In 2011, we reported on In Re Countrywide Financial Mortgage Lending Practices Litigation, No. 08-MD-1974, 2011 U.S. Dist. LEXIS 118695 (W.D. Ky. Oct. 13, 2011), a decision denying class certification of a class of mortgage borrowers. In that case, African-American and Hispanic named plaintiffs alleged that Countrywide Financial discriminated against them in granting mortgage loans by charging higher interest rates and imposing costs not assessed on non-minority borrowers. Plaintiffs asserted that a “discretionary pricing policy” allowed individual mortgage officers to make subjective decisions that had a disparate impact on minorities. Plaintiffs presented expert-generated statistical regression analyses to support their claims. In rejecting a motion to certify a class, the District Court held that this theory could not satisfy the commonality requirement of Rule 23(a), in the wake of the Supreme Court’s then-recent decision in Wal-Mart Stores, Inc. v. Dukes, 131 S.Ct. 2541 (2011). You can read our initial post on that decision here.
Plaintiffs sought an interlocutory appeal of that decision, which the Sixth Circuit granted as a discretionary interlocutory appeal pursuant to Rule 23 (f). On January 15, 2013, the Sixth Circuit affirmed the denial of certification in In Re Countrywide Financial Corp., Case No. 12-5250, 2013 WL 149853 (6th Cir. Jan. 15, 2013). In its opinion, the Sixth Circuit rejected Plaintiffs’ argument that the District Court abused its discretion in finding that the proposed class failed to satisfy the Rule 23(a) commonality requirement. The Sixth Circuit relied heavily on the Wal-Mart opinion, finding that the Supreme Court foreclosed a class challenge to the subjective component of Countrywide’s loan-pricing policy. The Sixth Circuit noted that: “On this point, [Wal-Mart Stores, Inc. .v] Dukes is clear: class members must unite acts of discretion under a single policy or practice, or through a single mode of exercising discretion, and the mere presence of a range within which acts of discretion take place will not suffice to establish commonality.” Id. at *3.
The Sixth Circuit additionally rejected Plaintiffs’ argument that the Seventh Circuit’s decision in McReynolds v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 672 F.3d 482 (7th Cir. 2012), somehow resuscitated their claims. The Sixth Circuit found that, even under McReynolds’s approach to Wal-Mart, the claims at issue could not be certified because Plaintiffs failed to identify “companywide policies that contributed to the alleged disparate impact that arose from the delegation of discretion” to individual decision-makers. 2013 WL 149853 at *4.
Implications For Employers
This decision provides further support for employers defending employment discrimination class actions premised on a theory that managers engaged in subjective decision-making to disadvantage protected groups. The Sixth Circuit has joined the chorus of rulings that have observed that class certification theories based on the use of subjective discretion are rarely viable after Wal-Mart.