Class Certification

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By Ashley K. Laken and Timothy F. Haley

Seyfarth Synopsis: On February 1, 2018, the U.S. District Court for the Middle District of North Carolina entered an order granting in part, and denying in part, the plaintiff’s motion for class certification in a no-hire antitrust case entitled Seaman v. Duke University, 1:15-CV-462, at 1-2 (M.D.N.C. Feb. 1, 2018) (A copy of the decision can be found here.)  The case was brought against Duke University, Duke University Health System (collectively “Duke”), and various University of North Carolina entities and one of its executives (collectively “UNC”).  The complaint alleged that the defendants had entered into an agreement not to hire each other’s medical faculty employees in violation of federal antitrust laws.  With some notable exceptions it has been difficult for plaintiffs to achieve class certification in wage suppression cases such as Seaman.  The ruling is a “must read” for employers, as the Court’s reasoning and conclusions make it difficult to predict whether this case will be helpful or hurtful to the plaintiffs’ bar in other cases.

Background To The Case

Seaman, an Assistant Professor of Radiology at Duke, contended that she applied for a position at UNC in 2015.  She alleged that she was denied consideration due to an agreement among the Duke and UNC defendants that they would not hire each another’s medical faculty employees unless the hire involved a promotion.  Seaman alleged that this agreement not only suppressed the compensation of defendants’ medical faculty members, but also their other skilled medical employees.  Thus, Seaman sought to certify a class consisting not only of defendants’ medical faculty members, but also their physicians, nurses, and skilled medical staff.  Id. at 1-2.

Antitrust Impact And Damages – Faculty

The primary certification challenge for the plaintiff  in Seaman was to demonstrate predominance under Rule 23(b)(3), as there was little dispute that the other Rule 23 requirements were satisfied.  As is typical with wage suppression antitrust cases, the battleground centered on whether antitrust impact and damages could be shown with common proof.  The Court defined antitrust impact as injury that reflects the anti-competitive effect, either of the violation or of anti-competitive acts made possible by the violation.  Id. at 8.  Seaman contended that the no-hire agreement had an antitrust impact on faculty compensation in two ways, including: (1) the defendants did not have to provide preemptive compensation increases for faculty that otherwise would have been needed to ensure employee retention; and (2) the defendants’ internal equity structures – policies and practices that are alleged to have insured relatively constant compensation relationships between employees – spread the individual harm of decreased lateral offers and corresponding lack of retention offers to all faculty, thus suppressing compensation faculty-wide.  The Court agreed that the evidence offered by Seaman to prove these facts was common to the class.  Id. at 8-9.

Regarding damages, Seaman’s expert testified that his analysis of the data demonstrated that compensation increases were associated with increases in experience – i.e., individual faculty members were typically paid more as they obtained experience.  Id. at 13.  The expert conducted a regression analysis and applied the results “to the faculty compensation data to develop an aggregate damages estimate for faculty.”  Id. at 14.  Based on this evidence, the Court concluded that Seaman’s proposed method for calculating damages was based upon evidence that would be common to the faculty.

Antitrust Impact And Damages – Non-Faculty

Seaman’s expert also attempted to demonstrate that antitrust impact and damages could be shown with common proof as to non-faculty members based on the same analysis applied to faculty members.  As to impact, the Court noted that unlike the faculty, there was no evidence that non-faculty received retention offers or peremptory compensation increases that would then be spread to other non-faculty through Seaman’s internal equity theory.  Thus, the Court concluded that Seaman’s method of proving impact involved individual rather than common proof for all non-faculty.  Id. at 15-16.

Accordingly, the Court granted the motion for class certification as to faculty members, but not as to non-faculty members.  Id. at 21-25.

Implications For Employers

It is unclear what precedential impact Seaman may have on future class action wage suppression cases.  Plaintiffs have had mixed results achieving class certification in compensation suppression cases.  This is true in wage information exchange cases as well as cases involving no-hire agreements such as Seaman.  For example, in Weisfeld v. Sun Chem. Corp., 84 Fed. Appx. 257, 258 (3rd Cir. 2004), the Third Circuit upheld the district court’s decision denying certification in an antitrust case involving an alleged series of no-hire agreements among employers in the ink printing industry, agreeing with the district court that the plaintiff did not satisfy the requirements of Rule 23(b)(3).  Among other things, the Third Circuit noted that the “decreased salary and deprivation of opportunities inquiries would require considering numerous individual factors” including “whether a covenant not to compete was included in a particular employee’s contract; employee salary history, educational and other qualifications; employer’s place of business; employee’s willingness to relocate to a distant competitor; and [employees’] ability to seek employment in other industries in which their skills could be utilized….” Id. at 264.  There was no mention in Seaman whether factors like this were present, and if so, how they could be addressed with common evidence.  It would certainly be unusual if the only factor affecting compensation was experience.

Furthermore, the expert’s damage model in Seaman was designed to show only an “aggregate class-wide damages estimate for faculty.”  It is not entirely clear what the Court meant by that phrase, but if the Court was referring to an average wage suppression, such reliance has been pointedly rejected as a “fundamental flaw” by at least one other court.  In rejecting the plaintiff’s expert’s analysis in Reed v. Advocate Health Care, 268 F.R.D. 573, 590-92 (N.D. Ill. 2009), the court stated: “Measuring average base wage suppression does not indicate whether each putative class member suffered harm from the alleged conspiracy.  In other words, it is not a methodology common to the class that can determine impact with respect to each class member.”  Id. at 591.

Given these issues, it remains to be seen what effect Seaman will have on future cases.

By Gerald L. Maatman, Jr., Julie G. Yap, and Alex W. Karasik

Seyfarth Synopsis: In a class action lawsuit alleging that Tinder discriminated on the basis of age in violation of California state laws by charging consumers age 30 and over a higher price for Tinder Plus subscriptions, the California Court of Appeal recently reversed the trial court’s judgment in favor of Tinder, holding there was no strong public policy that justified the allegedly discriminatory pricing model. 

Businesses, especially those in the social media and technology sectors, should keep this ruling in mind when implementing marketing and pricing policies to avoid claims they are discriminating against potential classes of users based on protected demographics.

