By Rebecca Bjork and Gerald L. Maatman, Jr.

Workplace class actions are being reshaped before our very eyes, as district courts across the country apply important new Supreme Court decisions. A new noteworthy ruling illustrating this trend in the context of Rule 23(b)(3) requirements is from a long-running employment discrimination case in New York entitled Gulino, et al. v. The Bd. of Educ. of the City Sch. Dist. of the City of N.Y., No. 96 CV 8414, 2013 U.S. Dist. LEXIS 123948 (S.D.N.Y. Aug. 29, 2013). You can read it here. Judge Kimba M. Wood of the U.S. District Court for the Southern District of New York granted plaintiffs’ motion to certify a class under that Rule 23(b)(3) and embraced their proposal for a two-stage remedial phase, even though some aspects of those proceedings will necessarily require consideration of some individualized evidence. As such, it represents a “work-around” that plaintiffs’ class action counsel have sought since the U.S. Supreme Court’s employer-friendly rulings in Wal-Mart Stores, Inc. v. Dukes, 131 S.Ct. 2541 (2011), and Comcast Corp. v. Behrend, 133 S.Ct. 1426 (2013).

Ultimately, though, we think the unique nature of the ruling in Gulino leaves plenty of room for employers facing newly-filed class actions to argue it should not carry much persuasive weight.

Background Of The Case

Briefly, the lawsuit alleges that the School Board discriminated against New York City public school teachers by requiring them in the early 1990’s to pass a licensing exam that had a disparate impact on minorities. Id. at *3-4. Thousands of them failed, and in response, according to a judgment reached after an earlier eight week bench trial, “the Board retained them in the same teaching positions and assigned the same course load, but revoked their licenses, demoted them to substitute teachers, reduced their salaries, froze their pensions, and revoked their seniority rights.” Id. at *5 (citing Gulino v. Bd. Of Educ. Of the City Sch. Dist. of City of N.Y., 201 F.R.D. 326, 329 (S.D.N.Y. 2001)). 

Initially, the previous judge assigned to the litigation had certified a class under Rules 23(a)’s commonality requirement and Rule 23(b)(2)’s injunctive class procedure. But after the Supreme Court’s decision in Wal-Mart Stores, Inc., which held that individual monetary relief cannot be awarded on a class-wide basis through a Rule 23(b)(2) injunction, the class was partially decertified on that issue. Gulino, 2013 U.S. Dist. LEXIS 123948, at *8. The latest development is that now Judge Wood has granted the plaintiffs’ proposal to certify a remedial class, to be tried in two phases, under Rule 23(b)(3) instead. 

The Basis Of The Ruling

Rule 23(b)(3)’s predominance requirement, which the Supreme Court has explained is even more demanding than commonality, “tests whether proposed classes are sufficiently cohesive to warrant adjudication by representation.” Id. at *30 (quoting Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 623 (1997). Despite the higher standard, the Court in Gulino found that certifying a damages class under Rule 23(b)(3) would be “the superior method of adjudicating Plaintiffs’ remaining claims.” Id. at *37. 

For the remedial phase, “the Court agree[s] with Plaintiffs that the class shares common questions (and answers) relating to the calculation of appropriate remedies” and that the first stage “will address class-wide issues, including calculation of back pay, pension benefits, and seniority; the second stage will address individual issues, including mitigation and the amount of back pay to which each claimant is entitled.” Id. at *19. The Court embraced the use of salary tables and cohorts (based on what year the teachers would have been eligible for full-time teaching) to calculate back pay on  periodic basis. Id. at *20-21. At the second stage, the Board “will have an opportunity to present other, non-discriminatory reasons why a class member would not have received” a license or regular teaching assignment. Id. at *22. This outcome may seem surprising given that the Supreme Court’s ruling in Comcast Corp. v. Behrend requires plaintiffs to propose a model capable of calculating individual damages on a class-wide basis at the class certification stage. There, the majority stated, “respondents cannot show Rule 23(b)(3) predominance: Questions of individual damage calculations will inevitably overwhelm questions common to the class.” Id. at 2560.  

Implications For Employers

The decision in Gulino is one of the first employment discrimination class actions to certify phase two damages issues under Rule 23(b)(3). Its reasoning to get to that result is somewhat strained and convoluted. In many respects, the decision reflects the historical tendency to favor class actions in case law in the Second Circuit. For example, the Court explained that plaintiffs “have identified more than 1,000 individuals who have been harmed” by the use of the test, and requiring them to file individual lawsuits “would sacrifice the efficiencies that could be obtained by resolving common issues together and using those determinations to streamline individual proceedings.” Id. However, the procedural posture of the litigation appears to have been a crucial determining factor, for “[c]lass members have been relying on this litigation proceeding as a class action for more than seventeen years” and “forcing members to initiate separate actions at this late stage would be unfair.” Id. at *37-38. Proceedings for damages determinations “will expedite compensating Plaintiffs” who, “despite clear evidence of the [School] Board’s liability, . . . “have yet to obtain any relief.” Id. at 838. As a result, employers have a sound basis to blunt the impact of this plaintiff-friendly predominance decision in cases where facts regarding liability are still in dispute.