No IN THE UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT

Transcription

1 No IN THE UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT SHIRLEY RAE ELLIS, LEAH HORSTMAN, AND ELAINE SASAKI, ON BEHALF OF THEMSELVES AND ALL OTHERS SIMILARLY SITUATED, v. Plaintiffs-Appellees, COSTCO WHOLESALE CORPORATION, Defendant-Appellant. ON APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF CALIFORNIA, SAN FRANCISCO DIVISION, CIVIL ACTION NO MHP BRIEF AMICUS CURIAE OF THE EQUAL EMPLOYMENT ADVISORY COUNCIL IN SUPPORT OF DEFENDANT-APPELLANT AND IN SUPPORT OF REVERSAL Rae T. Vann Counsel of Record Paulos Iyob* NORRIS, TYSSE, LAMPLEY & LAKIS, LLP 1015 Fifteenth Street, N.W. Ste Washington, DC (202) * Admitted only in Maryland; practice supervised by Partners of the Firm

2 CORPORATE DISCLOSURE STATEMENT Pursuant to Fed. R. App. P. Rules 26.1 and 29(c), Amicus Curiae Equal Employment Advisory Council discloses the following: 1. The Equal Employment Advisory Council has no parent corporations and no subsidiary corporations. 2. No publicly held company owns 10% or more stock in the Equal Employment Advisory Council. Respectfully submitted, Rae T. Vann Paulos Iyob Counsel of Record NORRIS, TYSSE, LAMPLEY & LAKIS, LLP 1015 Fifteenth Street, N.W. Ste Washington, DC (202) * Admitted only in Maryland practice supervised by Partners of the Firm

3 ii TABLE OF CONTENTS TABLE OF AUTHORITIES...ii INTEREST OF THE AMICUS CURIAE...1 STATEMENT OF THE CASE...2 SUMMARY OF ARGUMENT...5 ARGUMENT...6 I. THE DISTRICT COURT FAILED TO CONDUCT A RIGOROUS ANALYSIS OF PLAINTIFFS CLASS CERTIFICATION MOTION AS REQUIRED BY RULE II. III. THE DISTRICT COURT IMPROPERLY CONCLUDED THAT INJUNCTIVE RELIEF PREDOMINATES OVER PLAINTIFFS DEMAND FOR SUBSTANTIAL MONETARY DAMAGES...13 THE CLASS CERTIFICATION STANDARD APPLIED BY THE DISTRICT COURT IS LIKELY TO EXPOSE ANY LARGE COMPANY TO A CLASS ACTION BASED SOLELY ON THE EXISTENCE OF SOME SUBJECTIVE DECISION-MAKING...17 CONCLUSION...21 CERTIFICATE OF COMPLIANCE CERTIFICATE OF SERVICE

4 ii TABLE OF AUTHORITIES FEDERAL CASES Allison v. Citgo Petroleum Corp., 151 F.3d 402 (5th Cir. 1998)...14 Bacon v. Honda of America Mfg., Inc., 370 F.3d 565 (6th Cir. 2004)...15, 16 Blackie v. Barrack, 524 F.2d 891 (9th Cir. 1975)...9 Castano v. American Tobacco Co., 84 F.3d 734 (5th Cir. 1996)...18, 19 Chamberlan v. Ford Motor Co., 402 F.3d 952 (9th Cir. 2005)...5, 12 Coopers & Lybrand v. Livesay, 437 U.S. 463 (1978)...8 Dukes v. Wal-Mart, Inc., 474 F.3d 1214 (9th Cir. 2007)...10, 12, 17 Eisen v. Carlisle & Jacquelin, 417 U.S. 156 (1974)...8, 9 General Telephone Co. of the Southwest v. Falcon, 457 U.S. 147 (1982)...5, 7, 8, 9 Hanon v. Dataproducts Corp., 976 F.2d 497 (9th Cir. 1992)...11 In re Initial Public Offering Securities Litigation, 471 F.3d 24 (2d Cir. 2006)...8, 11, 12 In re Rhone-Poulenc Rorer, Inc., 51 F.3d 1293 (7th Cir. 1995)...18 In re Visa Check/Mastermoney Antitrust Litigation, 280 F.3d 124 (2d Cir. 2001)...18 Kanter v. Warner-Lambert Co., 265 F.3d 853 (9th Cir. 2001)...14 Molski v. Gleich, 318 F.3d 937 (9th Cir. 2003)...14, 15 Newton v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 259 F.3d 154 (3d Cir. 2001)...8, 18 Ortiz v. Fibreboard Corp., 527 U.S. 815 (1999)...16 ii

