Second-Circuit-Court-of-Appeals-SealBy Gerald L. Maatman Jr. and Howard M. Wexler

On March 4, 2015, the U.S. Court of Appeals for the Second Circuit reversed a District Court’s decision to certify a class action against Nextel Communications, Inc. (“Nextel”) in Johnson, et al v. Nextel Communications, Inc., et. al., 2015 U.S. App. LEXIS 3470 (2d Cir. Mar. 4, 2015), which we previously blogged about here. In Johnson, the District Court certified a class action – pursuant to Rule 23(c)(4) – relative to the claims of 587 employees of Nextel who allege that Nextel, and the former plaintiffs’ law firm representing the employees, engaged in various illegal acts against them by entering into a Dispute Resolution Settlement Agreement (“DSRA”) to resolve their employment discrimination claims. The ruling provides yet another interesting spin on Comcast Corp. v. Behrend, 131 S. Ct. 1426 (2013).

Background To The Case

In or around 2000, a law firm representing 587 employees (current and former) entered into a DRSA with Nextel to resolve various discrimination claims. Id. at 2. As a result of the DSRA, the law firm received $5.5 million in attorneys’ fees as well as an additional $2 million to act as consultants to Nextel on its employment practices. Id. In total, the 587 employees received less than half of the amount that their law firm received as part of the DRSA. Id. As a result, the employees filed two state court actions in Colorado, which resulted in a $1.2 million class-wide settlement against the law firm, with 39 employees opting-out of the settlement. Id.

Plaintiffs in Johnson – the 587 individuals whose claims against Nextel were resolved pursuant to the DRSA – sought to certify a proposed liability class against Nextel only as well as a sub-class made up of the 39 employees who-opted out of the Colorado settlements against their law former law firm. Id. at *3. The District Court granted this motion.

The Second Circuit’s Decision

The Second Circuit reversed the District Court and held that class certification was inappropriate because under Rule 23(b)(3), class-wide issues would not predominate, and individualized issues would “overwhelm” the case. The Second Circuit reasoned that Rule 23(b)(3)’s predominance requirement is more demanding than the Rule 23(a) commonality requirement, and that individual issues must be considered in deciding whether class issues outweigh issues involving individualized proof. The Second Circuit so ruled based on its reading on Comcast Corp.

Against this backdrop, the Second Circuit held that the District Court incorrectly held that New York law should apply in deciding whether the DRSA was enforceable. Id. at 11. Rather, the Second Circuit held that majority of the alleged wrongdoing took place outside of New York, where the individual employees resided, and “where he or she were promised representation.” Id.  As such, the Second Circuit held that “the state with the most significant relationship to plaintiffs’ claims is each individual state in which a class member resides and where he or she was promised representation.” Id.

Once the Second Circuit established that the substantive law of each class member’s state will applied, “the case for finding predominance of common issues and the superiority of trying this case as a class action diminishes to the vanishing point.” Id. at 11. These individualized inquiries associated with looking at the substantive law of each class member’s state “…are not collateral issues that could be determined in individual hearings after common questions are resolved for the class – they go to the heart of defendants’ liability for each class members’ alleged injury” and therefore warranted the denial of class certification. Id. The Second Circuited noted that “the specter of having to apply different substantive laws does not necessarily warrant refusing to certify a class…where as here, the variations in state law present ‘insuperable obstacles’ to determining liability based on common proof, such variations defeat the predominance of common issues and the superiority of trying the case as a class action.” Id. at 13.

Implications For Employers

Workplace class actions are being reshaped before our very eyes, as courts across the country apply new Supreme Court precedent. The application of Comcast to class certification in a variety of contexts is still developing in the law. The decision in Johnson adds to the ever growing post-Comcast appellate court decisions on Rule 23 certification and is a must read for employers caught in the crosshairs of high stakes, “bet the company” class action litigation, whether employment-related or otherwise.

By Gerald L. Maatman, Jr. and Gina R. Merrill

On September 29, 2014, the U.S. Court of Appeals for the Second Circuit affirmed the dismissal of a high-profile lawsuit brought by the EEOC – entitled EEOC v. Port Auth. of N.Y. & N.J., No. 13-2705 (2d Cir. Sept. 29, 2014) – alleging that female attorneys were underpaid as compared to their male counterparts at the Port Authority of New York and New Jersey (“Port Authority”). In dismissing the case, the Second Circuit affirmed the District Court’s determination that the EEOC had failed to adequately plead its Equal Pay Act claims against the Port Authority because it had failed to plead any specific facts regarding what the job duties of the employees were.

The Second Circuit’s ruling is a distinct defeat for the Commission, as equal pay issues are a key agenda item on the EEOC’s enforcement program.


In 2007, the EEOC initiated a three-year investigation into pay practices at the Port Authority which led to the filing of EEOC v. Port Auth. of N.Y. & N.J., No. 10 Civ. 7462 (S.D.N.Y.) in the U.S. District Court for the Southern District of New York; the case was assigned to Judge Buchwald. The crux of the suit was that female attorneys in non-supervisory positions were paid less than similarly situated male attorneys performing the same work in violation of the Equal Pay Act (“EPA”). In support of the EPA claim, the EEOC broadly pled that female attorneys were paid less than male attorneys with the same “job code” and that the disparity could not be explained by factors other than sex. (The suit also initially included an age discrimination claim which was later abandoned.)