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Background

In Candelore v. Tinder, Inc., No. B270172, 2018 Cal. App. LEXIS 71 (Cal. App. Jan. 29, 2018), Plaintiff brought an action on behalf of himself and a putative class of California consumers who were over 30 years old when they subscribed to Tinder Plus, asserting age discrimination in violation of two state laws, including the Unruh Civil Rights Act and the Unfair Competition Law (“UCL”).  Specifically, Plaintiff alleged that Tinder charged consumers over the age of 30 $19.99 per month for Tinder Plus, while it charged consumers under the age of 30 only $9.99 or $14.99 per month for the Tinder Plus features. 

The Trial Court’s Decision

Tinder moved to dismiss the action in the trial court on the basis that Plaintiff failed to state a claim because: (1) age-based pricing does not “implicate the irrational, invidious stereotypes” that the Unruh Act was intended to proscribe; (2) a public statement by Tinder’s executive, as quoted in the complaint, “refute[d] any notion that the alleged discrimination in pricing [was] arbitrary”; and (3) age-based pricing was neither “unlawful” nor “unfair” under the UCL.  Id. at *4.

The trial court agreed with Tinder and entered judgment in its favor, holding that Tinder’s age-based pricing practice did not constitute arbitrary or invidious discrimination because it was reasonably based on market testing showing “younger users” are “more budget constrained” than older users “and need a lower price to pull the trigger.”  Id. at *2-3.  The trial court reasoned that there was “no basis in the published decisions for applying the Unruh Act to age-based pricing differentials” and that Tinder’s pricing structure furthered the public policies of increasing access to services for the general public and maximizing profit by the vendor, a legitimate goal in our capitalistic economy.”  Id. at *4-5.  Based on these rulings, the trial court concluded that Plaintiff could note state a claim for discrimination under the Unruh Act.  Because the discrimination claim formed the basis for the Plaintiff’s UCL claims, the trial court similarly dismissed those claims.  Id. 

Plaintiff appealed to the California Court of Appeal..

The Court of Appeal’s Decision

The Court of Appeal reversed the trial court’s ruling in favor of Tinder, holding that “[a] blanket, class-based pricing model like this, when based upon a personal characteristic such as age, constitutes prohibited arbitrary discrimination under the Unruh Act.”  Id. at *12.  In doing so, the Court of Appeal departed from guidance in (and other authority embracing) the California Supreme Court’s opinion in Koire v. Metro Car Wash, 40 Cal. 3d 24, 29 (1985), which held that age can serve as a reasonable proxy for income.  Id. at *12-13.  The Court of Appeal characterized the Supreme Court’s statements in Koire as dicta and declined to adopt the reasoning, holding that that “discrimination based on generalized assumptions about an individual’s personal characteristics are ‘arbitrary’ under the Act.”

The Court of Appeal also rejected the trial court’s conclusion that Tinder’s alleged age-based pricing model was justified by public policies.  Id. at *19-20.  Also relying on Koire, the Court of Appeal held that “a merchant’s interest in profit maximization” cannot justify discriminatory pricing “based on an individual’s personal characteristics.”  Id. at *22-23 (emphasis in original).  Nevertheless, the Court of Appeal opined that a business like Tinder could employ “rational economic distinctions to broaden its user base and increase profitability,” so long as those distinctions are “drawn in such a way that they could conceivably be met by any customer, regardless of the customer’s age or other personal characteristics.”  Id. at *23 (emphasis in original; citations omitted).  Offering its own solution, the Court of Appeal suggested that Tinder “could establish different membership levels for its Tinder Plus service that would allow more budget constrained customers, regardless of age, to access certain premium features at a lower price, while offering additional features to those less budget conscious users who are willing to pay more.”  Id. 

Accordingly, the Court of Appeal concluded that the Complaint’s allegations were sufficient to state a claim for age discrimination in violation of the Unruh Act.  Id. at *24.  Based on this finding and because the standard for finding an “unfair” practice in a consumer action is intentionally broad, the Court of Appeal also held that Plaintiff sufficiently alleged a claim for violation of the UCL.  Id. at *24-25.

Implications For Employers

While most businesses contemplate age discrimination claims in the hiring context, this ruling illustrates that companies can be vulnerable to class action litigation if their products or services can be perceived as giving preferential or detrimental treatment to certain consumers based on an individual’s personal, protected characteristics.  Companies should be cautious if their business decisions — whether it be in the context of hiring, pricing, or any other strategic considerations — could potentially have (or be perceived to have) an adverse impact on a class of people based on their demographics.

 

By Christopher M. Cascino and Gerald L. Maatman, Jr.

Seyfarth Synopsis: In Ellis v. Google, Inc., No. CGC-17-561299 (Cal Sup. Ct. Dec. 4, 2017), Judge Mary Wiss of the Superior Court of California granted a motion to dismiss a class action lawsuit brought by Google employees who claimed that all female Google employees are paid less than their counterparts.  Specifically, Judge Wiss found that the plaintiffs failed to plead sufficient facts to conclude that Google paid all female employees less than their male counterparts, even though the complaint alleged that a statistical analysis “found systematic compensation disparities against women pretty much across the entire workforce.”  Id.  at 4. This case represents a win for employers, who too often are forced to defend large class actions based on conclusory allegations.

Case Background

Three former female Google employees filed a putative class action in the Superior Court of California, alleging that Google “maintained throughout California a ‘centrally determined and uniformly applied policy and/or practice of paying its female employees less than male employees for substantially similar work.’”  Id. at 2.  To support this allegation, the plaintiffs also alleged that the U.S. Department of Labor found that, with respect to Google’s Mountain View office in 2015, “‘systematic compensation disparities against women pretty much across the entire workforce.’”  Id.  The plaintiffs asserted four causes of action against Google based on the alleged disparity, including a California Equal Pay Act claim, a California Labor Code claim, a Business and Professions Code claim, and a claim for declaratory judgment.  The plaintiffs purported to bring these claims on behalf of all female Google employees in California.

Decision

The Court observed that a class action complaint should be dismissed where, “assuming the truth of the factual allegations in the complaint, there is no reasonable possibility that the requirements for class certification will be satisfied.”  Id. at 3.  The Court then discussed the requirements for class certification under California law, including: “(a) an ascertainable and sufficiently numerous class; (b) a well-defined community of interest; and (c) substantial benefits from certification that render proceeding as a class superior to the alternatives.”  Id. at 4.  With respect to the second factor, the Court observed that it has three factors, including “(a) predominant common questions of law or fact; (b) class representatives with claims or defenses typical of the class; and (c) class representatives who can adequately represent the class.”  Id.

