Articles from March 2012

In an opinion authored by Judge Richard Posner, the Seventh Circuit has reversed a trial court’s order denying certification of Title VII race discrimination claims.  See McReynolds v. Merrill Lynch, No. 11-3639, (7th Cir. Feb. 24, 2012) (order reversing denial of certification) (available here).

In McReynolds, Merrill Lynch brokers alleged that their employer’s compensation policies had a discriminatory effect on African Americans.  Slip op. at 2.  Merrill Lynch argued that individualized circumstances predominated across the 700 class members, thereby precluding certification per Dukes v. Wal-Mart.  Slip op. at 17.

The plaintiffs had originally moved for class certification in 2010.  The district court denied that motion.  Slip op. at 3.  Then, in a seemingly counter-intuitive move, the plaintiffs renewed their motion based on the Supreme Court’s Dukes decision.  Slip op. at 11.  Again, the district court denied certification.  Slip op. at 11.  However, the district court also suggested that the plaintiffs appeal the ruling to determine how Dukes should affect the certification issue.  Slip op. at 11-12.  The Seventh Circuit accepted the Rule 23(f) appeal.

Writing for the Seventh Circuit, Judge Posner acknowledged that Dukes “may seem a perverse basis for a renewed motion for class certification, since the Supreme Court reversed a grant of certification in what the defendant in our case insists is just like this one.”  Slip op. at 11.  However, in contrast to Dukes, where “there was no company-wide policy to challenge,” Merrill Lynch’s policies were alleged to be company-wide and therefore better suited to a class action treatment.   Slip op. at 12-14.  The McReynolds panel rejected the defendant’s argument that any discrimination would result from the “local, highly-individualized implementation of policies rather than the policies themselves.”  Slip op. at 17.  Even assuming that the defendant’s policies were not intended to discriminate against African American employees, “[t]he incremental causal effect . . . of those company-wide policies—which is the alleged disparate impact—could be most efficiently determined on a class-wide basis.”  Slip op. at 17-18.

Should the plaintiffs succeed in their challenge, each of the class members may have to prove their compensation was adversely affected by the corporate policies in separate, individual actions.  Slip op. at 20-21.  Even so, the Seventh Circuit reasoned that judicial efficiency favored certification:

Obviously a single proceeding, while it might result in an injunction, could not resolve class members’ claims . . . . So should the claim of disparate impact prevail in the class-wide proceeding, hundreds of separate trials may be necessary. . . . But at least it wouldn’t be necessary in each of those trials to determine whether the challenged practices were unlawful.

Slip op. at 18-19. 

In addition to a significant holding that surprised many by reversing the denial of certification, the McReynolds decision also shows an unexpected side of Seventh Circuit Judge Richard Posner, owing to Judge Posner’s reputation as a “conservative.”  However, this opinion, together with Posner’s other judicial opinions, scholarship, and public pronouncements, indicates that he is perhaps more of an iconoclast than a conservative.  

The McReynolds opinion leaves open the prospect of class certification, where it might have otherwise been barred by Dukes, and as such may be influential beyond the Seventh Circuit.

The U.S. District Court for California’s Southern District has issued yet another certification ruling that limits the holding of Dukes v. Wal-Mart and contributes to the growing body of post-Dukes commonality jurisprudence.  See Johns v. Bayer Corp., 09-cv-1935, 2012 U.S. Dist. LEXIS 13410 (S.D. Cal. Feb. 3, 2012) (order granting class certification motion) (available here).  Additionally, the Johns decision confirms the prevalent view that, in consumer class actions, reliance need not be established for each class member on an individual basis.  Rather, classwide reliance can be presumed where a reasonable consumer would be deceived by the at-issue misrepresentations.  Id.

Southern District Court Judge Anthony Battaglia granted certification of a class of California consumers who allegedly paid a higher price for Bayer’s “Men’s 50+ Advantage” and “Men’s Health Formula” vitamins in reliance on Bayer’s claim that the products “support prostate health.”  Id at *2-4.  The Johns plaintiffs allege that “in truth, the vitamins did not provide any prostate health benefits.  In fact, according to Plaintiffs, recent clinical studies have shown that for some men, increased selenium consumption may increase their prostate cancer risk.”  Id. at *3.

Bayer opposed class certification, principally by focusing on the heightened commonality requirement set forth in Dukes.  Id. at *6-14.  Specifically, Bayer argued that the commonality requirement could not be satisfied because there were individualized questions regarding the plaintiffs’ actual reliance on Bayer’s purported misrepresentations, the materiality and timing of Bayer’s health claims, and the amount of damages suffered.  Id.

However, the Johns court rejected Bayer’s arguments, invoking Ninth Circuit authority for the proposition that California consumer laws “take an objective approach of the reasonable consumer, not the particular consumer.”  Id. at *12-13 (citing Williams v. Gerber Prods. Co., 552 F.3d 934, 938 (9th Cir. 2008)) (emphasis in original).  Thus, the key question is whether a reasonable consumer would have been misled by Bayer’s packaging, not whether each individual purchaser was misled.  Id. at *12-13.  In adopting the “reasonable consumer” standard and the presumption of classwide reliance, Johns is consistent with the emerging consensus among California’s federal courts.  See Wolph v. Acer, 272 F.R.D. 477 (N.D. Cal. Mar. 25, 2011) (class-wide reliance presumed from showing that misrepresentation is material to reasonable consumer).   

