lodestar method nonetheless could be applied to determine the fee award.  Disagreeing with the Ninth Circuit’s decision in In Re HP Inkjet Printer Litigation, 716 F.3d 1173 (9th Cir. 2013), the Seventh Circuit concluded that attorneys’ fees could be calculated using the lodestar method in coupon settlements, while simultaneously warning district courts to use the method only after “evaluat[ing] critically the claims of success of a class receiving coupons.”  Id. at 16-17.

The Seventh Circuit further considered whether the settlement agreement was fair and reasonable in light of Southwest Airlines’ agreement to pay $3 million in attorneys’ fees and in light of the “clear-sailing” and “kicker” clauses.  Addressing the objecting class members’ argument that the fact Southwest Airlines was willing to pay $3 million in attorneys’ fees showed that there was additional money class counsel could have recovered on behalf of the class, the Seventh Circuit held that this argument, while potentially powerful in other cases, was of “little force” here because “the class members [would] receive essentially everything they could have hoped for.  As the district court put it, ‘the class members are getting back exactly what they had before, an unexpired drink voucher.’”  Id. at 18-20.

The Seventh Circuit also addressed the “clear-sailing” and “kicker” clauses.  It pointed out that, while it had “deep skepticism about such clauses, which seem to benefit only class counsel and can be signs of a sell-out,” it would not adopt a rule finding that such clauses per se bar settlement approval.  Id. at 21.  On the record before it, the Seventh Circuit concluded that the settlement agreement was fair and reasonable despite these clauses because the class members got everything they could have hoped for in the settlement.  Id.

Finally, the Seventh Circuit addressed class counsel’s argument that he should receive $3 million in fees because Southwest Airlines agreed to provide that amount.  It held that judicial deference to the provisions of class action settlements is not appropriate, and that the district court did not abuse its discretion in awarding class counsel $1.6 million in fees.  Id. at 22.

Implications For Employers

Employers who are involved in class action litigation should use this case for guidance on how courts in the Seventh Circuit and beyond will react to proposed class action settlement agreements.  Employers should be aware that including “clear-sailing” or “kicker” clauses in such agreements will cause district courts – and any appellate court on appeal if objectors attack the settlement – to more closely examine the fairness of the proposed settlement because such clauses may only benefit class counsel.  In the right circumstances, employers may also be able to use this case to argue that they are providing full relief to a class even when they are not providing monetary relief if they can plausibly argue that they are providing something else that remedies a past wrong.  Finally, employers who agree to provide nearly full relief to the class to settle a class action can use this case to overrule objections to the terms of a class action settlement.

Seventh Circuit Again Limits Application Of The Wal-Mart Ruling And Certifies Chicago Teachers’ Discrimination Claims

Posted in Class Certification

School desk with pencil and appleBy Christopher M. Cascino and Gerald L. Maatman, Jr.

In Chicago Teachers Union, Local No. 1, American Federation of Teachers, AFL-CIO v. Bd. of Educ. of the City of Chicago, Case No. 14-2843 (7th Cir. Aug. 7, 2015), the U.S. Court of Appeals for the Seventh Circuit reversed a district court decision we discussed previously here and certified the discrimination claims of a class of African-American Chicago teachers. The case is significant for employers in that the Seventh Circuit, as it previously did in McReynolds v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 672 F.3d 482 (7th Cir. 2012), a case we discussed here, again certified a class even though the final alleged discriminatory decisions were based on subjective decisions by multiple decision-makers. In addition, the Seventh Circuit further limited Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541 (2011), and held that, even where the legality of final employment decisions cannot be decided on a class-wide basis because of individualized exercise of discretion, there are circumstances where the legality of intermediate decisions preceding the final alleged unlawful employment decision can nonetheless be decided on a class-wide basis.

Background Of The Case

Under the Illinois School Code, schools may be subject to a “turnaround” if they have been on probation for at least one year and have failed to make adequate progress in correcting deficiencies. In a turnaround, the Board of Education takes control of the school and removes all staff. Affected teachers and para-professionals are either placed in a reassignment pool or a substitution pool with different rights to salary and other benefits depending on their tenure status and job position.

In 2011, the Board began considering which schools should be turned around in 2012. There were three steps in this process. The process started with an initial list of 226 schools eligible for turnaround because they had been on probation for one year and had failed to make adequate progress in correcting deficiencies. That list was reduced to 74 schools based on composite standardized test scores and graduation rates. Subsequently, in the third step, a qualitative “in-depth investigation process” began for the remaining 74 schools. This involved school visits, additional data collection, and meetings with a variety of school representatives and community members. No written policy applied to the final turnaround decision. Some of the factors considered were: the academic culture of the school, whether quality instruction was being provided, the quality of the leadership, and the academic trends of the school.

After reviewing the information, several Chicago Public Schools officials decided to recommend that 10 schools should be turned around. The Board subsequently agreed. The schools were located exclusively on the south and west sides of Chicago. The total percentage of African-American tenured teachers at the 10 schools selected for turnaround was approximately 51%, while the total percentage of African-American tenured teachers in the entire Chicago public school system was only 25%.

