Human Resource Executive Online, August 18, 2015 – Rethinking Class-Action Requirements

Posted August 18th, 2015.

As appeared on Human Resource Executive Online

By Mark McGraw
Tuesday, August 18, 2015

Four years ago, the Supreme Court ruled in Wal-Mart Stores Inc. v. Dukes. The Court’s decision in that pivotal case struck down what would have been a class-action employment action involving 1.6 million Wal-Mart employees, and led experts to predict that achieving class certification would now be more difficult for plaintiffs and their attorneys.

Now, however, a 4th Circuit court decision in South Carolina may be providing plaintiffs with an easier path to class certification.

In a 2-1 decision, the 4th Circuit—covering Maryland, North Carolina, South Carolina, Virginia and West Virginia—recently reversed a district court’s previous decision that decertified a class of African-American steel workers at Charlotte, N.C.-based Nucor Corp.’s Nucor Steel Berkeley plant in Huger, S.C.

In overturning the district court ruling and remanding for recertification of the class, the 4th Circuit didn’t adhere to class-action certification requirements as strictly as the Supreme Court did in the Dukes case, which was cited 571 times across lower federal and state courts in 2014.

The 4th Circuit reached its decision for two primary reasons, says James Hammerschmidt, a Bethesda, Md.-based co-managing partner at Paley Rothman, and co-chair of the firm’s employment law practice.

Beyond “the irritation” the 4th Circuit felt with the district court “for not having followed the court’s prior mandate to certify the class,” the equities of the case made it compelling, he says.

For instance, court documents indicate that statistical analysis of a four-year period (December 1999 to December 2003) suggest the plaintiffs’ experts established a benchmark using “change-of-status” forms filed by the company whenever a promotion took place at the plant, finding significant statistical disparities in the number of white employees receiving promotions in comparison to black employees.

(According to court records, the Nucor Steel Berkeley plant encompasses six production departments that work together to melt, form, finish and ship steel products to customers. At the start of this litigation, 611 employees worked at the plant. Despite 71 of these employees—nearly 12 percent—being black, there was at most one black supervisor in the production departments until after the Equal Employment Opportunity Commission initiated the charges that preceded the class action.)

The plaintiffs also produced “a mountain of anecdotal allegations of a hostile work environment,” which affected decisions regarding promotions, says Hammerschmidt.

For example, the suit alleges a series of discriminatory practices that court documents describe as “disquieting in their volume, specificity and consistency,” including the routine use of racial epithets directed at African-American employees via the plant-wide radio system, the circulation of racist emails and “the prominent display” of a hangman’s noose.

Hammerschmidt says the Nucor promotion practices the plaintiffs are calling into question are “much more centralized and objective than those in Wal-Mart,” adding that there is evidence of a “common glue” that was not present in the Wal-Mart suit, a sex-discrimination case in which approximately 1.6 million female employees accused the Bentonville, Ark.-based retail behemoth of gender discrimination in its pay and promotion practices across many Wal-Mart locations.

“In Wal-Mart, there was no anecdotal evidence of animosity toward women across the country in its 3,400 stores, whereas here there is ample evidence of racial hostility toward blacks, and of a conspiracy among the managers to ensure that there would not be a black supervisor at the plant,” says Hammerschmidt, adding that the Wal-Mart case found no evidence that the alleged culture of gender bias concretely influenced employment decisions across the country.

In that case, the Supreme Court essentially set new, tougher standards for class certification. The three-plus years since that ruling, however, have brought about a “rebooting process” of sorts for plaintiffs’ attorneys seeking class certification, says Gerald Maatman, a Chicago-based partner and co-chair of Seyfarth Shaw’s class-action defense group.

Plaintiffs’ attorneys “are trying out new theories” in seeking certification, he says. “And this is an example of a new theory—limiting the class theory to a single plant and a single employment practice—that worked.”

We may soon see other courts taking a similar view of certification requirements, says Katherine Kimpel, an executive board member and managing partner of Sanford Heisler Kimpel’s Washington office.

“The 4th Circuit’s opinion is, in many ways, consistent with long-standing precedents regarding various aspects of class-action litigation,” says Kimpel.

In refusing to endorse criticisms of the data and statistics used by the plaintiffs, for example, the court “simply affirmed long-standing precedent that says that evidence of that sort doesn’t need to be ‘perfect.’ ”

As one of the highest courts in the land, the 4th Circuit’s ruling serves as “affirmation of the enduring value of those earlier cases, carries particular weight and helps crystalize how those prior precedents apply specifically to post-Wal-Mart class cases,” continues Kimpel.

For instance, she says, this ruling explains more fully how statistics and anecdotes from class members should be read together “to determine if there is a systemic problem,” she says.

“This decision makes it very clear that anecdotal evidence—here it’s the stories relayed by the named plaintiffs and 16 other individuals—plays an important role.”

The 4th Circuit opinion also illuminates the fact that “even if decisions are made by a range of lower-level managers, those decisions must be ratified by a more-senior individual,” says Kimpel.

Indeed, any court would likely have difficulty believing that the type of “widespread and appalling” work environment such as the one that allegedly permeated the Nucor plant “was not well-known throughout the company’s management,” adds Hammerschmidt.

Of course, no workplace has room for the sort of behavior detailed in this case. But, in the event that the organization does have to handle a claim of discrimination, “sound nuts-and-bolts HR policies and procedures are always the best antidote,” says Maatman, “so these problems are isolated and individualized rather than systemic.”

And, “every single discrimination claim is worthy of a response,” he adds, “in order to get to the bottom of it and diffuse it, so you don’t have a second, third or fourth situation or incident to deal with.”

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