Workplace Class Action Litigation

By Timothy F. Haley and Laura Maechtlen

Antitrust claims are not unknown or uncommon anymore for employers.  We have previously blogged about how workplace antitrust claims are coming into vogue for the plaintiffs' class action bar.

The recent decision in In Re High-Tech Employee Antitrust Litigation, No. 11-CV-02509-LHK, 2012 U.S. Dist. LEXIS 55302 (N.D. Cal., Apr. 18, 2012), illustrates this trend.

Introduction And Summary Of Decision

A group of employees at four high-tech companies filed five class actions against their employers and three other high-tech companies alleging that the Defendants entered into a series of unlawful agreements not to recruit and hire each others’ employees. Plaintiffs alleged that these agreements violated federal and state antitrust laws and two additional California statutes. After the cases were consolidated, Defendants jointly filed a motion to dismiss. While the motion succeeded in getting rid of the claims brought under the two additional California statutes, the Court denied the motion with respect to the Plaintiffs’ federal and state antitrust claims. Id. at *49-50, 53. 

The decision serves as a warning that agreements between or among employers not to hire one another’s employees can violate antitrust laws. Nevertheless, the more challenging question for the Plaintiffs is whether they can obtain certification of their proposed class.  In other similar cases employees have met with mixed results in convincing a court that they can demonstrate antitrust injury with common proof. See, e.g., Weisfeld v. Sun Chemical Corp., 84 Fed. Appx. 257, 263-64 (3d Cir. 2004) (affirming denial of class certification with respect to plaintiff’s antitrust claim based on a “no hire” agreement because plaintiff was unable to show that he could prove that the class members suffered antitrust injury with proof common to the class).

Plaintiffs’ Allegations 

At the heart of the Plaintiffs’ consolidated complaint are five discrete bilateral agreements between the Defendants. In substance each of the so-called “Do Not Cold Call” agreements allegedly provided that the parties to the agreement would not solicit and hire each other’s employees. Id. at *11. Plaintiffs alleged that Apple was a party to three of these agreements with Adobe, Google, and Pixar, respectively. Pixar was also alleged to be a party to a Do Not Cold Call agreement with Lucasfilm, and Google was alleged to be a party to two additional agreements with Intuit and Intel, respectively. Id. at *12-15.  While Plaintiffs did not allege that each of the Defendants was a party to the same agreement, Plaintiffs asserted that these five discrete agreements resulted in “an overarching conspiracy” to decrease competition for skilled labor, reduce employee mobility, and suppress compensation. Plaintiffs also averred that each of the Defendants entered into the conspiracy with knowledge of the other Defendants’ participation. Id. at *15.

The Motion To Dismiss

Aided by evidence uncovered as a result of a prior Department of Justice investigation, the Plaintiffs easily defeated the Defendants’ argument that the complaint contained insufficient allegations of the alleged conspiracy and of the Defendants' knowledge and intent. Id. at *25-40. The more interesting issue was the Defendants’ argument that the alleged conspiracy was not plausible and that the Plaintiffs failed adequately to allege antitrust injury. The five bilateral agreements did not cover all possible pairings between the Defendants. For example, although Adobe could not cold call Apple employees or vice versa, there were no allegations that Adobe was prohibited from cold calling the employees of Intuit, Google, Lucasfilm, and Pixar. According to the Defendants, of the 21 possible pairings between the seven Defendants, only six pairings had bilateral Do Not Call agreements, thereby leaving competition open among the remaining 15 pairings. The Defendants argued that, for an agreement to be effective in suppressing compensation, the other pairings would also have to be eliminated and thus, the alleged conspiracy was irrational and implausible. Id. at **40-41.

The Court rejected this argument. The Complaint alleged that the any failure to cold call any employee impacted not only the compensation of that employee, but also the compensation of all other employees. Plaintiffs supported this allegation with hypothetical examples. For example, Plaintiffs alleged that when a current employee of Company A receives a cold call from rival Company B, that information is likely to spread through informal employee communication channels, empowering other employees of Company A to use that information in their own compensation negotiations. The Court found that while the Plaintiffs’ economic effects argument needed to be proven, the Plaintiffs had pled sufficient facts alleging the economic plausibility of the conspiracy to withstand a motion to dismiss. Id. at *41-44. 

Given the procedural posture of the litigation, the Plaintiffs' economic theory will be subjected to greater scrutiny at the class certification stage. Although in a somewhat different context, it is noteworthy that a similar economic theory was found to be inadequate to demonstrate class-wide injury in an antitrust wage suppression case involving registered nurses.  The Court in Fleischman v. Albany Medical Center, 2008 U.S. Dist LEXIS 57108, at *16-17 (N.D. N.Y. July 28, 2008), found that the theory presumed an “unrealistic degree of interchangeability in the nursing profession,” and rejected it.  

Lessons For Employers 

Not all agreements between or among employers not to hire each other’s employees violate the antitrust laws.  See e.g., Eichorn v. AT&T Corp., 248 F.3d 131 (3d Cir. 2007) (8 month agreement not to hire employees of an affiliate of the defendant that was sold to a purchaser did not violate the antitrust laws because the agreement was reasonable in scope and its primary purpose was to ensure the workforce continuity of the purchased entity). However, a no-hire agreement that is not ancillary to another business arrangement and is not limited in time and scope and designed to protect a legitimate business interest can create serious antitrust risks.

As class action lawyers assert claims on behalf of employees continue to branch into new vistas in the brave new world of class actions after Wal-Mart Stores, Inc. v. Dukes, 131 S.Ct. 2541 (2011), we expect to see more activity in this area and resort to antitrust claims.

By Laura J. Maechtlen

We were honored to present today on workplace class action issues at the Annual Conference of the Risk and Insurance Management Society (RIMS) in Philadelphia with Thomas P. Hams, EPLI Practice Leader at Aon Risk Solutions, and Nicole Franzese, Senior Risk Manager at Best Buy Co., Inc. RIMS is the largest insurance-based educational meeting in the world, and its annual meeting is attended by thousands of insurance executives and corporate representatives from around the world.

Our presentation was entitled “Are Employment Class Actions Dead After Walmart & AT&T?”  A copy of our PowerPoint is here. The mobile app can be downloaded here.

The panelists discussed trends in workplace class action litigation in 2011 and 2012, and the aftermath and evolution of the headline-grabbing U.S. Supreme Court decisions Wal-Mart Stores, Inc. v. Dukes, 131 S.Ct. 2541 (2011), and AT&T Mobility LLC v. Concepcion, 131 S.Ct. 1740 (2011). As highlighted in the presentation, class actions are not “dead” - although many employers and attendees at the conference today might wish they were. [We were also featured on this topic over the weekend in the Chicago Tribune's focus on workplace class actions].

As highlighted by the panelists today, Wal-Mart Stores, Inc. v. Dukes caused both federal and state courts to conduct a wholesale review of the propriety of previous class certification orders in pending cases, prompted defendants to file new rounds of motions based on Wal-Mart to attack a variety of class theories (not just those rejected by the Supreme Court), and reverberated in case law rulings on a myriad of Rule 23-related issues in a variety of cases in all substantive areas, not just workplace discrimination cases. In addition, the panelists discussed how Wal-Mart has led the plaintiffs' bat to reboot their class theories by focusing on smaller claims, regional claims, or a retooling the architecture of putative class claims in an effort to side-step Wal-Mart.

The panelists also discussed the viability of workplace arbitration agreements, and whether and why some employers have implemented, expanded, and altered their arbitration agreements as a result of the AT&T decision and its progeny. The panel discussed how AT&T has fueled significant litigation over the impact of workplace arbitration agreements and the impediments such agreements may impose on employment discrimination class actions and wage & hour collective actions. As recognized in our discussion today, the AT&T decision has also spawned significant “second generation” analysis when employers and employers alike have restructured and reformed their strategies related to arbitration in preventing, alleging, and defending class action lawsuits at the federal and state level. Because there is a myriad of potential issues arising in the arbitration context, the panelists advised that employers should have a “toolkit” of considerations – both “pros” and “cons” of arbitration from a practical and legal perspective – when considering whether to change or implement a workplace arbitration program. A non-comprehensive list of those factors can be found in the presentation materials linked to this post (see Slides 13-18).

Finally, Tom Hams from Aon provided some interesting analysis from a broker’s perspective on employment liability practices trends, which included increased activity by the EEOC and the OFCCP, addition of new protected status categories under statutory law, and a surge of disability claims in administrative and judicial proceedings. Tom also shared statistics and trends in several categories including EPLI large loss trends, EEOC charge patterns, workforce trend issues, and class action filings in the last year (see Slides 23-33). 

Based on the trends identified at the RIMS presentation, class actions are alive and well, as are governmental enforcement actions.

We hope you find the power point useful, and hope to see some of you this week at the RIMS conference!

By Laura Maechtlen and Brian Wong

It is not uncommon for an employer to face vague or overbroad class claims premised on one employee’s injury limited to a specific set of facts. However, in a recent ruling in Singleton v. BP Amoco Chemical Co., No. CVV-12-J-255-5 (N.D. Ala. April 3, 2012), an Alabama federal district court judge limited an individual plaintiff’s attempt to bring Title VII class claims on behalf of a large group of women, finding that the plaintiff lacked standing to represent the group of female employees she sought to include in the putative class. This decision provides an interesting roadmap for employers seeking to challenge a plaintiff’s standing under Title VII.  

Key Facts In The Case

In Singleton, the named plaintiff Debbie Singleton brought suit on behalf of herself and a purported group of similarly situated women, alleging gender discrimination in violation of Title VII of the Civil Rights Act and 42 U.S.C. § 1981a. Singleton had previously worked for BP from 2000 through 2009, and returned to BP as a contract employee in September 2010. In November 2010, Singleton applied for a permanent position, which required her to pass a “WorkKeys” test. Singleton repeatedly failed the test and was not rehired as a permanent employee. After Singleton filed an EEOC charge, however, the employer dispensed with the WorkKeys test in favor of a different applicant process. By the time she filed her complaint, Singleton had taken and passed the new test, and was awaiting an interview for a permanent position.

Nevertheless, in filing suit, Singleton sought to represent a class of all women and applicants affected by the employer's alleged discriminatory hiring policies and procedures, including prior use of the WorkKeys test to intentionally exclude females from employment. The claim asserted on behalf of the class is that the employer engaged in a general pattern or practice of discrimination against all women employees and applicants in all aspects of employment.

In response, the employer moved to dismiss Singleton’s claims on multiple grounds, arguing that Singleton lacked standing to sue on behalf of purported class members because the plaintiff’s only injury stemmed from the failure to pass one section of the WorkKeys test. Plaintiff argued that her injury in fact was the failure to be hired, which resulted in her failure to pass the test.

The Court's Analysis Of The Standing Defense

The Court agreed with the employer and recognized that a plaintiff necessarily is limited to the issues as to which the employee is aggrieved, and as such, Singleton lacked standing to assert claims on behalf of a class for purported injuries she did not herself suffer. 

The Court based its holding on the rule that “a claim cannot be asserted on behalf of a class unless at least one named plaintiff has suffered the injury that gives rise to the claim.” Id. at  6. In the context of Title VII, the Court noted “[t]he mere fact that an aggrieved private plaintiff is a member of an identifiable class of persons of the same race or national origin is insufficient to establish his standing to litigate on their behalf all possible claims of discrimination against a common employer.” Id. It further recognized that, if the testing procedures are the basis for the disparity in women hired, as the plaintiff alleged, then only women who were not hired because of the testing procedures could possibly allege an injury from those procedures.

In the end, because Singleton herself was not discouraged from applying for a job with BP, nor barred from positions with defendant, applied for jobs with defendant, and was hired by defendant, more than once, she lacked “standing to assert claims on behalf of females discouraged from applying with [BP], regardless of the reasons for non-application.” Id. at 10. Similarly, the Court held Singleton lacked standing to assert claims on behalf of women allegedly injured before she applied for a permanent position in November 2010 or after the date the employer eliminated the WorkKeys test, or women who were not hired for reasons other than the WorkKeys test. Plaintiff did, however, have standing to represent those females who did not pass the Work Keys test post-2009. Id. at 13.

In addition to “necessarily limit[ing]” the scope of Singleton’s class claims, the Court also dismissed her request for injunctive relief, and denied BP’s motion to dismiss her § 1981a claim. Id.  

Lessons To Be Drawn From The Ruling

This case serves as a reminder to employers that aggressive challenges to a named plaintiff’s standing can be an effective method of narrowing the scope of an improperly broad class discrimination claim. This defense can be asserted up front through a Rule 12 pleading.

By Timothy Haley and Gerald L. Maatman, Jr. 

