Diluting Dukes?
California Lawyer

Diluting Dukes?

Two circuit panels reopen the commonality issue in class cert battles.

July 2014

San Francisco Police Officer Juanita Stockwell played by the house rules, waiting years as her name inched up a 1998 promotion list for a coveted spot as a police investigator. The department selected eligible officers ranked by test results and a court-supervised civil rights consent decree.

After the expiration of the consent decree, the department changed employment practices in 2005. It abandoned the old system of choosing police investigators in favor of a new exam that produced a promotion list composed of much

younger sergeants. Three years later Stockwell - by then 60 years old - joined other over-40 officers and filed suit, arguing that the city's use of a new list constituted a pattern or practice of discrimination and generated a disparate impact on older officers, in violation of the Age Discrimination in Employment Act (29 U.S.C. §§ 621-634) and California's Fair Employment and Housing Act (Cal. Gov't Code§§ 12900-12996).

The district court initially denied the plaintiffs' motion for class certification, finding that the officers had failed to satisfy the commonality requirements of both rule 23(a)(2) and rule 23(b)(3) of the Federal Rules of Civil Procedure. (Stockwell v. City and County of San Francisco, No. 08-CV-5180 (N.D. Cal. order filed Aug. 27, 2010).)

So the older officers filed an amended complaint, this time alleging only the disparate impact theory of liability. But their timing was off: While the plaintiffs' motion for class certification was pending, the U.S. Supreme Court raised the requirements under rule 23(a)(2). In a 5-4 opinion, Justice Antonin Scalia spoke for the majority, noting that rule 23 is "not a mere pleading standard." Parties seeking class certification must affirmatively demonstrate compliance with the rule, Scalia wrote. Sometimes, he added, "it may be necessary for the court to probe behind the pleadings" with "rigorous analysis" that "will entail some overlap with the merits of the plaintiff's underlying claim. That cannot be helped." (Wal-Mart Stores, Inc. v. Dukes, 131 S.Ct. at 2541, 2551 (2011) (quoting Gen. Tel. Co. of Sw. v. Falcon, 457 U.S. 147 (1982)).)

Relying on the Court's analysis in Dukes, U.S. District Judge Phyllis J. Hamilton again denied class certification to the Stockwell plaintiffs for want of commonality. (See Stockwell v. City and County of San Francisco, 2011 WL 4803505 (N.D. Cal.).) The officers then filed an interlocutory appeal, arguing that the district court had dipped too deeply into the merits arguments of the case.

It seemed that the over-40 officers had little cause for optimism. Last year the U.S. Supreme Court had ordered the Ninth Circuit to correct a class certification ruling in a wage-and-hour case filed on behalf of about 200 employees of the Chinese Daily News in Monterey Park. A panel had initially affirmed class cert on state-law claims, and, two years later, a jury verdict awarding plaintiffs several million dollars in damages. (Wang v. Chinese Daily News, 623 F.3d 743 (9th Cir. 2010).) In light of Dukes, however, the U.S. Supreme Court vacated and remanded the case. (Chinese Daily News, Inc. v. Wang, 132 S.Ct. 74 (2011).)

In March 2013, a Ninth Circuit panel reversed the decision, finding that the district court had wrongly certified the class. Under Dukes, wrote Judge William A. Fletcher of the court's liberal wing, the trial court must show that there are common questions of law and fact under rule 23(a)(2), and also that common issues of fact or law predominate over individual issues under rule 23(b)(3).

In the damages section of his opinion, Fletcher took up what Justice Scalia in Dukes had called "Trial by Formula" - the practice of determining damages for an entire class by extrapolating from a sample set of class members. "We disapprove that novel project," Scalia had written. Fletcher also noted that the tone of the Dukes opinion suggested the Court had created a due process right for employers to litigate defenses to individual class members' claims in the wage-and-hour context.

The Wang plaintiffs filed for a rehearing. "The first version of Wang adopted a reading of Dukes that went too far," says Jocelyn Larkin, an attorney at Berkeley's Impact Fund and class counsel in Dukes. She contends that Scalia's trial-by-formula language permits defendants to argue that any aggregated proof is a denial of due process.