5 iii Robinson v. Metro-North Commuter Railroad, 267 F.3d 147 (2d Cir. 2001)...14, 15 Rutstein v. Avis Rent-A-Car System, Inc., 211 F.3d 1228 (11th Cir. 2000)...18 Szabo v. Bridgeport Machines, Inc., 249 F.3d 672 (7th Cir. 2001)...9 Ticor Title Insurance Co. v. Brown, 511 U.S. 117 (1994)...16 FEDERAL STATUTES Title VII of the Civil Rights Act of 1964, 42 U.S.C. 2000e et seq....1 RULES Federal Rule of Civil Procedure , 6, 7, 18 Federal Rule of Civil Procedure 23(a)...6, 17 Federal Rule of Civil Procedure 23(b)(2)...passim Federal Rule of Civil Procedure 23 advisory committee s notes...14 OTHER AUTHORITIES Daniel F. Piar, The Uncertain Future of Title VII Class Actions After the Civil Rights Act of 1991, 2001 B.Y.U. L. Rev. 305 (2001)...20 Deborah R. Hensler, et al., Class Action Dilemmas: Pursuing Public Goals For Private Gain, Executive Summary, RAND Institute for Civil Justice (2000)...20 Gary Kramer, No Class: Post-1991 Barriers to Rule 23 Certification of Across-The-Board Employment Discrimination Cases, 15 The Labor Lawyer [A.B.A. Sec. Lab. & Emp. L.] 415 (2000)...19 iii

6 The Equal Employment Advisory Council respectfully submits this brief as amicus curiae with the consent of the parties. The brief urges the Court to reverse the district court s decision certifying the class and thus supports the position of Defendant-Appellant Costco Wholesale Corporation. INTEREST OF THE AMICUS CURIAE The Equal Employment Advisory Council ( EEAC ) is a nationwide association of employers organized in 1976 to promote sound approaches to the elimination of employment discrimination. Its membership includes over 300 of the nation s largest private sector corporations. EEAC s directors and officers include many of industry s leading experts in the field of equal employment opportunity. Their combined experience gives EEAC a unique depth of understanding of the practical, as well as legal, considerations relevant to the proper interpretation and application of equal employment policies and requirements. All of EEAC s members are employers subject to Title VII of the Civil Rights Act of 1964 (Title VII), as amended, 42 U.S.C. 2000e et seq., as well as other federal nondiscrimination laws. Many of these companies do business within the Ninth Circuit. As potential defendants in large-scale employment class action litigation, the nationwide constituency that EEAC represents has a direct and ongoing interest in the issues presented in this case regarding the type of analysis a

7 2 district court must undertake in deciding whether class certification is appropriate under Rule 23 of the Federal Rules of Civil Procedure. The district court certified a class of over 700 current and former Costco employees. It concluded that there were questions of fact or law common to the entire class. This crucial finding was based upon the district court s unquestioned acceptance of plaintiffs mere allegation that subjective employment decisions generally are vulnerable to bias, and the results of statistical analyses Costco was not permitted to challenge. In reaching its conclusion, the district court failed to apply widely accepted minimum standards for evaluating the appropriateness of class certification, and in so doing left all large employers vulnerable to inappropriate class determinations. EEAC seeks to assist the Court by highlighting the impact its decision may have beyond the immediate concerns of the parties to the case. Accordingly, this brief brings to the Court s attention relevant matters that the parties have not raised. Because of its experience in these matters, EEAC is well situated to brief the Court on the concerns of the business community and the significance of this case to employers. STATEMENT OF THE CASE Shirley Ellis worked for Costco as an Assistant General Manager (AGM) since Ellis v. Costco Wholesale Corp., 240 F.R.D. 627, 633 (N.D. Cal. 2

8 3 2007). She filed a discrimination charge with the Equal Employment Opportunity Commission (EEOC) on October 30, 2002, alleging that Costco refused to promote her to General Manager (GM) because of her gender in violation of Title VII of the Civil Rights Act of 1964, 42 U.S.C. 2000e et seq. Id. She filed a second discrimination charge with the EEOC in 2004, claiming that Costco unlawfully retaliated against her for filing the 2002 EEOC charge. Id. The EEOC dismissed Ellis discrimination charge and issued her a right to sue notice. See Brief of Appellant at 3. Ellis filed a putative class action against Costco on August 17, Ellis, 240 F.R.D. at 634. She later amended her complaint to name two additional plaintiffs Leah Horstman (a former Costco employee) and Elaine Sasaki (currently an AGM). Id. The plaintiffs claim that Costco fails to consider women for promotions on an equal basis with men, and that its system for promotion has a statistically significant disparate impact on women. Id. at 632. Furthermore, they allege that Costco relied on subjective decision making by a nearly all-male managerial force, which resulted in a pattern and practice of intentional gender discrimination. Id. at The plaintiffs moved to certify a nationwide class including current and former female employees who had been denied promotions to GM or AGM since January 3, Id. at 636. The district court granted the motion, ruling that the 3

