Rough Justice Is Not Simple Justice: Fourth Circuit Guts Wal-Mart v. Dukes and Creates Circuit Split by Ordering Title VII Claims Certified as Rule 23(b)(3) Class

By Derek Stikeleather

Judges want to do justice in all cases. In civil-rights cases, they overwhelmingly want to promote equal opportunity and fight racial injustice in America. Title VII employment discrimination cases often provide them with that opportunity. Workers who present persuasive evidence that they were harassed or denied promotions because of their race often find sympathetic jurors and judges who are eager to faithfully enforce fair-employment laws.

A righteous and sincere desire to do justice in civil-rights cases, however, does not insulate judges from legal errors or allow them to resort to rough justice. In the Fourth Circuit’s recent split-panel decision, Brown v. Nucor Corp., the majority resorted to rough justice and erred profoundly by ordering a trial court to certify a Rule 23(b)(3) “class action as a tool to realize Title VII’s core promise of equality.” No. 13-1779 (May 11, 2015), slip op. at 63. In doing so, it necessarily held that one purportedly representative worker’s proof that he was unlawfully denied a promotion because of his race would be adequate proof that every other worker in the plant who shares his racial identity also was denied a promotion because of race and entitled to back-pay. As desirable as Title VII’s goal of racial equality is, the (b)(3) class action has no place in Brown nor in the overwhelming majority of civil-rights cases. It is simply the wrong tool for the job.

A (b)(3) class action is ill-suited to a Title VII action because a representative plaintiff’s ability to prove his individual Title VII case does little or nothing to prove every absent class member’s case. Proof that one black worker in a South Carolina steel plant was denied a promotion based on race would not prove that all black workers in the plant were denied promotions because of race.[1] Even if one worker’s proof of discrimination increases the odds that coworkers faced similar discrimination, especially if they worked for the same supervisor, it is not conclusive or even adequate proof that everyone in the class – regardless of his or her supervisor or department – was denied a promotion because of race. But, applying Brown, most judges in the Fourth Circuit will feel pressure to certify classes on the shaky premise that proof of unlawful discrimination against one representative worker is all that is needed to prove class-wide liability and entitlement to monetary damages. Under Rule 23 and Supreme Court precedent, that is not enough.

The Fourth Circuit’s erroneous decision to compel certification of a Rule 23(b)(3) employment discrimination class action has serious repercussions beyond the immediate case. It throws federal employment law into some disarray by creating a sharp circuit split. It also muddies an area of class action law that the Supreme Court had recently clarified in Wal-Mart v. Dukes, 131 S. Ct. 2541 (2011) (“Dukes”). The case calls out for review – and reversal – by either the en banc Fourth Circuit or the Supreme Court.

Rule 23 has historically limited the scope of civil-rights class actions to cases seeking true injunctive relief, and Dukes affirmed those limitations.

In class actions, “representative” plaintiffs are allowed to sue not only on behalf of themselves but also on behalf of “absent class members,” who never appear in court but share with the named plaintiffs specific traits that define class membership. If the court certifies the proposed class and the representative plaintiffs prove their case, every absent class member also wins the same case. Class actions are exceptional because courts typically (1) decide the rights and liabilities only of the individuals and entities that appear before them and (2) rule in favor of plaintiffs only if they actually prove the required elements of their claim. Recognizing the extraordinary nature of class actions, the Supreme Court began the Dukes opinion by reminding judges and practitioners that class actions are “an exception to the usual rule that litigation is conducted by and on behalf of the individual named parties only.” Dukes, 131 S. Ct. at 2550.

Before 1966, Rule 23 was applied to civil rights (and many other) laws in a manner consistent with established law and equity jurisprudence. Although plaintiffs could seek class-wide relief in civil-rights cases, Rule 23 allowed only injunctive or declaratory relief. This proved a powerful weapon in the civil-rights movement, which sought to vindicate the rights of entire groups through representative litigation. In fact, one of the most famous cases in American history is a pre-1966 civil-rights class action: Brown v. Board of Education, 347 U.S. 483 (1954), which applied injunctive relief to end de jure racial segregation of American public schools.

