ndil seal.gifBy Gerald L. Maatman, Jr. and Jennifer Riley

The plaintiffs’ class action bar continues in its search for “re-booting theories” to workaround Wal-Mart Stores, Inc. v. Dukes, 131 S.Ct. 2541 (2011). Our blog has commented on this phenomenon and the courthouse scorecard to date as judges confront and rule upon these attempts (read more here, here, here and here).

In one of the first rulings applying the Seventh Circuit’s recent decision in McReynolds v. Merrill, Lynch, Pierce, Fenner & Smith, 2012 WL 592745 (7th Cir. Feb. 24, 2012), a recent opinion by Judge Joan Lefkow of the U.S. District Court for the Northern District of Illinois demonstrates its potential broad-reaching impact. 

In Bolden v. Walsh Group, No. 06-CV-4104 (N.D. Ill. March 30, 2012), twelve construction workers filed a putative class action against Walsh alleging race discrimination. Plaintiffs alleged that Walsh discriminated against African-American  employees through its hiring, firing, job assignment, and compensation practices. Plaintiffs asserted both disparate treatment and disparate impact theories of liability and also alleged that the working conditions at Walsh amounted to a hostile work environment.

Judge Lefkow certified classes under Rule 23(b)(3) for both Plaintiffs’ disparate impact discrimination and hostile work environment claims, even though the evidence showed that Walsh delegated discretionary decision-making to its superintendents and foremen on each of hundreds of construction sites.   

For employers facing workplace class action litigation, the ruling in Bolden v. Walsh Group is noteworthy in its recognition of workarounds to Wal-Mart Stores, Inc. v. Dukes, 131 S.Ct. 2541 (2011).

Factual Background To Judge Lefkow’s Ruling

From 2000 to 2009, Walsh employed approximately 2,610 journeymen and 175 foremen on 262 construction projects in the Chicago area. Walsh typically allowed independent management of its construction projects with little oversight from its corporate office. Usually, a project manager or business group leader selected a superintendent, the superintendent supervised foremen, and either the superintendent or the foremen hired journeymen and assigned tasks. Walsh did not have a policy for hiring journeymen, and it left decisions regarding hiring and assigning overtime work to the discretion of superintendents and foremen.   

Plaintiffs filed a motion seeking to certify four classes, including a hire and promotion class, a work hours and compensation class, a lay-off and termination class, and a hostile work environment class. The Court granted plaintiffs’ motion in part and denied it in part.

The Court’s Opinion On Rule 23 Commonality Factors

Walsh asserted that plaintiffs could not satisfy the commonality requirement of Rule 23(a)(2) because their claims involved a myriad employment decisions made by numerous managers at hundreds of construction sites and thus turned on individual as opposed to class-wide issues of fact and law. In essence, the defense argued that Plaintiffs’ class theories failed to surmount the Wal-Mart bar.

At the outset, Judge Lefkow recognized that the commonality requirement should be measured against Wal-Mart and McReynolds, 2012 WL 592745, at *5. In Wal-Mart, plaintiffs brought disparate treatment and disparate impact claims on behalf of 1.5 million putative class members alleging that local managers exercised discretion over pay and promotions disproportionately in favor of men, leading to an unlawful disparate impact on female employees. In McReynolds, plaintiffs alleged that two company-wide policies – including a “teaming policy” under which the company delegated the formation of teams to local brokers – had a disparate impact on African-American brokers. Unlike Wal-Mart, the Seventh Circuit concluded that the plaintiffs in McReynolds met the commonality requirement. Id. at 9 (citing McReynolds, 2012 WL 592745, at *8.) Seeking to navigate the waters between Wal-Mart and McReynolds, Plaintiffs in Bolden asserted that Walsh had a company-wide policy of setting up each project as its own business, with no material oversight. 