The complaint was devoid of substantive allegations regarding the actual job duties of the attorneys, and at an initial conference Judge Buchwald expressed skepticism that the EEOC had sufficiently stated a claim. The EEOC then responded to interrogatories and provided information for 14 claimants and numerous comparators. The EEOC responses stated in conclusory terms that all of the attorney positions required the same skill, effort, and responsibility, but it still failed to provide any information about the specific content of the jobs. When the District Court asked during a pre-motion conference whether the EEOC was proceeding on the theory that “an attorney is an attorney is an attorney,” the EEOC agreed that this was true at the Port Authority. The District Court later granted the Port Authority’s Rule 12(c) motion for judgment on the pleadings, and the EEOC appealed.

The Second Circuit’s Decision

In EEOC v. Port Auth. of N.Y. & N.J., the Second Circuit held that the EEOC had utterly failed to meet the demanding EPA standard that the jobs compared be “substantially equal.” Id. at 18. The Second Circuit explained that the case law requires a plaintiff to establish “that the jobs compared entail common duties or content, and do not simply overlap in titles or classifications,” and it further noted that the EEOC’s own regulations and compliance manual emphasize that the content of the jobs determines whether they are substantially equal for purposes of the Equal Pay Act. Id. at 18-20. The Second Circuit found that the EEOC complaint and interrogatory responses, which were treated as a “functional amendment” to the complaint (id. at 10), failed to plead that the content of the jobs was similar. The Second Circuit commented that the EEOC set forth only “bland abstractions [which were] untethered from allegations regarding Port Authority attorneys’ actual job duties.” Id. at 23 (emphasis in original). The Second Circuit further characterized the EEOC’s contention that “an attorney is an attorney is an attorney” as a “broad generalization” that is not recognized by the EPA. Id.

Implications For Employers

The Second Circuit ruling is powerful precedent for employers defending EPA suits that a generalized comparison of jobs will not carry the day. Plaintiffs – and the EEOC – must plead and prove that the specific content of the jobs is substantially equal through discussion and analysis of particular job duties. The decision should also embolden employers to carefully review complaints, including those filed by the EEOC, and scrutinize whether they meet the Rule 8 pleading standard mandated by Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007).

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

By Gerald L. Maatman, Jr. and Gina R. Merrill

Earlier this week, the U.S. District Court for the Southern District of New York certified a liability class in a Title VII suit brought against the United States Census Bureau. In Houser v. Pritzker, Case No. 10-CV-3105 (S.D.N.Y. July 1, 2014), Magistrate Judge Frank Maas found that five of eight named plaintiffs had standing to bring suit, and further held that the proposed class met the commonality and typicality requirements of Rule 23(a).

The judge declined, however, to certify a damages class. Analyzing the Supreme Court’s decision in Comcast Corp. v. Behrend, 133 S.Ct. 1426 (2013), which significantly raised the bar for predominance under Rule 23(b), Magistrate Judge Maas found that certification of a damages class was inappropriate given the highly individualized nature of each class member’s damages. Rather than reject certification entirely, the Court chose to exercise its discretion under Rule 23(c)(4) to bifurcate the liability and damages phase, and proceed to adjudication of the liability questions.

As such, the decision is Houser is of significant importance to all employers in the workplace class action context.


The United States Census Bureau (“Census Bureau”) conducts a nationwide census every ten years, known as the Decennial Census. The 2010 Decennial Census created 1.3 million temporary employment positions between October 2008 and September 2010, and the Census Bureau received approximately 3.8 million applications for these positions.

In screening job applicants, the Census Bureau required all applicants with a criminal record to provide “official court documentation” of their prior arrests and convictions within thirty days of receipt of a demand letter. Once the documentation was received, staff members would review and determine whether to treat the applicant as available for hire, or to request further information.

In 2010, eight individuals filed a purported class action suit challenging these procedures as non-job related and discriminatory because they negatively impacted the hiring of African-Americans and Latinos for obtaining employment.

The Court’s Decision

Magistrate Judge Maas focused primarily on two issues – subject matter jurisdiction and class certification under Rule 23 – in his ruling.

Subject Matter Jurisdiction  

The Census Bureau moved to dismiss the suit for lack of subject matter jurisdiction pursuant to Rule 12(b)(1). The Court examined whether the named plaintiffs had standing to bring suit and whether a favorable decision could redress their injuries.

First, the Court concluded that five of the eight named plaintiffs individually possessed Article III standing to bring suit because they met the bare minimum qualifications for employment. Even though the Census Bureau established that the candidates would not have been hired due to a variety of factors ‒ geography, test scores and availability, among others ‒ the Court rejected the notion that Title VII plaintiffs must show that they ultimately would have secured employment.  Rather, “the question here is whether the Census Bureau’s allegedly discriminatory practices place any of the named plaintiffs on an unequal footing in terms of their ability to compete for employment.” Id. at 25. In answer to this question, the Court determined that the “five plaintiffs have established that they were eligible to be considered for employment but were denied the opportunity to compete with other applicants.  That showing is sufficient to confer standing under Title VII.” Id.