On March 21, 2012, we attended the Federal Bar Association panel discussion on the future of class actions in the Seventh Circuit. U.S. District Court Judge Ruben Castillo moderated the panel discussion, that included Judge Diane Wood of the U.S. Court Of Appeals for the Seventh Circuit, one of the circuit judges who recently issued the now already "famous" ruling in McReynolds v. Merrill Lynch, Pierce, Fenner & Smith, 2012 U.S. App. LEXIS 3683 (7th Cir. Feb. 24, 2012), which we blogged about when that decision hit the presses.

The panel discussion provided an interesting and informative discussion on important recent developments in class action jurisprudence and their impact on Rule 23 issues. We thought our readers would find several points to be informative in thinking through issues in the context of workplace class actions.

Are Class Actions Alive And Well? 

There was a general consensus that the Supreme Court’s decisions in AT&T Mobility LLC,  v. Concepcion, 131 S. Ct. 1740 (2011), and Wal-Mart Stores, Inc, v. Dukes, 131 S. Ct.  2541 (2011), do not sound the death knell for class actions. The plaintiffs’ class action bar is a resourceful and creative group, and there are many questions left open by Concepcion and Dukes. The general consensus was that Dukes is not deterring the plaintiffs’ bar from filing class actions in appropriate cases. These opinions were confirmed by data provided by Judge Castillo in his opening remarks. Judge Castillo observed that class action filings in the Northern District of Illinois in 2012 are on pace to match the number of class actions filed in 2011.

Dukes Raises The Certification Bar 

Dukes made it clear that federal district courts must resolve all factual issues bearing on class certification even if doing so requires consideration of the merits. The panelists agreed that this standard would probably lead to the development of a more fulsome evidentiary record before class certification could be determined. It may also result in more evidentiary hearings at the class certification stage, and there may be fewer instances in which bifurcation between class discovery and merits discovery is allowed. An important question is the evidentiary standard that plaintiffs must satisfy to obtain certification. It was noted that the Second Circuit in Teamsters Local 445 Freight Division Pension Fund v. Bombadier Inc., 546 F.3d 196, 202-03 (2d Cir. 2008), held that the correct standard is "preponderance of the evidence," but the issue has not been resolved in all jurisdictions. The need for a more developed factual record will make the class certification question a more expensive issue to resolve. Judge Wood, who sits on the Committee on Rules of Practice and Procedure, observed that the cost issue is a question the Committee will be looking at in the future. Though not stated during the presentation, the increased cost issue supports a careful look at the class allegations at the pleading stage. Arguably, defendants should not be required to bear these increased costs if plaintiffs cannot allege sufficient facts to state a plausible claim for class treatment.

Other Dukes "Second Generation" Issues 

The panel agreed that in light of Dukes, a large nationwide class alleging discriminatory treatment at multiple facilities will be difficult certify. On the other hand, disparate impact cases - which do not require proof of intent to discriminate - may not pose the same problems. Plaintiffs often contend that Dukes was an unusual case and should be confined to its facts – i.e., 1.5 million potential class members, nationwide in scope, and allegations of discriminatory treatment. The panel debated whether the Seventh Circuit's recent decision in Ross v RBS Citizens, 667 F.3d 900 (7th Cir. 2012), supports that view. In Ross, the Seventh Circuit distinguished Dukes and upheld Rule 23 class certification involving a state law wage & hour claim. The panelists also noted that the Supreme Court left open the question of whether a Daubert analysis is appropriate at the class certification stage, while hinting that it is based on American Honda Motor Co. v. Allen, 600 F.3d 813 (7th Cir. 2010), although other circuits - notably the Eighth Circuit - have held to the contrary (in In Re Zurn Plex Plumbing Products Liability Litigation, 644 F.3d 604 (8th Cir. 2011)). Judge Wood remarked that she could not imagine any district court allowing “junk science" to be used in determining whether class certification is appropriate.

Issue Certification 

We recently blogged on the Seventh Circuit's decision in McReynolds and its approach to issue certification and how the plaintiffs' bar may use it in "re-booting" their class certification claims post-Dukes. In McReynolds, the Seventh Circuit reversed the District Court's denial of certification in a discriminatory impact case alleging violation of Title VII. The Seventh Circuit recognized that each of the 700 class members would have to individually prove that their compensation was adversely affected by the alleged policies and by how much. However, it ruled that the District Court committed error when it refused to certify the question of whether Merrill Lynch's "teaming" and "account distribution" policies were unlawful. A petition for reconsideration en banc is currently pending in McReynolds - the petition is here. While stating that her comments had no implications with respect to any current or future case before her, Judge Wood did remark generally on the question of issue certification. She noted that it is another question that is going to be reviewed by the Rules Committee. She said that a key consideration as to whether issue certification would be appropriate is the manageability of the class. If what needs to be done on an individual basis is too complex or overwhelming, then issue certification may be inappropriate. In this respect, Judge Wood indicated that it is important for plaintiffs to present a plan that demonstrates that the case is manageable. It is insufficient for plaintiffs simply to provide assurances that it can be done.

The panel’s presentation provided very interesting and thoughtful insights on the current and future state of class action jurisprudence. The panelists' discussion also underscored the notion that the future dynamics in Rule 23 workplace class action litigation continue to change and evolve.

Today Seyfarth Shaw held its Annual Workplace Class Action Webinar for over 1,000 clients and loyal blog readers. Thank you to everyone who participated. The Webinar was based on the trends identified in our 8th Annual Workplace Class Action Report, and case law developments discussed on our blog. Gerald L. Maatman, Jr., the Report's author, and Lorie Almon and Ian Morrison, the chairs of our wage & hour and ERISA practice groups, led attendees through the changed national landscape of “bet the company” employment disputes fueled by an aggressive plaintiffs’ bar and invigorated federal and state enforcement regimes. They also provided insights on the new parameters for Rule 23 standards and workplace class arbitration defenses created by Dukes and Concepcion, and how employers can continue to prepare themselves for litigation in light of those decisions. For anyone unable to participate, the Webinar presentation can be found here. 

It was a busy morning for Mr. Maatman, as he also spoke on National Public Radio's Morning Edition on age discrimination lawsuits and EEOC litigation - click here to read the story and hear those comments.

Keep checking our blog for more workplace class action news, case analysis, and the implications that these high stakes cases have for employers.

By Gerald L. Maatman, Jr.

Today we are launching Seyfarth Shaw's 8th Annual Workplace Class Action Litigation Report to the loyal readers of our blog.

The 2012 Report is our biggest ever. It contains analyses of 976 class action rulings on a circuit-by-circuit and state-by-state basis. The Report is divided into chapters on leading class action settlements (both from a monetary and injunctive relief standpoint), federal law rulings, and state law rulings. The substantive areas examined include Title VII, EEOC pattern or practice cases, the Age Discrimination in Employment Act, the Fair Labor Standards Act, the Employee Retirement Income Security Act, state law rulings in employment law, wage & hour, and breach of contract cases, key CAFA rulings, and other class action rulings with significance to employers on Rule 23 and/or workplace litigation issues.

The Report is the sole compendium in the U.S. dedicated exclusively to workplace class action litigation. Called "the definitive source on employment class action litigation" (EPLiC Magazine, Spring 2011), it has become the "go to" research and resource guide for businesses and corporate counsel facing complex litigation. The Report is fully searchable, and is a great tool for corporate law departments in dealing with complex litigation issues in all sorts of substantive legal areas.

The 2012 Report is 790 pages. To obtain your copy, a convenient order form is attached here.

The Introduction Chapter on significant workplace class action trends over the past year can be downloaded here.

2011 Was A Landmark Year In Workplace Class Actions

As events of the past year in the workplace class action world have demonstrated, the array of bet-the-company litigation issues that businesses face continued to evolve on a landscape that is undergoing significant change. In turn, governmental enforcement litigation and regulatory oversight of workplace issues heated up to new levels, thereby challenging businesses to integrate their litigation and risk mitigation strategies to navigate these exposures.

By almost any measure, 2011 was a transformative year for workplace class actions. The U.S. Supreme Court issued three class action rulings - in Wal-Mart Stores, Inc. v. Dukes, et al., AT&T Mobility v. Concepcion, et al., and Smith, et al. v. Bayer - that impact all varieties of complex litigation in a profound manner. The Supreme Court's decisions are also apt to have far-reaching implications for litigants for years to come.

More than any other development in 2011, Dukes had an immediate and substantial ripple effect on virtually all types of class actions pending in both federal and state courts throughout the county. It fostered a cascading waive of decisions in the second half of 2011, as litigants and courts grappled with the ruling's implications in a wide variety of class action litigation contexts. As of the close of the year, Dukes had been cited a total of 260 times in subsequent case rulings, a remarkable figure for a decision rendered in June of 2011.

Against this backdrop, the plaintiffs' class action employment bar filed and prosecuted significant class action and collective action lawsuits against employers in 2011. In turn, employers litigated an increasing number of novel defenses to these class action theories, fueled in part by the new standards enunciated in Dukes and Concepcion. As the Report reflects, federal and state courts addressed a myriad of new theories and defenses in ruling on class action and collective action litigation issues. The impact and meaning of "Dukes issues" and "Concepcion issues" were at the forefront of these case law developments.

The Key Trends Of 2011 

An overview of workplace class action developments in 2011 reveals six key trends. 

First, the Supreme Court's opinions in Dukes and Concepcion had a profound influence in shaping the course of class action litigation rulings throughout 2011. Dukes caused both federal and state courts to conduct a wholesale review of the propriety of previous class certification orders in pending cases, prompted defendants to file new rounds of motions based on Dukes to attack all sorts of class theories (and not just those modeled after the nationwide class claims rejected in Dukes), and reverberated in case law rulings on a myriad of Rule 23-related issues. Concepcion likewise fueled significant litigation over the impact of workplace arbitration agreements and the impediments such agreements may impose on employment discrimination class actions and wage & hour collective actions. The result was a year of decisions on class action issues the likes of which have never been seen before. This wave of new case law is still in its infancy. As many class action issues are in a state of flux post-Dukes and post-Concepcion, these evolving precedents are expected to continue developing in the coming year.

Second, government enforcement litigation reached "white hot" levels in 2011. This was especially evident in terms of the enforcement litigation program of the U.S. Equal Employment Opportunity Commission. As an inevitable by-product of our nation's economic woes, more discrimination charges were filed with the EEOC in 2011 than in any previous year since the founding of the Commission in 1964 - a new record high of 99,947 discrimination charges against private sector employers (by comparison, the EEOC last year reported receiving a then record high of 99,922 discrimination charges). The Obama Administration's emphasis on administrative enforcement also spawned more government-initiated litigation over workplace issues. The EEOC's systemic program - in which the Commission emphasizes the identification, investigation, and litigation of discrimination claims affecting large groups of "alleged victims" - grew to its largest level ever. This development is of significant importance to employers, for it evidences an agency with a laser-focus on high-impact litigation.

Third, the continued dislocations in the economy during 2011 fueled more class action and collective action litigation. In particular, the plaintiffs' bar continued the pace of filings of FLSA collective actions and ERISA class actions seeking recovery for unpaid wages and 401(k) losses. Furthermore, these conditions spawned more employment-related case filings, both by laid-off workers and government enforcement attorneys. As of the close of the year, filings held steady in these distinct categories and increased across the board in employment discrimination, wage & hour, and ERISA cases. In turn, this resulted in more judicial rulings (especially in FLSA collective action cases), as well as higher settlement numbers (especially in government-initiated enforcement lawsuits and ERISA class action litigation). Even more workplace litigation is expected in 2012, as businesses re-tool their operations and the dust continues to settle.

Fourth, wage & hour litigation continued to out-pace all other types of workplace class actions. This trend was manifested by the fact that in terms of case filings, collective actions pursued in federal court under the FLSA outnumbered all other types of private class actions in employment-related cases. In addition, Rule 23 and § 216(b) decisions by federal and state court judges on wage & hour issues were greater than in any other area of workplace litigation - more than triple that for employment discrimination or ERISA class actions combined. Significant growth in wage & hour litigation also was centered at the state court level, and especially in California, Illinois, New Jersey, New York, Massachusetts, Minnesota, Pennsylvania, and Washington. The crest of the wave of wage & hour litigation is not yet in sight, and this trend is likely to continue in 2012.

Fifth, the plaintiffs' class action bar is a tight-knit community, and developments in Rule 23 and § 216(b) case law in 2011 saw rapid strategic changes based on evolving decisions and developments. This fostered quick evolution in case theories, which in turn impacted defense litigation strategies. With the Supreme Court's rulings in Dukes and Concepcion, the plaintiffs' class action bar has begun a process of "re-booting" class-wide theories of liability and certification. As a result, new certification approaches and cutting-edge strategies are spreading rapidly throughout the substantive areas encompassed by workplace class action law. More than any other trend, the on-going changes to strategy considerations in crafting class claims and litigating Rule 23 certification motions in the wake of Dukes drove case law developments in the second half of 2011. As a result, workplace class action case law is in flux, and more change is inevitable in 2012.

