PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 12-1610
LUANNA SCOTT; SHUNDERIA GARLINGTON; RUTH BETH; WENDY BEVIS;
KATHERINE BRACEY; RUBY BRADY; MARIE ALICE BROCKWAY;
VICKIE CLUTTER; DIANE CONAWAY; JUDY CORROW; TRACI DAVIS;
CAROL DINOLFO; REBECCA DIXON; PAMELA EWALT; NANCY FEHLING;
TERESA FLEMING; IRENE GRACE; DOROTHY HARSON; CHARLENE HAZELTON;
SHELLY HUGHES; CHRISTAL J. JOSLYN; ADA L. KENNEDY;
NEITA LAFRENIERE; MARGIE A. LITTLE; CAROL MARTIN;
LEANNE MAXWELL; WANDA MAYFIELD; DORIS MOODY; VANESSA L. PEEPLES;
VERONICA PERRY-PREDDIE; RUTH ELLEN PHELPS; SHEILA PIPPIN;
LANA RADOSH; MICHELLE RODGERS; VADA ROSE; VICKEY JO SCRIVWER;
LINDA R. SILVA; SHARON SIPES; NANCY SMITH; MARIE E. SPELLISSY;
SYLVIA C. TENORIO; JUDY TIDRICK; BEVERLY L. TRIPLETT;
CAROL SUE VANFLEET; DEBBIE VASQUEZ; CLAIRE WHITE;
BONNIE WILLIAMS; CINDY MARIE ZIMBRICH,
Plaintiffs - Appellants,
and
LINDA L. FULMER; JEAN MACQUARRIE; HELEN ZIMMERMAN,
Plaintiffs,
v.
FAMILY DOLLAR STORES, INC.,
Defendant - Appellee.
Appeal from the United States District Court for the Western
District of North Carolina, at Charlotte. Max O. Cogburn, Jr.,
District Judge. (3:08-cv-00540-MOC-DSC)
Argued: May 14, 2013 Decided: October 16, 2013
Before WILKINSON, GREGORY, and KEENAN, Circuit Judges.
Affirmed in part, reversed in part, and remanded by published
opinion. Judge Gregory wrote the majority opinion, in which
Judge Keenan joined. Judge Keenan wrote a concurring opinion.
Judge Wilkinson wrote a dissenting opinion.
ARGUED: Robert L. Wiggins, Jr., WIGGINS, CHILDS, QUINN &
PANTAZIS PC, Birmingham, Alabama, for Appellants.
John Robbins Wester, ROBINSON, BRADSHAW & HINSON, P.A.,
Charlotte, North Carolina, for Appellee. ON BRIEF:
Gerald L. Maatman, Jr., David Bennet Ross, Rebecca S. Bjork,
SEYFARTH SHAW LLP, New York, New York; David C. Wright, III,
Adam K. Doerr, ROBINSON, BRADSHAW & HINSON, P.A., Charlotte,
North Carolina, for Appellee.
2
GREGORY, Circuit Judge:
In this sex discrimination and equal pay action filed
pursuant to Title VII of the Civil Rights Act of 1964, 42 U.S.C.
§ 2000e, and Section 216(b) of the Equal Pay Act of 1963, 29
U.S.C. § 206(d), Appellants appeal the district court’s grant of
Family Dollar Stores, Inc.’s (“Family Dollar”) motion to dismiss
and/or strike class claims under Federal Rules of Civil
Procedure 12(c), 12(f), and 23(d)(1)(D), and the district
court’s denial of Appellants’ first motion to amend their
complaint. We find that the district court’s denial of leave to
amend the complaint was based on an erroneous interpretation of
Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541 (2011), and the
denial was thus an abuse of discretion. Without resolving the
class certification issue, we reverse and remand for the
district court to consider whether, based on our interpretation
of Wal-Mart, the proposed amended complaint satisfies the class
certification requirements of Federal Rule of Civil Procedure
23.
I.
Family Dollar operates a chain of over 7,000 stores in more
than forty states. Its operations are divided “into 95 regions,
each run by a vice president, and then into districts, each run
by a district manager. A district, which can vary in size from
3
a single city to an area within multiple States, includes 10 to
30 retail stores, each run by a salaried store manager.” Grace
v. Family Dollar Stores, Inc., 637 F.3d 508, 510 (4th Cir.
2011). Family Dollar has approximately 400 district managers.
Appellants are fifty-one named plaintiffs and a putative
class consisting of females who are, or have been, store
managers of Family Dollar stores. Appellants primarily allege
they are paid less than male store managers who perform the same
job, requiring the same skill, responsibility and effort, under
similar working conditions. In relevant part, Count I of their
complaint asserts a disparate impact claim predicated on the
following assertions:
Defendant engages in centralized control of
compensation for store managers at the corporate level
of its operations.
. . .
Defendant’s pay decisions and/or system includes
subjectivity and gender stereotyping that causes
disparate impact to compensation paid to female store
managers. Plaintiffs are aware, at this time, of no
other criteria which causes such disparate impact
other than gender bias, subjectivity and stereotyping.
Plaintiffs are unaware, at this time, of any other
specific criteria that are capable of separation and
job relatedness.
Count II alleges a pattern-or-practice of disparate treatment in
violation of Title VII, and asserts that Family Dollar, who
“engages in centralized control over compensation of store
managers,” “willfully violated Title VII by paying the
4
plaintiffs and other similarly situated females [] wages
[unequal] to . . . similarly situated males.” Count IV asserts
a violation of the Equal Pay Act. Appellants seek injunctive
and equitable relief, back pay, attorneys’ fees and costs, and
punitive damages.
In 2008, Appellants filed their complaint in the U.S.
District Court for the Northern District of Alabama. Upon a
grant of Family Dollar’s motion to dismiss or transfer, the case
was transferred to the U.S. District Court for the Western
District of North Carolina. In opposing the motion to dismiss
but consenting to transfer, Appellants cited Dukes v. Wal-Mart,
Inc., 509 F.3d 1168 (9th Cir. 2007) on reh’g en banc sub nom.
603 F.3d 571 (9th Cir. 2010), pointing out that “[t]he Ninth
Circuit has now affirmed certification of such a nationwide
class having virtually identical claims of sex discrimination in
pay to those brought in this case.” As is relevant here, the
Ninth Circuit’s Dukes decision was subsequently reversed by the
Supreme Court in Wal-Mart, 131 S. Ct. 2541.
Following the transfer, Family Dollar filed a motion for
partial judgment on the pleadings, arguing that Appellants would
be unable to satisfy the class action requirements in Rule
23(b). The filing of this motion had the effect of staying
discovery. The district court denied Family Dollar’s motion
without prejudice, holding that the class allegations in the
5
complaint satisfied the pleading standards as established in
Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007), and
Ashcroft v. Iqbal, 556 U.S. 662 (2007). The court further found
that a fully developed evidentiary record was necessary to make
findings as to class certification.
In July 2010, Family Dollar moved for summary judgment, but
the court stayed the motion pending the completion of discovery.
In August 2010, Family Dollar moved for a protective order with
respect to class certification discovery, which the court
denied. From January to July 2011, the parties unsuccessfully
tried to resolve their dispute through mediation.
Following re-assignment of the case to a different judge,
in September 2011, Family Dollar filed a motion to dismiss
and/or strike the class allegations pursuant to Rules 12(c),
12(f), and Rule 23(d)(1)(D). Family Dollar argued that Wal-
Mart, which was issued by the Supreme Court in June 2011,
foreclosed Appellants’ class allegations and the monetary relief
sought in the complaint.
Appellants opposed the motion to dismiss and moved the
court for leave to file their first amended complaint, 1 arguing
that the proposed amended complaint “elaborate[s]” on the
1
Family Dollar’s motion to dismiss and Appellants’ motion
for leave to amend the complaint were filed before the deadlines
to end class certification discovery and to file a motion to
certify the class.
6
original complaint’s allegation of “centralized control of
compensation for store managers at the corporate level.” In the
proposed amended complaint, Appellants allege and challenge at
least four company-wide policies. First, Appellants assert the
existence of a mandatory salary range for Store Managers set
annually by the corporate headquarters, which locks in prior
disparities between male and female Store Managers’
compensation. Only corporate Vice Presidents can grant
exceptions above the salary range, and they grant these
exceptions disproportionally in favor of men. Second,
Appellants allege the existence of an annual pay raise
percentage set by corporate headquarters that corresponds to
performance ratings. Regional Managers and Divisional Vice
Presidents grant exceptions above the pay raise percentage, and
“significantly greater” exceptions are granted to men. Third,
Appellants claim a “built-in headwinds” corporate-imposed
compensation criteria for Store Managers that takes into account
“prior experience, prior pay, quartile rankings and other
specific criteria which have a disparate impact.” Finally,
Appellants allege the existence of a dual-system of compensation
structured to pay less to persons promoted to store managers
than to persons hired (from outside the company) to the same
position, where “women are disproportionately promoted to Store
7
Manager [positions,] while men are disproportionately hired into
such jobs.”
The district court granted Family Dollar’s motion to
dismiss, but denied Appellants’ motion for leave to amend. In
granting Family Dollar’s request and dismissing the class
allegations, the district court first relied on Appellants’ pre-
Wal-Mart admission that their claims were “virtually identical”
to those asserted by the Wal-Mart plaintiffs. Further, the
court 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 their gender as a result of “subjective decisions made at the
local store levels.” The court dismissed the Equal Pay Act
class claims on the same basis. Additionally, the district
court held that Appellants’ claims fail to satisfy the
predominance requirement in Rule 23(b)(3).
In denying Appellants’ motion for leave to amend, the court
first 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. Second, the court found that amendment would be
prejudicial to Family Dollar because the original complaint was
filed over three years prior, and the new complaint alleges a
“new theory” only in an attempt to avoid Wal-Mart.
8
Appellants timely petitioned this Court under Federal Rule
of Civil Procedure 23(f) for interlocutory appeal of the class
certification decision.
II.
We granted Appellants’ petition under Rule 23(f), which
authorizes courts of appeals to review decisions denying or
granting class-action certification. 2 Appellants did not
petition us directly for interlocutory review of the decision
denying leave to amend the complaint. Appellate jurisdiction
pursuant to Rule 23(f)’s interlocutory provision lies only where
the subject matter of the appeal is the grant or denial of class
certification. Fed. R. Civ. Pro. 23(f); see Brown v. Nucor
Corp., 576 F.3d 149, 155 n.8 (4th Cir. 2009) (“[A]ppellants
2
Class certification is typically pursued under Rule 23(c),
which provides that “[a]t an early practicable time after a
person sues or is sued as a class representative, the court must
determine by order whether to certify the action as a class
action.” Id. 23(c). Family Dollar filed its motion to dismiss
pursuant to Rule 12(c), 12(f), and 23(d)(1)(D)--rules not
expressly within Rule 23(f)’s jurisdictional purview. See Fed.
