Class Action Litigation

Seyfarth Synopsis: On October 5, 2017, U.S. Attorney General Jeff Sessions issued an agency memorandum stating that the language contained in Title VII of the Civil Rights Act of 1964, “does not prohibit discrimination based on gender identity per se, including transgender status.” It represented a head-snapping pivot of the position of the U.S. Department of Justice. In this video, Jerry Maatman of Seyfarth Shaw, LLP gives blog readers an overview of the recent history regarding legal interpretation of Title VII. Jerry discusses potentially conflicting statutes and court rulings, as well as the ways in which this Department of Justice memorandum could affect businesses and those who litigate under Title VII.

Summary

Title VII of the Civil Rights Act of 1964 has been a prevalent federal statute since its passage over 50 years ago. Therefore, it is an especially important statute to understand for nearly every employer. During the Obama Administration, Attorney General Eric Holder stated in a 2014 memorandum that the Department of Justice does, in fact, apply the concept of sex discrimination in the workplace to transgender workers. However, Congress has rejected all attempts thus far to amend Title VII. To that end, the language of the law leaves legal interpretation open for debate.

The EEOC’s current view of Title VII is that it includes protections for transgender workers. In addition, 20 states and the District of Columbia include both sexual orientation and gender identity as protected categories under their discrimination statutes. The recent statement by the Department of Justice has renewed the widespread debate over the definition of sex discrimination, a dispute which we suspect will not end any time soon. Make sure to stay tuned to our blog and Twitter account for updates and insights on this important legal issue!

Seyfarth Synopsis: The plaintiffs’ bar has recently brought a flurry of class action lawsuits against businesses under the Illinois Biometric Information Privacy Act, commonly known as “BIPA.”  In this Vlog, Seyfarth Shaw Associate Alex Karasik sits down with esteemed class action litigator, Partner Jerry Maatman, to discuss this emerging legal trend, and to provide employers guidance on how to prevent and defend against BIPA class actions.

Background

Unique to the state of Illinois, the Biometric Information Privacy Act was the first of its kind enacted by a state legislature.  In light of the technological advancements of the past decade, the Illinois legislature enacted this law to protect the “biometric data” of individuals, including their fingerprints, retinal scans, and facial recognition.  Since BIPA’s passage in 2008, a number of states have followed suit and added “biometric data” to their privacy laws. 

Implications For Employers

Recently, there has been a major uptick in ligation across the country involving biometric technology, and there are no signs of this trend slowing down.  In terms of preventive measures, business should establish sound protocols for the handling and dissemination of biometrics.  This is important because, in this day and age, biometric data can be used to access sensitive personal information.  Businesses should thus be cognizant of the biometric data laws in the states where they operate and closely examine whether their own policies and procedures are compliant.

Businesses must also be prepared to defend against a potential lawsuit under a biometric privacy statute.  Following the U.S. Supreme Court’s decision in Spokeo, Inc. v. Robins 136 S. Ct. 1540 (2016), the concept of “standing” has become highly relevant in employment law.  As such, when confronted with a BIPA suit, businesses should focus on whether the plaintiffs suffered a traceable harm stemming from the actions taken on their biometric data.

 

 

By Gerald L. Maatman, Jr. and John S. Marrese

Seyfarth Synopsis:  In In Re Subway Footlong Sandwich Mktg. & Sales Practices Litig., No. 16-1652 (7th Cir. Aug. 25, 2017), the U.S. Court of Appeals for the Seventh Circuit overturned a district court’s approval of a class action settlement involving Subway sandwich purchasers who sued for alleged consumer fraud.  The Seventh Circuit called the settlement “worthless” in terms of alleged relief to the class. The decision illustrates that companies defending class action litigation cannot exit such lawsuits by simply “buying peace” by paying-off plaintiffs’ lawyers without providing any value to the class. In this respect, it is one of those unique rulings that is well worth a read by corporate counsel and business executive alike.

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In In Re Subway Footlong Sandwich Mktg. & Sales Practices Litig., No. 16-1652, 2017 U.S. App. LEXIS 16260 (7th Cir. Aug. 25, 2017), the U.S. Court of Appeals for the Seventh Circuit addressed the propriety of an injunctive relief settlement for a class of Subway “Footlong” sandwich purchasers.

A number of state-law consumer protection class actions were filed against Subway based on Subway’s alleged failure to ensure that its Footlong sandwiches were actually 12 inches long.  Id. at *3-5.  Limited discovery showed that the claims had little merit. Subway had always taken steps to ensure that its sandwiches were proper length, but bread length nonetheless varies due to natural and unpreventable variation in the bread-baking process.  Id. at *5.

Rather than pursue resolution on the merits, the parties reached a class-wide settlement for injunctive relief whereby Subway agreed to implement redundant and futile measures in an attempt to ensure Footlongs lived up to their name.  Id. at *7.  Plaintiffs’ attorneys received $520,000 in return for attorneys’ fees.  Id. at *8.  The district court approved of the settlement over objections by certain class members.  Id.

On appeal, the Seventh Circuit reversed, finding that the settlement was “worthless” to the class.  Id. at *14.

Case Background

In 2013, after an online photo went viral showing one customer’s Footlong Subway sandwich was in fact only 11 inches, a slew of plaintiffs’ attorneys filed putative class actions against Subway for damages and injunctive relief.  Id. at *3-4.   The class actions were consolidated in a multidistrict litigation in the U.S. District Court for the Eastern District of Wisconsin.  Id. at *4-5.

Limited discovery revealed that the claims had little merit as: (i) Subway had taken steps to ensure that its Footlongs were in fact 12 inches long; (ii) the minor variability in bread length revealed was due to natural and unpreventable variability in the baking process; and (iii) irrespective of bread length, customers received the same amount of meat, cheese, and other toppings on a sandwich.  Id. Such facts eliminated any hope of certification of a damages class under Rule 23(b)(3), so class counsel focused on certification of a Rule 23(b)(2) injunctive relief class instead.  Id. at *5-6.

The parties subsequently reached a settlement for injunctive relief whereby Subway agreed to implement measures aimed at ensuring Subway Footlongs were in fact 12 inches long, including: (i) requiring franchisees to use a measuring tool for sandwiches; (ii) requiring corporate quality-control inspectors to measure baked bread and check oven operation during regularly scheduled visits; and (iii) posting a notice on its website and in restaurants notifying customers of the variability in baked bread.  Id. at *7.