In the context of civil-rights class actions that seek merely injunctive or declaratory relief, the 1966 revisions to Rule 23(b)(2) were relatively modest. Class actions seeking injunctive relief continued to pursue indivisible relief for entire groups rather than individual or monetary relief. As the Supreme Court unanimously recognized in Part III of Dukes, this component of Rule 23 “reflects a series of [pre-1966] decisions involving challenges to racial segregation—conduct that was remedied by a single classwide order.” Id. at 2558. Dukes emphasized that in “none of the cases cited by the [1966 Rule 23] Advisory Committee as examples of [Rule 23](b)(2)’s antecedents did the plaintiffs combine any claim for individualized relief with their classwide injunction.” Id. Rather, the civil-rights class actions seeking injunctions reflected “the most traditional justifications for class treatment—that individual adjudications would be impossible or unworkable.” Id.

Although the 1966 amendment to Rule 23(b)(2) changed little, Rule 23(b)(3) was revolutionary.[2] As Dukes unanimously recognized, Rule 23(b)(3) represented “an adventuresome innovation of the 1966 amendments, framed for situations in which class-action treatment is not as clearly called for.” Id. at 2558 (internal citations and quotation marks omitted). “It allows class certification in a much wider set of circumstances but with greater procedural protections.” Id.

Courts have struggled to understand the scope of this rule change, which seems to favor more class actions while also imposing “greater procedural protections” that disfavor class actions. The (b)(3) amendments, by allowing class-wide monetary relief, fundamentally changed class actions, empowering plaintiffs (and their counsel) to obtain enormous – and previously unattainable – monetary awards by aggregating thousands of common claims into one representative claim. Under Rule 23(b)(3), a plaintiff could now win a case in court and recover not only for himself on the merits of his case but also generate an exponentially larger class-wide recovery to compensate every absent member of his class without ever trying their individual cases. The catch to a Rule 23(b)(3) certification is that it also requires proof that common issues not only exist but also predominate over individual issues and that class treatment is superior to handling the absent class members’ claims individually.[3]

But in the decades that followed the 1966 amendments to Rule 23, plaintiffs blurred the lines between (b)(2) and (b)(3) class actions by frequently seeking both injunctive and monetary relief and moving for certification simultaneously under both subsections. In this admittedly confusing context, courts often struggled to honor the “greater procedural protections” of the (b)(3) class actions. Certification of the Dukes class action and its affirmance by the en banc Ninth Circuit showed just how far courts had strayed from core class action principles. The Dukes decision brought much-needed clarity to class action law by reminding courts and practitioners of the limits of Rule 23 and the critical differences between (b)(2) and (b)(3) cases.

To summarize Dukes briefly, the plaintiffs had won class certification of Title VII pay-and-promotion gender discrimination claims under Rule 23(b)(2). With certification, three class representatives suddenly represented 1.5 million current and former female Wal-Mart employees from 3,400 stores across the country. Id. at 2547. The case was certified despite Wal-Mart’s explicit published policy against gender discrimination and its decentralized management where individual managers in different stores made their own discretionary promotion decisions. Id. at 2548.

As part of their request for purportedly “injunctive” relief, the plaintiffs sought back-pay awards for the 1.5 million absent class members. Id. The Supreme Court unanimously held that the case presented a request for monetary relief that should have been brought under Rule 23(b)(3) and subject to (b)(3)’s heightened procedural protections. Id. at 2557. The justices unanimously held that Dukes was improperly certified under Rule 23(b)(2) and, in Part II of the opinion, a majority of the Court also held that the case also could not have been certified under Rule 23(b)(3) because it did not satisfy the prerequisite of “commonality” imposed by Rule 23(a)(2). Id. at 2556-57.

By clarifying the meaning of commonality under Rule 23(a)(2), Dukes limited not only Rule 23(b)(2) class actions but also those brought under (b)(3).[4] Under Rule 23(a)(2), all class actions require a common contention “of such a nature that it is capable of class-wide resolution—which means that determination of its truth or falsity will resolve an issue that is central to the validity of each one of the claims in one stroke.” Id. at 2551. In other words, the elements of the relevant claims must be amenable to class-wide proof such that proof of one representative class member’s claim reasonably proves every absent class member’s claim.

