A trend toward a boom in class-action and collective litigationover workplace issues is expected to continue in 2007–starklydefined by circuit location. Pay and promotional practices continueto interest the plaintiffs' bar, as well as a wide variety ofpayroll practices attached under federal and state wage-and-hourlaws.

One case that continues to dominate is Dukes, et al. v. Wal-MartStores Inc. (N.D. Cal. 2004). Here, on behalf of female employeesof Wal-Mart, equal rights advocates charged Wal-Mart with denyingpromotions, training opportunities and equal pay to women. This isthe largest sex discrimination case ever litigated against aprivate employer.

The plaintiffs' bar has increasingly used the theories in Dukesto seek certification of “punitive damages”-only classes under Rule23(b)(2), as well as pressing for certification of mega-classesinvolving pay and promotion claims of employees in multiplefacilities on a nationwide basis.

In fact, employers fought these theories with good success, as2006 witnessed many pro-employer victories in class certificationbattles.

The leading defense decisions in 2006 include Gutierrez, et al.v. Johnson & Johnson (a decision from the federal court in NewJersey); Colindres, et al. v. Goodman (a decision from the federalcourt in Texas); and Reeb, et al. v. Ohio Department ofRehabilitation (an appellate decision from the 6th Circuit).

In each of these decisions, courts rejected “Dukes-like”theories, where plaintiffs sought to certify broad classesinvolving multiple divisions of a company and/or damages recoveriesfor classwide compensatory damages and punitive damages.

Gutierrez, Colindres and Reeb provide strong precedent foremployers to fight off class actions where the pay and promotionalsystems of companies vary by facility or division, or whereplaintiffs seek damages recovery, which is dependent uponindividualized examination of each class member'scircumstances.

Fair Labor Standards Act collective action wage-and-hourlitigation increased again in 2006 and outpaced employmentdiscrimination class-action filings.

While plaintiffs continued to achieve certification ofwage-and-hour claims, employers also secured several significantvictories in defeating conditional certification and obtainingdecertification of ? 216(b) collective actions.

Leading decisions for employers in 2006 include Himmelman, etal. v. Continental Casualty (a decision from the federal court inNew Jersey); Carlson, et al. v. C.H. Robinson (a decision from thefederal court in Minnesota); and Honojos, et al. v. The Home Depot(a decision from the federal court of Nevada).

Under the test of “similarly situated” for certifying awage-and-hour collective action, each of these rulings eitherdenied a plaintiffs' motion or “decertified” an existing collectiveaction because of the differences in the circumstances of thevarious workers in terms of their pay, supervisors and workingconditions.

In 2006, employers used these types of defenses to stem the tideof certification of wage-and-hour collective actions which weremore one-sided in favor of plaintiffs in 2005.

The two most important rulings from the past few monthsimpacting corporations include the 2nd Circuit's decision in thecase of In Re Initial Public Offering Securities Litigation inDecember 2006 and the 9th Circuit's decision in Dukes, et al. v.Wal-Mart Stores Inc. in February 2007.

While In Re IPO Securities Litigation is not anemployment-related class action, its holdings impact directly uponclass-action exposures for employers.

In this case, the 2nd Circuit addressed significant legalquestions about the quantum of proof a party must present tocertify a class action. The case involved thousands of lawsuitsfiled in 2001 against issuers and underwriters of initial publicofferings alleging that a group of companies had manipulatedhundreds of IPOs.

In granting class certification, the district court applied astandard that plaintiffs needed only to make “some showing” of eachof the required elements for certification under Rule 23.

On appeal, the 2nd Circuit reversed the order granting classcertification, and in doing so, it clarified the proof requirementswhich parties must make at the time of a class certificationhearing.

The 2nd Circuit held that during the hearing a judge mustresolve factual disputes and make findings with respect to theunderlying Rule 23 requirements, even if proof of thoserequirements overlaps with issues on the merits.

This holding, in effect, allows defendants to cut off classcertification at an earlier stage of the litigation in appropriatecases.

The 9th Circuit's ruling in Dukes, in a 2-1 opinion, upheld adistrict court's certification of a massive and diverse classencompassing an estimated 1.5 million women who have worked in awide range of hourly and salaried positions in Wal-Mart's 3,400stores across the U.S.

The six named plaintiffs seeking to represent this huge classcontended that Wal-Mart engaged in a pattern or practice of sexdiscrimination with regard to pay and promotion practices.

There are many aspects of the case which are important foremployers, as the theories are tantamount to a “plaintiffs'blueprint” for litigation of nationwide class actions against largeemployers.

Unlike the 2nd Circuit's view of the class certification processas determined in IPO Securities Litigation, the 9th Circuitindicated that any issues involving the merits or the weight ofoffered proof on certification requirements should not be the focusin a class certification hearing.

In addition, it endorsed the “classwide punitive damages”theory–that punitive damages could be assessed against Wal-Martbased on a formula approach, without any consideration of actualharm to particular class members–which courts outside of the 9thCircuit have rejected to date in employment discrimination classactions.

Wal-Mart filed a request for a full en banc review of the appealin the 9th Circuit on Feb. 20 (which is still pending), so the lastchapter in the case is far from written at this juncture.

Given the start of the year with the Dukes ruling, 2007 is aptto be another year filled with bet-the-company class-actionlitigation involving workplace issues. Employers also are likely toexperience an increasing number of wage-and-hour class actions.

Such filings will be made throughout the federal system, as wellas in “plaintiff friendly” jurisdictions with liberal wage-and-hourstate laws such as California, Florida, Illinois, New Jersey, NewYork, Pennsylvania and Texas.

Large employers are also exposed to the “Dukes-like” theoryrecently affirmed by the 9th Circuit. As a result, the U.S.District Court for the Northern District of California (in SanFrancisco) is likely to remain “ground zero” for employers facingnationwide employment discrimination class actions.

“Given the start of the year…, 2007 is apt to be another yearfilled with bet-the-company class-action litigation involvingworkplace issues. Employers also are likely to experience anincreasing number of wage-and-hour class actions.”

Gerald L. Maatman Jr.