In recent posts, we have recounted efforts by the plaintiffs’ class action bar to “re-boot” class certification theories to work around the Supreme Court’s decision in Wal-Mart Stores, Inc. v. Dukes, 131 S.Ct. 2541 (2011) (read more here, here, here and here).
Today, one of the most far-reaching re-booting theories suffered a significant blow as the U.S. Court of Appeals for the Seventh Circuit issued its decision in Bolden v. Walsh Construction Co., No. 12-2205 (7th Cir. Aug. 8, 2012) and reversed a decision by Judge Joan Lefkow of the U.S. District Court for the Northern District of Illinois (discussed here).
In an opinion by Chief Judge Easterbrook, the Seventh Circuit embraced Wal-Mart’s holding and concluded that, no matter how plaintiffs attempt to repackage it, a policy to allow discretionary decision-making is not a policy that supports certification of classes extending across different decision-makers in different locations.
Walsh is a large construction company with a central organization of permanent employees, including superintendents who the company dispatches to manage particular projects. Id. at 1. Walsh has some policies, including rules against race discrimination, but gives the superintendents discretion over most matters, including hiring and pay of hourly workers. Id. at 2.
Twelve construction workers filed a putative class action alleging, among other things, that Walsh’s superintendents practiced or tolerated discrimination against African-American employees by selectively assigning overtime work and by maintaining hostile working conditions. Id. at 2-3.
In one of the first rulings applying McReynolds v. Merrill, Lynch, Pierce, Fenner & Smith, 672 F.3d 482 (7th Cir. Feb. 24, 2012) (discussed here), Judge Lefkow certified two classes that covered all of Walsh’s 262 projects in the Chicago area since 2001. Walsh filed a Rule 23(f) petition, and the Seventh Circuit granted it permission to appeal the decision.
The Seventh Circuit’s Opinion
The Seventh Circuit held that class certification was not appropriate because Plaintiffs did not meet the commonality requirement of Rule 23(a)(2). Bolden v. Walsh Constr. Co. No. 12-2205 (7th Cir. Aug. 8, 2012).
The Seventh Circuit noted that different Walsh sites had materially different working conditions. For instance, most of the plaintiffs conceded at their depositions that most of the superintendents with whom they worked did not discriminate, and several conceded that many of the sites at which they worked did not have racial hostility. Id. at 5-6. Thus, to evaluate Plaintiffs’ grievances about Walsh, a court “would need site-specific, perhaps worker-specific, details, and then the individual questions would dominate the common questions.” Id. at 6.
The Seventh Circuit found the Supreme Court’s Wal-Mart decision controlling. As the Supreme Court in Wal-Mart explained, a multi-store (or multi-site) class can satisfy Rule 23(a)(2) if the employer uses a procedure or policy that spans all sites. Id. at 7-8. Here, however, as in Wal-Mart, plaintiffs contended that the employer gave local managers discretion that permitted them to undermine its anti-discrimination policy and had a disparate impact that justified class treatment. As Wal-Mart observed, “allowing discretion by local supervisors over employment matters . . . is just the opposite of a uniform employment practice that would provide the commonality needed for a class action; it is a policy against having uniform employment practices.” Id. at 8 (quoting Wal-Mart, 131 S. Ct. at 2554.) As in Wal-Mart, this variation means that a class including all stores cannot be certified; “one class per store may be possible; one class per company is not.” Id. at 8.
The Seventh Circuit also rejected Judge Lefkow’s attempt to limit Wal-Mart to super-sized cases. Relying on language from McReynolds, Judge Lefkow distinguished Wal-Mart as a case where the difficulties of manageability and lack of efficiency overwhelmed any potential common issue. Id. at 9. The Seventh Circuit set the record straight: “Our opinion remarked that the class in Wal-Mart would not have been manageable, but we did not suggest that this was the basis of the Court’s decision.” Id. at 10. “Wal-Mart tells us that local discretion cannot support a company-wide class no matter how cleverly lawyers may try to repackage local variability as uniformity.” Id. at 11.
The Court noted in conclusion that it might be possible to contest the effect of a single supervisor’s conduct on many employees in a class action and suggested that plaintiffs could choose to propose site-specific or superintendent-specific classes. Id. at 12-13.
Implications For Employers
Bolden is a significant decision for employers as courts continue to redefine the playing field in the wakes of Wal-Mart v. Dukes. The Seventh Circuit seemingly went out of its way to attempt to shut down the potential end-run around Wal-Mart created by its decision in McReynolds. And, in setting the record straight, the Seventh Circuit reaffirmed that company-wide claims based on discretionary decision-making are not appropriate for class treatment. The Court also suggested an alternative way to address these issues: multiple subclasses organized by supervisor, site, and perhaps even time period at each site. It remains to be seen, however, whether and to what extent plaintiffs will try to take advantage of these more burdensome methods to pursue smaller group claims.