United States: Seventh Circuit Again Limits Application Of The Wal-Mart Ruling And Certifies Chicago Teachers' Discrimination Claims

In Chicago Teachers Union, Local No. 1, American Federation of Teachers, AFL-CIO v. Bd. of Educ. of the City of Chicago, Case No. 14-2843 (7th Cir. Aug. 7, 2015), the U.S. Court of Appeals for the Seventh Circuit reversed a district court decision we discussed previously here and certified the discrimination claims of a class of African-American Chicago teachers. The case is significant for employers in that the Seventh Circuit, as it previously did in McReynolds v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 672 F.3d 482 (7th Cir. 2012), a case we discussed here, again certified a class even though the final alleged discriminatory decisions were based on subjective decisions by multiple decision-makers. In addition, the Seventh Circuit further limited Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541 (2011), and held that, even where the legality of final employment decisions cannot be decided on a class-wide basis because of individualized exercise of discretion, there are circumstances where the legality of intermediate decisions preceding the final alleged unlawful employment decision can nonetheless be decided on a class-wide basis.

Background Of The Case

Under the Illinois School Code, schools may be subject to a "turnaround" if they have been on probation for at least one year and have failed to make adequate progress in correcting deficiencies. In a turnaround, the Board of Education takes control of the school and removes all staff. Affected teachers and para-professionals are either placed in a reassignment pool or a substitution pool with different rights to salary and other benefits depending on their tenure status and job position.

In 2011, the Board began considering which schools should be turned around in 2012. There were three steps in this process. The process started with an initial list of 226 schools eligible for turnaround because they had been on probation for one year and had failed to make adequate progress in correcting deficiencies. That list was reduced to 74 schools based on composite standardized test scores and graduation rates. Subsequently, in the third step, a qualitative "in-depth investigation process" began for the remaining 74 schools. This involved school visits, additional data collection, and meetings with a variety of school representatives and community members. No written policy applied to the final turnaround decision. Some of the factors considered were: the academic culture of the school, whether quality instruction was being provided, the quality of the leadership, and the academic trends of the school.

After reviewing the information, several Chicago Public Schools officials decided to recommend that 10 schools should be turned around. The Board subsequently agreed. The schools were located exclusively on the south and west sides of Chicago. The total percentage of African-American tenured teachers at the 10 schools selected for turnaround was approximately 51%, while the total percentage of African-American tenured teachers in the entire Chicago public school system was only 25%.

The Chicago Teachers Union and three African-American tenured teachers brought a class action lawsuit against the Chicago Board of Education alleging that the board's decision to turn around the 10 Chicago public schools was racially discriminatory. Plaintiff sought to certify a class consisting of all African-American teachers or para-professionals in any school subjected to the 2012 turnarounds. The U.S. District Court for the Northern District of Illinois denied class certification, and the Plaintiffs appealed.

The Seventh Circuit's Decision

The Seventh Circuit began its analysis by noting that one of the purposes of class action litigation is to avoid repeated litigation of the same issues. Chicago Teachers Union, at 8. Then pointing out that the question on appeal was whether there were common issues of law or fact common to the class, the Seventh Circuit addressed the Board's argument that, given that the third step in the turnaround decision-making process was qualitative and subjective, there was a lack of commonality under Wal-Mart. Id. at 12.

The Seventh Circuit reasoned that the first flaw in this argument was that it skipped to the third step of the decision-making process. It pointed out that the first two steps of the process were "clearly-objective steps." Id. at 13. The Seventh Circuit opined that these first two steps could have resulted in disparate impact discrimination against African-Americans regardless of what happened at the third step. Id. For example, it hypothesized that, after the first two steps, it could be the case that all schools remaining under consideration for turnaround had 100% African-American teaching staffs, and that the first two steps would thus have had a disparate impact on African-Americans regardless of the third step. Id. The Seventh Circuit therefore found that the question of whether the first two objective steps had a disparate impact could be decided on a class-wide basis. Id. at 14.

The Seventh Circuit concluded that this result followed from its prior decision in McReynolds.  In McReynolds, the Seventh Circuit certified the disparate impact claims of a class of African-Americans even though the employment decisions at issue were made at the discretion of 165 separate individuals because two company-wide policies allegedly caused the 165 individuals to exercise their discretion in a common way that caused discrimination. Id. at 15-16. In Chicago Teachers Union, the Seventh Circuit held that McReynolds demonstrated "that a company-wide practice is appropriate for class challenge even where some decisions in the chain of acts challenged as discriminatory can be exercised by local managers with discretion[,] at least where the class at issue is affected in a common manner[,]" and that under this principle certification of a class to determine the disparate impact of the first two steps of the turnaround decision-making process was appropriate. Id. at 17-18.

The Seventh Circuit went on to consider whether a class could be certified to determine whether the third step of the decision-making process was discriminatory. It found that, despite the fact the Board "describe[d] numerous factors considered in the various schools" during the third step, "they could be boiled down to" 10 factors, including factors like "school culture" and "parent and community input." Id. at 19-20. It found the fact that there were 10 factors that made the "case worlds away from that in Wal-Mart where a court could have no way of knowing why each of the thousands of individual managers made distinct decisions." Id. at 22. It did so even though there were cases where only one of the 10 factors was determinative in deciding to turnaround a school.  Id.

The Seventh Circuit also emphasized the fact that there was one decision-making body that was "of one mind, using one process." Id. at 23. It distinguished this situation from Wal-Mart, where there were "myriad actions of individual managers." Id. It concluded that "[d]ecisions by myriad low-level managers are different than decisions made by . . . few concentrated top-level managers," and thus that certification of claims based on the third stage of the decision-making process was appropriate. Id. at 23-24.

The Seventh Circuit also reaffirmed McReynolds' holding that a class should be certified where liability can be determined on a class-wide basis even though individual trials as to damages would be needed. Id. at 32-33.

Implications For Employers

Plaintiffs' class action lawyers will likely cite to this case as further support in their McReynolds-based arguments for class certification. Of particular concern to employers might be the fact that the Seventh Circuit found that decisions based on consideration of 10 non-enumerated factors – including factors like "school culture" that are far from objectively measurable – are the type of decisions that can support certification of a discrimination class action.  Moreover, this case provides an additional tool that plaintiffs' lawyers are likely to use to try to certify classes where employment decisions are made in multiple stages. They will likely try to certify classes even where final decisions were highly individualized and discretionary by arguing that earlier steps leading to the final decision were uniformly applied and discriminatory. Employers should be on the lookout for how successful these attempts are in future litigation.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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Gerald L. Maatman Jr.
 
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