Employers Eschew Settlement in Class Actions

justice-scale-761665_1Employers are settling fewer class action employment discrimination cases than at any time in recent history.

This is a finding  of the employer defense  law firm,  Seyfarth and Shaw, LLP, in its Annual Workplace Class Action Litigation Report: 2014 Edition.

The tone of the report is almost gleeful as it chronicles pro-employer rulings by the  U.S. Supreme Court in the past five years that make it  much more difficult for employees to prevail in  class action lawsuits against employers.

According to the  report, the total amount  for the top ten largest employment discrimination class action settlements in 2012 was $48.6 million, compared to $282.1 million in 2007 and  $91 million in 2006. The number was higher in 2013 ($234.1 million) because of a single $160 million settlement. However, when that settlement is deducted, the 2013 represents the second smallest settlement figure in the past decade.

The firm  attributes the reduction in class action settlements to two decisions by the  U.S. Supreme Court, Comcast Corp. v. Behrend, 133 S. Ct. 1426 (2013) and Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541 (2011), which  “influenced settlement strategies in workplace class actions in a profound way.”

The report states Comcast and Walmart decisions have “impaired the ability of the plaintiffs’ bar to convert their case filings into blockbuster settlements”  and improved the “ability of defendants to dismantle large class cases, or to devalue them for settlement purposes.”

“ Simply stated, Wal-Mart and Comcast Corp. aided employers to defeat, fracture, and/or devalue employment discrimination class actions, and resulted in fewer settlements at lower amounts.”

The   Comcast decision, decided by a slim 5 to 4 majority, added a new weapon to employers’ arsenals in challenging class certification. The  majority held that individual issues of damages may preclude class certification under Rule 23(b)(3) of the Federal Rules of Civil Procedure.  This means the plaintiffs may have to conduct hundreds or perhaps thousands of mini-hearings on the issue of damages, raising the cost of the litigation to prohibitive levels.

The Comcast decision  has “sharply curtailed” the ability of plaintiffs to obtain certification on the damages and “provides companies with a significant and rational defense to class certification in class actions,” according to the report

 The  2011  Walmart decision  held that a small group of female employees of the world’s largest retail chain  did not have enough in common with other Walmart female employees to constitute a class in a sex discrimination lawsuit.  The Court unanimously ruled in Walmart’s favor, although Justice Ruth Bader Ginsburg concurred in part and dissented in part, joined by Justices Stephen Breyer, Sonia Sotomayor and Elena Kagan.

The consistent conservative majority on the Court includes Chief Justice John Roberts and Justices Antonin Scalia, Clarence Thomas, Anthony  Kennedy and Samuel Alito.

Employer gets Immunity from Class Action

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Workers this week suffered another  potentially devastating blow when an influential appellate court ruled in Parisi v. Goldman Sachs & Co, that a former managing director could not file a class action lawsuit against  Goldman Sachs for sex discrimination because she had signed a contract agreement to arbitrate employment disputes.

The decision by the  Second Circuit Court of Appeals in New York creates a scenario that  allows a savvy employer to class-action proof itself.

The appellate court ruled that Lisa Parisi, a former managing director of Goldman Sachs, could not sue the company in a class action because she agreed to submit all employment disputes to binding arbitration when she signed a “managing director” agreement in 2003.  Since the “managing director” agreement is  silent as to class actions,  Parisi must proceed to arbitration  on an individual basis. Bottom line: Parisi can’t sue in class action and she can’t arbitrate in class action.

 Parisi, who was fired in 2008,  alleged Goldman Sachs conducted a “pattern and practice” of sex discrimination against top female employees in violation of Title VII of  the Civil Rights Act of 1964, 42 U.S.C. §§ 2000e et seq. (“Title VII”) and the New York City Human Rights Law.  She said she could not proceed in arbitration with a class action claim without Goldman Sachs permission and thus was effectively being denied her right to sue the company for systemic sex discrimination.. In other words, she said the arbitration clause in her  agreement must be invalidated because arbitration would preclude her from vindicating a statutory  right to file a “pattern and practice” class action lawsuit.

The appellate court agreed with Goldman Sachs that no substantive statutory right exists for employees to pursue a class action “pattern-or-practice” claim.

The court’s decision reversed two earlier decisions by a federal magistrate and a  district court judge who both denied Goldman Sach’s motion to compel arbitration in the case.

 The ruling  is a  boon to employers who are prescient enough to force new hires or employees who are being promoted to sign over-reaching binding arbitration clauses;  it  effectively negates the possibility that the employee will participate in a costly class action lawsuit down the road.   

Goldman Sachs took the position that it could not be sued by Parisi in federal court because of the arbitration clause, and it could not be compelled to defend a class action suit in arbitration because the arbitration clause in the agreement Parisi signed  was silent as to the arbitration of class claims.

Goldman Sachs is not entirely of the woods. Parisi filed the class action lawsuit along with two other Goldman Sachs employees,  Shanna Orlich, an associate, and H. Christina Chen-Oster, a vice president, who reportedly did not sign binding arbitration agreements with Goldman Sachs and presumably could proceed without Parisi.

Parisi’s employment agreement  contained an  arbitration clause in which she agreed  to arbitrate any dispute, controversy or claim arising out of or based upon or relating to “Employment Related Matters.”  The agreement defined  “employment related matters” are defined as “matters arising out of or relating to  or concerning this Agreement, your hire by or employment with the Firm or the termination thereof,  or otherwise concerning any rights, obligations or other aspects of your employment relationship in respect of the Firm.”

 The appellate court reasoned that  the U.S. Supreme Court has consistently interpreted the Federal Arbitration Act as establishing a “federal policy favoring arbitration agreements.”  It also cited an earlier ruling in which the appeals court  concluded that in Title VII jurisprudence “pattern-or-practice” simply refers to a method of proof and does not constitute a “freestanding cause of action.”  Chin v. Port Authority of New York, 685 F.3d 135, 148 (2d Cir. 2012).

The arbitration clause in question states the Plaintiffs claims will be “finally settled by arbitration in New York City before, and in accordance with the rules . . . of, the New York Stock Exchange, Inc. (“NYSE”) or . . . the  National Association of Securities Dealers (“NASD”). If both the NYSE and NASD decline  to arbitrate the matter, the matter will be arbitrated before the American Arbitration Association  (“AAA”) in accordance with the commercial arbitration rules of the AAA. You agree that any  arbitration decision and/or award will be final and binding.”

Goldman’s appeal was supported by briefs from the U.S. Chamber of Commerce and the Securities Industry and Financial Markets Association. Parisi had support from the NAACP Legal Defense and Education Fund and the National Women’s Law Center.

The case is Parisi v. Goldman Sachs & Co, 2nd U.S. Circuit Court of Appeals, No. 11-5229.