Sex Discrimination and Equal Pay Class Action Revived; District Court Misinterpreted Dukes when Denying Leave to Amend the Complaint: Fourth Circuit | Practical Law

Sex Discrimination and Equal Pay Class Action Revived; District Court Misinterpreted Dukes when Denying Leave to Amend the Complaint: Fourth Circuit | Practical Law

In Scott v. Family Dollar Stores, Inc., the US Court of Appeals for the Fourth Circuit, in a sex discrimination and equal pay class action, reversed the district court's denial of leave to amend the complaint, holding that the denial was based on an erroneous interpretation of Wal-Mart Stores, Inc. v. Dukes, and was therefore an abuse of discretion.

Sex Discrimination and Equal Pay Class Action Revived; District Court Misinterpreted Dukes when Denying Leave to Amend the Complaint: Fourth Circuit

by Practical Law Labor & Employment
Published on 22 Oct 2013 • USA (National/Federal)
In Scott v. Family Dollar Stores, Inc., the US Court of Appeals for the Fourth Circuit, in a sex discrimination and equal pay class action, reversed the district court's denial of leave to amend the complaint, holding that the denial was based on an erroneous interpretation of Wal-Mart Stores, Inc. v. Dukes, and was therefore an abuse of discretion.
On October 16, 2013, in Scott v. Family Dollar Stores, Inc., the US Court of Appeals for the Fourth Circuit issued an opinion reversing the district court's denial of leave to amend the complaint, holding that the denial was based on an erroneous interpretation of Wal-Mart Stores, Inc. v. Dukes, and was therefore an abuse of discretion.
Family Dollar's more than 7,000 stores are each run by a salaried store manager. The appellants in this case are 51 named plaintiffs and a putative class consisting of females who are or have been store managers. The appellants' allegations include:
  • Subjectivity and gender stereotyping caused disparate impact to compensation paid to female store managers.
  • Pattern-or-practice of disparate impact in violation of Title VII.
  • Violation of the Equal Pay Act.
In 2008, the appellants filed their claim in federal court. Family Dollar then filed a motion for partial judgment on the pleadings, arguing that the appellants would be unable to satisfy the class action requirements of Federal Rule of Civil Procedure 23(b). In September 2011, after several months of unsuccessful attempts to resolve the dispute through mediation, Family Dollar filed a motion to dismiss and strike the class allegations, arguing that Wal-Mart foreclosed the appellants' class allegations. The appellants opposed the motion and moved for leave to file an amended complaint. In the proposed amended complaint, appellants allege and challenge at least four company-wide policies which they allege have a disparate impact on women. The district court granted Family Dollar's motion to dismiss, but denied the appellants' motion for leave to amend. In granting Family Dollar's motion and dismissing the class allegations, the district court:
  • Relied on the appellant's pre-Wal-Mart admission that their claims were "virtually identical" to the claims asserted by the Wal-Mart plaintiffs.
  • Reasoned that as a matter of law under Wal-Mart, appellants cannot satisfy the Rule 23(a) commonality requirement because they allege they were discriminated against on the basis of gender as a result of "subjective decisions made at the local store levels."
  • Dismissed the Equal Pay Act class claims on the same basis.
  • Held that appellants' claims do not satisfy the predominance requirement in Rule 23(b)(3).
In denying appellants' motion for leave to amend, the district court held that amendment:
  • Was futile because the only source of alleged discrimination in the proposed complaint is the "discretionary pay of managers" which are "foreclosed" under Wal-Mart.
  • Would be prejudicial to Family Dollar because:
    • the original complaint was filed over three years before; and
    • the new complaint alleges a new theory only in an attempt to avoid Wal-Mart.
The appellants appealed the class certification decision to the Fourth Circuit under Rule 23(f). On appeal, the appellants argued that the district court:
  • Erred in holding that under Wal-Mart, the proposed class claims in the original complaint fail to satisfy the Rule 23(a) commonality requirement.
  • Failed to conduct a rigorous analysis of the certification issue and failed to consider the evidence.
  • Abused its discretion by failing to grant leave to amend the complaint.
The Fourth Circuit, however, focused its review on the district court's denial of leave to amend the complaint (because the proposed amended complaint contains substantial allegations of centralized control, which are necessary to satisfy the commonality requirement for class certification as set out in Wal-Mart). The Fourth Circuit held that the district court's denial of leave to amend the complaint on the ground that it was foreclosed by Wal-Mart was erroneous because it failed to consider whether:
  • In light of the discretion alleged, the discretion was exercised in a common way under some common direction, or despite the discretion alleged, another company-wide policy of discrimination is also alleged.
  • The discretionary authority at issue was exercised by high-level managers, not low-level managers as in Wal-Mart.
Court documents: