Use Of Expert-Driven Formulas In Doling Out Over $128 Million In Class Action Remedies
Workplace class action litigation poses enormous risks for employers. For those that play out the string and go all the way down the road to a remedies phase, an award for plaintiffs of over $128 million is a head-line grabber.
While it might be a stretch to say it should be required Springtime reading – given its heft at 64 double-spaced pages when pulled from PACER – the Memorandum Order issued recently by Judge Nicholas A. Garaufis of the U.S. District Court for the Eastern District of New York in United States, et al. v. City of New York, et al., No. 07-CV-2067, 2012 U.S. Dist. LEXIS 30989 (E.D.N.Y. Mar. 8, 2012) is a must-read for employers who face the twists and turns of complex discrimination litigation. The Memorandum Order provides an eye-opening view of how the practical realities of claims administration and notice processes can take on huge significance in the bottom line of damages calculations in employment discrimination class actions. And it shows once again, as we have commented on before in this Blog, how the outcome in large employment discrimination cases can often come down to a Court’s judgments with regards to dueling experts. The bottom line is that failing to challenge the methodology of the other side’s experts each and every time the opportunity the presents itself can result in unhappy consequences down the road if and when liability is proven.
The Court's latest ruling continues the remedial phase in a race discrimination suit the U.S. Department of Justice Department originally filed in 2007 alleging that the City violated Title VII of the 1964 Civil Rights Act by using firefighter entrance exams that had a disproportionate adverse impact on black and Hispanic applicants. The Vulcan Society, which represents African-American firefighters, and individual minority candidates subsequently intervened as plaintiffs, alleging intentional discrimination as well. In July 2009, the Court granted summary judgment on liability for disparate impact discrimination under Title VII largely on the basis of the statistical analysis of the impact of a multi-stage pre-hiring testing process on minority versus non-minority applicants. This analysis was presented by the United States’ expert Dr. Bernard Siskin. Id. at *16-17. Subsequently, in January 2010, the Court entered summary judgment for plaintiffs on liability for disparate treatment discrimination, moving to the remedial phase. Id. at *17.
The first step of the remedial process was the entry of an Initial Remedial Order, “which provided a preliminary outline for the remedial phase . . . [which would involve] order[ing] compensatory, ‘make whole’ relief for the individual victims of the disparate impact of the entry-level firefighter hiring process.” Id. at *17-18. The Court granted certification of sub-classes in this phase, including a “Delayed-Hire Victim Sub-class” and a “Non-Hire Victim Sub-class,” to allow for class-wide determination of several elements of “make whole” relief including back pay, benefits, retroactive seniority, and priority hiring; at the same time, the Court declined to extend class treatment to mitigation of damages, finding it to be too individualized. Id. at *20-21.
The second step of the remedial process was before the Court in this decision, namely whether to enter summary judgment in favor of plaintiffs for back pay under the calculations submitted by Dr. Siskin, the plaintiff-intervenors’ expert Dr. Louis Lanier, and rebutted by the defendant’s expert Dr. Christopher Erath. While the defendant did attempt to rebut assumptions made by Dr. Siskin in creating his regression models, the Court rejected nearly each and every such attempt in turn.
The most important reason from the point of view of case management of complex litigation was the Court’s conclusion that the law of the case doctrine prevented the defendant from attempting to poke holes in the methodological approach and assumptions made therein by the plaintiffs’ expert. As the Court explained, “the parties have used these calculations, and relied on the methodology that underlies them, for years [and] [t]he City offers no cogent reason for reversing this determination.” Id. at *39. One key lesson from this holding is not to make the assumption that bifurcation of liability and damages will allow for a fresh “numbers” analysis to occur in any damages phase, should liability be found in the plaintiffs’ favor.
In addition, the Court denied the defendant the right to off-set its potential liability figure by adjusting the dataset to account for 2008 hiring patterns, which were more favorable towards minority applicants. Id. at *43-44. It did so on the ground that the defendant was under a continuing duty to supplement the data produced in discovery and which formed the basis of Dr. Siskin’s analysis; because the City did not supplement the data, Dr. Siskin did not include the 2008 hires into his calculations. Id. As a result, the Court concluded, [t]he City’s failure to follow the Rules of Civil Procedure created the incomplete nature of Dr. Siskin’s data, and the City has not explained why this information should not be excluded” as those Rules provide for in Fed. R. Civ. P. 37(c)(1). Id. at *44.
As a result of its rulings on class-wide “make whole” relief for both sub-classes, the Court found the City liable for the sum of $128,696,803 in gross lost wages. The Court, however, noted that the City “will have the opportunity to reduce this amount significantly by proving the interim earnings of claimants in individual proceedings.” Id. at *72. It then appointed four special masters from the private bar to oversee the claims and notice process, which was necessary in the Court's view because of the individualized nature of the mitigation evidence (which is why the Court previously found could not be handled on a class-wide basis).
Take-Aways For Employers
Time will tell how the class-wide nature of the next remedial phase of this case turns out. Individual evidence of remediation, or of other factors that could undermine the cohesiveness of the class remedy, could reveal the fractures in the commonality underlying the class, defined by the Court largely through statistics.
Further, the sheer cost of moving through the remedial phase in and of itself will be very costly. In litigation brought by private plaintiffs, an employer faces the double whammy of having to pay attorneys' fees for the successful prosecution of claims. A dollar saved in cutting down damages is often lost by having to pay for the attorneys' fees of the plaintiffs.
The bottom line is good defense experts are critical, as liability and monetary exposure are fueled by expert testimony in cases of this ilk.