Workplace Class Action Blog

New York Federal Court Takes Lessons From Wal-Mart And Partially Decertifies Class And Bifurcates Liability And Damages Phases

Posted in Class Certification

us-district-court-for-the-southern-district-of-new-york-logo-sdny.jpgBy Anthony Califano and Lynn Kappelman

On December 4, 2012, Judge Kimba Wood of the U.S. District Court for the Southern District of New York partially decertified a class in a disparate impact race discrimination case entitled Gulino v. Bd. of Educ. of City School Dist. of City of New York, No. 96-CV-8414, 2012 U.S. Dist. LEXIS 172687 (S.D.N.Y. Dec. 4, 2012), holding that Plaintiffs’ claims for individualized monetary and injunctive relief cannot proceed on a class-wide basis under Rule 23(b)(2) following the Supreme Court’s decision in Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541 (2011).

Perhaps more interesting, however, is the Court’s decision to bifurcate the liability and damages phases of the remaining class claims in a fashion that will likely become more common in the future. As such, this is a good read for corporate counsel about the future battlegrounds for workplace class action litigation.

Background Of The Case

Purporting to represent a class of African-American and Latino teachers in the New York City public school system, Plaintiffs filed this class action in 1996. Id. at *2. Plaintiffs assert that when the Board of Education of the City School District of the City of New York (“Board”) required teachers to pass certain standardized tests in order to be licensed to teach in the school district, this had a disparate impact on them because of their race and violated Title VII. Id. Plaintiffs and putative class members had not passed the standardized licensing exams so they could not obtain permanent teaching licenses or they had their licenses revoked. Id. at *10. Plaintiffs claimed that the standardized exams had a disparate impact because Caucasian teachers passed the exams “at a statistically significant higher rate than African-American and Latino test-takers.” Id. at *11. Likewise, Plaintiffs asserted that the standardized tests were not justifiable as “job related because they did not measure whether experienced teachers such as Plaintiffs were qualified to teach.” Id

On behalf of themselves and the putative class, Plaintiffs sought three types of relief, including: (1) back pay; (2) a declaratory judgment as to the Board’s liability for disparate impact discrimination under Title VII; and (3) injunctive relief, ordering the Board to give them teaching licenses and seniority rights, and ordering the appointment of a monitor to ensure that the current test does not violate Title VII. Id. at *12-13. In 2001, the Court certified the case as a class action under Rule 23(b)(2). Id. at *21. After dispositive motions, an “epic bench trial,” and a trip to the Second Circuit regarding issues seemingly unrelated to class certification, the case ended up back before the Court. Id. at *8. In July 2011, while the case was pending on remand, the Board filed a motion to decertify the class based on the Supreme Court’s decision in Wal-Mart.  Judge Wood granted the Board’s motion to decertify as to Plaintiffs’ claims for individualized monetary relief and individualized injunctive relief (teaching licenses and seniority rights), but denied the motion as to Plaintiffs’ claims for a declaratory judgment as to the Board’s liability and the injunctive relief which would benefit the class as a whole. Id. at *20, 25. 

The Court’s Ruling

In the wake of Wal-Mart, the Court reasoned that it would be inappropriate to certify the class under Rule 23(b)(2) in those instances where each class member is entitled to different relief requiring individualized determinations. Id. at *25-27. “In order to obtain individualized relief, a putative class must satisfy the requirements of Rule 23(b)(3), which includes greater procedural protections, such as notice and opportunity to opt out.” Id. at *26. Because Rule 23(b)(2) lacks those procedural and due process safeguards, the Supreme Court in Wal-Mart held that it is inappropriate to certify class actions requiring individualized determinations and awards under Rule 23(b)(2). Id. In this case, Plaintiffs clearly were seeking individualized monetary relief in the form of back pay and individualized injunctive relief in the form of teaching licenses and seniority rights. However, the Court noted that Wal-Mart does not address class certification under Rule 23(c)(4)(A), which provides that “‘an action may be brought or maintained as a class action with respect to particular issues.’” Id. at *27 (quoting Fed.R.Civ.P. 23(c)(4)(A)). Here, because the Court’s determination of whether the Board’s tests had a disparate impact under Title VII did not require any individualized determination, it could be determined under either Rules 23(b)(2) or 23(c)(4)(A). Thus, the Court noted that it is appropriate to “bifurcate proceedings by first certifying an ‘injunctive’ class under (c)(4) to determine liability, and then certifying a ‘remedial’ class under (b)(3) to determine damages” if Plaintiffs establish class-wide liability. Id. at *28.

The Court then applied this framework to the three types of relief that Plaintiffs were seeking. First, the Court held that Plaintiffs’ request for a declaration regarding the Board’s liability under Title VII is appropriate for class treatment under Rule 23(b)(2) and (c)(4) at the liability stage because “resolution of the claim will not involve individualized determinations, but rather involves a claim common to the class, the resolution of which will streamline later proceedings for damages and other individual relief.” Id. at *30-31. Second, the Court held that Plaintiffs’ request for monetary relief is inappropriate for class treatment under Rule 23(b)(2), and “unquestionably may be certified only under Rule 23(b)(3).” Id. at *31. The Court went on, however, to allow bifurcation of the proceeding into two phases – a liability phase, which is appropriate for certification under Rule 23(b)(2) and (c)(4), and a later remedial phase in which Plaintiffs may seek class certification under Rule 23(b)(3) if they establish liability. Id. at *32. The Court held that “[t]he reasons for bifurcating liability from remedial issues apply with no less force now than they did prior to Wal-Mart, particularly since individual issues will arise only if the class establishes the employer’s liability.” Id. at *32-33 (internal citations and quotations omitted). Lastly, the Court held that Wal-Mart requires the Court to decertify the class as to Plaintiffs’ claims for injunctions providing teaching certificates to each class member and providing seniority rights to each class member who is still teaching but failed the test.  Id. at *33-34. The Court noted that each class member would be entitled to a different injunction, making class certification inappropriate under Rule 23(b)(2). Id. at *34. On the other hand, Plaintiffs’ request for a monitor to ensure that the current exam is non-discriminatory seeks  “an indivisible injunction benefiting all the class members at once,” and thus complies with Wal-Mart requirements for class certification under Rule 23(b)(2). Id. at *36 (internal citations and quotations omitted).

Implications For Employers

We expect that more and more Plaintiffs’ class action lawyers will begin to adapt and argue for an application of Wal-Mart to bifurcate cases in this fashion where the Plaintiffs are seeking individualized relief, but the liability issues pertain to the class as a whole. Specifically, courts will likely certify classes under Rule 23(b)(2) or (c)(4) as to the liability issues and later, if necessary, allow Plaintiffs to seek class certification at the remedial phase under Rule 23(b)(3).