By Chris DeGroff and Brian Wong

In the world of EEOC systemic enforcement, court-imposed injunctive relief accompanies nearly every settlement of Title VII claims. The parties memorialize this relief in the form of a consent decree to be approved by the Court and entered as an enforceable order. Though the parties and the public tend to focus primarily on the dollar value of systemic action settlements, employers bound by consent decrees must remember that failure to comply with agreed-upon injunctive mandates could result in significant exposure for the company.

In EEOC v. Supervalu, Inc. and Jewel-Osco, Case No. 1:09-CV-05637 (N.D. Ill. July 15, 2014), the EEOC tried to send this very message to employers.

Background

On September 11, 2009, the EEOC sued Supervalu, Inc. and Jewel-Osco (collectively “Jewel”) in the U.S. District Court for the Northern District of Illinois, alleging Jewel engaged in a pattern or practice of violating Title I of the Americans with Disabilities Act.  Specifically the EEOC alleged Jewel prohibited disabled employees from returning to work after disability leaves unless they could return without accommodation, and that Jewel terminated such employees at the end of their one-year leave period.

On January 14, 2011, the EEOC and Jewel entered into a three-year Consent Decree to resolve the case. Among other provisions, the Consent Decree required Jewel to make monetary payments to eligible claimants, provide training to certain employees who administer disability leaves, and engage a “job description consultant” and “accommodations consultant” to improve job descriptions and assist in identifying possible accommodations for disabled employees.

The case was over. But was it?

The next year, on March 26, 2012, the EEOC filed a motion seeking civil contempt sanctions against Jewel for failing to follow the requirements of the Consent Decree as to three former employees. The EEOC also sought limited discovery on the issue, which the Court initially denied, but thereafter granted following written objections by the parties. After the parties engaged in limited discovery, the Court conducted evidentiary hearings on March 17 and 18 and April 7, 2014, before U.S. Magistrate Judge Michael T. Mason.

The Magistrate Judge’s Recommendation

Judge Mason filed his Report and Recommendation on July 15, 2014, determining that Jewel violated the terms of the Consent Decree by failing to accommodate and ultimately terminating three disabled employees.  According to the Court, Jewel failed to follow its own interactive process guidelines and declined to consider a list of possible accommodations generated by the accommodations consultant the company itself had appointed per the Consent Decree.  According to Magistrate Judge Mason, “[q]uite simply, the evidence [was] overwhelming that the company did not do what it was supposed to do under the Decree.” Id. at 46.

After determining clear and convincing evidence showed Jewel violated the Consent Decree, the Court recommended: (i) a finding of contempt on the part of Jewel; (ii) compensatory sanctions of over $82,000 in back pay for the three aggrieved individuals; (iii) a one year extension of the term of the Consent Decree; (iv) retention of a company-paid “special master” to review prospective accommodation decisions made by Jewel in the future; and (v) company payment of reasonable fees and costs incurred by the EEOC in pursuing its contempt motion.

But the saga continues.  Jewel has until July 29, 2014 to file objections to Judge Mason’s Report and Recommendations.  So blog readers, please stay tuned.

Implications For Employers

Regardless of the outcome of the ongoing briefing, this action brought by the EEOC serves as a cautionary tale for any employer living under the terms of an EEOC consent decree. Companies bound by consent decrees must remain vigilant, as the EEOC frequently looks for opportunities to retake the spotlight by making allegations about supposed compliance issues. As EEOC Chicago Regional Attorney John Hendrickson has warned, “Consent decrees have teeth.” The attraction of these compliance actions for the EEOC is clear:  tag-along actions like those discussed here have all of the publicity elements of an actual lawsuit, while expending minimal governmental resources. Because consent decrees often contain exhaustive injunctive mandates, robust documentation of those efforts can be a critical safeguard against aggressive EEOC allegations of non-compliance.

Readers can also find this post on our EEOC Countdown blog here.