Sixth and finally, the financial stakes in workplace class action litigation increased in 2011, but in a manner far different than past years. The plaintiffs' bar continued to push the envelope in crafting damages theories to expand the size of classes and the scope of recoveries. These strategies resulted in a series of massive settlements in nationwide ERISA class actions, as well as in government enforcement prosecutions at levels above the aggregate settlement totals in 2010. At the same time, settlements of employment discrimination class actions were less frequent and decidedly smaller than in past years. This reflected the impact of Dukes, and the notion that difficulties in certifying nationwide, massive class actions place restrictions on the ability of the plaintiffs' bar to convert their case filings into settlements; it also manifests the ability of defendants to dismantle large class cases, or to devalue them for settlement purposes. As the "shake-out" period of litigating in the post-Dukes world continues to play out in 2012, the plaintiffs' bar undoubtedly will continue in their search for a successful blueprint for certifying large employment discrimination class actions that enhance their ability to convert the class filings into substantial settlements.

More To Come 

Some of our subsequent postings will cover our picks for the "top ten" 2011 rulings and the "most intriguing decisions" of the year. We also will announce our annual class action webinar date soon.

We hope you enjoy the Report!

By Rebecca Bjork and Lynn Kappelman

The recent decision of the U.S. Court of Appeals for the Third Circuit in NAACP, et al v. North Hudson Regional Fire & Rescue, Nos. 10-3965 & 10-3983, 2011 WL 6144188 (3d Cir. Dec, 12, 2011), demonstrates how employers facing disparate impact claims must have a laser-like focus on statistical analysis of hiring patterns, along with the demonstrable business reasons implicated in hiring policies and decision-making.

In this case, the Third Circuit affirmed the findings of the U.S. District Court for the District of New Jersey that the North Hudson Regional Fire and Rescue Department’s (“North Hudson”) residency requirement for firefighter candidates caused a disparate impact by excluding African-Americans who would otherwise be qualified for available firefighter positions. The Third Circuit affirmed the District Court's decision granting summary judgment for the NAACP and Plaintiff class and found that North Hudson had failed to present evidence to create any genuine dispute regarding this disparate impact or to adduce a valid business necessity for the residency requirement. 

By way of background, the North Hudson fire department was formed in 1998, and it was comprised of firefighters from five New Jersey municipalities, including Guttenberg, North Bergen, Union City, Weehawken, and West New York. North Hudson maintained a requirement that all firefighter candidates must live within the five North Hudson towns to be eligible for hire, regardless of their written or physical test scores. The NAACP filed a class action to challenge this policy in 2007, along with three African-American firefighter candidates, alleging that it had a disparate impact on African-American applicants.

In February 2009, the District Court certified Plaintiffs’ class and preliminarily enjoined North Hudson from hiring any firefighters from its residents-only list. The District Court also permitted six Hispanic firefighters who would have otherwise been hired from that residents-only list to intervene in the NAACP’s action. 

At the close of discovery, Plaintiffs sought summary judgment on their disparate impact claim and a permanent injunction against North Hudson prohibiting it from hiring from the residents-only list. Since disparate impact claims depend heavily on statistical proof of the discriminatory effects of the policy at issue, the District Court focused its analysis on the expert testimony presented by both sides. In the District Court, North Hudson had challenged the NAACP expert’s statistical analysis, arguing that it had failed to establish a causal relationship between the residency requirement and the statistical disparity in its African-American employment ratio. Alternatively, North Hudson claimed that even if there was a causal relationship, it could establish that there was a business necessity for its residents-only hiring policy for firefighters. 

In granting Plaintiffs' summary judgment motion, and permanently enjoining North Hudson from using its residents-only list, the District Court held that the North Hudson residency requirement had a disparate impact on African-American applicants. North Hudson appealed the District Court’s judgment to the Third Circuit, and the six Hispanic firefighter candidates who had intervened also joined in the appeal.

The Third Circuit affirmed the decision. The Third Circuit held that the report from the NAACP’s expert, Dr. Richard Wright, had established a prima facie case of disparate impact discrimination. Dr. Wright’s report had compared the proportion of African-Americans employed by North Hudson with the percentages of African-Americans employed in “full time protective service” positions (i) in the three neighboring counties and (ii) in the entire state of New Jersey. In the report, Dr. Wright identified disparities between the percentage of qualified African-Americans in the relevant labor market, and the percentage of African-Americans employed by North Hudson. 

After finding Dr. Wright’s analysis credible, the Third Circuit then analyzed the finding of North Hudson’s expert, Dr. Bernard Siskin. The Third Circuit determined that Dr. Siskin’s expert report actually supported the NAACP’s case because it revealed that a significant number of qualified African-Americans would have been eligible and qualified for employment with North Hudson if the labor market were expanded to the Tri-County Area. 

As a result, the Third Circuit found that Plaintiffs had provided ample evidence of not only a statistical disparity between the number of African-Americans in the labor market in New Jersey, but also a causal connection between its residents-only policy and that disparity. The Third Circuit emphasized that in more than a decade since North Hudson’s inception, it had hired only two African-American firefighters (0.62% of its firefighters), despite an African-American population of 3.4%. 

As a result, the Third Circuit held that Plaintiffs had satisfied their prima facie case that by applying a facially neutral policy, it had caused a significantly discriminatory hiring pattern. The Third Circuit noted that Dr. Wright’s comparison of the proportion of African-Americans employed in Tri-County Area protective service positions (37.4%) with the proportion of African-Americans employed as firefighters by North Hudson (0.62%) showed a disparity that raised an inference of causation. It suggested that North Hudson should have employed sixty-five African-American firefighters, but in fact it employed only two. 

Both the District Court and the Third Circuit were struck by the fact that although North Hudson had contested Dr. Wright’s definition of the relevant labor market as too broad because he had included the Tri-County Area, Dr. Siskin had offered no alternative analysis to explain why the market should be defined more narrowly. The Third Circuit further reasoned that Dr. Wright had bolstered his definition of the broader labor market by pointing out that applicants from the Tri-County area would not have significantly higher commuting times than the average for North Hudson residents. In addition, the Third Circuit rejected North Hudson’s argument that Dr. Wright’s analysis of full-time protective service employees included several positions which were not analogous to firefighters. The Third Circuit found that Dr. Wright’s definition of "protective service employee” fairly, and as nearly as possible, approximated the pool of qualified African-Americans.

In sum, Plaintiffs won this “battle of the experts” because both the District Court and the Third Circuit concluded that North Hudson’s expert not only failed to create a real dispute regarding Dr. Wright’s findings, but also actually bolstered the causal link between the residency requirement and the hiring disparity demonstrated in the NAACP’s expert’s calculations. Once the Third Circuit found that Plaintiffs had established a prima facie case of disparate impact, it made short shrift of North Hudson’s purported business necessity arguments and held that they too failed. The Third Circuit found that there was no business necessity for firefighters to be resident in the North Hudson towns; this requirement was not tied to minimum firefighter qualifications and less discriminatory alternatives were available. 

The moral of this story is that employers who engage in a battle of the statistical experts to defend against a disparate impact hiring case, may win or lose based on how their expert defines the class of people from whom they draw applicants. In addition, if an employer has a facially neutral policy which is determined to have a disparate impact on one protected class, it must be prepared to advance significant business necessity arguments to survive close scrutiny.

By Rebecca Bjork and Matthew Gagnon

On August 8, 2011, the Fifth Circuit held in McClain, et al. v. Lufkin Industries, Inc.,  No. 10-40036 (5th Cir. Aug. 8, 2011), that where the record unequivocally shows that it was necessary for plaintiffs’ counsel to retain co-counsel from outside their local district, the district court abused its discretion in refusing to use the out-of-district co-counsel’s home rates as the starting point for the calculation of attorneys’ fees. In essence, the ruling supports the notion that plaintiffs-side class action specialist firms are entitled to be paid their customary rates from large metropolitan areas, as opposed to typical rates in the locale where they file and prosecute their class action lawsuit.

Plaintiffs had filed a class action in the U.S. District Court for the Eastern District of Texas under Title VII alleging that defendant engaged in unlawful employment practices, including disparate treatment and disparate impact. Id. at *2. The district court certified a class. Id. at *3. After realizing that defendant was not going to settle the case and that they did not have the resources to prosecute an employment class action through trial, plaintiffs’ counsel sought the assistance of another law firm. Id. However, plaintiffs’ counsel was not able to find another law firm in Texas that was willing or able to commit the time and resources necessary to assist in the prosecution of the class action, so plaintiffs’ counsel was forced to turn to an Oakland, California firm with a nationwide reputation as a plaintiffs’ employment discrimination class action firm. Id. at *3-5.

Plaintiffs ultimately won their lawsuit and were awarded extensive back pay, attorneys’ fees, and injunctive relief. Id. at *5. The district court issued a 24-page ruling addressing plaintiffs’ counsel’s application for more than $7.7 million in attorneys’ fees. The district court ruled for plaintiffs’ counsel on nearly all issues, but refused to order payment to the partners of the California firm at a rate of $650 per hour, which was the prevailing rate in the San Francisco Bay area. Id. at *6. The district court based its ruling on the fact that plaintiffs’ counsel had not shown that attorneys from outside the Eastern District of Texas were necessary for the representation of the class; that the Fifth Circuit requires that attorneys’ fees be awarded at locally prevalent rates; and that the California attorneys performed second-chair duties and were therefore not entitled to fifty percent higher rates than local counsel who shouldered more of the responsibility at trial. Id. at *6-7, 11.

The Fifth Circuit reversed, holding that where abundant and uncontradicted evidence proved the necessity of hiring out-of-district counsel, the co-counsel’s “home” rates should be considered as a starting point for calculating the lodestar amount. Id. at *11. The Fifth Circuit acknowledged that the general principles governing the award of attorneys’ fees required that they be calculated according to the prevailing market rates in the local community, and that district courts are required to consider the customary fee for similar work in the same community. Id. at *8-9. However, the Fifth Circuit noted that other circuits allow out-of-district specialist attorneys to be compensated at rates prevailing in their home districts if the hiring of the out-of-town specialist was reasonable and if the rates sought were reasonable for attorneys of the same degree of skill, experience, and reputation. Id. at *9-10 (citing and quoting Hadix v. Johnson, 65 F.3d 532, 535 (6th Cir. 1995)).

As a result, the Fifth Circuit held that the district court erred when it found that there were local counsel who were available to assist on the trial, noting that the record was replete with affidavits from experts attesting to the contrary. Id. at *12. The Fifth Circuit also expressly adopted the rule that rates for out-of-district attorneys can be calculated according to the rates prevailing in their home district: “[I]n the unusual cases where out-of-district counsel are proven to be necessary to secure adequate representation for a civil rights plaintiff, the rates charged by that firm are the starting point for the lodestar calculation.” Id. at *12-13. The Fifth Circuit cautioned that those rates were only the starting point; they could be revised to account for the second chair role played by the firm, to account for travel time, to remove duplicative work, and to discount time spent on unsuccessful claims in the litigation. Id. at *13.

With McClain, the Fifth Circuit joins the Sixth, Seventh, Third, Fourth, and D.C. Circuits in recognizing an exception to the general rule that attorneys’ fees are to be calculated according to the rates that prevail in the local district. Where out-of-district counsel is reasonably necessary to the prosecution of an action, and where they do not charge fees that are unreasonable considering their degree of skill and experience, then the starting point for the calculation of their fees will be the rates prevailing in their home district.

McClain removes a barrier for experienced class action counsel in higher-rate jurisdictions to join in the prosecution of class action employment litigation in the Fifth Circuit. Where previously such counsel may have been deterred from joining an class action in the Fifth Circuit by the large amount of work necessary to take these cases through trial coupled with the uncertainty of obtaining a final fee award in their favor, the Fifth Circuit's ruling provides an incentive for class action counsel to branch out to handle cases outside of their home district. When coupled with similar case law precedent in the Sixth, Seventh, Third, Fourth, and D.C. Circuits, employers should be mindful of the fact that class actions often attract the best and brightest of the plaintiffs’ bar.

By William Dugan and Jennifer Riley

In one of the first court opinions applying Dukes v. Wal-Mart Stores, Inc, 2011 U.S. LEXIS 4567 (U.S. 2011), a Michigan state court ruled in Henry v. Dow Chemical Co., Case No. 03-47775 (Saginaw County, Mich.), that plaintiffs could not certify a class of property owners accusing Dow Chemical of negligently releasing dioxin into a river floodplain. In Dukes, the U.S. Supreme Court issued a landmark ruling last month addressing various aspects of class certification in the employment discrimination context. We posted an in-depth report on Dukes on the date of the decision here, predicting that both federal and state court judges were apt to apply Dukes in a wide variety of class action contexts. To that end, Henry is one of the first rulings that applies Dukes in an on-going class action lawsuit in a state court non-employment class action setting.