9 4 plaintiffs had satisfied all of the requirements of Rule 23(a), and the requirements of Rule 23(b)(2) of the Federal Rules of Civil Procedure. Id. at 652. The district court concluded that the plaintiffs met Rule 23(a) s commonality requirement by claiming subjective decision-making, presenting statistics suggesting the existence of gender disparities in GM and AGM positions nationwide, and offering expert testimony regarding Costco s allegedly pervasive gender stereotyping culture. Id. at The district court rejected evidence and expert testimony presented by Costco that directly undermined the plaintiffs evidence, concluding that an examination of the merits of the plaintiffs allegations at the class certification stage would be inappropriate. Id. at 635. It observed, [t]hough a rigorous examination of 23(a) factors is required for class certification, the district court is not to inquire into the merits of the suit during the certification process. Id. (citations omitted). The district court also found that the plaintiffs satisfied Rule 23(b)(2) s predominance requirement, notwithstanding their demand for both compensatory and punitive damages. Id. at 642. Relying on the self-serving statements of Horstman, the district court concluded that the plaintiffs request for injunctive relief provides evidence of their primary motivation: to change the promotion practices at Costco. Id. at 643. This interlocutory appeal followed. 4

10 5 SUMMARY OF ARGUMENT The district court s decision sets a flawed and dangerous precedent for employment class actions. The district court consistently rejected Costco s challenges to statistical and other expert evidence offered by the plaintiffs in support of their motion for class certification, on the basis that it should accept the plaintiffs allegations as true rather than inquire into the merits of their claims. The district court s adamant refusal to rigorously analyze the plaintiffs evidence is a complete departure from the class certification standard established by the U.S. Supreme Court in General Telephone Co. of the Southwest v. Falcon, 457 U.S. 147, 161 (1982), which this Court expressly adopted in Chamberlan v. Ford Motor Co., 402 F.3d 952, 961 (9th Cir. 2005). The district court s finding that the class is maintainable under Rule 23(b)(2) because injunctive relief is the primary goal of the litigation is based on flawed reasoning and the self-serving statements of the class representatives. For many of the class members, especially those who no longer work for Costco, the monetary damages requested necessarily will be of far greater significance than injunctive relief. The district court required that the plaintiffs show a common policy, and then simply assumed that the common policy is discriminatory and that injunctive relief to eliminate the policy is more important than monetary relief. This 5

11 6 improperly relieved plaintiffs from demonstrating that injunctive, not monetary, relief predominates. The district court s improper application of Rule 23 s class certification requirements represents an abandonment of its role as gatekeeper in eliminating meritless cases at the class certification stage, thus drastically increasing the number of large class actions and the pressure on employers to settle even meritless claims. ARGUMENT I. THE DISTRICT COURT FAILED TO CONDUCT A RIGOROUS ANALYSIS OF PLAINTIFFS CLASS CERTIFICATION MOTION AS REQUIRED BY RULE 23 To maintain a class action alleging violations of Title VII, plaintiffs must satisfy all four requirements of Rule 23(a), and at least one of the requirements of Rule 23(b), of the Federal Rules of Civil Procedure. Fed. R. Civ. P. 23. Rule 23(a) permits class certification only when: (1) the class is so numerous that joinder of all members is impracticable, (2) there are questions of law or fact common to the class, (3) the claims or defenses of the representative parties are typical of the claims or defenses of the class, and (4) the representative parties will fairly and adequately protect the interests of the class. Fed. R. Civ. P. 23(a). Rule 23(b)(2), in turn, allows certification only when the defendant has acted or refused to act on grounds generally applicable to the class, 6

