Puffer v. Allstate Ins. Co.

• Decision Date: 27 March 2012
• Docket Number: No. 11–1273.,11–1273.
• Citation: 114 Fair Empl.Prac.Cas. (BNA) 1025,95 Empl. Prac. Dec. P 44455,675 F.3d 709
• Parties: Katherine PUFFER, Plaintiff,andKaren Pell, et al., Intervening Plaintiffs–Appellants, v. ALLSTATE INSURANCE COMPANY, Defendant–Appellee.
• Court: U.S. Court of Appeals — Seventh Circuit

114 Fair Empl.Prac.Cas. (BNA) 1025

675 F.3d 709

95 Empl. Prac. Dec. P 44,455

Katherine PUFFER, Plaintiff,andKaren Pell, et al., Intervening Plaintiffs–Appellants,

v.ALLSTATE INSURANCE COMPANY, Defendant–Appellee.

No. 11–1273.

United States Court of Appeals, Seventh Circuit.

Argued Feb. 23, 2012.Decided March 27, 2012.

Paul R. Garry (argued), Attorney, Meckler Bulger Tilson Marick & Pearson LLP, Richard C. Godfrey, Attorney, Kirkland & Ellis LLP, Chicago, IL, for Defendant–Appellee.

Linda Debra Friedman, Senior Attorney, Stowell & Friedman, Shona B. Glink (argued), Attorney, Meites, Mulder & Glink, Chicago, IL, for Intervenors–Appellants.

Before FLAUM and TINDER, Circuit Judges, and SHADID, District Judge. ^*FLAUM, Circuit Judge.

Katherine Puffer sued Allstate Insurance Company (“Allstate”) on behalf of herself and a putative class, alleging that Allstate carried out a nationwide pattern or practice of sex discrimination in violation of Title VII of the Civil Rights Act of 1964, 42 U.S.C. § 2000e et seq., and the Equal Pay Act of 1963, 29 U.S.C. § 206(d). In her complaint, she alleged gender-based earning disparities rooted in differential treatment and disparate impact theories based on Allstate's salary, promotion, and training policies, which left significant discretion in the hands of individual managers. The district court denied plaintiff's motion for class certification. In response to the concerns expressed by the court and in response to the enactment of the Lilly Ledbetter Fair Pay Act of 2009, Pub. L. No. 111–2 (the “Ledbetter Act”), plaintiff again moved for class certification. This time, she focused exclusively on Allstate's uniform compensation policies. The court again denied certification, citing flaws in plaintiff's evidence and the lack of common issues.

Puffer then settled her individual claims with Allstate. Karen Pell, Gail Howells, and Mary Keith, members of the putative class, intervened to appeal the denials of class certification. These intervenors now allege only a disparate impact theory, claiming that Allstate's policy of awarding merit increases based on a percentage of base pay and Allstate's policy of comparing salaries to its competitors caused gender-based disparities in earnings.

We shall not reach the merits of this claim, however. We conclude that intervenors have waived their disparate impact claim by failing to meaningfully develop it before the district court. Although plaintiff nominally mentioned a disparate impact claim in her complaint, she developed and argued only her pattern-or-practice claim—a type of intentional discrimination. We therefore affirm the district court's denial of class certification.

I. Background

A. Allstate's Corporate Structure and Policies

Allstate Insurance Company is headquartered in Illinois and employs 38,000 people throughout the country. In 2002, Allstate created an operating unit called Allstate Protection, which employs approximately 80% of Allstate's personnel. Allstate Protection is organized into different Areas of Responsibility (“AORs”). The four largest AORs are Claims, Product Operations, Protection Finance, and Distribution.

Responsibilities, supervisors, office locations, and salary grades vary among these AORs. The Claims AOR handles insurance claims and employs approximately 17,000 people as attorneys, human resources professionals, information technology specialists, claims investigators, claims and subrogation service managers, and project managers. The Product Operations AOR creates insurance products, prices products, assesses risk, updates Allstate's insurance policies, and communicates with customers. Among its employees are pricing directors, actuaries, product operations managers, and personal line directors and managers. The Protection Finance AOR provides financial support and typically employs managers with finance or accounting degrees. The Distribution AOR works with the insurance agencies that sell Allstate's products by developing recognition plans, directly supporting agents, and promoting business.

The hierarchical structure among the AORs is similar: entry-level managers are at Salary Grades (“Grades”) 63 and 64; senior managers are at Grade 77; directors are at Grade 78; appointed officer positions (Assistant Vice President and Assistant Field Vice President) are at Grade 80; and elected officer positions (Vice President, Senior Vice President, and Senior Vice President) are at Grade 90 and above. At the end of 2003, women comprised 61% of Protection employees but only 36% of the managerial positions and 24% of the officer positions.