In Henry, Plaintiffs sought to represent a putative class in an action against defendant, Dow Chemical Company, alleging that Dow negligently released dioxin, a synthetic chemical that is potentially hazardous to human health, from its plant in Midland into the Tittabawassee River flood plain. Plaintiffs sought class certification under Michigan Court Rule 3.501(A)(1), which articulates prerequisites for class certification similar to those reflected in Rules 23(a) and 23(b)(3) of the Federal Rules of Civil Procedure. 

Previously, on October 21, 2005, the court had granted plaintiffs' motion for class certification. Thereafter, Dow appealed, and the Michigan Supreme Court held that the court's analysis of the numerosity, commonality, and superiority requirements was sufficient but remanded for the court to "clarify its reasoning" on the other elements and "reanalyze" the numerosity, commonality, and superiority prerequisites if it determined that it had not used the proper standards. Henry v. Dow Chemical Co., 484 Mich. 483 (2009). Two years after the Michigan Supreme Court's remand in Henry, the U.S. Supreme Court released its decision in Dukes v. Wal-Mart Stores, Inc., 2011 U.S. LEXIS 4567 (U.S. June 20, 2011). 

On remand, the court in Henry noted that, despite the focus in Dukes on Rule 23 of the Federal Rules of Civil Procedure, it nonetheless "has far-reaching implications for certification of class action lawsuits, including the present case." Indeed, based on the Supreme Court's decision in Dukes, the court reversed its earlier decision and determined that plaintiffs had failed to provide sufficient information to establish the commonality prerequisite to class certification. The court reasoned that, like the plaintiffs in Dukes, plaintiffs in this case failed to establish any "glue" to hold their claims together. The only common question was whether Dow released dioxin into the Tittabawassee River flood plain; but, even assuming that Dow negligently did so and that it contaminated the soil on plaintiffs' properties, "whether and how the individual plaintiffs were injured involves highly individualized factual inquiries regarding issues such as the level and type of dioxin contamination in the specific properties, the different remediation needs and different states of remediation for different properties, and the fact that some of the properties have been sold." The court found that plaintiffs' nuisance claims required similar individualized factual inquiries; "whether plaintiffs have suffered an interference with or loss of use and enjoyment of their property requires an individualized factual inquiry into each plaintiff's use and enjoyment of [his or her] property." Because plaintiffs failed to show a common contention capable of class-wide resolution, the court held that it was unnecessary to consider the typicality and adequacy requirements and denied plaintiffs' motion for class certification. 

As one of the first applications of Dukes, Henry is significant in demonstrating the new landscape of Rule 23 class certification and the higher bar for plaintiffs attempting to demonstrate commonality. The first courts applying Dukes have confirmed predictions of far-reaching effects for defense of employment class action litigation, as well as non-employment claims. Henry is illustrative of that trend and its wide-ranging application - even to an environmental tort class action in a state court.

By Gerald L. Maatman, Jr. and Matthew Gagnon

Rejecting an employer’s bid to use the U.S. Supreme Court’s recent decision in Dukes, et al. v. Wal-Mart Stores, Inc. to shield it from class-related discovery requests, Magistrate Judge Maria-Elana James of the U.S. District Court for the Northern District of California ordered Deere & Co. and John Deere Landscapes, Inc., to disclose the contact information of all putative class members in a nationwide gender discrimination in hiring lawsuit in Artis, et al. v. Deere & Co., Case No. 10-CV-5289 (N.D. Cal. June 29, 2011) [link to ruling]. In Dukes, the SCOTUS issued a landmark ruling on various facets of class certification in employment discrimination lawsuits, which we analyzed on the date of the decision here. Artis is significant as it is one of the first rulings to apply Dukes in an on-going class action lawsuit.

In a lawsuit filed under Title VII and the California Fair Employment and Housing Act, the plaintiff in Artis sought certification under Rule 23 of a class of all female job applicants and deterred applicants for entry level sales, customer service and shipping and receiving positions in Deere’s Equipment Operations divisions who have been or may be denied employment by Defendants. She alleged the class included hundreds of former and current female applicants and deterred applicants as well as future applicants and deterred applicants. In this respect, the theories in Artis were one step removed from Dukes, which alleged class-wide discrimination in pay and promotions.

In a discovery request, plaintiff's counsel sought job applications and other sources of names, addresses, telephone numbers, and email addresses of putative class members and percipient witnesses. Plaintiff's counsel argued that she was entitled to this discovery in order to fully develop the evidentiary record in an effort to substantiate her class allegations and meet the requirements of Rule 23. Defendants resisted, asserting that pursuant to Dukes, et al. v. Wal-Mart Stores, the individualized information possessed by class members was irrelevant and that the plaintiff was required to identify a company-wide evaluation method that could be charged with discrimination or offer significant proof of a general policy of bias — a showing the defense asserted the plaintiff was unable to make.

In rejecting the use of Dukes to limit plaintiff's discovery requests, the Court determined that the plaintiff made a prima facie showing under Rule 23. As to the first element of the rule, she alleged the class included hundreds of former and current female applicants and deterred applicants as well as future applicants and deterred applicants. The second element was satisfied by her allegations that defendants provided female applicants and potential applicants discriminatory, inconsistent, or inaccurate statements about the job requirements and qualifications. Likewise, her allegation that her claim of injury is typical of the class met the third element. Finally, the Court found that the prima facie requirement was completed by the plaintiff’s allegation that the employers engaged “in a pattern or practice of discriminating against female applicants.” Id at. 4. The Court concluded that given the plaintiff's satisfaction of these requirements, the key issue was whether "discovery of the requested contact information will likely provide plaintiff an opportunity to present evidence as to whether a class action is maintainable." Id.

Noting first that the disclosure of names, addresses, and telephone numbers is a common practice in the context of class actions, the Court held the plaintiff was entitled to the contact information of putative class members. The Court reasoned that the information was needed to substantiate class allegations and meet the certification requirements of Rule 23. The contact information and contact with potential class members was necessary to determine whether the plaintiff’s claims were typical of the class, and ultimately whether the suit could be maintained as a class action.

In so holding, the Court rejected the defense arguments pursuant to Dukes, et al. v. Wal-Mart Stores because they were focused on whether the plaintiff would ultimately be able to satisfy her burden of showing that a class action was proper under Rule 23. The Court determined that this question was not pertinent because the plaintiff’s burden was merely to make a prima facie showing that the Rule 23 class certification requirements were met, which she had done. Moreover, the defense assertion that the plaintiff must identify a company-wide evaluation method or significant proof of a general policy of bias went to the merits of the plaintiff’s claims, which were not appropriately addressed in the context of the discovery dispute. Furthermore, because such information was most likely in the possession of the employers, the Court held that it was necessary to give the plaintiff the opportunity to propound enough discovery to obtain the material. Id. at 5.

As to the employers’ argument that production of the requested discovery would violate the right to privacy of other applicants, the Court acknowledged that the constitutional right to privacy was implicated. Hence, the party seeking discovery must show a compelling need for discovery that is so strong as to outweigh the privacy right when the two competing interests are balanced. Nonetheless, the Court found that the privacy interests at stake in the names, addresses, and telephone numbers “must be distinguished from those more intimate privacy interests such as compelled disclosure of medical records and personal histories.” Id. at 6.  Specifically, the Court ruled that although the putative class members had a legally protected interest in the privacy of their contact information and a reasonable expectation of privacy, the information sought in this case was “not particularly sensitive,” and the employers’ privacy objections must yield to the plaintiff’s request for the information as the putative class members might possess relevant discoverable information about issues dealing with the plaintiff’s gender bias claims, as well as other class certification issues. Id.

Finally, the Court reasoned that the parties could craft a protective order limiting the use of any contact information to the parties involved in this litigation, and thus ordered that the discovery be produced to the plaintiff’s counsel only and that it be used solely in this litigation. Id. at 6-7.

Artis is significant to employers. For those who may have believed that employers could cite Dukes and avoid class-wide discovery where "Dukes-like" certification theories are advanced by plaintiffs, Artis suggests that the task of the defense is not so easy. At the same time, Artis shows that Dukes may be a sword for use in approaching the defense of class action litigation in nuanced and varied ways. The Court in Artis did not reject the use of Dukes to limit discovery, but rather held that the plaintiff has alleged sufficient class theories to get around a Dukes-derivative defense to discovery. This suggests that class action litigation over the coming years will see wide-ranging fights over the meaning of Dukes for many facets of workplace class action litigation.

By Gerald L. Maatman, Jr. and Laura Maechtlen

Today, the U.S. Supreme Court issued its long-awaited and much anticipated opinion in Dukes, et al. v. Wal-Mart Stores, Inc. The Supreme Court reversed, and ruled in favor of Wal-Mart.

The decision is likely to spark a transformation of Rule 23 class certification law, and the workplace class action litigation is apt to change dramatically in the future. In short, the Supreme Court’s opinion re-positions the goal posts on the playing fields of how workplace class actions are structured, defended, and litigated.

In a 5 to 4 ruling, the SCOTUS held that plaintiffs failed to demonstrate commonality under Rule 23(a)(2), and unanimously held that the back pay claims could not be properly certified under Rule 23(b)(2).

The impact of the ruling will be significant to employers for their approach to employment discrimination litigation. As such, Dukes determines how much, for purposes of Rule 23(a), class members must have in common for a class action to be certified and the extent to which claims for money damages can ever be certified under Rule 23(b)(2).

The U.S. Supreme Court’s decisions reverses the 6 to 5 en banc decision of the U.S. Court of Appeals for the Ninth Circuit in San Francisco – reported at 603 F.3d 571 (9th Cir. 2010) – which had affirmed an earlier class certification order in the largest employment discrimination class action in history.  The full Ninth Circuit had ruled that the U.S. District Court for the Northern District of California did not abuse its discretion in finding that the large and diverse class – encompassing approximately 1.5 million female employees, both salaried and hourly with a range of positions, who are or were employed at one or more of the company’s 3,400 stores across the country – was united by a complex of company-wide discriminatory practices against women. Plaintiffs sought to justify class certification with a combination of expert opinions, factual evidence, statistical evidence, and anecdotal evidence purporting to show a corporate policy and common pattern of discrimination imposed on female employees nationwide.

Our blog has covered virtually every angle of the Dukes case since the SCOTUS's grant of certiorari on December 6, 2010 [see posts on the grant of certification here - on the briefs of the parties and their amicus - here, here, here, here, and here - and on the SCOTUS oral argument here].

Today's ruling confirms what we predicted - Dukes creates a new landscape for Rule 23 certification issues, and is apt to impact employment discrimination litigation for years to come.

The U.S. Supreme Court’s Decision

The opinion, authored by Justice Scalia and joined in by Justices Roberts, Kennedy, Thomas, and Alito, addresses two primary questions: (1) whether the order certifying a class conforms to the requirements of Federal Rule of Civil Procedure 23(a); and (2) whether claims for monetary relief can be certified under Federal Rule of Civil Procedure 23(b)(2) and, if so, under what circumstances.  

The two issues are at the heart of most class actions, and the resolution of these questions often casts the die for success or failure in the prosecution or defense of complex discrimination lawsuits.

Holdings Focused On Rule 23(a) Commonality Issues

Today's opinion focuses on the issue of whether plaintiffs had adequately demonstrated a common policy of discrimination on the part of Wal-Mart under Rule 23(a)(2). The Supreme Court opined that "the crux of this case is commonality." Id. at 8. Plaintiffs’ theory - which had been endorsed below by the District Court and the slim majority of the Ninth Circuit - is that the common policy consisted of two elements: an alleged common corporate culture that allegedly embodies sexual stereotypes, coupled with a policy that gave local managers unfettered discretion in making personnel decisions. The Supreme Court framed the issue as whether "that common contention" is "capable of classwide resolution - which means that determination of its truth or falsity will resolve an issue that is central to the validity of each of the claims in one stroke." Id. at 9. In this respect, the commonality issue overlapped with the merits issue that the employer engaged in a pattern or practice of discrimination. The Supreme Court concluded that based on the reasons for the employment decisions at issue, "it would be impossible to say that examination of all the class members' claims for relief will produce a common answer to the critical question…" at issue in the lawsuit. Id. at 12.