12 7 thereby making appropriate final injunctive relief or corresponding declaratory relief with respect to the class as a whole. Fed. R. Civ. P. 23(b)(2). In General Telephone Co. of the Southwest v. Falcon, the U.S. Supreme Court held that district courts must engage in a rigorous analysis in determining whether plaintiffs seeking class certification have met the requirements of Rule U.S. 147, 161 (1982). The plaintiff in Falcon filed a class action alleging his employer s promotion practices were racially discriminatory in violation of Title VII. Id. at 149. In support of his motion for class certification, the plaintiff argued that the company s reliance on subjective decision-making in awarding promotions was a common practice that affected the class as a whole. Id. at 152 n.4. The district court granted class certification, which was affirmed on appeal to the Fifth Circuit. Id. at 155. Reversing, the Supreme Court determined that the plaintiff failed to meet the commonality, typicality, and adequacy requirements of Rule 23(a). Id. at In so doing, the Court strongly cautioned against dispensing with a careful analysis of the Rule 23 requirements in favor of an across-the-board approach. It observed: [T]he allegation that [] discrimination has occurred neither determines whether a class action may be maintained in accordance with Rule 23 nor defines the class that may be certified. Conceptually, there is a wide gap between (a) an individual s claim that he has been denied a promotion on discriminatory grounds, and his otherwise unsupported allegation 7

13 8 that the company has a policy of discrimination, and (b) the existence of a class of persons who have suffered the same injury as that individual, such that the individual s claim and the class claims will share common questions of law or fact.... Id. at 157 (footnote omitted). The Court therefore concluded it sometimes may be necessary for the court to probe behind the pleadings before coming to rest on the certification question. Id. at Under Falcon, district courts should not indeed, must not refrain from examining the merits of the plaintiffs allegations at the expense of conducting a thorough Rule 23 analysis. Id.; see also In re Initial Pub. Offering (IPO) Secs. Litig., 471 F.3d 24, 33 (2d Cir. 2006). Rather, where a Rule 23 class certification 1 The Falcon decision dispelled the misconception that the Supreme Court had adopted a bright-line approach to merit inquiries in Eisen v. Carlisle & Jacquelin. 417 U.S. 156, 177 (1974). The Court in Eisen found nothing in either the language or history of Rule 23 that gives a court any authority to conduct a preliminary inquiry into the merits at the class certification stage. Id. As other circuits have noted, this oft-quoted statement from Eisen was made in a case in which the district judge s merits inquiry had nothing to do with determining the requirement for class certification. In re Initial Pub. Offering (IPO) Secs. Litig., 471 F.3d 24, 33 (2d Cir. 2006); see also Newton v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 259 F.3d 154, 166 (3d Cir. 2001) (finding that the merit inquiry at issue in Eisen was ancillary to the principal Rule 23 issue in that case). Shortly after Eisen, the Supreme Court acknowledged that the [e]valuation of many of the questions entering into determination of class action questions is intimately involved with the merits of the claims typicality adequacy and the presence of common questions of law or fact are obvious examples. Coopers & Lybrand v. Livesay, 437 U.S. 463, 469 n.12 (1978) (citation and internal quotation omitted). It is this overlap between the merits of plaintiffs claims and the Rule 23 class certification standards that makes it necessary, as the Supreme Court later instructed in Falcon, to probe behind the pleadings and inquire into the merits of plaintiffs allegations. Falcon, 457 U.S. at

14 9 issue is so closely tied to the merits of the underlying claim, the court must make a preliminary inquiry into the merits in order to determine whether class certification is proper. Szabo v. Bridgeport Machs., Inc., 249 F.3d 672, 676 (7th Cir. 2001). Giving uncontestable weight to the plaintiffs allegations moves the court s discretion to the plaintiff s attorneys, and essentially permits the plaintiffs to tie the judge s hands by making allegations relevant to both the merits and class certification. Id. at 677. The district court ignored Falcon in its discussion of the legal standard for granting class certification. It cited instead to this Court s pre-falcon decision Blackie v. Barrack, 524 F.2d 891 (9th Cir. 1975), in deciding that it must accept the allegations in the plaintiffs complaint as true as long as the plaintiffs have articulated those allegations with specificity and clarity. Ellis, 240 F.R.D at 635. The district court s adherence to this standard, as well as its rigid interpretation of the Supreme Court s decision in Eisen v. Carlisle, was evident throughout, as it continually resolved the parties conflicting evidence in favor of the plaintiffs ostensibly to avoid a merits inquiry. Plaintiffs chief contention is that Costco allowed individual managers to use subjective criteria in making promotion decisions, thereby giving these managers the means to discriminate against employees based on their gender. See Ellis, 240 F.R.D. at Thus, much like the plaintiffs in Falcon, they argue that 9

