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Chicago Board of Ed Wins Battle with Teachers Union

On May 27, 2014, the U.S. District Court for the Northern District of Illinois handed a major win to the Chicago Board of Education in its battle with the Chicago Teachers Union over the selection of 10 schools for turnaround in 2012, which affected the jobs of more than 200 African-American teachers and para-professionals. The decision – Chicago Teachers Union v. Board of Education of Chicagois reflective of a growing trend that raises the Rule 23 class certification bar in employment discrimination class actions.

In an important lesson for all employers, the Court held that the Board’s rigorous, individualized assessment of the schools considered for turnaround meant that the case was unsuitable for class treatment of plaintiffs’ discrimination claims.

Background

Under the Illinois School Code, schools may be subject to a “turnaround” if they had been on probation for at least one year and have failed to make adequate progress in correcting deficiencies. In a turnaround, the Board of Education takes control of the school and removes all staff. Affected teachers and para-professionals are either placed in a reassignment pool or a substitution pool with different rights to salary and other benefits depending on their tenure status and job position.

In 2011, the Board began considering which school should be turned around in 2012. The process started with an initial list of 226 schools. That list was reduced to 74 schools based on composite standardized test scores and graduation rates. Subsequently, a qualitative “in-depth investigation process” began for the remaining 74 schools. This involved school visits, additional data collection, and meetings with a variety of school representatives and community members. No written policy applied to the turnaround decision and no one set of factors was applied to determine whether a turnaround was appropriate for a particular school. Some of the factors considered were: the academic culture of the school, whether quality instruction was being provided, the quality of the leadership, and the academic trends of the school.

After reviewing the information, the Board ultimately voted to turnaround 10 schools. The schools were located exclusively on the south and west sides of Chicago where African-Americans made up 40.9% of tenured teachers. The total percentage of African-American tenured teachers at the 10 schools selected for turnaround was approximately 51%, while the total percentage of African-American tenured teachers in the entire Chicago public school system was only 25%.

The Chicago Teachers Union and three African-American tenured teachers brought suit against the Chicago Board of Education alleging that the board’s decision to turn around 10 Chicago public schools was racially discriminatory. Plaintiff sought to certify a class consisting of all African-American teachers or para-professionals in any school subjected to the 2012 turnarounds.

The Certification Decision

The Court held that the individualized, qualitative nature of the Board’s selection process made the case unsuitable for class certification. Relying on Wal-Mart v. Dukes, the Court held that it could not resolve “in one stroke” the question of whether the Board’s turnaround policy was discriminatory as applied to all class members because that would require an examination of the rationale behind the decisions to turnaround each of the 10 schools selected for turnaround in comparison with the decisions concerning the remaining 63 schools that had not been selected. The Court noted that its decision may have been different if schools had been selected based solely on objectively measurable criteria applied across the board, which would have eliminated the need for further review into how the criteria were applied to individual schools.

Although the commonality question drove its decision, the Court went on to analyze the other class certification requirements. In particular, the Court found that plaintiffs had failed to establish that they met the requirements of Rule 23(b)(2) or the predominance requirement of Rule 23(b)(3).

The Court held that plaintiffs’ claims for relief were not amenable to certification under Rule 23(b)(2) because the injunctive and declaratory relief sought by plaintiffs would merely initiate a process through which highly individualized determinations of liability and remedy would have to be made. The relief would be class-wide in name only, and could not be final without further individualized inquiries involving, for example, placement of individual class members in specific jobs based on their qualifications or providing them with back pay and front pay if no positions were available.

With respect to Rule 23(b)(3), the Court held that the case was unsuitable for class treatment because individualized questions of liability and damages would predominate over common questions. Because the selection process involved a qualitative review, claims would have to be resolved on a school-by-school basis, eliminating any efficiencies gained by certifying the matter as a class action. The Court went on to note, however, that the mere fact that damages may be individualized would not preclude certification. Distinguishing the Supreme Court’s decision in Comcast v. Behrend, 133 S. Ct. 1426 (2013), the Court held that it was enough for class certification purposes that all putative class members attributed their damages to the turnaround decisions. Although the extent to which individual class members were able to mitigate their damages would involve individualized inquiries, those were not enough to merit departure from the prevailing rule that individualized damage issues will not preclude class certification.

Implications for Employers

This case is another interesting decision in the line of cases interpreting Wal-Mart Stores, Inc. v. Dukes. The Court applied the reasoning of Wal-Mart to hold that a policy of selecting schools for turnaround that relied on the individualized application of common criteria was not enough of a common policy such that the claims of all class members could be resolved in one stroke. In other words, because each school got a separate, fact-intensive and individualized review, there was no one common question that could provide a common answer on an essential question of liability for the entire class.

This has important implications for all employers considering any kind of mass lay-offs. Common, across-the-board numerical or objective criteria that are applied to select individuals for termination are going to make the company’s actions more easily challenged on a class-wide basis. To the extent that an employer utilizes and can document a more searching, qualitative selection process, this decision supports that approach as a process that may be better immunized from attack on a class-wide basis.

This blog was previously posted on the Seyfarth Shaw website.

Best of the Worst in Insurance Fraud

The second most costly white collar crime in America behind tax evasion, insurance fraud costs an estimated $80 billion annually. Questionable claims rose 26.7% across the United States between 2010 and 2012, according to Mercury Insurance Company, whose Special Investigation Unit (SIU) of 50 investigators nationwide examines questionable claims. The team completed 1,476 investigations in California alone, exposing more than $24 million in attempted fraud, the company said.