The Chicago Teachers Union and three African-American tenured teachers brought a class action lawsuit against the Chicago Board of Education alleging that the board’s decision to turn around the 10 Chicago public schools was racially discriminatory. Plaintiff sought to certify a class consisting of all African-American teachers or para-professionals in any school subjected to the 2012 turnarounds. The U.S. District Court for the Northern District of Illinois denied class certification, and the Plaintiffs appealed.

The Seventh Circuit’s Decision

The Seventh Circuit began its analysis by noting that one of the purposes of class action litigation is to avoid repeated litigation of the same issues. Chicago Teachers Union, at 8. Then pointing out that the question on appeal was whether there were common issues of law or fact common to the class, the Seventh Circuit addressed the Board’s argument that, given that the third step in the turnaround decision-making process was qualitative and subjective, there was a lack of commonality under Wal-Mart. Id. at 12.

The Seventh Circuit reasoned that the first flaw in this argument was that it skipped to the third step of the decision-making process. It pointed out that the first two steps of the process were “clearly-objective steps.” Id. at 13. The Seventh Circuit opined that these first two steps could have resulted in disparate impact discrimination against African-Americans regardless of what happened at the third step. Id. For example, it hypothesized that, after the first two steps, it could be the case that all schools remaining under consideration for turnaround had 100% African-American teaching staffs, and that the first two steps would thus have had a disparate impact on African-Americans regardless of the third step. Id. The Seventh Circuit therefore found that the question of whether the first two objective steps had a disparate impact could be decided on a class-wide basis. Id. at 14.

The Seventh Circuit concluded that this result followed from its prior decision in McReynolds.  In McReynolds, the Seventh Circuit certified the disparate impact claims of a class of African-Americans even though the employment decisions at issue were made at the discretion of 165 separate individuals because two company-wide policies allegedly caused the 165 individuals to exercise their discretion in a common way that caused discrimination. Id. at 15-16. In Chicago Teachers Union, the Seventh Circuit held that McReynolds demonstrated “that a company-wide practice is appropriate for class challenge even where some decisions in the chain of acts challenged as discriminatory can be exercised by local managers with discretion[,] at least where the class at issue is affected in a common manner[,]” and that under this principle certification of a class to determine the disparate impact of the first two steps of the turnaround decision-making process was appropriate. Id. at 17-18.

The Seventh Circuit went on to consider whether a class could be certified to determine whether the third step of the decision-making process was discriminatory. It found that, despite the fact the Board “describe[d] numerous factors considered in the various schools” during the third step, “they could be boiled down to” 10 factors, including factors like “school culture” and “parent and community input.” Id. at 19-20. It found the fact that there were 10 factors that made the “case worlds away from that in Wal-Mart where a court could have no way of knowing why each of the thousands of individual managers made distinct decisions.” Id. at 22. It did so even though there were cases where only one of the 10 factors was determinative in deciding to turnaround a school.  Id.

The Seventh Circuit also emphasized the fact that there was one decision-making body that was “of one mind, using one process.” Id. at 23. It distinguished this situation from Wal-Mart, where there were “myriad actions of individual managers.” Id. It concluded that “[d]ecisions by myriad low-level managers are different than decisions made by . . . few concentrated top-level managers,” and thus that certification of claims based on the third stage of the decision-making process was appropriate. Id. at 23-24.

The Seventh Circuit also reaffirmed McReynolds’ holding that a class should be certified where liability can be determined on a class-wide basis even though individual trials as to damages would be needed. Id. at 32-33.

Implications For Employers

Plaintiffs’ class action lawyers will likely cite to this case as further support in their McReynolds-based arguments for class certification. Of particular concern to employers might be the fact that the Seventh Circuit found that decisions based on consideration of 10 non-enumerated factors – including factors like “school culture” that are far from objectively measurable – are the type of decisions that can support certification of a discrimination class action.  Moreover, this case provides an additional tool that plaintiffs’ lawyers are likely to use to try to certify classes where employment decisions are made in multiple stages. They will likely try to certify classes even where final decisions were highly individualized and discretionary by arguing that earlier steps leading to the final decision were uniformly applied and discriminatory. Employers should be on the lookout for how successful these attempts are in future litigation.

Court Rejects The EEOC’s Novel Attempt To Impose Disparate Treatment Liability Without Any Injury

Posted in EEOC Litigation

scales-of-justice-tippedBy Christopher M. Cascino and Gerald L. Maatman, Jr.

In EEOC v. Autozone, Inc., Case No. 14-CV-5579 (N.D. Ill. Aug. 4, 2015), Judge Amy St. Eve of the U.S. District Court for the Northern District of Illinois granted summary judgment in favor of the defendant and against the EEOC in a case in which the EEOC brought a disparate treatment discrimination suit on behalf of an individual who did not suffer an adverse employment action as a result of alleged discrimination.

This decision is an important victory for employers, as it represents a rejection of the EEOC’s novel theory that an employer can be liable for limiting, segregating, or classifying employees in a purportedly discriminatory way even absent any adverse employment action. In addition, the Court rejected the EEOC’s theory that an alleged discriminatory transfer is per se an adverse employment action.

