Seyfarth Synopsis: The impact of the #MeToo Movement was the fifth major class action development of 2018, as well as the newest trend in our 15th Annual Workplace Class Action Litigation Report (“WCAR”). By way of its groundbreaking emergence on social media, the #MeToo Movement profoundly impacted the workplace and made its way into the class action arena. Today, we conclude our exclusive video series by posting WCAR author Jerry Maatman’s analysis of this trend from Seyfarth Shaw’s “Top Trends In Workplace Class Action Litigation” book launch event held on January 30, 2019. Click the link below to see and hear Jerry discuss the #MeToo Movement’s effect on complex litigation in 2018!
Seyfarth Synopsis: Of the five major class action developments in 2018, the decline in class action settlement numbers may have been most the striking shift. In fact, when compared to the 2017 numbers, the value of the top class action settlements in 2018 decreased by over $1 billion. In today’s blog, our readers can see and hear Workplace Class Action Report (“WCAR”) author Jerry Maatman outline what he called “a very significant marker of class action litigation in 2018.” Click the link below to watch and hear Jerry’s presentation from Seyfarth Shaw’s “Top Trends In Workplace Class Action Litigation” book launch event!
Seyfarth Synopsis: Governmental enforcement litigation increased in 2018 despite the U.S. Equal Employment Opportunity Commission’s (“EEOC”) first full year under the presumably business-friendly Trump Administration. However, while the EEOC’s filing numbers went up, the value of the top 10 governmental settlements dropped by more than $350 million. As a result, these developments represent the third trend of the 15th Annual Workplace Class Action Litigation Report (“WCAR”). In today’s post, our blog readers to see and hear WCAR author Jerry Maatman’s presentation from Seyfarth Shaw’s recent “Top Trends In Workplace Class Action Litigation” book launch event. Watch Jerry discuss the government’s 2018 enforcement litigation activity in the link below!
Seyfarth Synopsis: Last week, we posted the first video in a series of clips from Seyfarth Shaw’s “Top Trends In Workplace Class Action Litigation” book launch event. Specifically, this set of exclusive videos allows our readers to see and hear Workplace Class Action Litigation Report author Jerry Maatman’s perspective on each major class action trend from 2018. Today’s clip focuses on class certification rulings, and identifies the areas of litigation in which the Plaintiffs’ bar experienced noticeable success in 2018. Watch and hear Jerry’s analysis in the link below!
Seyfarth Synopsis: On January 30, 2019, Seyfarth Shaw hosted “Top Trends In Workplace Class Action Litigation”, an event designed to officially launch the firm’s 15th Annual Workplace Class Action Litigation Report (“WCAR”). The event’s special guest was Law360 Senior Employment Report Braden Campbell, and also featured an exclusive presentation by WCAR author Jerry Maatman. Over the next week, we will be posting a series of video clips allowing our blog readers to see Jerry’s analysis of the five most influential class action developments in 2018. Click the link below to watch Jerry discuss highlights from the U.S. Supreme Court in 2018!
Seyfarth Synopsis: On February 4, 2019, in Woods-Early v. Corning Corp., Case No. 18-CV-6162, a race discrimination class action, Judge Frank P. Geraci, Jr. of the U.S. District Court for the Western District of New York refused to strike class allegations of discrimination in promotions on the basis of race and color in violation of Title VII and the New York State Human Rights Law. Although Plaintiff’s amended complaint failed to identify a single promotion she was denied on the basis of race and color, the Court found that allegations of discriminatory decision-making by a small group of upper-level management exercising unfettered discretion over an employer’s performance review process was sufficient to survive a motion to dismiss the class claims under Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338 (2011).
In 2018 an employee of Corning, a multinational technology company specializing in designing and manufacturing materials for industrial and scientific applications, brought a class action alleging that the employer discriminated against her on the basis of her color and race (Black, African-American) in violation of Title VII and the New York State Human Rights Law. Plaintiff asserted that by utilizing a performance evaluation tool and process that disadvantaged Black, African-American employees in obtaining access to promotion opportunities, the employer violated the law. Plaintiff alleged that the Company used an evaluation tool that allowed supervisors, without sufficient training, to exercise unfettered discretion in evaluating employee performance on the basis of ill-defined “Corning Values,” and that these ratings then were advanced to a group of high-level executives called the “brain trust,” who themselves had unfettered discretion to change the ratings.
