American Law Institute – American Bar Association
Boston, Massachusetts May 4, 2007
Class and Collective Actions
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Table of Contents
- A. Purported Waivers of Class Actions in Arbitration
- 1. Prediction as to the Ultimate Decisions of the Courts
- 2. The Bases for the Prediction
- 3. Practical Examples of Cases Where the Ultimate Principles Make a Difference
- a. Where Class Treatment Affects Liability by Broadening the Evidence to Be Considered
- b. Where Class Treatment Affects the Availability of Systemic Relief
- c. Where Class Treatment Affects Punitive Damages
- d. Where Class Treatment is Efficient, and Individual Litigation is Inefficient, Individual Claimants Will Be Unlikely to Sue
- e. Effect of a Fee-Shifting Provision
- f. Cases Rejecting this Argument Where a State-Law Claim Bars Class Treatment
- 4. Recent General Decisions
- B. Tiny Disparities of Treatment Do Not Support a Post-Decertification Claim
- C. Time Period for Resolving Appeals Under the Class Action Fairness Act
- D. Burden of Proof in Removals Under the Class Action Fairness Act
- E. Numerosity, and Problematic Appeals After a Loss on the Merits
- F. Dukes v. Wal-Mart
- G. Efforts to Enforce Class Judgment
Corporate insistence on customer and employee waivers of class actions, whether or not accomplished through the mechanism of unilaterally imposed arbitration, will ultimately be held proper only where they do not effectively deprive employees or consumers of substantive rights as to liability or remedy, of the right to materially useful evidence, or of the right to significant efficiencies of litigation.
The wording of unilaterally imposed arbitration documents may make it unnecessary to resort to the above principle by providing for class litigation in arbitration or by exempting class claims from arbitration, but will not be enough to save imposed arbitration if the above principles are violated.
EEOC v. Waffle House, Inc., 534 U.S. 279 (2002), did not simply hold that the EEOC is not bound by an employee’s arbitration “agreement,” but also summarized its holdings in numerous cases that the maximum reach of arbitration is as the specification of a nonjudicial forum, with all other rights remaining fully in effect. “We have held that federal statutory claims may be the subject of arbitration agreements that are enforceable pursuant to the FAA because the agreement only determines the choice of forum.” Id. at 295 n.10. The Court held that the Fourth Circuit had erred in failing to consider the substantive right breached by the agreement:
To the extent the Court of Appeals construed an employee’s agreement to submit his claims to an arbitral forum as a waiver of the substantive statutory prerogative of the EEOC to enforce those claims for whatever relief and in whatever forum the EEOC sees fit, the court obscured this crucial distinction and ran afoul of our precedent.
The importance of Waffle House to class action waivers becomes clearer as one examines the nature of the substantive right the Court found violated there: the right of a complainant to rely on the EEOC to provide representation, where:
- the complainant could pursue the identical claim on his or her own;
- for the identical monetary and prospective relief;
- relying on the identical evidence; and
- where there is in theory no cost to the employee under either option, through the fee-shifting provision if the case is successful, and the availability of counsel to handle the matter on a contingent basis.
If a right can be substantive despite its lack of practical significance to the process or outcome, the ultimate principles set forth in part A above are already good law at the Supreme Court level.
Note that Green Tree Financial Corp. v. Bazzle, 539 U.S. 444 (2003), did not resolve or even discuss these ultimate issues in either the plurality opinion or Justice Stevens’ opinion.
Some cases can only be won through evidence of classwide or systemic practices. These are often cases in which the plaintiff must show an unlawful intent, or pierce a defendant’s explanation, or show that a particular incident was part of a pattern, in order to prevail.
In the Fifth Circuit, such evidence can be considered only if a class has been certified. Celestine v. Petroleos de Venezuela SA, 266 F.3d 343, 355–56, 86 FEP Cases 1462 (5th Cir. 2001), affirmed the grant of summary judgment to the defendant on the plaintiffs’ claims of denial of promotion and training. Although there were 206 individual plaintiffs, the court held that, in light of the earlier denial of class certification, the lower court did not abuse its discretion in barring the plaintiffs from proceeding with their claims on a pattern-and-practice basis and requiring them to proceed on an individual basis under the McDonnell Douglas model.
The Fifth Circuit’s rule is extraordinary. The school desegregation cases were often brought as individual actions. In some of the defendant school districts, racially segregated pupil assignments occurred despite the lack of an explicitly stated policy. This was particularly true in the aftermath of Brown, when explicit policies were changed without changing the pupil assignments. Imagine attempting to prove ongoing racial discrimination when one is not allowed to rely on a pattern, and can only show facts specific to the plaintiff. Imagine a fraud case in which the defense is one of innocent mistake, and the plaintiff is not allowed to show the frequency with which investors were harmed by such “innocent mistakes.”
If the denial of class treatment puts a thumb on the scales of justice, a class action waiver should be held unenforceable, and an arbitration procedure barring class treatment should not be enforced.
Even if individual plaintiffs prove pervasive discrimination, the absence of class certification may jeopardize their obtaining the kind of systemic injunction that will prevent future wrongs, to the extent it exceeds what is necessary to give individual relief to the named plaintiffs.
Zepeda v. INS, 753 F.2d 719, 727–29 (9th Cir. 1983) (absent class certification, injunction limited to individual plaintiffs); Nat’l Center for Immigrant Rights v. INS, 743 F.2d 1365, 1371–72 (9th Cir. 1984) (same), vacated on other grounds, 481 U.S. 1009 (1987); Bresgal v. Brock, 843 F.2d 1163, 1170–71 (9th Cir. 1987) (classwide relief without class certification proper only when necessary to give relief to named plaintiffs); Paige v. California, 102 F.3d 1035, 1039 (9th Cir. 1996) (exercising pendent jurisdiction over class certification order in appeal from grant of injunction, stating: “Because the injunction issued here provides class-wide relief, we could not uphold it without also upholding the certification of the class.”); Lowery v. Circuit City Stores, Inc., 158 F.3d 742, 766–67 (4th Cir. 1998), vacated and remanded on other grounds, 527 U.S. 1031 (1999) (reversing systemic injunction going farther than needed to give individual plaintiffs relief).