The Dukes majority held that the case presented no common questions whose answers would substantively advance every other class member’s claim in one stroke. Id. at 2556-57. Any class representative who could prove that she was unlawfully discriminated against by her supervisor would not simultaneously be proving that other women managed by other supervisors were also unlawfully discriminated against. Wal-Mart’s only uniform policy prohibited gender discrimination and allowing managers too much discretion could not create a common presumption of gender discrimination. Id. at 2554. Plaintiffs argued that they could bridge the “conceptual gap” between proving an individual case and proving every absent class member’s case with (1) statistical evidence that showed women at Wal-Mart were underpaid and under-promoted relative to equally qualified men, (2) anecdotal evidence, and (3) a sociologist’s “social framework analysis,” which found a strong corporate culture subject to gender bias. Id. at 2553-45.

The majority rejected this class-wide proof and held that, under these facts, a district court would abuse its discretion if it found any common questions capable of resolving a class-wide issue. Id. at 2556-57. Necessarily implied in Dukes’s holding that there were no common issues capable of class-wide resolution was that, if the case was brought under the more rigorous standards of Rule 23(b)(3), as it should have been, common issues would not predominate over individual issues. The dissenting justices disagreed with the holding that there were not any common issues, but they did not argue that common issues predominated over individual ones. Id. at 2561. Instead, they argued that it would be the district court’s role to decide the predominance question on a properly framed motion. Id.

Brown v. Nucor misapplies Dukes and exceeds the permissible scope of Rule 23(b)(3).

Dukes compelled the Fourth Circuit to reexamine its handling in Brown of a certified Title VII class action by “black steel workers” in a South Carolina plant who alleged racial discrimination in pay and promotion as well as a hostile work environment. Before the Supreme Court handed down Dukes, the District Court of South Carolina denied class certification of all Title VII claims, which it had divided into a job promotion practices action and hostile-environment action, but the Fourth Circuit later reversed the denial of class certification for both claims. After Dukes, the district court reexamined its rulings and decertified the job promotion practices class, while allowing the hostile-work-environment class to remain certified.

In reviewing this revised decision, a divided panel of the Fourth Circuit held that the district court had misapplied Dukes by decertifying the job promotion practices class. It held that the lower court had no discretion to decertify the class where plaintiffs had put forth (1) statistical evidence of racial disparities in promotions, (2) “substantial anecdotal evidence” that “suggests discrimination in multiple plant departments,” and (3) “significant evidence that those promotions decisions were made in the context of a racially hostile work environment.” Slip op. at 3-4.[5] Although the panel majority faulted the district court for “fundamentally misapprehend[ing] the reach of Wal-Mart and its application to the workers’ promotion claims,” id. at 4, it is the majority itself, however, that has fundamentally erred.

It is undisputed that the Nucor plant had no general or uniform company policy that favored racial discrimination or a policy that had uniform, adverse effects on individual black workers. See id. at 6. It is further undisputed that the plant was divided into six production departments, each of which made its various discretionary promotion decisions according to its own standards and methods. See id. at 33-37. In this setting, one worker’s proof that he was discriminated against in his department would not prove that every similar worker in every department at the plant suffered the same unlawful discrimination in promotions. Dukes does not leave room for the Fourth Circuit to hold that a district court judge abused his discretion by deciding that such a claim should not proceed as a Rule 23(b)(3) class action.

The Fourth Circuit’s Brown opinion has also created a sharp circuit split on the viability of Title VII promotion class actions where the employer’s decision-makers and policies are not uniform. Specifically, the Eighth Circuit declined to order the creation of a class when applying Dukes to a case strikingly similar to Brown. See Bennett v. Nucor Corp., 656 F.3d 802 (8th Cir. 2011). In Bennett, six African-American steel workers at an Arkansas plant challenged the same employer, alleged the same types of unlawful conduct, and employed the same statistical analysis when seeking certification of their Title VII job promotion practices class action. Id. at 808.