The Court found that the plaintiffs did not allege sufficient facts to conclude that there was an ascertainable class.  Even though the plaintiffs defined the class as “all women employed by Google in California,” which on its face was ascertainable, the Court found the definition overbroad because the plaintiffs offered “no means  by which only those class members who have claims can be identified from those who should not be included in the class.”  Id.  Significantly, the Court found that the plaintiffs’ allegation that the U.S. Department of Labor “‘found systemic compensation disparities against women pretty much across the entire workforce’” at a Google office in 2015 was insufficient to support the conclusion that “Google implemented a uniform policy of paying all female employees less than male employees for substantially equal or similar work.”  Id.  The Court observed that the complaint did not “specify, for example, the specific job classifications it pertains to, or whether the comparison was made against men who perform substantially similar work under similar working conditions.”  Id.

The Court also concluded that the plaintiffs failed to allege that there were common questions of law and fact that predominated over individual issues because the plaintiffs’ class was “overbroad,” so liability could not be decided for all putative class members in one proceeding.  Id. at 5. The Court further opined that the plaintiffs’ conclusory allegation that they “performed ‘equal work’ as their male counterparts” was insufficient to allege that they, in fact, performed equal work, and dismissed their individual claims.  Id. at 6.

Implications For Employers

The Ellis case has been closely watched as it is a significant workplace class action in a worker-friendly jurisdiction. The ruling of December 4 is a win for employers insofar as companies, especially in California, can use the decision to try to stop class actions at the pleadings stage.  When moving to dismiss such complaints, employers should lay out what conclusions can be drawn from assuming specific factual allegations are true, as they may have far less significance than may appear at first glance.  Employers should also continue reminding courts that class actions are only appropriate when they can create common answers to common questions, which is often not the case in large, overbroad class actions, and that conclusory allegations are insufficient to state claims.

By Gerald L. Maatman, Jr. and Alex W. Karasik

Seyfarth Synopsis: Four African-American teachers alleged that their school district employer discriminated against them on the basis of race by failing to hire them as assistant principals, and filed a motion for class certification. A federal district court in Florida denied the teachers’ motion for class certification, finding the employees failed to satisfy the commonality requirement of Rule 23 based on the exercise of discretion by different hiring principals at different schools. The ruling has important lessons for employers facing Rule 23 motions in workplace class actions.

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In Gittens v. The School Board of Lee County, Florida, No. 2:16-CV-412, 2017 U.S. Dist. LEXIS 115987 (M.D. Fla. July 7, 2017), Plaintiffs brought suit against their employer, the School Board of Lee County, Florida (“School District”), alleging that the School District discriminated against them on the basis of their race, i.e., African-American.  After Plaintiffs moved for class certification, Judge Mac R. McCoy of the U.S. District Court for the Middle District of Florida denied their motion, finding that Plaintiffs “fail[ed] to provide the necessary glue to hold the putative class claims together under [the] commonality analysis,” that was set forth in Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338 (2011).  Id. at *34.  The Court also found that Plaintiffs failed to demonstrate the sufficiency of the proposed class definition, the ascertainability of the putative class, adequacy, typicality, and the Rule 23(b) requirements.

For employers facing workplace class actions where putative class members are subjected to employment decisions by different supervisors at different facilities, this ruling is another post-Wal-Mart employer victory that can be used to oppose class certification.

Case Background

Plaintiffs, four African-Americans, held various teaching and administrative positions at various schools within the School District.  Id. at *6-12.  All four Plaintiffs had advanced degrees, and sought administrative positions at various schools, including the position of assistant principal.  All four had at least one interview for the assistant principal position, and two were interviewed by panels of all-White school administrators.  All four Plaintiffs were rejected for assistant principal positions.

To be considered for an assistant principal position, an applicant must first apply and be accepted into the AP Pool.  Id. at *13.  Once accepted, an individual may then apply and be hired for a specific assistant principal position at a certain school.  Each individual school advertises its open assistant principal positions, screens the applicants, conducts its own interviews and, when selected by the Principal of that specific school, the candidate’s name is submitted to the Superintendent, who then sends it to the School Board for final approval.

Plaintiffs alleged that the School District had a pattern or practice of refusing to hire well-qualified, African-American employees to administrative positions.  After bringing class-wide allegations under Title VII for race discrimination, Plaintiffs moved to certify a class of current and former employees who had applied for various positions with the School Board, including assistant principal positions.

The Decision

The Court denied Plaintiffs’ motion for class certification.  First, the Court rejected Plaintiffs’ class definition, “[a]ny and all black/African-American employees who applied for an AP Pool position in the four years preceding this action but who were denied such a position by Defendant,” as being improperly vague and ambiguous.  Id. at *18-20.  The Court noted that that the class definition was unclear as to whether “denied”  referred to the AP Pool or the actual assistant principal position.

After the Court found that Plaintiffs satisfied the numerosity requirement of Rule 23, it held that Plaintiffs failed to establish that there were common questions of law or fact sufficient to satisfy the commonality requirement.  The Court opined that “[s]imilar to [Wal-Mart v. Dukes], the Plaintiffs here wish to bring suit calling into question a relatively large number of employment decisions at once. Without some glue holding the alleged reasons for all those decisions together, it will be impossible to say that examination of all the class members’ claims for relief will produce a common answer to the crucial question why was I disfavored.”  Id. at *28 (internal quotation marks and citation omitted).  The Court held that the exercise of discretion by schools and principals over time at different schools precluded a finding of commonality.  Id. at *30.

Turning to the typicality requirement of Rule 23, the Court held that the named Plaintiffs failed to meet this requirement because each individual school advertised its opening for an assistant principal position and had its own decision-maker screening applicants and conducting interviews before the school principal selected the top applicant.  Id. at *37.  The Court determined that Plaintiffs did not meet their burden to show that their claims were based on the same event, pattern, or practice as the claims of other putative class members.  Regarding the adequacy of representation requirement, citing Plaintiffs’ counsel’s motion to withdraw as counsel of one of the named Plaintiffs due to “a breakdown in the attorney-client relationship,” the Court concluded that Plaintiffs failed to meet their burden.  Id. at *39-40.  Finally, Plaintiffs could not meet the Rule 23(b) requirements since not all of the Rule 23(a) requirements were met.  Id. at *40-41.  Accordingly, the Court denied Plaintiffs’ motion for class certification.

