gavel.jpgBy Timothy Haley and Gerald L. Maatman, Jr. 

On March 21, 2012, we attended the Federal Bar Association panel discussion on the future of class actions in the Seventh Circuit. U.S. District Court Judge Ruben Castillo moderated the panel discussion, that included Judge Diane Wood of the U.S. Court Of Appeals for the Seventh Circuit, one of the circuit judges who recently issued the now already “famous” ruling in McReynolds v. Merrill Lynch, Pierce, Fenner & Smith, 2012 U.S. App. LEXIS 3683 (7th Cir. Feb. 24, 2012), which we blogged about when that decision hit the presses.

The panel discussion provided an interesting and informative discussion on important recent developments in class action jurisprudence and their impact on Rule 23 issues. We thought our readers would find several points to be informative in thinking through issues in the context of workplace class actions.

Are Class Actions Alive And Well? 

There was a general consensus that the Supreme Court’s decisions in AT&T Mobility LLC v. Concepcion, 131 S. Ct. 1740 (2011), and Wal-Mart Stores, Inc, v. Dukes, 131 S. Ct.  2541 (2011), do not sound the death knell for class actions. The plaintiffs’ class action bar is a resourceful and creative group, and there are many questions left open by Concepcion and Dukes. The general consensus was that Dukes is not deterring the plaintiffs’ bar from filing class actions in appropriate cases. These opinions were confirmed by data provided by Judge Castillo in his opening remarks. Judge Castillo observed that class action filings in the Northern District of Illinois in 2012 are on pace to match the number of class actions filed in 2011.

Dukes Raises The Certification Bar 

Dukes made it clear that federal district courts must resolve all factual issues bearing on class certification even if doing so requires consideration of the merits. The panelists agreed that this standard would probably lead to the development of a more fulsome evidentiary record before class certification could be determined. It may also result in more evidentiary hearings at the class certification stage, and there may be fewer instances in which bifurcation between class discovery and merits discovery is allowed. An important question is the evidentiary standard that plaintiffs must satisfy to obtain certification. It was noted that the Second Circuit in Teamsters Local 445 Freight Division Pension Fund v. Bombadier Inc., 546 F.3d 196, 202-03 (2d Cir. 2008), held that the correct standard is “preponderance of the evidence,” but the issue has not been resolved in all jurisdictions. The need for a more developed factual record will make the class certification question a more expensive issue to resolve. Judge Wood, who sits on the Committee on Rules of Practice and Procedure, observed that the cost issue is a question the Committee will be looking at in the future. Though not stated during the presentation, the increased cost issue supports a careful look at the class allegations at the pleading stage. Arguably, defendants should not be required to bear these increased costs if plaintiffs cannot allege sufficient facts to state a plausible claim for class treatment.

Other Dukes “Second Generation” Issues 

The panel agreed that in light of Dukes, a large nationwide class alleging discriminatory treatment at multiple facilities will be difficult certify. On the other hand, disparate impact cases – which do not require proof of intent to discriminate – may not pose the same problems. Plaintiffs often contend that Dukes was an unusual case and should be confined to its facts – i.e., 1.5 million potential class members, nationwide in scope, and allegations of discriminatory treatment. The panel debated whether the Seventh Circuit’s recent decision in Ross v RBS Citizens, 667 F.3d 900 (7th Cir. 2012), supports that view. In Ross, the Seventh Circuit distinguished Dukes and upheld Rule 23 class certification involving a state law wage & hour claim. The panelists also noted that the Supreme Court left open the question of whether a Daubert analysis is appropriate at the class certification stage, while hinting that it is based on American Honda Motor Co. v. Allen, 600 F.3d 813 (7th Cir. 2010), although other circuits – notably the Eighth Circuit – have held to the contrary (in In Re Zurn Plex Plumbing Products Liability Litigation, 644 F.3d 604 (8th Cir. 2011)). Judge Wood remarked that she could not imagine any district court allowing “junk science” to be used in determining whether class certification is appropriate.

Issue Certification 

We recently blogged on the Seventh Circuit’s decision in McReynolds and its approach to issue certification and how the plaintiffs’ bar may use it in “re-booting” their class certification claims post-Dukes. In McReynolds, the Seventh Circuit reversed the District Court’s denial of certification in a discriminatory impact case alleging violation of Title VII. The Seventh Circuit recognized that each of the 700 class members would have to individually prove that their compensation was adversely affected by the alleged policies and by how much. However, it ruled that the District Court committed error when it refused to certify the question of whether Merrill Lynch’s “teaming” and “account distribution” policies were unlawful. A petition for reconsideration en banc is currently pending in McReynolds – the petition is here. While stating that her comments had no implications with respect to any current or future case before her, Judge Wood did remark generally on the question of issue certification. She noted that it is another question that is going to be reviewed by the Rules Committee. She said that a key consideration as to whether issue certification would be appropriate is the manageability of the class. If what needs to be done on an individual basis is too complex or overwhelming, then issue certification may be inappropriate. In this respect, Judge Wood indicated that it is important for plaintiffs to present a plan that demonstrates that the case is manageable. It is insufficient for plaintiffs simply to provide assurances that it can be done.

The panel’s presentation provided very interesting and thoughtful insights on the current and future state of class action jurisprudence. The panelists’ discussion also underscored the notion that the future dynamics in Rule 23 workplace class action litigation continue to change and evolve.