Case Background

Kevin Stuckey (“Stuckey”), an African-American, was employed by AutoZone from January 2008 to July 2012. Id. at 1-2. During this period, Stuckey was transferred four times to different AutoZone locations. Id. In each such transfer, Stuckey was placed in the same position and had the same job duties and rate of pay that he had at his prior location. Id.

After Stuckey was transferred for the fourth time, Stuckey refused to report to his new location, and instead filed an EEOC charge on August 13, 2012, claiming he was transferred to the new location due to his race. Id. at 2. According to Stuckey, he was transferred out of the third AutoZone location where he worked because AutoZone’s district manager wanted to make the third location “predominantly Hispanic.” Id. at 2-3. The EEOC thereafter filed a disparate treatment suit on Stuckey’s behalf. AutoZone moved for summary judgment, arguing that, because Stuckey did not suffer an adverse employment action as a result of his transfer, he did not have a claim for disparate treatment discrimination.

The Court’s Decision

The Court began by pointing out that Title VII makes two types of racial discrimination unlawful. Id. at 4. First, under 42 U.S.C. § 2000e-2(a)(1), it is unlawful to refuse to hire, to discharge, or to discriminate against individuals with respect to compensation or other terms of employment on the basis of race. Id. Second, under 42 U.S.C. § 2000e-2(a)(2), it is unlawful “‘to limit, segregate, or classify . . . employees . . . in any way which would deprive . . . any individual of employment opportunities or otherwise adversely affect his status as an employee’” on the basis of race. Id. (quoting 42 U.S.C. § 2000e-2(a)(2)).

After pointing out that disparate treatment claims brought under Title VII generally require a plaintiff to prove that he or she suffered an adverse employment action, the Court addressed the EEOC’s argument that there is no need for an adverse employment action to maintain a claim under 42 U.S.C. § 2000e-2(a)(2). Id. at 4-5.

The Court first indicated that the Seventh Circuit has consistently required an adverse employment action in § 2000e-2(a)(2) cases. Id. at 5-6. It then addressed the EEOC’s argument that, in Kyles v. J.K. Guardian Sec. Serv., Inc., 222 F.3d 289 (7th Cir. 2000), the Seventh Circuit held that a defendant could be liable under  § 2000e-2(a)(2) even in the absence of an adverse employment action. In Kyles, the Seventh Circuit held that employment discrimination “testers” – individuals who, without an intent to accept an offer of employment, pose as job applicants in order to gather evidence of discriminatory hiring practices – had standing to sue under Title VII, even though they were not genuinely interested in the employment they were denied.  Id. at 6-7. The Court reasoned that the holding of Kyles was that a plaintiff has standing to bring suit for a statutory violation if he or she suffers an injury contemplated by the statute even if a plaintiff was not harmed apart from the statutory violation. Id. at 7. It thus held that Kyles did not support the EEOC’s position. The Court thereby concluded that an adverse employment action is required in § 2000e-2(a)(2) cases.

The Court also considered the EEOC’s argument that Stuckey had suffered an adverse employment action in that he “suffered dignitary harm and humiliation because AutoZone maintained a racially segregated workplace.” Id. at 9. While agreeing that a materially adverse employment action could include an action that subjected an employee to “an objectively humiliating or degrading workplace,” the Court could not find any reason that transfer to another AutoZone location “resulted in an objectively humiliating or degrading change in work conditions.” Id. at 9-10. The Court thus granted summary judgment to Autozone.

Implications For Employers

This case represents a significant win for employers. The Court rejected the EEOC’s attempt to create liability for disparate treatment discrimination under § 2000e-2(a)(2) of Title VII without any proof of an adverse employment action.  Moreover, the Court found that an allegedly discriminatory transfer does not automatically create an objectively humiliating or degrading workplace and thus is not necessarily an adverse employment action.  Despite this setback, we expect the EEOC to continue its attempts to create new Title VII liability using novel and untested theories.  Stay tuned.

Readers can also find this post on our EEOC Countdown blog here.

Whither Mootness? The Seventh Circuit Reverses Itself

Posted in Class Action Litigation

money bagBy Gerald L. Maatman, Jr. and Jules Levenson

Defendants fighting class actions in the Seventh Circuit may have one less tool in their arsenal following the recent ruling in Chapman v. First Index, Inc., No. 14-2773, 2015 WL 4652878 (7th Cir. Aug. 6, 2015) [here], a putative class action arising from allegedly illegal junk faxes. Though not a workplace class action decision, Chapman is important for any employer facing high-stakes litigation.

Until Chapman (authored by Judge Easterbrook joined by Circuit Judges Posner, and Manion), prevailing case law in the Seventh Circuit held that when a plaintiff received an offer of judgment for full relief requested, the claim became moot. This had particular salience in the class action context where mooting the claim of a would-be class representative often served to head off the specter of a larger case. Though plaintiffs typically avoided this by filing a “placeholder” motion for class certification, the tool was still a valuable one in the proper circumstances. After Chapman, however, an offer of judgment for full relief no longer moots a case for Article III purposes in the Seventh Circuit.