Implications For Employers

One of the most crucial events in employment law class actions is class certification briefing, which can potentially lead to several more commas and zeros in a settlement figure or jury verdict if an employer is not successful.  The Wal-Mart v. Dukes decision has given employers an avenue to attack large class actions where decisions made by different supervisors at different facilities can make it difficult for employees to prove common questions of law and fact.  Although the Court here identified several reasons not to certify this particular putative class, employers are now armed with another post-Wal-Mart ruling that they can use as a blueprint to fight class certification on the basis of commonality.

middle-district-of-florida-stampBy Gerald L. Maatman, Jr. and Alex W. Karasik

Seyfarth Synopsis: Following an employer’s reduction-in-force that ultimately led to an ADEA collective action after several employees over 50 years old were terminated, a federal district court in Florida recently granted a motion to conditionally certify a collective action of employees who worked at the employer’s Tampa, Florida location, but denied a motion to certify a nationwide collective action.

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When employers decide to undertake a reduction-in-force (“RIF”), one of the major pitfalls from a legal perspective involves mass terminations of employees over 40 years of age, leading to potential exposure under the Age Discrimination in Employment Act (“ADEA”).  After multi-discipline design firm RS&H, Inc. (“RS&H”) terminated 23 employees during an RIF, a 53 year old terminated employee brought suit against RS&H under the ADEA, noting that five of the seven employees terminated at the Tampa location where he worked were over 50 years old.  In Jones v. RS&H, Inc. , No. 8:17-CV-54-T-24, 2017 U.S. Dist. LEXIS 60088 (M.D. Fla. Apr. 20, 2017), after Plaintiff moved for conditional certification of a nationwide collective action of employees over 40 who were terminated in the RIF, Judge Susan C. Bucklew of the U.S. District Court for the Middle District of Florida granted the motion for conditional certification for employees who worked at the Tampa location, but denied conditional certification of a nationwide collective action.

While the Court’s grant of conditional certification should serve as a cautionary tale for employers who are considering mass layoffs that may include a significant proportion of employees over 40, the Court’s denial of conditional certification of a nationwide collective action provides insight as to how employers facing ADEA multi-party actions can attempt to minimize exposure.

Case Background

Plaintiff worked for RS&H from 1991 through 2015.  When RS&H terminated Plaintiff, it stated that his termination was part of an RIF.   Id. at *1-2.  After RS&H terminated 23 employees nationwide, including seven from its Tampa location, Plaintiff filed an EEOC charge alleging age discrimination.  Plaintiff stated that he had more work than the projected staffing requirement, and thus there was no reason for his termination.  He further alleged that RS&H rarely allowed non-officers to work until they retired.  In addition, RS&H was alleged to have hired young employees, and then terminated older employees once the young employees were trained.  According to Plaintiff, one RS&H supervisor commented just prior to the RIF that he had been informed that RS&H was looking to reduce staff, specifically older personnel.  Plaintiff further alleged that RS&H agents often said, “young people are our future.”  Id. at *2.

After being issued a notice of suit rights letter and thereafter bringing suit, Plaintiff sought to conditionally certify a nationwide collective action of former employees who were terminated from October 28, 2014 through August 24, 2015 (i.e., within 300 days prior to Plaintiff’s filing of his EEOC charge) and who were at least 40 years old at the time of their termination.  Two opt-in Plaintiffs who also worked at the Tampa location and were terminated during the 2015 RIF filed affidavits in support of Plaintiff’s allegations of age discrimination.  In opposition to the motion for conditional certification, RS&H argued that: (1) Plaintiff was not a proper representative because his ADEA claim was time-barred; (2) Plaintiff’s EEOC charge did not provide sufficient notice of claims from the proposed collective action; and (3) the scope of the proposed collective action was too large.

The Court’s Decision

The Court granted in part and denied in part Plaintiff’s motion for conditional certification.  First, in support of its argument that conditional certification was not warranted since Plaintiff was not a proper representative, RS&H argued that Plaintiff’s suit was untimely because he filed his suit 95 days after the EEOC issued its notice of suit rights.  Id. at *5-6.  The Court rejected this argument, citing evidence submitted by Plaintiff’s counsel illustrating that it did not receive the notice of suit rights letter until over two weeks after it was stamped.

Next,  RS&H argued that conditional certification was not warranted for the proposed nationwide collective action because Plaintiff’s EEOC charge did not give adequate notice that such claims were being asserted.  Id. at *7.  After examining Plaintiff’s EEOC charge, which indicated that “[o]n the day of my termination 5 of the 7 [Tampa, Florida] employees let go were over 50 and had at least 10 years with the company,” the Court found that Plaintiff’s EEOC charge could not be read to give notice that he was asserting claims on behalf of a nationwide group of employees.  The Court agreed with RS&H that, at best, Plaintiff’s charge put RS&H and the EEOC on notice that Plaintiff may be pursuing age discrimination claims on behalf of himself and the four other employees terminated on the same day at his Tampa work location.  Id. at *9-10.  In addition, the Court found that the decision-maker who terminated Plaintiff and the two opt-ins was never involved in a decision to terminate any employee outside of the Tampa location.  Accordingly, the Court declined to certify a nationwide collective action.

The Court then explained that to conditionally certify a collective action, (i) there must be other employees who desire to opt-in; and (ii) those employees must be similarly-situated to Plaintiff.  Given that two former employees had already opted-in, and that three of the five individuals that are over 50 and were terminated during the June 2015 RIF wanted to pursue ADEA claims, the Court found that the first element was met.  Regarding the similarly-situated element, the Court noted that while Plaintiff attempted to assert a company-wide pattern or practice of age discrimination claim, he did not show a sufficient factual basis on which a reasonable inference could be made that RS&H had a pattern or practice of discriminating against all employees at all locations based on their age.  Id. at *15-16.  Plaintiff offered no evidence that any employees outside of Tampa were interested in joining the lawsuit, nor did they identify any decision-makers outside of Tampa who allegedly discriminated on the basis of age during the RIF.  The Court further opined that the evidence that Plaintiff submitted could only support his contention of a pattern or practice of age discrimination within the Tampa location.  As such, the Court denied Plaintiff’s motion to conditionally certify a nationwide collective action of former employees over 40 who were terminated during the June 2015 RIF, but conditionally certified a collective action consisting of the five individuals that were terminated from the Tampa location.