The Court also held that the requested relief could redress the injuries of the same five plaintiffs. The Court rejected the Census Bureau’s argument that each plaintiff was “precluded from selection for reasons entirely independent of the challenged policies and procedures” and therefore had no injuries that could be redressed by the relief sought. Id. at 28. The Court noted that these arguments were simply “repackaged” arguments relating to standing, and it denied the Census Bureau’s motion to dismiss. Id.

Class Certification

Next, the Court examined certification of the class. The Court found without hesitation that the class met the standard for commonality under the Supreme Court’s decision in Wal-Mart Stores v. Dukes, 131 S.Ct. 2541, 2562 (2011), and commented that Dukes seemed to address the very situation at bar, where there was a “’testing procedure to evaluate [all] applicants for employment’” and ‘”a class action on behalf of every applicant or employee who might have been prejudiced.’” Id. at 35 (citing Dukes). The Court found that the parties had all but agreed that the “central questions in the case have a common, classwide answer; [and] the only point on which the parties disagree is the answers themselves.” Id. at 36.

In examining typicality, the Court noted that the only two Latino class representatives were not among the five plaintiffs with standing, and therefore the Court declined to certify a class including Latino class members. This class definition seems unlikely to hold, however, as the Court noted that Plaintiffs will have an opportunity to identify other Latino representatives, and the Court may in its discretion amend the class definition at that time. Id. at 41.

Finally, the Court examined the predominance requirement of Rule 23(b) and found no bar to certification with respect to injunctive relief. The Court’s analysis of damages sub-classes, however, was quite different. The Court explained that “[t]he Supreme Court recently emphasized the stringency of the predominance requirement in Comcast Corp. v. Behrend” which requires that plaintiffs offer a damages model capable of calculating damages across the class. Id. at 53-54. Given the “highly individualized nature” of analyzing damages as to any individual class member in this case, the Court found that individual questions would predominate and the stringent requirements of Comcast were not met. Id. at 55.

Nevertheless, the Court found that Comcast did not mandate denial of class certification in its entirety. Rule 23(c)(4) allows a court in its discretion to maintain a class action only with respect to particular issues, and Magistrate Judge Mass opined that “nothing in the [Comcast] ruling seems appears to have taken that option off the table in future lawsuits.” Id. at 58. The Court noted that although Comcast did not bifurcate the issues under Rule 23(c)(4), the plaintiffs in that suit did not request that relief.

Implications For Employers

Courts have disagreed as to the effect of Comcast on class certification. Some courts have held that the decision requires a class-wide model for calculating damages in order to certify a class for any purpose, while other courts have bifurcated liability and damages phases and granted certification only with respect to the former. Indeed, district courts in the Second Circuit have reached different conclusions, and the Court of Appeals for the Second Circuit seems poised to decide the issue. Employers should be watching carefully.


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

The end of daylight savings is not the only reason why employers within the Second Circuit need to be paying extra close attention to their clocks. It is not uncommon for an employer faced with a lawsuit alleging unlawful discrimination, harassment, or retaliation to be sued as well under state tort law claims arising out of the same factual circumstances, e.g,. intentional infliction of emotional distress, negligent hiring/retention, assault and battery. The U.S. Court of Appeals for the Second Circuit recently held in Castagna, et al. v. Bill Lucino, Majestic Kitchens, Inc., No. 13-0796 (2d Cir. Mar. 5, 2014), that “as a matter of federal law that the filing of charge of discrimination with the Equal Employment Opportunity Commission (“EEOC”) does not toll the statute of limitations period for state-law tort claims, even for those alleging claims arising out of the same factual circumstances as the discrimination alleged in the EEOC Charge.” Id. at 2. In so holding, the Second Circuit joined the Seventh and Ninth Circuits on this issue.

This ruling is important for employers in single plaintiff as well as workplace class action litigation.


In Castagna, an employee resigned from her receptionist position after she alleged the owner of the company screamed at her and subsequently shoved her computer monitor at her. Id. at 3-4. Approximately three months later the employee brought an EEOC charge alleging discrimination based on her sex, and included as relevant evidence the shoving of the computer monitor. Id. at 4. The employee received a right-to-sue letter from the EEOC on August 14, 2009, and then filed a lawsuit in federal court on November 9, 2009. Id.

In her complaint, the employee alleged discrimination under Title VII as well as claims of intentional infliction of emotional distress, assault, and battery under New York state law. Id. Defendant filed a motion to dismiss her three New York-based tort claims on grounds that they were barred by the applicable one year statute of limitations. Id. In opposition, the employee argued that the one year limitations period was tolled by the filing of her EEOC charge. Id. The District Court rejected this argument and dismissed the claims as time-barred. Id.