Background Of The Case

The path to this groundbreaking ruling started off as so many other class actions before it. While the parties were wrangling over certification, the defendant made an offer of full relief, which was set to expire 14 days after the district court ruled on class certification.

Following over four years of litigation, including discovery and multiple class certification motions, the district court denied Rule 23 certification.

After the plaintiff failed to accept the offer within two weeks, the defendant moved for, and won, dismissal on mootness grounds.

The Appellate Ruling

On appeal, the Seventh Circuit affirmed the denial of certification, but vacated the dismissal of the plaintiff’s individual claims. It held that cases are “moot only when it is impossible for a court to grant any effectual relief whatever to the prevailing party” and that because the trial court “could award damages and enter an injunction” relief was available and the case was not moot. Id. at 5.

Judge Easterbrook acknowledged the prior Seventh Circuit case law, but cited Justice Kagan’s dissent (joined by 3 other Supreme Court Justices) in Genesis Healthcare Corp. v. Symczyk, 133 S.Ct. 1523, 1532-37 (2013), as showing that “an expired (and unaccepted) offer of a judgment does not satisfy the Court’s definition of mootness, because relief remains possible.”  Id. at 5. In addition, the opinion noted that if a case were really mooted by an offer of judgment, dismissal would be required and no court would even be able to enter judgment because “the case would have gone up in smoke.” Id. at 6.

Even though the question of mootness is currently pending before the Supreme Court in the coming term, the Seventh Circuit panel felt that there was no need to wait for further binding guidance and, aligning itself with the other courts of appeals that have considered the question of mootness after Symczyk, overruled prior Seventh Circuit cases “to the extent they hold that a defendant’s offer of full compensation moots the litigation or otherwise ends the Article III case or controversy.” Id. at 7.

Implications For Employers

Despite the apparently unequivocal holding, however, the exact impact of the Chapman ruling is unclear. Even though offers of full relief will no longer result in mootness, the Seventh Circuit still seemed dubious as to allowing litigation to continue once a defendant has offered everything a plaintiff seeks (at least as to individual plaintiffs). Reaffirming that plaintiffs cannot continue to sue after they’ve already won, the Seventh Circuit left open the question of how district courts should deal with offers of full compensation. While that issue which was not directly raised in this case, in a fairly considered dictum Judge Easterbrook suggested potential arguments (such as estoppel or waiver) as to why such cases should not be allowed to continue, but also noted that a fleeting offer (this one expired 14 days after the ruling on class certification) could not be equated to full compensation.

That said, the dictum may be read to cabin the arguments for ending litigation via offers of full relief to non-class cases. Indeed, the Seventh Circuit noted that “it may be that, in class actions, the conclusion ‘not moot’ implies that the case should be allowed to continue — for even a settlement offer after the district judge has declined to certify a class may be designed to prevent an effective appeal (or at least change everyone’s incentives about whether to appeal).” Id.at 8.

If district courts come to the same conclusion, the era of settling with putative class representatives to head off class actions may be at an end – and defendants will have to turn to other strategies to cut off class litigation at an early stage. Even if district courts do not adopt a bright line rule prohibiting full offers of judgment from ending class cases, defendants will have another hoop to jump through in trying to end cases at an early stage.

Regardless of how the arguments play out, one potential change is that placeholder class certification motions, currently used to avoid mootness, might go away, perhaps resulting in a silver lining for defendants who will no longer have a certification motion hanging over their head from the very beginning of the case.

The silver lining aside, Chapman is a blow to the defense of class actions, but the magnitude of that blow remains uncertain. Stay tuned.

If At First You Don’t Succeed, Plead, Plead Again…

Posted in Class Action Litigation

NewYorkSkylineBy Gerald L. Maatman Jr. and Howard M. Wexler

In Wynn, et al. v. The New York City Housing Authority 14 Civ. 2818 (S.D.N.Y. July 29, 2015), several employees (who were either African-American or Hispanic) alleged that their employer, the New York City Housing Authority (“NYCHA”) systematically undercompensated them based on their race and/or ethnicity in violation of 42 U.S.C. Section 1981 as well as New York City Human Rights Law (“NYCHRL”). Id. at 1. The NYCHA filed a motion to dismiss both for failure to state a claim as well as for lack of subject matter jurisdiction.  In a decision highlighting both the legal questions that must be addressed in deciding a motion dismiss claims of wage-based discrimination, as well as the standards that courts must apply when deciding whether to grant leave to amend a complaint, Judge Shira Scheindlin granted in part and denied in part  the NYCHA’s motion to dismiss.

Background Facts

Plaintiffs are employed as Plasterer Tenderers with the NYCHA. Id. at 1. Plaintiffs, who worked for the NYCHA from between 12 and 17 years, allege that they were discriminated against based on their race and were not paid prevailing wages. Id. at 2. Plaintiffs also alleged that the NYCHA attempts to cover up their discriminatory practices by assigning them to an improper job title (and thus locking them into certain salary schedule set by an applicable collective bargaining agreement). Id. at 2-3.