In return, the plaintiffs agreed to cap their requests for attorneys’ fees at $525,000 and incentive awards at $1,000.  Id. The district court preliminarily approved the settlement, and class counsel filed a motion seeking $520,000 in fees for class counsel and $500 incentive awards for each named plaintiff.  Id. at *8.

A professional objector who was also a member of the class objected to the settlement.  However, the district court overruled the objection, approved the settlement, and certified a class of persons nationwide who had purchased six-inch and Footlong Subway sandwiches between 2003 and 2015.  Id.

The objector appealed.

The Decision

On appeal, the U.S. Court of Appeals for the Seventh Circuit reversed the district court’s approval of the class action settlement.  Id. at *14.

The Seventh Circuit found that the settlement was “worthless” and that “[n]o class action settlement that yields zero benefits for the class should be approved[.]”  Id. at *11.  The Seventh Circuit explained that irrespective of the measures Subway promised to take under the settlement, “there’s still the same small chance that Subway will sell a class member a sandwich that is slightly shorter than advertised.”  Id. at *13 (emphasis in original).

Moreover, the Seventh Circuit found that class members’ right under the settlement to hold Subway in contempt for violating the injunction did not add any value.  Id. at *14.  “Contempt as a remedy to enforce a worthless settlement is itself worthless.  Zero plus zero equals zero.”  Id.

Finally, though not part of its holding, the Seventh Circuit expressed its disdain for the Footlong lawsuits by proclaiming that, because the consolidated class actions sought worthless relief, they “should have been dismissed out of hand.” Id. at *14 (internal quotations and citation omitted).

Implication For Employers

As shown by the Seventh Circuit’s decision, paying-off class action plaintiffs’ counsel can be a poor strategy for efficient resolution of class litigation.  If an employer wishes to realize the cost-savings of early settlement, it must ensure that settlement provides actual value to the class and fees to class counsel commensurate with that value.  Otherwise, expected cost-savings are squandered on opposing objectors (or the trial judge), with the possibility that the trial or an appellate court rejects the settlement and returns the litigation to where settlement talks began.

As an alternative approach, employers should consider efficient and realistic paths to summary judgment.  That approach can make good sense in the face of attorney-driven class litigation with no emotional appeal like the Subway case.  The Seventh Circuit’s emphatic command that meritless class actions should be “dismissed out of hand” should give employers and counsel more confidence in that regard.

By Gerald L. Maatman, Jr. and John S. Marrese

Seyfarth Synopsis:  In Love v. Wal-Mart Stores, Inc., No. 15-15260 (11th Cir. Aug. 3, 2017), the U.S. Court of Appeals for the Eleventh Circuit ruled that the deadline for putative class members to appeal the dismissal of class claims was triggered by the filing of a stipulation of dismissal by named plaintiffs and defendant.  The decision adds to the growing body of jurisprudence concerning the limits on the ability of absent class members to continue class litigation after named representatives abandon it.

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In Love v. Wal-Mart, No. 15-15260, 2017 U.S. App. LEXIS 14261 (11th Cir. Aug. 3, 2017), the Eleventh Circuit addressed the timeliness of putative class members’ appeal of the dismissal of class claims filed more than 30 days after the named class representatives and defendant filed a stipulation of dismissal.  Id. at *5.

Putative class members had moved to intervene in the district court not long after the stipulated dismissal was filed.  Id. at *4. On the same day their motion to intervene was denied, but 34 days after the filing of the stipulated dismissal, putative class members appealed the denial of the motion as well as the district court’s prior dismissal of the class claims.  Id. at *4.

The Eleventh Circuit held that the putative class members’ appeal was untimely pursuant to the 30-day deadline set forth in Rule 4 of the Federal Rules of Appellate Procedure (“FRAP”).  Id. at *9.  The Eleventh Circuit reasoned that a stipulated dismissal under Rule 41(a)(1)(A)(ii) is effective immediately upon filing, unless its effectiveness is conditioned on a subsequent occurrence. Id. at *6-7.  No such condition existed in the stipulated dismissal at hand and, as such, the putative class members’ appeal 34 days after the filing of the stipulated dismissal ran afoul of FRAP 4.

Case Background

After the U.S. Supreme Court reversed the certification of a nationwide gender discrimination class in Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338 (2011), some members of the putative class in that case filed new, regional class actions against Wal-Mart, including Love v. Wal-Mart Stores, Inc. Id. at *1-2.  Putative class members were able to do so because Wal-Mart Stores v. Dukes tolled the statute of limitations with respect to their filing claims with the EEOC, which is a prerequisite to filing a federal discrimination suit.  Id. at *3.  However, in the Eleventh Circuit, such tolling is limited to individual, not class, claims.  Id.

Accordingly, the district court in Love allowed the individual claims of named plaintiffs to proceed, but dismissed the class claims as untimely.  Id. The named plaintiffs subsequently settled their individual claims with Wal-Mart.  Id.

On October 16, 2015, the named plaintiffs and Wal-Mart filed a stipulation of voluntary dismissal under Rule 41(a)(1)(A)(ii).  Id. On October 23, 2015, the district court entered an order acknowledging the stipulated dismissal and dismissing pending motions as moot. Id.

On November 6, 2015, a group of putative class members moved to intervene in the district court solely to appeal the district court’s dismissal of the class claims.  Id. at *4.  On November 19, 2015, the district court denied the motion to intervene on the grounds that the stipulated dismissal stripped the district court of jurisdiction to hear the motion. Id.  That same day, 34 days after the filing of the stipulated dismissal, the putative class members appealed both the denial of their motion to intervene and the dismissal of the class claims.  Id.

The Decision

On appeal, the Eleventh Circuit ruled that it did not have jurisdiction over the putative class members’ appeal of the dismissal of the class claims because it was filed more than 30 days after the filing of the parties’ stipulated dismissal.  Id. 