 

By Gerald L. Maatman, Jr., Jennifer A. Riley, and Rebecca S. Bjork 

We have been following developments in an important case regarding judicial review of the EEOC’s statutory obligations to try and resolve discrimination complaints in conciliation before filing suit. Today, the Supreme Court decided to take up consideration of this issue, granting certiorari in Mach Mining, LLC v. EEOC (No. 13-1019). As our previous coverage of this case demonstrates, the outcome could be a game changer in EEOC litigation. The Seventh Circuit had ruled in December 2013 that an alleged failure to conciliate is not an affirmative defense to the merits of an employment discrimination suit brought by the Commission. The Seventh Circuit ruled it will not scrutinize the EEOC’s pre-suit obligations, so long as the EEOC’s complaint pleads it has complied with all procedures required under Title VII, and the relevant documents are facially sufficient. Mach Mining sought Supreme Court review due to conflicting rulings amongst the circuit courts about the courts’ authority and standards for reviewing the EEOC’s pre-suit conduct, and the EEOC did not oppose the petition for certiorari.

The case has significant implications for employers who are dealing with the EEOC. If the Supreme Court sides with the Seventh Circuit, employers will lose a powerful defense against the EEOC’s aggressive litigation tactics. We will continue to follow developments as the parties and amicus groups file their briefs, and keep our readers informed.

 

By Gerald L. Maatman, Jr., and Alexis P. Robertson

On June 20, 2014, the U.S. Court of Appeals for the Eighth Circuit reversed a district court’s dismissal of a request by the NFL Players’ Association and several NFL players (collectively, the “Association”) to set aside and reopen an earlier Stipulation and Settlement Agreement with the National Football League (“NFL”). The decision – Reggie White v. NFL Players Association, No. 13-1251 (8th Cir. June 21, 2014), illustrates that settlements and stipulations of dismissal in a class action context may be vulnerable to later attack under Rule 60 of the Federal Rules of Civil Procedure.

Background

In 1992, Reggie White and four other players sued the NFL on behalf of all other NFL players. They asserted that the NFL’s free agency system, college draft system, practice of using standard-form contracts, and several other NFL rules violated antitrust laws. Subsequently, the district court certified a class of current and former NFL players. While this lawsuit was pending, the NFL and the players began to negotiate a deal that they hoped would end the labor issues that had plagued their relationship. On February 26, 1993, these negotiations culminated in the signing of  the Stipulation and Settlement Agreement (“SSA”). Although styled as a settlement, it functionally operated as a collective bargaining agreement. The SSA awarded monetary relief to each class member to compensate them for the NFL’s alleged antitrust violations. The SSA also set forth rules regarding numerous labor-related issues.

Although the SSA was set to expire in 1996, the NFL and players agree to extend it four times – in 1996, 2000, 2002, and 2006.  In 2008, the NFL declined to extend the SSA.  The final year of the SSA became 2010.  For this final year, there was no salary cap.  The players expected the absence of a cap to yield a significant increase in player salaries.  When it did not, the players suspected that the NFL teams were colluding to avoid bidding wars over free agents.  As a result, players filed a complaint alleging that the NFL was colluding to suppress competition for free agents during the 2010 season.

In August 2011, the NFL and the Association agreed to terms on a new collection bargaining agreement. As part of this agreement, the two sides settled the various lawsuits between them. The NFL and Association settled the lawsuit over the alleged secret salary cap by signing a Dismissal under Federal Rule of Civil Procedure 41(a)(1)(A)(ii). In the Dismissal the Association agreed to dismiss with prejudice “all claims, known and unknown, whether pending or not, regarding the Stipulation and Settlement Agreement . . . including but not limited to claims asserting . . . collusion with respect to the 2010 League Year.”

After the dismissal was signed, several NFL owners made public statements about the NFL’s alleged collusion in 2010. The player’s association interpreted these statements as admissions that the NFL had colluded during the 2010 season to institute a secrete salary cap in violation of the SSA. On May 2012, the player’s association petitioned the district court to reopen and enforce the SSA so that it could pursue its collusion claim against the NFL with the new evidence.

When the NFL asserted that the Association had settled this claim in the Dismissal, the Association countered that the Dismissal was invalid because the district court had never approved the class action settlement as required by Rule  23(a).  After the district court denied the Association’s petition, the Association moved under Rule 60(b) to set aside the Dismissal on the ground that the NFL had procured the Dismissal by fraud, misrepresentation, or misconduct. The district court denied the motion.