The Court’s Decision

In an analysis that all corporate counsel would be wise to read, the Court set forth exactly what must be established by a party seeking to have a case dismissed under both Rule 12(b)(1) and 12(b)(6). With respect to a Rule 12(b)(1) dismissal, a court must “take all uncontroverted facts in the complaint as true, and draw all reasonable inferences in favor of the party asserting jurisdiction.” In reaching such a decision, courts are permitted to look to “evidence outside of the pleadings” when deciding issues of fact concerning jurisdiction. Id. at 3-4.

Here, the NYCHA argued that plaintiffs’ claims are governed by a collective bargaining agreement, and thus the Court lacked subject matter jurisdiction because plaintiffs failed to exhaust their administrative remedies.   Id. at 13.  The Court flatly rejected this argument, finding that “NYCHA fails to cite any case linking the existence of a collective bargaining agreement to depriving federal courts of subject matter jurisdiction to hear a claim of employment discrimination.  There is none.”  Id. at 14.  As such, Judge Scheindlin refused to dismiss the case based on lack of subject matter jurisdiction.  Id.

As to the remainder of the NYCHA’s motion, Judge Scheindlin – as many judges frequently do when faced with a defective initial pleading – granted Plaintiffs a proverbial second bite of the apple to state valid causes of action. With respect to their Section 1981 claim alleging municipal liability, Plaintiffs’ proposed amended complaint alleged that the NYCHA gave preferential treatment to Mason Helpers – who are predominantly white – by assigning them to a higher rate of pay than the positions they held, Plasterer Tenderers, a position mostly occupied by Hispanic and African-American employees. Id. at 17-18. The Court held that the new alleged practice – assigning a lower compensation and incorrect job title to minority workers – could constitute a “persistent or widespread practice that has the force of law” which is needed to state a claim for municipal liability. As such, the Court allowed Plaintiffs’ to amend their complaint. Id. at 18.

The Court similarly granted Plaintiffs leave to amend their Section 1981 and 1983 claims, claims as well as their claims for discrimination under the New York City Human Rights Law.  Id. at 18-20. The Court, however, refused to grant Plaintiffs leave to assert a disparate impact theory of liability in connection with their Section 1981 and 1983 claims since such claims are not cognizable under Section 1981 or a claim of denial of equal protection under Section 1983. Id. at 21.

Implications For Employers

While the Court’s decision to, for the most part, allow Plaintiffs to replead their claims is not a surprise, this decision highlights a common question companies face when presented with a barebones, deficient, initial pleading:  move to dismiss, or, litigate the case with the deficient pleading on the books and use it to set up the case for dismissal at the summary judgment stage.  Each case is different, however, it may be beneficial to hold off on moving to dismiss for fear of facing a better pleading drafted with the benefit of a Court providing a roadmap for a better plead complaint well as to prevent tipping off the other side to arguments that could wipe the case out at summary judgment. As such, think strategically so as to avoid winning the battle but losing the war!

Court Awards The EEOC Attorneys’ Fees And Contempt Fines In Post-Judgment Discovery Dispute

Posted in EEOC Litigation

gavel on white backgroundBy Christopher M. Cascino and Gerald L. Maatman, Jr.

In EEOC v. Northern Star Hospitality, Inc., No. 12-CV-214 (W.D. Wis.), a case we have blogged about previously here, Judge Barbara B. Crabb of the U.S. District Court for the Western District of Wisconsin imposed contempt sanctions on an employer for failure to cooperate in post-judgment discovery and granted the EEOC’s request for attorneys’ fees for the time it spent bringing the contempt motion.

The ruling is a cautionary tale for employers, and shows how the EEOC can seek attorneys’ fees despite the fact that its attorneys do not bill a client, and demonstrates that the EEOC will pursue collection of even small judgments against unsuccessful defendants.

Case Background

Dion Miller, an African-American, was a cook for Northern Star Hospitality, Inc. d/b/a Sparx Restaurant (“Sparx”).  On October 1, 2010, when Miller arrived at Sparx to begin his shift, a co-worker told him to look in the kitchen cooler.  In the cooler was a one-dollar bill with a noose drawn around President Washington’s neck and a sketch of a hooded Klansman on horseback with “KKK” written on the hood.  Also in the cooler was a picture of the late Gary Coleman.

Miller had a co-worker take a photograph of the display in the cooler and lodged a complaint with the restaurant’s general manager.  The general manager learned that two of Miller’s superiors – the kitchen manager and kitchen supervisor – admitted that they were responsible for the display.  As a result of the complaint, the kitchen supervisor was given a warning, with the kitchen manager receiving no discipline at all.

After Miller’s complaint, the kitchen manager and supervisor began to criticize Miller’s performance.  Miller was then terminated less than one month after the display was put up.

On March 27, 2012, the EEOC filed suit against Sparx on Miller’s behalf, claiming that he was the victim of racial harassment and that he was wrongfully terminated for opposing that harassment.  On February 25, 2014, after a jury verdict in favor of the EEOC, the Court entered a $64,795.50 judgment against Sparx.  That judgment was upheld by the Seventh Circuit on January 29, 2015.

