Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541 (2011), is becoming a focal point in virtually all pending workplace class actions. Defense lawyers are increasingly citing Dukes and asserting that it either calls into question any previously certified class or impedes plaintiffs from certifying their proposed class theories. In contrast, the plaintiffs’ class action bar is contending Dukes is either narrowly decided and/or inapplicable to non-mega workplace class actions.
The same debate is beginning to surface in written opinions in federal courts throughout the country.
The recent decision in McReynolds v. Merrill Lynch, Pierce, Fenner & Smith Inc., No. 05-CV-6583 (N.D. Ill. Sept. 19, 2011), is a prime example where the defense got the upper hand, and argued for and secured denial of class certification based on Dukes.
The ruling of September 19 is the third opinion deciding the class certification issues in this litigation. Judge Robert Gettleman of the U.S. District Court of the Northern District of Illinois initially denied class certification to a putative class of Merrill Lynch financial advisors on August 9, 2010. Plaintiffs alleged that African-American financial advisors were victims of racially discriminatory corporate policies. Merrill Lynch employs approximately 15,000 financial advisors to aid clients in identifying and reaching their financial goals. See McReynolds v. Merrill Lynch, Pierce, Fenner & Smith Inc., No. 05-CV-6583, 2010 WL 3184179, at *1 (N.D. Ill. Aug. 9, 2010) (“McReynolds I”). They are overseen by approximately 135 Complex Directors, who each oversee a number of branch offices. Id. The Complex Directors make individualized employment decisions affecting the financial advisors in their branches, constrained only by national policies. Id. As a result, the Court held that the discretionary authority wielded by those supervisors meant that class treatment was inappropriate.
Subsequently, plaintiffs moved for reconsideration of that decision, which the Court denied in McReynolds v. Merrill Lynch, Pierce, Fenner & Smith Inc., No. 05-CV-6583, 2011 WL 3184179 (N.D. Ill. Feb. 14, 2011) (“McReynolds II”).
Then came the SCOTUS ruling in Dukes on June 20, 2011, and our post of the same morning.
Plaintiffs’ counsel in McReynolds sought – and the Court then allowed – leave to file an amended motion for class certification that relied on the Supreme Court’s holding in Dukes. Plaintiffs argued that Dukes actually supported their claim for class certification, despite the discretion that Complex Directors exercised in making employment-related decisions – a key component of the Dukes decision.
The Court noted that the parties agreed that in a strictly disparate impact case, plaintiffs must identify a specific, uniform employment policy and offer sufficient evidence of disparate impact in order to certify a class under Fed. R. Civ. P. 23. McReynolds v. Merrill Lynch, Pierce, Fenner & Smith Inc., No. 05-CV-6583, at *2 (N.D. Ill. Sept. 19, 2011). Plaintiffs identified two employment policies: the National Teaming Policy, and the National Account Distribution Policy. Id. They supported their amended motion for class certification with statistical evidence to show that African-American financial advisers earned less than their white counterparts on a company-wide basis. Id.
Once again, the Court held that plaintiffs had failed to establish that there are questions of law or fact common to the class, and denied certification. Relying on Dukes, the Court reasoned that it was not enough to simply identify policies that were common to the class, instead plaintiffs had to show that the identified policies caused the disparate impact. Id. at *3. The Court concluded that plaintiffs had failed to do so, as the policies they identified depended on discretionary decisions for their implementation. Id. For example, with respect to the National Teaming policy, the Court noted that the decision on whether to join a team or to be invited to join a team would depend on a myriad of decisions by supervisors and the financial advisors themselves. A financial advisor may decline to become a member of a team for personal or professional reasons, or the team itself may balk at his or her membership for discriminatory reasons. Id. at *4. Because each decision would have to be examined to determine whether a financial advisor had been the victim of discrimination, the Court reasoned that a class-wide proceeding could not generate a common answer that would drive the resolution of the litigation. Id.
McReynolds is another example of how courts are interpreting Rule 23’s commonality requirement more strictly in light of Dukes. Plaintiffs cannot rely on the mere existence of common questions of law or fact to meet the commonality requirement of Rule 23(a)(2). Those questions must be central to the class’s clams such that an answer to them will determine the validity of those claims. Here, the Court held that there were too many layers of discretion and personal choice between the alleged discriminatory policies and the alleged disparate impact to allow the court (or the jury) to determine that the disparate impact was caused by those policies. Like Dukes, the fact that the class was overseen by many different managers who exercised discretion over employment decisions turned out to be fatal to class certification.