The Eighth Circuit Opinion

On appeal, the Eight Circuit rejected Plaintiffs’ argument that the settlement was subject to Rule 23. The Eighth Circuit held that the stipulation to class certification from the 1993 SSA was unrelated to the allegations of alleged collusion. The two cases were linked peripherally by the SSA, but that was where the connection ended.

The Eighth Circuit reasoned that the SSA was not a true class settlement; instead, it was a “comprehensive collective bargaining agreement that set[] the terms of employment between the League and its players.” Id. at 11. Thus, The SSA was a “normal contract,” not a class settlement. Id. at 12. This was exemplified by the fact that, over the life of the SSA, neither party ever invoked Rule 23 for the numerous complaints that were filed for its alleged violation. The only time the parties did invoke Rule 23 was when they agreed to extend the SSA itself, and even then the parties did not actually follow Rule 23 because they did not provide notice to the same class members, but an entirely different group of players.

Next, the Eighth Circuit addressed whether, even though the Dismissal was valid, the district court erred in prohibiting the player’s association from seeking relief from the Dismissal under Rule 60(b). The Eighth Circuit found that a stipulated dismissal constituted a “judgment” under Rule 60(b). It reasoned that “[i]n nearly all relevant respects, an accepted offer of judgment [under Rule 68] is identical to a stipulated dismissal under Rule 41(a)(1)(A)(ii).” Id. at 16. Despite the fact that an offer of judgment shifts some of the potential costs of litigation to the plaintiff, the Eighth Circuit found that the “the two means of settlement are functionally equivalent.” Id. at 17. Therefore, it ruled that the Association could seek Rule 60(b) relief from the Dismissal. Id. at 18.

Implications For Employers

Although this is not an employment-related case, it has important implications for employers regarding the effect of a settlement and stipulated dismissal. This case illustrates that a stipulated dismissal may now be considered a “judgment” and therefore can potentially be revisited by a motion made pursuant to Rule 60(b) of the Federal Rules of Civil Procedure. The burden that a plaintiff must meet in order to prove that such a stipulation was fraudulent, remains high. But, the fact that a plaintiff may now more easily seek to attack a settlement and dismissal after it has been finalized makes this case significant.

 

By Laura J. Maechtlen and Brian Wong

The U.S. District Court for the Northern District of California recently published guidance for submission of class action settlements for preliminary and final approval. The Court’s guidance, available here, is a helpful chart for employers currently navigating the rocky shoals of class action settlement.

The guidance includes detailed suggestions as to what information the parties should provide in motions for preliminary and final approval, as well as various procedures the court suggests should be best, if not standard, practice moving forward. For example, the guidance suggests that parties secure claims administrators prior to filing for preliminary approval, and provide class notice via website and supplemental email where “feasible.” These practices may be common, but certainly are not universal at present.

Employers facing class actions should be sure to add the Northern District of California’s guidance on class settlement to their litigation tool kits. As the Court is quick to remind, compliant parties will benefit from minimized risk of “unnecessary delay, or even failure, of approval” of their class settlements.

By Gerald L. Maatman, Jr., Jennifer Riley, and Alexis Robertson

On June 2, 2014, the U.S. Court of Appeal for the Seventh Circuit overturned approval of a class action settlement that it described as “inequitable” and “even scandalous.” The decision, Eubank v. Pella, Nos. 13-2091, 13-2133, 13-2136, 13-2162 & 13-2202 (7th Cir. June 2, 2014), is a laundry list of what not to do when settling class actions and serves as a good reminder that a settlement will not necessarily pass scrutiny merely because the parties agree to the terms. Although it arose outside of the employment context, this case provides a road map of factors that employers facing class actions should keep in mind when approaching the negotiating table.

Background

In 2006, Pella, a leading manufacturer of windows, was sued on the basis that its “ProLine Series” of casement windows allowed water to enter and cause damage to the window frame and the house itself. It was alleged that Pella’s sale of the defective windows violated product-liability and consumer-protection laws of a number of states in which the windows were sold.

The district court certified two separate classes, including one for customers who had already replaced or repaired their defective windows, the other for those who had not. The first class sought damages and was limited to customers in six states, with a separate sub-class for each state. The latter class sought only declaratory relief and was nationwide in scope. The Seventh Circuit, over Pella’s objection, upheld the orders of class certification in Pella Corp. v. Saltzman, 606 F.3d 391 (7th Cir. 2010).  Class counsel subsequently negotiated a settlement with Pella in fall of 2011.

