Smith v. Texaco

• Citation: 263 F.3d 394
• Decision Date: 22 August 2001
• Docket Number: No. 00-40337,00-40337
• Parties: (5th Cir. 2001) Matthews Smith, John Comeaux, John Lumpkins, Kenneth Ford, and Darlene Greene, et al., Plaintiffs-Appellees, v. Texaco, Inc.; et al., Defendants, Aramco Services Company, Saudi Refining, Inc., Shell Oil Company, Star Enterprise, Texaco, Inc., Texaco Refining and Marketing Incorporated, and Texaco Refining and Marketing East, Inc., Defendants-Appellants
• Court: United States Courts of Appeals. United States Court of Appeals (5th Circuit)

Page 394

263 F.3d 394 (5th Cir. 2001)

Matthews Smith, John Comeaux, John Lumpkins, Kenneth Ford, and Darlene Greene, et al., Plaintiffs-Appellees, v. Texaco, Inc.; et al., Defendants, Aramco Services Company, Saudi Refining, Inc., Shell Oil Company, Star Enterprise, Texaco, Inc., Texaco Refining and Marketing Incorporated, and Texaco Refining and Marketing East, Inc., Defendants-Appellants.

No. 00-40337

IN THE UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT

August 22, 2001

Appeal from the United States District Court for the Eastern District of Texas

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[Copyrighted Material Omitted] Before REAVLEY, SMITH, and DeMOSS, Circuit Judges.

JERRY E. SMITH, Circuit Judge:

In this appeal brought pursuant to Fed. R. Civ. P. 23(f), the defendants challenge a class certification. Concluding that the attempted class does not meet the requirements of the applicable rules, we reverse and remand.

I.

This case has its origins in race discrimination claims made against Texaco, Inc. ("Texaco"), and its subsidiaries in Roberts v. Texaco, Inc., 979 F. Supp. 185 (S.D.N.Y 1997). During that litigation, counsel for Roberts mentioned in briefs that employees of Star Enterprise ("Star") were considered members of the class; he also made representations to Matthews Smith that Star employees were included. When the Roberts case settled and a settlement class was certified, however, Star employees were written out of the class.¹

A short time after the settlement was announced, Smith obtained a state court temporary restraining order prohibiting Star and Texaco from removing or destroying documents; media reports had suggested that they were destroying evidence.² At this point, the statute of limitations already had expired.

Star then removed the case to federal court. After a hearing, the district court entered preliminary injunctions and document preservation orders that Star and Texaco appealed. This court affirmed.

The plaintiffs have filed a series of amended complaints, including inter alia, claims against Texaco based on agency principles and stemming from its part ownership of Star (through its wholly-owned subsidiaries Texaco Refining and Marketing Incorporated ("TRMI") and Texaco Refining and Marketing East ("TRMI East")). TRMI and its wholly-owned subsidiary TRMI East were included, based on the latter's role as joint venturer in Star. Saudi Refining Incorporated ("SRI") was joined as the other joint venturer in Star. Finally, Aramco Services Company ("ASC") was joined because it owns SRI.

Plaintiffs, individually and as representatives of a class of approximately two hundred other salaried black employees, allege that defendants discriminated on the basis of race in violation of title VII of the Civil Rights Act of 1964, as amended by the Civil Rights Act of 1991, 42 U.S.C. § 2000e, and the Civil Rights Act of 1871, as amended by the Civil Rights Act of 1991, 42 U.S.C. § 1981. The plaintiffs assert discrimination in promotions, compensation, and other benefits and privileges of employment throughout Star's facilities in various states.

The allegations involve Star's evaluation, job posting, and compensation/pay grade systems and promotion practices. Star and Texaco also are accused of creating or permitting the creation of a hostile work environment for black employees.³ The claims focus on the policies' subjectivity, which allegedly allows defendants to apply the facially-neutral practices in a discriminatory manner. Plaintiffs seek monetary damages including, but not limited to, compensatory and punitive damages. After a hearing, the district court certified the following class:

All African-American employees of Star Enterprise, at any time from March 23, 1991 to the present who have held or who have tried to obtain, a managerial, supervisory, or professional salaried position, and who have been, continue to be, or may in the future be adversely affected by Star's alleged racially discriminatory employment and practices. The class does not include any hourly individuals who have tried to obtain salary positions.

II.

A.

