Ellis v. Costco: Federal Court Certifies Class, Distinguishes Dukes

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A federal judge has certified a class of current and former Costco employees who allege that the wholesale giant failed to promote women to management positions at a rate commensurate with male employees. Ellis v. Costco, No. 04-3341 (N.D. Cal. Sept. 25, 2012) (order certifying class) (available here). In a sprawling, meticulously detailed 86-page decision, Judge Edward M. Chen extensively distinguishes the Title VII claims against Costco from those deemed not suitable for class treatment in the U.S. Supreme Court’s Wal-Mart v. Dukes (131 S.Ct. 2541 (2011)). As such, Ellis is expected to provide widely applicable guidance to trial courts as they interpret and apply Dukes.

Ellis has traveled a long procedural path; its 2007 certification ruling by then-presiding Judge Marilyn Hall Patel was vacated by the Ninth Circuit, which directed the trial court to reprise its certification analysis in light of Dukes. See Ellis v. Costco Wholesale Corp., 657 F.3d 970 (9th Cir. 2011). Though also a Title VII discrimination case, Dukes is distinguishable from Ellis, most conspicuously in class size. While the Dukes plaintiffs sought to certify a class of some 1.5 million female Wal-Mart employees, the Ellis class is comprised of approximately 700 current and former Costco employees. Judge Chen reasoned, “[a]lthough class size has no per se bearing on commonality, when the claims focus in part on the exercise of managerial discretion, it is reasonable to suspect that the larger the class size, the less plausible it is that a class will be able to demonstrate a common mode of exercising discretion.” Order at 24. 

Indeed, Judge Chen relied on and excerpted extensively from the Ninth Circuit’s decision, in particular its description of Costco’s store-level management structure, concluding that “[d]espite the lack of written guidelines” governing Costco’s promotion procedures, “as observed by the Ninth Circuit, Costco nonetheless imposes uniform practices and policies with regard to its promotion system.” Id. at 7. 

However, it is the “specific employment practices” identified by the Ellis plaintiffs which are cited as the “most important” distinguishing factor in the opinion: “Unlike in Dukes, which the Supreme Court concluded merely identified the delegation of discretion (i.e., the absence of a policy), here Plaintiffs identify specific practices and a common mode of guided discretion directed from the top levels of the company.” Id. at 25.

Because the Ellis opinion closely tracks the Ninth Circuit’s remand order (and in so doing distinguishes Dukes), the plaintiffs’ discovery strategy and presentation of evidence of predominant common questions are likely to be used as a template for certification motions filed in other employment class actions. Specifically, the Ellis order notes that Costco employs the “same recruitment and selection process” company-wide, and “[t]op management’s involvement in the promotion process is also consistent, and pervasive.” Id. at 28, 29.

Ellis is likely to be a key ruling in the post-Dukes era, and it provides a far more optimistic view of the possibilities for class treatment than many had predicted when Dukes was issued.