R. Civ. Pro. 23(f) advisory comm. note (1998). Nonetheless, we
have jurisdiction to review the district court’s grant of Family
Dollar’s motion to dismiss or strike the class allegations
because the district court’s ruling is the functional equivalent
of denying a motion to certify the case as a class action. See
In re Bemis Co., Inc., 279 F.3d 419, 421 (7th Cir. 2002)
(holding that the rejection of the position taken in the answer
that the case could not proceed as a class action is the
“functional equivalent of denying a motion to certify a case as
a class action”). Family Dollar does not dispute the basis for
asserting jurisdiction over the class certification decision.
9
cannot appeal a discovery order under [Rule] 23(f).”). Thus,
Family Dollar contends we lack jurisdiction to review the
district court’s denial of Appellants’ motion for leave to amend
their complaint.
We find that under our pendent appellate jurisdiction
jurisprudence, we have jurisdiction and exercise our discretion
to review the denial of the motion for leave to amend. See Rux
v. Republic of Sudan, 461 F.3d 461, 475 (4th Cir. 2006) (stating
that pendent appellate jurisdiction, a judicially created
exception to the final judgment rule, is discretionary).
Pendent appellate jurisdiction is available only in two
scenarios: “(1) when an issue is ‘inextricably intertwined’
with a question that is the proper subject of an immediate
appeal; or (2) when review of a jurisdictionally insufficient
issue is ‘necessary to ensure meaningful review’ of an
immediately appealable issue.” Id. (quoting Swint v. Chambers
Cnty. Comm’n, 514 U.S. 35, 50–51 (1995)).
We may review the leave-to-amend decision under the
“inextricably intertwined” methodology. Two separate rulings
are “inextricably intertwined” if “the ‘same specific question’
will ‘underlie both the appealable and the non-appealable
order,’ such that resolution of the question will necessarily
resolve the appeals from both orders at once.” Ealy v.
Pinkerton Gov’t Servs., Inc., No. 12-1252, 2013 WL 980035, at *8
10
(4th Cir. Mar. 14, 2013) (per curiam, unpublished) (quoting
Myers v. Hertz Corp., 624 F.3d 537, 553 (2d Cir. 2010)
(alterations omitted)). Here, the crux of the denial of class
certification based on the allegations of the original
complaint, and the denial of leave to amend the complaint turns
on the district court’s interpretation of Wal-Mart. Because the
interpretation of Wal-Mart underlies both the appealable
certification decision and the non-appealable leave-to-amend
decision, and resolution of the interpretation of Wal-Mart will
necessarily resolve both appeals, we find that our exercise of
pendent appellate jurisdiction is proper.
We may also review the leave-to-amend decision under the
“necessary to ensure meaningful review” methodology. An issue
is “necessary to ensure meaningful review” if “resolution of the
appealable issue necessarily resolves the nonappealable issue or
where review of the nonappealable issue is necessary to ensure
meaningful review of the appealable one.” Berrey v. Asarco,
Inc., 439 F.3d 636, 647 (10th Cir. 2006). Here, as detailed
below, the proposed amended complaint includes specific company-
wide policies that allegedly cause a disparate impact--polices
not specified in the original complaint that would ensure
meaningful review of the class certification decision. Thus, we
exercise pendent appellate jurisdiction to review the denial of
leave to amend the complaint.
11
III.
Appellants raise three primary arguments on appeal. First,
Appellants contend that the district court erred in holding that
pursuant to Wal-Mart, the proposed class claims in the original
complaint fail to satisfy Rule 23(a)’s commonality requirement.
Second, Appellants urge that the district court failed to
conduct a rigorous analysis of the certification issue and
failed to consider the evidence. Finally, Appellants argue that
the district court abused its discretion by failing to grant
leave to amend the complaint. Because we find that the proposed
amended complaint contains substantial allegations of
centralized control, which are necessary to satisfy the
commonality requirement for class certification as set forth in
Wal-Mart, we focus our review in this appeal on the district
court’s denial of leave to amend the complaint.
We review a district court’s decision to deny leave to
amend a complaint for abuse of discretion, and it is our “policy
to liberally allow amendment in keeping with the spirit of
Federal Rule of Civil Procedure 15(a).” Galustian v. Peter, 591
F.3d 724, 729 (4th Cir. 2010). A district court abuses its
discretion “by resting its decision on a clearly erroneous
finding of a material fact, or by misapprehending the law with
respect to underlying issues in litigation.” Quince Orchard
12
Valley Citizens Ass’n, Inc. v. Hodel, 872 F.2d 75, 78 (4th Cir.
1989) (internal quotation marks omitted).
The district court denied Appellants’ request for leave to
amend their complaint for two primary reasons. First, the
district court determined that the proposed amendment was
foreclosed by Wal-Mart, reasoning that like the original
complaint, the proposed complaint pointed to subjective,
individualized decisions and failed to satisfy the commonality
requirement of Rule 23(a). 3 Second, the district court found
that amendment would be prejudicial to Family Dollar because the
proposed complaint was filed three years after the filing of the
original complaint and alleges a new legal theory in order to
avoid Wal-Mart. We address each rationale in turn.
A.
The district court’s denial of leave to amend the complaint
on grounds that it was foreclosed by Wal-Mart is erroneous and
based on a misapprehension of the applicable law. A review of
Wal-Mart and its principles reveal the district court’s error.
3
Under Rule 23, a class may be certified if (1) “the class
is so numerous that joinder of all members is impracticable”
(numerosity); (2) there are one or more “questions of law or
fact common to the class” (commonality); (3) the named parties’
“claims or defenses are typical of the claims or defense of the
class” (typicality); and (4) the class representatives “will
fairly and adequately protect the interests the class” (adequacy
of representation). Fed. R. Civ. P. 23(a). Commonality is the
only factor at issue in this appeal. We make no findings or
conclusions as to the other requirements.
13
i.
In Wal-Mart, the Supreme Court considered whether the
commonality requirement under Rule 23 for class actions was
satisfied in a sex discrimination suit alleging violations of
Title VII. The plaintiffs filed suit on behalf of 1.5 million
current and former female employees of Wal-Mart Stores, Inc.
(“Wal-Mart”), asserting that Wal-Mart’s local managers exercised
discretion over employees’ pay and promotions in a manner that
disproportionally favored male employees and had an unlawful
disparate impact on the female employees. Further, the
plaintiffs alleged that Wal-Mart’s failure to curtail its
managers’ discretion essentially amounted to unlawful disparate
treatment.
In holding that the allegations were insufficient to
satisfy the commonality requirement for class actions, the Court
found that the plaintiffs could not demonstrate that the class
members “suffered the same injury,” i.e., their claims did not
depend upon a “common contention” capable of “classwide
resolution.” Wal-Mart, 131 S. Ct. at 2551. The Court reasoned
that in the Title VII context, one individual’s claim turns on
“‘the reason for the particular employment decision.’” Id. at
2552 (quoting Cooper v. Fed. Reserve Bank of Richmond, 467 U.S.
867, 876 (1984)). And, in the class action context, “[w]ithout
some glue holding the reasons for all those decisions together,
14
it will be impossible to say that examination of all class
members’ claims for relief will produce a common answer to the
crucial question why was I disfavored.” Id.
The Court explained that such glue might exist if: (1) the
employer uses a biased testing procedure that produces a common
result; or (2) there is “‘[s]ignificant proof that an employer
operated under a general policy of discrimination.’” Id. at
2253 (quoting Gen. Tel. Co. of Sw. v. Falcon, 457 U.S. 147, 159
n.15 (1982)). The latter form was more applicable in Wal-Mart,
yet the Court found that a “general policy of discrimination”
was “entirely absent.” Id. Specifically, the Court pointed to:
(1) Wal-Mart’s express policy forbidding sex discrimination;
(2) expert testimony of a “strong corporate culture” that made
it vulnerable to gender bias but which lacked a nexus to
employment decisions; and (3) a corporate policy of allowing
discretion by local supervisors over employment matters, which
to the Court was “just the opposite of a uniform employment
practice that would provide the commonality needed for a class
action” because it was “a policy against having uniform
employment practices.” Id. at 2553-54.
The Court acknowledged that it previously recognized that
giving discretion to lower-level employees may form the basis of
Title VII liability under a disparate impact theory, but to do
so, the plaintiffs must first identify the “specific employment
15
practice that is challenged.” Id. at 2555 (citing Watson v.
Fort Worth Bank & Trust, 487 U.S. 977, 994 (1988)). However, in
the case before it, the Court noted “[o]ther than the bare
existence of delegated discretion, respondents have identified
no ‘specific employment practice’--much less one that ties all
their 1.5 million claims together.” Id. Thus, the Court
concluded that the commonality requirement was not satisfied.
Two principles readily derived from Wal-Mart are applicable
to this case. First, Wal-Mart did not set out a per se rule
against class certification where subjective decision-making or
discretion is alleged. Rather, where subjective discretion is
involved, Wal-Mart directs courts to examine whether “all
managers [] exercise discretion in a common way with[] some
common direction.” Id. at 2554. Thus, to satisfy commonality,
a plaintiff must demonstrate that the exercise of discretion is
tied to a specific employment practice, and that the “subjective
practice at issue affected the class in a uniform manner.”
Elizabeth Tippett, Robbing a Barren Vault: the Implications of
Dukes v. Wal-Mart for Cases Challenging Subjective Employment
Practices, 29 Hofstra Lab. & Emp. L. J. 433, 446 (2012).
As a corollary, even where company-wide subjective
decision-making or discretion is alleged in the employment
discrimination context, Wal-Mart indicates that if another
company-wide policy is also alleged, courts must also consider
16
it. See Wal-Mart, 131 S. Ct. at 2553 (considering evidence of a
company-wide “strong corporate culture” that makes Wal-Mart’s
decision-makers susceptible to gender bias, but finding it
unsatisfactory because the adduced expert testimony failed to
demonstrate that the corporate culture or “stereotyped thinking”
affected employment decisions). Thus, even in cases where the
complaint alleges discretion, if there is also an allegation of
a company-wide policy of discrimination, the putative class may
still satisfy the commonality requirement for certification.
Second, Wal-Mart is limited to the exercise of discretion
by lower-level employees, as opposed to upper-level, top-
management personnel. This qualitative distinction is critical
because typically, in exercising discretion, lower-level
employees do not set policies for the entire company; whereas,
when high-level personnel exercise discretion, resulting
decisions affect a much larger group, and depending on their
rank in the corporate hierarchy, all the employees in the
company. Consequently, discretionary authority exercised by
high-level corporate decision-makers, which is applicable to a
broad segment of the corporation’s employees, is more likely to
satisfy the commonality requirement than the discretion
exercised by low-level managers in Wal-Mart.
17
ii.
Courts’ rulings on class certification since Wal-Mart bear
out the principles announced herein. See McReynolds v. Merrill
Lynch, Pierce, Fenner & Smith, Inc., 672 F.3d 482, 489 (7th Cir.