The Eighth Circuit affirmed the trial judge’s decision not to certify the same proposed class at the Arkansas plant. Id. at 807. The trial judge also granted the company summary judgment on the named plaintiffs’ failure-to-promote claims, id., but allowed the individual plaintiffs to proceed to trial with their hostile-work-environment claims and – despite the company’s objection – allowed the jury to hear evidence of racial harassment of non-parties at the same plant along with the necessary evidence of harassment experienced by the actual plaintiffs. Id. at 809. The plaintiffs were each awarded $200,000 in monetary damages on their individual claims, which included $100,000 in punitive damages for each plaintiff. Id. at 807.

Bennett shows that the South Carolina plaintiffs – to the extent that their unproven allegations are later shown to be true – have a meaningful remedy under Title VII without creating a Rule 23(b)(3) class. A quick review of the elements of a failure-to-promote claim shows just how unworkable a (b)(3) class action would be. To simply establish a prima facie case of racial discrimination, the familiar McDonnell Douglas burden-shifting framework requires each plaintiff to prove that:

(1) he is a member of a protected group;

(2) he applied for promotion to a position for which the employer was seeking applicants and for which he was qualified;

(3) he was not promoted; and

(4) similarly situated employees who did not belong to the protected group were promoted instead.

Bennett, 656 F.3d at 819-20.

If one member of the proposed South Carolina class states a prima facie case, it cannot be reasonably presumed that everyone in the class can state a prima facie case. Only individual inquiry, i.e., litigation, would determine whether a steel worker in the absent class was qualified for the promotion he did not receive. Only individual inquiry would determine whether that steel worker in the absent class had not, in fact, been promoted. And only individual inquiry would determine whether a non-black worker was promoted instead. To presume that (1) all class members were qualified, (2) none were promoted, and (3) no one who filled these open positions was black is to presume that a Title VII defendant must be discriminating against everyone in a protected group if someone merely files a class action against it.

The prima facie case would precede yet another necessarily detailed individual inquiry into whether the employer’s nondiscriminatory reason for denying a specific worker’s promotion was a pretext for racial discrimination. If 10 workers were denied promotions for “lack of experience” or “disciplinary problems,” a jury could reasonably find that the reasons were perfectly valid for some of the workers but pretext for the others. Only individual inquiry would reveal the answer for each worker. Rule 23 allows for efficiency where it is reasonable and fair; it does not allow a court to trample a party’s right to defend itself whenever plaintiffs paint it as a racist.

Rule 23(b)(3) class certification can only be applied in limited circumstances that do not include Title VII cases with multiple supervisors.

What is too often lost in class action analysis – and what the panel majority lost sight of in Brown v. Nucor – is that Rule 23(b)(3) class actions are not a panacea for any and all unlawful conduct. Many types of cases beyond civil-rights law simply cannot be certified under Rule 23(b)(3). For example, courts rarely certify Rule 23(b)(3) personal-injury class actions because one plaintiff’s ability to prove that a defendant caused her personal injury rarely proves that the same defendant caused every other plaintiff’s personal injury.[6]

If a hypothetical individual plaintiff proves in court that a prescription drug caused her to go blind, she has not proved that the drug caused blindness in everyone else who took the drug and became blind. Certifying a Rule 23(b)(3) class of drug users who became blind would provide no judicial efficiency because doing so would either (1) presume that the defendant is liable to everyone if it is liable to the named plaintiff or (2) require separate mini-trials to prove each class member’s case. The class-wide presumption of liability is impermissible, and the train of individual trials would destroy any possible efficiency that class treatment had hoped to achieve.

For these same reasons, Title VII claims that challenge discretionary promotion decisions by different individuals in different departments are simply not amenable to class treatment under Rule 23(b)(3). This holds true even in a hostile work environment where racism is allegedly rampant. If one African-American plant worker proves that his supervisor unlawfully denied him a promotion because of his race, he has not come close to proving that every African-American worker at the plant was unlawfully denied a promotion on the basis of race. Nor has he proven that every African-American worker in the plant who unsuccessfully applied for a promotion was unlawfully discriminated against on the basis of race. As with the hypothetical plaintiffs above, who took a prescription drug and became blind, the individual facts specific to each worker’s case are what control the outcome. Although evidence from the first plaintiff’s Title VII case would certainly overlap with the evidence in the next class member’s case, there is not enough of an overlap to get anywhere close to establishing causation or liability in one case and applying it uniformly to dozens or hundreds of other cases without stripping the defendant of its right to present a defense.

