Tag Archives: Class Action Lawsuits

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Bifurcation in the Wake of Comcast

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

Background

The United States Census Bureau conducts a nationwide census every 10 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 about 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 30 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 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.” 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.”

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. The court noted that these arguments were simply “repackaged” arguments relating to standing, and it denied the Census Bureau’s motion to dismiss.

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., 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.” 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.”

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.

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. 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.

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 appears to have taken that option off the table in future lawsuits.” 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 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 todecide the issue. Employers should be watching carefully.

This blog was previously published on the Seyfarth Shaw website.

NY Bill Follows ‘Franken Amendment’

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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.

Sixth Circuit Affirms EEOC Credit-Check Case Dismissal

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Less than three weeks after oral argument, the Sixth Circuit affirmed a lower court order granting summary judgment in favor of Kaplan in one of the EEOC’s most high profile cases – EEOC v. Kaplan Higher Education Corp.

The EEOC brought suit against Kaplan for using credit-checks in its hiring process – “the same type of background check that the EEOC itself uses” the Sixth Circuit pointed out – claiming that the practice had a disparate impact on African Americans.

On Jan. 28, 2013, Judge Patricia A. Gaughan of the U.S. District Court for the Northern District of Ohio granted summary judgment in favor of Kaplan, finding that the EEOC’s statistical evidence of disparate impact was not reliable and not representative of Kaplan’s applicant pool as a whole. (Read more about that ruling here.)

The Sixth Circuit found no abuse of discretion. The EEOC’s “homemade” methodology for determining race – by asking its “race raters” to label photographs – was, in the Sixth Circuit’s words, “crafted by a witness with no particular expertise to craft it, administered by persons with no particular expertise to administer it, tested by no one, and accepted only by the witness himself.”

Background

The EEOC filed suit against Kaplan alleging that Kaplan’s use of credit-checks causes it to screen out more African-American applicants than white applicants, creating a disparate impact in violation of Title VII.

In support of its allegations, the EEOC relied on statistical data compiled by Kevin Murphy.  Because Kaplan’s credit check process was race-blind, the EEOC subpoenaed records regarding Kaplan’s applicants from state departments of motor vehicles. Thirty-six states and the District of Columbia provided color copies of approximately 900 drivers’ license photos.

Murphy assembled a team of five “race raters” and directed them to review the photos and classify them as “African-American,” “Asian,” “Hispanic,” “White,” or “Other.” Murphy also provided the raters with applicant names.

Based on the results of this “race rating,” Murphy opined that, in a sample of 1,090 (out of 4,670 applicants), the percentage of black applicants who were flagged for review based upon their credit histories was higher than the percentage of white applicants who were flagged.

The district court excluded Murphy’s testimony as unreliable for two reasons. First, the EEOC presented “no evidence” that Murphy’s methodology satisfied any of the factors that courts typically consider in determining reliability under Federal Rule of Evidence 702; and second, as Murphy himself admitted, his sample was not representative of Kaplan’s applicant pool as a whole. The district court granted summary judgment in favor of Kaplan, and the EEOC appealed.

The Sixth Circuit’s Opinion

The Sixth Circuit affirmed. The Sixth Circuit noted that, as the proponent of expert testimony, the EEOC bears the burden of proving its admissibility. It determined that the district court did not abuse its discretion in finding that the EEOC failed to make such a showing.

The EEOC argued that the district court erred in finding that it had “wholly fail[ed]” to provide evidence that its technique had been tested or had any “known or potential rate of error.” The EEOC contended that it provided such support in the form of “anecdotal corroboration.” That is, as to 57 applicants, Murphy cross-checked his raters’ classifications with racial identifications provided by a DMV or Kaplan.

The Sixth Circuit noted that the EEOC’s cross-check yielded an 80% match – “an unimpressive correlation in case where a few percentage points (in credit-check fail rates for blacks and whites) might make the difference between significant liability and none.” In any event, as Murphy himself conceded, a mere 57 instances of anecdotal corroboration is “not enough” to establish the reliability of his photo rating methodology.

