by James M. Finberg and Jonathan D. Selbin1 |
| April 1998 |
| A district court's decision regarding whether or not to certify a class is a watershed event in an employment discrimination class action. If the class is certified, the employer must take the case seriously. If class certification is denied, the employer will be able to resolve the case by settling with the individual plaintiff or plaintiffs, likely without having to institute any meaningful changes in its employment practices, although the employer will have no protection against the possibility that other plaintiffs may file similar suits. |
| District court judges have tremendous discretion when deciding whether or not to certify a case as a class action. As things stand now, there is no interlocutory review of class certification decisions. See Coopers & Lybrand v. Livesay, 437 U.S. 463 (1978).2 As a result, unless a court of appeals takes the unusual step of reviewing a class certification decision on a writ,3 the parties will have to proceed through trial and final judgment before there can be review of a class certification decision. Class certification is thus often the major turning point in employment class action litigation. |
| A. Legal Standards for Class Certification |
| As with other federal class actions, Federal Rule of Civil Procedure 23 provides the legal standard for class certification in employment discrimination class actions. As an initial matter, plaintiffs must establish that the four prerequisites of Rule 23(a) are satisfied: (1) that the class is so numerous that joinder of all class members is impracticable; (2) that there are common questions of law and fact; (3) that the representative parties' claims and defenses are typical of the class claims and defenses; and (4) that the representative parties will fairly and adequately protect the class' interest. Fed. R. Civ. P. 23(a). The party moving for class certification bears the burden of showing that the Rule 23(a) requirements are satisfied. General Telephone Company of the Southwest v. Falcon, 457 U.S. 147, 156 (1982). |
| In addition to demonstrating that the Rule 23(a) requirements are met, the plaintiffs must also establish that the suit satisfies one or more of the standards of Rule 23(b): (1) that there is a risk of substantial prejudice from separate actions; (2) that declaratory or injunctive relief benefitting the class as a whole would be appropriate; or (3) that common questions of law or fact predominate and the class is superior to other available methods of adjudication. Fed. R. Civ. 23(b). Traditionally, employment discrimination class actions have been certified under Rule 23(b)(2). See, e.g., Probe v. State Teachers' Retirement System, 780 F.2d 776, 780 (9th Cir.), cert. denied, 476 U.S. 1170 (1986); Barefield v. Chevron, 48 F.E.P. Cases (BNA) 907, 1988 U.S. Dist. LEXIS 15816 (N.D. Cal. 1988); Shores v. Publix Super Markets, Inc., 69 E.P.D. Cases (CCH) 44,477, 1996 U.S. Dist. LEXIS 3381 (M.D. Fla. 1996). |
| B. Rule 23(a)'s Requirements |
| Of the four Rule 23(a) requirements, numerosity is rarely in dispute in employment discrimination class actions. As few as 40 putative class members generally suffices. See 1 Newberg on Class Actions (3d ed. 1992), § 3.05 at 3-25. The Rule 23(a)(4) adequacy requirement also generally is not disputed in employment cases, although it sometimes becomes an issue in a situation where there are potential conflicts between different groups of class members. For example, defendants sometimes contend that a class member who was an employee cannot adequately represent class members who were applicants. However, classes comprising both employees and applicants can be certified together, see General Telephone v. Falcon, 457 U.S. at 159 n.15, and courts have rejected the view that an employee cannot adequately represent applicants. See, Home Depot, 1996 U.S. Dist. LEXIS at *11; Hartman v. Duffy, 19 F.3d 1459, 1471-72 (D.C. Cir. 1994); Richardson v. Boyd, 709 F.2d 1016, 1020 (5th Cir.), cert. denied, 464 U.S. 1009 (1983). As the D.C. Circuit has explained, there is no "requirement of 'congruence' between the job categories of named plaintiffs and those of the putative class." Hartman, 19 F.3d at 1471. |
