As we discussed previously here, in the wake of the class certification denial by the U.S. Supreme Court in Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541 (2011), three named plaintiffs filed a third lawsuit against Wal-Mart entitled Phipps, et al. v. Wal-Mart Stores, Inc., No. 3:12-CV-01009, 2013 WL 752152 (W.D. Tenn. Feb. 20, 2013), alleging sex discrimination on behalf of a class of present and former female Wal-Mart retail store employees who have been subjected to purported gender discrimination. The claims are similar to the original Dukes case. However, the plaintiffs “rebooted” their claims and focused them in a different way, with new region-specific allegations related to “Region 43”— a region allegedly centered in Middle and Western Tennessee, and including portions of Alabama, Arkansas, Georgia, and Mississippi. The Phipps plaintiffs allege, for Region 43: (1) denial of equal pay for hourly retail store positions; (2) denial of equal pay for salaried management positions up to, and including, Co-Manager; and (3) denial of equal opportunities for promotion to management track positions up to, and including, Store Manager.
Wal-Mart’s Motion To Dismiss Class Claims
Wal-Mart filed a partial motion to dismiss plaintiffs’ complaint or, in the alternative, to strike the class claims, arguing that the class claims are not viable for a host of reasons. As a threshold argument, Wal-Mart asserted that the putative class members’ claims are time-barred because — based on American Pipe & Constr. Co. v. Utah, 414 U.S. 538, 554 (1974) — the applicable statute of limitations was not tolled.
American Pipe stands of the proposition that the commencement of a class action suspends the applicable statute of limitations as to members of the class who would have been parties had the suit been permitted to continue as a class action. Phipps, 2013 WL 752151, at *12-15 (citing American Pipe, 414 U.S. at 554). The threshold question addressed by the Court was whether American Pipe tolling permitted the Phipps plaintiffs to pursue class-wide relief on behalf of a regional subclass, after the U.S. Supreme Court in Wal-Mart held that certification of the broader class was not appropriate. See id. If they were not, the claims of any putative class members who otherwise failed to file timely EEOC charges would be time-barred. Id. at *12.
The Court’s Opinion
The Court determined that the class claims were time-barred based on the Sixth Circuit controlling decision of Andrews v. Orr, 851 F.2d 146, 149 (6th Cir. 1988), which addressed whether American Pipe tolling applies to a follow-on subclass action. By way of background, Andrews was the third in a succession of class action racial discrimination lawsuits, the first of which was resolved through a consent decree, and the district court denied certification in the second. In addressing whether a named plaintiff could file a third round of individual and/or follow-on subclass action claims, the Sixth Circuit held in Andrews that plaintiffs individually benefitted from American Pipe tolling only through the date on which the district court denied the first class certification motion, and that the tolling principle in American Pipe applies only to the initiation of a new individual action, not a new class action. Id. at *27-32; see also Andrews, 614 F. Supp. At 692-93. Thus, the Sixth Circuit found in Andrews that the time limitation requiring a timely administrative charge for requesting class-wide relief (as compared to individual relief) was not tolled during the pendency of a second motion to certify. Id.
Relying on Andrews, the Court in Phipps was “constrained” to find that the class claims were time barred. Phipps, 2013 WL 752151, at *44. However, the analysis did not stop there. The Court provided extensive analysis regarding American Pipe and its progeny, and provided a roadmap for possible Sixth Circuit review of the issues, noting that, “in light of recent jurisprudential trends, the Court believes that Andrews merits reconsideration — or at least refinement — to permit follow-on sub-class actions to benefit from American Pipe tolling under appropriate circumstances, such as those presented here.” Id. at *10. The Court then laid out the reasons that it believes Andrews merits refinement, and — absent Andrews controlling precedent — why tolling would be appropriate in this circumstance:
American Pipe and its progeny does not preclude the application of American Pipe tolling to subsequent lass actions because the case law does not seem to “have contemplated the possibility of a follow-on sub-class action, let alone how the American Pipe rule might apply. Indeed the [American Pipe] Court and the concurring opinions seem to have recognized that future procedural contexts would test the limits of the American Pipe doctrine.” Id. at *44-46.
The broad language in certain early circuit court cases appearing to adopt a bright-line rule precluding American Pipe tolling to subsequent sub-class actions may have obscured the limited nature of each holding. Id. at *45 (citing Korwek v. Hunt, 827 F.2d 874 (1987) and Salazar-Calderon v. Presidio Valley Farmers Ass’n, 765 F.2d 1334 (5th Cir. 1985)). The Court noted in several places that these cases arose in “specific procedural contexts that led to relatively narrow case-specific holdings. See id. at *26.
After Andrews, various circuit decisions and circuit court decisions have found that American Pipe tolling can and should apply to follow-on class actions under appropriate circumstances. Id. at *32-38, 45.
The recent cases of Shady Grove Orthopedic Assocs., P.A. v. Allstate Ins. Co., 130 S. Ct. 1431 (2010), and Smith v. Bayer, 131 S. Ct. 2368 (2011), may affect the American Pipe rule as applied to follow-on class actions, but the precise impact of those decisions seems to require further clarification from the appellate courts and the Supreme Court. Id. at *46 (citing Shady Grove for the proposition that “Rule 23 provides a ‘one-size-fits-all formula’ for determining whether a case merits class action treatment” and Smith in that it “suggests that, at least in the context of timely filed actions, the problem of serial re-litigation of class claims is best resolved through traditional notions of stare decisis, comity, case management, federal legislation and/or amendment to the Federal Rules of Civil Procedure, rather than through a categorical refusal to permit reconsideration).
As a policy matter, the result required by Andrews could undermine the principles that animated American Pipe or, at least, strip plaintiffs of their ability to pursue an otherwise viable subclass action without filing a protective lawsuit. And, precluding American Pipe tolling for follow-on subclass actions might also have “negative or perverse” implications for future class actions involving any type of geographic class capable of further subdivision for class purposes.
The Phipps decision is a “must read” for any practitioner addressing tolling issues in workplace class actions. It provides background and analysis regarding many of the leading cases interpreting tolling issues, and sets up a debate about the applicability of American Pipe in differing factual and procedural scenarios. It further highlights the differences in rulings among the “rebooted” cases filed against Wal-Mart on similar issues, which we discussed here and here.