2012) cert. denied, 133 S. Ct. 338 (U.S. 2012) (allowing Title
VII class certification where the plaintiffs pointed to two
company-wide policies); see also, Tabor v. Hilti, Inc., 703 F.3d
1206, 1229 (10th Cir. 2013) (denying class certification where
challenged policy was “highly discretional,” and the only other
alleged company-wide policy was not maintained in a uniform
manner); Bolden v. Walsh Constr. Co., 688 F.3d 893, 898 (7th
Cir. 2012) (denying class certification in a Title VII case
where the only company-wide policy alleged was a policy of
giving discretion to lower-level managers and there was a lack
of evidence that discretion was exercised in a common way at
some common direction).
A comparison of McReynolds and Bolden, both decisions from
the Seventh Circuit, highlight the parameters of Wal-Mart. In
McReynolds, the plaintiff contested two national, company-wide
policies--a teaming policy and an account distribution policy.
672 F.3d at 488. The teaming policy allowed brokers to form and
distribute commissions with teams; brokers could decide for
themselves whether to form teams; and, once the team was formed,
brokers decide which other brokers to admit. Id. The
18
plaintiffs argued that this national policy had a disparate
impact because some successful teams refused to admit blacks.
Under the account distribution policy, the customers’ accounts
of a broker that had left the company were transferred within a
branch office; brokers in that office competed for the accounts,
and the broker who ultimately won the accounts was determined by
company-wide criteria that included the competing brokers’ past
records of revenue generated, and number of investments and
clients retained. Id. at 488-89.
The Seventh Circuit noted that “Complex Directors” and
“branch-office managers” “have a measure of discretion with
regard to teaming and account distribution [because] they can
veto teams or supplement criteria for distributions.” Id. at
489. The court explained:
[T]o the extent that these regional and local managers
exercise discretion regarding the compensation of the
brokers whom they supervise, the case is indeed like
Wal-Mart. But the exercise of discretion is
influenced by the two company-wide policies at issue:
authorization to brokers, rather than to managers to
form and staff teams; and basing account distribution
on the past success of the brokers who are competing
for transfers.
. . .
[P]ermitting brokers to form their own teams and
prescribing 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--are practices of Merrill Lynch, rather
than practices that local managers can choose or not
at their whim. Therefore challenging those policies
19
in a class action is not forbidden by the Wal-Mart
decision.
Id. at 489-90. The court noted that in the absence of the
teaming or account distribution policies, if instead the case
involved delegation to local management the decision to allow
teaming and the criteria for account distribution, McReynolds
would be more like Wal-Mart. Id. at 490. Satisfied with the
distinction between McReynolds and Wal-Mart, the court reversed
the district court’s denial of class certification.
In Bolden, the Seventh Circuit reversed the district
court’s grant of class certification. There, twelve black
construction workers alleged that the supervisors practiced or
tolerated racial discrimination in assigning overtime work and
in working conditions (for example, derogatory graffiti in
portable toilets and hangman’s nooses in toilets or break
sheds). 688 F.3d at 895. The plaintiffs attempted to certify a
class covering the employer’s 262 project sites in Chicago. Id.
The Seventh Circuit noted that “[t]he sites had different
superintendents, with different policies . . . and many of the
allegedly discriminatory practices depended on the foremen, who
made most overtime offers, [and] chastised (or failed to
chastise) workers who used racially inflammatory language.” Id.
at 896. Additionally, the court pointed out the plaintiffs’
concessions that “[d]ifferent sites had materially different
20
working conditions[;] . . . most superintendents the[]
[plaintiffs] had worked with did not discriminate; [and] their
objections concerned only a handful of superintendents and
foremen.” Id. The court likened the case to Wal-Mart and held
that “when multiple [local] managers exercise independent
discretion, conditions at different stores (or sites) do not
present a common question.” Id. It then distinguished the case
before it from McReynolds:
[In McReynolds,] we held that a national class could
be certified to contest the polic[ies], which [were]
adopted by top management and applied to all of
Merrill Lynch’s offices throughout the nation. This
single national policy was the missing ingredient in
Wal-Mart. . . . [Here,] Walsh had no relevant
company-wide (or Chicago SMSA-wide) policy other than
(a) its rule against discrimination, and (b) its grant
of discretion to superintendents assigning work and
coping with offensive or bigoted conduct. The first
of these policies presents no problem . . . and the
second--the policy of on-site operational discretion
is the precise policy that Wal-Mart says cannot be
addressed in a company-wide class action.
Id. at 898. Thus, the court reversed the grant of class
certification.
As evident from our application of the two principles in
our discussion below, we believe the allegations in the proposed
amended complaint bear a closer resemblance to McReynolds.
iii.
As a preliminary matter, we note that the class allegations
in the original complaint were insufficient to satisfy the
21
commonality standard set forth in Wal-Mart, because the
complaint fails to allege that the “subjectivity and
stereotyping” regarding compensation paid to female store
managers were exercised in a common way with some common
direction, and conclusorily alleges that Family Dollar engaged
in “centralized control of compensation for store managers at
the corporate level of its operations.” Aside from this bare
allegation, the original complaint does not identify the
decision-makers responsible for pay and promotion. Thus, we
affirm the district court’s dismissal of the original complaint.
We view the proposed amended complaint differently.
Applying the above principles, we find that the district
court erred in denying leave to amend the complaint because it
failed to consider whether: (1) 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; and (2)
the discretionary authority at issue was exercised by high-level
managers, as distinct from the low-level type managers in Wal-
Mart.
In dismissing the proposed amended complaint, the district
court held that Wal-Mart precludes Appellants’ class allegations
of sex discrimination in pay because it believed that
Appellants’ claims rest only on a theory that Family Dollar’s
22
“use of subjective decision-making created disparities between
male and female employees.” Additionally, the district court
concluded that the company-wide employment policies in the
proposed amended complaint were limited to subjective,
individualized decision-making--a theory which it stated was
“simply foreclosed” by Wal-Mart. The district court’s reasoning
is based on a misapprehension of both the applicable law and
policies alleged by Appellants.
The proposed amended complaint clearly specifies the
following company-wide practices: (1) a salary range policy;
(2) a pay raise percentage policy; (3) a “built-in headwinds”
policy; and (4) dual pay system for hirees and promotees. To
expound, the salary range policy sets mandatory minimum and
maximum pay for Store Managers. According to Appellants, as a
result of this company-wide salary range policy, there are
significant disparities in the number of women in the upper pay
levels of that range, and exceptions above the range--granted by
the corporate Vice Presidents--are often granted more in favor
of men. Further, under the pay raise percentage policy, an
increase to a store manager’s compensation is determined by the
manager’s prior performance ratings. The Regional Manager and
Divisional Vice President grant exceptions above that pay raise
percentage, and do so “significantly greater” in favor of men.
Additionally, the “built-in headwinds” policy is a method for
23
evaluating and determining compensation based on “prior
experience, prior pay, quartile rankings and other specific
criteria that have a disparate impact on women’s salaries
because they incorporate and perpetuate such past
discrimination.” Essentially, this is a testing or evaluation
method that Appellants allege is biased. Finally, the dual pay
system for hirees and promotees caps the compensation paid to
individuals who are promoted below what lateral hires can make.
Statistics proffered by Appellants show more women promoted, and
more men hired laterally, influencing the disparity in pay.
We do not now rule on the sufficiency of the allegations of
the proposed amended complaint concerning the company-wide
policies or on whether certification of the putative class will
ultimately be warranted. However, in considering whether
amendment of the complaint would be futile, we observe that the
proposed amended complaint’s allegations of uniform corporate
policies and of high-level corporate decision-making are
substantively different from those that the Supreme Court held
sufficient in Wal-Mart. For instance, the dual pay policy
referenced in the proposed amended complaint is a company-wide
policy that is in place in all Family Dollar Stores. The
amended complaint alleges that women suffer disparate impact as
a direct result of this corporate-imposed pay preference for
lateral hires. In contrast, if decisions regarding the pay of
24
hirees and promotees were left to the discretion of low-level
managers, then the alleged discrimination would be akin to the
discrimination alleged in Wal-Mart. See McReynolds, 672 F.3d at
490.
Moreover, the discretionary decisions set forth in the
proposed amended complaint are made by high-level corporate
decision-makers with authority over a broad segment of Family
Dollar’s employees, not on an individual store level as in Wal-
Mart. Contrary to the dissent’s unsupported characterization of
the decision-makers in the present case as “middle management,”
the amended complaint explains that exceptions to centrally
determined salary ranges can only be made by “the corporate Vice
President at corporate headquarters.” Similarly, exceptions to
corporate-imposed raise percentages were made by regional
managers and senior vice presidents, again at “corporate
headquarters.” These allegations of high-level decision-making
authority exercised by officials at corporate headquarters are
thus different in kind from the allegations in Wal-Mart, in
which local supervisors were vested with almost absolute
discretion over pay and promotion decisions. Wal-Mart, 131 S.
Ct. at 2547.
Given these substantial distinctions, Wal-Mart does not
preclude as a matter of law a class certification based on the
amplified allegations of the proposed amended complaint. In
25
light of our policy favoring liberal amendment of complaints, we
hold that the district court erred in concluding that amendment
would be futile and in denying leave to amend the complaint.
The district court therefore should revisit the certification
question when the record underlying the allegations in the
amended complaint has been more fully developed.
B.
The district court next denied leave to amend on grounds
that amendment would be prejudicial to Family Dollar. In
support of its prejudice conclusion, the district court stated
that the original complaint was filed over three years prior,
and Appellants did not seek to amend until briefing on Family
Dollar’s motion for summary judgment was almost complete.
Further, the court stated that the proposed complaint alleges a
“new theory” in an attempt to avoid Wal-Mart. For the reasons
stated below, we find that the district court’s determinations
as to prejudice are clearly erroneous.
First, as to the delayed filing of the proposed complaint,
review of the record indicates that the cited delay, for the
most part, is attributable to Family Dollar. On numerous
occasions, Family Dollar moved to dismiss the complaint and this
had the effect of staying discovery, thereby prolonging the
litigation. Appellants ought not to be penalized for this
delay. Further, the typical briefing schedule for motions to
26
dismiss or summary judgment involves the initial filing of a
dismissal motion by the defendant, then the plaintiff files an
opposition to the motion and if necessary, a motion to amend the
complaint, and then the defendant files a reply brief. That
Appellants filed the motion for leave to amend simultaneously
with their opposition to Family Dollar’s motion for summary
judgment does not appear out of turn and cannot be grounds for
finding prejudice to Family Dollar.
With respect to the alleged “new theory,” review of the two
complaints indicates that Appellants do not allege an entirely
new theory in the amended complaint, but rather elaborate on one
of two allegations that were previously pled in a conclusory
fashion. In their original complaint, Appellants alleged both
“subjectivity and gender stereotyping,” as well as “centralized
control of compensation for store managers at the corporate
level of [Family Dollar’s] operations.” They originally failed
to support either theory with substantial factual allegations,
including the nature of the claimed “centralized control,”
though the district court initially held that the original
complaint survived Rule 12(b)(6). Following Wal-Mart, it became
clear that Appellants needed to allege more control over pay
determinations by upper-level decision-makers to meet the
commonality requirement. The Appellants filed a proposed
amended complaint accordingly and included numerous additional
27
facts supporting their previous assertion of centralized
corporate control.