Initially the case had only one named plaintiff, a dentist named Leonard E. Saltzman. His son-in-law,  Paul M. Weiss, was lead counsel for the class. Weiss’ firm was also lead class counsel. Mr. Weiss’ wife – Saltzman’s daughter – was also a lawyer, and a partner in her husband’s firm. Both Mr. and Mrs. Weiss were defendants in a lawsuit charging them with misappropriation of the assets of their  firm. Further, Mr. Weiss was the subject of an additional lawsuit that resulted in a disciplinary committee recommendation that he be suspended from practicing law for 30 months.

Early in the litigation, four class members were added as plaintiffs, in addition to Saltzman. When the settlement was presented to the district court for preliminary approval, the four class members who had also been named as plaintiffs opposed it.   These four members were subsequently removed and replaced with members who supported Saltzman.

The final settlement directed Pella to pay $11 million in attorney’s fees to class counsel. The basis for this figure was plaintiffs’ claim that the settlement was worth $90 million to the class. However, the settlement did not specify an amount of money to be received by the class members, as distinct from class counsel. Instead, it specified a procedure by which class members could claim damages.

The Seventh Circuit Opinion

Judge Richard Posner, issuing the opinion for the Seventh Circuit, found no reason to affirm the class settlement and ruled that the settlement contained “every danger sign in a class action settlement” that the Seventh Circuit had previously “warned district judges to be on the lookout for. . . .” Id. at 21. In stern language, he asserted that the objectors in this litigation were right because they “smell[ed] a rat…” Id. at 5.

The Seventh Circuit’s opinion is essentially a recitation of what went wrong. The Seventh Circuit identified that lack of an adversarial presentation as a primary reason why a district court would approve such an unfair settlement: “This is a case in which he lawyers support the settlement to get fees; the defendants support it to evade liability; the court can’t vindicate the class’s rights because the friendly presentation means that it lacks essential information.” Id. at 22.

The Seventh Circuit also ticked off the wide array of “danger sign(s)” that, nevertheless, should have signaled to the district court that the settlement was insufficient. Id. at 21. The key read flags were numerous: (i) the settlement agreement ignored that two classes had been certified and purported to bind a single nationwide class consisting of all owners of Pella ProLine windows containing the defect, whether or not the owners have already replaced the windows; (ii) the family relationship between lead class counsel and the named representative raised significant concerns; (iii) the lawsuits, disciplinary hearings, and ethical troubles that embroiled class counsel, and the likely financial hardship that resulted and further incentivized plaintiff’s counsel to reach a settlement, signaled further problems; (iv) the procedural maneuver the resulted in the replacement of all class representatives that disagreed with the settlement further exacerbated these problems; (v) the fact that the settlement did not specify how much was to be received by class and instead replaced it with a procedure by which class members had to execute complex and arcane forms in order to receive payment simply would not be fair; (vi) Plaintiff’s overall estimate of the value of the settlement was not credible, as Plaintiff,  and subsequently the district court judge, estimated that it was worth $90 million, clearly in an effort to make their $11 million payout in attorney’s fees appear reasonable (in doing the math, it became clear that it was valued at significantly less than that, as Judge Posner found that the class could not reasonably expect to receive more than $8.5 million from the settlement); and (vii) the settlement agreement gave lead class counsel “sole discretion” to allocate the award of attorneys’ fees to which the parties had agreed among the class counsel. Id.at 7.

Based on these factors, the Seventh Circuit rejected Plaintiffs’ argument that the settlement must have been fair because the notice to class resulted in very few objections to the settlement. The Seventh Circuit recognized that not only was the notice designed as to avoid objection, but also that “[i]t was not neutral and it did not provide a truthful basis for deciding whether to opt out.” Id. at 20. Additionally, opting-out of a class is extremely rare. An individual who opts out is “unlikely to hire a lawyer and litigate over a window.” Id. at 21. Overall, the Seventh Circuit found that “[t]he settlement flunked the fairness standard by the one-sideness of its terms and the fatal conflicts of interest on the part of Saltzman and Weiss.” Id. at 22.