15 10 Costco s use of subjective decision-making in promoting employees to GM and AGM was sufficient, in and of itself, to satisfy Rule 23(a) s commonality requirement. Id. at 639. As this Court previously has recognized, however, discretionary decision-making by itself is insufficient to meet [p]laintiffs burden of proving commonality. Dukes v. Wal-Mart, Inc., 474 F.3d 1214, 1231 (9th Cir. 2007). Rather, subjective decision-making claims must be supported by other evidence giving rise to an inference of discrimination in order to create a common question of fact. Id. (citation omitted). The plaintiffs attempt to show that Costco s subjective practices resulted in discrimination against the class through a combination of statistical evidence and expert testimony, including: 1) a statistical analysis performed by Dr. Richard Drogin, allegedly showing gender disparities in Costco s promotions; 2) Dr. Marc Bendick s statistical analysis suggesting that other companies do a better job of promoting women; and 3) the testimony of Dr. Barbara Reskin, a sociologist, regarding Costco s allegedly paternalistic corporate culture. Ellis, 240 F.R.D. at 638. This supporting evidence particularly the statistical analysis is an essential component of the plaintiffs commonality argument, the validity of which is seriously called into question by Costco s own statistical evidence. The Second Circuit recently clarified the proper standard for granting class certification in the context of so-called statistical dueling between the parties on 10

16 11 the commonality issue, abandoning the approach it previously had adopted in Caridad v. Metro-North Commuter R.R., 191 F.3d 283 (2d Cir. 1999). In re Initial Pub. Offering (IPO) Secs. Litig., 471 F.3d 24, (2d Cir. 2006). In In re IPO, the court noted that Caridad condemned statistical dueling between experts based on the no-merits-inquiry approach taken by the Supreme Court in Eisen. Id. at 35 (citation omitted). It found, however, that Caridad, by the imprecision of its language, left unclear whether the merits dispute between the experts was not to be resolved at the class certification stage or whether their dispute about a class certification requirement was not to be resolved at that stage. Id. The Second Circuit thus concluded that judges must resolve factual disputes relevant to each Rule 23 requirement before ruling on whether to certify a class: With Eisen properly understood to preclude consideration of the merits only when a merits issue is unrelated to a Rule 23 requirement, there is no reason to lessen a district court s obligation to make a determination that every Rule 23 requirement is met before certifying a class just because of some or even full overlap of that requirement with a merits issue. Id. at 41. This Court itself in Hanon v. Dataproducts Corp., 976 F.2d 497, 509 (9th Cir. 1992), observed: we are at liberty to consider evidence which goes to the requirements of Rule 23 even though the evidence may also relate to the underlying merits of the case... [a] class may only be certified if we are satisfied, after a rigorous analysis, that the prerequisites of Rule 23(a) have been satisfied. Id. (citations omitted) (emphasis added). 11

17 12 The district court simply chose not to engage in such an analysis. It refused, for instance, to resolve a key factual dispute between the parties about whether data used in Dr. Bendick s analysis contained overbroad comparator companies, even after acknowledging [c]ertainly Costco is distinct in some aspects from most other retailers. Ellis, 240 F.R.D. at 645. Instead, the district court approved all of Dr. Bendick s findings on the basis that his analysis is not junky or junk science, id., adopting an approach akin to the some showing standard soundly rejected by the Second Circuit in In re IPO: Obviously, we can no longer continue to advise district courts that some showing of meeting Rule 23 requirements will suffice... or that an expert s report will sustain a plaintiff s burden so long as it is not fatally flawed... In re IPO, 471 F.3d at 40 (citations and footnote omitted); see also Chamberlan v. Ford Motor Co., 402 F.3d 952, 961 (9th Cir. 2005) ( the Supreme Court [has] emphasized that classes may be certified only if the trial court is satisfied, after a rigorous analysis, that the prerequisites of Rule 23(a) have been satisfied. ) (citation and internal quotations omitted) (emphasis added). 2 2 This Court in Dukes uncritically relied on Visa Check and Caridad without acknowledging that the Second Circuit expressly repudiated Caridad s some showing standard and Visa Check s suggestion that an expert s testimony may establish a component of a Rule 23 requirement simply by being not fatally flawed, as well as dictum in Heerwagen suggesting that a district judge may not weigh conflicting evidence and determine the existence of a Rule 23 requirement just because that requirement is identical to an issue on the merits. In re IPO, 471 F.3d at 42 (citing Caridad v. Metro North Commuter R.R, 191 F.3d 283 (2d Cir. 12