Family Dollar makes much of the fact that Appellants
previously stated their claims were virtually identical to those
dismissed in Wal-Mart, seemingly alleging an estoppel argument.
Even assuming that Appellants seek to pursue a completely new
legal theory from the one asserted previously, such an approach
is not cause for “judicial estoppel.” See Lowery v. Stovall, 92
F.3d 219, 224 (4th Cir. 1996) (For judicial estoppel to apply,
“the party sought to be estopped must be seeking to adopt a
position that is inconsistent with a stance taken in prior
litigation. And the position sought to be estopped must be one
of fact rather than law or legal theory.” (emphasis added)
(citation omitted)). Appellants’ present factual position in
the proposed amended complaint is consistent with the original
complaint. As Appellants contend, the proposed amended
complaint merely elaborates on the allegation in the original
complaint that Family Dollar engages in “centralized control of
compensation for store managers at the corporate level.” The
legal theory remains the same, thus, judicial estoppel is not
cognizable in this action.
Further, we have held that “the filing of a supplemental
pleading is an appropriate mechanism for curing numerous
possible defects in a complaint.” Franks v. Ross, 313 F.3d 184,
28
198 (4th Cir. 2002) (also noting that “[u]nder Rule 15(d), a
party may supplement its complaint ‘even though the original
pleading is defective in its statement of a claim for relief or
defense.’”). Hence, as Family Dollar believed that the original
complaint was defective in light of Wal-Mart, Appellants should
have been granted leave to amend to cure the defect, more
especially because this was the first time they sought to amend
their complaint.
Besides, although prejudice can result where a new legal
theory is alleged if it would entail additional discovery and
evidentiary burdens on the part of the opposing party, this
“basis for a finding of prejudice essentially applies where the
amendment is offered shortly before or during trial.” Johnson
v. Oroweat Foods Co., 785 F.2d 503, 510 (4th Cir. 1986).
Because the parties were still in discovery, and many steps
removed from trial, the purported undue prejudice to Family
Dollar is overstated. We emphasize that our holding does not
condone an automatic three-year period for plaintiffs to seek
leave to amend a complaint. Rather, we conclude that Family
Dollar would not be unduly prejudiced by the amendment under all
the particular circumstances presented in this case.
29
IV.
The district court abused its discretion in denying
Appellants’ request for leave to amend their complaint by
primarily basing the denial on its erroneous interpretation of
Wal-Mart. We reverse the district court’s decision in part and
remand for the court to consider, consistent with this opinion,
whether the proposed amended complaint satisfies the class
certification requirements of Rule 23.
AFFIRMED IN PART,
REVERSED IN PART,
AND REMANDED
30
BARBARA MILANO KEENAN, Circuit Judge, concurring:
I join Judge Gregory’s fine majority opinion in full. I
write briefly to emphasize that despite the dissent’s dystopian
view, the majority has rendered a straightforward and limited
decision: that the plaintiffs should be permitted to amend their
original complaint after a dramatic shift in the law regarding
class action certification.
Meaningful access to the courts requires that plaintiffs
have a fair opportunity to plead their case in accordance with
the prevailing legal standard. The plaintiffs here should not
be penalized for failing to amend their complaint in
anticipation of Wal-Mart, but should be permitted this first
attempt to amend following that decision. Additionally, the
plaintiffs obtained new information about the corporate
structure of Family Dollar during mediation occurring after the
original complaint was filed, which facts they reasonably chose
to include in the proposed amended complaint. Despite the
dissent’s apparent assumption that the class will be certified
by the district court, if the allegations included in the
amended complaint ultimately are not substantiated, the class
simply will not be certified, and the plaintiffs’ case will
fail.
The dissent nevertheless sweeps broadly and bleakly,
convinced that the class action mechanism is being used to
31
“punish” the business community “for nothing more than being
companies.” Dissent at 35. However, the majority opinion
simply allows a putative class to re-plead its class
allegations, in accordance with Federal Rules of Civil Procedure
15 and 23. Under the majority’s holding, the ability of
litigants to seek access to our courts will be restricted solely
by the strength of their case.
32
WILKINSON, Circuit Judge, dissenting:
I cannot join the majority’s decision, because it fails to
respect the two other levels of the federal judiciary, namely
the Supreme Court and the district courts. First as to the
Supreme Court. The decision is Wal-Mart Stores, Inc. v. Dukes,
131 S. Ct. 2541 (2011), and the majority opinion has drained it
of meaning. The defendant here, as in Wal-Mart, relies on what
plaintiffs admit are multitudinous, discretionary decisions by
middle and lower management, which would seem to render class
action treatment under Wal-Mart impermissible and ineffectual.
Notwithstanding this, the majority has unloaded on the district
court the prospect of a massive, nationwide class action whose
administrability would in all likelihood prove impossible.
In the majority’s view, Wal-Mart applies only where
decisions are left to the complete discretion of low-level
managers, maj. op. at 25, and are implemented on an “individual
store level.” Id. The fact that a company delegates extensive
discretion to 95 vice presidents and 400 district managers,
Appellee’s Br. at 3 (citing Grace v. Family Dollar Stores, Inc.
(In re Family Dollar FLSA Litig.), 637 F.3d 508, 510 (4th Cir.
2011)), does not, in the majority’s view, bring this case within
the ambit of Wal-Mart and still permits nationwide class action
treatment. The majority assumes that nearly 500 middle managers
somehow all exercise their discretion in lockstep. That cannot
33
be. The fact that some middle managers would promote from
within, and others recruit from without, as they are given the
discretion to do, does not, in the majority’s view, preclude
nationwide class action treatment. The fact that many managers
would elevate women from either inside or outside the company,
as they are perfectly free to do, would hardly seem
discriminatory, but it would be contrary to the commonality Wal-
Mart requires for a nationwide class action to proceed.
The majority responds to this point by citing the fact that
exceptions to corporate salary ranges may be granted by a
corporate vice president. Maj. op. at 25. But this fact only
confirms the assertion that placements within the ranges are
determined by middle managers. The fact that exceptions to
corporate limits on raises are made by regional managers and
senior vice presidents is similarly unavailing to the majority’s
position -- regional managers, by definition, do not make
decisions on a national level. In the majority’s view, middle
managers at Family Dollar are purely robotic with respect to
those they supervise, but no American company operates in such a
way.
The majority plainly believes Wal-Mart does not apply to
middle managers exercising delegated discretion under guidelines
such as these because if it believed Wal-Mart applied, the
district court’s denial of nationwide class certification would
34
be promptly affirmed. The majority’s insistence that Wal-Mart
does not apply to middle management (but only to lower-level
store managers) suggests not so subtly that it wants this class
to be certified. But the commonality Wal-Mart insists is
necessary for class action certification is plainly absent here,
though the majority purports to find it in some centralized
policy. The fact that a company sets pay ranges or values prior
experience or performance as factors in compensation is not
sinister. Vast numbers of companies do just that. A policy
with an obvious business justification may occasionally produce
some statistical disparity nationwide. But Wal-Mart makes clear
that the fact that a policy may have some statistical disparity
nationwide does nothing to dispel the fact that in many
districts, the policy will not have a statistical imbalance, but
indeed may work to the decided advantage of the putative class.
131 S. Ct. at 2555.
The policies cited by plaintiffs are not “built-in
headwinds,” maj. op. at 23 (internal quotation marks omitted),
but rather common management techniques that make common sense.
If centralized delegations of discretion such as these are
enough for a nationwide class action to get rolling, then few
companies will be exempt. The law is punishing companies for
nothing more than being companies, which is apparently the new
status offense.
35
In reaching its decision, the majority faults the district
court for denying plaintiffs leave to amend their complaint.
But if this is an abuse of discretion, and these findings are
clearly erroneous, then class action litigation will almost
never end. Not content with finding the district court “abused
its discretion,” maj. op. at 30, the majority holds its factual
findings “clearly erroneous” as well. Id. at 26. The district
judge should be commended, not condemned. The amended complaint
severely prejudiced the defendants by forcing them to defend a
wholly different suit three years after the original complaint
was filed. The amended complaint contradicted assertions in the
original complaint to such an extent as to do violence to the
values of forthrightness and fair dealing that the district
court had every right to expect from the litigants before it.
It was also every bit as irreconcilable with the Supreme Court’s
decision in Wal-Mart as the original, making denial of leave
fully justifiable on futility grounds.
In sum, the district court has been brought up short and
found to have abused its discretion for doing nothing more than
faithfully following a Supreme Court decision and for attempting
to ensure a small measure of candor and consistency in the
filings of that court. It is our obligation to respect the
Supreme Court’s preeminent place in a hierarchical judicial
system, as well as the trial court’s discretion and experience
36
in matters explicitly entrusted by both logic and precedent to
its competence. This decision does neither.
I.
Federal Rule of Civil Procedure 15(a)(2), which governs
pretrial requests for leave to amend, advises that “[t]he court
should freely give leave when justice so requires.” The Supreme
Court has accordingly required some “justifying reason” in
support of the rejection of a party’s request to amend. Foman
v. Davis, 371 U.S. 178, 182 (1962).
Nevertheless, the Supreme Court has repeatedly recognized
that “the grant or denial of an opportunity to amend is within
the discretion of the District Court.” Id.; see also Krupski v.
Costa Crociere S. p. A., 130 S. Ct. 2485, 2496 (2010). Denying
leave to amend is appropriate when at least one of three
circumstances exists: (1) “the amendment would be prejudicial to
the opposing party;” (2) “there has been bad faith on the part
of the moving party;” or (3) “the amendment would have been
futile.” Laber v. Harvey, 438 F.3d 404, 426-27 (4th Cir. 2006)
(internal quotation marks omitted). For the reasons that
follow, it is abundantly clear that the district court was
justified in denying plaintiffs’ motion for leave on all three
grounds -- prejudice, bad faith, and futility.
37
II.
A.
As to the first ground, “[w]hether an amendment is
prejudicial will often be determined by the nature of the
amendment and its timing.” Laber v. Harvey, 438 F.3d 404, 427
(4th Cir. 2006). With respect to the amendment’s nature, “[a]
common example of a prejudicial amendment is one that ‘raises a
new legal theory that would require the gathering and analysis
of facts not already considered by the defendant.’” Id.
(quoting Johnson v. Oroweat Foods Co., 785 F.2d 503, 510 (4th
Cir. 1986)) (alterations omitted). By contrast, “[a]n amendment
is not prejudicial . . . if it merely adds an additional theory
of recovery to the facts already pled.” Id.
The majority acts as a cheerleader for the amended
complaint, glossing over its gross incompatibility with the
original and casually dismissing the threat of prejudice as
“overstated.” Maj. op. at 29. A comparative analysis of the
two complaints makes recognition of the night-and-day
differences between them unavoidable. The majority’s statement
that appellants do not allege a new theory, id. at 27, finds
support neither in the record nor in the law. The text of the
two complaints speaks -- nay, screams -- this conclusion for
itself.
