Last Friday, the Seventh Circuit Court of Appeals issued a significant employment class action decision that may challenge conventional wisdom about the impact of the Supreme Court’s 2011 decision in Wal-Mart Stores, Inc. v. Dukes. The opinion, authored by respected Judge Richard Posner, is McReynolds v. Merrill Lynch, Pierce, Fenner & Smith, Inc., No. 11-3639 (7th Cir., Feb. 24, 2012).
The procedural history of McReynolds is interesting, because the plaintiffs had actually moved for reconsideration of an earlier denial of class certification after the decidedly pro-employer decision in Dukes was announced. Although the trial court judge was unconvinced to change his earlier decision, he did agree that Dukes presented a good basis for reconsideration of the class action issue, and expressly stated in his decision that he believed the case was a good candidate for an interlocutory appeal under Rule 23(f).
The Seventh Circuit accepted the appeal, and reversed the denial of class certification. The Seventh Circuit panel recognized that individualized issues would prevent certification of any claims for back pay or damages, but held that certification of the issue of whether the defendant’s challenged employment policies had an adverse impact on members of a protected class would still be appropriate under Rule 23(b)(2), which allows a class to be certified for the purpose of awarding injunctive relief, and Rule 23(c)(4), which allows certification of particular issues. Essentially, the case would be certified for the purpose of deciding whether the defendant’s challenged policies created a disparate impact to members of a protected class and for the purpose of ruling on plaintiffs’ request to enjoin the practices. Any claims for back pay, compensatory or punitive damages would then have to be brought as separate proceedings.
In reaching its conclusion, the court drew a key factual distinction between the practices being challenged in the case before it and the practices that had been challenged in Dukes. In McReynolds, the practice being challenged was the company-wide policy of “permitting brokers to form their own teams and prescribing criteria for account distributions that favor the already successful—those who may owe heir success to having been invited to join a successful or promising team.” The court distinguished this policy, which it characterized as a firm-wide policy of Merrill Lynch, from the allegations in Dukes, which were that the lack of a uniform corporate policy on discrimination created too much discretion in local managers to create locally discriminatory policies.
I’ll be posting more on this decision within the coming week, so stay tuned…