The Second Circuit’s Decision

The employee argued that if the statute of limitations period were not tolled pending the filing of an EEOC charge, she would have been forced to file suit in state court to preserve her tort claims, and then bring a federal discrimination claim upon the conclusion of the EEOC’s investigation. Id. at 5. The employee argued that such a scheme does not comport with notions of judicial economy, which mandates the tolling of the relevant limitations period once an EEOC charge is filed. Id. at 6.

The Second Circuit noted that the only two federal courts of appeals to previously address this issue – the Seventh and Ninth Circuits – rejected the argument that the filing of an EEOC charge tolls the limitations period for state law tort claims. Id. In agreeing with the Seventh and Ninth Circuits, the Second Circuit reasoned that Congress did not intend for the EEOC process to “delay independent avenues of redress” and there is “no basis for concluding that Congress intended that a civil rights claimant should be entitled to delay filing any state law tort claims during the EEOC’s consideration of a charge of discrimination. Id. at 9. The Second Circuit therefore upheld the dismissal of the time-barred state law tort claims. Id. at 9-10.

Implications For Employers

Given that the Second, Seventh, and Ninth Circuits have all reached the same conclusion, employers – especially those within the jurisdiction of these three Circuits – have reason to feel confident that courts will not accept arguments by plaintiffs to toll the limitations period of state law claims simply because an individual has filed an EEOC charge.  It is possible that as a result of this decision employees may file lawsuits to preserve their state law based claims during the pendency of the EEOC process. However, one thing for certain is that employers should carefully review all state law causes of action in a discrimination lawsuit filed after the issuance of a right-to-sue letter since it is very possible that the limitations period on some of these state law claims may have already expired and thus moving to dismiss them might make sense depending on the possible damages that are available under such state laws.

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

On February 4, 2014 the U.S. Court of Appeals for the Second Circuit dealt the New York City Board of Education (“BOE”) a resounding defeat when it affirmed a District Court decision that allowed a class action brought by public school teachers regarding a mandatory certification test and rejected several of NYC’s defenses to the allegations of discrimination. The ruling is significant to both private and public employers.

Case Background

In Gulino v. Board of Education, No. 13-1001 (2d Cir. Feb. 4, 2014), a group of teachers brought a class action alleging that the BOE engaged in unlawful discrimination under Title VII by requiring public school teachers to pass certain examinations to obtain/retain a teaching position. Id. at 2. On appeal the BOE asked the Second Circuit to overturn the District Court opinion, which held that: (1) the BOE could be subject to Title VII liability for its use of the at issue required test – the Liberal Arts and Sciences Test, or “LAST” – and that LAST violated Title VII’s disparate impact provisions as it was not properly validated; (2) that Wal-Mart v. Dukes, 131 S.Ct. 2541 (2011), did not compel full decertification of the class; and (3) that the BOE’s defense grounded in the Supreme Court’s decision in Ricci v. DeStefano, 557 U.S. 557 (2009), does not apply to disparate impact claims. Id. at 2-3.

The Second Circuit’s Decision

The Second Circuit affirmed the District Court’s decision in all respects. First, the Second Circuit rejected the BOE’s argument that its use of a facially neutral state licensing requirement – LAST – shielded it from liability under Title VII. Id. at 3. In addition to finding that the BOE forfeited this argument by abandoning it in a previous appeal brought before the Second Circuit, it held that employers cannot “justify [its] policy by reliance on what it contends are the requirements of state law” as “Title VII explicitly relieves employers from any duty to observe a state hiring provision ‘which purport to require or permit’ any discriminatory employment practice.” Id. at 4-5.

With respect to the BOE’s contention that the District Court should have decertified the entire class based Wal-Mart v. Dukes, the Second Circuit deemed this dispute as moot since on August 29, 2013, the District Court granted the BOE the relief it sought – a determination of whether plaintiffs’ claim satisfies the predominance and superiority requirements of Rule 23(b)(3) – which it held it did when a remedy-phase class was certified. Id. at 6.

Finally, the Second Circuit rejected the BOE’s argument based on the “Ricci” defense. Id. In Ricci, the Supreme Court determined that the City of New Haven discriminated against a group of white firefighters when it scrapped the results of a promotional exam that had a disproportionately adverse impact on minorities. In evaluating the City of New Haven’s decision to disregard the test results, the Supreme Court held that in a race-based action, is a permissible defense to a disparate treatment claim under Title VII only if the employer can demonstrate a strong basis in evidence that, had it not taken the action, it would have been liable under a disparate impact claim. The Second Circuit rejected the BOE’s claim that Ricci also provided a defense to employers facing claims of disparate impact. Id.

Implications For Employers

This decision highlights the continued wide-ranging impact (as we recently discussed here and will be covered in our upcoming Annual Workplace Class Action Report Webinar on February 11, 2014, which our readers can register for here) – that Wal-Mart v. Dukes has on virtually all class actions pending in federal and state courts throughout the country. Additionally, the Second Circuit’s holding as to the unavailability of Ricci as a defense to disparate impact claims, although not surprising, is an important reminder for employers as to the reach of this 2009 Supreme Court decision.