After the judgment was affirmed, the EEOC served interrogatories on Sparx, seeking information about its assets.  Deeming Sparx’s responses insufficient, the EEOC moved to compel Sparx to provide adequate answers to its interrogatories and for attorneys’ fees expended in seeking adequate interrogatory answers.  The Court granted the motion on June 16, 2015, ordering Sparx to provide further interrogatory answers and to pay the EEOC attorneys’ fees for time spent preparing the motion to compel.

Despite the order, Sparx failed to pay the EEOC’s fees and failed to provide updated interrogatory answers.  On July 27, 2015, the EEOC moved for sanctions for contempt of the Court’s order on the motion to compel.  It also sought attorneys’ fees for the time it spent preparing the motion for a finding of contempt.

The Court’s Ruling

The Court granted the EEOC’s motion for a finding of contempt.  It ordered Sparx to pay a $1,000 per day fine starting three days following the finding of contempt for each day Sparx did not provide updated interrogatory answers and did not pay the EEOC’s fees for the motion to compel.  It further awarded the EEOC $1,000 in fees for the two-and-a-half hours it spent drafting the motion for a finding of contempt.

Implications For Employers

This case will provide further support for the EEOC’s position that, despite the fact its attorneys do not bill any client for their time, it should be entitled to attorneys’ fees in the right circumstances.  Moreover, the case indicates that the EEOC will pursue judgments, no matter how small, that it has won.

Readers can also find this post on our EEOC Countdown blog here.

 

Calling All Readers! The Workplace Class Action Blog Is In The Running For The ABA Journal Blawg 100 Award!

Posted in Class Action Litigation

awardsAs many of you may know, our blog is a one-of-a-kind reference site and thought leadership forum that analyzes the latest trends in complex employment litigation. The Workplace Class Action Blog is also one of the primary vehicles for disseminating Seyfarth’s Annual Workplace Class Action Litigation Report. We were again honored this year with a review of our Report by Employment Practices Liability Consultant Magazine (“EPLiC”).

Here is what EPLiC said: “The Report is the singular, definitive source of information, research, and in-depth analysis on employment-related class action litigation. Anyone who practices in this area, whether as an attorney, risk manager, underwriter, or broker, should not be without it. This is because the Report is the only publication of its kind in the United States.” You can read more about the review here.  Furthermore, EPLiC recognized our Report as the “state-of-the-art word” on workplace class action litigation.

Please help us gain some extra recognition by nominating us for the ABA’s annual 100 best legal blogs competition today!

Check out what others are saying about us:

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Here are some additional information you should know about the nomination.

When: Nominations are open now till August 16, 2015.

Where: Click the link here to nominate. Simply provide a short explanation of why you like this blog.

Why: Check out some of the competition criteria:

  • The author is recognizable as someone working in a legal field or studying law in the vast majority of the posts. √
  • The majority of the blog is written with an audience of legal professionals or law students — rather than potential clients or potential law students — in mind. √
  • The majority of the blog’s content is unique to the blog and not cross-posted or cut and pasted from other publications. √

Hurry over to the site and nominate!  Thank you for your consideration and support!

 

Court Issues Preliminary Injunction Prohibiting Employer From Terminating Employee Pending Resolution Of EEOC Lawsuit

Posted in EEOC Litigation

CADNUS-District-Court-CaliforniaBy Laura J. Maechtlen and Courtney K. Bohl

On July 22, 2015, in Equal Employment Opportunity Commission v. Peters’ Bakery, Case No. 13-CV-045107 (N.D. Cal. July 22, 2015), Judge Beth Labson Freeman of the U.S. District Court for the Northern District of California, granted the EEOC’s request for a preliminary injunction enjoining Peters’ Bakery from terminating Claimant Marcela Ramirez’ employment pending resolution of the EEOC’s lawsuit.

While such injunctions are rare, this decision is a cautionary tale and must read for employers who may be considering terminating an employee after he or she files a charge of discrimination or a lawsuit under Title VII or similar state statutes.

Background

In September 2013, the EEOC filed suit against Peters’ Bakery alleging that it subjected Ramirez to harassment and discrimination based upon her race/national origin and that Peters’ Bakery had retaliated against Ramirez after she engaged in protected activity of filing a charge with the EEOC. The EEOC alleged that the owner of Peters’ Bakery, Charles Peters, allegedly subjected Ms. Ramirez to comments such as “Mexicans like you would rather lie than tell the truth” and “I never trusted your kind of people.” The EEOC also alleged that Mr. Peters terminated Ramirez’ employment in August 2011, but was forced to reinstate her after an arbitrator ordered him to do so in a union grievance proceeding.

A couple years after the lawsuit was filed, on June 30, 2015, Peters’ Bakery informed Ramirez that she was being fired effective, Friday, July 3, 2015. When asked why, Mr. Peters allegedly stated that Ramirez “knew why,” that he did not have to give Ramirez “a f***ing reason,” that he doesn’t like her, and that he needed to fire her “before [he] f***ing lose[s] it and kill[s] someone.”