As the Sixth Circuit found, “[t]he EEOC’s case goes downhill from there.” The EEOC failed to present evidence that its technique was subjected to peer-review or publication, failed to show that Murphy employed standards to control “the technique’s operation,” and presented no evidence that Murphy’s race-rating methodology was “generally accepted in the scientific community.” The raters themselves “had no particular standard in classifying each applicant; instead, they just eyeballed the DMV photos.”

Finally, as an independent ground for excluding Murphy’s testimony, the district court found “no indication” that Murphy’s group of 1,090 applicants was representative of the applicant pool as a whole. The Sixth Circuit noted that, “[i]nstead there is a strong indication to the contrary: Murphy’s group had a fail rate of 23.8%, whereas the GIS applicant pool had a fail rate of only 13.3%.” It held that an unrepresentative sample “by definition” might skew the respective fail rates of black and white applicants in the larger pool – “and thus is not a reliable means to demonstrate disparate impact.”

Implications

In its opinion, the Sixth Circuit staunchly critiqued the EEOC’s “do as I say, not as I do” litigation tactics. It noted (in the first line of its opinion) that the EEOC “sued the defendants for using the same type of background check that the EEOC itself uses.” It also noted, as the district court observed, that “the EEOC itself discourages employers from visually identifying an individual by race and indicates that visual identification is appropriate ‘only if an employee refuses to self-identify.’”

This blog was previously published by Seyfarth Shaw LLP.

Risk Management Links of the Day … Featuring Security Dogs on Vacation

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security dog philadelphia airport

  • Three bomb-sniffing dogs at the Philly International airport failed their recertification tests and have been relieved of duty. While laying off security dogs may sound like overkill, even in the new climate of airline security sensitivity, one expert notes that “these dogs are not ornamental. They are there for a purpose. If the purpose is not being satisfied, that’s a serious issue.” There is a “built-in redundancy” at the airport so other screening methods can be used in the meantime until new dogs can be brought in. As for the dogs who failed … Do they just get to go on vacation and relax playing billiards like the pup above? Nope. It’s back to school for them: “TSA spokesman Greg Soule said the agency could not comment on the status of its dogs. He said, however, that the rigorous nature of yearly certification tests means that some of the nation’s 700 TSA-led dog teams deployed in air, marine and mass transportation systems may not pass and must go through a remedial program.”
  • A scary-to-think-about report was released today from the Sector Risk Research Programme stating that risks that are poorly understood and thus not addressed properly by the commercial insurance sector could “prompt a new phase of the financial crisis.” More specifically, the report states: “Parallels can be drawn between large property and casualty insurance institutions today lacking the ability to fully understand changing risk exposures and more publicised past failures of financial institutions to understand risks assumed. While loss impacts naturally lag economic changes by several years, turmoil in commercial insurance is expected as a latter phase of the financial crisis.” Jeez. Let’s hope not. (via Risk & Insurance)
  • The 4th quarter of 2009 set a record for cat bond issuance volume. “More companies have put their toes back in the water after a slow start in 2009,” said Robert Stone, director with the RMS dedicated ILS team, RiskMarkets.
  • This is a little dated at this point, but I read it over my holiday break and was just reminded how much I enjoyed Vanity Fair‘s extensive look at Goldman Sachs. The article breaks down the disconnect between “the way Goldman Sachs sees itself (they’re the smartest) and the way everyone else sees Goldman (they’re the smartest, greediest, and most dangerous).” It seems like the further we get away from September 15, 2008, the more interesting the stories become about what actually happened between Wall Street and Washington during the market meltdown, and Bethany Mclean of Vanity Fair peels back a few more revealing layers of the onion here. They also devised this sweet chart illustrating that “Goldman’s influence is ubiquitous in the highest echelons of global political power.” That sure is a ton of former Goldman employees in a ton of the world’s most influential financial positions.
  • Speaking of political power over the financial system … David Leonhardt is asking “If the Fed Missed This Bubble, Will It See a New One?” in the New York Times. “The fact that Mr. Bernanke and other regulators still have not explained why they failed to recognize the last bubble is the weakest link in the Fed’s push for more power. It raises the question: Why should Congress, or anyone else, have faith that future Fed officials will recognize the next bubble?” Fair question, it would seem.

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