The Johns decision also addressed Dukes’ “due process” analysis and rejected Bayer’s argument that certification would deprive Bayer of the opportunity to raise defenses to individuals’ claims.  Echoing a similar decision against Bayer by an Ohio district court, the Johns court held that certification would not prevent Bayer from trying individualized defenses, and therefore Dukes did not bar certification.  Id. at *23 (discussing Godec v. Bayer Corp., 2011 LEXIS 131198, *7 (N.D. Ohio Nov. 11, 2011)).

Not surprisingly, the U.S. Supreme Court’s Dukes v. Wal-Mart decision caused many class action defendants to file motions asking trial courts to revisit prior class certification rulings.  One such motion for decertification was recently denied in Driver v. AppleIllinois.  In that action, the defendant argued that Dukes required the decertification of a wage and hour class.  The trial court disagreed, distinguishing Dukes from Driver on grounds that class treatment in Dukes would have required the assessment of numerous subjective employment decisions, whereas class treatment in Driver would involve “strictly objective” issues of law and fact.  See Driver v. AppleIllinois, No. 06-C-6149, Slip op. at 5 (N.D. Ill. Mar. 2, 2012) (order denying motion to decertify) (available here). 

 In Driver, the defendant’s decertification motion came at an unusually late stage in the case, after notice had been distributed to class members and merits discovery had been completed.  See Slip. op. at 2.  The defendant sought a further review of the certification decision following the issuance of new authority, including Dukes and several decisions from within the Seventh Circuit “elucidating the application of [Dukes v.] Wal-Mart.”  Slip op. at 2.

 In denying the motion to decertify, the Driver court emphasized that Dukes was “significantly different” from Driver.  Slip. op at 4.  The Dukes class lacked commonality because the plaintiffs could not show a policy of gender discrimination applicable to all members of the class.  Rather, the plaintiffs’ allegations were predicated on the notion that local store managers exercised their discretion in a manner that created an unlawful disparate impact on female employees.  Slip op. at 4 (quoting Dukes v. Wal-Mart, 131 S. Ct. 2541, 2548).  In contrast, the Driver class shared a common question: “whether AppleIllinois required its tipped employees to engage in duties unrelated to their tipped occupation without paying them at the minimum wage rate.”  Slip op. at 5.  Unlike the Dukes gender discrimination claim, the Driver class’ claims do not require any proof of individual discriminatory intent.  Rather,  “[t]he analysis is strictly objective.”  Id.

 The Driver court’s analysis distinguishing Dukes from wage and hour class actions is potentially advantageous authority for plaintiffs’ counsel as they seek certification.  Notably, the minimum wage and employee classification laws at issue in Drivers are quite similar to California’s comparable statutes.

 Driver may also prove useful in wage and hour actions where the relevant employment policy is unofficial (and thus often referred to as a “practice”).  Analogizing to an earlier Seventh Circuit ruling, the Driver decision concluded that “[t]his case parallels the Ross case, in which declarations supported the plaintiffs’ theory that the defendant enforced an unofficial policy of denying employees overtime pay that was lawfully due.”  Slip op. at 6 (citing Ross v. RBS Citizens, N.A., No. 10-3848, 2012 WL 251927, *7 (7th Cir. Jan. 27, 2012)).

 Between the Driver decision, Ross, and Messner v. Northshore University HealthSystem, No. 10-2514 (7th Cir. Jan. 13, 2012) (reversing denial of certification), the Seventh Circuit has made a substantial contribution to post-Dukes jurisprudence.  Above all, it appears that the death knell for state law wage and hour class actions was sounded prematurely, as post-Dukes jurisprudence has distinguished these cases from gender discrimination claims.

A New York federal court has conditionally certified a class of audit associates in an action alleging that the accounting firm KPMG violated their rights under the federal Fair Labor Standards Act (FLSA).  See Pippins v. KPMG, No. 11-Civ-0377, 2012 U.S. Dist. LEXIS 949 (S.D. N.Y. Jan. 3, 2012) (available here).  Specifically, the plaintiffs claim that KPMG systematically misclassified its auditors in order to avoid paying them overtime.  Id.

The court found that the auditors established that they were “similarly situated” per the FLSA’s certification requirements by proving that they received the same training, served on similarly structured work teams, performed similar job duties, were subject to the same compensation policies, and worked under tightly circumscribed guidelines applicable to all auditors.  Id. at *3-9.  The court rejected the defendant’s argument that individualized issues predominated, and instead gave credence to the plaintiffs’ allegations and declarations indicating that the same practices and policies apply to auditors across the country.  Id. *3, *28-29. 

Although Rule 23 requirements do not formally apply to FLSA collective actions, the Pippins court noted that “KPMG’s alleged policy of classifying all Audit Associates as exempt is the ‘glue’ that the Supreme Court found lacking in Dukes.”  Id. at *21 (discussing Dukes v. Wal-Mart, 131 S.Ct. 2541 (2011)).  The court also relied on decisions by other courts granting certification of classes of auditors with FLSA claims.  See id. at *29-31 (discussing Kress v. PricewaterhouseCoopers, LLP, 263 F.R.D. 623 (E.D. Cal. 2009)(granting conditional FLSA certification); In re Deloitte & Touche Overtime Litig., No. 11-Civ-2461 (S.D.N.Y. Dec. 16, 2011) (same)).

The Pippins matter is also notable due to a prior ruling by the magistrate judge that required KPMG to preserve electronically stored data during the litigation’s pendency, including prior to the time that conditional certification was granted.  That discovery order was subsequently affirmed by the presiding Article III judge, Hon. Coleen McMahon.  See Pippins v. KPMG, No. 11-Civ-0377 (S.D. N.Y Feb. 3, 2012) (order denying defendant’s objections to the discovery order).