If systemic relief is appropriate in the type of case in question, a class action waiver should be held unenforceable, and an arbitration procedure barring class treatment should not be enforced.
The availability and extent of punitive damages may depend on the frequency of unlawful actions, and on the level of a defendant’s hierarchy from which the unlawful actions emanated:
Although “[o]ur holdings that a recidivist may be punished more severely than a first offender recognize that repeated misconduct is more reprehensible than an individual instance of malfeasance,” Gore, supra, at 577, 116 S. Ct. 1589, in the context of civil actions courts must ensure the conduct in question replicates the prior transgressions. TXO, 509 U.S., at 462, n. 28, 113 S. Ct. 2711 (noting that courts should look to “‘the existence and frequency of similar past conduct’”) (quoting Haslip, 499 U.S., at 21–22, 111 S. Ct. 1032).
State Farm Mutual Auto. Ins. Co. v. Campbell, 538 U.S. 408, 423 (2003).
If evidence of the frequency and level of unlawful actions is available only in a class proceeding, a class action waiver should be held unenforceable, and an arbitration procedure barring class treatment should not be enforced.
Where the costs of even simplified litigation are disproportionate to the amount likely to be recovered, few will sue. This is true in employment discrimination cases, where in some parts of the country it is difficult for an individual to obtain counsel in a low back-pay case such as a promotion or demotion case. It is more intensely true in consumer cases in which a defendant may pocket millions from a practice of defrauding many people in small amounts, a process known as filling the ocean by constant rain.
In many instances, a company’s strong desire to escape accountability, where it has guilty knowledge of its own deeds, or its hopes of committing unlawful deeds in the future and desire to make sure it can keep the loot, is the undeclared reason for imposing arbitration with a class-action waiver.
Given the success of business in starving essential governmental agencies of the resources needed to perform regulatory, investigative, and enforcement functions by inducing politicians to support unaffordable tax cuts and to reduce spending to an irresponsible degree, the availability of class actions is the last remaining restraint on wild and wooly corporate behavior. The elimination of that restraint invites abuse, and seeks to transfer risk and cost to an unprotected public.
If individual suits are unlikely because the costs of even simplified litigation are disproportionate to the amount likely to be recovered, a class action waiver should be held unenforceable, and an arbitration procedure barring class treatment should not be enforced.
(2) Cases Supporting this Argument
Kristian v. Comcast Corp., 446 F.3d 25, 61 (1st Cir. 2006) (antitrust), severed the class action bar. The court noted at 58: “Yet, Plaintiffs have provided uncontested and unopposed expert affidavits demonstrating that without some form of class mechanism—be it class action or class arbitration—a consumer antitrust plaintiff will not sue at all.” The court concluded at 61: “If the class mechanism prohibition here is enforced, Comcast will be essentially shielded from private consumer antitrust enforcement liability, even in cases where it has violated the law. Plaintiffs will be unable to vindicate their statutory rights. Finally, the social goals of federal and state antitrust laws will be frustrated because of the “enforcement gap” created by the de facto liability shield.” (Footnote omitted.)
Leonard v. Terminix Intern. Co., L.P., 854 So.2d 529, 535–37 (Ala. 2002), held that an arbitration agreement coupling an unconscionable limitation of remedies with a class-action waiver was unconscionable. This argument was a major factor in the decision: “The Leonards contend that the arbitration clause mandates a procedure involving costs so great in comparison to the potential recovery that the injured person is effectively precluded from a remedy.” Id. at 537. The court held that this meant plaintiffs were deprived of a “meaningful remedy.” Id. at 537.
Discover Bank v. Superior Court, 36 Cal.4th 148, 161, 113 P.3d 1100, 1108–09 (Calif. 2005), held an agreement with a class-action waiver unconscionable:
Class action and arbitration waivers are not, in the abstract, exculpatory clauses. But because, as discussed above, damages in consumer cases are often small and because “‘[a] company which wrongfully exacts a dollar from each of millions of customers will reap a handsome profit’” (Linder, supra, 23 Cal.4th at p. 446, 97 Cal.Rptr.2d 179, 2 P.3d 27), “‘the class action is often the only effective way to halt and redress such exploitation.’” (Ibid.) Moreover, such class action or arbitration waivers are indisputably one-sided. “Although styled as a mutual prohibition on representative or class actions, it is difficult to envision the circumstances under which the provision might negatively impact Discover [Bank], because credit card companies typically do not sue their customers in class-action lawsuits.” (Szetela, supra, 97 Cal.App.4th at p. 1101, 118 Cal.Rptr.2d 862.) Such one-sided, exculpatory contracts in a contract of adhesion, at least to the extent they operate to insulate a party from liability that otherwise would be imposed under California law, are generally unconscionable.
We acknowledge that other courts disagree. Some courts have viewed class actions or arbitrations as a merely procedural right, the waiver of which is not unconscionable. (See, e.g., Strand v. U.S. Bank National Association ND (N.D. 2005) 693 N.W.2d 918, 926 ( Strand); Blaz v. Belfer (5th Cir. 2004) 368 F.3d 501, 504–505; Johnson v. West Suburban Bank (3d Cir. 2000) 225 F.3d 366, 369; Champ v. Siegel Trading Co., Inc. (1995) 55 F.3d 269, 277; but see Leonard v. Terminix Intern. Co. L.P. (Ala. 2002) 854 So.2d 529, 538 [class action waiver together with limitation of damages clause in adhesive consumer arbitration agreement deprives plaintiffs of a “meaningful remedy” and is therefore unconscionable]; State v. Berger (2002) 211 W.Va. 549, 567 S.E.2d 265, 278 [holding contract provision limiting class action rights unconscionable]; Powertel v. Bexley (Fla. Dist. Ct. App.1999) 743 So.2d 570, 576 [same].) But as the above cited cases of this court have continually affirmed, class actions and arbitrations are, particularly in the consumer context, often inextricably linked to the vindication of substantive rights. Affixing the “procedural” label on such devices understates their importance and is not helpful in resolving the unconscionability issue.