| The Rule 23(a)(2) requirement that there be common questions of law and fact is a routine -- and sometimes tenacious -- battleground in class certification motions. Defendants invariably argue that the employment decisions affecting class members vary from individual to individual, decision-maker to decision-maker, hiring practice to hiring practice, and facility to facility. To overcome these arguments, plaintiffs argue that common discriminatory practices infect all of defendants' employment decisions throughout the proposed class. As numerous courts have noted, "race discrimination is peculiarly class discrimination." Senter v. General Motors Corp., 532 F.2d 511, 524 (6th Cir.), cert. denied, 429 U.S. 870 (1976); see also, General Telephone v. Falcon, 457 U.S. at 157. Proof that an employer has operated under a "general policy of discrimination" warrants class certification where such a policy manifests itself "in the same general fashion" throughout the employer's company. See General Telephone v. Falcon, 457 U.S. at 159 n.15; Hartman, 19 F.3d at 1471-72; Senter, 532 F.2d at 524. It is often critical for plaintiffs to demonstrate that the employer's procedures and criteria are uniform across the company. Where the court concludes that the defendants' personnel practices are uniform and centralized, it is more likely to find that plaintiffs have satisfied the commonality element. See, e.g., Barefield v. Chevron U.S.A., Inc., 44 F.E.P. Cases (BNA) 1885, 1987 U.S. Dist. LEXIS 15125 (N.D. Cal. 1987); Publix, supra; Home Depot, supra; Hartman v. Duffy, 158 F.R.D. 525 (D.C. Cir. 1994), aff'd in part, remanded in part on other grounds, 88 F.3d 1232 (D.C. Cir. 1996), cert. denied, 117 S. Ct. 1884 (1997). Conversely, if a court finds that the defendants' practices vary from facility to facility and decision-maker to decision-maker, it likely will not certify the class. See, e.g., Jackson v. Motel 6, 130 F.3d 999 (11th Cir. 1997); Appleton v. Deloitte & Touche, 168 F.R.D. 221 (M.D. Tenn. 1996); Zapata v. IBP, 167 F.R.D. 147 (D. Kan. 1996). |
| The Rule 23(a)(3) typicality requirement and the Rule 23(a)(2) commonality requirement "tend to merge," and a finding of commonality ordinarily will support a finding of typicality. See General Telephone v. Falcon, 457 U.S. at 157 n.13. If a court finds that the practices are uniform and centralized, the court will generally conclude that the plaintiffs' claims are typical of those of the class. Barefield, 44 F.E.P. Cases at 1890; Harriss v. Pan American World Airways, Inc., 74 F.R.D. 24 (N.D. Cal. 1977). |
| Commonality of issues is relatively clear in cases involving a uniformly applied, "objective" test, or such objective criteria as height or weight. See, e.g., Dothard v. Rawlinson, 433 U.S. 321, 328-31 (1977) (addressing height and weight requirement for correctional officers); Harriss v. Pan American World Airways, Inc., 74 F.R.D. 24 (N.D. Cal. 1977) (addressing a maternity leave requirement for flight attendants). In Watson v. Fort Worth Bank & Trust, 487 U.S. 977 (1988), the Supreme Court held that "Title VII's proscription against discriminatory actions" applies not only to such "objective" tests, but also applies equally to "an employer's undisciplined system of subjective decision-making . . ." where such a system has a disparate impact on protected groups. Id. at 990-991. Since Watson, many courts have found sufficient commonality where an employer has a company-wide policy of delegating decision-making to low-level managers who employ subjective and unvalidated decision-making criteria. See, e.g., Publix, supra; Home Depot, supra; Hartman v. Duffy, 158 F.R.D. at 539; Stender v. Lucky Stores, 803 F. Supp. 259, 319 (N.D. Cal. 1992); Jenson v. Eveleth Taconite Co., 139 F.R.D. 657 (D. Minn. 1991). As the D.C. Circuit has explained, |
where a plaintiff charges that subjective employment decisions have allowed the employer systematically to discriminate on the basis of gender in choosing among the minimally qualified applicants, the potential for common issues of law and fact among applicants for different positions clearly exists regardless of individual differences in job descriptions or minimal qualifications. |