Judge Lefkow noted that the most obvious distinction between the two cases – the absence in Wal-Mart and the presence in McReynolds of a company-wide policy more definite than that of granting all hiring and promotion decisions to local managers – was “razor thin.” Id. She reasoned that both “cases concern a company-wide policy of delegation of discretionary authority to a low-enough level that employment decisions are based on the decider’s personal comfort level, resulting in a statistical disparity disfavoring a protected class.” Id. at 10. In so doing, Judge Lefkow discounted McReynold’s explanation for parting ways with Wal-Mart (i.e., that, unlike the effect of delegating decision-making authority to local managers, the incremental causal effect of permitting brokers to form teams was susceptible to class-wide determination). Id. at 10 n.9. 

Instead, in effect, Judge Lefkow cabined the Supreme Court’s decision in Wal-Mart. Judge Lefkow seized on the Seventh Circuit’s characterization of Wal-Mart’s holding as partially based on “manageability” concerns: “‘Wal-Mart holds . . . a class action by more than a million . . . is unmanageable [and] the incidents of discrimination complained of do not present a common issue that could be resolved efficiently in a single proceeding.’. . . This language implies that the Seventh Circuit reads Wal-Mart as a case where the difficulties of manageability and lack of efficiency overwhelmed any potential common issue based on delegation of authority.” Id. at 11. Judge Lefkow concluded, therefore, that whether Walsh’s company-wide policy of delegating discretionary authority to job site superintendents discriminates against black employees was a common question that could be certified so long as Plaintiffs could demonstrate an evidentiary basis for their class definition. Id. at 12. 

Rule 23 Certification Conclusions

The Court concluded that, with respect to their disparate treatment claims, Plaintiffs fell short of the required evidentiary threshold. The Court found Plaintiffs’ limited statistical evidence and their anecdotal evidence (which was limited to seven out of 262 construction sites) “too weak to support the conclusion that there will be a common question of whether supervisors at all of Walsh’s construction sites engaged in ‘stereotyped thinking’ that adversely affected black journeymen.” Id. at 15. 

The Court reached the opposite conclusion with respect to Plaintiffs’ disparate impact claims. Plaintiffs alleged that Walsh’s superintendents and foremen tended to offer overtime and work hours to non-African-American employees in the first instance and supported their allegation with the same statistical evidence showing that African-American journeymen, on average, received fewer hours than non-African-American journeymen. Id. at 17. 

The Court also found common issues with respect to Plaintiffs’ hostile environment claims. Plaintiff submitted “voluminous testimony, affidavits, and the EEOC Investigative Memorandum” showing that supervisors at two job sites made offensive comments, and Plaintiffs claimed that they saw offensive graffiti in portable toilets and saw “hangman’s nooses” at three other sites. The Court concluded that “Plaintiffs’ evidence demonstrates that there is a common issue of fact as to whether Walsh management knew of its supervisors’ harassing conduct . . . and yet allowed supervisors to act with unfettered discretion on the job.” Id. at 20.

Impact Of The Bolden Decision

Bolden is one of the first opinions applying McReynolds. After McReynolds, we predicted that employers could expect to see plaintiffs’ lawyers attempting to repackage claims that attack discretionary decision-making as claims that attack a company-wide policy that allows managers to exercise discretion in a certain, allegedly discriminatory, manner. After Bolden, employers can continue to expect the plaintiffs’ class action bar to use McReynolds in this and perhaps even broader ways.   

Although Judge Lefkow’s decision is not binding on other district courts, if other judges take a similarly broad view of McReynolds, it could represent a game-changing limitation on Wal-Mart. Judge Lefkow relied on McReynolds to marginalize the Supreme Court’s decision in Wal-Mart – limiting much of its impact to situations involving super-sized or otherwise unmanageable classes. Judge Lefkow proceeded to find commonality in a situation that Wal-Mart seemed to place off-limits – a situation where the alleged common policy involved delegating virtually unfettered discretion to local managers. She also certified a workplace harassment claim, which most had thought post-Wal-Mart would never survive a commonality analysis.