Implications For Employers

Employers can learn from Eubank v. Saltzman, even though it is not an employment-related class action. In settling a class action, it is important to recognize that frequently at the settlement phase, the interests of defendants and class counsel are aligned. Because of this – especially in light of this ruling – just because the parties agree, that does not mean that the settlement is proper or will be affirmed by the district court (or on appeal).

By Laura J. Maechtlen and Brian Wong

On May 20, 2014, the California Department of Fair Employment and Housing (“DFEH”) announced the impending settlement of its high-profile systemic action against the Law School Admission Council, Inc. (“LSAC”). Our ongoing coverage of this case, DFEH v. Law School Admission Council, Inc., No. 12-CV-1830, can be found here and here. The proposed settlement will include payment by LSAC of upwards of $8 million in penalties, damages, costs and fees, as well as an exhaustive slate of injunctive relief.

This multimillion dollar settlement is a big win for the DFEH, and a clear warning to employers that state agency systemic enforcement is here to stay. The agency’s press release can be found here, and the U.S. Department of Justice’s press release is available here.

Background

The DFEH’s enforcement suit sought damages and injunctive relief for alleged failure by LSAC to provide disability-related accommodations to individuals taking its Law School Admission Test (“LSAT”). The DFEH brought its action both on behalf of seventeen named individuals, and also on behalf of a “group or class” consisting of all disabled individuals in California who have requested a reasonable accommodation for the LSAT since January 2009. During litigation, the U.S. Department of Justice and a number of individuals joined the DFEH as plaintiff-interveners.

The DFEH alleged that LSAC violates titles III and V of the Americans with Disabilities Act (“ADA”), 42 U.S.C. §§ 12181 et seq. and 12203—incorporated by reference in Unruh Civil Rights Act, Cal. Civ. Code § 51(f)—by (i) failing to provide required testing accommodations to individuals with disabilities; (ii) subjecting applicants requiring accommodations to excessive documentation demands; and (iii) annotating or “flagging” such individuals’ test results prior to sending their scores to law schools.

Over the course of the lawsuit, the DFEH flexed its newfound enforcement powers (see here for our prior discussion of the agency’s novel authority) in an attempt to lay further groundwork for future systemic actions. On April 22, 2013, Judge Edward Chen of the U.S. District Court for the Northern District of California held that DFEH collective enforcement actions are cut from the same cloth as EEOC enforcement suits, and therefore need not satisfy federal Rule 23 class certification requirements (see here for our analysis of Judge Chen’s order). The DFEH has already shown its eagerness to rely on this ruling as it looks to pursue future collective actions against large employers in California.

Terms Of Settlement

The parties in DFEH v. LSAC, Inc. memorialized the terms of their proposed settlement in a lengthy 61-page consent decree filed with the district court on May 20. Pending court approval of the consent decree, LSAC will pay over $8 million for costs and fees, civil penalties, damages payments to named claimants and plaintiff-interveners, and creation of a large monetary fund to compensate thousands of aggrieved claimants.

Major elements of the consent decree’s exhaustive slate of injunctive relief include: (i) creation of new policies and practices for processing accommodation requests; (ii) engagement of expert consultants for evaluation of testing accommodation requests; (iii) enhanced tracking of accommodation-related data; (iv) ADA notice posting, monitoring and reporting; and (v) alteration of LSAC’s score annotation practices.

Implications For Employers

Settlement of this high-profile case heralds a new reality in systemic enforcement litigation – the DFEH now has a model for engaging employers in “bet the company” systemic lawsuits on behalf of large swaths of employer workforces to which Rule 23 class certification requirements may not apply.

The question on employers’ minds nationwide now should be: “Will agencies in other states also join in the EEOC’s unwavering focus on systemic litigation?” Provided they have the statutory authority to so act, this settlement may well entice them. The best defense? As we discussed recently in our CalPecs blog, employers should ensure their policies and procedures strictly comply with state and federal law, and that managers receive the training they need to know, observe, and enforce these policies and procedures.

Please visit our sister blog’s recent analysis of this case here for additional thoughts on the impact of DFEH v. LSAC, Inc. from an ADA Title III standpoint.