State ex rel. Dunlap v. Berger, 211 W.Va. 549, 562–63, 567 S.E.2d 265, 278–79 (W.Va.), cert. denied sub nom. Friedman’s, Inc. v. West Virginia ex rel. Dunlap, 537 U.S. 1087 (2002), stated:
In Mr. Dunlap’s case, the total of $8.46 in insurance charges that Friedman’s added to his purchase price by Friedman’s is precisely the sort of small-dollar/high volume (alleged) illegality that class action claims and remedies are effective at addressing. In many cases, the availability of class action relief is a sine qua non to permit the adequate vindication of consumer rights.
As the United States Supreme Court stated in Amchem Products, Inc. v. Windsor, 521 U.S. 591, 617, 117 S. Ct. 2231, 2246, 138 L. Ed. 2d 689, 709 (1997), “[t]he policy at the very core of the class action mechanism is to overcome the problem that small recoveries do not provide the incentive for any individual to bring a solo action prosecuting his or her rights. A class action solves this problem by aggregating the relatively paltry potential recoveries into something worth someone’s (usually an attorney’s) labor (citations omitted).” See also Riverside v. Rivera, 477 U.S. 561, 575, 106 S. Ct. 2686, 2694, 91 L. Ed. 2d 466, 480 (1986): “‘If the citizen does not have the resources, his day in court is denied him; the ••• policy which he seeks to assert and vindicate goes unvindicated; and the entire Nation, not just the individual citizen, suffers.’ 122 Cong. Rec. 33313 (1976) (remarks of Sen. Tunney).”
Thus, in the contracts of adhesion that are so commonly involved in consumer and employment transactions, permitting the proponent of such a contract to include a provision that prevents an aggrieved party from pursuing class action relief would go a long way toward allowing those who commit illegal activity to go unpunished, undeterred, and unaccountable.
(1) Cases Holding that Fee-Shifting Helps the Arbitration Procedure Survive
Johnson v. West Suburban Bank, 225 F.3d 366, 374–75 (3d Cir. 2000), cert. denied, 531 U.S. 1145 (2001).
Adkins v. Labor Ready, Inc., 303 F.3d 496, 502 n.1 (4th Cir. 2002) (FLSA); Snowden v. CheckPoint Check Cashing, 290 F.3d 631, 638 (4th Cir.), cert. denied, 537 U.S. 1087 (2002) (TILA, RICO, etc.).
Jenkins v. First American Cash Advance of Georgia, LLC, 400 F.3d 868, 877–78 (11th Cir. 2005), cert. denied, __ U.S. __, 126 S. Ct. 1457, 164 L. Ed. 2d 132 (2006) (TILA and Georgia RICO).
Strand v. U.S. Bank Nat. Ass’n ND, 693 N.W.2d 918, 926, 2005 ND 68 (N.D. 2005): stated:
Strand argues that no attorney will be willing to litigate these small claims on an individual basis, and that enforcement of the “no class action” provision would leave him and other cardholders without an effective remedy. Strand points to no empirical evidence that all attorneys would be unwilling to litigate these claims. Strand’s attorney filed an affidavit stating that he would not accept individual cases involving the amounts at issue here. That is not, however, evidence that no attorney would be willing to accept such cases, particularly where attorney fees are available for prevailing plaintiffs. We recognize that, due to the procedural posture of this case, there was a limited record on this issue and no full-blown evidentiary hearing was held. In answering the certified questions, however, we may consider only the facts as stated in the order of certification and accompanying documents. (Emphases in original.)
(2) Cases Holding that Fee-Shifting is Not Enough
Discover Bank v. Superior Court, 36 Cal.4th 148, 162, 113 P.3d 1100, 1109–10 (Calif. 2005) (“Nor are we persuaded by the rationale stated by some courts that the potential availability of attorney fees to the prevailing party in arbitration or litigation ameliorates the problem posed by such class action waivers. (Strand, supra, 693 N.W.2d at p. 926; Snowden v. Checkpoint Check Cashing (4th Cir. 2002) 290 F.3d 631, 638.) There is no indication other than these courts’ unsupported assertions that, in the case of small individual recovery, attorney fees are an adequate substitute for the class action or arbitration mechanism. Nor do we agree with the concurring and dissenting opinion that small claims litigation, government prosecution, or informal resolution are adequate substitutes.”).
State ex rel. Dunlap v. Berger, 211 W.Va. 549, 562–63, 567 S.E. 2d 265, 278–79 (W.Va.), cert. denied sub nom. Friedman’s, Inc. v. West Virginia ex rel. Dunlap, 537 U.S. 1087 (2002) (fees limited to 15% of debt).
Iberia Credit Bureau, Inc. v. Cingular Wireless LLC, 379 F.3d 159, 174–75 (5th Cir. 2004), held that the Cingular arbitration procedure was enforceable despite a class-action waiver, but stated that it was “highly relevant” that Louisiana had barred class treatment for one of the State-law claims in the case.