At the beginning of each year, managers meet with their supervisors to discuss major job responsibilities and individual performance goals. At the end of the year, supervisors fill out performance development summaries for the managers they oversee. In a process known as “one-over-one” review, supervisors submit the performance summaries to their own superiors for input, review, and approval before turning them over to the evaluated managers. Allstate also evaluates its managers based on 17 critical success factors and on Quality Leadership Management Surveys. These evaluations factor into decisions about merit or promotional salary increases for managers.

Allstate Protection is allotted a percentage amount of money annually for merit or promotional salary increases. Allstate's Human Resources department establishes an overall range of salary increases in terms of a percentage amount for each performance and salary level. These guidelines are suggestions, leaving supervisors with the discretion to grant more or less of an increase based on performance. Salary increases for officers follow a similar process except that the senior management team makes the decisions.

B. Procedural Background

Katherine Puffer, the original plaintiff in this suit, worked at Allstate from 1977 to 2003. She primarily worked in the Finance AOR, but she also worked in the Production Operations AOR. By 1993, Puffer had been promoted eight times.

Puffer alleged that she was sexually harassed by her supervisor from late–1998 to mid–1999 and that she was not promoted because she rejected her supervisor's advances and because of her gender. She filed a charge of gender discrimination, sexual harassment, and retaliation with the Equal Employment Opportunity Commission (“EEOC”) in January 2001, but she did not file a lawsuit within the required time period after receiving a right to sue letter. In 2003, Puffer was terminated as part of a reorganization and officer reduction in force. Fourteen officers, including Puffer, were terminated at that time: eleven were male and three were female. Puffer filed a new charge with the EEOC, alleging gender discrimination and retaliation, and she then timely filed the complaint in this case.

In her amended complaint, Puffer asserted three claims. First, she alleged that Allstate discriminated against her and a class of female managerial employees because of their gender and allowed the discrimination “to exist and go unremedied for so long that it amounts to a policy or practice and constitutes Allstate's standard operating procedure.” Am. Compl. ¶ 38. She alleged this claim under both “differential treatment and disparate impact theories of liability under Title VII.” Id. ¶ 53. Second, Puffer alleged a class claim under the Equal Pay Act, contending that Allstate pays putative class members “lower wages than male employees in substantially equal jobs even though Plaintiffs and all others similarly situated performed similar duties requiring the same skill, effort, and responsibility of male employees” and performed “substantially equal work.” Id. ¶ ¶ 57, 59. Third, Puffer alleged an individual claim of retaliation under Title VII and the Equal Pay Act.

At the time Puffer filed her complaint, case law supported the “paycheck accrual rule,” such that a new claim under Title VII arose each time an employer issued a paycheck reflecting discriminatory wages, even if the discriminatory decision setting the amount occurred outside the limitations period (i.e., more than 300 days before the filing of the first EEOC charge). But in 2007, in Ledbetter v. Goodyear Tire & Rubber Co., the Supreme Court held that present effects of a discriminatory decision that predated the limitations period could no longer form the basis for Title VII liability. 550 U.S. 618, 632, 643, 127 S.Ct. 2162, 167 L.Ed.2d 982 (2007).

On November 8, 2007, after substantial discovery, Puffer moved for class certification pursuant to Federal Rules of Civil Procedure 23(b)(2) and 23(b)(3) of her Title VII claims. She sought to certify a class of approximately 1700 female managers in the position of division or department manager (Grade 63) and above who worked or continue to work at Allstate Protection since May 9, 2001. Members of the putative class held 275 different jobs in a hundred offices across the country. Eighty percent of the putative class was employed in entry-level management positions, with the remainder of the class in higher management and officer positions. Plaintiff argued that Allstate has a “strong paternalistic culture” and further that “Allstate Protection's organizational structure vests all authority to choose, advance and compensate staff in the male-dominated, senior manager ranks.” Pl.'s Class Cert. Mem. 1.

The parties briefed the class certification motion for nearly a year. They offered the opinions of two statisticians, two sociologists, two industrial psychologists, and 84 fact witnesses. Plaintiff's main expert, Dr. Janice Madden, presented statistical evidence indicating that, from 2001 through 2005,¹ women earned substantially lower wages than men did at every salary grade—even after accounting for job code, tenure, and other variables. Plaintiff also presented the expert report of Dr. Cristina G. Banks, an industrial and organizational psychologist, and ...