Posts belonging to Category Caselaw Developments

In an opinion authored by Judge Richard Posner, the Seventh Circuit has reversed a trial court’s order denying certification of Title VII race discrimination claims.  See McReynolds v. Merrill Lynch, No. 11-3639, (7th Cir. Feb. 24, 2012) (order reversing denial of certification) (available here).

In McReynolds, Merrill Lynch brokers alleged that their employer’s compensation policies had a discriminatory effect on African Americans.  Slip op. at 2.  Merrill Lynch argued that individualized circumstances predominated across the 700 class members, thereby precluding certification per Dukes v. Wal-Mart.  Slip op. at 17.

The plaintiffs had originally moved for class certification in 2010.  The district court denied that motion.  Slip op. at 3.  Then, in a seemingly counter-intuitive move, the plaintiffs renewed their motion based on the Supreme Court’s Dukes decision.  Slip op. at 11.  Again, the district court denied certification.  Slip op. at 11.  However, the district court also suggested that the plaintiffs appeal the ruling to determine how Dukes should affect the certification issue.  Slip op. at 11-12.  The Seventh Circuit accepted the Rule 23(f) appeal.

Writing for the Seventh Circuit, Judge Posner acknowledged that Dukes “may seem a perverse basis for a renewed motion for class certification, since the Supreme Court reversed a grant of certification in what the defendant in our case insists is just like this one.”  Slip op. at 11.  However, in contrast to Dukes, where “there was no company-wide policy to challenge,” Merrill Lynch’s policies were alleged to be company-wide and therefore better suited to a class action treatment.   Slip op. at 12-14.  The McReynolds panel rejected the defendant’s argument that any discrimination would result from the “local, highly-individualized implementation of policies rather than the policies themselves.”  Slip op. at 17.  Even assuming that the defendant’s policies were not intended to discriminate against African American employees, “[t]he incremental causal effect . . . of those company-wide policies—which is the alleged disparate impact—could be most efficiently determined on a class-wide basis.”  Slip op. at 17-18.

Should the plaintiffs succeed in their challenge, each of the class members may have to prove their compensation was adversely affected by the corporate policies in separate, individual actions.  Slip op. at 20-21.  Even so, the Seventh Circuit reasoned that judicial efficiency favored certification:

Obviously a single proceeding, while it might result in an injunction, could not resolve class members’ claims . . . . So should the claim of disparate impact prevail in the class-wide proceeding, hundreds of separate trials may be necessary. . . . But at least it wouldn’t be necessary in each of those trials to determine whether the challenged practices were unlawful.

Slip op. at 18-19. 

In addition to a significant holding that surprised many by reversing the denial of certification, the McReynolds decision also shows an unexpected side of Seventh Circuit Judge Richard Posner, owing to Judge Posner’s reputation as a “conservative.”  However, this opinion, together with Posner’s other judicial opinions, scholarship, and public pronouncements, indicates that he is perhaps more of an iconoclast than a conservative.  

The McReynolds opinion leaves open the prospect of class certification, where it might have otherwise been barred by Dukes, and as such may be influential beyond the Seventh Circuit.

The U.S. District Court for California’s Southern District has issued yet another certification ruling that limits the holding of Dukes v. Wal-Mart and contributes to the growing body of post-Dukes commonality jurisprudence.  See Johns v. Bayer Corp., 09-cv-1935, 2012 U.S. Dist. LEXIS 13410 (S.D. Cal. Feb. 3, 2012) (order granting class certification motion) (available here).  Additionally, the Johns decision confirms the prevalent view that, in consumer class actions, reliance need not be established for each class member on an individual basis.  Rather, classwide reliance can be presumed where a reasonable consumer would be deceived by the at-issue misrepresentations.  Id.

Southern District Court Judge Anthony Battaglia granted certification of a class of California consumers who allegedly paid a higher price for Bayer’s “Men’s 50+ Advantage” and “Men’s Health Formula” vitamins in reliance on Bayer’s claim that the products “support prostate health.”  Id at *2-4.  The Johns plaintiffs allege that “in truth, the vitamins did not provide any prostate health benefits.  In fact, according to Plaintiffs, recent clinical studies have shown that for some men, increased selenium consumption may increase their prostate cancer risk.”  Id. at *3.

Bayer opposed class certification, principally by focusing on the heightened commonality requirement set forth in Dukes.  Id. at *6-14.  Specifically, Bayer argued that the commonality requirement could not be satisfied because there were individualized questions regarding the plaintiffs’ actual reliance on Bayer’s purported misrepresentations, the materiality and timing of Bayer’s health claims, and the amount of damages suffered.  Id.