Implications For Employers

While the Court’s grant of conditional certification should serve as an eye opener for employers considering RIFs that may include several employees over 40, the Court’s refusal to certify a nationwide collective action provides guidance for employers as to how to minimize potential RIF exposure.  Here, the Court noted that Plaintiff’s EEOC charge did not identify any aggrieved individuals outside of the Tampa location, nor did it identify anyone involved in the termination decision-making process outside of Tampa.  Employers facing motions for nationwide conditional certification in ADEA collective actions following RIFs should closely review the plaintiff’s EEOC charge to assess the sufficiency of nationwide allegations.  Given the potentially substantial consequences of RIFs involving older workers, the best practice for employers would be to contact their employment law counsel before engaging in this process.

FMLA-300x289By Gerald L. Maatman, Jr. and Thomas E. Ahlering

Seyfarth Synopsis:  A recent decision has added to the chorus of courts recognizing that FMLA class actions must be pursued under Rule 23 and are often appropriate for class certification.  As a practical matter, this means that FMLA class actions can now be pursued as opt-out – rather than opt-in – actions because the statutory language of the FMLA does not incorporate language requiring that plaintiffs affirmatively consent to join the action.  These recent decisions ultimately make FMLA class actions more attractive to the plaintiffs’ bar and increase the likelihood that employers may face similar actions in the future.

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Employers who have paid time off (PTO) or short-term leave policies are now at an increased risk of facing a class action under the Family-Medical Leave Act (“FMLA”) due to a recent decision in Carrel v. MedPro Group, Inc., No. 16-130, 2017 U.S. Dist. LEXIS 62969 (N.D. Ind. April 26, 2017).  The decision, which applied Rule 23 to FMLA class action claims and certified a class under Rule 23, serves as the most recent example of how plaintiffs’ attorneys are achieving success in FMLA class actions and may signal that additional and similar actions may be forthcoming.

Case Background

In Carrel, the Plaintiff brought a class claim under the FMLA alleging that she was docked earned PTO and that Defendant failed to pay her unused PTO upon the termination of her employment.  Specifically, the Plaintiff alleged that Defendant’s short-term leave policy violated the FMLA because each employee was provided PTO at the beginning of the year according to Defendant’s PTO policy and thus, PTO was unlawfully “docked” whenever an employee took FMLA leave.  Id. at *2.

Plaintiff filed a motion for class certification under Rule 23 seeking certification of a class defined as “all current and former [Defendant] employees who took FMLA leave at any point since March 29, 2013[.]”  Id. at *5.

The Court’s Decision

The Court granted Plaintiff’s motion for class certification.  First, the Court rejected Defendant’s argument that class certification under Rule 23 was the wrong mechanism for an FMLA class, and that the alleged class-wide  violations of the FMLA must be treated as a collective action instead.  Id. *6.  Although the Seventh Circuit has not weighed in on the applicability of Rule 23 to FMLA actions, the Court noted that other case law authorities in the Seventh Circuit have held that “class violations of the FMLA must be treated as opt-out actions pursuant to Rule 23 because the statutory language of the FMLA § 2617(a)(2) does not incorporate the additional language in the FLSA expressly requiring that plaintiffs affirmatively consent to join the action by opting-in.”  Id. at *7.  Accordingly, the Court held that “Rule 23 is the correct mechanism by which to proceed with the analysis” of the Plaintiff’s class certification motion.  Id. at *8.

Second, the Court proceeded to find that the requirements of Rule 23(a) had been satisfied.  Specifically, the Court found that the “commonality” requirement of Rule 23(a) was satisfied because “Plaintiff and the putative class members were all [Defendant] employees who were subject to the same uniformly applied PTO policy.”  Id. at *12.  Therefore, “[w]hether the Defendant’s PTO policy violated the FMLA presents a common question of law.”  Id.  In so holding, the Court noted that how Defendant’s policy individually impacted each member of the class was an issue relating to the merits and did not defeat commonality.  Id. at *15.

Finally, the Court noted that certification under Rule 23(b)(3) – applicable to classes seeking monetary relief – was appropriate.  In so holding, the Court found that the Rule 23(b)(3) “predominance” factor was satisfied because “causation issues, which here are actually issues concerning what damages, if any, each class member has actually suffered pursuant to the PTO policy applied in his/her own case, will not predominate over common liability issues.  Id. at *22.  Therefore, it did not matter to the Court’s inquiry “how much PTO each employee used or would have used.”  Id. at *23.

Implications For Employers

Employers are at an increased risk of facing similar FMLA class actions in the future in light of the fact that an increasing number of courts have found FMLA class actions to be proper for class certification under Rule 23.  The simple fact that plaintiffs’ attorneys can now pursue FMLA class actions under Rule 23, instead of an opt-in class akin to FLSA claims, may serve to increase the total number of potential class members (and an employer’s total exposure), and likely makes such actions much more attractive to the plaintiffs’ bar.  In addition, the fact that courts have found that individual issues pertaining to employees’ usage of PTO do not predominate over the overarching issue of whether an employer’s PTO policy violates the FMLA also increases the likelihood that more employers may be faced with similar actions in the future.

 

fingerprintBy Gerald L. Maatman, Jr., Thomas E. Ahlering, and Alex W. Karasik 

Seyfarth Synopsis:  In a class action alleging that the criminal background policy of Washington D.C.’s local transit authority had a disparate impact on African-Americans, a federal district court recently certified three classes of African-American employees and applicants despite the employer’s workforce being 75% African-American. The ruling – in Little v. Washington Metropolitan Area Transit Authority, No. 14-1289, 2017 U.S. Dist. LEXIS 48637 (D.D.C. Mar. 31, 2017), is a “must read” for employers that use hiring screens.

