Matz v. Household Intl Tax, et al
Filing
607
MEMORANDUM Opinion and Order Signed by the Honorable Joan B. Gottschall on 3/12/2012. Mailed notice(vcf, )
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
ROBERT J. MATZ, individually and
on behalf of all others similarly situated,
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Plaintiff,
v.
HOUSEHOLD INTERNATIONAL TAX
REDUCTION INVESTMENT PLAN,
Defendant.
Case No. 96 C 1095
Judge Joan B. Gottschall
MEMORANDUM OPINION AND ORDER
On November 29, 2011, in response to defendant’s motion to decertify the class based on
the Supreme Court’s decision in Wal-Mart, Inc. v. Dukes, 131 S.Ct. 2541 (2011), the court
agreed to reconsider whether the class should be decertified in this case. Wal-Mart required the
party seeking class certification to demonstrate with proof, at the class certification stage, that
the requirements of Rule 23 are satisfied. One of those requirements, the focus of the decision in
Wal-Mart, was the commonality requirement of Rule 23(a)(2): that the plaintiff be permitted to
represent only those who suffered an injury like his. The parties have submitted briefs and other
materials pursuant to the November 29 order.1 Based on Wal-Mart and the Seventh Circuit’s
recent opinion in McReynolds v. Merrill Lynch, Inc., __ F.3d ___, 2012 WL 592745 (7th Cir.
Feb. 24, 2012), the court believes that the class must be decertified in at least one particular:
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Plaintiff dropped off with the court a banker’s box full of discovery materials. It is not clear what the
plaintiff wishes the court to do with these materials, but if it is the plaintiff’s wish that the court review them all to
try to figure out (on its own) whether plaintiff has sufficient evidence to justify the certification of a class, the court
is unwilling to take on this task. It is plaintiff’s job to point out what from among all this discovery material it is
relying upon.
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constructively discharged employees. With respect to terminated employees, the court does not
find plaintiff’s submissions helpful, and one round of further briefing in this interminable case
will unfortunately be necessary.
In Wal-Mart, the named plaintiffs sought to represent a class of women injured by the
subjective pay and promotion decisions of their local managers; they claimed that Wal-Mart, by
refusing to cabin its managers’ discretion, was condoning–and was therefore responsible for–the
discriminatory treatment they claim resulted. (In addition, they claimed that a strong and
uniform corporate culture permitted bias to infect the discretionary decisionmaking of thousands
of Wal-Mart managers.) Plaintiffs sought to represent a class of all women employed at a WalMart domestic retail store at any time since December 1998 “who have been or may be subjected
to Wal-Mart’s challenged pay and management track promotions policies and practices.” WalMart, 131 S.Ct. at 2549. As is relevant to the case at bar, the class was defined so that the only
people who would recover were those injured by the challenged subjective pay and promotion
decisions of their local managers. Nevertheless, to figure out who those people were, the suit
would require an examination of millions of employment decisions, and it was impossible to say
in advance that the examination of each would yield the same answer to the question of why a
given employee was disfavored. (Presumably, while large numbers of decisions might be based
on the managers’ uncabined and biased discretion, large numbers would be based on other
factors altogether.) While recognizing that under some circumstances a company’s giving of
discretion to lower-level supervisors can be a basis for Title VII liability, this “does not lead to
the conclusion that every employee in a company using a system of discretion has such a claim
in common.”Id. at 2554. “In such a company,” the Court stated, “demonstrating the invalidity of
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one manager’s use of discretion will do nothing to demonstrate the invalidity of another’s.” Id..
Wal-Mart makes plain that it is not sufficient to define the class in a way that conditions
relief on sharing the named plaintiff’s injury unless the plaintiff can show, at the certification
stage, that the named plaintiff and the members of the putative class shared a common injury. At
the certification stage, along with satisfying the other requirements of Rule 23, plaintiff must
demonstrate that he and the members of the putative class share the same injury. In the instant
case as in Wal-Mart, no class member can recover unless, at the merits stage, it is demonstrated
that that class member was terminated (or constructively discharged) as a result of the
reorganization. But Wal-Mart makes plain that it is not sufficient to wait until the merits stage
to determine whether the plaintiff’s injury, and the class members’ injury, is the same. Rather, at
the certification stage, the named plaintiff must show that the class satisfies Rule 23, including
the requirement the members of the class share a common injury.
The Seventh Circuit’s recent treatment of Wal-Mart in McReynolds v. Merrill Lynch,
Inc., is helpful. In McReynolds, plaintiffs claimed that Merrill’s practice of delegating
discretion over broker compensation to “Complex Directors” (branch office supervisors) through
their implementation of the company’s teaming policy (by which the directors had discretion to
approve the formation of employee teams to solicit and service clients) and account distribution
policy (by which customers’ accounts were transferred when a broker left Merrill Lynch based
upon competing brokers’ records of revenue) had a disparate impact on African-Americans.
