SUPREME COURT REFUSES TO HEAR APPEAL IN LUFKIN INDUSTRIES V. MCCLAIN

by Art Gutman Ph.D., Professor, Florida Institute of Technology

The refusal to grant certiorari in this case was handed down on 11/14/11 (2011 U.S. LEXIS 8265). Ordinarily, refusal to grant certiorari is no big deal … indeed, it’s the norm, not the exception. But this case has some interesting facts in light of the Supreme Court’s ruling in Wal-Mart v. Dukes (2011).

This case began in 1999 when the District Court Judge Howell Cobb of the Eastern District of Texas granted class certification for two plaintiffs and a class of similarly situated plaintiffs in McClain v. Lufkin (1999 U.S. Dist. LEXIS 6779) under Federal Rules 23(a) and 23(b)(2). The plaintiffs claimed there was adverse impact against blacks in job assignments and promotion because of subjective decision making, and Judge Cobb ruled the plaintiffs established a prima facie case based on statistical evidence. Subsequently, Judge Cobb then ruled for the plaintiffs on both charges, and awarded an injunction and back pay (2005 U.S. Dist. LEXIS 42545). Issues relating to attorney and expert fees remained, but are less relevant for present purposes. More importantly for present purposes, the 5th Circuit ultimately reversed the lower court ruling on job assignments, but upheld the ruling on promotions in 2009 (519 F.3d 264), and a class of 700 former or current employees at Lufkin was awarded more than three million dollars.

As an aside, the basis for the adverse impact (in promotion) claim was of interest in its own right. The plaintiffs’ expert (Dr. Richard Drogin) argued successfully that applicant flow data was unreliable because of missing data (and other factors). Therefore he constructed “hypothetical pools” of those potentially eligible for promotion and concluded that black received 127 fewer hourly promotions and 8.85 fewer salaried promotions would been expected from chance alone, and that these differences were statistically significant for hourly promotion (7.61 standard deviations) and salaried promotion (2.02 standard deviations). The defense expert (Dr. Mary Baker) based her calculation on bid data from Lufkin’s paper bid sheets and concluded there were no statistically significant differences. Faced with this “battle of experts”, Judge Cobb favored Drogin’s analysis, and the 5th Circuit upheld. Of course, it could be argued that Drogin’s analysis lacked controls for important covariates. However, because of the unreliability of the applicant flow data, Judge Cobb felt he had no choice but to favor Drogin’s approach. Obviously one take home message from this case is for employers to keep accurate records on data that would be used in adverse impact analyses.

So now, 12 years after the original class certification ruling, Lufkin argued that the Supreme Court’s ruling in Wal-Mart v. Dukes highlights two major errors made by Judge Cobb in his 1999 ruling relating to commonality under Rule 23(a) and the award of back pay under Rule 23(b)(2). On the commonality issue, Lufkin used language from the Wal-Mart ruling claiming there was no “glue” to hold the claims together because there unionized employees promoted under one set of rules and non-unionized employees promoted under another set of rules. Therefore, there was also no specific employment practice. Lufkin also argued that Rule 23(b)(2), generally reserved for injunctive and declaratory relief, does not apply to back pay under the Wal-Mart ruling. Interestingly, the plaintiffs never challenged either of these directly, but instead, argued that they were not made in prior appeals.

We do not know why the Supreme Court declined to review this case. However, a reasonable person could assume that under normal circumstances, these are appeasable issues based on the Wal-Mart ruling. So my best guess is that the case was deemed to be moot.

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