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Costco Class Action Defense Case-Ellis v. Costco: California Federal Court Rejects Defense Arguments And Certifies Class Action Alleging Sex Discrimination

California Federal Court Holds that Plaintiffs Satisfied Rule 23 Requirements for Certification of Class Action Alleging Gender Discrimination in Promotion and Management Practices by Costco

Plaintiff filed a class action against their employer for violations of Title VII of the Civil Rights Act of 1964 and California’s Fair Employment and Housing Act alleging “that Costco’s promotion system has a disparate impact on female employees, that Costco’s management discriminates against women in promotions, and that defendant has retaliated against persons seeking redress for discrimination.” Ellis v. Costco Wholesale Corp., ___ F.Supp.2d ___, 2007 WL 127800-, *1 (N.D. Cal. January 11, 2007). Plaintiffs’ lawyer moved the federal court to certify a nationwide class action on behalf of at least 700 women; defense attorneys opposed the motion and moved to strike the declarations of plaintiffs’ experts in support of the motion. Id., at *4, *7. The defense also argued against class action treatment on the grounds that plaintiffs failed to exhaust administrative remedies, id., at *5, and lacked standing, id., at *6. The district court rejected defense arguments and certified a nationwide class action as requested by plaintiffs.

Plaintiffs sought certification of a nationwide class action on behalf of “current and former female employees who have been denied promotion to GM [General Manager] or AGM [Assistant General Manager] or denied Senior Staff jobs important to AGM promotion since January 3, 2002.” Ellis, at *5. The district court first addressed the procedural objections raised by defense attorneys . The administrative remedies defense was premised on the argument that plaintiffs’ EEOC claim was limited to discriminatory practices in promotion to general manager positions. Id.. Plaintiffs disagreed, and argued that even if it had been limited to GM claims that their other claims were “reasonably related to the allegations in the EEOC charge.” Id. The district court agreed, noting that Ninth Circuit case law instructs courts “to construe the EEOC charge ‘with utmost liberality.'” Id. (citation omitted). Plaintiffs’ EEOC claim provided adequate notice to Costco of the claims asserted in the class action complaint. Id. With respect to Costco’s standing arguments, the district court held (1) that former employees may seek injunctive relief on behalf of current employees, because “[t]o hold that employees must continue to work in jobs where they face discrimination in order to challenge discrimination would pervert Article III’s injury-in-fact requirement,” Ellis, at *6, and (2) that a current AGM may seek injunctive relief on behalf of women denied promotion to AGM and that it would not “delve into the merits” of the discrimination claims at the class certification stage, id.

With respect to the requirements of Rule 23(a), the district court readily found that the numerosity and typicality requirements were met. Ellis, at *7 and *10-*11. However, the parties “staged a battle of the experts over the issue of commonality.” Id., at *7. The district court defined the legal standard at page *8 as follows: “To demonstrate commonality, plaintiffs must show at least one significant issue of fact or theory of law common to the entire class. . . . The court examines the experts’ opinions not to engage in a merits evaluation of the opinions but only to determine whether their testimony is probative of an inference of discrimination. . . .” (Citations omitted.) Under that test, the federal court held that plaintiffs had adequately established commonality. Id., at *7-*10. Considered as a whole, the district court found that plaintiffs had presented “compelling evidence of the gender disparities . . . sufficient to demonstrate class-wide impact.” Id., at *9. And with respect to the last of the Rule 23(a) requirements, the district court found that the adequacy of representation prong had been satisfied, rejecting defense arguments that former employees had inadequate incentive to seek injunctive relief on behalf of current employees, and that the current employee class representative suffered from the opposite problem. Id., at *11.

Finally, the district court addressed whether plaintiffs had satisfied the requirements of Rule 23(b)(2). Ellis, at *12. The court recognized that “a class seeking both injunctive relief and damages is proper only where the claim for injunctive relief is the predominant form of relief sought by the class,” id.; in the Ninth Circuit, “‘[i]t is sufficient if class members complain of a pattern or practice that is generally applicable to the class as a whole[,] [e]ven if some class members have not been injured by the challenged practice.'” Id. (quoting Walters v. Reno, 145 F.3d 1032, 1047 (9th Cir. 1998)). The court concluded that the “primary motivation” behind the class action was injunctive relief, id., at *13, and held the requirements of Rule 23(b)(2) satisfied without the need for certification of a hybrid class, id.

NOTE: The district court discussed at great length the evidentiary objections to plaintiffs’ expert declarations. Ellis, at *15-*23. The discussion is well worth reading.

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