| Hartman, 19 F.3d at 1472. |
| C. Certification Under Rule 23(b)(2) |
| Because employment discrimination class actions primarily seek declaratory and injunctive relief, they are properly certified under Rule 23(b)(2). See, e.g., Home Depot, supra; Publix, supra. Indeed, in AmChem Products, Inc. v. Windsor, 117 S. Ct. 2231 (1997), the Supreme Court stated: |
Rule 23(b)(2) permits class actions for declaratory or injunctive relief where "the party opposing the class has acted or refused to act on grounds generally applicable to the class." Civil rights cases against parties charged with unlawful, class-based discrimination are prime examples. |
| Id. at 2245; see also Notes of Advisory Committee to 1966 Amendment, 39 F.R.D. 69 (1966). |
| Ironically, passage of the 1991 Civil Rights Act -- which was designed to broaden the scope of protection and relief for plaintiffs in Title VII cases -- has led many defendants to argue that Rule 23(b)(2) certification is no longer appropriate in employment discrimination class actions. Pursuant to 42 U.S.C. § 1981a(a)(1), emotional distress and punitive damages are now available for the first time to plaintiffs in Title VII cases alleging intentional discrimination. As a result, defendants often now contend that monetary relief overwhelms any declaratory or injunctive relief, such that certification under Rule 23(b)(2) is not proper. However, courts long have held that the mere fact that plaintiffs seek monetary damages in addition to declaratory injunctive relief does not preclude certification under Rule 23(b)(2). See Probe v. State Teachers' Retirement System, 780 F.2d at 780; Home Depot, 1996 U.S. Dist. LEXIS at *14. Further, this argument ignores the long line of cases certifying Rule 23(b)(2) classes involving claims for monetary relief and damages as well as injunctive relief under 42 U.S.C. § 1981. See Johnson v. Railway Express Agency, Inc., 421 U.S. 454, 463 (1975); Johnson v. Goodyear Tire and Rubber Co., 491 F.2d 1364, 1375, 1379 (5th Cir. 1974); Domingo v. New England Fish Co., 727 F.2d 1429, 1433-34, 1442 (9th Cir.), modified on other grounds, 742 F.2d 520 (9th Cir. 1984); Gore v. Turner, 563 F.2d 159, 166 (5th Cir. 1977); Barefield, 48 F.E.P. Cases at 909-911; Sumlin v. Brown, 420 F. Supp. 78 (N.D. Fla. 1976). Because the damages relief to which plaintiffs are now entitled under the 1991 Civil Rights Act for intentional discrimination is, for these purposes, identical to that always available to plaintiffs under § 1981, the rationale of these cases is equally applicable to Title VII claims today. |
| Furthermore, in making the argument that damages overwhelm injunctive relief in Title VII cases, defendants often ignore the fact that it is well established that back-pay and front-pay are equitable relief, and not treated as monetary damages in the Title VII context. See 42 U.S.C. § 2000e-5(g) (listing backpay as one form of equitable relief to which plaintiffs may be entitled); see also, generally, U.S. v. Burke, 504 U.S. 229, 238-39 (1992) (Title VII back-pay is not an award of tort-like damages but rather a form of equitable relief). Accordingly, even with the potential availability of emotional distress and punitive damages, the injunctive and equitable relief sought by the plaintiffs in an employment discrimination class action almost always overwhelm any monetary damages sought. Moreover, emotional distress and punitive damages are available only on a disparate treatment claim, not a disparate impact claim, so that there is no reason why disparate impact claims cannot be certified under Rule 23(b)(2) even after the 1991 Civil Rights Act. |
| D. Bifurcation |
