On March 10, 2015, a group of plaintiffs suing Goldman Sachs for gender discrimination suffered another setback in their attempt to certify a company-wide class in the case of Chen-Oster et al. v. Goldman, Sachs & Co., 10 Civ. 6950, pending in the Southern District of New York.  In that decision, linked here, Magistrate Judge Francis issued a report and recommendation holding that individualized issues of causation would “swamp” any classwide questions and that the predominance requirement of Rule 23(b)(3) was not met.

The Chen-Oster plaintiffs allege that Goldman Sachs’ internal evaluation, promotion, and compensation policies disfavor women.  They rely primarily on an expert report stating that women tend to score lower than men on Goldman Sachs’ yearly evaluations, known as “360 Reviews,” even after controlling for factors such as experience and education; and that women were likely to be rated in a lower “quartile” by their supervisors as compared to similarly situated men.  The court held that, while this statistical evidence met the low burden of showing a common question under Rule 23(a), it did not meet the “more demanding” predominance standard of Rule 23(b)(3).  Even if the expert report created a “presumptive causal link” between the challenged processes and an individual class member’s alleged injury, “Goldman Sachs would retain the right to demonstrate that there were other, legitimate explanations for any shortfall in compensation or failure to be promoted.”  Certain factors that are necessarily unique to each potential plaintiff – her “particular skills, the nature of the work in her business unit, the unit’s profitability relative to other units, and, indeed, the extent to which the employee’s manager considered 360 review and quartiling evaluations — would effectively swamp the common question of whether the evaluative policies have, on average a discriminatory impact.”  Thus, even though the expert report may establish that, on average, women were disadvantaged by these processes, it was impossible to show that any particular plaintiff suffered an adverse employment action because of the challenged policies rather than because of her own individual job performance or her business group’s profitability. The Court also held that individualized factors were likely to play an even greater role with respect to plaintiffs’ intentional disparate treatment claims.

The court further noted that, in a previous decision in this action, District Judge Leonard B. Sand had found that the plaintiffs had no standing to seek certification for injunctive relief under Rule 23(b)(2) because they were no longer employed with Goldman Sachs.  The court declined to reconsider that decision despite its misgivings, citing the law of the case doctrine. Thus, because neither of the Rule 23(b) requirements for certification were met, Plaintiffs’ motion was denied.

Judge Francis’s report and recommendation emphasizes the heightened standard that plaintiffs face in certifying disparate impact classes in light of the Supreme Court’s seminal 2011 decision of Wal-Mart Stores, Inc. v. Dukes.This report is still subject to review by District Judge Analisa Torres and, potentially, the Second Circuit. Nonetheless, it is yet another sign that lower courts are paying close heed to the Supreme Court’s admonition that defendants are entitled to present individual defenses to individualized claims, and that a presentation of overarching classwide statistical evidence cannot override this right.