CONCLUSION

Racism is repugnant to modern Americans. Yet, despite 50 years of federal and state civil-rights legislation, America remains a nation hobbled by stark racial disparities in employment, income, housing, health care, education, and many other basic building blocks for a successful life. This persistent racial inequality is a national crisis. And all judges and practitioners should look to combat injustice and seek – like the Brown v. Nucor panel majority does – “simple justice.” Slip op. at 63.

But courts do not achieve simple justice by resorting to rough justice. They cannot misapply complex procedural rules on aggregate litigation to create massive monetary sanctions for any company that a handful of employees and their lawyers may accuse of despicably racist behavior. As Bennett v. Nucor shows, existing civil-rights laws create rights and remedies that can both sanction employers who discriminate and meaningfully compensate those who prove they are victims of racial (or other unlawful) discrimination. The pursuit of simple justice should not prompt courts to create additional legal remedies that are disconnected from due process and the burden of individual proof.

[1] As a matter of practice, I would normally be inclined to refer to these workers as “African-American,” instead of “black.” But class actions require precise class definitions, and the two terms are not synonymous. Thus, this article will be faithful to terminology used by the Fourth Circuit, which I presume was chosen carefully and deliberately by the plaintiffs when defining their proposed class.

[2]  Under revised Rule 23, plaintiffs must satisfy all four requirements imposed by Rule 23(a) (numerosity, commonality, adequacy, and typicality) and one of three alternatives provided by Rule 23(b)(1)-(3). Fed. R. Civ. P. 23.

[3]  Rule 23(b)(3) was intended to allow class actions that would redress and discourage previously unpunished misconduct. As a hypothetical example, if a bank has millions of account holders and charges them an illegal $2 fee with every ATM transaction, one of its account holders who has paid this illegal fee at least once could file a class action seeking to have the fee returned to him and all other account holders who paid the illegal fee. If his class was properly certified and he won at trial, the bank would have to pay back all of the fees it collected to everyone in the class.

In this scenario, the elements of the class representative’s claim are, in fact, subject to common proof that satisfies the burden of proof for each of the absent class members. Before Rule 23(b)(3), there was no real incentive for an account holder or any attorney to file a lawsuit to recover such a small fee, and people feared that, with modernization, large companies would increasingly engage in such practices with impunity. By aggregating all of the cases in a class action that sought individual monetary judgments, small-transaction consumers – and their attorneys – suddenly had a weapon to win multimillion-dollar judgments or (more likely) settlements that would theoretically discourage such misconduct.

[4] Recall that Rule 23 certification requires plaintiffs to meet all of the Rule 23(a) criteria and one of the Rule 23(b) criteria. Failure to meet one of the Rule 23(a) requirements ends the inquiry without any analysis of Rule 23(b).

[5]  The decision not to decertify the Title VII hostile-work-environment class action was not appealed or substantively addressed by the Fourth Circuit. However, for many of the same reasons that Rule 23(b)(3) cannot apply to the Title VII job promotions claim, it should not be applied to the hostile-work-environment claim either. Consistent with the history of civil-rights class actions, discussed supra, the hostile-work-environment claim should be limited to injunctive relief to remedy any racially discriminatory practices that are proven at trial. One class representative’s proof at trial that he suffered both objective and subjective racial harassment – required elements of a hostile work environment claim – would not prove that all absent class members subjectively felt harassed and are entitled to monetary damages. That one worker subjectively perceived racial harassment and suffered injury because of the harassment (as opposed to other factors in that individual’s life) could only be proven in individual trials, which makes these claims improper for class treatment under Rule 23(b)(3).

[6]  Something like an airplane crash at sea with no survivors would be the rare case where one passenger’s personal injury lawsuit against various defendants (e.g., the airline, parts manufacturers, pilots, etc.) could effectively prove his co-passengers’ cases, making it viable as a Rule 23(b)(3) class action for all passengers on the flight. But airline disasters are rare exceptions to the generally accepted wisdom that personal-injury claims are simply not appropriate as class actions because they seek individual relief and require individual proof.