Classes Certified In Action Alleging That Costco Discriminates Against Women

by Tara Arick on September 28, 2012 · 0 comments

in Labor and Employment Law,

Two nationwide classes of female employees in a gender discrimination action against club warehouse retail giant Costco Wholesale Corp. were certified by a California federal judge Sept. 25, a year after the Ninth Circuit U.S. Court of Appeals vacated the original class certification (Shirley “Rae” Ellis, et al., v. Costco Wholesale Corporation, No. 04-3341, N.D. Calif.; 2012 U.S. Dist. LEXIS 137418).

On the Ninth Circuit’s remand, U.S. Judge Edward M. Chen of the Northern District of California, quoting Wal-Mart Stores, Inc. v. Betty Dukes, et al. (131 S. Ct. 2541 [2011]), said in an 86-page order that the plaintiffs provided “significant proof” that Costco operates under a general policy of discrimination and that the company’s management uses a “common mode of exercising discretion.” The plaintiffs’ proof satisfies the standard for class certification of a disparate treatment claim under Federal Rule of Civil Procedure 23(a), the judge said.

Judge Chen further held that “commonality is even clearer with respect to disparate impact, as Plaintiffs have identified specific employment practices they allege have caused the gender disparity in promotions to [assistant general manager] and [general manager] positions.”

Vacated In Part

Shirley “Rae” Ellis, Leah Horstman and Elaine Sasaki, current and former employees of Costco, filed a putative class action alleging gender discrimination in Costco’s promotion and management practices. Pursuant to Title VII of the Civil Rights Act of 1964, the plaintiffs allege that Costco has engaged in a pattern or practice of discrimination against women in promotions to assistant general manager (AGM) and general manager (GM) positions and that Costco’s promotion system has a disparate impact on female employees.

In 2007, the District Court certified a class of all current and former Costco employees nationwide who had been denied promotions to GM, AGM or senior staff positions since Jan. 3, 2002.

Costco received permission to file an interlocutory appeal, and on Sept. 16, 2011, the Ninth Circuit in Ellis v. Costco Wholesale Corp. (657 F.3d 970 [9th Cir. 2011]) affirmed in part, vacated in part and remanded the certification order for reconsideration in light of the U.S. Supreme Court’s landmark decision in Dukes. The panel said the District Court applied the wrong legal standard in its analyses of commonality and typicality under Rule 23(a).

‘Significant Proof’

On remand, the plaintiffs moved for certification of two classes: an injunctive relief class of all women currently employed or who will be employed at any Costco warehouse in the United States who have been or will be subject to Costco’s system for promotion to AGM or GM and a monetary relief class of all women who have been employed at any Costco warehouse store in the United States since Jan. 3, 2002, who have been subject to Costco’s system for promotion to AGM and GM.

In granting the motion, Judge Chen said that the plaintiffs’ “significant proof” of discriminatory practices on the part of Costco includes “persuasive evidence of numerous common policies and practices under which Costco conducts promotions to AGM and GM.” Also, the judge held, “Plaintiffs similarly demonstrate a pervasive companywide culture that, along with the common policies and practices, guide Costco managers’ discretion in making promotion decisions. Plaintiffs allege that this culture generates and reinforces discriminatory outcomes.”

Judge Chen added that the plaintiffs’ proof demonstrates classwide effects purportedly caused by Costco’s policies and practices for all regions of the company structure, which was the specific question identified by the Ninth Circuit for the court to address on remand. The judge said that Costco’s own anecdotal evidence and admissions provide evidence of the existence of common practices that apply to the class as a whole.

Different Than Dukes

“Independently viewing the record as a whole, the Court rejects Defendant’s argument ‘that promotion decisions to AGM and GM vary by region and that promotion decisions to AGM are made at the store level,’” Judge Chen said. “Furthermore, the fact that the scope of this suit is confined to the selection of GMs and AGMs by a much smaller group of decisionmakers than in Dukes – decisionmakers who form a relatively small coherent group – makes it far less ‘unbelievable’ that these managers would exercise their discretion in a common way. To the contrary, Plaintiffs have offered persuasive evidence of a common direction emanating from Costco’s upper management.”

The judge said that, contrary to Costco’s contention, the case is different than Dukes in many ways. For example, the putative class in the instant case is smaller and the scope of the claims much more narrow than in Dukes, the judge said. Also, “unlike in Dukes, here Plaintiffs point to several companywide policies and practices allegedly responsible for the disparity in promotions to AGM and GM,” the judge said.

“The instant case presents not simply the absence of a policy, as in Dukes, but discrete companywide policies guided and supervised by a relatively small and coherent group of company executives. These policies and practices, set and enforced by upper management, provide the ‘glue’ the Supreme Court sought – but did not find – in Dukes, sufficient to ‘say that examination of all the class members’ claims for relief will produce a common answer to the crucial question why was I disfavored,’” Judge Chen said.

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