18 13 The district court took the same so long as it is not fatally flawed approach to much of the plaintiffs proffered evidence, refusing to resolve the parties dispute over what variables should or should not have been included in Dr. Drogin s statistical analysis, for instance. See Ellis, 240 F.R.D. at It even acknowledged that Dr. Reskin s opinion that Costco has a gender stereotyping culture is based on disputed factual information: Id. at 651. Although Dr. Reskin s opinion may be based in part on disputed factual information, it does not invalidate her study. The mistake in Dr. Reskin s study, if a mistake at all, goes to its weight, but does not render her study completely unreliable so that it lacks any probative value. The standard applied by the district court in granting class certification clearly does not meet the rigorous analysis requirement articulated by the Supreme Court in Falcon and adopted by this Court. Thus, the district court s order granting class certification is erroneous and should therefore be reversed. II. THE DISTRICT COURT IMPROPERLY CONCLUDED THAT INJUNCTIVE RELIEF PREDOMINATES OVER PLAINTIFFS DEMAND FOR SUBSTANTIAL MONETARY DAMAGES To satisfy the requirements of Rule 23(b)(2), the plaintiffs must show that Costco acted or refused to act on grounds generally applicable to the class, thereby making appropriate final injunctive relief or corresponding declaratory 1999), In re Visa Check Master Money Antitrust Litig., 280 F.3d 124 (2d Cir. 2001), and Heerwagen v. Clear Channel Communs., 435 F.3d 219 (2d Cir. 2006)). 13

19 14 relief with respect to the class as a whole. Fed. R. Civ. P. 23(b)(2). The advisory committee notes accompanying Rule 23(b)(2) provide that 23(b)(2) does not extend to cases in which the appropriate final relief relates exclusively or predominately to money damages. Fed. R. Civ. P. 23 advisory committee s notes (Subdivision (b)(2)). Thus, class certification is available under Rule 23(b)(2) only where claims for injunctive relief predominate over claims for monetary damages. Id. This Circuit and others repeatedly have held that class certification under Rule 23(b)(2) is improper unless the claim for monetary damages is merely incidental to the injunctive relief being sought. See, e.g., Kanter v. Warner- Lambert Co., 265 F.3d 853, 860 (9th Cir. 2001) (citing Probe v. State Teachers Ret. Sys., 780 F.2d 776, 780 (9th Cir 1986)); Allison v. Citgo Petroleum Corp., 151 F.3d 402, 415 (5th Cir. 1998) (citing cases); but cf. Molski v. Gleich, 318 F.3d 937, (9th Cir. 2003); Robinson v. Metro-North Commuter R.R., 267 F.3d 147, (2d Cir. 2001). While the Second Circuit in Robinson appears to have abandoned the brightline, incidental damages approach taken by the Fifth Circuit in Allison v. Citgo Petroleum Corp., 151 F.3d 402, 415 (5th Cir. 1998), even it recognized: [B]efore allowing (b)(2) certification a district court should, at a minimum, satisfy itself of the following: (1) even in the absence of a possible monetary recovery, reasonable plaintiffs would bring the suit to obtain the injunctive or declaratory relief sought; and (2) 14

20 15 the injunctive or declaratory relief sought would be both reasonably necessary and appropriate were the plaintiffs to succeed on the merits. Robinson v. Metro-North Commuter R.R., 267 F.3d at 164 (emphasis added). This Court in Molski v. Gleich, 318 F.3d 937, (9th Cir. 2003), also refused to adopt the Fifth Circuit s incidental damages approach, but based on vastly different facts and circumstances than are presented in the instant case. In Molski, the Court permitted class certification where only $5,000 of money damages was sought on behalf of a single named plaintiff. Id. at 944. It concluded that the primary relief sought there was injunctive, rather than monetary, thus satisfying Rule 23(b)(2). Id. at 950. Unlike Molski, the plaintiffs in this case are seeking substantial compensatory and punitive damages that could amount to tens if not hundreds of millions of dollars. The district court nevertheless ruled that the class is maintainable under Rule 23(b)(2) because injunctive relief is the primary purpose of the litigation. Ellis, 240 F.R.D at 642. It based this finding primarily on the class representatives personal declarations that injunctive relief, not any potential monetary windfall, is most important to them. Id. at These statements, however, are selfserving ipse dixit. Merely declaring that injunctive relief is the primary motivation for the litigation does not constitute proof of that fact, nor should conclusory remarks ever form the basis for granting class certification. See Bacon v. Honda of 15