| Bifurcation of employment discrimination class actions into a Stage I liability phase certified pursuant to Rule 23(b)(2), to be followed by a Stage II individual compensatory damages phase has long been held proper by courts, including the Supreme Court. In International Brotherhood of Teamsters v. United States, 431 U.S. 324, 359-62 (1977), the Supreme Court described how a Title VII class action should be separated into two stages. According to Teamsters, employment discrimination class actions should be bifurcated into a first "liability" stage, in which the burden is upon the plaintiff "to demonstrate that unlawful discrimination has been a regular procedure or policy followed by [the] employer . . . ." Id. at 360. The burden then shifts to the employer "to provide a non-discriminatory explanation for the apparently discriminatory result." Id. at n.46. If the employer fails to rebut the inference of discrimination that arises from the prima facie case, Teamsters provides for a second, "remedial" stage of the trial to "determine the scope of individual relief to which victims are entitled." Id. at 361. |
| Numerous courts have followed the Teamsters two-stage bifurcation procedure in structuring Title VII class action trials. See Domingo v. New England Fish Co., 727 F.2d 1429, 1434 (9th Cir.), modified on other grounds, 742 F.2d 520 (9th Cir. 1984); Sledge v. J.P. Stevens & Co., 585 F.2d 625, 637 (4th Cir. 1978), cert. denied, 440 U.S. 981 (1979); Wells v. Meyer's Bakery, 561 F.2d 1268, 1277 (8th Cir. 1977); United States v. United States Steel Corp., 520 F.2d 1043, 1053-56 (5th Cir. 1975), cert. denied, 429 U.S. 817 (1976); Home Depot, 1996 U.S. Dist. LEXIS at *18-19; Barefield, 48 F.E.P. Cases at 909-911. Further, the leading treatises on class actions support the notion that employment discrimination class actions have been and should be tried in separate stages under Rule 42(b). See Manual for Complex Litigation 3d, § 33.54 (1995); Newberg on Class Actions, § 24.123, at 24-414. An additional advantage of such bifurcation, which typically involves a time interval between the two stages of litigation, is that it provides the parties with an opportunity to settle the action if plaintiffs prevail at the liability phase of the proceeding, or, at the very least, affords the parties an opportunity to agree on streamlined or mutually acceptable Stage II adjudicatory procedures. |
| Over the last several years, defendants have begun raising the argument that such bifurcated liability and damages proceedings would violate the Seventh Amendment right to a fair trial because different juries will be deciding essentially the same issues. The genesis of the Seventh Amendment argument lies in the Supreme Court's decision in Gasoline Products Co. v. Champlin Ref. Co., 283 U.S. 494 (1931), in which the Supreme Court held that it is consistent with the Seventh Amendment to allow separate juries to hear different issues, so long as the issues tried to the separate juries are "distinct and separable," such that the second jury will not revisit issues determined by the first jury. Id. at 499. Citing Gasoline Products and such recent court of appeals product liability cases as Castano v. American Tobacco Co., 84 F.3d 734, 750-51 (5th Cir. 1996), and In re Rhone-Poulenc Rorer, Inc., 51 F.3d 1293 (7th Cir.), cert. denied, 116 U.S. 184 (1995), defendants argue that true bifurcation of liability and damages issues is impossible, and that as a result more than one jury inevitably ends up reviewing the same facts, thus depriving the defendant of its Seventh Amendment rights. In addition to pointing out that neither Castano nor Rhone-Poulenc involved Title VII class actions, but rather were product liability actions, plaintiffs can point to other decisions by court of appeals that reject such Seventh Amendment arguments. See Hilao v. Estate of Marcos, 103 F.3d 767, 783-787 (9th Cir. 1996); Valentino v. Carter-Wallace, 97 F.3d 1227 (9th Cir. 1996); Central Wesleyen College v. W.R. Grace & Co., 6 F.3d 177 (4th Cir. 1993); In re School Asbestos Litigation, 789 F.2d 996 (3rd Cir.), cert. denied, 479 U.S. 852 (1986); Arthur Young & Co. v. United States District Court, 549 F.2d 686 (9th Cir.), cert. denied, 434 U.S. 829 (1977); In re Copley Pharmaceutical, Inc. Albuterol Product Liability Litigation, 161 F.R.D. 456 (D. Wyo. 1995). In the Home Depot case, the district court rejected Home Depot's Seventh Amendment argument in the employment discrimination context, holding: |