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One of the hottest areas in workplace class actions involves criminal background checks used by employers.  On one end of the spectrum, employers want to be sure they are not subjecting their businesses, employees, and clients to any potential criminal conduct by their own workers.  On the other hand, many prospective employees with criminal backgrounds may have been adequately rehabilitated through the criminal justice system and merely need an opportunity to prove they can be counted on as an employee.  In Little v. Washington Metropolitan Area Transit Authority, No. 14-1289, 2017 U.S. Dist. LEXIS 48637 (D.D.C. Mar. 31, 2017), Plaintiffs alleged that a criminal background check policy used by the Washington Metropolitan Area Transit Authority (“WMATA”) to screen candidates and employees was facially neutral, but had a disparate impact on African-Americans.  After the Plaintiffs moved for class certification , Judge Collyer of the U.S. District Court for the District of Columbia granted Plaintiffs’ motion in part and certified three classes pursuant to Rule 23(b)(2) and 23(c)(4), finding that Plaintiffs had satisfied Rule 23’s requirements with respect to liability and the availability of injunctive or other declaratory relief, but that the proposed classes failed to meet the predominance requirement of Rule 23(b)(3) because the case involved “more than just the individual determination of damages.”  Id. at *65. 

The Little ruling puts employers on notice that even if their workforce is predominately made up by one protected class, their criminal background policies can still be challenged as having a disparate impact on that class for purposes of class certification.

Case Background

WMATA, the primary public transit agency for the Washington D.C. metropolitan region, adopted its Policy 7.2.3 to govern how and when individuals with criminal convictions can obtain or continue employment with WMATA and its contractors and sub–contractors.  Id. at *4-5.  Plaintiffs alleged that although the policy was facially neutral, it had a disparate impact on African-Americans.  WMATA argued that the policy was adopted as a business necessity.  Id. at *6.  Further, WMATA  argued that the make-up of its employee and contractor workforce, which included 12,000 individuals, was 75% African-American, thus demonstrating that no discrimination occurred.

Plaintiffs moved for certification of a hybrid Rule 23(b)(2) and Rule 23(b)(3) class, seeking both injunctive and individual monetary damages for the alleged discriminatory policy.  Id. at *16.  Alternatively, if the Court determined monetary damages were not suitable for class-wide determination, Plaintiffs proposed certification under Rule 23(b)(2) for liability and injunctive relief determinations and the application for Rule 23(c)(4) to allow the question of liability to be answered on a class-wide basis (but with individual hearings on damages owed to each specific class member).

The Court’s Decision

The Court held that certification was proper under Rule 23(b)(2) and Rule 23(c)(4) and certified three classes for a determination of liability and injunctive relief under Rule 23(b)(2), but withheld any individual damages determinations.  Id. at *46.  Beginning with its Rule 23(a) analysis, the Court first noted that as WMATA did not dispute Plaintiffs’ assertion that the overall class included over 1,000 individuals, and each sub–class included at least 200, the Court found that Plaintiffs satisfied the numerosity requirement.  Further, the Court determined that Plaintiffs satisfied the commonality requirement since the policy at issue was mandated for non-discretionary application to all hiring decisions regard the class members, regardless of whether the candidates applied for positions with different contractors, sub–contractors, or directly with the WMATA.  Id. at *50.  Regarding typicality, the Court concluded that the class representatives’ claims were typical of the class as they addressed each part of the policy with the exception of one policy appendix, for which Plaintiffs did not present a class representative.  Finally, regarding adequacy, the Court rejected WMATA’s argument that the proposed named Plaintiffs were inadequate because they lacked standing, noting the merits of their allegations were not to be considered as part of the class certification calculus.  Id. at *56-57.

Next, the Court analyzed Plaintiffs’ motion for certification of a hybrid Rule 23(b)(2) and (b)(3) class.  WMATA argued that Plaintiffs failed to identify which parts of Policy 7.2.3 produced a disparate impact, and their failure to identify the particular challenged employment practice prohibited certification.  Noting that each appendix to the policy constituted a separate employment practice, and that Plaintiffs identified three appendices to the policy that allegedly had a disparate impact on African-Americans, the Court found that Plaintiffs satisfied their burden under Rule 23(b)(2).  Id. at *59-60. 

However, the Court held that Plaintiffs failed to meet the predominance requirement under Rule 23(b)(3) and therefore refused to certify the class for monetary damages.  Id. at *65-66.  Specifically, the Court reasoned that the case involved “more than just the individual determination of damages” – namely, the trier of fact must also determine, for each individual class member, whether that class member was not hired or fired due to the Policy 7.2.3., or for some other reason.  Accordingly, the Court granted in part Plaintiffs’ motion for class certification and certified three classes under Rule 23(b)(2) and Rule 23(c)(4) with respect to liability and the availability of injunctive relief.

Implications For Employers

This ruling illustrates that even if a majority of an employer’s workforce is part of a protected class, an employer’s policies potential can still be considered to have a disparate impact on that class for purposes of Rule 23 class certification.  Plaintiffs will likely use this ruling in subsequent motions for class certification in class actions involving the disparate impact of criminal background policies.  As such, employers should be cognizant of the effect of its policies, and continue to ensure they are neutrally applied.

 

#16-3881 2016 Certification Motions For Employment Discrimination, FLSA, And ERISA R5Surveys of corporate counsel confirm that complex workplace litigation – and especially class actions and multi-plaintiff lawsuits – are one of the chief exposures driving corporate legal budgetary expenditures, as well as the type of legal dispute that causes the most concern for their companies.

As profiled in our Workplace Class Action Report for 2017, federal and state courts issued more favorable class certification rulings for the plaintiffs’ bar in 2016 than in past years. The prime concern in that array of risks is now indisputably wage & hour class action and collective action litigation.

In this video, the third in our continuing series outlining the key findings of the Workplace Class Action Report, we examine the story behind the class certification statistics and what that means for employers.

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#16-3836 2017 WCAR Front Cover for Word In the third post of our series on workplace class action issues, this blog posting focuses on the statistical study of class certification rulings throughout the Unites States in 2016. Not unlike real estate, location – in terms of venue, the assigned judge, and applicable circuit case law – is an all-important factor in class certification dynamics.