Al-Safin v. Circuit City Stores, Inc., 394 F.3d 1254, 1260–62 (9th Cir. 2005), affirmed the denial of arbitration and held that a class-action waiver provision was one of the elements rendering the arbitration procedure substantively unconscionable under Washington law. Accord, Circuit City Stores, Inc. v. Mantor, 335 F.3d 1101, 1107 (9th Cir. 2003), cert. denied, 540 U.S. 1160 (2004) ( California law); Ingle v. Circuit City Stores, Inc., 328 F.3d 1165, 1172–73 (9th Cir. 2003), cert. denied, 540 U.S. 1160 (2004) (same).
Ting v. AT&T, 319 F.3d 1126, 1150 (9th Cir.), cert. denied, 540 U.S. 811 (2003), held that a consumer arbitration agreement was unconscionable because it precluded class treatment, and was one-sided because it is inconceivable that AT&T would sue a class of its customers.
Vasquez-Lopez v. Beneficial Oregon, Inc., 210 Or. App. 553, 152 P.3d 940 (Or. App. 2007), held that a class action waiver rendered the arbitration agreement unconscionable.
Coady v. Cross County Bank, __ N.W.2d __, 2007 WL 188993, 2007 WI App. 26 (Wis. App. Jan. 25, 2007) (No. 2005AP2770), held the arbitration agreement substantively and procedurally unconscionable for a number of reasons, including the class-action waiver. It stated at *12:
¶ 48 Second, we acknowledge that a majority of state and federal courts have enforced class action waivers and found them not unconscionable. We are, however, persuaded by what appears to be a growing minority of courts that a waiver of class-wide relief is a significant factor (and in at least one instance a determinative factor) in invalidating an arbitration provision as unconscionable. 14 These courts have recognized that the availability of class-wide relief is often the only means of vindicating consumer rights. See, e.g., Discover Bank v. Superior Court, 36 Cal.4th 148, 30 Cal.Rptr.3d 76, 113 P.3d 1100, 1109 (Cal. 2005) (“[C]lass actions and arbitrations are, particularly in the consumer context, often inextricably linked to the vindication of substantive rights.”); State ex rel.Dunlap v. Berger, 211 W. Va. 549, 567 S.E.2d 265, 278 (W. Va. 2002) (“In many cases, the availability of class action relief is a sine qua non to permit the adequate vindication of consumer rights.”). This is particularly so when the damages involved are comparatively small for each individual consumer. SeeDiscover Bank, 30 Cal.Rptr.3d 76, 113 P.3d at 1108, 1110; Muhammad v. County Bank, 189 N.J. 1, 912 A.2d 88, 97–98 (N.J. 2006). Moreover, without the availability of a class-wide mechanism, many consumers may never realize that they have been wronged because they may not know that the defendant’s conduct is illegal. SeeMuhammad, 912 A.2d at 100. 15 In addition, the prospect of class-wide relief “ordinarily has some deterrent effect on a manufacturer or service provider,” Powertel, Inc. v. Bexley, 743 So.2d 570, 576 (Fla. Dist. Ct. App. 1999), but any such effect is eviscerated by arbitration clauses like Cross Country’s. __________
14SeeLeonard v. Terminix Int’l Co., L.P., 854 So.2d 529,
534, 538 (Ala. 2002) (arbitration clause unconscionable where it deprived plaintiffs of a meaningful remedy by limiting certain damages and precluding eligibility for class action treatment); Powertel, Inc. v. Bexley, 743 So.2d 570, 574, 576-77 (Fla. Dist. Ct. App. 1999) (arbitration clause unconscionable where it limited damages, removed defendant’s exposure to class-wide remedies, and forced the plaintiff to waive statutory remedies, including state consumer act remedies), review denied, 763 So.2d 1044 (Fla. 2000); Muhammad v. County Bank, 189 N.J. 1, 912 A.2d 88, 91, 101 (N.J. 2006) (it was unconscionable for defendants to deprive plaintiff of the class-action mechanism, whether in litigation or arbitration, because the public interest at stake in plaintiff’s and fellow consumers’ ability to effectively pursue their statutory rights under state’s consumer protection act overrides the defendants’ right to enforce a bar on class arbitration); see also Discover Bank v. Superior Court, 36 Cal.4th 148, 30 Cal.Rptr.3d 76, 113 P.3d 1100, 1103, 1110 (Cal. 2005) (class action waivers, whether for litigation or arbitration, are unconscionable under “some circumstances,” including when dispute involves small amounts of damages and plaintiffs allege that defendant has carried out a scheme to cheat large numbers of consumers out of individually small sums of money); Kinkel v. Cingular Wireless LLC, 223 Ill.2d 1, 306 Ill. Dec. 157, 857 N.E.2d 250, 254–56, 274–75 (Ill. 2006) (class action waiver in arbitration clause unconscionable where it requires customer to arbitrate all claims, but does not reveal the cost, and contains a liquidated damages clause such that the plaintiff’s only reasonable means of obtaining a complete remedy is as the representative or member of a class); State ex rel. Dunlap v. Berger, 211 W.Va. 549, 567 S.E.2d 265, 270–71, 280 (W.Va. 2002) (prohibitions on punitive damages and class action relief in arbitration agreement rendered application of agreement unconscionable).
15 Cross Country relies on the fact that the arbitration clause provides that the plaintiffs are free to bring a small claims action. We are not convinced that this provision is significant. Cross Country assumes that attorneys are willing to take small claims cases for plaintiffs on an individual basis or that plaintiffs are able to effectively represent themselves in small claims court against multimillion dollar national corporations such as Cross Country. Moreover, the allowance for a small claims action does nothing to change the arbitration clause’s dictate that Delaware law be applied to all “Claims,” thereby precluding the plaintiffs from asserting any claims or remedies under the Wisconsin Consumer Act. Therefore, the availability of a small claims action does not change our analysis.