By Reema Kapur and Alexis P. Robertson

On May 6, 2014, the U.S. Court of Appeals for the Tenth Circuit in Miller v. Basic Research, LLC, No.13-4048 (10th Cir. May 6, 2014), dismissed defendant’s appeal of a district court’s order enforcing a class settlement agreement, over defendants objection. The Tenth Circuit held that the case was an impermissible interlocutory appeal and that it therefore had no jurisdiction.

The ruling is important for employers in the process of settling workplace class actions. It illustrates that once material terms of settlement have been agreed upon, later attempts to abandon the agreement may be unsuccessful and notice may be sent to class, over defendant’s objection, before appellate review.

Background

Defendant, Basic Research, a manufacturer of a weight-loss dietary supplement called Akävar 20/50, marketed its drug as follows: “Eat all you want and still lose weight.” A class of purchasers filed suit, alleging that they relied on the marketing pitch, and that the slogan constituted false and misleading advertising.

The district court certified a class “limited to those persons who purchased Akavar in reliance on the slogan ‘Eat all you want and still lose weight.’” After class certification, the parties entered into mediation. Following negotiations, defendants’ counsel drafted and all parties signed a handwritten “Proposed Terms” document outlining the terms of an expected class settlement. The parties then filed a notice of settlement with the district court.  The notice stated that the mediation was “successful” and that the parties were preparing a formal settlement agreement.

At some point, defendants stopped participating in the drafting process. Plaintiffs subsequently moved to enforce what they argued was a binding contract. The district court granted plaintiffs’ motion. It concluded that the parties had agreed to the material terms of a settlement and that any ongoing disagreements concerned only “linguistic changes.” Miller v. Basic Research, LLC, 2013 WL 1194721, at *1 (D. Utah, Mar. 22, 2013). Defendants appealed, arguing that, amongst other things, their interests would be harmed by sending out notice of settlement prior to appellate review.

The Tenth Circuit Opinion

The Tenth Circuit never made it to the merits of the appeal. The Tenth Circuit focused its opinion on whether it had jurisdiction to hear the matter and concluded that it did not. The Tenth Circuit reasoned that because the district court had not yet reached its final decision, which would entail approving the proposed settlement, and because the defendants were unable to prove an exception to the final judgment rule, it lacked appellate jurisdiction.

The Tenth Circuit rejected defendant’s argument that granting enforcement of the settlement was the functional equivalent of issuing an injunction under 28 U.S.C. § 1292(a)(1) (providing appellate jurisdiction to review district court orders “granting, continuing, modifying, refusing or dissolving injunctions.”) Further, the Tenth Circuit did not find that it had appellate jurisdiction under the collateral order doctrine. The Tenth Circuit was not persuaded that delaying appellate review imposed serious consequences or that the district court’s decision would evade appellate review. The Tenth Circuit further stressed that the fairness to the plaintiff class would be addressed at the Rule 23 hearing.

Implications for Employers

This case is a cautionary tale for companies involved in class action settlements. A defendant has an interest in settling a class action, but it faces potential problems if it backs out of a “deal” when the parties’ memorandum of understanding is deemed enforceable and its terms disadvantage the defendant. As a matter of contract law, if material terms have been agreed upon, complete abandonment of the settlement negotiation by a defendant will not serve to kill the settlement. The agreement, although not final, may be far enough along to be enforced by the district court and such enforcement will not be immediately appealable. In the context of class settlement, this may result in class notice being issued notwithstanding defendants’ objections and prior to any appellate review.

By Gerald L. Maatman Jr. and Howard M. Wexler

On March 18, 2014 the U.S. Department of Justice (“DOJ”) announced that New York City agreed to pay $98 million to settle a workplace class action originally brought by the DOJ in 2007 alleging that certain civil service tests administered by the FDNY were discriminatory against African-American and Hispanic applicants. In addition to this large monetary sum, the settlement also provides for systemic relief meant to transform the way in which the FDNY recruits firefighters going forward.

The settlement is the largest employment discrimination class action settlement for 2014 thus far.