In doing so, the Eleventh Circuit rejected the putative class members’ argument that only the named plaintiffs’ appeal deadline was triggered by the stipulated dismissal and that the putative class members’ deadline was not triggered until the district court’s subsequent order on October 23, 2015.  Id. at *4-6.  The Eleventh Circuit explained that “the plain language of Rule 41(a)(1)(A)(ii) requires that a stipulation filed pursuant to that subsection is self-executing and dismisses the case upon its becoming effective, i.e., upon filing unless it explicitly conditions its effectiveness on a subsequent occurrence.”  Id. at *6-7 (internal quotations and citations omitted).

Without any condition in the stipulation here, the Eleventh Circuit found that the stipulated dismissal was effective upon filing and triggered the putative class members’ 30-day deadline under FRAP 4 to appeal dismissal of the class claims.  Id. at *7.  The putative class members’ appeal, filed 34 days after the filing of the stipulated dismissal, was therefore untimely.  Id. at *8-9.

In turn, although the putative class members’ appeal of the denial of their motion to intervene was timely filed, such an appeal was moot as the putative members had intervened solely for the purpose of appealing the dismissal of the class claims.  Id. at *9.

Implication For Employers

This decision is a great victory for the employer. It also offers insight into how an employer can protect itself from continued class litigation after settling individually with named plaintiffs.

In particular, an employer should endeavor to file a stipulation of dismissal in short order because, in certain jurisdictions, the district court may find that the filing of such a stipulation precludes absent class members’ from intervening and pursing class litigation further.  Employers should also try to prevent the inclusion of conditions in stipulations of dismissal which delay the effectiveness of such stipulations.

Furthermore, given the application of FRAP 4 here, employers should anticipate receiving notices of appeal from absent class member-intervenors with, or soon after, the filing of their motion to intervene.

By Gerald L. Maatman, Jr., Pamela Q. Devata, & Robert T. Szyba

Seyfarth Synopsis: Following remand from the U.S. Supreme Court, the Ninth Circuit found that the plaintiff suing Spokeo, Inc. under the Fair Credit Reporting Act alleged sufficient injury to establish standing to proceed in federal court and to proceed with his class action.

On August 15, 2017, the U.S. Court of Appeals for the Ninth Circuit issued the latest opinion in the Robins v. Spokeo, Inc. litigation that gave us last year’s U.S. Supreme Court opinion on Article III standing (which we discussed here).  After the Supreme Court found that the Ninth Circuit, in its prior February 2014 opinion (found here), had analyzed only whether the alleged injury was particular to Plaintiff, it remanded the case back for the second part of the analysis to determine whether Plaintiff alleged a concrete injury-in-fact, as required by Article III.

This new ruling is a “must read” for employers, as it has the potential to allow plaintiffs to launch more workplace class actions.

Case Background

The case was originally filed in the U.S. District Court for the Central District of California in 2010 against Spokeo, Inc., which operates an online search engine by the same name that compiles publicly available information on individuals into a searchable database on the internet.  The plaintiff alleged that Spokeo’s database showed inaccurate information about him, such as that he had a greater level of education and more professional experience than he in fact had, that he was financially better off than he actually was, and that he was married (he was not) with children (he did not have any).  Instead of any actual damages, the plaintiff alleged that Spokeo, as a consumer reporting agency, failed to “follow reasonable procedures to assure maximum possible accuracy of the information concerning” Plaintiff, and that its violation of section 1681e(b) of the Fair Credit Reporting Act (FCRA) was “willful” in order to seek statutory damages of between $100 and $1,000 for himself, as well as for each member of a putative nationwide class.

U.S. Supreme Court Decision

The issue of whether the plaintiff had standing to sue for the alleged statutory violation made its way to the U.S. Supreme Court, which in 2016 (in a 6 to 2 opinion by Justice Samuel A. Alito, Jr.) explained that “an invasion of a legally protected interest” that is both “concrete and particularized” is required to establish standing to proceed in federal court.  To be concrete, the alleged injury must “actually exist” and must be “real” and not “abstract.”  The Court further discussed that plaintiffs do not “automatically” meet the injury-in-fact requirement where the violation of a statutory right provides a private right of action.   The plaintiff here, therefore, “could not, for example, allege a bare procedural violation divorced from any concrete harm, and satisfy the injury-in-fact requirement of Article III.”  Because the Ninth Circuit had not completed both parts of the standing analysis, however, the case was remanded for further review.

Ninth Circuit’s Standing Analysis

In light of the Supreme Court’s directive, the Ninth Circuit opened by affirming the threshold principle that “even when a statute has allegedly been violated, Article III requires such violation to have caused some real—as opposed to purely legal—harm to Plaintiff.”  The Court explained that intangible harms, such as restrictions on First Amendment freedoms and harm to one’s reputation, can be concrete enough for standing, though the Court noted this is a “murky area.” Either way, Plaintiff cannot simply point to a statutory cause of action to establish an injury-in-fact.

Turning to its standing analysis of the plaintiff’s particular allegations, the Ninth Circuit conducted a two-step inquiry:

  1. “whether the statutory provisions at issue were established to protect [the plaintiff’s] concrete interests (as opposed to purely procedural rights)”; and, if so
  2. “whether the specific procedural violations alleged in [the] case actually harm, or present a material risk of harm to, such interests.”

First, the Ninth Circuit cited a long history of protections against dissemination of false information about individuals that underlies the FCRA, including common law protections against defamation and libel, to find that the interests protected by the FCRA are real and concrete.  The harm alleged in the case, the Ninth Circuit concluded, “has a close relationship to a harm that has traditionally been regarded as providing a basis for a lawsuit,” even if it is not the exact historical harm itself.

In the second step, the Ninth Circuit reasoned that in many cases, “a plaintiff will not be able to show a concrete injury simply by alleging that a consumer-reporting agency failed to comply with one of the FCRA’s procedures.”  The statute may be violated, but the violation alone is not enough.  Here, however, the plaintiff pointed to multiple examples of information (e.g., his education level, etc.) that might be relevant to a prospective employer.  A court also has to look at the nature of the inaccuracy as part of its analysis.  Even if the inaccuracy has a debatable negative impact (e.g., a greater level of education could make a plaintiff deemed to be overqualified and passed over for a job), the information is nevertheless relevant, and the Court held, its dissemination is not simply a technical statutory violation.  The Ninth Circuit also pointed out that the injury alleged in this case was not speculative because the dissemination of information already occurred, and the dissemination itself was the harm.  The Court commented that further alleged harm, such as being able to point to an actual missed job, was not required.