The discriminatory result alleged by Plaintiff was that African-American employees routinely received lower ratings than their non-minority counterparts, and because of this they were unable to achieve the “Emerging Talent” internal designation and higher salary bands required by Corning to access training and other executive networking opportunities necessary to obtain promotional opportunities. Plaintiff did not, however, identify any single promotional opportunity she was denied.
Defendant filed a motion to dismiss the class allegations as well as any allegations of discrimination against Plaintiff in promotions. Relying on Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338 (2011), the Company argued that discrimination claims based on the exercise of managerial discretion in the performance evaluation process lack sufficient commonality to proceed in litigation. Moreover, Defendant argued that allegations that its executive “brain trust” controlled the performance evaluation process, and had the unfettered discretion to change performance ratings and determine who is designated “Emerging Talent,” were merely “conclusory and implausible.” It further argued that Plaintiff’s claims should fail because she could not link any discriminatory, low performance ratings to an adverse action against her.
The Court’s Ruling
Observing that parties often mistake the import of Wal-Mart as requiring that sustainable class allegations present common questions, the Court opined that the proper inquiry in scrutinizing class allegations is whether the class mechanism is appropriate to find common answers to the allegations. Noting that the Supreme Court in Wal-Mart emphasized that in Title VII claims implicating many employment decisions there must be a “glue” holding the alleged reasons for the decisions together, the Court stated that this “glue” can come in different forms, such as a biased testing procedure or general policy of discrimination manifested in promotions practices.
The Court followed the lead of the Fourth and Seventh Circuits respectively in Scott v. Family Dollar Stores, Inc., 733 F.3d 105 (4th Cir. 2013), and Chicago Teachers Union, Local No. 1 v. Bd. Of Educ. Of Chicago, 797 F.3d 426 (7th Cit. 2015), each of which found that the commonality required to sustain class treatment is satisfied when discretion is exercised uniformly by higher-level management. As a result, the Court ruled that allegations of the unfettered discretion of the Company’s “brain trust” — to determine employee performance ratings, the incentive of this singular and cohesive group to manipulate performance ratings to impact the individuals designated as “Emerging Talent,” and the effect of the exercise of that discretion to bar African-American employees from advancing to higher pay bands and the access to executives and training needed for promotions — were sufficient to survive the motion to dismiss.
The Court also rejected Defendant’s challenge that although Plaintiff alleged that she suffered discriminatorily low performance ratings, her claim for discrimination in promotions should be dismissed for failing to allege any promotional opportunity for which she applied and was qualified, and that she had been denied. The Court rejected the contention that Plaintiff must allege the adverse action of a specific promotion sought and denied in order to survive a motion to dismiss a claim of discrimination in promotions. Rather, the Court determined that Plaintiff’s allegations of a discriminatory performance evaluation and rating process, and a link between the alleged discriminatory actions of the Company’s “brain trust” and tangible adverse impacts to African-Americans, including herself, was sufficient for her promotions claims to proceed.
Implications For Employers
This decision is one of a growing body of case law authority interpreting and expanding the contours of class actions maintainable in the aftermath of Wal-Mart. Over time, employers may expect the plaintiffs’ class action bar to test and refine theories to obtain class certification in “managerial discretion” cases. To get ahead of this curve, employers should periodically review their performance evaluation processes for disparate impact and other vulnerabilities. Evaluating performance management programs for well-communicated expectations, detailed and sufficiently objective metrics, disciplined scoring, and standardized supervisor training, also is a proactive step for savvy employers to take to enhance the workplace while reducing risk.
Seyfarth Synopsis: Last week, we were honored to have Braden Campbell, Senior Employment Reporter for Law360, as our guest speaker for Seyfarth Shaw’s “Top Trends In Workplace Class Action Litigation” book launch event. As the official book launch of our 15th Annual Workplace Class Action Litigation Report, over 1,000 attendees participated in the live event webcast and tuned in to see and listen to Braden’s in-depth analysis. Specifically, Braden spoke to our viewers about the most influential Supreme Court decisions of 2018, and gave his prediction for the hottest class action topics of 2019. Today’s post allows anyone who missed the event to see Braden’s entire presentation. Watch it the link below!