Background Of The Case

As we previously blogged here and here, the United States originally filed this lawsuit against the City in 2007, alleging that the City’s entry-level firefighter exams and applicant ranking had an unlawful disparate impact on African-American and Hispanic applicants. The Vulcan Society and several individuals intervened in the lawsuit alleging similar claims of disparate impact and also alleging disparate treatment on behalf of a putative class of African-American, entry firefighter candidates. The Court agreed with Plaintiffs, finding that the City’s procedures for screening and selecting entry-level firefighters violated Title VII, the Equal Protection Clause, and the Civil Rights Act of 1866, along with New York state and local law. Consequently, the Court issued an order requiring the City to develop a non-discriminatory test for entry-level firefighter applicants. In 2013 the Second Circuit vacated the grant of summary judgment for disparate treatment liability, but upheld the injunctive relief order.

Settlement Terms

As set forth in the DOJ press release, New York City will pay a total of approximately $98 million to resolve allegations that the FDNY engaged in a pattern or practice of employment discrimination against African-American and Hispanic applicants for the entry-level firefighter position by using two discriminatory written tests in 1999 and 2002. The parties have yet to agree on the method in which the settlement fund will be distributed among class members; however, according to the DOJ “the parties have committed to streamline the claims process and to expedite the distribution of monetary relief to eligible claimants.”

In addition to the money that the City has agreed to pay, the Court has already ordered several changes to remedy the city’s discriminatory hiring practices included among them the use of an entry-level firefighter exam jointly developed by the parties as well as the appointment of a court monitor to oversee the FDNY’s hiring reforms.

Implications For Employers

Although it appears that the approval of the consent decree (which is still subject to a fairness hearing) is a formality, anything is possible given the number of twists and turns this case has taken over the years. Either way, cases such as this serve as a reminder that multi-million dollar settlements in class action cases such as this are not unusual and that whether it is the Department of Justice or the EEOC, the government is focused on forcing employers to make systemic changes to the way in which they do business as well as seeking monetary relief for class members.

By Gerald L. Maatman, Jr.

We blogged on the $160 million settlement in McReynolds this past week, and employers and the news media have been talking about its implications ever since.

The case presents multiple take-aways, including the viability of re-booted certification theories pursued by plaintiffs’ class action attorneys in the post-Wal-Mart Stores, Inc. v. Dukes world, as well as the extent to which the massive settlement will fuel the prosecution of more employment discrimination class actions.

Today we provided an overview of those issues via video, and we thought our loyal blog readers would find those thoughts to be of interest – here is the video courtesy of LXBN TV:

By Gerald L. Maatman, Jr. and David Ross

Our Annual Workplace Class Action Report analyzes the top ten settlements each year in various categories of complex workplace litigation, including employment discrimination, wage & hour, ERISA, and governmental enforcement litigation. As analyzed in Chapter 2 of our Annual Reports, employment discrimination settlements have waned since Rule 23 certification standards were heightened with the U.S. Supreme Court’s ruling in 2011 in Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541 (2011).

In 2010, the last year prior to Dukes, the top ten employment discrimination settlement totaled $346 million. Conversely, in 2012, the first year after Dukes, the top ten employment discrimination settlements totaled $45 million. Clearly, employers have been more successful in opposing employment discrimination class actions, and to the extent they settle such litigation, they are doing so for fewer dollars.

As we have blogged about previously here and here, the Seventh Circuit’s decision in McReynolds, et al. v. Merrill Lynch, 672 F.3d 482 (7th Cir. 2012), is a head-scratcher in the post-Dukes world. Many see McReynolds as an aberration, where certification of a narrow “issue” class on liability only under Rule 23 (c)(4) runs contrary to the teachings of Dukes.

In McReynolds, a decision authored by Judge Richard Posner, the Seventh Circuit reversed the district court’s decision to deny certification of a race discrimination class claim challenging the impact of two Merrill Lynch policies — one that allowed brokers to decide to work in “teams” and one that suggested success-based criteria for distribution of departing brokers’ accounts — even though managers had discretion regarding implementation of both policies. In permitting such a class certification theory, the Seventh Circuit drew a fine distinction between the situation that gave rise to the Supreme Court’s decision in Wal-Mart and the one before the Seventh Circuit. According to Judge Posner, the only “company-wide” policies at issue in Wal-Mart forbade discrimination and delegated employment decisions to local managers. In McReynolds, by contrast, Judge Posner reasoned that “company-wide” policies permitted individuals to exercise discretion in a certain way — a way that, according to plaintiffs, caused the alleged disparate impact on African-American employees.