The EEOC filed an application for a temporary restraining order (“TRO”) and an order to show cause for entry of a preliminary injunction on July 2, 2015. The Commission sought to enjoin Peters’ Bakery from terminating, disciplining, threating, or harassing Ramirez. The Court granted the TRO in part, enjoining Peters’ Bakery from terminating Ramirez pending a hearing on the motion for preliminary injunction. On July 22, 2015, following oral argument, the Court granted the EEOC’s preliminary injunction in part, enjoining Peters’ Bakery from terminating Ramirez’ employment pending resolution of the lawsuit.

The Court’s Ruling

The Court first addressed Peters’ Bakery argument that the EEOC was seeking a mandatory injunction reinstating Ramirez, and thus the EEOC has a heavier burden. Id. at 4. The Court rejected this argument, noting it was not supported by the evidence because Ramirez had not been fired before the TRO of July 2, 2015. Rather, the Court found that Ramirez had been given notice that she would be fired effective July 3, 2015. Id. Additionally, the Court held that even if the EEOC was requesting reinstatement, the EEOC would be entitled to such relief under the Court’s broad authority to grant preliminary injunctive relief and due to the fact that reinstatement is a form of relief specifically provided for by Title VII. Id.

Next, the Court applied the four part test for a preliminary injunction set forth in Winter v. Natural Resources Defense Council, Inc., 555 U.S. 7, 22 (2008). Under this four part test, a plaintiff seeking a preliminary injunctive relief must establish: (1) that he is likely to succeed on the merits; (2) that he is likely to suffer irreparable harm in the absence of preliminary relief; (3) that the balance of equities tips in his favor; and (4) that an injunction is in the public interest. Id. at 3. The Court found that the EEOC satisfied its burden to establish each of these four elements with regard to the threatened termination, but not with regard to the harassment and discipline. Id. at 7.

Threatened Termination

The Court found the EEOC established the first Winter factor — likelihood of success on the merits — because the EEOC submitted evidence that Mr. Peters previously terminated Ms. Ramirez in August 2011 without cause, refused to comply with an arbitrator’s order to reinstate her; used language on July 30, 2015 giving rise to an inference of improper motive; and gave no legitimate business reason for terminating Ramirez. Id. at 5. The Court also found that the EEOC satisfied the second factor — likelihood of irreparable harm — citing Ramirez’ declaration, which stated that if she was fired, Ramirez would not have enough money to pay her mortgage or keep her children in private Catholic school, she and her family would lose their healthcare benefits, she would lose the positive relationships she developed with coworkers over the last 14 years working at Peters’ Bakery, and she would lose her seniority in the union. Id. The Court also noted that terminating Ramirez may have a chilling effect on other employees who might wish to file charges with the EEOC and could interfere with the EEOC’s mission. Id. at 5-6.

As to the third and fourth Winter factors — the balance of equities and whether an injunction is in the public interest — the Court found that the equities tip in the EEOC’s favor. Id. at 6. Although the Court was sympathetic to Mr. Peters’ testimony that working with Ramirez affects his health and causes him stress, the Court noted that Mr. Peters is the owner of the bakery and his hours are within his own control. Id. Any inconvenience that would result from Mr. Peters changing his hours is far outweighed by the irreparable harm that would be imposed on Ramirez if she was fired. Id. The Court also noted that taken to its logical conclusion, Mr. Peters’ argument would mean that anytime an employee sues an employer, the employer could fire the employee to avoid being stressed. Id. The Court held such a result is not within the public interest. Id.

Harassment And Discipline

The Court denied the EEOC’s request for preliminary injunction to enjoin discipline and harassment. Id. at 7. The Court noted that the EEOC did not present specific evidence regarding the irreparable harm Ramirez would suffer if the harassment and discipline was not enjoined. Id. Further the Court  found the injunction would be hopelessly vague to the point of  threatening Peters’ Bakery’s due process rights. Id.

Implication for Employers

This decision is a reminder to employers that courts can, and sometimes do, enjoin employers from making termination decisions or require an employer to reinstate an employee pending the outcome of litigation alleging violations of Title VII or similar state statutes. If an employer is considering terminating an employee with a pending charge or lawsuit, that employer should ensure it has substantial justification for its decision.  Stress or mere inconvenience to an employer will likely not be sufficient to support a termination.

Readers can also find this post on our EEOC Countdown blog here.

Where’s the Beef Part II: Court Refuses To “Butcher” EEOC’s Religious Discrimination Claim

Posted in EEOC Litigation

Raw, Inside Round Beef Roast -Photographed on Hasselblad H3-22mb CameraBy Gerald L. Maatman Jr. and Howard M. Wexler

Our loyal blog readers may recall a post we authored in October 2013 regarding EEOC v. JBS USA, LLC (the “Nebraska Case”), where Chief Judge Laurie Smith Camp of the U.S. District Court for the District of Nebraska entered judgment for the employer, JBS USA, in a hotly contested religious discrimination case, finding that the employer established the affirmative defense of undue hardship since “a religious accommodation for Muslim employees [at its Grand Island, Nebraska processing facility] within the parameters requested [by the EEOC], would have caused more than a de minimis burden on JBS and on its non-Muslim employees.”