Outlook

Overall, the Ninth Circuit’s decision adopted an expansive interpretation of the type of harm that will suffice for Article III standing, though indicating that this interpretation will not extend so far as to find standing to sue for bare statutory or procedural violations.  In the present case, however, the Ninth Circuit focused on the specific allegedly inaccurate information to find harm, in line with Justice Ginsburg’s dissent (found here) to the Supreme Court’s majority, which was concerned more with the reporting of allegedly false information that “could affect [the plaintiff’s] fortune in the job market.”  Further allegations of actual injury, according to the Ninth Circuit, were not required to establish standing.  However, the Ninth Circuit stopped from opining on other specific circumstances and noted that the specific facts will need to be considered to determine if the threshold of “concrete harm” is satisfied.

Thus, the Ninth Circuit provides further guidance on standing, affirming that bare statutory violations continue to be insufficient.  The specific factual allegations of such cases, however, may present courts with greater latitude to find standing in civil litigation alleging violations of the FCRA, as well as cases under ERISA, the Americans With Disabilities Act, and a host of other workplace statutes.  As courts address similar inquiries, we are likely to see increased guidance regarding standing.   Additionally, with this decision, there seems to be more evidence of a potential split among the federal Courts of Appeals, which could result in another petition to the U.S. Supreme Court.

By Gerald L. Maatman, Jr. and Julie Yap

Seyfarth Synopsis: Seyfarth Shaw submitted comments to the Federal Advisory Committee on Civil Rules regarding needed reform to Rule 30(b)(6), the rule that governs depositions of organizations in federal litigation. Our workplace class action group proposed two important areas for consideration that would encourage cooperation between the parties, including discovery proportional to the litigation, and more transparency and efficiency in an area that too often creates significant costs and burdens.

Proposed Changes To Rule 30(b)(6)

As most employers are aware, Rule 30(b)(6) allows a party to take the deposition of an organization by requiring the designation of an officer, director, managing agent, or other person competent to testify on a potentially wide range of topics requested by the opposing party.  This process often results in the imposition of significant burdens on the organization where the requesting party makes disproportional and overbroad demands for information, seeks to impose sudden deadlines, or refuses to cooperate in negotiations that would appropriately narrow the types of information sought.  In the face of such obstacles and inefficiencies, Seyfarth advocated for the need of procedural reform in this process.

The Advisory Committee on Civil Rules (the “Committee”) for the Federal Courts, which is responsible for recommending amendments to the Federal Rules of Civil Procedure, is contemplating possible changes to Rule 30(b)(6).  In furtherance of this process, the Committee has created the Rule 30(b)(6) Subcommittee, which invited comment on the need for reform to the rule.

Seyfarth’s written submission is here. Seyfarth’s comments were prepared by the team of Alex Meier, Gina Merrill, Esther Slater McDonald, Ryan Swindall, and Julie Yap.

Seyfarth’s submission identified two major areas of reform to Rule 30(b)(6) that could provide much needed guidance and transparency.  First, Seyfarth proposed that Rule 30(b)(6) should be amended to include presumptive limits on the number of topics that can be covered in deposition, on the scope of those topics, and on the number of deposition hours.  These presumptive limits would not only create efficiencies on the resources required for an organization to be prepared for deposition, it would better ensure that the organization is prepared to respond to all topics identified by the requesting party.

Second, Seyfarth proposed that Rule 30(b)(6) should provide a clear framework for when depositions must be noticed and how a party may object to the notice.  While district courts have created or endorse avenues for a party to protect itself from problematic Rule 30(b)(6) notices, disparities in the preferred approach has created confusion with respect to the proper procedure and the applicable standard of review.  As such, Seyfarth endorsed a 30-day minimum notice requirement that would help organizations properly prepare their witnesses.  Seyfarth also recommended adoption of an objection process similar to that employed to respond to subpoenas that would create a uniform, transparent process for challenging notices.

Implications For Employers

Rule 30(b)(6) can often create significant burden and impose substantial costs on employers facing all types of federal litigation.  Potential amendments to this rule could help address the disproportional impact that this type of discovery has on employers.  Seyfarth is hopeful that the Committee will continue to look at reform and potential amendments to address these issues.

Stay tuned for more updates regarding potential amendments to Rule 30(b)(6) as we continue to monitor developments on this important issue.

 

 

By Gerald L. Maatman, Jr. and Anthony S. Califano

Seyfarth Synopsis: In Smith v. City of Boston, Plaintiffs brought suit against their employer, the City of Boston (the “City”), challenging the City’s police promotional exam from sergeant to lieutenant.  Plaintiffs alleged that the exam had a disparate impact on racial minorities and was invalid under Title VII of the Civil Rights Act of 1964 (“Title VII”).  For the second time, in the same case, District Court Judge William G. Young ruled in favor of Plaintiffs and imposed liability on the City.

The Court’s decision, Smith v. City of Boston, No. 12-CV-10291-WGY (D. Mass. July 26, 2017) (“Smith II”), serves as a cautionary tale about the discretion that trial courts have to distinguish between similar cases and reach conclusions that might appear to be inconsistent with appellate authority.

Case Background

In 2012, a group of African-American police sergeants filed a lawsuit claiming that the City’s exam for promotion from sergeant to lieutenant discriminated against minority candidates in violation of Title VII.  In a 2015 decision, the Court agreed with Plaintiffs after a bench trial, holding that the “lieutenants’ exam had a racially disparate impact and was insufficiently job-related to survive the Plaintiffs’ challenge.” Smith v. City of Boston, 144 F. Supp. 3d 177, 180-81 (D. Mass. 2015) (“Smith I”).

In a different case, Lopez v. City of Lawrence, No. 07-11694, 2014 U.S. Dist. LEXIS 124139 (D. Mass. Sept. 5, 2014) (“Lopez I”), a different judge in the District of Massachusetts addressed similar claims.  In that case, a group of African-American and Hispanic patrolmen challenged the civil service exam for promotion from patrolman to sergeant, claiming disparate impact discrimination.  The presiding judge in Lopez, Judge George A. O’Toole, rejected the plaintiffs’ claim after a bench trial.  The trial court reasoned that, although the sergeants’ exam “imposed a significantly disparate impact on minority applicants,” the defendants established that the exam was nevertheless justified by business necessity.  Id. at *48, 60-61.  The Lopez plaintiffs appealed to the U.S. Court of Appeals for the First Circuit.