Burden v. Check into Cash of Kentucky, LLC, 267 F.3d 483, 492 (6th Cir. 2001), cert. denied, 535 U.S. 970 (2002) (TILA), held that plaintiffs had not met their burden of showing that Congress intended class-action rights under the statute to be non-waivable. Accord, Johnson v. West Suburban Bank, 225 F.3d 366, 377–78 (3d Cir. 2000), cert. denied, 531 U.S. 1145 (2001); Bowen v. First Family Financial Services, Inc., 233 F.3d 1331, 1337–38 (11th Cir. 2000).
Livingston v. Associates Finance, Inc., 339 F.3d 553, 558–59 (7th Cir. 2003) (TILA), accepted the waiver, citing cases from the Third and Eleventh Circuits, without independent discussion.
Freedom Life Insurance Co. of America v. Wallant, 2007 WL 600629, 32 Fla. L. Weekly D604 (Fla. App. 4th Dist. Feb. 28, 2007), dismissed the defendant’s appeal from the denial of its second motion to compel arbitration, holding that defendant’s failure to appeal the first decision denying arbitration barred its filing of a second motion after class certification.
Doyle v. Finance America, LLC, 2007 WL 765211 ( Md. App. 2007) (provisional opinion subject to modification), upheld a class-action waiver in arbitration where plaintiffs failed to show that arbitration costs on an individual basis would be excessive.
99 FEP Cases 1310 (7th Cir. 2007), affirmed the grant of summary judgment to the racial discrimination defendant after the decertification of the plaintiff class. The court held that a statistical difference showing at most that white workers received an average of one additional promotion every 20 years did not show it was more likely than not that the African-American plaintiffs were discriminated against because of their race.
C. Time Period for Resolving Appeals Under the Class Action Fairness Act Hart v. FedEx Ground Package System Inc., 457 F.3d 675, 678 (7th Cir. 2006), a challenge to the asserted independent-contractor status of defendant’s drivers, held that the sixty-day time period for resolving appeals runs from the date a petition is granted:
Before addressing the merits of the petition, we explain more fully our earlier holding that the 60-day time limit for resolving CAFA appeals begins to run at the time a petition is granted, not when it is initially filed. We join the Fifth, Ninth, and Eleventh Circuits in this conclusion. Evans v. Walter Industries, Inc., 449 F.3d 1159, 1162–63 (11th Cir. 2006); Patterson v. Dean Morris L.L.P., 444 F.3d 365, 368 (5th Cir. 2006); Amalgamated Transit Union Local 1309, AFL-CIO v. Laidlaw Transit Serv., Inc., 435 F.3d 1140, 1144 (9th Cir. 2006); see alsoBush v. Cheaptickets, Inc., 425 F.3d 683, 685–86 (9th Cir. 2005) (calculating 60-day deadline for decision on merits of § 1453(c)(1) appeal from date appeal was accepted).
D. Burden of Proof in Removals Under the Class Action Fairness Act Hart v. FedEx Ground Package System Inc., 457 F.3d 675, 679– 82 (7th Cir. 2006), a challenge to the asserted independent-contractor status of defendant’s drivers, held that a plaintiff seeking remand of a case removed to Federal court under CAFA has the burden of persuasion as to whether the home-state or local-controversy exceptions to the Act apply, but is entitled to discovery to assist in making that showing.
E. Numerosity, and Problematic Appeals After a Loss on the Merits Pruitt v. City of Chicago, 472 F.3d 925, 926–27, 99 FEP Cases 737 (7th Cir. 2006), affirmed the denial of summary judgment to the Title VII and § 1981 racial harassment defendant, holding that the joinder of at most 40 employees was not impracticable. The court’s discussion of the wisdom of appealing, after a loss on the merits, is of interest:
Plaintiffs’ lead argument on appeal is that the district judge should have certified a class. Coming after the plaintiffs have lost on the merits, that’s problematic. Do they want to take all other employees down in flames with them? If so-or if they just don’t care about that risk-then they have demonstrated inadequacy as other workers’ representatives and rendered class certification impossible. See Fed.R.Civ.P. 23(a)(4). What’s more, plaintiffs do not come to grips with the ground on which the district court acted. The judge concluded that the proposed class flunked the numerosity requirement, see Rule 23(a)(1), because joinder of the fewer than 40 workers affected by Jason’s excesses and desiring to participate (some maintenance workers told the court that they wanted no part of this suit) would be practical. Plaintiffs argue at length that all other requirements of Rule 23 have been satisfied, and maybe that’s so, but if joinder would be practical then the other criteria don’t matter. Sometimes “even” 40 plaintiffs would be unmanageable, but plaintiffs do not contend that this is one of those occasions. They devote only one page of their brief to Rule 23(a)(1) and do not discuss why it would be any harder to have 40 plaintiffs than to have 40 hearings (each employee’s interactions with Jason, and the resulting damages if any, are person-specific) as part of one class action. So we proceed to the merits, and our decision will affect only the ten named plaintiffs.
Dukes v. Wal-Mart, Inc., 474 F.3d 1214, 1241 (9th Cir. 2007), petition for reh’g en banc filed and response requested, affirmed the grant of class certification and the limits the lower court imposed on back pay and punitive damages for promotion claims. The court rejected defendant’s argument that class certification would improperly deprive it of the ability to assert a “same decision” defense under the Civil Rights Act of 1991:
Plaintiffs have the choice to proceed under a “single motive” theory or a “mixed motive” theory; Wal-Mart cannot force Plaintiffs to proceed under a “mixed motive” theory simply because it wishes to present a “same decision defense.” Bogle v. McClure, 332 F.3d 1347, 1357 (11th Cir. 2003). In this case, Plaintiffs have elected to prove the “single motive” theory. This means that Wal-Mart is not entitled to present a “same decision defense” because such a defense at the remedy stage applies only where the conduct was the result of “mixed motives.” 42 U.S.C. § 2000e–5(g)(2)(B). [FN17] Accordingly, the Civil Rights Act of 1991 does not preclude use of the class action format in this case. __________
FN17. Wal-Mart also contends that the 1991 Act mandates that a district court hold individualized hearings where a defendant pursues a “mixed motive” defense. However, Wal-Mart offers no support for this theory. Nor does caselaw or legislative history suggest that individualized hearings are required where plaintiffs pursue a “mixed motive” theory. Regardless, this issue is irrelevant to the case at hand because, as discussed above, Plaintiffs are proceeding under the “single motive” theory. Judge Kleinfeld dissented. Id. at 1244–49. See also the discussion of this case in the sections below on “Statistics,” and on “Class Actions.”