Seyfarth Synopsis: On January 18, 2019, in Porath v. Logitech, Case No. 18-CV-3091 (N.D. Cal. Jan. 18, 2019), Judge William Alsup of the U.S. District Court for the Northern District of California rejected, for the second time, Defendant’s attempts to allow pre-certification discussions relating to a class-wide settlement. Specifically, the Court upheld its prior order, prohibiting such discussions and denying the appointment of interim counsel to represent the class. The end result for the parties is that they must spend more time and money litigating this case despite readiness to engage in settlement negotiations. The ruling is an important read for all corporate counsel involved in class action litigation.
In May 2018, Plaintiff filed a putative class action alleging that the Defendant falsely and deceptively advertised its Z200 speakers as containing four speakers when two of the speakers did not independently produce sound. On June 13, 2018, Judge Alsup issued an order entitled “Notice and Order Re Putative Class Actions and Factors To Be Evaluated For Any Proposed Class Settlement”— an order Judge Alsup typically issues at the outset of any proposed class action pending before him. That order prohibits any settlement discussions of any class claims prior to class certification. Alternatively, the order provides that if counsel believe settlement discussion should precede class certification, interim class counsel must first be appointed.
In August 2018, counsel for Plaintiff and Defendant moved to appoint interim class counsel and enumerated four reasons why they believed pre-class certification settlement discussions were appropriate, including: (i) Defendant agreed not to seek a discount based on the risk a class would not be certified, (ii) Defendant had already begun revising the advertising at issue, (iii) Defendant was prepared to make purchasers of the product whole, and (iv) the parties were prepared to engage in reasonable and appropriate discovery necessary to resolve the case.
The Court denied the motion. Judge Alsup took issue not only with the limited discovery conducted to ascertain the viability of class claims at that point, but also with what he termed “the clever wording” of the motion, which “offered little of substance” in regards to remedies that would be on the table for the absent class members in any pre-certification settlement discussions. Id. at 5.
After the Ninth Circuit denied Defendant’s request for review, Defendant moved for reconsideration of the order prohibiting discussion of class-wide settlement issues, as well as the order denying appointment of interim class counsel. Specifically, Defendant asserted that Judge Alsup’s order prohibiting pre-certification class-wide settlement violated the parties’ First Amendment rights.
Judge Alsup denied Defendant’s motion. Specifically, Judge Alsup explained that his prohibition on any class-wide settlement discussions protects absent class members because (i) it prevents the imposition of overbroad releases on claims that cannot meet Rule 23 class certification standards; and (ii) it guards against settlements inappropriately discounted based on the risk that a claim will not be certified for class treatment. Citing scholarly commentaries, Judge Alsup opined that procedural hurdles should not require absent class members to accept a “lowball offer to salvage a class recovery.” Id. at 3.
Turning to Defendant’s free speech argument, Judge Alsup noted that his order was viewpoint neutral and simply regulated the time, place and manner of class-wide settlement discussions. Judge Alsup also emphasized that his order only restrained such discussions until counsel is authorized under Rule 23 to negotiate on behalf of a class; as a result, he explained that no permanent or overly broad ban exists. Additionally, even if a limited restriction existed, Judge Alsup concluded that the interests of the parties are “overwhelmingly outweighed” by the interest of the Court in implementing orderly case management and the interests of absent class members and their rights. Id. at 5-6. As a result, Judge Alsup noted that Defendant had no First Amendment right to obtain a class-wide release from an attorney with no authority to act for the class.
While such limitations on pre-certification settlement discussions are not currently widespread, parties seeking to resolve such disputes without engaging in costly class discovery may find themselves in a difficult situation if other courts adopt Judge Alsup’s approach. Given that the recent proposed amendments to Rule 23 did not adopt proposals to provide a different standard for settlement classes, parties may see vastly different approaches to class action settlements throughout the federal system.