A district court maintains substantial discretion in determining whether to certify a class. See Jenkins v. Raymark Indus., Inc., 782 F.2d 468, 471-72 (5th Cir. 1986). We recognize the essentially factual basis of the certification inquiry and defer to the district court's inherent power to manage and control pending litigation, so we review certification decisions only for abuse of that discretion. See Pegues v. Miss. State Employment Serv., 699 F.2d 760, 763 (5th Cir. 1983). Nonetheless, "[a] district court by definition abuses its discretion when it makes an error of law." Koon v. United States, 518 U.S. 81, 99-100 (1996). Whether the court applied the correct legal standard is a question subject to de novo review. See Forbush v. J.C. Penney Co., 994 F.2d 1101, 1104 (5th Cir. 1993).

B.

As a guide, we compare the causes of action before delving into the specifics of this case. Class actions brought under title VII typically proceed under two theories, disparate impact⁴ and systemic disparate treatment⁵; plaintiffs advance both. The disparate impact theory is used to challenge a facially-neutral employment policy that affects a protected employee class more harshly. Pouncy v. Prudential Ins. Co. of Am., 668 F.2d 795, 799 (5th Cir. 1982). Disparate impact cases in particular, which challenge specific, facially-neutral policies with proof of statistical disparities despite uniform application, implicate class-based claims.

The disparate treatment theory focuses on whether the employer engaged in a "pattern or practice" of intentional discrimination, that is, whether discrimination was the employer's standard operating procedure rather than a sporadic occurrence. See Teamsters, 431 U.S. at 336. We previously have upheld class action certifications involving both causes of action.⁶

Class actions in which an employer engaged in a pattern or practice of intentional discrimination ordinarily are handled in bifurcated proceedings imposing different burdens of proof in the respective phases. See Shipes v. Trinity Indus., 987 F.2d 311, 318 (5th Cir. 1993). During the first or "liability" stage, plaintiffs seek to prove a pattern or practice of invidious class-based discrimination. See id. When successful, individual class members benefit from a presumption of equitable pay (i.e., back pay), their entitlement to which is determined during the second or "remedial" stage.

To obtain back pay, class members need only prove that they were denied employment opportunities and the extent of their loss; the burden then shifts to the employer to demonstrate that the denial was for legitimate reasons. See Richardson, 709 F.2d at 1021; see also Teamsters, 431 U.S. at 362. Although this final determination typically involves individual hearings, see Johnson v. Goodyear Tire & Rubber Co., 491 F.2d 1364, 1375 (5th Cir. 1974), courts, until 1991, streamlined the process by employing special masters, see Newberg & Conte, Newberg on Class Actions §§ 24.119-24.121 (3d ed. 1992).

The Civil Rights Act of 1991 fundamentally changed the procedures and remedies available under title VII. Inter alia, the act now permits plaintiffs to recover, in cases raising individual disparate treatment and pattern or practice claims, compensatory and punitive damages for unlawful intentional discrimination. See 42 U.S.C. § 1981a(a)(1). Compensatory damages include relief for "future pecuniary losses, emotional pain, suffering, inconvenience mental anguish, loss of enjoyment of life, and other nonpecuniary losses. § 1981a(b)(3). The act also allows punitive damages if the employer discriminated with malice or with reckless indifference to the federally protected rights of an aggrieved individual. § 1981a(b)(1)(2). Damages are capped at $300,000 per plaintiff. See § 1981a(b)(3). Finally, in all cases in which a plaintiff seeks compensatory and punitive damages, either party may demand a jury. See § 1981a(c).

C.

Under Fed. R. Civ. P. 23, the various categories of class actions, with their divers requirements, represent a balance struck in each case between the need and efficiency of a class action and the interests of class members to pursue their claims separately or not at all.⁷ Class actions are categorized according to the nature or effect of the relief sought.

Relevant to this case are the rules governing rule 23(b)(2) and (b)(3) classes. The rule 23(b)(2) class action was intended for cases in which broad, class-wide injunctive or declaratory relief is necessary. See Holmes v. Cont'l Can Co., 706 F.2d 1144, 1155 n.8 (11th Cir. 1983). The rule 23(b)(3) class action exists to dispose of all other cases in which a class action would be "convenient and desirable," including those involving large-scale, complex litigation for money damages. Amchem, 521 U.S. at 516.⁸ Pairing the respective rule 23 categories with specific kinds of relief reflects a concerted effort to respect the variety among class-member interests, which often depends on the natures of the injuries alleged and relief sought.

D.

The four prerequisites of Rule 23(a) are that

(1) the class be so numerous that joinder of all members is impracticable;

(2) there be questions of law or fact common to the class;

(3) the claims or defenses of the representative parties be typical of the claims or defenses of the class; and

(4) the representative parties will fairly and adequately protect the interests of the class.

Rule 23(a); accord Amchem, 521 U.S. at 613.

1.

A class must be so numerous that "joinder of all members is impracticable." Rule 23(a)(1). To meet this requirement, the class representatives need show only that it is difficult or inconvenient to join all members of...