38
1.
At its core, the original complaint attacks Family Dollar
for maintaining a supposedly subjective and decentralized
decision-making structure for determining store manager
compensation, which plaintiffs alleged produced illegal
discrepancies between male and female pay. A crucial paragraph,
in particular, levels the following accusation with great force:
Defendant’s pay decisions and/or system includes
subjectivity and gender stereotyping that causes
disparate impact to compensation paid to female store
managers. Plaintiffs are aware, at this time, of no
other criteria which causes such disparate impact
other than gender bias, subjectivity and stereotyping.
Plaintiffs are unaware, at this time, of any other
specific criteria that are capable of separation and
analyses.
Compl. ¶ 22 (emphases added).
The import of that paragraph is crystal clear: according
to plaintiffs themselves, any actionable discrimination derived
solely from “subjectivity and gender stereotyping” -- nothing
less, nothing more. 1 Where subjectivity and gender stereotyping
translate directly into discriminatory employment outcomes for a
nationwide group of employees (as alleged here), the contested
decisions must necessarily have occurred outside the
1
As discussed in Part III, plaintiffs also repeatedly
represented to the district court the extreme similarity of
their claims to those brought in Wal-Mart Stores, Inc. v. Dukes,
131 S. Ct. 2541 (2011), which were founded on allegedly
discriminatory exercises of discretion.
39
corporation’s core. Any centralized employment policy -- even
if rooted in the prejudicial predilections of a particular
officer or group of officers -- could result in generally
unfavorable consequences for plaintiffs only if implemented
through objective standards, such that the lower-level decision-
makers who determine individual store managers’ salaries have
little personal power to deviate from the commands dictated by
corporate headquarters. But plaintiffs’ complaint was that
lower-level managers had too much discretion to deviate, not too
little.
Nor does the original complaint specify any other aspect of
Family Dollar’s compensation policies as a source of plaintiffs’
injury. In light of prior litigation involving Family Dollar,
it should come as no surprise that the original complaint is
rooted exclusively in allegations of permissive “subjectivity
and gender stereotyping.” In a previous suit brought by
plaintiffs’ counsel against Family Dollar, for instance,
plaintiffs (some of whom are also parties to the instant action,
Appellee’s Br. at 4) alleged that “[d]espite [gender-based
disparities in pay, Family Dollar] continues to allow its
District Managers to subjectively decide what a Store Manager
should earn.” Opponent’s Responsive Submission in Resp. to Ex.
B of the Ct.’s Order at 12, Collins v. Family Dollar Stores,
40
Inc., No. 7:04-cv-00553-VEH (N.D. Ala. Nov. 17, 2006), ECF No.
235.
Plaintiffs seek to avoid the thrust of their original
complaint by clinging to a single sentence repeated (with
immaterial variations) several times in their original complaint
-- that “[d]efendant engages in centralized control of
compensation for store managers at the corporate level of its
operations.” Compl. ¶¶ 18, 37, 46, 53. This uninformative bit
of boilerplate seeks to subject corporations to nationwide class
actions by virtue of their mere existence. Plaintiffs’
reasoning in this respect would penalize a company for little
more than operating on a national scale under the same corporate
name. Even if taken as true, the fact that some centralized
directive comes from some corporate headquarters is entirely
unremarkable. Surely corporations of national scope cannot
flourish in the modern economy without some “centralized control
of compensation” for their many thousands of employees. At the
very least, corporate headquarters must allocate resources and
articulate certain general policies to guide regional or other
mid-level managers in setting individual salaries and wages.
The alternative would operate to inhibit the most basic
tools of management and result in budgetary chaos. The
question, therefore, is how much “centralized control of
compensation” the original complaint actually alleges with
41
respect to the challenged employment decisions. The answer is,
clearly, not much. If this bare, conclusory statement in the
complaint is given weight, then nationwide class action suits
are off and running, notwithstanding Wal-Mart and the pleading
standards laid down in Ashcroft v. Iqbal, 556 U.S. 662 (2009),
and Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007).
2.
The amended complaint, in stark contrast to the original,
pivots 180 degrees to assert that Family Dollar’s compensation
scheme actually operates in an objective and centralized manner.
The amended complaint is not, as the majority contends, a
“mere[] elaborat[ion]” on the original. Maj. op. at 28. It is
what the district court says it is: a bald attempt to assert a
completely new theory. It backtracks on the earlier assertion
that the flaw in Family Dollar’s compensation scheme was too
much decentralized, subjective decision-making, by alleging that
the system “requires pay to be set by uniform, company-wide
criteria.” Am. Compl. ¶ 29. The complaint now decides to
challenge the purported lack of subjectivity inherent in the
company’s supposedly centralized compensation scheme -- the very
subjectivity that plaintiffs had earlier insisted was the
hallmark of Family Dollar’s corporate structure.
42
As for plaintiffs’ allegations concerning the
implementation of Family Dollar’s compensation criteria, the
following passage is typical:
Store Managers’ compensation is not set by
managers who have unfettered discretion to use their
own judgment without regard to any corporate-imposed
criteria or standards. All Store Managers’ salaries .
. . are subject to the same corporate-administered pay
system and policy established by corporate
headquarters; all Store Manager’s salaries are subject
to store payroll budgets established at corporate
headquarters; and all Store Managers have the same job
description which sets forth a common set of duties
and responsibilities regardless of location. There is
no policy against having uniform employment practices
at Family Dollar.
Id. ¶ 32. We are now explicitly told, moreover, in a complete
about-face from the original complaint, that “Family Dollar is
not operated in a decentralized, subjective manner. Nor is the
pay-setting process for Store Managers based on decentralized,
subjective decisionmaking.” Id. ¶ 34. The demons in the
original complaint were those runaway lower-level managers. The
demon in the amended complaint is a controlling “corporate
headquarters.” Id. ¶ 35.
3.
Given all of the foregoing, it should be plain that the
amended complaint is not some mere modification of the original,
as the majority contends. Instead, it is manifestly,
substantively different from the original. The two are utterly
irreconcilable. They describe two different companies. By
43
transforming their claims from a frontal assault on an
excessively subjective and decentralized compensation system
into an intricate attack on a purportedly objective and
centralized scheme, plaintiffs have done far more than “raise[]
a new legal theory.” Laber, 438 F.3d at 427 (internal quotation
marks omitted).
The majority breezily dismisses these concerns, asserting
in conclusory terms that “[t]he legal theory remains the same.”
Maj. op. at 28. My colleagues would be wise to pay some modest
heed to the opinion of the district judge, who was better
situated to evaluate the actual implications of the transfigured
complaint. The new complaint, by virtue of its novel
allegations, would require significant “gathering and analysis
of facts not already considered by the defendant.” Laber, 438
F.3d at 427 (internal quotation marks and alterations omitted).
As the district judge emphasized: “Plaintiffs wish to pursue
extensive discovery to support and clarify their new theories,
which will require the parties to re-open and conduct new expert
discovery based on plaintiffs’ changed version of the facts.”
J.A. 418.
Thus, the district court was correct to conclude that
granting leave to amend would be prejudicial to Family Dollar.
Id. at 417-18. “The proof required to defend against this new
claim would be of an entirely different character than the proof
44
which the defendant [was] led to believe would be necessary.
Belated claims which change the character of litigation are not
favored.” Deasy v. Hill, 833 F.2d 38, 42 (4th Cir. 1987). The
district court acted well within its discretion by denying
plaintiffs’ motion for leave to amend.
B.
The timing of a proposed pleading amendment also bears on
whether the change would prejudice the opposing party. Laber,
438 F.3d at 427. In particular, whereas an amendment “offered
before any discovery has occurred” is unlikely to be
prejudicial, “the further [a] case [has] progressed . . . , the
more likely it is that the amendment will prejudice the
defendant.” Id.; see also United States ex rel. Nathan v.
Takeda Pharm. N. Am., Inc., 707 F.3d 451, 461 (4th Cir. 2013)
(affirming denial of motion for leave to amend in light, inter
alia, of a two-year gap between filing of complaint and
dismissal); Mayfield v. Nat’l Ass’n for Stock Car Auto Racing,
Inc., 674 F.3d 369, 379 (4th Cir. 2012) (affirming denial of
motion for leave to amend where “a significant amount of
discovery had already been conducted”).
Here, plaintiffs’ attempt to amend their complaint came
three years after the case was initially filed -- and only when
Family Dollar appeared poised to succeed on its motion to
dismiss and/or strike the original complaint’s class
45
allegations. Moreover, the district judge observed that
plaintiffs had been given “adequate time to conduct discovery,”
that they had in fact “conducted significant discovery,” and
that plaintiffs’ own counsel had even admitted “that discovery
is mostly completed.” J.A. 414-15. Hence, the district court
concluded that any “additional discovery would be . . .
prejudicial to defendant.” Id. at 415. The court proceeded to
hold that:
[A]llowing plaintiffs to amend the complaint would
prejudice defendant. Since the filing of the
complaint three years ago, the parties have pursued
discovery . . . and have attempted to mediate claims
under the original complaint. Here, plaintiffs chose
not to file their proposed amended complaint until the
briefing on defendant’s motion to dismiss was nearly
complete . . . . Plaintiffs wish to pursue extensive
discovery to support and clarify their new theories,
which will require the parties to re-open and conduct
new expert discovery based on plaintiffs’ changed
version of the facts.
Id. at 417-18.
Plaintiffs attempt to blame the three-year delay in filing
for leave to amend on the various motions and objections that
were exchanged between the parties during the course of
discovery. Such tit for tat, however, is not peculiar to this
litigation; every complex class action of this variety will have
just this sort of pretrial motion exchange. The majority’s
adoption of plaintiffs’ reasoning in this respect, maj. op. at
26, thus comes close to establishing a per se three-year grace
46
period for motions for leave to amend. Such a protracted
interval is excessive and susceptible to manipulative conduct.
The new rule established by today’s opinion endorses filing
delays that patently prejudice opposing parties.
Moreover, the delay in this particular case is especially
unjustifiable. Plaintiffs’ counsel have extensive experience
with defendant’s corporate structure: by their own admission,
they have sued Family Dollar over labor and employment matters
“approximately 15” times since 2001. See Pls.’ Reply to Def.’s
Resp. to Pls.’ Opp’n to Terry Price Serving as Local Counsel and
Req. for Emergency Hr’g at 3 n.2, Scott v. Family Dollar Stores,
Inc., No. 3:08-cv-00540-MOC-DSC (W.D. N.C. Nov. 4, 2008), ECF
No. 15. As the district court noted, plaintiffs were plenty
familiar through their multiple prior lawsuits with defendant’s
corporate organization. J.A. 417. Although plaintiffs assert
in a conclusory footnote that defendant’s compensation policies
have changed since the time of these many prior suits,
Appellants’ Br. at 53 n.7, they provide no substantiation for
this claim nor do they identify any specific ways in which the
policies have been altered.