The Supreme Court determined that plaintiffs had to show that the employer operated under a general policy of discrimination. It concluded that this "is entirely absent here." Id. at 13. In criticizing plaintiffs' expert showing (based on the testimony of Dr. William Bielby, which the Supreme Court viewed with extreme skepticism), the Supreme Court concluded that the testimony demonstrated no linkage between sexual-bias stereotyping and employment decisions impacting the class members. In essence, it fell far short of "significant proof" that the company operated under a general policy of discrimination. Id. at 14.

The Supreme Court opined that the only evidence of a corporate policy plaintiffs showed was Wal-Mart's policy of allowing discretion by local supervisors over employment decisions, which in and of itself was not evidence sufficient to raise an inference of discrimination. This showing fell short of the requisite proof necessary for Rule 23(a)(2). However, for class certification purposes, the Supreme Court reasoned that demonstrating the invalidity of one manager's use of discretion "will do nothing to demonstrate the invalidity of another's…" such that all class members' claims will "depend on the answers to common questions." Id. at 15. The Supreme Court also rejected plaintiffs' statistical proof (from Drs. Richard Drogin and Marc Bendick), and concluded that "even if [the expert studies] are taken at face value, these studies are insufficient to establish" plaintiffs' theory of discrimination on a classwide basis. Id. at 16. The Supreme Court also dispatched plaintiffs' anecdotal proof - 120 affidavits, representing about 1 of every 12,500 class members and relating to some 235 stores out of the 3,400 stores at issue - as insufficient to show a general policy of discrimination. Id. at 18.

For these reasons, the Supreme Court held that plaintiffs failed to demonstrate the existence of any common questions sufficient for class certification under Rule 23(a)(2).

Whether Claims For Monetary Relief Can Be Certified Under Rule 23(b)(2)

The Supreme Court's ruling also addressed the split in the federal circuits relative to the standard for determining whether monetary claims inappropriately predominate in a Rule 23(b)(2) class.  The Supreme Court concluded that plaintiffs' claims for back pay were improperly certified under Rule 23(b)(2), and that claims for monetary relief may not be certified under Rule 23(b)(2) unless the monetary relief is not incidental to claims for injunctive and declaratory relief., a question the Supreme Court previously raised but did not decide in Ticor Tile Insurance v. Brown, 511 U.S. 117 (1994).

The Supreme Court opined that Rule 23(b)(2) certification is unavailable when "each class member would be entitled to an individualized award of monetary damages." Id. at 21. Instead, such claims "belong in Rule 23(b)(3)." Id. at 22. The effect, of course, is that the required showings of predominance and superiority, and the right to mandatory notice and the right to opt out, are features of Rule 23(b)(3) certification, and a much harder showing for plaintiffs to make.

Finally, the Supreme Court also rejected plaintiffs' theory - and the Ninth Circuit's conclusion below - that back pay could be determined with a "Trial by Formula" - the notion that a sample of class members could be selected, and statistical modeling could yield a result for the entire classwide recovery without further individual proceedings. Id. at 27. The Supreme Court concluded that such a device violates the Rules Enabling Act, as a class cannot be certified on the premise that an employer "will not be entitled to litigate its statutory defenses to individual claims." Id.

The Likely Impact Of The Supreme Court's Ruling On Workplace Class Actions And Human Resources Best Practices

The SCOTUS ruling in Dukes addresses several cutting-edge class action issues. These issues are of substantial importance to employment discrimination class action litigation and to employers generally because it establishes a roadmap for plaintiffs' lawyers and defense counsel alike in approaching class certification briefing and hearings. The new roadmap is decidedly more favorable to employers than before. Employers should be upbeat in terms of the Supreme Court's articulation of the required showings plaintiffs must make in the future to certify an employment discrimination class action. In short, the bar has been raised.

The impact of the Dukes case also impacts all employers’ human resources administration, policies, and procedures. As a result of the decision, employers should review HR practices related to pay and promotion decisions - subjective or not - to determine whether they are adversely impacting any classification of employee. Employers should design any subjective decision-making process and procedure carefully, by linking the process and procedure directly to each position and criteria for performance, ensuring that managers closest to performance are trained to make effective decisions, and consider an appeal process for employees considered but not selected for promotion or training opportunities. Employers should review their programs aimed at increasing diversity and preventing discrimination to ensure that they are being implemented effectively, and should not avoid implementing these programs. Further, employers should continue providing training and communications regarding company policies, including those relating to equal employment opportunities, non-discrimination, and career opportunities.

Upcoming Seyfarth Webinars On Dukes

Tomorrow - on June 21, 2011, at 12 ET/11 CT/9 PT, Seyfarth Shaw LLP is hosting a short, interactive webinar on the Dukes ruling, and initial thoughts regarding the impact of the ruling on employers, and what it means for the future of workplace litigation. To register, please click this link.

In July of 2011, Seyfarth Shaw LLP will be hosting two more in-depth webinars on the Dukes ruling, one that addresses the Rule 23 and class action implications of the ruling, and another tailored for human resources professionals that will focus on the practical and business-related impacts of the opinion. Information on registration will be available shortly.

Upcoming BNA Webinar And Article On Dukes

On July 9, 2011, we are presenting at the BNA webinar on the Dukes ruling sponsored by BNA's Class Action Litigation Reporter. Our loyal readers can access the webinar from our blog next week.

We are also submitting a full analysis on the SCOTUS's decision in Dukes for the next issue of BNA's Class Action Litigation Reporter, which we will post on the blog shortly.

By Rebecca Bjork and Dave Ross

So what does the U.S. Supreme Court ruling of June 6 vacating the Fifth Circuit’s decision affirming the denial of class certification in Erica P. John Fund, Inc.  v. Halliburton Co. tell employers about what the Supreme Court might do when deciding the highly-anticipated Dukes v. Wal-Mart case?  Probably, not much. 

In previous blog posts, our contributors have noted the significance of two Supreme Court decisions this term that will dramatically affect how employment class actions are prosecuted and defended – AT&T Mobility LLC v. Concepcion (No. 09-893) and Wal-Mart v. Dukes (No. 10-277).  Because the Supreme Court has not accepted cases in the class certification arena for so long, the guidance it provides to lower courts in Dukes will be important, even beyond the direct impact it will have on employers’ defenses to workplace class action lawsuits.  Further, the ruling in Concepcion has very broad implications for class arbitration waiver provisions in consumer and employment contracts.  But if you think that this is the “year of the class action” in the Supreme Court – which it may very well be – and that the unanimity shown by the Supreme Court in Halliburton presages the outcome in Dukes, one should think again.

The reason is that the holding in Halliburton is actually quite narrow.  The Petitioner, EPJ, filed a securities fraud class action against Halliburton, alleging that the company deliberately “made various misrepresentations designed to inflate its stock price” in violation of § 10(b) of the Securities Exchange Act of 1934 and Securities and Exchange Commission Rule 10b-5.  Id. at 1-2.  EPJ alleged that when corrective disclosures were made that caused the price of Halliburton stock to drop, it and a class of investors in that stock lost money.  Id. at 2.  The District Court denied EPJ’s motion for class certification because it had failed to demonstrate “loss causation,” the causal connection between the alleged material misrepresentation made by a company and the economic loss suffered by its investors.  The District Court relied upon controlling Fifth Circuit authority holding that such a showing was necessary in order to obtain class certification. 

The Supreme Court granted certiorari to resolve a conflict amongst the circuits on that specific question – “whether securities fraud class action plaintiffs must prove loss causation in order to obtain class certification” – noting that the Fifth Circuit rule was at odds with the Second, Seventh, and Third Circuits which do not require such a showing.  Id. at 3.  It is true that in analyzing the issue, the Supreme Court did focus on the Rule 23(b)(3) predominance standard which is in play in Dukes.  But the Supreme Court carefully focused on the case law it has developed over the years interpreting securities law, going no further than holding that the Fifth Circuit’s rule “is not justified by [that case law] or its logic.”  Id. at 6.  Justice Roberts, who authored the unanimous opinion, made clear that the Supreme Court’s holding was limited to the “loss causation” question, stating that if Halliburton “has preserved any further arguments against class certification, they may be addressed in the first instance by the Court of Appeals on remand.”  Id. at 9.    

If one reads the Halliburton ruling and wonders whether it increases the odds of a plaintiff-side victory in Dukes, we suggest that the best approach is simply to wait for the Supreme Court to decide that much more complicated set of questions, which we continue to believe will have far more important effects on employment class actions. Stay tuned!

By Gerald Maatman and Michael Fleischer

On May 13, 2011, in Lewis, et al. v. City of Chicago, Illinois, No. 07-2052 (7th Cir. May 13, 2011), the Seventh Circuit, on remand from the U.S. Supreme Court, issued an important decision applying the Supreme Court’s ruling that plaintiffs may challenge the application of an employment practice with an alleged disparate impact on protected employees even if they have not timely challenged the adoption of that practice. 

In Lewis, African-American applicants challenged the City of Chicago’s selection process for hiring new fire fighters.  In 1995, the City administered a written examination to over 26,000 applicants for positions in the Chicago Fire Department.  The applicants who scored 89 or above were deemed “well qualified,” and the applicants who scored between 65 and 88 were deemed “qualified.”  To fill their position openings, the City announced that they would randomly draw from those who were deemed “well qualified,” while those who were deemed “qualified” would remain on the list of potential selectees but were unlikely to be hired.  From March 1996 to November 2001, the City hired 11 groups of applicants, all from the “well qualified” group.  On March 31, 1997, the plaintiffs sued, alleging that the City’s practice of selecting only applicants who were “well qualified” caused a disparate impact on African-American applicants in violation of Title VII.

The district court found that the City’s reliance on the 1995 test constituted an on-going violation and did not make the plaintiffs’ claim untimely.  The district court noted the City’s concession that the test had a disparate impact on African-Americans, and rejected its business-necessity defense in awarding relief to the plaintiffs, which included the hiring of 132 class members and damages.  The Seventh Circuit later reversed, holding that the plaintiffs’ suit was untimely because it was filed more than 300 days after the City’s announcement of the selection policy, and that later hiring decisions were merely automatic consequences of the discriminatory act, not fresh violations.  The Supreme Court reversed that ruling in Lewis v. City of Chicago, 130 S.Ct. 2191 (2010), and remanded to the Seventh Circuit on the grounds that the adoption of an employment practice and its later application both give rise to an independent cause of action.

On remand, the Seventh Circuit applied the Supreme Court’s ruling that in disparate impact litigation, the 300 day statute of limitations starts anew whenever the employer uses a test (or other practice) to make hiring decisions.  The Seventh Circuit analyzed whether the City had preserved its contention that the charge of discrimination was untimely with respect to the first hiring class on March 16, 1996.  The Seventh Circuit found that since the district court had treated all of the hiring waves alike, the City did not need to make separate arguments for each hiring class, and that only plaintiffs’ charge on March 31, 1997 - for the first wave of hires - was untimely because it was filed after the 300 day statue of limitations.  The Seventh Circuit also found that the City was unable to prove that the plaintiffs failed to establish a disparate impact in any particular use of the list. 

As to the remainder of the plaintiffs' claims, the Seventh Circuit first pointed to the City’s admission in district court that the City’s policy had a disparate impact on minority applicants.   The Seventh Circuit found that since the City had always selected from the “well qualified” group at random, each new batch of hires created the same disparate impact as the overall list.   Though the Seventh Circuit noted that there was a possibility that one of the 10 contested hiring classes may have produced a batch of hires in which minority applicants predominated, the City had failed to point this out, and the plaintiffs were entitled to the natural inference that all classes were alike and created the same disparate impact.

The Seventh Circuit suggested that if the City had hired in rank order, as many civil-service employers do, the outcome may have been different.  If the City had hired the top scores in the “well qualified” group first, followed by the next highest, it would have been essential for the plaintiffs to evaluate each use of the list separately.  In turn, the City may have had more success in arguing a business necessity defense premised on the fact that it was essential to hire those who scored 100 ahead of those who scored 85.  

In affirming the district court’s decision, except for the first batch of hires, the Seventh Circuit concluded that “in disparate impact litigation, the question is not whether a test or standard is lawful standing alone, but whether its application has been adequately justified.”  Lewis, at 8.

The Seventh Circuit’s application of the Supreme Court’s ruling provides insights for employers whose practices may be subject to class action disparate impact litigation.   First, employers may be liable for disparate impact violations stemming not just from the date of their policy, but for each action which results from their policy.  Second, employers should review their policies and procedures to ensure that they are not creating a disparate impact on members of a protected class.  Third, as suggested by the Seventh Circuit, employers would be wise to forego future selection processes which allow for a broad grouping of candidates by score; instead, employers who use selection tests should institute policies whereby their candidates are selected by their specific scores. In doing so, this will give employers the opportunity to later present specific business necessity evidence which may aid in reducing the size of a class.