By Gerald L. Maatman, Jr. and Gina R. Merrill

Defendants in class action litigation in New York federal courts have historically enjoyed a favorable state law procedural rule in certain suits.  That rule, New York Civil Practice Law and Rules § 901(b) (“Section 901(b)”), prohibits class actions suits for statutory damages.  While plaintiffs may proceed on a class basis by waiving their entitlement to statutory damages in favor of actual damages, Section 901(b) has served as an important device for entities facing purported class action suits, and has allowed many defendants to obtain dismissal at the motion to dismiss phase.

Recent Supreme Court jurisprudence and associated case law has changed the landscape considerably, and this week the Second Circuit confirmed in Bank, et al. v. Independence Energy Group LLC, No. 13-1746 (2d Cir. Dec. 3, 2013), that Federal Rule of Civil Procedure 23 (“Rule 23”), and not Section 901(b), governs complaints brought pursuant to the federal Telephone Consumer Protection Act (“TCPA”).

This is important for employers in two respects. First, class action litigation under the TCPA is ubiquitous. As a result, Rule 23 case law – applicable to workplace class actions – is being shaped by TCPA rulings in no small part. Second, the creation of certain procedural road blocks – or avenues of opportunity – to successful pursuit of class action litigation lends to the ever growing arsenal of defense positions that employers can put to good use in workplace class action litigation (or challenges that they need to account for in shaping their defense strategies).


In March 2012, Todd Bank, a lawyer proceeding pro se, brought a purported class action suit against Independence Energy Group LLC and Independence Energy Alliance LLC, alleging more than 10,000 calls in violation of the TCPA and seeking up to $1,500 in statutory damages for each member of the class. Bank’s complaint was dismissed sua sponte by the District Court. Judge William Kuntz of the U.S. District Court for the Eastern District of New York, relying on previously well-settled law, found that he lacked subject matter jurisdiction due to the Second Circuit’s previous cases holding that Section 901(b) bars TCPA class actions in federal court. See Holster III v. Gatco, Inc., 618 F.3d 214 (2d Cir. 2010); see also Bonime v. Avaya, Inc., 547 F.3d 497 (2d Cir. 2010).

The Second Circuit’s rationale was based on the language of Section 227(b)(3) of the TCPA, which states that private parties “may, if otherwise permitted by the law or rules of court of a State, bring [action] in an appropriate court of that State.” The Second Circuit interpreted this state-centric language – in concert with Section 901(b)’s prohibition on statutory damages – to bar TCPA class actions in federal court. 

In dismissing the Bank complaint, the District Court acknowledged the Supreme Court finding in Mims v. Arrow Financial Services., LLC, 132 S.Ct. 740 (2012), that federal and state courts have concurrent jurisdiction over TCPA suits.  Nevertheless, the District Court held that “the Mims decision did not interpret or consider the effect on federal courts of the limiting statutory language on which the Second Circuit relied,” and its interaction with Section 901(b), in barring TCPA class action suits in federal court.  Judge Kuntz determined that Holster III remained good law “until further notice.”

The Court’s Decision

This week, the Second Circuit provided that notice. In a per curiam opinion, the Second Circuit held that Mims “uprooted” its prior TCPA jurisprudence, and that Rule 23 trumps Section 901(b). The Second Circuit explained that Mims stands for the proposition that the TCPA’s state-centric language was merely “a permissive grant of jurisdiction to state courts” and did not alter the federal courts’ “exercise of the general federal-question jurisdiction they have possessed since 1875.” Applying Mims in a decision earlier this year, the Second Circuit  found that the governing limitations period for TCPA claims is the federal catch-all limitations period and not the applicable state limitations period.  See Giovanello v. ALM Media, LLC, 726 F.3d 107 (2d Cir. 2013). Consistent with these holdings, the Second Circuit pronounced that Rule 23, and not New York’s Section 901(b), controls whether a TCPA suit may proceed as a class action.

Implications for Employers

While not an employment law decision, the Bank decision has important implications for employers. Along with Shady Grove Orthopedic Associates, P.A. v. Allstate Insurance Co., 559 U.S. 393 (2010), the decision reflects the rejection of a long-held theory that the Erie doctrine requires application of state law class action procedures to certain claims even in federal court. In New York, this has historically meant the availability of Section 901(b)’s prohibition against class actions seeking statutory damages, even when plaintiffs filed in federal court. Employers should expect plaintiffs to work around this procedural rule by avoiding New York state courts, and choosing to file their claims in a federal forum.

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

There are stunners and there are non-stunners. This is a stunner…

In one of the most highly controversial class actions currently working its way through the federal court system, the U.S. Court of Appeals for the Second Circuit issued a pair of decisions (here and here) on November 13, 2013, rejecting what it termed an “unprecedented  motion” filed U.S. District Court Judge Shira A. Scheindlin – the federal judge who had been handling the trial court proceedings in the class action in the U.S. District Court for the Southern District of New York – to appear on her own behalf in order to seek reconsideration of the Second Circuit’s decision to reassign the case of Floyd v. City of New York – a class action challenging the NYPD’s “stop and frisk” policies – to a different judge given the appearance of partiality.

Though Floyd is a civil rights and not a workplace class action, the Second Circuit’s rulings underscore how class action litigation is not for the faint of heart.


