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Labor Law Class Action Defense Cases-McClain v. Lufkin: Fifth Circuit Issues Mixed Opinion On Class Action Appeal Following Judgment In Favor Of Plaintiff On Title VII/§ 1981 Discrimination Class Action Complaint

District Court Judgment on Discrimination Class Action Complaint Required Reversal and Remand as to Certain Issues Necessitating Remand of Class Action to District Court for Further Proceedings Fifth Circuit Holds

Plaintiffs filed a class action against their employer, Lufkin Industries, alleging violations of Title VII and 42 U.S.C. § 1981 based on the allegation that Lufkin’s “practice of delegating subjective decision-making authority to its managers with respect to initial assignments and promotions disparately affected them.” McClain v. Lufkin Industries, Inc., ___ F.3d ___ (5th Cir. February 29, 2008) [Slip Opn., at 2]. Among the many named plaintiffs in the class action complaint, only two had filed charges with the EEOC and received right-to-sue letters, id. The class action involved all four of Lufkin’s production divisions, and the company has approximately 1,500 hourly and salaried workers. Id. The district court granted plaintiffs’ request to certify the litigation as a class action with respect to the disparate-impact claims, but the court refused to give class action treatment to plaintiffs’ disparate-treatment claims. Id., at 3. Following a bench trial, at which “the court strictly limited each party to twenty hours for the presentation of its case,” the court found in favor of the plaintiffs and awarded $3.4 million in back pay, together with injunctive relief and attorney fees. Id. Both sides appealed: plaintiffs argued the court should have granted class action treatment to the disparate-treatment claims, and defense attorneys argued (1) plaintiffs failed to exhaust administrative remedies, (2) lacked standing to represent the class, and (3) the district court committed various errors in finding for plaintiffs and calculating damages. Id., at 4. The Fifth Circuit issued an opinion “unfortunately inconclusive of the litigation,” id., at 1.

The Fifth Circuit addressed first the defense claim that plaintiffs failed to exhaust their EEOC remedies, which the Circuit Court characterized as the “mainstay of proper enforcement of Title VII remedies.” McClain, at 4. The defense argued that the class action’s disparate-impact claims concerning its hiring and promotional practices, id., at 4-5. Relying on Pacheco v. Mineta, 448 F.3d 783 (5th Cir.), cert. denied, 127 S.Ct. 299 (2006), the Circuit Court concluded that the January 1995 letter from plaintiff McClain to the EEOC (relied on by the district court in finding that plaintiffs had exhausted their administrative remedies) complained only about demotion and was thus insufficient to support the hiring and promotion class action claims. See McClain, at 5-8. The Court concluded, however, that plaintiff Thomas’s EEOC charge satisfied the exhaustion requirement, id., at 8-9. However, the Fifth Circuit agreed with defense attorneys that neither McClain nor Thomas adequately complained about Lufkin’s “Foundry” division, and therefore vacated the judgment insofar as it affected the Foundry division, id., at 9. Indeed, the Court noted that “considerable doubt” existed as to whether either of these individuals even had standing to represent a class consisting of Foundry division workers. Id., at 9 n.2.

Defense attorneys next “challenge[d] two factual findings” underlying the district court’s finding of disparate-impact liability, but the Circuit Court rejected these challenges and we do not discuss them further here. See McClain, at 10-16. Nor do we here discuss the Fifth Circuit’s analysis of the district court’s finding of a statistically significant disparate impact in promotions; for our purposes, it is sufficient to note that the Circuit Count found no error with that finding. See id., at 16-18. We also note only briefly that the Fifth Circuit rejected defense arguments that the district court erred in limiting it only 20 hours to present Lufkin’s case: The Court explained at page 21 that while it “[did] not doubt that it was difficult for Lufkin to mount a defense against generalized claims of subjective decision making – claims that implicated all of its divisions and spanned almost a decade – in the mere twenty hours the district court allowed each side[,]” the defense failed to show that any prejudice flowed from the error. Finally, we respect to defense challenges to the “class-wide back-pay award” determination of the lower court, the Fifth Circuit noted that the judgment and damage award had to be vacated because of its conclusion concerning Foundry division workers and provided guidance to the district court for remand. See id., at 18-21. The discussion is well worth reading, but we do not take the time to summarize it here.

With respect to plaintiffs’ claims, the Circuit Court held that the district court did not abuse its discretion in denying class action certification of the 42 U.S.C. § 1981 disparate-treatment claim. McClain, at 22. “The district court declined to certify the class under Rule 23(b)(2) because individual claims for monetary relief would have predominated, and it concluded that the class representatives would be ‘inadequate’ if they dropped the class members’ demand for compensatory and punitive damages in order to protect the ‘predominance’ of nonmonetary claims.” Id. (citation omitted). A “serious conflict” existed in that plaintiffs had disavowed monetary damages, and the Fifth Circuit agreed that the named plaintiffs had attempted to trade “significant legal remedies” otherwise available to putative class members in exchange for class certification, fully supporting the district court’s decision to refuse class action treatment. Id., at 22-23.

The Fifth Circuit agreed, with plaintiffs’ claim that the injunction was impermissibly vague. As the Court explained at pages 23 and 24, “The injunction includes such vague directives as ‘cease and desist all racially biased assignment and promotion practices, ‘create and implement a program to ensure that black employees receive an equitable proportion of promotions,’ and ‘take all necessary steps to remedy the effects of past discrimination.’” The injunction thus failed to have the specificity required by FRCP Rule 65(d), id., at 23. The Circuit Court therefore vacated the injunction and remanded “for the court to try again,” id., at 24.

NOTE: The Fifth Circuit also held that the district court abused its discretion in determining plaintiffs’ attorney fee award, finding that the lower court failed to explain its reasons for reducing the fee request. See McClain, at 24-25.

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