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Class Action Litigation of Employment Discrimination Claims in 2001

December 31, 2001

Employers spent millions of dollars in 2001 defending class action discrimination cases, and some employers spent millions more settling such cases.

What is a class action?

A class action lawsuit enables one or more members of a group to pursue claims on behalf of other similarly-situated individuals. Plaintiffs seeking to commence a class action lawsuit must ask the court to "certify" a class of plaintiffs on whose behalf the named individual plaintiff(s) may proceed. The court has discretion to certify a class where (i) the class is so numerous that the inclusion of each class member individually is impracticable ("numerosity"); (ii) there are questions of law or fact common to the class ("commonality"); (iii) the claims or defenses of the representative parties are typical of the claims or defenses of the class ("typicality"); and (iv) the representative parties will fairly and adequately protect the interests of the class ("adequacy").

Why do plaintiffs pursue employment discrimination claims as class actions?

A class action allows individuals to bring claims as a group that they might not have otherwise brought individually. This could be because the value of individual claims is too small to justify the costs of initiating litigation. Or, it could be because some employees are hesitant to sue their employers on their own. However, membership in a class of plaintiffs provides employees with a cover of anonymity, as well as a feeling of belonging to a larger group. Most class members never have to testify or even provide information to the defendant regarding their specific allegations. The named plaintiffs in the suit generally take on that responsibility alone.

Employment discrimination class actions provide incentives for plaintiffs' attorneys as well. The anti-discrimination statutes under which plaintiffs generally file employment discrimination suits require defendants to pay the prevailing plaintiffs' attorney's fees. More plaintiffs in a case translates to more attorney's fees for plaintiffs' counsel. And, when a large company is sued, the resulting negative publicity may prompt the defendant to settle. Class action settlement agreements, moreover, typically include generous payments to the plaintiffs' attorneys.

Significant class action settlements in 2001

A number of employers faced with class action employment discrimination cases elected to settle those cases in 2001. For example:

Ford Motor Company agreed on December 18, 2001 to pay $10.5 million to settle two class action lawsuits in which the auto maker was accused of discriminating against older, white male employees in an effort to achieve its diversity goals. The plaintiff class (comprising approximately 620 current and former Ford employees) had contended that the system Ford began using in 2000 to evaluate approximately 18,000 of its managers and supervisors unfairly favored "diversity candidates" (younger women and minorities), and that a disproportionate number of older white men were given low grades, costing them raises or promotions.

Courts continue to disagree as to whether class actions are barred where monetary damages are sought

Under the federal Civil Rights Act of 1991, plaintiffs in Title VII actions can potentially recover both compensatory and punitive damages. Determining the extent of such damages tends to require individualized proof of the specific harm suffered by each individual plaintiff. Where plaintiffs seeking class action certification request both monetary and injunctive relief, the need for individualized assessment of appropriate monetary damages seems to conflict with the requirements that class members share commonality and typicality in their claims. In attempting to defeat class certification motions, employers often use this apparent inconsistency to drive a wedge between class members' claims. This approach has met with mixed results in court.

In Robinson v. Metro-North Commuter Railroad, 267 F.3d 147 (2d Cir. 2001), the U.S. Court of Appeals for the Second Circuit (whose jurisdiction includes New York and Connecticut), found that the district court erred in refusing to certify class claims brought by approximately 200 black employees against their employer. The employees contended that Metro-North's disciplinary and promotional procedures were racially discriminatory, and they sought both injunctive and monetary relief in their complaint.

The district court ruled that class certification was not appropriate, since the monetary relief the plaintiffs were seeking was more than "incidental" to the injunctive relief sought. The Second Circuit disagreed, concluding that rather than using such a bright line approach, courts should engage in a balancing test, and should consider whether a reasonable plaintiff would bring the suit even in the absence of possible monetary recovery, and whether the injunctive or declaratory relief sought would be reasonably necessary and appropriate should the plaintiffs succeed on the merits.