By Eric J. Janson and Richard Sloane

On April 26, 2011, in EEOC v. Xerxes Corporation, No. 10-1156 (4th Cir. April 26, 2011), the U. S. Court of Appeals for the Fourth Circuit emphasized the importance of responsiveness and, where appropriate, prompt remedial action by employers in addressing allegations of harassment by co-workers.  In a unanimous opinion (with two concurring opinions), the Fourth Circuit affirmed in part, vacated in part, and remanded the District Court’s grant of summary judgment in favor of the employer.

Xerxes is a fiberglass tank manufacturer based in Minneapolis, Minnesota.  In July 2008, the EEOC filed a lawsuit on behalf of three current or former African-American employees of Xerxes’ manufacturing plant in Williamsport, Maryland.  The complaint alleged a hostile work environment on the basis of race in violation of Title VII of the Civil Rights Act of 1964.  Specifically, the complaint asserted that the employees were the targets of racial slurs and racially derogatory comments, pranks and practical jokes, and threatening notes from their co-workers.  The alleged harassment included name-calling such as “Black Polack,” “Buckwheat,” and “boy;” White co-workers’ frequent used of the N-word; and the discovery of a note (delivered on a piece of fiberglass) in the locker of an African-American employee that included the following language:  “KKK plans could result in death, serious personal injury….”

As of at least 2006, the company had an anti-harassment policy in place, prohibiting “Sexual, Racial, and Other Objectionable Conduct or Unlawful Harassment.”  The policy provided specific examples of prohibited conduct and, among other directions, instructed employees to “Immediately report the incident to your supervisor and plant manager.” 

When the employees reported these incidents to Xerxes, the company conducted investigations, took disciplinary action against the alleged harassers, and thereafter conducted company-wide training on its anti-harassment policies and complaint procedures.  Additionally, the company reported the threatening notes to local law enforcement officials.  The District Court found these measures to provide a sufficient basis to grant Xerxes’ motion for summary judgment on the EEOC's multiple claims of co-worker racial harassment.  The District Court held that “whenever Xerxes learned of harassment, it acted quickly and reasonably effectively to end it.” 

On appeal, the Fourth Circuit indicated that, to survive summary judgment on a claim of a racially hostile work environment, the EEOC “must demonstrate that a reasonable jury could find [the] harassment (1) unwelcome; (2) based on race; and (3) sufficiently severe or pervasive to alter the conditions of employment and create an abusive atmosphere.” Additionally, the EEOC was required to present “sufficient evidence of a fourth element:  that there is some basis for imposing liability” for the harassment on the employer. In focusing on this critical fourth element, the Fourth Circuit examined the point at which Xerxes knew or should have known of the alleged harassment. 

In making this inquiry, the Fourth Circuit looked to a variety of factors, including the timeliness of a complaint following an alleged act of harassment, any evidence of undue delay by the employer in responding, and a determination as to whether the employer’s response was proportional to the seriousness and frequency of the alleged harassment.  For example, this involves a consideration of the repetition of unlawful conduct to demonstrate the unreasonableness of prior responses.  The Fourth Circuit reasoned that while Title VII requires employers to take steps reasonably likely to stop the harassment, the statute does not require an employer to “dispense with fair procedures for those accused or to discharge every alleged harasser.” Thus, an employer should conduct a thorough investigation into allegations of unlawful activity.  Even if a jury later concludes that harassment occurred, an employer may escape liability with a finding of a reasonable and proportional response to the alleged activity.  The Fourth Circuit determined that through this process, the rights of the victim, the alleged harasser, and the employer are balanced. 

In reviewing the factual record, the Fourth Circuit concluded that there was a genuine issue of material fact as to the point at which Xerxes had notice of alleged racial slurs and pranks at its Maryland plant – enough for the EEOC's case to survive the company’s motion for summary judgment. 

In his concurring opinion, Judge Wilkinson noted that: “The undisguised ugliness of the incidents alleged here stands as a rebuke to complacency and a reminder that the task of racial reconciliation in our country remains incomplete.”  In her separate concurring opinion, Judge Motz recalled that none of the alleged harassers were management officials, noting:  “If an employer’s president or another management official … had perpetrated this harassment, it would certainly be imputable to the employer.”  Had that been the case, the EEOC would have had much stronger evidence to have placed the employer on notice. 

The Fourth Circuit’s decision to vacate part of the District Court’s grant of summary judgment provides an important reminder to employers as to the significance of a prompt and appropriate response to allegations of unlawful conduct such as harassment, retaliation, or discrimination.  Of course, it is important for employers to have anti-discrimination policies in place, and that such policies are broadly and regularly communicated to all company employees.  Likewise, employers need well-defined complaint reporting and investigative procedures so that an appropriate response can be crafted and implemented to nip a problem in the bud.  The Xerxes decision should serve as a “wake up” call to employers as to the potential perils of slow responses to allegations of harassment, discrimination, or retaliation, and the fact that the EEOC views such situations as top litigation targets for pattern or practice lawsuits against companies. 

Co-authored by Gerald L. Maatman, Jr. and Laura Maechtlen

Today the U.S. Supreme Court heard oral argument in Dukes, et al. v. Wal-Mart Stores, Inc.

For those who enjoy reading the tea leaves from the intensely combative questioning during the argument, the hearing transcript makes for fascinating reading [link to transcript].

The stakes in the case are enormous and the future ruling is likely to be transformative for class action litigation. In short, the Supreme Court's decision will re-position the goal posts on the playing fields of how workplace class actions are structured, defended, and litigated.

To place the dispute in context, the argument comes nearly 7 years after the class certification order giving rise to the appeal. The Supreme Court's review follows a 6-to-5 en banc decision of the U.S. Court of Appeals for the Ninth Circuit in San Francisco - reported at 603 F.3d 571 (9th Cir. 2010) - which affirmed an earlier class certification order in the largest employment discrimination class action ever certified. The Ninth Circuit upheld an earlier panel decision certifying a class action gender discrimination lawsuit challenging Wal-Mart’s pay and promotions practices. The full Ninth Circuit ruled that the U.S. District Court for the Northern District of California did not abuse its discretion in finding that the large and diverse class - encompassing approximately 1.5 million female employees, both salaried and hourly with a range of positions, who are or were employed at one or more of company’s 3,400 stores across the country - was united by a complex of company-wide discriminatory practices against women where plaintiffs presented expert opinions, factual evidence, statistical evidence, and anecdotal evidence showing a corporate policy and common pattern of discrimination imposed on female employees nationwide.

The Supreme Court heard argument on the following questions: (i) whether claims for monetary relief can be certified under Rule 23(b)(2) of the Federal Rules of Civil Procedure and, if so, under what circumstances; and (ii) whether the order certifying a class conforms to the requirements of Rule 23.

As the transcript reflects, the argument was lively, and both counsel were repeatedly interrupted with questions from the Justices on a variety of points.

For those keeping score, here is the questioning breakdown: total questions to the defense - 34 questions (including 12 from Justice Sotomayor, 8 from Chief Justice Roberts, 5 from Justice Kagan, 3 from Justice Ginsberg, 2 from Justice Breyer, 2 from Justice Kennedy, 1 from Justice Alito, and 1 from Justice Scalia); and total questions to plaintiffs - 56 questions (including 22 from Justice Scalia, 8 from Justice Sotomayor, 8 from Justice Ginsberg, 7 from Justice Kennedy, 6 from Chief Justice Roberts, 2 from Justice Alito, 2 from Justice Breyer, and 1 from Justice Kagan). Justice Thomas was the only Justice who declined to ask any questions.

Some of the key questioning at today's hearing focused on:

• Whether plaintiffs' theory of discrimination is sound insofar as it asserts the gender-bias stereotyping theory of discrimination and an absence of any constraints on that discretion in the face of the company's strong ant-discrimination policy (as Justice Scalia commented at page 29 of the hearing transcript - "I'm getting whipsawed here. On the one hand you say the problem is they were utterly subjective, and on the other hand you say there is a...a strong corporate culture that guides all of this. Well, which is it?");
• Whether and to what extent experts are needed to establish commonality under Rule 23(a)(2) and the test for examining that evidence (as Justice Sotomayor indicated at page 8 of the hearing transcript, even if the company was right that the analysis of plaintiffs' expert did not hold water, "…That begs the legal question…that there was enough here after [the district court's] rigorous analysis?");
• Whether the Ninth Circuit's standard for pursuit of monetary relief under Rule 23(b)(2) is proper, or if pursuit of class-wide damages necessitates Rule 23(b)(3)'s opt-out procedures (as Justice Sotomayor commented at page 18 of the hearing transcript, "…Couldn't you separate out the (b)(2) issue from the (b)(3) question of whether monetary damages have enough common facts and law to warrant certification under (b)(3)?"); and
• Whether any procedure for parceling out damages could be fair in the circumstances of the case (or as Justice Scalia commented at page 49 of the hearing transcript, "...Is this really due process?").

Reading tea leafs from oral argument and predicting the outcome is a hazardous business. Here are our predictions:

1. We believe the Supreme Court did not accept Dukes to affirm what the Ninth Circuit ordered in its 6-to-5 en banc ruling. Rather, the Supreme Court is apt to re-fashion the points at issue.
2. We also think the Supreme Court will split on the issues, and unanimity is unlikely. The potentially dispositive impact of those splits will shape the ultimate decision - liberal vs. conservative views; strict vs. liberal/expansive reading of the statutes and rules at issue; civil rights vs. business/employer interests; etc.
3. We predict that the majority ruling will tighten the Rule 23(a) commonality test and require more cohesiveness across the class which is pursuing employment-related claims against an employer.
4. We also predict that the majority ruling will articulate additional guide posts for the Rule 23(b)(2) prerequisites that will be key to class action structuring and defense issues, and the extent to which opt-out rights become determinative when significant sums of money are at issue as in this litigation.

The key battleground issue likely will turn on how the legal boundaries of workplace class actions can be maintained consistent with the due process rights of an employer that must defend itself from class-wide theories of recovery.

The Supreme Court's decision is expected by the last week of June. We will be waiting for what is sure to be a seminal ruling, and plan to post our analysis of the ruling as soon as is announced by the Supreme Court. 

By Pamela Q. Devata

Challenges are on the increase over the use of credit checks by employers. One of the first private party class actions of this ilk - entitled Appolon, et al. v. University of Miami, Case No. 1:01-CV-24166 (S.D. Fla.) - asserts claims under Title VII of the Civil Rights Act of 1964, alleging disparate impact discrimination against African-Americans and Latinos due to the employer's use of credit information in hiring decisions.

In the first substantive ruling in Appolon, the Court issued a ruling on March 14, 2011 [link to ruling], granting the employer's motion to dismiss, and significantly limiting the scope of the lawsuit. Plaintiffs Loudy Appolon, an African-American woman, and Maria Olivera, a Latina woman, alleged that the University’s hiring policy of using credit checks in making certain employment decisions disparately impacted them and a class of African-Americans and Latinos in violation of Title VII. Appolon alleged that she was not hired for a Senior Medical Collector position in the Department of Patient Financial Services based on her credit history. The University moved to dismiss the complaint on multiple grounds, including: (i) that Olivera failed to exhaust her administrative remedies as required under Title VII; (ii) because of Olivera’s failure to exhaust her remedies, all Latino members of the purported class lacked standing (having no adequate representative); (iii) the Amended Complaint failed to plead any viable basis of relief; and (iv) the class allegations were flawed and speculative.

The Court ruled that because Olivera filed her EEOC charge of discrimination after the lawsuit was filed, she had failed to exhaust her administrative remedies. While Olivera argued that her administrative charge should “piggy-back” on that of the other named Plaintiff's charge of discrimination – which was timely filed by Appolon – the Court disagreed. Quoting Hipp v. Liberty National Life Insurance Company, 252 F. 3d 1208, 1225 (11th Cir. 2001), the Court reasoned that “in order to piggy-back, a Plaintiff must have been able to file his or her charge of discrimination on the date the representative Plaintiff filed the [EEOC] charge,” and further reasoned that “… the forward scope of a representative charge ends on the date that it was filed.” Id. at 8. Accordingly, the Court dismissed Olivera from the action. The Court further held that with Olivera’s dismissal, the only remaining class representative in the case was Appolon – who is not Latino - and that she had standing to assert claims for a class of African-Americans only. The Court trimmed the lawsuit's scope on the grounds that there was no class representative who was similarly-situated to the purported Latino class members, and thus that aspect of the class failed for lack of standing of a viable named Plaintiff to champion their cause. Id. at 11.

At the same time, the Court declined to dismiss the Amended Complaint brought relative to Plaintiff Appolon. The Court concluded that the alleged class theory was viable in stating a cause of action that Defendant's practice disparately impacts applicants for employment. Id. at 12. For this reason, the Court determined that it would revisit the sufficiency of the case theory when determining whether class certification was proper under Rule 23.