However, the Johns court rejected Bayer’s arguments, invoking Ninth Circuit authority for the proposition that California consumer laws “take an objective approach of the reasonable consumer, not the particular consumer.”  Id. at *12-13 (citing Williams v. Gerber Prods. Co., 552 F.3d 934, 938 (9th Cir. 2008)) (emphasis in original).  Thus, the key question is whether a reasonable consumer would have been misled by Bayer’s packaging, not whether each individual purchaser was misled.  Id. at *12-13.  In adopting the “reasonable consumer” standard and the presumption of classwide reliance, Johns is consistent with the emerging consensus among California’s federal courts.  See Wolph v. Acer, 272 F.R.D. 477 (N.D. Cal. Mar. 25, 2011) (class-wide reliance presumed from showing that misrepresentation is material to reasonable consumer).   

The Johns decision also addressed Dukes’ “due process” analysis and rejected Bayer’s argument that certification would deprive Bayer of the opportunity to raise defenses to individuals’ claims.  Echoing a similar decision against Bayer by an Ohio district court, the Johns court held that certification would not prevent Bayer from trying individualized defenses, and therefore Dukes did not bar certification.  Id. at *23 (discussing Godec v. Bayer Corp., 2011 LEXIS 131198, *7 (N.D. Ohio Nov. 11, 2011)).

A New York federal court has conditionally certified a class of audit associates in an action alleging that the accounting firm KPMG violated their rights under the federal Fair Labor Standards Act (FLSA).  See Pippins v. KPMG, No. 11-Civ-0377, 2012 U.S. Dist. LEXIS 949 (S.D. N.Y. Jan. 3, 2012) (available here).  Specifically, the plaintiffs claim that KPMG systematically misclassified its auditors in order to avoid paying them overtime.  Id.

The court found that the auditors established that they were “similarly situated” per the FLSA’s certification requirements by proving that they received the same training, served on similarly structured work teams, performed similar job duties, were subject to the same compensation policies, and worked under tightly circumscribed guidelines applicable to all auditors.  Id. at *3-9.  The court rejected the defendant’s argument that individualized issues predominated, and instead gave credence to the plaintiffs’ allegations and declarations indicating that the same practices and policies apply to auditors across the country.  Id. *3, *28-29. 

Although Rule 23 requirements do not formally apply to FLSA collective actions, the Pippins court noted that “KPMG’s alleged policy of classifying all Audit Associates as exempt is the ‘glue’ that the Supreme Court found lacking in Dukes.”  Id. at *21 (discussing Dukes v. Wal-Mart, 131 S.Ct. 2541 (2011)).  The court also relied on decisions by other courts granting certification of classes of auditors with FLSA claims.  See id. at *29-31 (discussing Kress v. PricewaterhouseCoopers, LLP, 263 F.R.D. 623 (E.D. Cal. 2009)(granting conditional FLSA certification); In re Deloitte & Touche Overtime Litig., No. 11-Civ-2461 (S.D.N.Y. Dec. 16, 2011) (same)).

The Pippins matter is also notable due to a prior ruling by the magistrate judge that required KPMG to preserve electronically stored data during the litigation’s pendency, including prior to the time that conditional certification was granted.  That discovery order was subsequently affirmed by the presiding Article III judge, Hon. Coleen McMahon.  See Pippins v. KPMG, No. 11-Civ-0377 (S.D. N.Y Feb. 3, 2012) (order denying defendant’s objections to the discovery order).

A federal judge has denied the Quaker Oats Company’s request to dismiss a consumer class action arising out of the company’s questionable product advertisements.  The lawsuit alleges that the cereal manufacturer’s characterizations of its oatmeal and granola as “wholesome” and “heart-healthy” are deceptive, because the products actually contain unhealthy trans fats.  See Askin v. The Quaker Oats Co., No. 11-cv-0111 (N.D. Ill. Oct. 12 2011) (order denying motion to dismiss) (available here).    

The plaintiff claims that Quaker has “engaged in a wide-spread marketing campaign to mislead consumers about the nutritional and health qualities of its Products.”  Slip op. at 3.  Contrary to its health-focused advertisements, Quaker products “contain highly unhealthy, unwholesome artificial trans fat.”  Slip op. at 3.  The plaintiff alleges that he has suffered an “injury-in-fact” because he purchased Quaker products in reliance on these false advertisements and that, had he known the truth, he would not have been willing to pay as much as he did for the products.  Slip op. at 3-4.

Quaker moved to dismiss the case by a Rule 12 motion, arguing that the levels of trans fats are so insignificant that the plaintiff cannot establish standing.  Specifically, Quaker contended that the plaintiff’s health concerns are speculative, and therefore his economic damage is not “a real injury.”  Slip op. at 4-5. 

The court disagreed with Quaker. In the order denying Quaker’s Rule 12 motion, Magistrate Judge Young B. Kim found that “regardless of whether [Plaintiff] was physically harmed by the products he consumed, he alleges that he would not have purchased them absent the allegedly misleading statements.  That allegation states the kind of economic injury that is redressable through this suit.”  Slip op. at 9.

 Quaker was likewise unsuccessful in attempting to dismiss a California consumer action with similar claims.  See Chacanaca v.The Quaker Oats Co., 752 F. Supp. 2d 1111 (N.D. Cal. Oct. 14, 2010) (available here).