Challenging Certification in Employment

Class Claims: Leveraging Comcast and Dukes Strategies for Determining Whether, When and How to Oppose Certification

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TUESDAY, NOVEMBER 26, 2013

Presenting a live 90-minute webinar with interactive Q&A

A. Craig Cleland, Shareholder, Ogletree Deakins Nash Smoak & Stewart, Atlanta

Joel C. Griswold, Partner, BakerHostetler, Chicago

Stephen E. Fox, Principal, Fish & Richardson, Dallas

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Certification in Employment Class Claims: Leveraging Comcast and Dukes

Strategies for Determining Whether, When and How to Challenge Certification

Stafford Webinars

November 26, 2013

A. Craig Cleland, Shareholder, Ogletree Deakins Nash Smoak & Stewart, Atlanta

Stephen E. Fox, Principal, Fish & Richardson, Dallas

Joel C. Griswold, Partner, BakerHostetler, Chicago

Agenda

• Overview of class certification

• Review of Dukes ruling

• Review of Comcast ruling

• Review of Dukes progeny

• Review of Comcast progeny

• Practical considerations of class certification in light of Dukes and Comcast and its progeny

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Overview of Class Certification

• Must meet all four requirements of FRCP Rule 23(a):

– Numerosity

– Commonality

– Typicality

– Adequate Representation

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Overview of Class Certification

• Three types of classes under FRCP Rule 23(b):

– (b)(1) – Incompatible Standards/Unitary Decisions

– (b)(2) – Injunctive Relief Class Actions

– (b)(3) – Damages Class Actions

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Wal-Mart Stores, Inc. v. Dukes • Facts

– 1.5 million current and former female Wal-Mart employees claimed sex discrimination with regard to pay and promotions in violation of Title VII

– The named class members were six current or former employees

– Wal-Mart is the nation’s largest private employer operating four types of retail stores with 3,400 locations and employing more than 1 million workers

– Pay and promotion decisions at Wal–Mart are generally committed to local managers' broad discretion

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Wal-Mart Stores, Inc. v. Dukes

• Northern District of California

– Plaintiffs moved the District Court to certify a plaintiff class consisting of “[a]ll women employed at any Wal–Mart domestic retail store at any time since December 26, 1998, who have been or may be subjected to Wal–Mart's challenged pay and management track promotions policies and practices.”

– District Court granted the motion and certified the proposed class

• Ninth Circuit Court of Appeals

– A divided en banc Court of Appeals affirmed the District Court's certification order

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Wal-Mart Stores, Inc. v. Dukes • Supreme Court

– 23(a)(2) Commonality Requirement

• Commonality is met when common answers drive the litigation

• Commonality requirement not met by Plaintiffs

– 23(b)(2)

• Claims for monetary relief may not be certified under 23(b)(2) where monetary relief is not incidental to the requested equitable relief

• Claims for individualized relief, like backpay, are excluded; therefore, Plaintiffs’ class was improper under 23(b)(2)

– Dissent (Ginsburg, J. with Breyer, J., Sotomayor, J., and Kagan, J.)

• Agreed with majority on 23(b)(2) issue, but disagreed that Plaintiffs failed to meet the Commonality requirement

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Wal-Mart Stores, Inc. v. Dukes

• Since the Supreme Court decision:

– Plaintiffs sought to certify a narrower class of three classes of women who worked in three of Wal-Mart's regions in California from 1998 through 2002

– Northern District of California denied certification on August 2, 2013

– On November 19, 2013, the Ninth Circuit Court of Appeals declined to take Plaintiffs’ appeal

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Comcast Corporation v. Behrend

• Facts

– 2 million current and former Comcast subscribers in the Philadelphia metro area sought certification under 23(b)(3), alleging Comcast had violated Sec. 1 and 2 of the Sherman Act

– Plaintiffs alleged that violations occurred because Comcast was deliberately buying up cable systems in areas where it had a significant market presence, often in return for giving up systems in areas where it was less concentrated

– Plaintiffs argued four different theories of antitrust injury

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Comcast Corporation v. Behrend

• Eastern District of Pennsylvania

– District Court accepted one theory of antitrust impact as capable of classwide proof and rejected the rest

– The accepted theory was the overbuilder theory

• The proposition that Comcast’s alleged behavior deterred entry by “overbuilders” – companies who deliberately entered a market where another cable provider was already established