21 16 America Mfg., Inc., 370 F.3d 565, 571 (6th Cir. 2004) ( Conclusory allegations and general assertions of discrimination are not sufficient to establish commonality ) (citation omitted). Moreover, the plaintiffs are seeking to certify a class comprised of both current and former Costco employees. Ellis, 240 F.R.D at 636. Common sense suggests that the former employees, who have nothing to gain from injunctive relief, are more interested in the possibility of obtaining windfall monetary damages than they are in whether, and to what extent, Costco revises its employment policies. Although it has not yet decided the issue, the Supreme Court has indicated that granting class certification status under Rule 23(b)(2) where money damages are sought raises constitutional and due process concerns. Ortiz v. Fibreboard Corp., 527 U.S. 815, 846 (1999). Indeed, the Court has strongly suggested a substantial possibility exists that damage claims can never be certified under Rule 23(b)(2). Ticor Title Ins. Co. v. Brown, 511 U.S. 117, 121 (1994). By simply accepting the plaintiffs self-serving statements as proof that injunctive relief predominates over their request for significant monetary damages, the district court failed to engage in any meaningful Rule 23(b)(2) analysis. The district court appeared to shift blame to Costco for offer[ing] no other way of discerning plaintiff s intent in bringing the suit, Ellis, 240 F.R.D. at 643 (citation 16

22 17 omitted), when in reality, the court had objective evidence bearing directly on the plaintiffs motives. 3 After finding the existence of a common policy under Rule 23(a), the district court simply assumed that the common policy is discriminatory and that injunctive relief to eliminate the policy is more important than monetary relief. It erred in this regard. III. THE CLASS CERTIFICATION STANDARD APPLIED BY THE DISTRICT COURT IS LIKELY TO EXPOSE ANY LARGE COMPANY TO A CLASS ACTION BASED SOLELY ON THE EXISTENCE OF SOME SUBJECTIVE DECISION-MAKING A district court s decision to grant class certification under Rule 23 inevitably becomes a watershed moment in the course of a case, as it shifts the balance of power between the parties to a considerable advantage to the plaintiffs. The reasonably predictable costs of defending a class action, plus the potential exposure to liability for monetary damages, creates enormous pressure on the defendant to settle. The larger a class, the greater the potential liability and defense costs, which very well could lead to what some courts have called judicial blackmail. 3 For instance, only one of the representative plaintiffs is a current employee and in a position to benefit from the sought after injunctive relief. Ellis, 240 F.R.D. at 633. The remaining plaintiffs thus lack standing to pursue injunctive relief on behalf of the class, but rather seek significant compensatory and punitive damages. Id. at 642; see also Dukes, 474 F.3d at 1235 (noting that the plaintiffs in Dukes did not seek compensatory damages). 17

23 18 Castano v. American Tobacco Co., 84 F.3d 734, 746 (5th Cir. 1996). As the Eleventh Circuit has found: Once one understands that the issues involved in the instant case are predominantly case-specific in nature, it becomes clear that there is nothing to be gained by certifying this case as a class action; nothing, that is, except the blackmail value of a class certification that can aid the plaintiffs in coercing the defendant into a settlement. Rutstein v. Avis Rent-A-Car Sys., Inc., 211 F.3d 1228, 1241 n.21 (11th Cir. 2000) (emphasis added). Judge Posner also has astutely observed that when companies face billions of dollars in potential liability as a result of a class action, [t]hey may not wish to roll these dice. That is putting it mildly. They will be under intense pressure to settle. In re Rhone-Poulenc Rorer, Inc., 51 F.3d 1293, 1298 (7th Cir. 1995) (citation omitted). See also In re Visa Check/Mastermoney Antitrust Litig., 280 F.3d 124, 152 (2d Cir. 2001) (quoting Rhone-Poulenc Rorer); Newton v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 259 F.3d 154, n.8 (3d Cir. 2001) (same). Traditionally, it has been the role of the courts to act as gatekeepers in eliminating meritless cases at the certification stage, minimizing the enormous blackmail value of large classes. The district court s improper application of Rule 23 s class certification requirements in this case represents an abandonment of that role. By allowing unchallenged evidence to form the basis for class certification 18

24 19 on the theory that the evidence will be evaluated at trial, the district court ignores the reality that class certification almost invariably leads to a settlement, making it likely that the evidence will never be evaluated. The district court s ruling below will make it easier to certify large class actions, increasing exponentially the pressure on employers to settle even meritless claims. Unfortunately, meritless cases that have been certified are just as likely to settle as cases that have merit. The pressure to settle exists largely independently of the merits of the underlying Title VII claims: Once plaintiffs obtain class certification, the defendant s exposure, plus projected costs of defending hundreds or thousands of individual claims, places almost overwhelming and irresistible pressure on the defendant to settle, regardless of the merits of the claims. Even if individual plaintiffs odds of prevailing in their specific cases are low, the risk to defendants remains extremely high. In the face of these numbers, companies often perceive that they have little choice but to cut their losses through settlement. Gary Kramer, No Class: Post-1991 Barriers to Rule 23 Certification of Across- The-Board Employment Discrimination Cases, 15 The Labor Lawyer [A.B.A. Sec. Lab. & Emp. L.] 415, 416 (2000) (footnotes omitted); see also Castano, 84 F.3d at 746 ( [c]lass certification magnifies and strengthens the number of unmeritorious claims and [a]ggregation... makes it more likely that a defendant will be found liable and results in significantly higher damage awards ) (citations omitted). This dilemma is evident in the employment context, where employers have settled large discrimination class actions for millions, or even hundreds of millions, of dollars 19