Plaintiffs claimed that the teams operated like fraternities with brokers choosing teammates most
like themselves, to the disadvantage of minorities, and that if minority employees failed to
generate as much revenue as white employees on teams did, they would suffer similarly in
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account distributions. The plaintiffs did not contend that the company (or even the directors)
acted with discriminatory intent. Rather, by maintaining a policy of director discretion whereby
directors “permitt[ed] brokers to form their own teams and prescrib[ed] criteria for account
distributions that favor the already successful–those who may owe their success to having been
invited to join a successful or promising team,” McReynolds, 2012 WL 592745, at *7, the
company was maintaining policies that had a disparate impact on racial minorities.
The Seventh Circuit held that the existence vel non of company-authorized policies that
authorized broker-initiated teaming and based account distributions on past success was a
common question that could most efficiently be determined on a class-wide basis. The
resolution of this issue on a class-wide basis might result in an injunction, however, but could
not resolve individual class members’ claims. Rather, “[e]ach class member would have to
prove that his compensation had been adversely affected by the corporate policies, and by how
much.” Id. at *8. At the pecuniary relief stage as opposed to the injunction stage, there might be
no common issues. In that case, individual trials would be necessary. Those trials would be less
rather than more complex, however, if the common issue of the existence and legality of the
challenged company policy had been already determined.
Having reviewed the parties submissions in light of Wal-Mart and McReynolds, this court
concludes as follows:
(1)
The issue of whether there was a reorganization and the scope of any such
reorganization is a common issue which Matz could appropriately litigate on
behalf of a class, assuming that he is able to satisfy the other requirements of
Rule 23 (numerosity in particular, since the other issues have been previously
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resolved).
(2)
Plaintiff’s attempt to represent a class which includes persons terminated via
“constructive discharge” cannot survive Wal-Mart because there appears to be no
evidence at this point (let alone when the class was certified in 2006) that
employees who left the Reorganization entities on their own volition did so
because of the reorganization. Individual issues predictably abound, as many
people likely left employment for reasons having nothing to do with the putative
reorganization: geographical motives, better employment opportunities, marriage
and divorce, illness, retirement–to name a few that come to mind. Wal-Mart does
not allow the court to find commonality between plaintiff and individuals who
may not have been injured at all or who, if injured, may have suffered an injury
completely unrelated to the plaintiff’s. Put another way, an answer to the
question of whether a partial termination occurred says nothing about whether
any person who voluntarily quit did so because of the reorganization. To the
extent that the court’s prior orders assumed that because the merits inquiry would
make clear whether constructively discharged persons should be included in
deciding whether a partial termination occurred, it was permissible to include
them in the class, the court was in error: “A party seeking class certification must
affirmatively demonstrate his compliance with the Rule–that is, he must be
prepared to prove that there are in fact sufficiently numerous parties, common
questions of law or fact, etc.” Wal-Mart, 131 S.Ct. at 2551 (emphasis in original).
(3)
Under Wal-Mart, plaintiff can represent a class of people who were involuntarily
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terminated only if he can make a showing at this stage of the case that there is a
class of people (satisfying the requirements of Rule 23) who share a common
injury–that is, were terminated because of the putative reorganization. The class
cannot be composed of all people who were terminated during the relevant time
period, because determining whether all these people shared plaintiff’s injury can
be determined only by means of a highly-individualized inquiry. Plaintiff’s
filings contain little or nothing on this subject. Defendant’s Response (filed
January 4, 2012) indicates that plaintiff has categorized terminated employees as
having left a Household entity due to “early retirement, sale of business,” “lack of
work” and “sale of business.” If it is possible to identify a numerically adequate
class of employees terminated for these and similar reasons, plaintiff may be able
demonstrate the existence of a class of similarly-injured people, who lost their
jobs for reasons related to the putative reorganization.2
Plaintiff has one week to provide its evidence as to the number of persons who should be
included in its class, based on the above criteria. The court will hear brief oral argument on
Monday, March 26, 2012, at 9:00 AM.
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Commentators have recognized that some performance terminations may in fact be subterfuges for
reductions-in-force, and should accordingly be included in the partial termination analysis. See Marcia S. Wagner &
Jon C. Schultze, Partial Plan Terminations of Qualified Plans, The ASPPA J., Winter 2011, at 2,
http://www.asppa.org/Document-Vault/PDFs/TAJ/TAJ-Winter2011-partialterm.aspx. To the extent plaintiff has
evidence of employees who were chosen for termination because of the reorganization but were explicitly terminated
for cause, such employees, together with this supporting evidence, may be proposed for inclusion in the class.
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ENTER:
/s/
Joan B. Gottschall
United States District Judge
Dated: March 12, 2012
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