While this initial ruling favored the defense on procedural grounds, the battle is now drawn on the viability of the credit check class theory. Given the current legal landscape regarding these types of claims, this case warrants keeping a close eye out for new developments in this area of the law.

Co-authored by Brandon L. Spurlock and Alex S. Drummond

Since the U.S. Supreme Court's ruling last year in Stolt-Nielsen S.A. v. AnimalFeeds Int'l Corp., 130 S. Ct. 1758 (2010), the battle lines are being drawn in federal courts over the extent to which employers can use workplace arbitration agreements to stay out of court proceedings and/or class actions.

Sutherland v. Ernst & Young LLP, No. 10-CV-3332 (S.D.N.Y. Mar. 3, 2011), a recent decision out of the U.S. District Court for the Southern District of New York [link to ruling], is the latest example of the impact of class waiver provisions in employment agreements. In Sutherland, Plaintiff was a former accountant who alleged that Ernst & Young ("E&Y") misclassified her and other similarly-situated individuals as exempt from overtime under the Fair Labor Standards Act ("FLSA"). She brought a putative collective action under the Section 216 (b) of the FLSA and a Rule 23 class action under New York state law claiming that she and putative class members were unlawfully denied overtime compensation. Plaintiff had signed a dispute resolution agreement with E&Y, which called for binding arbitration on an individual, rather than class-wide, basis. E&Y moved to dismiss Plaintiff's complaint and compel arbitration of Plaintiff's claim on an individual basis. 

Relying upon In Re American Express Merchant's Litigation, 554 F.3d 300 (2d Cir. 2009) ("Amex"), the District Court found E&Y's class waiver provision unenforceable on the grounds that enforcing the provision would preclude Plaintiff from vindicating her statutory rights. Even though she retained the right to pursue her individual claims in arbitration, the District Court determined that she would have to find legal counsel - at an estimated cost of $160,000 - to pursue a claim worth $1,800. The District Court concluded that no attorney would sign on to do so, and that this precluded Plaintiff from vindicating her rights. The District Court determined that Amex retained persuasive force notwithstanding the Supreme Court's summary order vacating the judgment in that case and remanding to the Second Circuit in light of the Supreme Court's April 2010 decision in Stolt-Nielsen S.A. v. AnimalFeeds Int'l Corp., 130 S. Ct. 1758 (2010), which held that class arbitration is not allowed unless the parties agree to it. 

The District Court reasoned that because it would be prohibitively expensive for Plaintiff to pursue her overtime claims on an individual basis, and because the arbitration provision barred any claim other than an individual claim, the class waiver provision was unenforceable because it would prevent Plaintiff from vindicating her statutory rights. At the same time, the District Court stated that it could not compel class-wide arbitration based on Stolt-Nielsen. In effect, this meant that Plaintiff could pursue her claims in a judicial forum.

Sutherland illustrates how Plaintiffs are apt to argue for an end-run around Stolt-Nielsen. The District Court determined the class waiver in the arbitration agreement was unenforceable because it prevented the vindication of the employment claim at issue, thus allowing workers to pursue class and/or collective actions in federal court notwithstanding agreements requiring individual arbitrations. While this argument is easier for plaintiffs' counsel to make in an FLSA case, the force of the argument is attenuated when employment discrimination claims - which allow for up to $300,000 in combined compensatory and punitive damages - are at issue.

It remains to be seen if this decision remains viable when the Supreme Court rules later this year in AT&T Mobility LLC v. Concepcion, which concerns the issue of whether class action waivers in a consumer contract of adhesion are enforceable. AT&T Mobility was argued before the Supreme Court on November 9, 2010.

The Sutherland ruling is a plaintiff-friendly decision. It should make employers cognizant of the possibility that class arbitration waivers in employment or dispute resolution agreements may not provide protection from class proceedings. Employers should continue to monitor decisions addressing this issue, as these cases will have a significant impact on how employment-related class actions are litigated and defended in the future.

Co-authored by Edward Cerasia II and Ian H. Morrison

The accrual date for the statute of limitations in pension benefits and other denial of benefits cases under ERISA continues to be a critically important issue in ERISA class action litigation.  On February 1, 2011, Magistrate Judge Sorokin in the U.S. District Court for the District of Massachusetts issued a favorable decision for plans and plan sponsors when he held in Kingsbury v. Marsh & McLennan Cos., Inc. and Marsh & McLennan Cos., Inc. Retirement Plan, Civil Action No. 10-11279 (LTS) [ruling link], that the statute of limitations in a denial of pension benefit case accrues when a plan "clearly and unequivocally repudiates the plaintiff's claim for benefits and that repudiation is known, or should be known, to the plaintiff." Applying that principle, the Court granted summary judgment in favor of the defendants, concluding that the limitations period accrued when the Plan clearly repudiated the plaintiff's claim for benefits by not paying her deceased sister a pension upon turning age 65.

The plaintiff, Joan Kingsbury, filed an ERISA action seeking to recover pension benefits for her deceased sister, Lorna Hutcheon.  Kingsbury claimed that Hutcheon was employed by Marsh & McLennan Cos. ("MMC") as an actuary from 1956 to 1977, but never sought retirement benefits due to her under the MMC Retirement Plan when she turned age 65 on July 5, 2000.  A claim was filed with the Plan in October 2007, but Hutcheon submitted no proof that she was a participant under the Plan or that she had not taken an early distribution from the Plan.  The Plan had no such records on Hutcheon.  The Court noted that the absence of records was not surprising, given that the claim was filed 33 years after Hutcheon's employment had ended.  The Plan denied the claim and, thereafter, Kingsbury filed suit.

The parties filed cross-motions for summary judgment.  The MMC defendants sought summary judgment on the ground, inter alia, that the ERISA claim was barred by the 6-year limitations period applicable to denial of benefits claims in Massachusetts. In granting the MMC Defendants' motion, Magistrate Judge Sorokin concluded that Hutcheon's claim for benefits was time-barred because it expired on July 5, 2006 -- 6 years after she turned age 65 and allegedly should have started to receive pension benefits. The Court reasoned that, when Hutcheon reached age 65, it should have been clear to her that she missed receiving a pension payment.  Yet, no claim was filed with the Plan until October 2007.  While the Court acknowledged that judges in the District of Massachusetts have ruled that the limitations period in certain ERISA cases does not begin to accrue until after the plaintiff has exhausted the administrative claims review process, the Court declined to adopt such a rule because it would give a plaintiff an unlimited amount of time to file a lawsuit, and thus allow a plaintiff to trigger the statute of limitations at her own discretion and create an indefinite limitations period.

This decision should prove helpful to plans and employers in ERISA class actions involving alleged miscalculation of benefits or denial of benefits, where plaintiffs may wait years after receiving allegedly miscalculated benefits (or no benefits) to file suit.  By arguing that there was clear repudiation when the plaintiff first received the miscalculated benefits (or shortly thereafter), plans and employers can argue that the limitations period accrued at that point, and not at a much later point when the plaintiff claims to have first discovered the error or completed the plan's administrative review process.

Seyfarth Shaw partners Edward Cerasia II and Christie Del Rey-Cone, and associate Allison Ianni, represented the MMC Defendants in the Kingsbury case.

Co-authored by Ian H. Morrison, John T. Murray, and Amanda A. Sonneborn

On January 21, 2011, the U.S. Court of Appeals for the Seventh Circuit issued two important decisions for all employers who offer 401(k) plans.  These two decisions could severely undermine plaintiffs’ ability to challenge fiduciary decisions related to 401(k) plans on a class-wide basis. 

In Howell v. Motorola, Inc. (Case No. 07-3837) and Lingis v. Dorazil (Case No. 09-2796) (“Stock Drop Cases”) [link to case], the Court concluded that the“safe harbor” in 29 U.S.C. § 1104(c) of the Employment Retirement Income Security Act (“ERISA”) shielded fiduciaries from claims that the defendants failed to disclose sufficient information about an allegedly bad business transaction and that certain defendants failed to monitor the conduct of fiduciaries they had appointed.  The Seventh Circuit also determined that the fiduciaries did not violate ERISA’s duty of prudence by including the Motorola Stock Fund as an investment option in the 401(k) plan, because Motorola stock never performed so poorly as to make it an imprudent investment option.  The Seventh Circuit also ruled that one plaintiff’s release agreement, signed as part of a reduction in force, barred his breach of fiduciary duty claims, despite a carve-out for claims for “benefits” under the company’s plans.

In Spano v. The Boeing Co. (Case No. 09-3001) and Beesley v. International Paper Co. (Case No. 09-3018) ( “401(k) Fees Cases”) [link to case], the Seventh Circuit vacated largely identical orders certifying classes of virtually all plan participants, raising claims that challenged the appropriateness of certain 401(k) plan fees and the prudence of plan investment options.  The Seventh Circuit found that the certified classes did not meet the adequacy and typicality requirements of Rule 23(a) of the Federal Rules of Civil Procedure. 

The Seventh Circuit’s opinion in the Stock Drop Cases reaffirms the importance of compliance with § 404 (c) of ERISA.  This safe harbor provision can provide 401(k) plan sponsors with protection if their fiduciary decisions are later challenged, although the Seventh Circuit declined to apply the safe harbor to the initial decision to include particular funds in a plan.  The Seventh Circuit’s ruling on the applicability of the release agreement is also significant because it enhances the value of a well-drafted severance agreement.  Moreover, the ultimate holding on the imprudent investment claim sets a high bar for plaintiffs.  Essentially, the Seventh Circuit has said that to recover on an imprudence theory, a plaintiff in a stock drop case must show that the employer has to be on the verge of collapse and that only worthless or extremely risky stocks will be deemed imprudent.  This is significant limitation on stock drop cases, as well as other cases challenging the prudence of particular investment options in 401(k) plans.

The Seventh Circuit’s class certification rulings in the 401(k) Fees Cases call into question the future viability of any 401(k) plan class actions.  The Seventh Circuit mandated that classes share a genuine common interest.  Thus, the opinion certainly suggests that a class that encompasses all participants in a 401(k) is too broad, given the wide-variety of investment practices and dates of participants’ entry and exit from the plan. 

Co-authored by Gerald L. Maatman, Jr. and Laura J. Maechtlen

On January 20, 2011, the defense submitted its merits brief to the U.S. Supreme Court in Dukes, et al. v. Wal-Mart.

The Supreme Court’s future decision in Dukes is sure to be significant for employers on many levels, as employers can expect further elucidation of Rule 23 certification standards in employment discrimination class actions. The case offers a framework for the analysis required in Rule 23(b)(2) class actions seeking injunctive and declaratory relief, coupled with a demand for massive monetary recovery. The Supreme Court’s future ruling in Dukes could prove to be critical for both sides in high-stakes class actions, and depending on the ultimate outcome of the case, it also has the potential for sparking a renewed discussion about class action reform. View the December 6, 2010 blog post regarding The Supreme Court’s decision to accept certiorari here. 

The defense's merits brief is a broad brush attack on the Ninth Circuit's interpretation of Rule 23 in the 6 to 5 en banc decision of the Ninth Circuit Court of Appeals (San Francisco) – reported at 603 F.3d 571 (9th Cir. 2010) (view ruling) - which affirmed an earlier class certification order in the largest employment discrimination class action ever certified. The Ninth Circuit upheld an earlier panel decision certifying a class action gender discrimination lawsuit challenging Wal-Mart’s pay and promotions practices. The full Ninth Circuit ruled that the U.S. District Court for the Northern District of California did not abuse its discretion in finding that the large and diverse class – encompassing approximately 1.5 million female employees, both salaried and hourly with a range of positions, who are or were employed at one or more of company’s 3,400 stores across the country – was united by a complex of company-wide discriminatory practices against women where plaintiffs presented expert opinions, factual evidence, statistical evidence, and anecdotal evidence showing a corporate policy and common pattern of discrimination imposed on female employees nationwide.

The company's merits brief advances two main areas of attack, including the certification order's inconsistency with the Rule 23(a) prerequisites, and its irreconcilability with Rule 23(b)(2)'s requirements.

While the merits brief addresses each of the Rule 23 (a) requirements of commonality, typicality, and adequacy, the centerpiece of the defense argument regarding Rule 23 (a) is commonality. The defense contends that millions of discretionary personnel decisions on pay and promotions by thousands of individual managers throughout the company's U.S. operations defy common treatment for purposes of Rule 23(a)(2). The defense challenges plaintiffs' statistical presentation as defective and insufficient to justify class certification because those statistics were aggregated nationally and were therefore unhinged from the reality of the company's facilities.  The defense argues that, because over 90 percent of the stores had no pay rate differences between men and women that are statistically significant, the aggregated statistics cannot support a finding of commonality regarding the myriad of decisions of local store managers or the impact of those personnel decisions on individual class members.