The majority inexplicably focuses on the fact that
plaintiffs’ motion for leave to amend was made prior to trial.
Maj. op. at 29. The crux of this dispute, however, is class
certification. That issue is routinely decided pretrial. See
47
Fed. R. Civ. P. 23(c)(1)(A) (“At an early practicable time after
a person sues or is sued as a class representative, the court
must determine by order whether to certify the action as a class
action.”). Any potential source of prejudice, therefore, lies
not in inconveniences at trial but rather in the superfluous or
additional discovery costs imposed on defendant as a result of
plaintiffs’ fluctuating class action theories. If the
majority’s misplaced emphasis on trial represents a new standard
for identifying prejudice in class certification proceedings,
prejudice will almost never be found.
I see no reason whatsoever to usurp the district court’s
essential case management functions or to question the accuracy
of its characterizations. It was entirely proper for the
district court to conclude that permitting plaintiffs to amend
their complaint so substantially and at such a late stage of the
game would impermissibly prejudice Family Dollar. It was
altogether sound for the trial court to hold that Family Dollar
should not be forced to defend a new suit three years after the
original complaint was filed. See Newport News Holdings Corp.
v. Virtual City Vision, Inc., 650 F.3d 423, 439-41 (4th Cir.
2011) (affirming on prejudice grounds denial of motion for leave
where amendment was filed at the “eleventh hour,” “would
probably have necessitated additional discovery,” and would have
“substantially change[d] the nature and scope” of litigation)
48
(internal quotation marks omitted); Equal Rights Ctr. v. Niles
Bolton Assocs., 602 F.3d 597, 603-04 (4th Cir. 2010) (same).
III.
As to why plaintiffs wanted to undertake such an extensive
overhaul of their complaint in the first place, the majority
opinion points to the Supreme Court’s decision in Wal-Mart, 131
S. Ct. 2541. The majority, however, misapprehends the import of
Wal-Mart with respect to the final two grounds on which a
district court may deny a motion for leave to amend a pleading -
- the lack of good faith, to which I now turn, and futility,
discussed in Part IV. See Laber v. Harvey, 438 F.3d 404, 426-27
(4th Cir. 2006).
A district court’s refusal to permit a pleading amendment
on bad faith grounds is justified where “the plaintiff’s first
theory of recovery is based on his own reading of . . . cases
and it turns out that he misinterpreted how that theory would
apply to the facts of his case.” Id. at 428 (emphasis omitted).
That situation is precisely what occurred here. Plaintiffs
misinterpreted how certain class action precedents would apply
to their case and then sought to construct an entirely new set
of facts to overcome their error. Their willingness to adopt
contradictory factual positions in order to match their evolving
legal theories evidences a degree of bad faith sufficient to
49
warrant denial of leave to amend. To the old-fashioned view
that prior representations to a court actually count for
something, the majority answers: Not much.
Plaintiffs were wholly content to ride the coattails of the
proposed class in Wal-Mart while that class was enjoying success
in the lower federal courts. In consenting to a transfer of
venue in 2008, plaintiffs explicitly stated that, with respect
to a then-recent round of the Wal-Mart litigation, “[t]he Ninth
Circuit . . . affirmed certification of . . . a nationwide class
having virtually identical claims of sex discrimination in pay
to those brought in this case.” J.A. 221 (citing Dukes v. Wal-
Mart, Inc., 509 F.3d 1168 (9th Cir. 2007)) (emphasis added).
Later in the litigation, plaintiffs argued that “[t]he evidence
is expected to show that this case is more like . . . the Ninth
Circuit’s decision in” Wal-Mart than the cases cited by
defendant. S.A. 527.
Then plaintiffs adopted a dramatically different stance
after the Supreme Court reversed the Ninth Circuit’s
certification decision in 2011. See 131 S. Ct. 2541. In their
briefing before this court, for instance, plaintiffs contend
that “Family Dollar’s salary system is the opposite of that in
Wal-Mart,” Appellants’ Br. at 5; that “[t]he current case has
never alleged any store-level decisionmaking similar to that in
Wal-Mart,” id. at 16, 21-22 (emphasis omitted); that “[t]he Wal-
50
Mart decision was limited to localized decisionmaking within
each store that was not subject to any centralized policies or
control similar to those alleged here,” id. at 20-21; and that
“Wal-Mart simply does not apply to [the] Complaint [here],” id.
at 52 (emphasis omitted).
Statements made at oral argument help to illustrate the
gross incompatibility between the factual allegations made by
plaintiffs’ original and amended complaints. The court
inquired: “Don’t we have a big difference . . . between your
complaint and your amended complaint . . . in terms of the
substantive allegations?” Plaintiffs’ counsel responded: “No, I
do not believe so.” He later elaborated:
We say that this case involves centralized criteria .
. . and that we can show that that centralized
criteria is what’s causing the disparity, not . . .
anything localized. . . . That’s our complaint from
Day 1. If you read our original complaint, it says
that we are attacking a centralized system. It says
nothing but that.
(emphasis added). Despite these protestations to the contrary,
the original complaint actually says precisely the opposite. It
states explicitly that “Plaintiffs are aware, at this time, of
no other criteria which causes such disparate impact other than
gender bias, subjectivity and stereotyping.” Compl. ¶ 22
(emphasis added).
To be sure, counsel must enjoy latitude in amending
complaints to address intervening developments in the law and to
51
incorporate factual material uncovered since the original
filing. Some evolution of a plaintiff’s approach to a case is
to be expected, for good advocacy is adaptive in some measure.
It is a matter of degree, however, and the district court was
right to spot in plaintiffs’ new attack a bridge too far.
For the instant plaintiffs do not merely present a new
legal argument predicated on their original factual allegations,
or some modification based upon new revelations. Instead, they
seek to invent an entirely new set of facts tailored to their
revised theory of recovery. The corporate defendant described
in the amended complaint bears no more than a nominal
relationship to that described in the original. The proposed
amendment is “not merely clerical or corrective. It
[establishes] an entirely new factual basis for the plaintiffs'
claims.” Little v. Liquid Air Corp., 952 F.2d 841, 846 (5th
Cir. 1992), reinstated in relevant part, 37 F.3d 1069, 1073 &
n.8 (5th Cir. 1994) (en banc); see also Cornell & Co., Inc. v.
OSHRC, 573 F.2d 820, 824-25 (3rd Cir. 1978) (denying leave to
amend where plaintiff “changed the factual basis for the charge
as well as his legal theory”) (internal quotation marks
omitted).
This is more than some commonplace doctrinal point.
Complaints must bear some relationship to the external reality
which they purport to describe. When a corporation is
52
reinvented from one employing decentralized, subjective
decision-making to one with rigid, entirely centralized
policies, law’s relationship to reality is stretched too thin.
See Bradley v. Chiron Corp., 136 F.3d 1317, 1324-26 (Fed. Cir.
1998) (disregarding “sham” facts in an amended complaint that
contradicted the factual allegations pled in the original and
represented “a transparent attempt to conform the facts to the
requirements of the cause of action”). Law is not a mere set of
expressions to be manipulated toward a given end. It is a
system designed to ascertain truth as far as possible in order
to produce justice, to the extent possible. To do this, law
must maintain some concrete relationship with facts as they
exist. Plaintiffs’ contradictory pleadings, which treat reality
as a plastic entity to be molded to their purposes, run directly
counter to this principle. See Reddy v. Litton Indus., Inc.,
912 F.2d 291, 296-97 (9th Cir. 1990) (“Although leave to amend
should be liberally granted, the amended complaint may only
allege other facts consistent with the challenged pleading.”)
(internal quotation marks omitted).
Were plaintiffs permitted to substitute contradictory
factual narratives every time an intervening opinion cast doubt
upon their claims, they could hold defendants hostage by
indefinitely postponing final judgment. The majority finds the
original complaint deficient because it alleged only a
53
subjective decision-making structure. Maj op. at 21-22. But
when plaintiffs sought to run from their prior representations
and assert a highly controlled decision-making apparatus, the
majority says no problem. I regret that the majority encourages
litigants to approach courts in such a manner.
IV.
Finally, the district court’s rejection of plaintiffs’
motion for leave to amend was warranted on a third ground:
futility. See Laber v. Harvey, 438 F.3d 404, 426-27 (4th Cir.
2006). “Futility is apparent if the proposed amended complaint
fails to state a claim under the applicable rules and
accompanying standards” -- that is, if it “fails to satisfy the
requirements of the federal rules.” Katyle v. Penn Nat’l
Gaming, Inc., 637 F.3d 462, 471 (4th Cir. 2011) (internal
quotation marks omitted). Wal-Mart itself expounded “the
requirements of the federal rules” -- specifically, Federal Rule
of Civil Procedure 23’s commands concerning the certification of
class actions. It is plain that the amended complaint fails to
state a claim by virtue of that decision.
A.
As in Wal-Mart, “[t]he crux of this case is commonality --
the rule requiring a plaintiff to show that ‘there are questions
of law or fact common to the class.’” 131 S. Ct. at 2550-51
54
(quoting Fed. R. Civ. P. 23(a)(2)). Wal-Mart’s central teaching
is that the claims of each class member “must depend upon a
common contention.” Id. at 2551. That common contention, in
turn, must “be of such a nature that it is capable of classwide
resolution -- which means that determination of its truth or
falsity will resolve an issue that is central to the validity of
each one of the claims in one stroke.” Id. Thus, “[w]hat
matters to class certification . . . is not the raising of
common ‘questions’ -- even in droves -- but, rather the capacity
of a classwide proceeding to generate common answers apt to
drive the resolution of the litigation.” Id. (internal
quotation marks omitted).
Applying these principles to employment discrimination
claims, the Wal-Mart Court made clear that “[w]ithout some glue
holding the alleged reasons for [each of the challenged]
decisions together, it will be impossible to say that
examination of all the class members’ claims for relief will
produce a common answer to the crucial question why was I
disfavored.” Id. at 2552. As relevant here, plaintiffs must
show “‘[s]ignificant proof that an employer operated under a
general policy of discrimination’” in order to demonstrate the
existence of the requisite “glue.” Id. at 2553 (quoting Gen.
Tel. Co. of Sw. v. Falcon, 457 U.S. 147, 159 n.15 (1982))
(alteration in original). For two reasons, plaintiffs have
55
failed to satisfy this standard. First, the claims in the
amended complaint fail on their face. Second, even if the
claims were not facially deficient, the proffered evidence would
still be incapable of supporting such claims on a classwide
basis.
1.
In light of the stunning similarities between this case and
Wal-Mart, the allegations in the amended complaint -- just as in
the original complaint -- are legally insufficient from the
outset. In both cases, defendants are large corporations
operating nationwide chains of consumer-goods stores. From Wal-
Mart:
Petitioner Wal–Mart is the Nation’s largest
private employer. It operates four types of retail
stores throughout the country . . . . Those stores are
divided into seven nationwide divisions, which in turn
comprise 41 regions of 80 to 85 stores apiece. Each
store has between 40 and 53 separate departments and
80 to 500 staff positions. In all, Wal–Mart operates
approximately 3,400 stores and employs more than one
million people.