Introduction

Federal and state courts issued more favorable class certification rulings for the plaintiffs’ bar in 2016 than in past years. Plaintiffs’ lawyers continued to craft refined and more successful class certification theories to counter the more stringent Rule 23 certification requirements established in Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338 (2011), and Comcast Corp. v. Behrend, 133 S. Ct. 1426 (2013). In the areas of employment discrimination, wage & hour, and ERISA class actions, the plaintiffs’ bar scored exceedingly well in securing class certification rulings in 2016. In sum, class actions continue to be certified in significant numbers and certain “magnet” jurisdictions continue to issue decisions that encourage – or, in effect, force – the resolution of large numbers of claims through class action mechanisms.

Anecdotally, surveys of corporate counsel confirm that complex workplace litigation – and especially class action and multi-plaintiff lawsuits – remains one of the chief exposures driving corporate legal budgetary expenditures, as well as the type of legal dispute that causes the most concern for their companies.

The prime concern in that array of risks is now indisputably wage & hour litigation.

Overall Certification Statistics

A circuit-by-circuit analysis of the 244 class certification decisions in all varieties of workplace class action litigation is detailed in the following map.

circuit courts graphic

Wage & Hour Certification Trends

While plaintiffs continued to achieve initial conditional certification of wage & hour collective actions in 2016, employers also secured significant victories in defeating conditional certification motions and obtaining decertification of § 216(b) collective actions.  The percentage of successful motions for decertification brought by employers rose by nearly 10% in 2016.

Most significantly, for the first time in over a decade, wage & hour lawsuit filings in federal courts decreased.

An increase in FLSA filings over the past several years, however, caused the issuance of more FLSA certification rulings than in any other substantive area of complex employment litigation, i.e., 224 certification rulings in 2016, as compared to the 175 certification rulings in 2015.

The analysis of these rulings shows that more cases are brought against employers in more “plaintiff-friendly” jurisdictions such as the judicial districts within the Second and Ninth Circuits. This trend is shown in the following map:

flsa

The map of FLSA certification rulings is telling.

First, it substantiates that the district courts within the Ninth Circuit and the Second Circuit are the epicenters of wage & hour class actions and collective actions.

More cases were prosecuted and conditionally certified – 33 certification orders in the Ninth Circuit and 29 certification orders in the Second Circuit – in the district courts in those circuits than in any other areas of the country. The district courts in the Fifth, Eleventh, and Sixth Circuits were not far behind, with 22, 12, and 11 certification orders respectively in those jurisdictions.

Second, as the burdens of proof reflect under 29 U.S.C. § 216(b), plaintiffs won the overwhelming majority of “first stage” conditional certification motions (147 of 195 rulings, or approximately 76%); in terms of “second stage” decertification motions, plaintiffs also prevailed in a slight majority of those cases (16 of 29 rulings, or approximately 55% of the time).

The “first stage” conditional certification statistics for 2016 are aligned to the numbers in 2015, when plaintiffs won 75% of “first stage” conditional certification motions. However, employers fared much better in 2016 on “second stage” decertification motions. Employers won decertification at a rate of 45%, which was up from 36% in 2015.

The following chart illustrates this trend for 2016:

 FLSA certification motionsThird, this reflects that there has been an on-going migration of skilled plaintiffs’ class action lawyers into the wage & hour litigation space. Securing initial “first stage” conditional certification – and foisting settlement pressure on an employer – can be done quickly (almost right after the case is filed), with a minimal monetary investment in the case (e.g., no expert is needed, unlike the situation when certification is sought in an employment discrimination class action or ERISA class action), and without having to conduct significant discovery (per the case law that has developed under 29 U.S.C. § 216(b)).

As a result, to the extent litigation of class actions and collective actions by plaintiffs’ lawyers is viewed as an investment, prosecution of wage & hour lawsuits is a relatively low cost investment, without significant barriers to entry, and with the prospect of immediate returns as compared to other types of workplace class action litigation. Finally, as success in litigation often begets copy-cat filings, the increase in top wage & hour settlements in 2016 to $695.5 million as compared to $463.6 million in 2015 is likely to prompt more litigation too.

Employment Discrimination & ERISA Certification Trends

At the same time, the rulings in Wal-Mart and Comcast also fueled more critical thinking and crafting of case theories in employment discrimination and ERISA class action filings in 2016.  The Supreme Court’s two Rule 23 decisions have had the effect of forcing the plaintiffs’ bar to “re-boot” the architecture of their class action theories. At least one result was the decision this past year in Tyson Foods, in which the Supreme Court accepted plaintiffs’ arguments that, in effect, appeared to soften the requirements previously imposed in Wal-Mart and Comcast for maintaining and proving class claims.

Hence, it is clear that the playbook on Rule 23 strategies is undergoing a continuous process of evolution. Filings of “smaller” employment discrimination class actions have increased due to a strategy whereby state or regional-type classes are asserted rather than nationwide mega-cases that Wal-Mart discouraged. In essence, at least in the employment discrimination area, the plaintiffs’ litigation playbook is more akin to a strategy of “aim small, miss small.”

In turn, employment-related class certification motions outside of the wage & hour area were a mixed bag or tantamount to a “jump ball” in 2016, as 4 of the 8 were granted and 4 were denied.

The following map demonstrates this array of certification rulings in Title VII and ADEA discrimination cases:

discrimination map

In terms of the ERISA class action litigation scene in 2016, the focus continued to rest on precedents of the U.S. Supreme Court as it shaped and refined the scope of potential liability and defenses in ERISA class actions.

The Wal-Mart decision also has changed the ERISA certification playing field by giving employers more grounds to oppose class certification.

The decisions in 2016 show that class certification motions have the best chance of denial in the context of ERISA welfare plans, and ERISA defined contribution pension plans, where individualized notions of liability and damages are prevalent.

Nonetheless, plaintiffs were more successful than defendants in ERISA class actions, as plaintiffs won 8 of 12 certification rulings in 2016.

A map illustrating these trends is shown below:

ERISA map

Overall Trends

So what conclusions overall can be drawn on class certification trends in 2016?

In the areas of employment discrimination, wage & hour, and ERISA, the plaintiffs’ bar is converting their case filings into certification of classes at a high rate.