Before Judge Young undertook to determine a proper remedy consistent with its ruling in Smith I, the First Circuit issued a ruling affirming the trial court’s decision in Lopez ILopez v. City of Lawrence, 823 F.3d 102 (1st Cir. 2016), cert. denied, 137 S. Ct. 1088 (2017) (“Lopez II”).  The First Circuit concluded, as did Judge O’Toole, that the sergeants’ exam had a significantly disparate impact on racial minorities, and that Judge O’Toole did not clearly err in concluding that business necessity nevertheless justified the exam.  Id. at 107-111.

In light of the First Circuit’s order in Lopez II, Judge Young revisited his earlier ruling in Smith I.  The City argued that Lopez II compelled the Court to reach a different conclusion on the issue of business necessity, and to consider whether there existed an equal or better exam that identified the best candidates for the lieutenant position, which had a less disparate impact on racial minorities.  The Court disagreed.

The Decision

Job Related & Consistent With Business Necessity

The City advanced several arguments in reliance on Lopez II.  First, the City argued that the Court used the wrong legal standard to evaluate the exam’s validity.  It argued that Lopez II requires the Court to determine the exam’s validity by utilizing a “better than random selection” standard, not the “representative sample test” established by the Equal Employment Opportunity Commission’s (“EEOC”) Uniform Guidelines on Employee Selection Procedures (“Guidelines”).  Smith II, at *15.  In its earlier analysis, the Court reasoned that the Guidelines “provide a sensible way of evaluating whether a given test . . . measures an important work characteristic, and whether the outcomes of that test are actually correlated with the characteristic measured.”  Id. at *11.  Using the Guidelines, and relying on expert testimony, the Court determined that the exam results were not predictive of or correlated with the important work behaviors of police lieutenants.  IdLopez II, according to the Court, does not require a different conclusion.  Indeed, the Court stated that the “First Circuit certainly did not ban the use of the Uniform Guidelines’ representative sample test.”  Id. at *15-16.  Such a ban, the Court observed, would be “surprising” because they come from the EEOC and “are due an appropriate degree of deference.”  Id. at *16.

Second, the City argued that the Court should reconsider its rejection of the Education and Experience (“E&E”) component of the lieutenants’ exam.  Because the First Circuit found in Lopez II that the E&E component of the sergeants’ exam was useful to assess qualities important to a sergeant’s daily work, the City argued that the Court should not have excluded the E&E component from its validity analysis of the lieutenants’ exam.  The Court was unpersuaded, noting that it did consider the E&E in its ruling, but held that the “E&E did not rescue an otherwise invalid written exam.”  Id. at *21.  The holding in Lopez II did not change the Court’s opinion given the variations between the two cases.  The Court: “(1) relied on expert testimony that the E&E component failed to differentiate among candidates or demonstrate the [knowledge, skills, and abilities] necessary in a lieutenant; (2) had no evidence that incumbent lieutenants performed better on the written exam; and (3) had no evidence to show that the E&E component was valid on its own.”  Id. at *21-22 (internal citations omitted).  Accordingly, unlike the evidence at issue in Lopez II regarding the sergeants’ exam, the evidence before the Court did “not establish that the E&E measured qualities important to a lieutenant’s daily responsibilities.”  Id. at *22.

Third, the City asserted that, in light of Lopez II, the Court “inappropriately applied a heightened validity requirement for rank ordering” and that “rank ordering furthers [the City’s] interest in eliminating patronage and intentional racism.”  Id.  The Court disagreed.  The Court reasoned that “[w]here a selection procedure not only has a disparate impact on a pass-fail basis, but also compounds that effect through use of rank ordering, each hiring decision carries an increased risk of a discriminatory result.”  Id. at *24.  In that case, the Court held that it “did not err in applying a heightened validity requirement for rank ordering,” and the First Circuit’s decision in Lopez II does not compel a contrary conclusion.  Id.  Even if the City faced a lower burden, it still failed according to the Court.  That is because the evidence before the Court did not support an inference that candidates who performed better on the lieutenants’ exam would be better performers on the job.  Id. at *25.

Equally Valid, Less Discriminatory Alternative Test

The City also challenged the Court’s finding of liability without first addressing whether an equally valid, less discriminatory alternative test existed to identify successful candidates for the lieutenant position.  Specifically, the City argued that the Court could not reject the City’s justification for the lieutenants’ exam absent “some showing that there exists an available alternative with less disparate impact that serves [the City’s] legitimate needs.”  Id. at *26.  Once again, the Court disagreed.  The Court held that the First Circuit’s ruling in Lopez II did not change the burden shifting framework that applies to the analysis of disparate impact cases.  Id.  If the plaintiff proves that a test has a significant disparate impact, and the defendant then fails to prove that the test is job related and consistent with business necessity, “then the defendant loses, regardless of the plaintiffs’ showing of an alternative.”  Id.  The City did not convince the Court that the lieutenants’ exam was sufficiently job related and consistent with business necessity.  Accordingly, the Court did not change its previous ruling in favor of Plaintiffs.

Implications For Employers

The Court concluded its decision by observing that Lopez and Smith are “significantly different” and “fact intensive cases.”  Id. at *29.  They involved different evidentiary records and different exams for different positions.  Id.  The Court held that it did not commit legal error by applying the same law to a different case and reaching a different conclusion.  Id. at *29-30.

The Smith II decision should therefore remind employers of the broad authority that trial court judges have when it comes to applying the law to the facts and evidence in order to reach a conclusion.  As Judge Young noted in Smith II: “Fact finding is the province of the district courts.”  Id. at *29-30.  Judge Young applied his understanding of disparate impact law to the evidence before him and determined that the City failed to meet its burden of proof.  Would a different judge have reached a different conclusion?  Will the First Circuit affirm the Court’s order if the City appeals?  These are fair questions, the answers to which are unclear.