Dukes v. Wal-Mart, Inc., 474 F.3d 1214 (9th Cir. 2007), petition for reh’g en banc filed and response requested, affirmed the grant of class certification and the limits the lower court imposed on back pay and punitive damages for promotion claims. The court rejected Wal-Mart’s challenges to plaintiff’s statistical evidence:
Wal-Mart challenges Dr. Drogin’s findings and faults his decision to conduct his research on the regional level, rather than analyze the data store-by-store. However, the proper test of whether workforce statistics should be viewed at the macro (regional) or micro (store or sub-store) level depends largely on the similarity of the employment practices and the interchange of employees at the various facilities. . . .
Here, Dr. Drogin explained that a store-by-store analysis would not capture: (1) the effect of district, regional, and company-wide control over Wal-Mart’s uniform compensation policies and procedures; (2) the dissemination of Wal-Mart’s uniform compensation policies and procedures resulting from the frequent movement of store managers; or (3) Wal-Mart’s strong corporate culture. Such evidence supports Plaintiffs’ claim that the discrimination was closely related to Wal-Mart’s corporate structure and policies. Because Dr. Drogin provided a reasonable explanation for conducting his research at the regional level, the district court did not abuse its discretion when it credited Dr. Drogin’s analysis.
Wal-Mart also contends that the district court erred by not finding Wal-Mart’s statistical evidence more probative than Plaintiffs’ evidence because, according to Wal-Mart, its analysis was conducted store-by-store. However, contrary to Wal-Mart’s characterization of its analysis, its research was not conducted at the individual store level. Dr. Joan Haworth, Wal-Mart’s expert, did not conduct a store-by-store analysis; instead she reviewed data at the sub-store level by comparing departments to analyze the pay differential between male and female hourly employees. 547 U.S. 268, 126 S. Ct. 1752 Further, our job on this appeal is to resolve whether the “evidence is sufficient to demonstrate common questions of fact warranting certification of the proposed class, not whether the evidence ultimately will be persuasive ” to the trier of fact. . . . 7 Thus, it was appropriate for the court to avoid resolving “the battle of the experts” at this stage of the proceedings. . . .
Finally, it is important to note that much of Dr. Haworth’s evidence, which Wal-Mart argues was “unrebutted” by Wal-Mart, was in fact stricken by the district court for failing to satisfy the standards of Federal Rules of Evidence 702 and 703. 8 . . . The district court specifically stated that Dr. Haworth’s stricken testimony could not be used to undermine or contradict Dr. Drogin’s analysis . . . and, as noted above, Wal-Mart does not appeal this ruling. Thus, while Dr. Haworth’s testimony may be relevant to an analysis of the merits of Plaintiffs’ claims, it does not rebut Dr. Drogin’s evidence and does not support Wal-Mart’s contention that its statistical evidence is more probative than Plaintiffs’ at the certification stage.
Because the district court reasonably concluded that Dr. Drogin’s regional analysis was probative and based on well-established scientific principles, and because Wal-Mart provided little or no proper legal or factual challenge to it, the district court did not abuse its discretion when it relied on Dr. Drogin’s use and interpretation of statistical data as a valid component of its commonality analysis. ________
6 This means that Dr. Haworth ran separate regression analyses for: (1) each of the specialty departments in the store, (2) each grocery department in the store, and (3) the store’s remaining departments. She did not run regression analyses to examine pay differential between male and female salaried employees.
7 Wal-Mart maintains that the district court erred by not requiring Dr. Drogin to perform a “Chow test” to determine whether data could be properly aggregated. The Chow test (named after the statistician who created it) can be used to analyze whether two or more sets of data may be aggregated into a single sample in a statistical model. . . . However, there is no legal support for the contention that a Chow test must—or even should—be applied at the class certification stage. Further, we have not found a single case suggesting that commonality would be undermined if Plaintiffs’ evidence failed this test.
8 In addition to her sub-store analysis, Dr. Haworth conducted a survey of store managers. After reviewing the survey and its methodology, the district court concluded that the store manager survey was biased both “on its face” and in the way that it was conducted. . . . Dr. Haworth’s disaggregated analysis created pools too small to yield any meaningful results. Wal-Mart has not appealed this issue. Accordingly, this evidence is not properly before us.
Id. at 1228–30 (citations omitted). Judge Kleinfeld dissented. Id. at 1244–49. See also the discussion of this case in the section above on “Mixed Motives, and in the section below on “Class Actions.”
Dukes v. Wal-Mart, Inc., 474 F.3d 1214 (9th Cir. 2007), petition for reh’g en banc filed and response requested, affirmed the grant of class certification and the limits the lower court imposed on back pay and punitive damages for promotion claims. The court described the class:
The class in this case is broad and diverse. It encompasses approximately 1.5 million employees, both salaried and hourly, with a range of positions, who are or were employed at one or more of Wal-Mart’s 3,400 stores across the country. Plaintiffs contend, and the district court found, that the large class is united by a complex of company-wide discriminatory practices against women.
Id. at 1224. The court discussed the central issue of commonality:
The commonality test is qualitative rather than quantitative—one significant issue common to the class may be sufficient to warrant certification. . . . As the district court properly noted, “plaintiffs may demonstrate commonality by showing that class members have shared legal issues by divergent facts or that they share a common core of facts but base their claims for relief on different legal theories.” . . .