Seyfarth Synopsis: On January 22, 2019, in Maderazo v. VHS San Antonio Partners, L.P., C.A. No. 06-CV-535 (available here), a case alleging that hospitals in San Antonio conspired to suppress nurses’ wages that had been pending for nearly 13 years, the U.S. District Court for the Western District of Texas issued a decision denying Plaintiffs’ motion for class certification In doing so, the Court expressly disagreed with a class certification decision issued in a nearly identical case by the U.S. District Court for the Eastern District of Michigan in Cason-Merenda, et al. v. Detroit Medical Center, 2013 U.S. Dist. LEXIS 131006 (E.D. Mich. Sept. 6, 2013).
In 2006, five nearly identical antitrust class actions were filed in different cities around the country alleging that hospitals in each of those cities unlawfully conspired to fix nurse wages below free market levels and agreed to unlawfully exchange nurse wage information in a way that had the effect of suppressing nurse wages. Class certification was defeated in the cases in Memphis and Chicago. In cases in Detroit and Albany, the courts certified or partially certified the classes, and those cases thereafter reportedly settled for millions of dollars.
Now the court in the San Antonio case has denied class certification also.
The Court’s Class Certification Ruling
Like the other cases, the complaint in Maderazo asserted two claims, including: (1) that the defendants agreed to suppress nurse wages, allegedly a per se violation of §1 of the Sherman Act; and (2) that the defendants agreed to, and did, exchange nurse wage information in violation of §1 of the Sherman Act under the rule of reason. The class certification decision turned on the question of the whether Plaintiffs could demonstrate, with proof common to the class, that common issues predominated over individual issues, consistent with the requirements of Rule 23(b)(3).
One of the issues in an antitrust case is whether the harm allegedly suffered was caused by the alleged conspiracy, often referred to as “antitrust impact.” Plaintiffs in Maderazo attempted to satisfy this element through the testimony of their expert, Henry Farber. In analyzing Farber’s expert report and deposition testimony, the Court concluded that Farber provided “no factual explanation of how Plaintiffs could show a causal link between the conspiracy and the wages of staff registered nurses.” In fact, the Court quoted the following testimony from Farber: “I don’t know anything about the precise effect of the – of any conspiracy or information exchange on the wages of different nurses.” As a result, the Court excluded Farber’s testimony under Daubert and denied Plaintiffs’ motion for class certification.
The Court in Maderazo further noted that the court in the Detroit nurse wage fixing/exchange case had found a similar problem with the testimony of the expert in that case. Nonetheless, the judge in the case in Detroit certified the class while stating that the defendant was free to attempt to persuade the trier of fact that the case lacked a sufficient causal connection between the plaintiffs’ theory of liability and the alleged injury. By contrast, the Court in Maderazo disagreed and ruled that this was an issue that had to be resolved at the class certification stage. (We previously blogged about the Detroit class certification decision here.)
Implications For Employers
This is obviously a helpful decision for employers because it requires plaintiffs to demonstrate at the class certification stage that they can show, with evidence common to the class, that there is a causal connection between the alleged conspiracy and the alleged harm suffered by the class. Sending the issue to the jury when plaintiffs are unable to demonstrate that they can make this showing at the class certification stage unnecessarily adds to the parties’ costs and wastes judicial resources. Often, if the stakes are high, employers may be unwilling to risk having a jury decide what is potentially a complicated question based on evidence provided by an economic expert. This in turn puts undue pressure on employers to settle cases that are baseless. The ruling in Maderazo levels the playing field in this respect.
Seyfarth Synopsis: In last week’s blog posting, we explained to our readers how the #MeToo Movement impacted the class action litigation space in 2018, and accordingly became the fifth trend of this year’s Workplace Class Action Report (“WCAR”). Specifically, due to the emergence of this movement via social media, victims of sexual misconduct began coming forward and bringing allegations against numerous well-known figures and companies. In today’s finale of the WCAR video series, author Jerry Maatman analyzes this movement in terms of its impact on complex workplace litigation, and discusses how employers should expect this trend to develop in 2019. Watch the video in the link below!