By Gerald L. Maatman, Jr. and John S. Marrese

Seyfarth Synopsis:  In Harrington v. Sessions, No. 15-8009, No. 16-5285 & No. 16-5286 (D.C. Cir. July 21, 2017), the U.S. Court of Appeals for the D.C. Circuit found that absent class members may intervene in an appellate court proceeding to pursue a Rule 23(f) petition abandoned by a settling class representative, even if the intervention motion is filed after the dismissal of the settling representative’s claims.  The D.C. Circuit’s ruling illustrates that even the denial of class certification and final settlement of a class representative’s claims may not put an end to class action litigation.

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In Harrington v. Sessions, No. 15-8009, No. 16-5285 & No. 16-5286, 2017 U.S. App. LEXIS 13111 (D.C. Cir. July 21, 2017), the D.C. Circuit addressed whether it had jurisdiction to rule upon absent class members’ motion to intervene in an appellate court proceeding to pursue a Rule 23(f) petition abandoned by a settling named plaintiff-appellant.  The absent class members filed their motion to intervene after the settling plaintiff-appellant had already filed a stipulated dismissal of his settled claims.

The D.C. Circuit found that it indeed had jurisdiction to entertain the absent class members’ motion to intervene in the Rule 23(f) petition.  It explained that the elimination of an Article III case or controversy does not preclude a district court or appellate court from entertaining a subsequent motion to intervene for purposes of filing an appeal, as long as the intervenor has a sufficient Article III stake in the appeal.  The D.C. Circuit further opined that absent class members may have a sufficient stake to appeal the denial of class certification even if the named plaintiff does not appeal.  As such, the D.C. Circuit found that it had jurisdiction under Rule 23(f) to hear the absent class members’ motion to intervene for purposes of appealing the denial of class certification.

On the merits, the D.C. Circuit found that the absent class members satisfied the prerequisites for intervention as a matter of right and, thus, it addressed their Rule 23(f) petition.  However, the D.C. Circuit declined to review the denial of class certification under Rule 23(f) as the absent class members presented no special circumstances justifying such review.

Case Background

In 2008, U.S. Marshal David Grogan filed a putative class action in the U.S. District Court for the District of Columbia against the U.S. Marshals Service (the “Marshals”) alleging racial discrimination under Title VII of the Civil Rights Act of 1964.  2017 U.S. App. LEXIS 13111, at *2-3 (D.C. Cir. July 21, 2017).  The complaint sought both injunctive and monetary relief, but alleged that “injunctive and declaratory relief [we]re the predominant forms of relief sought.”  Id. at *3.

By 2013, after pleading and motion practice, the named plaintiff Herman Brewer (“Plaintiff”) was the sole plaintiff representing the putative class.  Id. at *4.  Plaintiff retired from the Marshals a few months before discovery closed.  Id.  After discovery closed, Plaintiff filed: (i) a motion to amend the complaint to substitute four additional plaintiffs as class representatives; and (ii) a Rule 23 motion for class certification.  Id. at *5.

The district court denied Plaintiff’s motion to substitute new plaintiffs, finding that Plaintiff had not diligently pursued such substitution.  Id.

The district court also denied Plaintiff’s motion for class certification.  Id. at *5-6.  The district court found that, because Plaintiff had retired and was no longer an employee of the Marshals, Plaintiff could not adequately represent a class predominantly seeking injunctive relief.  Id. at *6.  The district court also found that Plaintiff’s individual claims for monetary relief were not typical of the class-wide claims for injunctive relief and, as such, did not provide a basis to certify a class either.  Id.  Finally, the district court refused to certify a narrower class, seeking damages only, because doing so constituted “claim splitting” and jeopardized class members’ ability to subsequently pursue other claims in the face of potential res judicata arguments. Id.

Plaintiff timely petitioned the D.C. Circuit under Rule 23(f) for interlocutory review of the denial of class certification.  Id.  However, during the pendency of the petition, Plaintiff settled his individual claims and filed a stipulation of dismissal under Rule 41(a)(1)(A)(ii).  Id. at *7.

On the same day Plaintiff filed the stipulated dismissal, three current and one former African-American employee of the Marshals (the “Intervenors”) moved to intervene in the district court to appeal the district court’s denial of class certification and moved to intervene in the appellate court to pursue the Rule 23(f) petition filed by Plaintiff.  Id.

While their motion to intervene in the district court was still pending, the Intervenors filed a notice of appeal from: (i) Plaintiff’s stipulated dismissal; (ii) the order denying class certification; and (iii) the “effective” denial of their motion to intervene insofar as the district court had not decided their motion to intervene within the time Intervenors believed they had to file a notice of appeal (i.e., within 60 days of Plaintiff’s stipulated dismissal).  Id. at *7-8.  Thereafter, the district court dismissed the Intervenors’ motion to intervene based on the rationale that the Intervenors’ notice of appeal stripped the district court of jurisdiction to rule on the motion.  Id. at *8.

On the Intervenors’ motion, Plaintiff’s Rule 23(f) petition and the Intervenors’ appeal were consolidated before the D.C. Circuit.  Id.

The Decision

The D.C. Circuit first addressed whether it had jurisdiction.  Id. at *9.  The stipulated dismissal of Plaintiff’s claims, which removed any live Article III case or controversy from the district court and appellate court, presented a quandary.  Although intervention could cure that quandary by substituting Intervenors for Plaintiff, the D.C. Circuit had to have jurisdiction in the first place to rule on the intervention motion.  See id. (“Thus, the situation may appear to present a Catch-22: Intervention can overcome the apparent jurisdictional problem created by the stipulated dismissal, but a court may grant intervention only if it has jurisdiction to do so.”).  The D.C. Circuit resolved the quandary by finding that it had jurisdiction over the Intervenors’ motion to intervene in the Rule 23(f) petition.  Id.

In so finding, the D.C. Circuit rejected the decisions of other courts that have held that a stipulated dismissal precludes a court from taking further action on motions filed after, or even before, such a dismissal.  Id. at *11-12.  The D.C. Circuit explained that a stipulated dismissal and a court-ordered dismissal are no different in their jurisdictional effect – both eliminate a live case or controversy.  Id. at *12-14.   As such, the D.C. Circuit found that it had jurisdiction to entertain any motion after a stipulated dismissal that it could entertain after a court-ordered dismissal.