Courts have routinely adopted the approach advocated by plaintiffs in which the first phase of the proceedings focuses exclusively on class-wide claims, e.g., whether a defendant has in fact engaged in discriminatory employment practices. The jury verdict in favor of plaintiffs at this phase would result in injunctive and declaratory relief, and possibly, punitive damages. Individual compensatory damages would be resolved in the second phase of the proceedings which, since they would adjudicate individual claims, would not involve the "same issues" as did the first phase. As evidenced by the numerous cases across the country that have addressed this issue, the Seventh Amendment does not mandate that all phases of the litigation be heard by the same jury. |
| Home Depot, 1996 U.S. Dist. LEXIS at *18.4 Further, in Teamsters, the Supreme Court clarified that the facts determined at the first stage of a bifurcated class action discrimination trial may not be and are not reconsidered during the second stage, holding that, |
the question of individual relief does not arise until it has been proved that the employer has followed an employment policy of unlawful discrimination. The force of that proof does not dissipate at the remedial stage of the trial. |
| Teamsters, 431 U.S. at 361-62. Thus, the jury in the Stage II proceeding does not revisit the already-decided factual issue of discrimination. |
| E. Class Certification in Disparate Treatment Cases |
| Defendants sometimes argue that, whatever the merits of class certification for purposes of a disparate impact claim, disparate treatment claims cannot be certified on a classwide basis. In support of this argument, defendants contend that each individual class member must satisfy the disparate treatment framework set out by the Supreme Court in McDonnell-Douglas Corp. v. Green, 411 U.S. 792, 802 (1973). |
| Under McDonnell-Douglas, a plaintiff alleging discrimination bears the initial burden of showing that: (1) the plaintiff is a member of a protected class; (2) the plaintiff applied for an advertised position; (3) the plaintiff was rejected despite being qualified for the position; and (4) similarly situated non-protected employees were hired or the employer sought a replacement with qualifications similar to the plaintiff's qualifications. Id. at 802. Defendants sometimes contend that this highly individualized four prong test makes class certification of a disparate treatment claim impossible. However, the Supreme Court explained in McDonnell-Douglas that this formula is not the only means by which a plaintiff can establish a prima facie case of intentional discrimination, id. at n.13, and held in Teamsters that in the context of a class action, plaintiffs need not satisfy the McDonnell-Douglas test but may make out a prima facie case of discrimination against class members by demonstrating the existence of a statistically significant pattern or practice of discrimination. Id. at 359-60 (citing Franks v. Bowman Transportation Co., Inc., 424 U.S. 747, 772 (1976)). If the plaintiff succeeds in establishing a prima facie case, there is a presumption or inference that the defendant engaged in unlawful discrimination against the plaintiffs. That presumption shifts the burden of production to the defendants who must rebut the prima facie case by producing evidence that the employment decisions were made for legitimate, non-discriminatory reasons. Teamsters, 431 U.S. at 359-60; Texas Dept. of Community Affairs v. Burdine, 450 U.S. 248, 253-54 (1981). In Teamsters, the Supreme Court explicitly rejected the defendant's argument that each individual plaintiff's claim must be proven at the Stage I liability trial. As the Court held, |
the petitioners' contention in this case is that if the [plaintiff] has not, in the course of proving a pattern or practice, already brought forth specific evidence that each individual was discriminatorily denied an employment opportunity, it must carry that burden at the second, "remedial" stage of trial. That basic contention was rejected in the Franks case. As was true of the particular facts in Franks, and as is typical of Title VII pattern-or-practice suits, the question of individual relief does not arise until it has been proved that the employer has followed an employment policy of unlawful discrimination. The force of that proof does not dissipate at the remedial stage of the trial. The employer cannot, therefore, claim that there is no reason to believe that its individual employment decisions were discriminatorily based; it has already been shown to have maintained a policy of discriminatory decision making. |