Other courts have recently concluded that the presence of monetary damages which are more than "incidental" to the injunctive relief sought dooms class certification. In Miller v. Hygrade Food Products Corp., 198 F.R.D. 638 (E.D. Pa. 2001), for example, the potential plaintiff class, consisting of 200 black employees and temporary employees, alleged that the employer engaged in a pattern and practice of racial discrimination with respect to compensation, hiring, training and discipline. The plaintiffs also alleged that they suffered from racial harassment. The court denied class certification, concluding that the issues surrounding the determination of the monetary relief sought by the plaintiffs could not be assessed by objective standards and would require individual hearings, thereby eroding the cohesion required of a class. In reaching this conclusion, the court was particularly influenced by plaintiffs' failure to allege that each potential plaintiff was affected by the alleged broad range of discriminatory practices in the same manner.

In like fashion, in Smith v. Texaco, Inc., 263 F.3d 394 (5th Cir. 2001), approximately 200 black employees alleged that the company discriminated against them on the basis of race in its promotions, compensation, and performance evaluation systems. The plaintiffs sought both compensatory and punitive damages. The district court certified the class, finding that the four elements for class certification had been satisfied. However, the Court of Appeals reversed the order granting class certification, concluding that the plaintiff class lacked the requisite commonality, since their claims for damages required individualized proof. The Fifth Circuit also noted that since each potential class member had a potentially valuable individual claim for damages, and since attorneys fees were available for each plaintiff's claims, a class action was not necessarily a superior method for litigating those claims.

What constitutes an appropriate class?

While courts have not shied away from certifying large classes, they also have not hesitated to rein in plaintiffs who try to create classes covering unrelated facilities spread out over large geographic areas. In Beck v. The Boeing Co., 203 F.R.D. 459 (W.D. Wash. 2001), for example, plaintiffs sought to certify a class comprising as many as 42,000 female employees; the court ultimately certified a class of 30,000. The plaintiffs, who sought injunctive relief and punitive damages, brought disparate treatment claims alleging that were denied job opportunities, promotions, overtime, training, ratings, and bonuses because of their gender.

The plaintiffs had sought to have their class claims certified on a nationwide basis. However, after examining the statistical evidence presented in connection with the plaintiffs' certification motion, the court limited the class to those female employees located in the Puget Sound area. The court specifically noted the difficulties inherent in establishing class claims across multiple work sites.

In certifying a class of plaintiffs (albeit a narrower class than plaintiffs had requested), the court took a similar approach to that employed by the Second Circuit in Robinson: it determined that the plaintiffs would have filed their lawsuit even without the prospect of obtaining any monetary relief. And, while the defendant contended that the class claims could only be litigated by having numerous plaintiffs testify, the court noted that the systemic gender discrimination at issue allegedly occurred at the highest levels of the company, and that this was where the plaintiffs intended to focus their offers of proof.

Unique challenges for employers defending class actions can also arise when multiple plaintiff classes exist in the same lawsuit. In Adams v. R.R. Donnelly & Sons, 2001 WL 336830 (N.D. Ill. April 6, 2001), for example, three distinct plaintiff classes were certified. The first class was comprised of black employees claiming they were denied transfer opportunities after one of the defendant's facilities was closed. The second consisted of black employees who claimed they were funneled into temporary and contract jobs rather than full time positions at the defendant's Chicago Manufacturing Division. The third class consisted of employees who claimed they were subjected to division-specific hostile work environments; this class was subdivided into separate classes based upon location. The third class was certified because these plaintiffs' claims related to a specific division of the company and essentially involved a discrete employment decision or practice aimed at specific individuals.

However, the court declined to certify the following four classes of employees: black employees who were allegedly denied promotions for which they were qualified ("promotions class"); black employees who received lower wages and wage increases than similarly situated white employees on a company-wide basis ("wage class"); claims that nationwide, black employees were funneled into temporary and contract jobs rather than full time positions ("status class"); and black employees throughout the company who were subject to disparate treatment in terms of discipline and discharge ("discipline class").

The court found that the myriad issues involved in these plaintiffs' claims would overwhelm any commonality among the plaintiffs. The most significant impediment to certification of these classes was the variability in personnel practices among the numerous divisions in which these plaintiffs worked. Aside from their allegations of company-wide discriminatory practices, the plaintiffs were unable to present statistical or other evidence of class-wide discriminatory practices. Nor could they demonstrate that the named plaintiff's claims were typical of the class.

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Class action litigation gives rise to complex and high-stakes issues. And the federal courts, in carrying out their responsibility for managing class action litigation, have not hesitated to take an active role in shaping the direction and scope of these lawsuits and in expanding the abilities of plaintiffs to bring them.