In that regard, the D.C. Circuit explained that it is well-established that, even in the absence of a live controversy, courts retain jurisdiction to hear motions to intervene for purposes of appealing dismissed claims, as long as the intervenor has an Article III interest sufficient to pursue the appeal.  Id. at *14 (citations omitted).  Moreover, the D.C. Circuit asserted that it is similarly well-established that absent class members may have a sufficient Article III interest to appeal the denial of class certification even if the named plaintiff does not appeal.  Id. at *14-15 (citing Twelve John Does v. District of Columbia, 117 F.3d 571, 575 (D.C. Cir. 1997)).  Indeed, “[w]hen an absent plaintiff intervenes to appeal a denial of class certification, he has the same Article III stake on appeal as he would have had in the action had the class been certified.”  Id. at *15 (citing Twelve John Does, 117 F.3d 571, 575).  The D.C. Circuit reasoned that, because the absence of an Article III controversy does not preclude a court from hearing a motion to intervene for purposes of appealing and because an appellate court has jurisdiction to hear an absent plaintiff’s appeal from the denial of class certification, it had jurisdiction under Rule 23(f) to hear the Intervenors’ motion to intervene.  Id. at *15-16.

In finding such jurisdiction, the D.C. Circuit distinguished the recent U.S. Supreme Court decision of Microsoft Corp. v. Baker, 137 S. Ct. 1702, 1712-1713 (2017), wherein the Supreme Court held that a plaintiff’s voluntary dismissal of his claims, subsequent to an appellate court’s denial of his Rule 23(f) petition, did not create a final, appealable order.  Harrington, 2017 U.S. App. LEXIS 13111, *16.  The D.C. Circuit explained that, unlike Baker, the issue here involved only a petition for review under Rule 23(f), not an appeal from a final order.  Id. at *17.  Furthermore, equitable considerations present in Baker, where the plaintiff had orchestrated guaranteed appellate review of his Rule 23 claims through voluntary dismissal, were not present here.  Id.  (For further discussion of Microsoft Corp. v. Baker, see here).

Next, the D.C. Circuit turned to the motion to intervene.  It stated that it could address the motion to intervene in the first instance on appeal primarily for purposes of judicial economy.  Harrington, 2017 U.S. App. LEXIS 13111, *18-19 .  The D.C. Circuit then found that the Intervenors easily met the criteria for intervention as a matter of right under Rule 24(a)(2).  Id. at *19-23.

Nonetheless, the D.C. Circuit rejected the Intervenors’ Rule 23(f) request and declined to review the district court’s denial of class certification.  Id. at *24-31.  It found that the Intervenors failed to show that any special circumstances warranted such review.  Id.

Finally, the D.C. Circuit dismissed the Intervenors’ appeal from final judgment in the case below, restoring the district court’s jurisdiction over the case.  Id. at *31.  It ordered that, on remand, the district court should allow reasonable time for the Intervenors to file both a motion to substitute a new class representative and a renewed motion for class certification.  Id.

Implication for Employers

Defeating the class representative does not necessarily end class litigation.  Absent class members may be able to pursue such litigation after the class representative exits.  Accordingly, employers should litigate with an eye toward defeating the class even where they anticipate that a named representative is inadequate or that the claims of a named representative may be defeated.

supreme-court-546279_960_720By: Michael L. DeMarino and Gerald L. Maatman, Jr.

Seyfarth Synopsis:  In Bristol-Myers Squibb Company v. Superior Court of California, et al., No. 16-466 (U.S. June 19, 2017), the U.S. Supreme Court articulated the narrow circumstances under which specific jurisdiction will lie when it rejected the California Supreme Court’s “sliding scale” approach to evaluating specific jurisdiction. The decision is decidedly employer-friendly. As a new weapon against forum shopping, this case is a must read for any employer facing class action litigation in a jurisdiction where the company is not incorporated or does not have its principal place of business.

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Case Background

In Bristol-Myers Squibb Company v. Superior Court of California, et al., No. 16-466 (U.S. June 19, 2017), 86 California residents and 592 non-residents from 33 other states sued Bristol-Myers in California  state court, asserting California state law claims for product liability, negligent representation, and misleading advertising. Id. at 2. Plaintiffs specifically alleged that the company’s drug, Plavix, damaged their health.  Id. In contrast to the California residents, the non-resident plaintiffs did not allege that they obtained Plavix in California, nor did they claim that they were injured by Plavix or treated for their injuries in California. Id.

After Bristol-Myers challenged personal jurisdiction with respect to the non-residents’ claims in the trial Court and the California Court of Appeal, the California Supreme Court held that specific jurisdiction existed. Id.

Although the California Supreme Court determined that general jurisdiction was lacking, it nonetheless found that specific jurisdiction existed under its “sliding scale” approach. Under this approach, the more wide-ranging the defendants’ forum contacts, the greater the connection between the forum contacts and the claim. Id. at 3. Because of Bristol-Myers’ extensive contacts with California, the California Supreme Court required less direct connection between the company’s forum activities and the non-residents’ claims than otherwise might be required. Id. Particularly important to the California Supreme Court’s determination that specific jurisdiction existed was that the claims of the California residents and the claims of the non-residents were similar. Id.

The Company thereafter successfully secured review by the U.S. Supreme Court.

The Decision

In an 8-1 decision, the U.S. Supreme Court held that the California Supreme Court failed to identify an adequate link between the State of California and the 592 non-resident plaintiffs to support specific jurisdiction.  After explaining that specific jurisdiction requires an “affiliation between the forum and the underlying controversy” the Supreme Court noted that the “sliding scale” approach relaxes this requirement and “resembles a loose and spurious form of general jurisdiction.”  Id. at 7.

The Supreme Court further explained that “[t]he mere fact that other plaintiffs were prescribed, obtained, and ingested Plavix in California — and allegedly sustained the same injuries as did the non-residents — does not allow the State to assert specific jurisdiction over the non-residents’ claims.” Id. at 8. Importantly, the Supreme Court emphasized “[w]hat is needed —  and what is missing here — is a connection between the forum and the specific claims [i.e., the non-residents’ claims] at issue.” Id.

Implication For Employers

Although the Supreme Court’s decision does little to alter the requirements of specific jurisdiction, it is nonetheless important in its practical effect of impeding forum shopping in the class action context. Plaintiffs, for instance, will have a much more difficult time suing in a jurisdiction where the company is not “at home” for general jurisdiction purposes and where the company’s conduct in the forum state is not sufficiently connected to the claims of nonresident plaintiffs.