– District Court found that damages resulting from overbuilder-deterrence impact could be calculated on a classwide basis

• Third Circuit Court of Appeals

– A divided panel affirmed

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Comcast Corporation v. Behrend • Supreme Court

– 23(b)(3)

• Rule 23(a) or (b) analysis will frequently entail overlap with merits

• Plaintiffs’ model attributed damages collectively to all four proposed theories and not just the overbuilder theory

• Plaintiffs’ class action was improperly certified under Rule 23(b)(3)

• District Court and Court of Appeals improperly saw no need for respondents to tie each theory of antitrust impact to a separate calculation of damages because they saw no place for a consideration of merits at the certification stage

– Dissent (Ginsburg, J. and Breyer, J., with Sotomayor, J., and Kagan, J.)

• Argued that the Court should have dismissed the petition for writ of certiorari after it became evident that the question the Court had agreed to decide was no longer in the case

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Developments Since Dukes

• The New Commonality

• Predominance

• Burden of Proof

• Road Maps for Future Cases

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Developments Since Dukes

• McReynolds v. Merrill Lynch, Pierce, Fenner & Smith (N.D. Ill. 2013) (race) (settlement $160 million)

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Developments Since Dukes

• Calibuso v. Bank of America Corp. (E.D.N.Y. 2013) (sex) (settlement $39 million)

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Developments Since Dukes

• Tabor v. Hilti, Inc. (10th Cir. 2013) (sex) (certification denied—no uniform policy)

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Developments Since Dukes

• Unsettled Law in (b)(2) Classes

• Issue Classes Under (c)(4)

• Trial by Formula

• FLSA cases

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Comcast v. Behrend

• Individualized damages can defeat class certification

• Damages must be “capable of measurement on a classwide basis,” otherwise “[q]uestions of individual damage calculations will inevitably overwhelm questions common to the class”

• At the class certification stage, plaintiffs must come forward with sufficient evidentiary support to establish that damages can be measured on a classwide basis

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Comcast v. Behrend

• Third Circuit: it was sufficient that the plaintiffs “provided a method to measure and quantify damages on a classwide basis” and that it was unnecessary to decide “whether the methodology [was] a just and reasonable inference or speculative.”

• Supreme Court: “[u]nder that logic, at the class-

certification stage any method of measurement is acceptable so long as it can be applied classwide, no matter how arbitrary the measurements may be. Such a proposition would reduce Rule 23(b)(3)’s predominance requirement to a nullity.”

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Comcast v. Behrend – The Dissent

• The dissent in Comcast attempts to limit the significance of the decision:

– “good for this day and this case only”

– “breaks no new ground”

– “recognition that individual damages calculations do not preclude class certification under Rule 23(b)(3) is well nigh universal”

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Developments Since Comcast

• The Supreme Court did not waste time in applying Comcast outside of the antitrust context

– Four days after Comcast, the Supreme Court vacated the Seventh Circuit’s judgment in a wage and hour case, RBS Citizens, N.A. v. Ross, and remanded the case “for further consideration in light of Comcast Corp. v. Behrend, 569 U.S. __ (2013).”

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Developments Since Comcast

• Ross v. RBS Citizens, N.A. (7th Cir. 2012) – N.D. Ill.: certified two classes of plaintiffs (assistant

bank managers and hourly employees) working at 100 locations throughout Illinois

– Seventh Circuit: affirmed and limited its review to two “narrow” issues: • (1) the class definition under Rule 23(c)(1)(B)

• (2) commonality under Rule 23(a), in light of Dukes

– Seventh Circuit did not consider predominance under Rule 23(b)(3)

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Developments Since Comcast

• Takeaways from Supreme Court’s GVR in Ross:

– Comcast applies in employment class actions

– Is a reliable method of measuring damages on a classwide basis needed to establish Rule 23(a) commonality?