Larkin filed an amicus brief in Wang urging the court to grant rehearing. "Read in context, the limited import of the 'Trial by Formula' shorthand is plain: it refers only to one trial plan adopted in an unusual case that the court found incompatible with Title VII's statutory scheme," she argued.

Six months after its initial ruling, Fletcher amended the Wang panel's opinion, dropping the trial-by-formula language and remanding the case. He directed the trial court to determine whether a class could be certified for commonality under rule 23(a); for predominance under rule 23(b)(3); and for injunctive relief under rule 23(b)(2). (Wang v. Chinese Daily News, Inc., 737 F.3d. 538 (9th Cir. 2013).)

"Dukes said you can't sample for liability; if you can't figure out [damages], you cannot certify a class," says Thomas R. Kaufman, a class action defense specialist with Sheppard, Mullin, Richter & Hampton in Los Angeles. "But Wang took the Scalia language out of the opinion, and that puts the [due process] issue in the air." The Fletcher panel, Kaufman adds, "decided not to address it, so it is no longer Ninth Circuit precedent. It will be left for another day."

The panel's amended opinion in Wang created a little breathing space for class counsel. Last April, U.S. District Judge Consuelo B. Marshall in Los Angeles recertified a class of Chinese Daily News employees, holding that the plaintiffs' common questions predominated.

The same month that Judge Marshall reinstated the Wang class, a different Ninth Circuit panel ruled in Stockwell. At issue was whether the trial court had erred by evaluating merits questions at the class certification stage, rather than focusing solely on common legal questions presented by the class.

Judge Marsha S. Berzon, a former labor lawyer, wrote that the trial judge in Stockwell must give the merits of the case just the right amount of consideration: enough to decide whether commonality exists among the over-40 officers, but not so much as to decide their claims.

Berzon's opinion relied heavily on a U.S. Supreme Court decision last year holding that plaintiffs in a securities fraud case need not establish materiality at the class certification stage. In a 6-3 majority opinion, Justice Ruth Bader Ginsburg stated that merits questions may be considered, "but only to the extent that they are relevant to determining whether the Rule 23 prerequisites for class certification are satisfied." (Amgen, Inc. v. Conn. Ret. Plans & Trust Funds, 133 S.Ct. 1184, 1194-95 (2013).)

Not everyone was happy with Berzon's interpretation of the law. "The Stockwell case is inconsistent with Dukes," says Paul Grossman, a partner at the Los Angeles office of Paul Hastings and general counsel to the California Employment Law Counsel. "If the panel in Stockwell is right, you can't look at the validity of statistics in a statistically based class action. So we are right back in the Ninth Circuit, it seems to me."

Counters plaintiffs lawyer Michael D. Singer, managing partner at Cohelan Khoury & Singer in San Diego: "I don't see the Ninth taking the anti-class action approach" of the Supreme Court.

Michael S. Sorgen, a Berkeley civil rights attorney and lead plaintiffs counsel in Stockwell, says the panel's ruling is "completely consistent with Dukes. We have a single issue that is determinative for all of the class," he argues.

Larkin adds that Wang and Stockwell instruct lower courts to interpret the Dukes requirements according to the facts of a case. As to Stockwell, that means the circuit applied the law as Justice Ginsberg instructed in Amgen: To meet rule 23(a)(2) requirements, plaintiffs must identify common questions - but they don't have to answer them.

For Larkin, these decisions come with a warning. The Ninth Circuit's opinions still stem from legacy cases filed before the Supreme Court's decision in Dukes. "Lawyers were framing their cases based on what had been law for 30 years," Larkin says. "It's going to take a couple more years to get enough distance from Dukes for lawyers to know the new rules."

But time is running out for the over-40 plaintiffs class in San Francisco. Although Stockwell is now headed back to Judge Hamilton's court for reconsideration, Juanita Stockwell retired from the police force in August 2012 at the age of 63 - still with the rank of officer.

Pamela A. MacLean is contributing writer at California Lawyer.

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