Whereas class certification was a coin toss for employment discrimination cases (4 granted and 4 denied in 2016), class certification is relatively easier in ERISA cases (8 granted and 4 denied in 2016), but most prevalent in wage & hour litigation (with 147 conditional certification orders granted and 48 denied, as well as 13 decertification motions granted and 16 denied).

The following bar graph details the win/loss percentages in each of these substantive areas:

– a 50% success rate for certification of employment discrimination class actions (both Title VII and age discrimination cases);

– a 66% success rate for certification of ERISA class actions; and,

– a 76% success rate for conditional certification of wage & hour collective actions.

all cert graphic

Obviously, the most certification activity in workplace class action litigation is in the wage & hour space.

The trend over the last three years reflects a steady success rate of 70% to 76% for the plaintiffs’ bar that is tilted toward plaintiff-friendly “magnet” jurisdictions were the case law favors workers and presents challenges to employers seeking to block certification.

Yet, in 2016, employers increased their odds of decertifying wage & hour cases to 45% as compared to 36% in 2015.

Comparatively, the trend over the past three years for certification orders is illustrated in the following chart:

FLSA 3 year graphic

While each case is different and no two class actions or collective actions are identical, these statistics paint the all-too familiar picture that employers have experienced over the last several years. The new wrinkle to influence these factors in 2017 is the Supreme Court’s recent ruling in Tyson Foods. To the extent it assists plaintiffs in their certification theories, future certification decisions may well trend further upward for workers.

Lessons For Employers From 2016

There are multiple lessons to be drawn from these trends in 2016.

First, while Wal-Mart undoubtedly heightened commonality standards under Rule 23(a)(2) starting in 2011, and Comcast tightened the predominance factors at least for damages under Rule 23(b) in 2013, the plaintiffs’ bar has crafted theories and “work arounds” to maintain or increase their chances of successfully securing certification orders.  In 2016, their certification numbers were up to the highest levels in the last three years.

Second, the defense-minded decisions in Wal-Mart and Comcast have not taken hold in any significant respect in the context of FLSA certification decisions for wage & hour cases. Efforts by the defense bar to use the commonality standards from Wal-Mart and the predominance analysis from Comcast have not impacted the ability of the plaintiffs’ bar to secure certification orders under 29 U.S.C. § 216(b).

Third, there are “cracks in the defense wall” appearing in the case law relative to efforts by employers to create sustained barriers to class certification. The Supreme Court’s decision in 2016 in Tyson Foods is the most prominent example of how “work arounds” are taking place to enable plaintiffs’ lawyers to achieve class certification.

Fourth, while monetary relief in a Rule 23(b)(2) context is severely limited, certification is the “holy grail” in class actions, and certification of any type of class – even a non-monetary injunctive relief class claim – often drives settlement decisions. This is especially true for employment discrimination, ERISA, and wage & hour class actions, as plaintiffs’ lawyers can recover awards of attorneys’ fees under fee-shifting statutes in an employment litigation context. In this respect, the plaintiffs’ bar is nothing if not ingenuous, and targeted, strategic certification theories (e.g., issue certification on a limited discrete aspect of a case) are the new norm in federal and state courthouses.

Fifth, during the certification stage, courts are more willing than ever before to assess facts that overlap both certification and merits issues, and to apply a more practical assessment of the Rule 23(b) requirement of predominance, which focuses on the utility and superiority of a preclusive class-wide trial of common issues. Courts are also more willing to apply a heightened degree of scrutiny to expert opinions offered to establish proof of the Rule 23 requirements.

In sum, notwithstanding these shifts in proof standards and the contours of judicial decision-making, the likelihood of class certification rulings favoring plaintiffs are not only “alive and well” in the post-Wal-Mart and Comcast era, but also thriving.

blue-1326154__340

Seyfarth Synopsis:  After certifying a class of Haitian blueberry pickers who asserted Title VII discrimination claims, Judge James Moody of the U.S. District Court for the Middle District of Florida issued a sua sponte order decertifying the class because it had become apparent to the Court that the class members’ claims for compensatory damages were too individualized for class treatment.

This ruling is a reminder that courts have broad discretion to revisit and change an earlier class certification ruling — even when a party has not requested it. The lesson learned is that it’s not over until it’s over and employers should not be afraid to file renewed motions for decertification, particularly when new evidence of individualized damages surfaces.

Case Background & Decision

In Shelene Jean-Louis, et al. v. Clear Springs Farming, LLC, No. 13-3084 (M.D. Fla. Dec. 6, 2016), plaintiffs were seasonal workers that were hired by defendants to pick blueberries from defendants’ berry fields during harvesting season. After reporting to work and being sent home without any compensation, plaintiffs filed a class action complaint in the U.S. District Court for the Middle District of Florida, alleging that the defendants discriminated against them because of their race, color, and national origin. Id. at 1. Although the Court initially certified plaintiffs’ proposed class and denied the defendants’ motion to decertify the class, the Court later determined  – in a sua sponte order – that plaintiffs’ bid for compensatory damages was inappropriate for class treatment. Id. Accordingly, on December 6, 2012, the Court issued an order to decertify the class. Id.

In its decertification order, the Court explained that Federal Rule of Civil Procedure 23(c)(1)(C) allows the Court to alter or amend a class certification ruling so long as a final judgment has not been entered. Id. at 2. The Court explained that at the time plaintiffs moved to certify the class, only the named plaintiffs’ depositions had been taken and that, on this record, common questions predominated regarding whether discrimination had occurred. Id.

However,“[a]s the case has proceeded,” the Court noted, “it has become clear that Plaintiffs seek” back pay and compensatory damages, including out of pocket costs and emotional distress. Id. at 3. The Court explained that these “individualized damages require an inquiry into the specific circumstances of each individual class member . . . .” Id. The Court reasoned that that this would result in a number of “mini-trials,” and therefore precluded class treatment under Rule 23. Id. As a result, the Court ordered decertification of the class. Id. at 5.

Implication For Employers

In the class action arena, employers should not forget that the potential for individualized issues to predominate when plaintiffs seek compensatory damages is another possible basis to attack the appropriateness of class treatment. An employer should also keep in mind that, short of a Rule 23(f) appeal, employers can renew a motion to decertify a class because Rule 23(1)(C) allows a judge to alter or amend a class certification ruling before final judgment.