• The weight to be accorded to the GVR has been the subject of debate

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Developments Since Comcast

• Courts have responded to Comcast by:

– Denying class certification where the plaintiff does not establish that damages are capable of measurement on a classwide basis

– Distinguishing Comcast and finding that the plaintiff did establish that damages are capable of measurement on a classwide basis

– Certifying an issue-based subclass for liability, but requiring individualized damages hearings

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Developments Since Comcast

• Denying class certification where the plaintiff does not establish that damages are capable of measurement on a classwide basis

– Roach v. T.L. Cannon Corp. (N.D.N.Y. March 29, 2013)

– Smith v. Family Video Movie Club, Inc. (N.D. Ill. April 15, 2013)

– Ginsburg v. Comcast Cable Communications Management, LLC (W.D. Wash. April 17, 2013)

– Tracy v. NVR, Inc. (W.D.N.Y. Apr. 29, 2013)

– Fernandez v. Wells Fargo Bank, N.A. (S.D.N.Y. Aug. 28, 2013)

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Developments Since Comcast

• Distinguishing Comcast and finding that the plaintiff did establish that damages are capable of measurement on a classwide basis

– Leyva v. Medline Indus. Inc. (9th Cir. 2013)

– Parra v. Bashas’, Inc. (D. Ariz. May 31, 2013)

– Barbosa v. Cargill Meat Solutions Corp. (E.D. Cal. July 2, 2013)

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Developments Since Comcast

• Certifying an issue-based subclass for liability, but denying certification for damages

– Jacob v. Duane Reade, Inc. (S.D.N.Y. Aug. 8, 2013)

– Whitlock v. FSL Management, LLC (W.D. Ky. Oct. 16, 2013)

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The Takeaway

• Plaintiffs bear the burden of establishing a clear and reliable method for proving liability and measuring damages on a class-wide basis at the time they move for certification

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Practical Considerations in Employment Class Claims

• Conduct an early assessment of the class

• Focus defense on defeating commonality, typicality, and Rule 23(b) requirements

• Provide evidence that challenged employment practice was not the result of a company-wide policy or practice

• Deciding when to settle

• Potential strategies by plaintiffs

• Effect on small businesses

• Recommendations for small businesses

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Conduct an Early Assessment of the Class

• Determine the potential class size

• Analyze the relevant written policies and practices

• Observe the workplace

• Interview management personnel and a sample of the employees

• Research related class decisions

• Gather sufficient financial data to calculate potential damages exposure

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Focus Defense on Defeating Commonality, Typicality, and Rule 23(b) Requirements

• Tailor various discovery devices towards defeating certification requirements:

– document requests

– interrogatories

– expert statistical analysis and reports

– affidavits and declarations of former and current supervisors or managerial employees

• Prepare to depose named plaintiffs and a sample (if the court allows) of other potential class plaintiffs

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Provide Evidence That Challenged Employment Practice Was Not the Result of a

Company-wide Policy or Practice

• Show differences in:

– Potential plaintiffs’ job duties

– Reporting structure

– Job performance

– Alleged adverse actions at issue

– Individual plaintiffs’ purported evidence

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Deciding When to Settle

• Obviously, consider the dollar value of each case

• Whether settling would permit the company to become more proactive and reform its practices

• Whether resolving a case quickly will protect the company’s reputation

• How likely will settling pave the road for additional lawsuits

• Be aware of the lack of confidentiality associated with settling a class action and how that ties into the possibility of future lawsuits

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Potential Strategies by Plaintiffs

• Using smaller classes in smaller geographic regions – Not a guarantee, especially given the recent developments in the Dukes case

• Simplifying pleadings

• Identifying employment policy or practice more clearly

• Linking claims from local manager decisions to common policy or practice

• Tying discrimination to company executives

• Avoiding the reliance on “bottom line” statistics

• Providing a detailed trial plan

• Pursuing non-class action multiple plaintiff cases under FRCP 42

• Considering partial or issue certification

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Effect on Small Businesses

• Easier for potential class to satisfy commonality

– Less opportunity to allocate discretionary authority

– Fewer employees

• Fewer resources to defeat certification

• Fewer absentee members make Rule 23(b)(3) easier to satisfy

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Recommendations for Small Businesses

• Incorporate to separate business and personal assets

• Incorporate arbitration agreements and class waiver provisions in employment contracts

• Invest in appropriate liability insurance

• Engage in subjective practices

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Contact Information

A. Craig Cleland, Shareholder Ogletree Deakins Nash Smoak & Stewart

craig.cleland@ogletreedeakins.com 404-870-1718

Joel C. Griswold, Partner BakerHostetler

jcgriswold@bakerlaw.com 312-416-6238

Stephen E. Fox, Principal Fish & Richardson

sfox@fr.com @StephenEFox 214-292-4060

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