This decision is particularly important to employers with a national presence or satellite offices. The lesson here is employers should not take personal jurisdiction for granted, particularly when defending claims brought by residents and nonresidents of a forum state where there is no general jurisdiction.

supreme-court-546279_960_720By Gerald L. Maatman, Jr., Michael L. DeMarino, and John S. Marrese

Seyfarth Synopsis:  In Microsoft Corp. v. Baker, No. 15-457 (U.S. June 12, 2017), the U.S. Supreme Court ruled on a procedural issue that is of importance in any class action in terms of when and in what circumstances a plaintiff may appeal orders that terminate their rights in a case. In that respect, the decision is required reading for any employer involved in class action litigation.

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In Microsoft Corp. v. Baker, No. 15-457, 582 U.S. ___ (2017), the Supreme Court was confronted with the question of whether courts of appeal have jurisdiction to review an order denying class certification after the named plaintiffs  have voluntary dismissed their claims with prejudice.

Litigants have an immediate right to appellate review only of “final decisions of the district courts,” as set forth in 28 U.S.C. § 1291. The denial of class certification is not a final order and, therefore, not necessarily entitled to such immediate review.  Nonetheless, Fed. R. Civ. P. 23(f) provides litigants the opportunity to appeal an adverse class certification decision, which the appellate court has unfettered discretion to review or not.

If the appellate court decides not to exercise discretion over such an appeal, plaintiffs still have options to ultimately obtain appellate review, including petitioning the district court to certify the interlocutory order for appeal pursuant to 28 U.S.C.  § 1292 or pursuing the litigation to a final judgment at which point the class certification denial becomes final and appealable.  However, as the Supreme Court’s decision in Baker makes clear, what plaintiffs may not do is circumvent that process by dismissing a case with prejudice after the denial of class certification in order to manufacture the appellate court’s jurisdiction over such an appeal. According to the Supreme Court, such a tactic impermissibly stretches Section 1291, circumvents the rules governing interlocutory appeals, including 23(f), and leads to protracted and piecemeal litigation.

Case Background

Plaintiffs, purchasers of Microsoft’s Xbox 360 console, filed a class action alleging design defect of the console.  (Slip Op. 8.)  The district court struck Plaintiffs’ class allegations based on the denial of class certification in a previously-filed case of the same nature, finding that comity mandated its decision.  (Id. at 8-9.)

Plaintiffs petitioned the Ninth Circuit for appellate review of the interlocutory order under Rule 23(f), but the Ninth Circuit declined to exercise jurisdiction.  Id. at 9.  Rather than pursue their individual claims further, Plaintiffs moved to voluntarily dismiss their claims with prejudice and represented to the district court that they would appeal the order striking their class allegations thereafter. (Id. at 10.)  Microsoft stipulated to the voluntary dismissal with prejudice, but argued that Plaintiff would have no right to appeal.  The district court granted the stipulated motion to dismiss.  Id.

As promised, Plaintiffs only appealed the district court’s decision to strike their class allegations.  Id.  The Ninth Circuit held that it had jurisdiction to entertain the appeal under the 28 U.S.C. § 1291, rejecting Microsoft’s argument that Plaintiffs had impermissibly circumvented Rule 23(f).  Id.  Then the Ninth Circuit reversed the district court’s decision to strike Plaintiffs’ class allegations. Id. at 11.  The Ninth Circuit expressed no opinion as to the merits of class certification, but merely found that comity did not require denial on the pleadings; such a decision would more properly be made on Plaintiffs’ eventual motion for class certification.  Id.

The Supreme Court granted certiorari to address a Circuit split over the question: “Do federal courts of appeals have jurisdiction under [28 U.S.C.] § 1291 and Article III of the Constitution to review an order denying class certification (or . . . an order striking class allegations) after the named plaintiffs have voluntarily dismissed their claims with prejudice?”  Id.

The Decision

The Supreme Court, sitting with eight justices, unanimously found that the Ninth Circuit had improperly exercised discretion over Plaintiffs’ appeal.

Justice Ginsburg, authoring the opinion of the Court in which Justices Kennedy, Breyer, Sotomayor and Kagan joined, ruled that Plaintiffs’ voluntary dismissal with prejudice did not transform the district court’s denial of class certification into a final order.  Such a tactic, the Supreme Court concluded, impermissibly attempts to subvert the final judgment rule in § 1291 as well as the process Congress implemented for refining that rule and providing for appeals of interlocutory orders.  Id. at 12.

The Supreme Court explained that Plaintiffs’ tactic encouraged “protracted litigation and piecemeal appeals” as well as indiscriminate review of interlocutory orders.  Id.  Indeed, as the Supreme Court pointed out, under Plaintiffs’ theory, “the decision whether an immediate appeal will lie resides exclusively with the plaintiff” because plaintiff “need only dismiss her claims with prejudice whereupon she may appeal the district court’s order denying class certification.” Id. at 12-13. Thus, if Plaintiffs here had subsequently been denied class certification on remand from the Ninth Circuit, they could have again voluntarily dismissed and forced an appeal of that decision, thereby circumventing the purpose of Rule 23(f) and, in conjunction, the rulemaking process Congress bestowed upon the Supreme Court.  Id. at 13-16.

Justice Thomas, joined by Chief Justice Roberts and Justice Alito issued a concurring opinion, concurring only in the judgment.  Justice Thomas agreed that Plaintiffs could not appeal under the circumstances of this case, but under a different rationale.  Specifically, Justice Thomas concluded that Plaintiffs’ voluntary dismissal with prejudice had indeed resulted in a final appealable order.  However, such dismissal destroyed any live case or controversy.  Accordingly, Plaintiffs had no standing under Article III of the Constitution to bring the appeal.

Implication for Employers

A decision on class certification is often the most significant event in the life of class litigation.  As such, plaintiffs who are denied certification craft inventive strategies to circumvent rules limiting their appellate rights.  With the Baker decision, one such strategy is no longer available to plaintiffs.  Employers should pay careful attention to alternative tactics similarly contravening the purpose and structure of the federal statutes and rules governing appellate review.