“It’s amazing the things people will do to try and cheat the system, but they don’t know we’ve seen it all,” said Dan Bales, national director of special investigations for Mercury, which established one of the country’s first SIU’s in 1978. “Our SIU goal is to stay several steps ahead of these criminals and continue to uncover fraud, which can contribute to as much as 30% of customers’ premiums.”

Below are Mercury’s Top 3 “Best of the Worst Claims,” in 2013, highlighting some of the methods used to try and beat the system.

Claim #3: Bicycle Down

The claimant alleged he was struck as his bicycle passed behind a Mercury-insured vehicle that was backing up in a parking lot. He called the police, filed a report claiming injury and property damage, and was then transported by ambulance to a medical center to treat his alleged injuries.

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The real story was quite different, however, as this criminal didn’t know the entire incident was caught on video. The video clearly showed the claimant intentionally slapping the back of the insured vehicle with his hand and then guiding his bicycle to the ground to make it look like he’d been struck by the car.

The claimant retained an attorney to pursue an injury claim, which was denied by Mercury following the police report that included the security camera video taken at the scene. The claimant was ultimately arrested, convicted and sentenced to three months in jail with three years’ probation, and also had to pay a fine, restitution and his medical bills. Watch the video clip

Claim #2: Wrong Way Driver

The insured stopped at an intersection in front of a repair van. Suddenly, the two vehicles collided in what appeared to be a rear-end collision, which necessitated police being called to gather statements.

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The insured driver and passenger claimed the van driver had rear-ended the insured’s vehicle and both were allegedly injured. However, the van driver’s adamant contention that he hadn’t caused the accident led the investigating officer to seek surveillance video, which he found at a nearby gas station. Sure enough, the footage revealed that instead of proceeding through the intersection as expected, the insured driver threw her vehicle into reverse, slamming into the front of the van.

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The insured driver and her passenger were subsequently charged with insurance fraud and conspiracy, and the driver was also charged with assault with a deadly weapon … her car. And yes, the claim was denied. Watch the video clip

Claim #1: A Not-So-Merry Christmas

Looking to make some quick Christmas cash, the insured and two cohorts staged an accident and filed medical payment claims through Mercury, which were identified as questionable and assigned to the SIU for investigation.

A detailed claims history was compiled for the three individuals, who were then interviewed by SIU investigators. What the investigators found was that each claimant’s story was different, so they began to look deeper. That’s when they uncovered some very compelling evidence that suggested this accident was staged.

The SIU team discovered the insured’s prior claim history showed a loss at the same location with the same facts provided. A confession quickly followed about his latest claim, as well as a description of all the fraud he’d committed on each of his previous claims. All three claimants were convicted and given probation, community service and ordered to pay more than $26,000 in restitution to Mercury Insurance.

Suspicious activity can be reported to the National Insurance Crime Bureau.

Businesses Feel Less Prepared For Increasingly Risky World, Travelers Finds

In its 2014 “Business Risk Index,” Travelers surveyed more than 1,100 businesses on the top risks they perceive and how ready they are to mitigate those threats. Overall, respondents clearly see an increasingly risky world around them, but feel notably unprepared  to handle the risks.

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The top seven threats, in order of reported concern, are: medical cost inflation, increasing employee benefit costs, legal liability, broad economic uncertainty, cyberrisk, complying with laws, and attracting and retaining talent.

Check out this infographic for more of the study’s insights:

Travelers Business Risk Index

NY Bill Follows ‘Franken Amendment’

Class action plaintiffs’ lawyers and their allies generally do not like arbitration, especially where the arbitration agreements effectuate a waiver of the ability of a worker or a consumer to bring a class action. Advocates for workers and consumers have attacked arbitration agreements through various avenues in the courts and in the court of public opinion.

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Recently, their efforts also have focused on passage of legislation.

On May 5, 2014, the New York State Assembly passed legislation – known as Bill A4791-2013 – prohibiting state entities from contracting with any business that requires an employee or independent contractor performing work under the contract to arbitrate claims arising under Title VII of the Civil Rights Act of 1964 or any tort related to or arising from discrimination, sexual assault, or harassment. Such torts may include assault, battery, intentional infliction of emotional distress, false imprisonment, or negligent hiring. If this legislation is enacted, all employers who do business with any State government entity in New York would be required to allow their employees to adjudicate employment claims before the courts instead of using arbitration.

Exempt from the bill is any arbitration that is mandated by a collective bargaining agreement between the employer and/or independent contractor. The bill also provides for a waiver to be granted “to respond to an emergency arising from unforeseen causes,” but the waiver is to be no longer than necessary in duration and the state agency granting the waiver is obligated to list the reasons for granting it.

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The New York legislation follows in the footsteps of a similar federal provision known as the “Franken Amendment,” which was added as part of a defense spending bill and signed into law in 2009. The Franken Amendment, named after Sen. Al Franken of Minnesota, bars federal funds from going to defense contractors that continue to apply mandatory arbitration clauses to claims of sexual assault, assault and battery, intentional infliction of emotional distress, and negligent hiring, retention and supervision. The law requires that subcontractors on federal projects also certify to the same arbitration restriction.

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These pieces of legislation indicate the beginning of a trend towards limiting the arbitration options for employment claims.

The New York bill now moves to the Republican-controlled New York Senate for consideration. Stay tuned for future developments on this front in New York and in other states.

This column previously appeared on the Seyfarth Shaw blog site.