Following a nine-week trial, Judge Scheindlin found that the City of New York (“the City”)  violated the Fourth and Fourteenth Amendments in connection with its “stop-and-frisk” policy in that it unlawfully targeted racially defined groups. Id. at 3. Pending an appeal the City moved to stay Judge Scheindlin’s ruling and, after extended oral argument, the Second Circuit granted the motion to stay the case during the appeal and also decided to reassign the case to a different district court judge “based on the record of the proceedings in the District Court and Judge Scheindlin’s participation in media interviews.” Id.

On November 8, 2013 Judge Scheindlin, through counsel she hired herself, filed a motion seeking permission for counsel to appear on her behalf and to argue against the Second Circuit’s decision to reassign the case. Id. at 3-4. If that has ever happened before, we are unaware of any federal judge doing so.

The Court’s Decision

In a strongly worded decision the Second Circuit dismissed Judge Scheindlin’s request, finding that no “procedural basis” exists that allows her to intervene and challenge the decision to reassign the Floyd case. Id. at 4. The Second Circuit held that there is “no precedent suggesting a district court judge has standing before an appellate court to protest reassignment of a case.” Id. at 6. As a district judge has “no legal interest in a case or its outcome” the Second Circuit held that Judge Scheindlin has not suffered any “legal injury by reassignment” that would entitle her to intervene. Id. at 7. Finally, while the Second Circuit was clear that it had not made a determination that Judge Scheindlin violated the Code of Conduct for United States Judges, it nonetheless held that based on her prior conduct “the appearance of her impartiality might be reasonably questioned” which is a strong enough reason to reassign the case to a different judge. Id. at 6-7. 

In an 87-page companion decision the Second Circuit explained in painstaking detail why its decision to reassign the case from Judge Scheindlin was proper given the appearance of impartiality.

Implications For Employers

The twists and turns in this hotly contested civil rights class action continue as it is now not only plaintiffs versus the City, but also district court judge v. appellate court judges. Although it does not specifically pertain to employment law, the lessons and procedural mechanisms in play in this case are important for all class action practitioners to follow. Stay tuned!

supreme-court-seal.pngBy  Gerald L. Maatman, Jr. and Jennifer A. Riley

This morning the U.S. Supreme Court issued its long-awaited decision in American Express Co. v. Italian Colors Restaurant, No. 12-133, 570 U.S. ___ (2013). The Supreme Court reversed the Second Circuit’s prior decision and held that merchants must arbitrate their antitrust claims on an individual, bilateral basis, even though the cost of pursing those claims would exceed their potential recovery. 

In doing so, the Supreme Court upheld the general validity of arbitration agreements containing class action waivers and reaffirmed the notion that the Federal Rules of Civil Procedure do not establish any entitlement to class proceedings. 

Factual Background

Plaintiffs, merchants who accept American Express cards, filed a class action suit against Amex alleging that Amex used its monopoly power in the market for charge cards to force them to accept credit cards at rates approximately 30% higher than the fees of its competitors. Id. at 1-2. 

Plaintiffs’ agreement with Amex contained a clause that required all disputes between the parties to be resolved by arbitration. The agreement provided that “there shall be no right or authority for any Claims to be arbitrated on a class basis.” Id. at 1.

Amex moved to compel individual arbitration under the Federal Arbitration Act (“FAA”). In opposition to the motion, Plaintiffs submitted a declaration from an economist stating that the cost of an expert analysis necessary to prove the antitrust claims would be “at least several hundred thousand dollars,” while the maximum recovery for an individual plaintiff would be $12,850, or $38,549 when trebled. Id. at 2. 

The district court granted the motion and dismissed the suit. The Second Circuit reversed, holding that, because Plaintiffs showed that they would incur prohibitive costs if compelled to arbitrate on a bilateral basis, the class action waiver was unenforceable and arbitration could not proceed. Id.

The Supreme Court initially vacated the judgment and remanded for further consideration in light of its decision in Stolt-Nielsen S.A. v. AnimalFeeds Int’l Corp., 559 U.S. 662 (2010), but on remand, the Second Circuit stood by its reversal.  Id. at 3. Our prior posts on those rulings are here and here.

The Supreme Court granted certiorari for a second time to consider whether the FAA permits courts to invalidate arbitration agreements that do not permit class arbitration of federal claims. Id.

The Supreme Court’s Opinion

In an opinion authored by Justice Scalia, the Supreme Court upheld the validity of Amex’s class action waiver and reversed the Second Circuit by a 5-3 decision. 

At the outset, the Supreme Court noted that arbitration is a matter of contract and that courts must “rigorously enforce” arbitration agreements according to their terms, including terms that specify with whom the parties choose to arbitrate their disputes and the rules under which the arbitration will be conducted. Id.

The Supreme Court rejected Plaintiffs’ argument that requiring them to litigate their claims individually – as they contracted to do – would contravene the policies of the antitrust laws, noting that the antitrust laws “do not guarantee an affordable procedural path to the vindication of every claim.” Id. at 4.