The proof of the pattern or practice supports an inference that any particular employment decision, during the period in which the discriminatory policy was in force, was made in pursuit of that policy. The [plaintiff] need only show that an alleged individual discriminate unsuccessfully applied for a job and therefore was a potential victim of the proved discrimination. As in Franks, the burden then rests on the employer to demonstrate that the individual applicant was denied an employment opportunity for lawful reasons. |
| Teamsters, 431 U.S. at 361. |
| Accordingly, it is not necessary in the disparate treatment context for each individual class member to satisfy the McDonnell-Douglas test, and a disparate treatment class can properly be certified following the procedures set forth in Teamsters. |
| F. Certification Under Rule 23(b)(3) |
| In a few cases recently, plaintiffs in discrimination cases have sought certification under the Rule 23(b)(3) provision that provides for certification where common issues predominate over individual issues. See, e.g., Jackson v. Motel 6, 130 F.3d 999 (11th Cir. 1998). In the Motel 6 case, which did not involve employment discrimination but rather discrimination in accommodation, the Eleventh Circuit found that plaintiffs failed to establish a predominance of common issues. Given what the court characterized as a need to conduct "distinctly case-specific inquiries into the facts surrounding each alleged incident of discrimination," the Eleventh Circuit found there to be insufficient commonality of issues to warrant class treatment. Id. at 1006. Significantly, the Eleventh Circuit did not address whether certification might have been appropriate in that case under Rule 23(b)(2). Equally significant, the Motel 6 case involved primarily accommodation claims, rather than employment claims, and the plaintiffs presented only anecdotal evidence and did not present any statistical evidence in support of their claims that defendant was engaging in a pattern and practice of discrimination. |
| G. Hybrid Rule 23(b)(2)/23(b)(3) Certification |
| Historically, some courts have chosen to certify the Stage I liability and injunctive relief portion of employment discrimination class actions pursuant to Rule 23(b)(2), and either deferred certification of the damages portion of the trial, or certified the damages phase pursuant to Rule 23(b)(3). The Home Depot case is a recent example of just this procedure. In Home Depot, the court certified the Stage I liability trial pursuant to Rule 23(b)(2), but chose to "defer ruling on class certification with respect to the second phase of th[e] trial," stating that "at such a time as it becomes necessary, the Court will adopt an approach that the Court and the parties can agree will best protect the rights of absent class members and defendant, in adjudicating the remaining issues." Home Depot, 1996 U.S. Dist. LEXIS at *18-19; see also Publix, supra. While such a procedure may be particularly appropriate in light of the damages now available to plaintiffs as a result of the 1991 Civil Rights Act, it is by no means a new procedure. See, e.g., Officers for Justice v. Civil Service Comm'n, 688 F.2d 615 (9th Cir. 1982); Barefield, 48 F.E.P. Cases at 912. |
CONCLUSION |
| Whether a class is certified or not is critical to the overall success and value of an employment discrimination case. Accordingly, it is in the interests of both plaintiffs and defendants to focus substantial attention and resources on litigating the class certification issue. |
NOTES |
| 1 Jonathan D. Selbin is a partner with Lieff Cabraser Heimann & Bernstein, LLP of San Francisco, California. |
| 2 The Federal Rules Committee currently is considering a proposal that would make class certification decisions subject to interlocutory appeal. |
| 3 See, e.g., Jackson v. Motel 6, 130 F.3d 999 (11th Cir. 1997). |
| 4 The Fifth Circuit is currently considering the Seventh Amendment and bifurcation issues in an appeal of Celestine v. CITGO Petroleum Corp., et al., 165 F.R.D. 463 (W.D. La. 1995) |