Now, a year later, plaintiffs’ counsel announced yesterday that the litigation had been settled for $160 million. The settlement terms and pleadings are due for presentation and filing in September to the U.S. District Court for the Northern District of Illinois. Once the public record filing takes place, the size of the settlement class and the pay-outs per class member, the attorneys’ fees award, and the agreed upon programmatic relief will become known.

While McReynolds is an aberrational ruling in Rule 23 case law, the settlement shows how Judge Posner’s decision drove the metrics of the settlement. Given the prospect of a trial on the narrow disparate impact liability only issues per the Seventh Circuit’s order, Judge Posner’s ruling shows how certification of any aspect of the litigation – even a narrow issue unrelated to damages – drives litigation and settlement decision-making by litigants.

So where does the $160 million settlement rank? It is right up there and appears to be one of the six largest in recent history (the other “top ten” are set out below for context) and the third largest race discrimination class action settlement.

1. $250 million – Arnett v. California Public Employees’ Retirement System, Case No.: 95-3022 (N.D. Cal. Jan. 29, 2003) (approval given to consent decree in a lawsuit involving charges that the employer discriminated against public safety officers who took disability retirements on the basis of age).

2. $240 million – Kraszewksi v. State Farm, Case No.: 79-CV-1261 (N.D. Cal. Jan. 13, 1988) (approval given to consent decree in a long-running sex discrimination lawsuit involving female employees alleging that the company discriminated against them in recruitment, hiring, job assignment, training and termination).

3. $192.5 million – Abdallah v. The Coca-Cola Co., Case No.: 98-CV-3679 (N.D. Ga. June 7, 2001) (approval given to consent decree involving class action brought on behalf of salaried African-American employees alleging race discrimination consisting of systemic discrimination in promotions, compensation, and performance evaluations).

4. $175 million – Velez, et al. v. Novartis, Case No.: 04-CV-9194 (S.D.N.Y. July 14, 2010) (preliminary approval granted to settlement of a nationwide class action accusing the employer of discriminating against 5,600 current and former female sales representatives in pay and promotions).

5. $172 million – Roberts v. Texaco, Case No.: 94-2015 (S.D.N.Y. July 29, 1997) (approval given to settlement in a lawsuit involving systemic race discrimination lawsuit).

6. $132.5 million – Haynes v. Shoney’s, Inc., Case No.: 89-30093 (N.D. Fla. Jan. 25, 1993) (approval given to consent decree in a race discrimination lawsuit brought in 1989 by a class of African-American employees).

7. $89.5 million – Lane v. Hughes Aircraft Co., Case No. S059064 (Cal. S. Ct. Mar. 6, 2000) (approval granted to settlement of race discrimination class action lawsuit).

8. $81.5 million – Shores v. Publix Super Markets, Inc., Case No.: 95-CV-1162 (M.D. Fla. May 23, 1997) (final approval given to a consent decree in a class action involving sex discrimination claims that the employer had discriminated against female employees in job assignments, promotions, allocation of hours and full-time work, and otherwise limited advancement, pay, and employment opportunities for women at stores in Florida and the Southeast).

9. $80 million – McReynolds, et al. v. Sodexho Marriott Services, Inc., Case No.: 01-CV-510 (D.D.C. Aug. 10, 2005) (settlement of class action filed by African-American employees alleging discriminatory promotion and pay policies and practices).

10. $72.5 million – Beck, et al. v. Boeing Co., Case No.: 00-CV-0301 (W.D. Wash. July 16, 2004) (settlement of Title VII class action alleging gender discrimination in pay, promotions, and other conditions of employment of 29,000 female employees).

Implications For Employers

McReynolds is the largest post-Dukes employment discrimination class action settlement to date.

Plaintiffs are apt to point to it as a reason for employers to pay more to settle class actions, whereas employers will appropriately distinguish the settlement as driven by Judge Posner’s ruling, which is inconsistent with Dukes and the developing case law since the Supreme Court’s decision on Rule 23 standards in 2011.

Stay tuned.