The district court found that Plaintiffs had provided evidence sufficient to support their contention that significant factual and legal questions are common to all class members. After analyzing Plaintiffs’ evidence, the district court stated:
Plaintiffs have exceeded the permissive and minimal burden of establishing commonality by providing: (1) significant evidence of company-wide corporate practices and policies, which include (a) excessive subjectivity in personnel decisions, (b) gender stereotyping, and (c) maintenance of a strong corporate culture; (2) statistical evidence of gender disparities caused by discrimination; and (3) anecdotal evidence of gender bias. Together, this evidence raises an inference that Wal-Mart engages in discriminatory practices in compensation and promotion that affect all plaintiffs in a common manner.
Id. at 1225. The court held that the district court did not err in accepting Dr. William Bielby’s conclusions that “(1) that Wal-Mart’s centralized coordination, reinforced by a strong organizational culture, sustains uniformity in personnel policy and practice; (2) that there are significant deficiencies in Wal-Mart’s equal employment policies and practices; and (3) that Wal-Mart’s personnel policies and practices make pay and promotion decisions vulnerable to gender bias.” Id. at 1226. It rejected Wal-Mart’s argument that such analysis is improper where no specific practice has been identified as the cause of the disparity. Id. It held that “courts need not apply the full Daubert ‘gate-keeper’ standard at the class certification stage. Rather, ‘a lower Daubert standard should be employed at this [class certification] stage of the proceedings.’” Id. at 1227 (citations omitted). The court held that plaintiffs’ 120 affidavits helped support the finding of commonality, rejecting defendant’s argument that 120 affidavits were too few with respect to a proposed class of 1.5 million. “However, we find no authority requiring or even suggesting that a plaintiff class submit a statistically significant number of declarations for such evidence to have any value.” Id. at 1230. The court emphasized that the affidavits were not the sole evidence of commonality. The court then turned to the evidence on subjective decision-making:
It is well-established that subjective decision-making is a “ready mechanism for discrimination” and that courts should scrutinize it carefully. . . . Wal-Mart is correct that discretionary decision-making by itself is insufficient to meet Plaintiffs’ burden of proof. The district court recognized this, noting that managerial discretion is but one of several factors that supported a finding of commonality. . . .
Plaintiffs produced substantial evidence of Wal-Mart’s centralized company culture and policies . . . which provides a nexus between the subjective decision-making and the considerable statistical evidence demonstrating a pattern of discriminatory pay and promotions for female employees . . . . Therefore, for the reasons stated above, we find that the district court did not abuse its discretion when it held that Wal-Mart’s subjective decision-making policy raises an inference of discrimination, and provides support for Plaintiffs’ contention that commonality exists among possible class members.
Id. at 1231 (emphasis in original; citations omitted). The court next held that the class representatives were typical of the class, rejecting Wal-Mart’s argument that the plaintiffs’ claims were not typical of all women with salaried management jobs because only one of the six was a salaried manager, and was only a lower-level manager.
However, the lack of a class representative for each management category does not undermine Plaintiffs’ certification goal because all female employees faced the same discrimination. . . .
In addition, because the range of managers in the proposed class is limited to those working in Wal-Mart’s stores, it is not a very broad class, and a named plaintiff occupying a lower-level, salaried, in-store management position is sufficient to satisfy the “permissive” typicality requirement. . . .
Id. at 1232–33 (citations omitted). The court held that Rule 23(b)(2) is only available where the claim for equitable relief predominates over the claim for monetary relief, whether or not such claim is incidental to the claim for injunctive relief.
Here, not only do the plaintiffs, current and former employees alike, state their common intention as ending Wal-Mart’s allegedly discriminatory practices, but logic also supports their declared intent. It is reasonable that plaintiffs who feel that their rights have been violated by an employer’s behavior would want that behavior, and the injustice it perpetuates, to end. In cases involving discrimination, it is especially likely that even those plaintiffs safe from immediate harm will be concerned about protecting those class members that are suffering as they once did. Perhaps that is why no case discusses the employment status of the plaintiffs as a factor in granting or denying class-certification under Rule 23(b)(2) even when former employees are explicitly mentioned as part of the class. . . .
Id. at 1234–35 (citation and footnote omitted). The court rejected defendant’s argument that the punitive-damages claim was so large that monetary relief must be considered predominant, stating: “However, such a large amount is principally a function of Wal-Mart’s size, and the predominance test turns on the primary goal of the litigation—not the theoretical or possible size of the damage award.” Id. at 1235 (emphasis in original). The court noted that claims for compensatory damages were not included in the class certification. It held that the claim for punitive damages did not automatically make the case ineligible for Rule 23(b)(2) certification, particularly in light of the lower court’s order granting class members the right to opt out of the class for purposes of punitive-damages. Id. at 1235–36. The court suggested that the lower court should have allowed an opt-out right on back pay claims as well and stated that in the absence of such a provision the back-pay claims undercut the motion for class certification, but held that the lower court did not err in finding that the class’s claims for injunctive relief nevertheless predominated over the claims for back pay. Id. at 1237. The court then held that class certification did not deprive defendant of substantive defenses. It summarized its holding on this issue:
This case involves the largest certified class in history. The district court was cognizant of this fact when it concluded that the class size, although large, was not unmanageable. In analyzing the manageability of the class at all stages of the case, the district court reasoned that if, at the merits stage, Wal-Mart was found liable of discrimination, the court could employ a formula to determine the amount of backpay and punitive damages owed to the class members. Wal-Mart contends that, by reaching this conclusion, the district court “decided to strip Wal-Mart of its right to defend itself.”