The Supreme Court also rejected Plaintiffs’ argument that congressional approval of Rule 23 established an entitlement to class proceedings. The Supreme Court noted that, “it is likely” that such an entitlement would “abridge or modify” a substantive right – something forbidden by the Rules. But, it found no evidence of such an entitlement in any event because the Rules impose “stringent requirements for certification that in practice exclude most claims.” Id. at 5. 

Finally, the Supreme Court addressed the “judge-made” exception to the FAA which allows courts to invalidate agreements that prevent the “effective vindication” of federal statutory rights. The Supreme Court clarified that the exception applies to arbitration agreements that “operat[e] . . . as a prospective waiver of a party’s right to pursue statutory remedies.” Id. at 6. 

That Supreme Court held that, whereas this exception “would certainly cover” a provision forbidding the assertion of certain statutory rights – and perhaps cover unreasonably high filing and administrative fees attached to arbitration – “the fact that it is not worth the expense involved in proving a statutory remedy does not constitute the elimination of the right to pursue that remedy.” Id. at 6-7.

Justice Kagan authored a strenuous dissent noting that, by so ruling, the Supreme Court effectively allowed a monopolist to use its monopoly power to insulate itself from antitrust liability by insisting on a contract that effectively deprived its victims of legal recourse. 

Implications For Employers

The decision in American Express v. Italian Colors seems to pave the way for employers to institute mandatory arbitration programs that require employees to bring claims on an individual basis. This is no small matter for workplace litigation, for the enforceability of class action waivers – and the future of workplace arbitration – is of major significance in controlling risks and costs in the workplace class action context.

The debate over whether this is good or bad for workplace disputes (and civil rights matters and consumer fraud litigation) is likely to continue and find its way into the halls of Congress again in terms of possible legislative responses to class action litigation issues.

It is also expected that class arbitration waivers will continue to face assault from legislative initiatives and from federal agencies such as the National Labor Relations Board (“NLRB”). Following the directive of former NLRB General Counsel Meisburg in a Memorandum issued on June 16, 2010, the NLRB has issued complaints against companies that maintain class actions waivers in pre-dispute arbitration agreements on the theory that such agreements interfere with employees statutory right to engage in concerted activity. Litigation over the NLRB’s position continues in the lower federal courts.

It is also expected that other federal enforcement agencies, such as the EEOC, may consider taking active steps to attack class action waivers relative to employers they deem to be violating federal law (and, of course, such waivers cannot block the EEOC from litigating lawsuits in its name against employers, even if the alleged victims for whom the Commission sues are parties to a workplace arbitration agreement with their employers).

In light of AT&T Mobility v. Concepcion and American Express v. Italian Colors, it behooves employers with pre-dispute arbitration agreements in employment contracts to consider inserting class-action waivers if their agreements do not already contain them. Employers without arbitration programs are likely to consider adopting them as a means to manage the risk of employment discrimination class actions.

nyfd.jpg.w300h356.jpgBy Rebecca Bjork and Gerald L. Maatman, Jr.

Employers who face Title VII discrimination lawsuits in the Second Circuit now have some pretty explicit guidance on how to rebut a plaintiff’s attempt to state a prima facie case of pattern or practice employment discrimination at the summary judgment stage. That blueprint was issued by the Second Circuit yesterday in United States and The Vulcan Society, Inc., et al v. City of New York, et al., No. 11-5113 (2d Cir. May 15, 2013). The de-emphasis on the probative power of statistical evidence in this Title VII pattern or practice case is the most newsworthy thing about it. 

The Second Circuit’s ruling teaches that if plaintiffs say you have operated under a “standard operating procedure” of discrimination against an entire class of people, an employer may respond with whatever evidence you have to show that if you did, you did not intend to do so.  Or, as the majority of this divided panel of the Second Circuit put it in one of the two opinions it issued, which you can read here, “[a]n employer facing that serious accusation [of intentional discrimination] must have a broad opportunity to present in rebuttal any relevant evidence that shows that it lacked such an intent.” United States and The Vulcan Society, Inc., et al v. City of New York, et al., slip op. at 28. 

In vacating a summary judgment ruling against New York City, the Second Circuit ruled that the city was basically entitled to present any kind of proof it wanted in an effort to rebut the prima facie claim of the Vulcan Society, the group of minority firefighter intervenors in this long-running legal battle, that it intentionally sought to not hire black and Hispanic firefighters. The Justice Department’s complaint focused particularly on the disparate impact of written examinations that statistical analyses show favor Caucasian test-takers and did not state a claim for disparate treatment discrimination, which requires proof of intent. Our prior post of the litigation is here.

The district court had granted summary judgment for the intervenors on their disparate treatment claim. The majority of the Second Circuit faulted the district court for requiring that the City present either its own statistical evidence — e.g.,to demonstrate that its hiring patterns should not raise an inference of unlawful discrimination — or take on the plaintiffs’ statistics. 