131 S. Ct. at 2547. And from the briefing here: “Family Dollar
operates a chain of over 7,000 stores in more than 40 states”
and “‘has divided its operations into 95 regions, each run by a
vice president, and then into districts, each run by a district
manager.’” Appellee’s Br. at 3 (quoting Grace v. Family Dollar
Stores, Inc. (In re Family Dollar FLSA Litig.), 637 F.3d 508,
510 (4th Cir. 2011)). There are approximately four hundred
56
districts, each of which includes between ten and thirty stores.
Id.
In both cases, the proposed class encompassed many
thousands of retail-level, female employees and former
employees. In both cases, plaintiffs challenged various pay and
promotion decision procedures as improperly gender-related.
Compare Wal-Mart, 131 S. Ct. at 2547 (“The named plaintiffs in
this lawsuit, representing the 1.5 million members of the
certified class, are three current or former Wal–Mart employees
who allege that the company discriminated against them on the
basis of their sex by denying them equal pay or promotions, in
violation of Title VII of the Civil Rights Act of 1964 . . .
.”), with Am. Compl. ¶ 5 (“The plaintiffs bring this action on
behalf of themselves and all female Store Managers pursuant to
Title VII of the 1964 Civil Rights Act . . . and § 216(b) of the
Equal Pay Act of 1963 . . . to redress the defendant’s
widespread and pervasive gender discrimination in employment
opportunities.”).
And most significantly, in both cases, all of the contested
employment actions derived from the same type of decision-making
structure. In Wal-Mart, the Supreme Court stated that mid-level
managers were allowed to exercise “discretion” within “limits”
imposed and enforced by “corporate oversight,” with such
oversight including “preestablished ranges” and “certain
57
objective criteria” for pay and promotions. 131 S. Ct. at 2547.
The district court in Wal-Mart provided even greater detail,
explaining that “the company maintains centralized corporate
policies that provide some constraint on the degree of
managerial discretion over in-store personnel decisions.” Dukes
v. Wal-Mart Stores, Inc., 222 F.R.D. 137, 152-53 (N.D. Cal.
2004). For instance, “there is a basic compensation structure
that applies similarly to all in-store salaried management
positions across all types of Wal–Mart stores, in that the
computation begins with a base salary within a range set by the
corporation . . . , with adjustments allowed for profit
incentives and/or merit increases.” Id. at 148.
As discussed in Part II, the factual and legal allegations
contained in the amended complaint in this case were so novel as
to warrant a finding of prejudice. The fact that certain
allegations are new, however, does not indicate that they are
viable. Here, despite plaintiffs’ efforts to allege extensive
centralized control, the amended complaint reveals the existence
of a corporate decision-making structure parallel to that
described in Wal-Mart. As the district court here explained,
“Although plaintiffs [now] purport to deny that class members’
pay is set through a discretionary, subjective process, . . .
the discretionary pay of managers, within uniformly established
parameters, remain[s] the only source of discrimination
58
alleged.” J.A. 417. That pattern of dispersed managerial
discretion within centralized parameters is precisely that of
Wal-Mart.
While plaintiffs fail to so much as identify the source of
many of the supposed nefarious corporate parameters, see, e.g.,
Am. Compl. ¶ 51, even if we were to accept these dubious
assertions at face value, plaintiffs’ proffered amendment would
still be futile. In an effort to identify a “specific
employment practice” responsible for the alleged pay
discrepancies, Wal-Mart, 131 S. Ct. at 2555 (internal quotation
marks omitted), plaintiffs (and the majority) point to four
corporate policies. With respect to each claim, plaintiffs’ own
brief gives away the ballgame. First, plaintiffs challenge the
corporate-imposed salary ranges for store managers. Appellants’
Br. at 13-14; Am. Compl. ¶ 35. A salary range, however,
intrinsically imparts discretion to those charged with
administering it. As the district judge noted, “a large number
of decision-makers, . . . located around the country, exercise
individual discretion in placing Store Managers within the
established pay ranges.” J.A. 419. Discretion cabined by broad
corporate policies -- including salary ranges -- is precisely
the structure that Wal-Mart found not to be susceptible to class
action treatment. 131 S. Ct. at 2547 (denying class
certification despite defendant’s use of salary ranges). If the
59
existence of such discretion defeated class action commonality
in Wal-Mart, it must do so here.
Second, plaintiffs decry the alleged corporate-imposed cap
on pay raises and contend that exceptions to this cap, which may
only be granted by Regional Managers and Divisional Vice
Presidents, are granted disproportionately to males.
Appellants’ Br. at 13; Am. Compl. ¶ 36. Regional Managers and
Divisional Vice Presidents, however, as their respective titles
indicate, are middle managers. See J.A. 419. By definition,
they are incapable of dictating corporate-wide policies. As the
district judge noted, plaintiffs’ allegations in this respect
again converge with the facts in Wal-Mart: both cases involve
dispersed decision-makers exercising discretion (e.g., granting
exceptions) free of direct corporate control and oversight. Id.
at 417, 419.
Third, plaintiffs argue that defendant’s criteria for
determining compensation -- criteria which include prior
experience and performance evaluations -- disparately impact
women. Appellants’ Br. at 32; Am. Compl. ¶¶ 40, 51. The use of
such criteria is hardly remarkable; the only thing that would be
remarkable is if Family Dollar failed to find prior experience
and prior performance relevant. The business justification for
this practice is obvious.
60
Plaintiffs do not allege, moreover, that these criteria
constitute a rigid formula; instead, the criteria appear to be
simple guideposts listing multiple factors designed to channel
the discretionary decisions of those middle managers charged
with setting store manager salaries. It is the business
equivalent of a judicial totality-of-the-circumstances test,
with the weight and relevance of the factor or circumstance to
be determined individually. Indeed, it would be senseless to
set rigid salaries for every store manager at corporate
headquarters, both because it would strip the system of
incentives and because the performance of each manager simply is
not identical. As noted above, this type of broad corporate
constraint on what is fundamentally a discretionary
determination does not satisfy the commonality requirement.
Wal-Mart, 131 S. Ct. at 2547 (denying certification despite
defendant’s use of “objective criteria” in making promotion
decisions).
Fourth, plaintiffs complain that corporate policies require
that store managers promoted from within be paid less than those
who are hired laterally. Appellants’ Br. at 9; Am. Compl. ¶ 52,
54. This policy allegedly produces a disparate impact insofar
as female store managers are disproportionately promoted in-
house. Appellants’ Br. at 10; Am. Compl. ¶ 55. Plaintiffs do
not allege, however, that either method of selection is
61
centrally mandated, nor do they allege that any central policy
is even responsible for the supposed tendency of females to be
promoted from within rather than hired laterally.
Given that the alleged policy does not dictate the internal
or external route of store manager selection, any disparate
impact that arises will necessarily be the result of
decentralized choices by middle managers. Whether women are
disproportionately hired from within will vary from region to
region. In short, “[i]n a company of [Family Dollar’s] size and
geographical scope, it is quite unbelievable that all managers
would exercise their discretion in a common way without some
common direction.” Wal-Mart, 131 S. Ct. at 2555. Consequently,
the existence of any disparate impact resulting from this
particular policy will be resistant to coherent analysis at the
national level.
The business justification for allotting a slight premium
to lateral hires is hardly obscure. It may well take such an
allowance to persuade an employee to switch companies.
Furthermore, the Supreme Court has noted that the mere fact that
a business practice produces some statistical disparity is,
standing alone, insufficient to conclude that a class action
will be viable. Id. at 2555-56. Under the lateral hire policy
at issue here, for example, some middle managers will hire women
from outside, or promote men from within. In other cases, the
62
hiring party may herself be female. The alleged policy could
very well work to the benefit of women in certain districts. In
short, the results will vary by district and by region;
nationwide patterns are inadequate to justify an inference of
discrimination at the subnational level. The variable results
produced by this particular practice -- which is neutral on its
face and supported by an obvious business justification -- are
precisely what Wal-Mart envisioned as inimical to class action
commonality.
The fact that each of plaintiffs’ key claims ultimately
reduces to an allegation of cabined discretion should be
unsurprising. There is nothing inherently discriminatory about
delegated discretion. Companies must rely on delegated
discretion. It would be virtually impossible, as a matter of
sheer practicality, for a company as extensive in scope as
Family Dollar to micromanage store manager compensation via
centralized policies. It is simply unfathomable that Family
Dollar’s corporate headquarters could afford to dictate the
compensation paid to managers in each of its 7,000 stores. Some
discretion is intrinsic to this type of national business. See
id. at 2554 (noting that an employment policy of decentralized
decision-making is “a very common and presumptively reasonable
way of doing business”).
63
The inference is therefore inescapable that Family Dollar
relies on middle managers -- who have greater and more intimate
knowledge of facts on the ground than the members of top
management -- to attend to the details of store manager
compensation within the broad constraints imposed by corporate
headquarters. Family Dollar expects its intermediate executives
to be more than mere automatons. See Watson v. Fort Worth Bank
& Trust, 487 U.S. 977, 990 (1988) (noting that “it may be
customary and quite reasonable simply to delegate employment
decisions to those employees who are most familiar with the jobs
to be filled and with the candidates for those jobs”).
Plaintiffs’ inventive pleadings simply cannot disguise the
economic and managerial realities associated with running a
national corporation. “[L]ocal discretion cannot support a
company-wide class no matter how cleverly lawyers may try to
repackage local variability as uniformity.” Bolden v. Walsh
Constr. Co., 688 F.3d 893, 898 (7th Cir. 2012). The presence of
such variability makes it difficult to establish the commonality
necessary for class action treatment because, among other
things, business managers in many regions and districts will
exercise delegated discretion in favor of the plaintiff class.
Plaintiffs’ argument, therefore, continues to boil down to
the contention that an “exercise of discretion results in
disparities in pay based on gender.” J.A. 419. Wal-Mart, of
64
course, found challenges based on such a decision-making
structure largely resistant to class action treatment. 131 S.
Ct. at 2555-56. The district court nicely summarized this
aspect of the futility analysis when it concluded that “the
proposed amended complaint appears to be an attempt to recast
plaintiffs’ class claims simply to avoid dismissal under [Wal-
Mart], but even the allegations in the amended complaint
ultimately point to subjective, individualized decisions rather
than pointing to any uniform company-wide policy that
discriminates against [female] Store Managers.” J.A. 417.
2.
Plaintiffs’ amended complaint is deficient for an
additional reason: the evidence plaintiffs have offered fails to
satisfy the standards suggested by Wal-Mart. As the Court in
that case made clear, “Rule 23 does not set forth a mere
pleading standard.” 131 S. Ct. at 2551. Rather, “[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 . . . common questions of law or
fact, etc.” Id. (emphasis omitted); see also Comcast Corp. v.
Behrend, 133 S. Ct. 1426, 1432 (2013). In light of the fact
that plaintiffs have already “conducted significant discovery in
this and other similar cases against defendant in other
jurisdictions,” J.A. 415, the data that they have gathered is
65
inadequate to satisfy the evidentiary standard imposed by Wal-
Mart.