On the Rule 23(b)(2) issue, the defense brief asserts that the monetary damages - billions of dollars - sought by plaintiffs stands the applicable legal standards on their head.  The company argues that the massive monetary damages at issue must be treated for class certification purposes, if at all, under Rule 23 (b)(3), which requires that class members be given the opportunity to receive notice and opt-out to pursue their own claims for monetary relief. To that end, the defense brief asserts that plaintiffs' claims for punitive damages will always predominate in a situation where such claims dwarf the claims for injunctive or declaratory relief.

Next up in the Supreme Court briefing schedule are the amicus briefs to be filed in support of the defense by January 27, 2011. Plaintiffs' merits brief is due on February 21, 2011. Oral argument is now set for March 29, 2011.

Stay tuned!

The year just ended was a seismic one for employment-related class action litigation, paving the way for more far-reaching judgments, court rulings, and changes to class action law in 2011. Furthermore, in 2010, the value of major employment discrimination class action settlements increased four-fold over the prior year and the top ten settlements of wage & hour, ERISA, and governmental enforcement class actions increased to $1.16 billion, the highest amount ever.

The “tipping point” aspect of these changes is featured in the 2011 edition of Seyfarth Shaw’s Workplace Class Action Litigation Report. The 664-page Report, our Seventh Annual Edition, examines 849 decisions rendered in 2010 against employers in state and federal courts, including private plaintiff and government enforcement actions. The Report is the sole compendium in the U.S. dedicated exclusively to workplace class action litigation, and has become to "go to" research and resource guide for businesses and their corporate counsel facing complex litigation.

A preview copy is available here, and can be ordered here.

While shareholder and securities class action filings experienced only a slight uptick in 2010, employment-related class action filings increased dramatically.  Anecdotally, surveys of corporate counsel confirm that workplace litigation – and especially class actions, multi-plaintiff lawsuits, and government enforcement litigation – continues to drive corporate legal budget expenditures, as well as the type of legal dispute that causes the most concern for their companies.

In terms of key decisions, there was no class action ruling in 2010 quite like Dukes, et al. v. Wal-Mart Stores, Inc., 603 F.3d 571 (9th Cir. 2010), a Title VII gender discrimination case challenging pay and promotions involving 1.5 million class members.  On April 26, 2010, an en banc panel of the Ninth Circuit affirmed the certification order in Dukes by a 6 to 5 vote.  A detailed analysis of the Ninth Circuit ruling in Dukes is contained in Appendix I at page 617 of the Report.  Wal-Mart subsequently filed a petition for certiorari with the U.S. Supreme Court, which was granted on December 6, 2010.  A future ruling by the Supreme Court in Dukes is likely to be one of the top class action developments in 2011 and beyond.

Employment discrimination, ERISA, and FLSA litigation filings increased over the past year.  FLSA and employment discrimination cases spiked sharply, and outpaced ERISA filings.  Based on statistics from PACER filings with the Administrative Office of the U.S. Courts, employment discrimination lawsuits increased to 14,559 in 2010 from 13,720 in 2009; ERISA lawsuits increased to 9,038 in 2010 from 8,944 in 2009; and FLSA lawsuits increased to 6,761 in 2010 from 6,120 in 2009.  Since the majority of FLSA filings were on behalf of groups of employees, wage & hour class actions and collective actions out-paced filings of class actions for employment discrimination and ERISA violations.  In turn, while plaintiffs continued to achieve initial certification of wage & hour collective actions, employers also secured several significant victories in defeating conditional certification motions and obtaining decertification of § 216(b) collective actions.  Given the trickle-down phenomenon of class action settlements (and the increased awareness of wage & hour issues by workers), it is expected that the pursuit of nationwide FLSA collective actions by the plaintiffs’ bar will continue in 2011.

A new case law trend in 2010 focused on workplace arbitration agreements and their enforceability and impact in the class action context. While no one suggests that the sun is setting on workplace class actions, the Supreme Court’s ruling in Stolt-Nielsen S.A., et al. v. Animalfeeds International Corp., 130 S. Ct. 1758 (2010), arms employers with additional ammunition to confront class action litigation through drafting of comprehensive workplace arbitration programs. Stolt-Nielsen quickly spawned several rulings in employment discrimination and wage & hour class actions, thereby demonstrating the importance of this development for employers utilizing arbitration agreements.  This development is likely to accelerate, as the Supreme Court considers state law limits on class action waivers in Concepcion, et al. v. AT&T Mobility, a case scheduled for decision in the Spring of 2011.

On the wage & hour front, a confluence of factors contributed to an ever-increasing number of claims. In one respect, 2010 might be termed the “Year of the Misclassified Worker” class action lawsuit based on end-of-the-year figures that show a sharp increase in crackdowns this year by state and federal authorities, and filings by class action lawyers in pursuing private lawsuits against companies that allegedly misclassify employees.  Employers utilizing independent contractors were the focus of intense litigation scrutiny on these fronts. Approximately 20 states and scores of municipalities passed laws in the past two years that make it easier to force employers to reclassify independent contractors as employees and seek unpaid taxes, or authorizing claims for “wage theft.”  Likewise, the DOL’s enforcement litigation resulted in employers paying $6.5 million in back wages to 5,261 employees in fiscal 2010, up sharply from $2.6 million obtained for 2,190 employees in 2009.  The DOL and Internal Revenue Service (“IRS”) also increased their budgets and staffs to identify and audit employers and their classifications of workers, as well as implementing its new “Plan/Prevent/Protect” enforcement strategy.

Due to the enormous financial stakes, trials of class actions continue to be rare, and verdicts in these trials rarer still.  However, 2010 witnessed the largest employment discrimination class action trial verdict ever – the $250 million verdict in Velez, et al. v. Novartis Pharmaceuticals Corp., Case No. 04-CV-9194 (S.D.N.Y.) following a seven-week trial in the Spring of 2010.  After the verdict, the parties promptly settled the class action for $175 million on July 14, 2010.  The settlement is one of the largest employment discrimination class action settlements ever.

If trials of class actions were rare, settlements of class actions in 2010 reflected a continuing trend from past years, in which significant monetary payments were made in mega-class actions with nationwide classes.  Settlements in FLSA collective actions and ERISA class actions once again outpaced employment discrimination class action settlements in terms of overall settlement values.  In turn, settlement amounts in wage & hour class actions and government enforcement lawsuits experienced significant increases over 2009 figures.  In closing the year, plaintiffs secured a $57 million verdict in a wage & hour class action in Rekhter, et al. v. Washington Department of Social And Health Services, Case No. 07-2-895-5 (Thuston County, WA), on December 20, 2010.

Finally, case law developments under the CAFA accelerated in 2010.  The statute has had profound effects on litigation strategy and the structuring of underlying class actions.  In this context, the CAFA’s impact on workplace class actions is both varied and evolving.  Class actions and collective actions under Title VII, the ADEA, the FLSA, and ERISA typically are brought in federal court.  The CAFA may have limited impact on strategic decisions in those cases relative to choice of venue in a federal court or state court.  Class actions in state law-based wage & hour litigation are another matter.  The plaintiffs’ bar and defense bar alike continue to confront novel CAFA issues in wage & hour cases, as the fight over venue is often a key driver of exposure and risk.  On the one hand, employers sued in state law wage & hour class actions are increasingly confronted by plaintiffs’ lawyers seeking to avoid removal to federal court by various stratagems, including prayers for relief of less than $5 million, the filing of multiple “baby” class action claims on behalf of fewer than 100 plaintiffs, and limiting the scope of the class to residents of one state.  On the other hand, defense counsel seeking (often successfully) to dismiss state law claims pursued by plaintiffs with FLSA claims in “hybrid” wage & hour class actions in federal court argue that judges should not exercise supplemental jurisdiction over the state law claims.  Federal courts, in turn, are increasingly confronted with questions of whether original jurisdiction exists under the CAFA over such hybrid state law claims, and employers also may face a two front litigation war – one in federal court and the other in state court – depending on resolution of those CAFA issues.  These litigation issues continue to shape class action practice and defense strategy, and are likely to do so for the foreseeable future.

Co-authored by Gerald L. Maatman, Jr., Laura J. Maechtlen, and Alfred L. Sanderson, Jr.

A jury in Washington state - in the case of Rekhter, et al. v. Washington Department of Social and Health Services, Case No.07-2-895-8 (Superior Court of Thurston County, WA) - gave workers an early holiday present in the form of a record verdict of over $57 million on December 20, 2010 [View verdict].

The 3 week trial in Rekhter involved claims of 22,000 home health care workers who sued in 2007. The backdrop to the case focused on cuts to benefits for in-home health care based on the “shared living rule” repealed by the WDSHS in 2007 after an unrelated state court ruling. Shared living is when the care provider lives in the home with the client. Plaintiffs contended that the WDSHS should have known that its “shared living rule” was subject to legal challenge in light of a Medicaid primer published by the federal government in 2000, which provided that all Medicaid beneficiaries should be treated equitably regardless of who provided the care. The WDSHS argued at trial that the 2000 Medicaid primer directed that Medicaid funds should not be used to benefit “other members of the household” and should only be used to benefit the Medicaid client; hence, the WDSHS asserted that is not appropriate to ask taxpayers to pay for everyday tasks that home care providers perform for themselves such as housekeeping, meal preparation, and shopping. Plaintiffs argued that the WDSHS in 2003 decided to cut 15 percent of the benefits usually given to in-home care recipients, who use the funds to pay the home care providers. The defense argued at trial that the plaintiff class was entitled to zero damages. Plaintiffs asked the jury for between $50 million and $90 million. The jury's verdict clearly sided with plaintiffs in awarding $57,123,794.50.

The verdict underscores the strategy of the plaintiffs' bar to put their wage & hour claims in state court based on favorable state law theories. Wage & hour class action litigation is growing exponentially in various "magnet" jurisdictions - such as California, Illinois, Massachusetts, New Jersey, New York, Pennsylvania, Oregon, and Washington - where liberal class certification standards and plaintiff-friendly wage & hour laws provide employees with a favorable playing field in this type of litigation. As success typically spawns copy-cats, the verdict is likely to fuel the attraction of skilled class action litigators to the already lucrative area of wage & hour litigation.

Co-authored by Rebecca Bjork and Brandon L. Spurlock

The Federal Judicial Center recently released new recommended class action notice forms - including a notice checklist and a plain language guide - to help attorneys and judges create more effective notices and notice plans for Rule 23 certification orders.  View Notice Checklist and Plain Language Guide.

The checklist provides overall guidance on Rule 23 notice and notice plan development. A graphical plain language guide also explains and highlights the important features of the illustrative notices. This guide ought to be required reading for corporate counsel and class action defense counsel, for Judges are apt to utilize this resource on a going-forward basis when reviewing and passing upon certification orders relative to notices to a class.                

The Federal Judicial Center is the research and education agency of the federal judicial system. It was established by Congress to promote continuing education and training for federal judges; develop recommendations about the operation of the federal courts; and conduct and promote research on federal judicial procedures, court operations, and history.

Co-authored by Rebecca S. Bjork and Gerald L. Maatman, Jr.

On November 19, 2010, the U.S. District Court for the Southern District of New York approved the settlement of claims of over 10,000 workers against New York City and its contractors over the workers' exposure to toxic debris during the cleanup of the World Trade Center disaster site following the September 11 terrorist attacks. View Order. The settlement became effective since the opt-in plaintiffs accepting the offers of settlement exceeded the 95 percent threshold set forth in the Settlement Process Agreement with New York City and its contractors. As of November 18, approximately 10,043 of 10,563 plaintiffs had signed on to the settlement agreement in the litigation entitled In Re World Trade Center Disaster Site Litigation, Case No. 21-MC-100 (S.D.N.Y.).

The settlement created a compensation fund to resolve personal injury and disease claims by more than 10,000 police, firefighters, and other rescue, recovery, and cleanup workers at the WTC site. The World Trade Center Captive Insurance Co., created in 2004 under a $1 billion Federal Emergency Management Agency grant, will pay into the fund. The settlement covers nearly 140 defendants, led by New York City and its private debris removal contractors and subcontractors involved at the site of the terrorist attacks and buildings collapses. Claim valuations will be overseen by a neutral third party, known as an allocation neutral, assisted by a panel of independent physicians. This neutral third party filed a report with the Court on November 19 regarding the opt-in status of the plaintiffs. It is expected that the settlement agreement is worth between $625 million and $712.5 million, depending on the overall payments to the opt-in plaintiffs.

Once finalized and implemented, the overall settlement will be one of the largest paid in a workplace class action ever.