Raising objections more appropriate for the merits stage, Wal-Mart maintains that it has the right to an individualized hearing for each class member’s claim so that it may present a defense relevant to the facts raised but that such a right cannot be exercised in a class action because of the enormous class size. Wal-Mart further contends that, by eliminating Wal-Mart’s ability to present a defense to each individual’s claims, the district court altered substantive law. For the reasons stated below, we find that the district court neither deprived Wal-Mart of substantive defenses nor altered substantive law when it certified the class.
Id. at 1237–38. The court held that neither Title VII nor Int’l Bhd. of Teamsters v. United States, 431 U.S. 324 (1977), nor the Civil Rights Act of 1991, nor the presence of a punitive-damages claim, nor due process, require individualized hearings on relief. 474 F.3d at 1238–42. The court stated that a Special Master could be employed to develop a formula for the distribution of a punitive-damages award, and stated:
Thus, in the event that Wal-Mart faces a punitive damages award, the district court took—and presumably will continue to take—sufficient steps to ensure that any award will comply with due process. [FN19] __________
FN19. The district court speculated that a Special Master might assist the court by developing and employing a formula to compute damages at the remedy stage. . . . Wal-Mart contends that its Seventh Amendment rights to a jury trial will be violated if the district court assigns this task to a Special Master. However, neither Plaintiffs nor the district court has suggested that a Special Master would be substituted for the jury as the fact-finder. Further, as Plaintiffs note, any formula, whether prepared by a Special Master or the parties’ experts, can be subjected to a jury’s review. . . .
Id. at 1242 (citations omitted).
4. Restrictions on Relief Dukes v. Wal-Mart, Inc., 474 F.3d 1214 (9th Cir. 2007), petition for reh’g en banc filed and response requested, affirmed the grant of class certification and the limits the lower court imposed on back pay and punitive damages for promotion claims. The court limited the monetary relief awardable by affirming the lower court’s requirement that class members demonstrate objective evidence of their interest in promotions in order to be entitled to back pay or punitive damages. The court recognized that this might deny all monetary relief to the class members most exposed to discrimination, but held that this was a consequence of the lack of individualized hearings:
Wal-Mart’s corporate records may provide substantial objective information about class members’ qualifications for promotions, but there is no suggestion that such records demonstrate or quantify Plaintiffs’ interest. . . . Thus, the district court reasoned, individual hearings would be necessary to determine which class members had an interest in promotions. . . .
Conceding that individualized hearings would be unmanageable, Plaintiffs suggest that this court overlook the district court’s interest requirement. However, there is no support for this proposition. Rather, courts have recognized that a class member may be qualified for a promotion but not interested in taking advantage of that opportunity. . . . Although Plaintiffs are correct that neither Teamsters nor McKenzie definitively requires individualized proof of interest at the remedy stage, Plaintiffs fail to present any case where a court states that individualized proof of interest is irrelevant.
We recognize that awarding backpay relief only to those plaintiffs who can demonstrate an interest in a promotion may deny relief to those class members exposed to the greatest opportunities for discrimination in promotions . . . and in turn fail to provide the class with “the most complete relief possible” . . . . However, in light of relevant case law, the district court acted reasonably when it concluded that class members must be able to prove with objective data an interest in a promotion in order to be eligible to collect certain damages. . . . Therefore, we find that the district court did not abuse its discretion when it concluded that backpay for promotions may be limited to those plaintiffs for whom actual proof of qualification and interest exists.
Id. at 1243–44 (citations omitted). Judge Kleinfeld dissented. Id. at 1244–49. See also the discussion of this case in the sections above on “Statistics” and on “Mixed Motives.”
Practice Suggestion: The limitation on recovery points to the importance of ensuring the preservation of, and discovering, all e-mails and other documents that might contain information about promotability and interest in promotions. Messages between managers, exit interviews, performance evaluations, personnel folders, and the like could all contain such objective evidence. If a defendant fails to preserve such records, perhaps an appropriate sanction might be to waive the requirement of objective evidence of interest in promotions. In some cases, the proof-of-claim form includes a statement that the class member would have been interested in promotions at the time, and it falls to the defendant to rebut it.
G. Efforts to Enforce Class Judgment Andrews v. Roadway Express Inc., 473 F.3d 565, 568–69, 99 FEP Cases 774 (5th Cir. 2006), petition for cert. filed, (U.S., March 17, 2007) (No. 06–1290), affirmed the dismissal on summary judgment of four class members’ action to enforce a 1985 consent decree in a Title VII and § 1981 case. The court held that State law provided the relevant time frame—ten years in Texas—for a judgment to become dormant, and the relevant time frame—two years, in Texas—to revive a dormant judgment. Plaintiffs brought their action seventeen years after the Supreme Court denied review of the appellate order affirming the grant of final approval of the class settlement. The court explained:
Appellants do not cite, and we have not found, any authority supporting their assertion that the district court’s retention of continuing jurisdiction to enforce its judgment is tantamount to electing a process of enforcement other than execution according to state law. Instead, appellants confuse the district court’s jurisdiction to enforce the judgment-which no party disputes-with the procedures by which the district court will enforce it. Moreover, we hesitate to interpret the Order’s language so broadly as to override Rule 69(a)’s standard writ of enforcement procedures, especially since Rule 69(a)’s “otherwise” clause is to be construed narrowly. See Aetna Cas. & Sur. Co. v. Markarian, 114 F.3d 346, 349 (1st Cir. 1997); Combs, 785 F.2d at 980; Shuffler v. Heritage Bank, 720 F.2d 1141, 1148 (9th Cir.1983) (“[W]e do not interpret the exception to execution to permit a federal court to ‘enforce a money judgment by . . . methods other than a writ of execution, except in cases where established principles so warrant.”) (quoting 7 J. Moore & J. Lucas, Moore’s Federal Practice ¶ 69.03 (2d ed.1982)). Accordingly, the district court’s mere retention of continuing limited jurisdiction to enforce a final judgment does not trigger the “otherwise” clause of Rule 69(a).