Wal-Mart emphasized that “left to their own devices most
managers in any corporation . . . would select sex-neutral,
performance-based criteria for hiring and promotion that produce
no actionable disparity at all.” 131 S. Ct. at 2554.
Furthermore, with respect to a large national corporation like
Wal-Mart or Family Dollar, “it is quite unbelievable that all
managers would exercise their discretion in a common way without
some common direction.” Id. at 2555. And while Wal-Mart did
not foreclose the theoretical possibility that such coordinated,
discriminatory, discretionary activity might one day be
demonstrated, it concluded that the “statistical and anecdotal
evidence” in that case fell “well short.” Id.
Here, the only real evidence that plaintiffs have provided
is numerical in nature, and it fails for the same reason as that
in Wal-Mart. The amended complaint supplies figures purporting
to show “statistically significant disparities in what Family
Dollar pays men and women for the same job of Store Managers.”
Am. Compl. ¶ 24. Plaintiffs point to an alleged salary gap
amounting to approximately $2,500 per year between 2008 and
2010, which they peg at twenty-two to twenty-three standard
deviations above “what would be expected in the absence of
gender-based discrimination” when “controll[ing] for non-gender
66
factors that may affect pay such as store, district, region,
store type, store size, store location, store volume, education
and prior work history, and length of service.” Id. ¶¶ 24-27.
But this lengthy enumeration of “controlled” elements itself
belies plaintiffs’ claim that any alleged discrepancy in store
manager pay is the product of a rigid collection of centralized
corporate policies.
Plaintiffs’ statistical evidence is insufficient under Wal-
Mart on two counts, both stemming from the fact that it is
national in scope. First and fundamentally, the Supreme Court
specifically underscored the “failure of inference” inherent in
attempting to draw particularized conclusions from national
statistical data. 131 S. Ct. at 2555. That is, “[i]nformation
about disparities at the regional and national level[s] does not
establish the existence of disparities at individual stores,” or
within individual districts, “let alone raise the inference that
a company-wide policy of discrimination is implemented by
discretionary decisions at the store and district level.” Id.
(internal quotation marks omitted); see also Bolden, 688 F.3d at
896 (“If [the defendant employed] 25 superintendents, 5 of whom
discriminated in awarding overtime, aggregate data would show
that black workers did worse than white workers -- but that
result would not imply that all 25 superintendents behaved
similarly, so it would not demonstrate commonality.”); Bennett
67
v. Nucor Corp., 656 F.3d 802, 815-16 (8th Cir. 2011) (“[A]
bottom-line [statistical] analysis is insufficient to
demonstrate that any disparate treatment or disparate impact
present in one department was also common to all the others.”).
Second, nationwide data fails to account for various
nondiscriminatory conditions that may have produced divergent
results from one area to another. For instance, as Wal-Mart
tells us, “[s]ome managers will claim that the availability of
women, or qualified women, or interested women, in their stores’
area does not mirror the national or regional statistics.” 131
S. Ct. at 2555. The controls that plaintiffs claim to have
factored into their statistical conclusions here do not account
for those factors, nor could their crude statistics possibly
comprehend the myriad other conceivable circumstances that may
affect comparative compensation levels in specific locales.
B.
Plaintiffs have thus failed to provide “convincing proof”
of any policy that discriminates in a “companywide” manner; as a
result, “they have not established the existence of any common
question.” Wal-Mart, 131 S. Ct. at 2556-57. The amended
complaint suffers from the same fatal flaw as the original,
rendering plaintiffs’ attempt to reboot the litigation futile,
and rendering the district court’s decision to refuse the
amendment on that ground an entirely proper exercise of its
68
discretion. Even without reaching the patent inadequacies of
the amended complaint under Rule 23(b) -- including the obvious
further difficulties raised by plaintiffs’ request for backpay
in light of the Court’s remedial holding in Wal-Mart, 131 S. Ct.
at 2557 -- the entire class action fails for a lack of
commonality under Rule 23(a)(2).
It bears reemphasis that the employment decision-making
structure at issue here -- in which a business articulates
certain centralized policies but also imparts to mid-level
managers some discretion to implement them -- is not only common
to Wal-Mart and Family Dollar. It is typical of most national
corporations. See McReynolds v. Merrill Lynch, Pierce, Fenner &
Smith, Inc., 672 F.3d 482, 488 (7th Cir. 2012) (noting that
large corporations may grant discretion to local managers “as a
matter of necessity”). The result is a substantial variety of
outcomes attributable to the disparate management philosophies,
priorities, and circumstances of each decentralized decision-
maker -- exactly what one would expect in a company staffed by
human beings.
The majority fails even to suggest why the challenged
policies might be legally suspect. Indeed, the corporate
guidelines targeted by plaintiffs -- such as the use of salary
ranges, the purported bonuses for lateral hires, and the
inclusion of prior experience and performance as factors in pay
69
decisions -- are among the most anodyne in the corporate world.
Permitting a class action suit to proceed on such a slender
basis exposes a large swath of companies to class-action
liability simply for adopting perfectly ordinary, plain vanilla
policies. These policies do, however, share one relevant
feature: they delegate discretion.
Wal-Mart recognized the difficulty of accounting for
regional discrepancies and individual exercises of discretion
through the blunderbuss of class action litigation. The
gravamen of that decision is that nationwide classes face a
steep climb to certification under Rule 23. 131 S. Ct. at 2554
(holding that under the circumstances discussed, “[a] party
seeking to certify a nationwide class will be unable to show
that all the employees’ Title VII claims will in fact depend on
the answers to common questions”). Given the managerial
nightmares encountered by district judges assigned these
unwieldy pieces of litigation, no other conclusion would be
possible. 2
2
The concurring opinion of my good colleague, which ignores
this reality, is notable chiefly for its silences. It advances
an analysis even more cursory than that of the majority on the
theory that some vague, soothing assurance about ordinary Rule
15 motions will obscure the extraordinary steps that have been
taken. Granted, it is in the nature of a concurrence to be
brief in relative terms, but surely some revelatory engagement
with appellee’s claims should be forthcoming. The concurrence
neglects to address which of the district court’s factual
(Continued)
70
It is also important to note that denial of nationwide
class certification here would not leave plaintiffs without a
path forward. Each could continue to pursue a personal claim of
discrimination, as the district court made clear. J.A. 420.
Or, should plaintiffs choose to take a different tack on remand,
class certification could perhaps be suitable for more modest --
and thus more manageable -- groups, such as district-level
findings were clearly erroneous, or which of its discretionary
judgments ran afoul of the abuse-of-discretion standard of
review. It declines to say exactly what new information was
supposedly discovered during mediation, or why that information
was not known to plaintiffs’ counsel as a result of their
fifteen previous suits against Family Dollar. It fails to
justify the irreconcilability of the various pleadings or the
changed thrust of the factual allegations contained therein. It
neglects to address the district court’s finding that this
entirely new case severely prejudiced defendant three years
after the filing of the original complaint. It refuses to
explain why Wal-Mart’s commonality holding, by its plain
language, does not apply to middle managers. It further refuses
to explain why 500 vice presidents and district managers who
concededly made discretionary decisions within delegated ranges
are anything other than middle management, or why a system in
which discretion is channeled by broad corporate guidelines does
not fall within Wal-Mart’s literal terms. It does not state why
it is justifiable to rope regions and districts with progressive
hiring practices into nationwide litigation, or how this
national class action, with all its disparate and moving parts,
is supposed to be administered, or what the district court is
even supposed to do upon remand. It fails, finally, to
illuminate for courts and litigants why this decision does not
subject every company in America with similarly unremarkable
policies to the prospect of class-action liability (and the
reality of interminable class certification disputes) merely for
existing. Perhaps my fine colleagues will some day provide some
answers to some of these questions, but for now they are doing
what football teams usually do on fourth down.
71
clusters, where the differences in the circumstances faced by
each member may be less pronounced. See Bolden, 688 F.3d at 899
(denying class certification but suggesting that smaller
subclasses might be certifiable). While plaintiffs have chosen
to bite off more than they can chew thus far, smaller morsels
may prove more palatable in the end.
V.
In holding Wal-Mart inapplicable to the manifold
discretionary decisions of middle managers, the majority has
hollowed out that case. Moreover, the district court engaged in
a sound exercise of discretion on any one of the three grounds
commonly recognized as reasons for denying leave to amend. The
majority’s decision is unjustifiable under the straightforward
application of governing precedent.
In a larger sense, though, the majority’s ruling is more
damaging even than the disregard of precedent. It impairs the
judicial process in three significant ways. First, it prolongs
disputes far past the point of reason. It requires companies to
defend completely different cases no less than three years after
the filing of the complaint. No other court has gone this far.
In so doing, the majority fails to address even the rudimentary
managerial realities of modern national corporations. The
72
more’s the pity, because in many places and under many managers,
the chief beneficiary would have been the plaintiff class.
Second, the majority pulls up curbside and dumps on the
district court an utterly unwieldy, unmanageable piece of
litigation. It is a truism that unpleasant tasks roll downhill,
and it is also worth the observation that the majority will not
have to deal with the many problems it has wrought. We use an
abuse of discretion standard in this context for a reason. The
district judge is best situated to make the type of
determinations at issue on this appeal. See Amchem Prods., Inc.
v. Windsor, 521 U.S. 591, 630 (1997) (Breyer, J., concurring in
part and dissenting in part) (noting in the class action context
that a district court “is far more familiar with the issues and
litigants than is a court of appeals”). Given the standard,
this is a rude reversal, as it would be even for a trial court
opinion less well reasoned than the one reversed.
Third, the majority has subverted a Supreme Court decision
that, whether congenial or not, was written precisely for a
dispute such as this one. We count upon district courts to
faithfully apply our decisions and precedents. The Supreme
Court should be able to count upon us to do the same.
I yield to no one in my respect for the truly fine judges
in the majority. But let this much be clear. Even the above
unfortunate consequences pale in comparison to the incentives
73
today’s ruling creates for future parties. The plaintiffs in
this case played fast and loose with the district court,
offering not an “amended complaint,” but rather a completely
contradictory one. They assumed that the allegations in a
complaint need bear no discernible relationship to any external
reality but reflect only the limitless malleability of lawyers’
verbal skills. The district court recognized that the system
was being gamed and moved to instill respect for the integrity
of the process over which it had the duty to preside. That we
should not only reverse the trial court, but do so as clearly
erroneous and an abuse of discretion, is simply wrong.
The abuse was committed on appeal.
74
Luanna Scott v. Family Dollar Stores, Inc.
Court: Court of Appeals for the Fourth Circuit
Date filed: 2013-10-16
Citations: 733 F.3d 105, 86 Fed. R. Serv. 3d 1691, 2013 U.S. App. LEXIS 20905, 120 Fair Empl. Prac. Cas. (BNA) 473, 2013 WL 5630636
Copy CitationsCombined Opinion