To quote former New York Yankee Yogi Berra, “It’s like Déjà vu all over again” for JBS, and this time, however, it was not as lucky. In EEOC v. JBS USA, LLC, Case No. 10-CV-02103 (d. Colo. July 17, 2015), Judge Philip A. Brimmer of the U.S. District Court for the District of Colorado denied JBS’ motion for summary judgment in connection with a similar case filed by the EEOC against JBS regarding a different facility, this one in Greeley, Colorado, which was based in part on JBS’ argument that its favorable decision in the Nebraska Case collaterally estopped the EEOC from advancing its claims. Judge Brimmer denied JBS’ motion and ordered that the case proceed to trial.

Background Facts

The EEOC filed the lawsuit based on a conflict between JBS and several hundred Muslim employees at a beef processing facility in Greeley, Colorado who sought accommodation from JBS for their religious beliefs.  Id. at 1-2.  The conflict reached its height during Ramadan 2008, when employees requested that JBS accommodate their need to leave the production line to pray at or near sundown. Id. at 2. The employees and JBS were unable to come to an agreement regarding the employees’ need to pray, leading to the suspension and termination of a large number of Muslim employees based on job abandonment. Id. On August 30, 2010, the EEOC filed suit claiming that JBS discriminated against its Muslim employees on the basis of religion by engaging in a pattern or practice of retaliation, discriminatory discipline and discharge, harassment, and denying its Muslim employees reasonable religious accommodations.  Id.

The Court bifurcated the case and the “Phase I” issues before the Court were: (1) the EEOC’s claim that JBS engaged in a pattern or practice of denying Muslim employees reasonable religious accommodations, (2) the EEOC’s retaliation pattern or practice claim, and (3) the EEOC’s discriminatory discipline and discharge pattern or practice claim. Id. At the close of “Phase I” discovery, JBS sought summary judgment on all three of EEOC’s Phase I claims. Id.

The Court’s Decision

JBS argued that Nebraska Case decision estopped the EEOC from: (1) claiming that its proposed accommodations of providing unscheduled breaks for prayer and moving scheduled breaks to sundown are non-burdensome; and (2) claiming that the termination and discipline of Muslim workers during Ramadan 2008 constituted a pattern or practice of retaliation and discrimination.  Id.  at 25.

In the Tenth Circuit, a party asserting collateral estoppel must satisfy four elements, including: (1) the issue previously decided is identical with the one presented in the action in question, (2) the prior action has been finally adjudicated on the merits, (3) the party against whom the doctrine is invoked was a party, or in privity with a party, to the prior adjudication, and (4) the party against whom the doctrine is raised had a full and fair opportunity to litigate the issue in the prior action. Id.

In opposing JBS’ motion for summary, judgment, the EEOC did not dispute that the accommodations it proposed were identical to those proposed in the Nebraska Case – which they were. Id. at 26-27. Rather, the question before the Court was whether EEOC was collaterally estopped from litigating the issue of whether those accommodations result in undue hardship at the Colorado facility given that they were held to pose an undue hardship at the Nebraska facility. Id. at 27.

In denying JBS’ request to estop the EEOC from challenging the undue burden defense, the Court focused on several differences between the two cases, including different staffing levels; different collective bargaining agreements between the two facilities with different break-time clauses; and different employee requests. Id. at 27-30. Accordingly, the Court held that, “although both cases involve application of the same rule of law and involve claims that are closely related, JBS has failed to establish that the factual differences between this case and the Nebraska case are legally insignificant and the Court further finds that the balance of considerations weighs against finding that the identity of issue element is satisfied.” Id. at 30.

The Court then turned to the aspect of JBS’ motion and went through the record in painstaking detail and reached the decision that there were genuine disputes of material fact which prevented JBS from obtaining summary judgment on its undue hardship defense as well as their retaliation and discrimination claims. Although the Court acknowledged similarities between the Nebraska and Colorado facilities, “genuine disputes of material fact exist as to the feasibility of the EEOC’s proposed accommodations…thus the…EEOC has raised a genuine dispute of material fact as to the effectiveness and facial reasonableness of its proposed accommodations” as well as whether granting such accommodations would have posed an undue burden. Id. at 50 & 62.

Implications For Employers

Employers faced with a claim of religious discrimination under Title VII who refuse an accommodation request must be prepared to come forward with specific evidence demonstrating the “undue burden” that granting the request would cause. Employers must be prepared to demonstrate that the proposed accommodations pose an undue hardship in order to escape liability. That JBS obtained summary judgment in the Nebraska case, however, was not able to do so in the Colorado case, is a perfect example of the case-by-case analysis that courts utilize in deciding these type of accommodation cases, especially when an employer argues the undue hardship defense to a failure to accommodate claim under either Title VII or the ADA. A “one size fits all” approach will not pass muster and will result in employers ending up on the chopping block.