25 20 simply to avoid continued litigation costs and the risk of unfavorable jury verdicts. See Daniel F. Piar, The Uncertain Future of Title VII Class Actions After the Civil Rights Act of 1991, 2001 B.Y.U. L. Rev. 305, 344 (2001). The district court s order increases the likelihood of abuse of the class action process and does little to advance the purpose of Title VII. Even under the best of circumstances, there is some question as to whether class actions effectuate the purpose of the laws under which they are brought. Considering the incentives built into the class action format: [Class action attorneys] may be too willing to bring nonmeritorious suits if these suits produce generous financial rewards for them.... For society, however, there are substantial costs: lost opportunities for deterrence (if class counsel settled too quickly and too cheaply), wasted resources (if defendants settled simply to get rid of the lawsuit at an attractive price, rather than because the case was meritorious), and over the long run increasing amounts of frivolous litigation as the attraction of such lawsuits becomes apparent to an ever-increasing number of plaintiff lawyers. Deborah R. Hensler, et al., Class Action Dilemmas: Pursuing Public Goals For Private Gain, Executive Summary, RAND Institute for Civil Justice 9-10 (2000). 4 The erroneous standard adopted by the district court increases the costs to society without bringing any benefits. There is little chance for deterrence based on the district court s decision, because there appears to be nothing an employer could do to avoid class certification. There are no policies the employer could 4 available at 20

26 21 create and no affirmative steps it could take to avoid conjectural evidence that its practices might be vulnerable to discrimination. In addition, because the district court s approach permits so little evaluation of the evidence prior to class certification, it will be nearly impossible to discern whether cases certified under the district court s standard will target actual discrimination, or merely the companies with the deepest pockets. It is likely that a number of these cases will simply move large sums of money from one party to the other. CONCLUSION For all of the foregoing reasons, the Equal Employment Advisory Council respectfully urges the Court to reverse the district court s order. Respectfully submitted, Rae T. Vann Counsel of Record Paulos Iyob* NORRIS, TYSSE, LAMPLEY & LAKIS, LLP 1015 Fifteenth Street, N.W. Ste Washington, DC (202) * Admitted only in Maryland; practice supervised by Partners of the Firm 21

27 22 Case No CERTIFICATE OF COMPLIANCE PURSUANT TO CIRCUIT RULE 32-1 I certify that: (check appropriate options) Oversize Briefs: The court granted permission to exceed the length limitations set forth at Fed. R. App. P. 32(a)(7) by an order dated, OR An enlargement of brief size is permissible under Ninth Circuit Rule The brief is: X Proportionately spaced, has a typeface of 14 points or more and contains 5,074 words or is Monospaced, has 10.5 or fewer characters per inch and contains words or lines of text or is In conformance with the type specifications set forth at Fed. R. App. P. 32(a)(5) and does not exceed pages Signature of Attorney or Pro Se Litigant

28 23 CERTIFICATE OF SERVICE This is to certify that two true and correct copies of the Brief Amicus Curiae of the Equal Employment Advisory Council in Support of Defendant-Appellant and in Support of Reversal were served today on the following counsel via first class U.S. Mail, postage prepaid, addressed as follows: Brad Seligman David D. Kadue THE IMPACT FUND Kenwood C. Youmans 125 University Avenue SEYFARTH SHAW LLP Berkeley, CA Century Park East Suite 3300 Jean M. Finberg Los Angeles, CA LIEFF CABRASER & HEIMANN, LLP Embarcadero Center West David B. Ross 275 Battery Street 30th Floor SEYFARTH SHAW LLP San Francisco, CA Avenue of the Americas Suite 2500 Elizabeth Ann Lawrence New York, NY DAVIS, COWELL & BOWE LLP 595 Market Street Suite 1400 Gerald L. Maatman, Jr. San Francisco, CA SEYFARTH SHAW LLP 131 S. Dearborn Street Bill Lann Lee Suite 2400 LEWIS FEINBERG LEE RENAKER Chicago, IL & JACKSON, PC 1330 Broadway Suite 1800 Thomas J. Wybenga Oakland, CA SEYFARTH SHAW LLP 999 Lake Drive Issaquah, WA September 17, 2007 Rae T. Vann