CADNUSBy Courtney Bohl and Laura J. Maechtlen  

We previously blogged about DFEH v. Law School Admissions Council, Inc., No. 12-CV-1830, 2013 U.S. Dist. LEXIS 57431 (N.D. Cal. April 22, 2013), and the recent motion filed by the California Department of Fair Employment and Housing (“DFEH”), which asked the Court to allow the agency to proceed for “group relief” under the “pattern or practice” framework applicable to EEOC-initiated Title VII enforcement actions, rather than meeting the requirements of Rule 23 for class certification. On April 22, 2013, Judge Edward M. Chen of the U.S. District Court for the Northern District of California determined that the DFEH is not required meet the requirements of Rule 23; instead, because it is pursuing a government enforcement action, the agency is exempt from the requirements of Rule 23 when pursuing a case on behalf of a group of employees.

The ruling is novel, and vitally important for companies facing the prospects of governmental enforcement litigation with state agencies.

Factual And Procedural Background

The DFEH filed suit against the Law School Admission Council, Inc. (“LSAC”), seeking damages and injunctive relief over alleged failures of the LSAC to provide disability-related accommodations to test-takers of the Law School Admission Test (“LSAT”). The DFEH brought its action both on behalf of seventeen named individuals and as a “group or class” complaint on behalf of “all disabled individuals in the State of California who requested a reasonable accommodation for the LSAT from January 19, 2009 to the present.” Id. at 1. The DFEH alleged several forms of discrimination, including policies or procedures alleged to require test-takers to undergo psycho-educational and neuropsychological evaluations in order to be eligible for an accommodation, and a practice of placing notations on the test score if a test-taker was provided an accommodation, which is disclosed to all schools receiving the test score. Id. at 1-3.

The DFEH brought the current motion claiming that its suit, similar to government enforcement actions brought by the EEOC, is not a “class action” and thus is not subject to the requirements of Rule 23.     

The Court’s Ruling

The Court held that the DFEH’s suit against LSAC was indeed a “government enforcement action” seeking relief on behalf of a group of aggrieved individuals and did not qualify as a class action within the meaning of Rule 23. Id. at 27. 

In so ruling, the Court first analyzed the U.S. Supreme Court’s ruling in General Telephone Co., of the Nw., Inc. v. EEOC, 446 U.S. 318 (1980), which held that the EEOC could maintain a civil action for the enforcement of a statute under its jurisdiction and may seek relief for a group of individuals without first obtaining class certification under Rule 23. Id. at 10-11. The Court noted that the principle that emerged from General Telephone and post-General Telephone cases is that — where a government agency is authorized to act in the public’s interest to obtain broad relief, and the statute confers this power on the agency without referencing class certification — Rule 23 may not apply. Id. at 18.

Turning to the DFEH, the Court noted that it must examine the nature of the DFEH’s enforcement actions to decide whether or not they are subject to Rule 23’s requirements. Id. at 20. The Court closely followed the Supreme Court’s analysis in General Telephone, starting with the DFEH’s authority. The Court noted that California Fair Employment and Housing Act (“FEHA”) authorizes the DFEH to file administrative charges and to bring civil actions in court for group or class relief. Id. at 21. Additionally, the California Supreme Court has recognized the DFEH as a public prosecutor testing a public right. Id.

Next, the Court analyzed the relationship and potential conflict between Rule 23 and the FEHA. Id. at *24-30. The Court noted that applying Rule 23 to the FEHA would substantially limit the number and types of suits the DFEH could bring on behalf of a class. Id. at 24. For instance, Rule 23 would foreclose actions by the DFEH against employers with a small number of employees because the DFEH would be unable to meet Rule 23’s numerosity requirement. Id. at 28. Similarly, the DFEH’s actions would be limited to claims “typified by those of the original charging party,” even though the FEHA authorizes class claims that are “like or reasonably related to” the original charge. Id. at 28-29. Finally, under FEHA, the DFEH is authorized to proceed with an action even if some class members may appear to be disadvantaged, so long as the suit is advancing the public interest. Id. at 29. Applying Rule 23’s adequate representation requirement to the DFEH, however, would operate to foreclose an enforcement action where a conflict of interest between the DFEH and the members of the putative class existed. Id. at*29. 

The Court also evaluated the policy behind distinguishing the DFEH’s action from a Rule 23 class action. Id. at 30-31. The Court reasoned that unlike a private class action, where typicality requirement ensures absent class members are not denied due process of law when they are bound without their explicit consent, in the DFEH case, absent victims are not bound by the outcome of a DFEH suit and may bring a suit against the employer on their own. Id.

The Court finally turned to and rejected the LSAC’s objections.  LSAC argued the Court’s ruling would create an untenable conflict between FEHA and Rule 23. Id. at 31-32. The Court dismissed this argument, noting that its decision does not hold that California law trumps Rule 23. Id. at 32. Instead, its decision establishes that certain governmental enforcement actions are simply “not” class actions. Id. 

LSAC also argued the Court’s rule would allow “a state statute to prescribe the procedure for pursuing purported class claims in federal court.” Id. at 37-38. The Court rejected this argument, finding that LSAC missed the import of General Telephone. The Court reiterated its ruling that when a government agency pursues class-wide relief through a civil enforcement action, it is not prosecuting a “class action” subject to Rule 23. Id. at 38.

Implications For Employers

This ruling has significant implications for employers, and especially those with operations in California.    

While the ruling dictates the procedure by which these cases are litigated, and not the underlying substantive claims, the DFEH’s ability to file class-like litigation outside the procedural requirements of Rule 23 is a significant advantage for the agency. The agency need not prove numerosity, or other Rule 23 requirements.  Instead, to prove a pattern-or-practice of discrimination, the agency will follow a burden-shifting framework encompassing two phases of litigation: a liability phase and a remedial phase.  In the liability phase of a pattern or practice case, the agency has the initial burden of establishing a prima facie case that discrimination was the employer’s standard operating procedure — that is, the regular rather than the unusual practice. The burden then shifts to the employer to defeat the prima facie showing by demonstrating that the agency’s proof is either inaccurate or insignificant. If an employer fails to rebut the inference created by the prima facie case, the court may award prospective relief without any further evidence from the EEOC, including an injunction against continuing the discriminatory policy.   

When a government agency seeks individual relief in addition to prospective relief, a court typically conducts a second “remedial” phase of the litigation to determine the scope of individual relief. Because the court has already found liability based on the existence of a pattern-or-practice of discrimination, it will infer that all decisions were made pursuant to the discriminatory policy at issue in the first phase. Therefore, the government need only show the persons subject to the offending policy, to show that they were potential victims of the proved discrimination. Once this showing is made, the burden shifts to the defendant to demonstrate that the individual claimant was denied an opportunity for lawful reasons. If a legitimate, non-discriminatory reason for the denial of opportunity is presented, the government then has an opportunity to demonstrate that the proffered reason is merely pretext for discrimination. 

For these reasons, defense of pattern or practice claims is challenging. The cases tend to be statistically-intensive, and difficult to win on summary judgment.  Moreover, in a remedial phase, individualized issues that may not be litigated in a Rule 23 class action are often addressed through a variety and varied array of trial plans determined by federal courts. 

Clothed with authority to bring class-wide claims that are not subject to Rule 23’s requirements, the DFEH most likely will perform more expansive investigations into employer’s policies and practices, demand class-wide discovery before a lawsuit is filed, and style its class claims as pattern-or-practice claims on the heels of this important decision. Employers should be on the lookout for these strategies and expect the DFEH to bring more pattern-or-practice litigation in the near future.