The Second Circuit clarified that this focus on statistics is not required. An employer can meet its burden under the shifting framework required by Int’l Brotherhood of Teamsters v. United States, 431 U.S. 324, 336 (1977), “by presenting a direct attack on the statistics relied upon to constitute a prima facie case. A defendant might endeavor to show that the plaintiff’s statistics are inaccurate, for example, infected with arithmetic errors, or lacking in statistical significance, for example, based on too small a sample.” Id. at 24-25. But — and this is what the ruling makes clear, and which potentially eases the burden on employers at the summary judgment stage  —  the employer can rebut the prima facie case “by accepting a plaintiff’s statistics and producing non-statistical evidence to show that it lacked such an intent [to discriminate against a class].” Id. at 25. Such evidence might take the form of affirmative action plans, diversity initiatives, attempts to produce an unbiased testing procedure, and the like. Id. at 26-27. There are other reasons to read these lengthy opinions — including the dissenter’s view that the majority misread Teamsters and imposed a less rigorous burden on the defense to challenge the accuracy or significance of a plaintiff’s statistics at the burden-shifting stage of a pattern or practice case. But the bottom line is that the Second Circuit’s decisions give employers more grounds in which to fight disparate pattern or practice claims.

secondcircuit.jpgBy Gerald L. Maatman, Jr., Jennifer A. Riley, and David B. Ross

On March 21, 2013, the Second Circuit issued its long-awaited decision in Parisi v. Goldman, Sachs & Co., No. 11-5229 (2d Cir. Mar. 21, 2013). In a significant ruling for employers, the Second Circuit held that a plaintiff has no substantive right to pursue a pattern or practice claim via a class action and, therefore, must arbitrate her discrimination claims on a bilateral basis in accord with her arbitration agreement. 

We previously have discussed the uncertain fate of arbitration agreements that prohibit class claims in prior posts (read more here, here, and here). Other cases addressing this issue continue to work their way through the Second Circuit and the Supreme Court. 

The outcome of these cases has important implications. If other courts align with Parisi, employers may be able to limit employees’ ability to pursue certain types of high-stakes class or collective actions through well-crafted arbitration agreements. 

Factual Background

Lisa Parisi and two other female employees brought a class action against Goldman Sachs alleging that the company engaged in a pattern and practice of discrimination against female employees with respect to compensation, business allocations, promotions, and other terms and conditions of employment in violation of Title VII. Id. at 2.

Parisi signed an arbitration clause agreeing that “any dispute, controversy or claim” arising out of, based upon, or relating to her employment with Goldman Sachs would be “finally settled by arbitration.” Id. 

In November 2010, Goldman Sachs moved to enforce Parisi’s arbitration agreement and compel bilateral arbitration of her claims. The company relied upon the Supreme Court’s decision in Stolt-Nielsen S.A. v. AnimalFeeds International Corp., 130 S. Ct. 1758 (2010), that a party cannot be compelled to arbitrate on a class basis where the relevant arbitration clause is silent as to class claims. Id. at 3.

The district court denied the motion. It adopted the magistrate’s conclusion that the arbitration agreement’s preclusion of class arbitration made it impossible for Parisi to arbitrate a Title VII pattern or practice claim and, consequently, operated as a waiver of a substantive right. Id. Goldman Sachs appealed.

The Second Circuit’s Opinion

On appeal, Parisi argued that she had a substantive right under Title VII to pursue a pattern or practice claim and, because she could not proceed on a class-wide basis in arbitration, she must be permitted to proceed in court via a class action. The Second Circuit disagreed. 

The Second Circuit acknowledged that, by agreeing to arbitrate a statutory claim, a party does not forgo substantive rights afforded by statute. Id. at 5. However, it found only two case precedents where arbitration prevented plaintiffs from vindicating statutory rights: a complex antitrust case (read more here) and cases where arbitration agreements interfered with recovery of statutorily authorized damages. Id.

The Second Circuit found that Parisi had no “right” to bring a pattern or practice claim under Title VII.  Id. at 6. The term “pattern or practice” simply refers to “a method of proof.” Id. at 7.  Because private plaintiffs do not have the right to bring pattern or practice claims, the Second Circuit reasoned that “there can be no entitlement to the ancillary class action procedural mechanism.” Id. 

Parisi, accordingly, will have to offer to the arbitrators evidence of discriminatory patterns, practices or policies, if any, that she contends support her claim. Id. at 8. 

Implications For Employers

The Second Circuit’s decision is favorable news for employers. The impact of the decision, however, remains unclear, as additional cases work their way through the Second Circuit and the Supreme Court. The Supreme Court is currently considering the Second Circuit’s earlier decision in In Re American Express Merchants’ Litigation, 667 F. 3d 204 (2d Cir. 2012), where the Second Circuit found that an arbitration agreement containing a class action waiver prevented an antitrust plaintiff from effectively vindicating his rights.  And, the Second Circuit is still considering cases like Raniere v. Citigroup, Inc., 827 F. Supp. 2d 294, 311-14 (S.D.N.Y. 2011), and Sutherland v. Ernst & Young, LLP, 768 F. Supp. 2d 547, 550-54 (S.D.N.Y. 2011), where district courts refused to compel arbitration of overtime collective action claims under the FLSA. The future of class action waivers in arbitration, accordingly, is still uncertain. Stay tuned.