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Shirley "Rae" Ellis; Leah v. Costco Wholesalecorporation

September 16, 2011


D.C. No.CV-04-03341-MHP Appeal from the United States District Court for the Northern District of California Marilyn H. Patel, District Judge, Presiding

The opinion of the court was delivered by: N.R. Smith, Circuit Judge:



Argued on April 14, 2008 and Resubmitted on September 9, 2011 San Francisco, California

Before: Ronald M. Gould, Richard R. Clifton, and N. Randy Smith, Circuit Judges.

Opinion by Judge N.R. Smith


Costco Wholesale Corporation appeals the district court's order granting class certification in a class action brought by Shirley "Rae" Ellis, Leah Horstman, and Elaine Sasaki (collectively Plaintiffs). In the class action, Plaintiffs allege that Costco's promotional practices discriminate based on gender. Because we granted Costco permission to file an interlocutory appeal, our jurisdiction arises under 28 U.S.C. § 1292(e). We affirm in part, vacate in part, and remand.

This complicated case requires us to consider a number of issues relating to class certification. Several of these issues have recently been clarified by the Supreme Court's decision in Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541, 2551 (2011). Given this new precedent altering existing case law, we must remand to the district court. See Associated Builders & Contractors, Inc. v. Curry, 68 F.3d 342, 343 (9th Cir. 1995). Specifically, we take the following actions: (1) Because at least one named Plaintiff (Sasaki) alleges a concrete injury that is both directly traceable to Costco's allegedly discriminatory practices and is redressable by both injunctive relief and monetary damages, see Bates v. United Parcel Serv., Inc., 511 F.3d 974, 985 (9th Cir. 2007) (en banc), we affirm the district court's ruling on standing. (2) We vacate and remand the district court's ruling as to "commonality" under Rule 23(a) of the Federal Rules of Civil Procedure. The district court failed to conduct the required "rigorous analysis" to determine whether there were common questions of law or fact among the class members' claims. Gen. Tel. Co. of the Sw. v. Falcon, 457 U.S. 147, 161 (1982). Instead it relied on the admissibility of Plaintiffs' evidence to reach its conclusion on commonality. (3) We vacate the district court's ruling as to "typicality" under Rule 23(a), because the district court failed to consider the effect that defenses unique to the named Plaintiffs' claims have on that question. Hanon v. Dataproducts Corp., 976 F.2d 497, 508 (9th Cir. 1992). (4) We affirm the district court's ruling that Sasaki is an adequate class representative under Rule 23(a). As a current employee who continues to be denied promotion, Sasaki has incentive to vigorously pursue injunctive relief as well as monetary damages on behalf of all the class members. Hanlon v. Chrysler Corp., 150 F.3d 1011, 1020 (9th Cir. 1998). However, we vacate the district court's finding that Ellis and Horstman could adequately represent the class, because they were former employees and had no incentive to pursue injunctive relief. (5) In light of Wal-Mart's rejection of the "predominance" test, 131 S. Ct. at 2557-59, the district court must consider whether the claims for various forms of monetary relief will require individual determinations and are therefore only appropriate for a Rule 23(b)(3) class. Thus, we vacate the district court's certification of the class under Rule 23(b)(2).


I. The Parties

A. Costco

Costco is a corporation headquartered in Issaquah, Washington. Costco operates over 350 warehouse-style retail establishments (warehouses). These warehouses sell items ranging from groceries to electronics. Within each Costco warehouse, the management structure consists of a General Manager (GM), two to three Assistant General Managers (AGM), and three to four Senior Staff Managers. A Costco GM is responsible for the entire operation of his or her respective warehouse and earns an average salary of approximately $116,000, plus stock and bonuses. Costco AGMs are second in command within each warehouse and earn an average salary of approximately $73,000, plus stock and bonuses. Costco's Senior Staff Managers are divided into four categories: Front End Managers, Administration Managers, Receiving Managers, and Merchandise Managers.*fn1 Front End Managers oversee cashiers, membership/marketing personnel, cart staff, and other employees who deal directly with Costco members. Administration Managers manage administrative functions such as payroll and human resources. Receiving Managers oversee stocking of all incoming items from the receiving dock to the shelves. Merchandising Managers oversee lower level managers and are responsible for planning floor displays to maximize sales.

Costco promotes almost entirely from within its organization. Only current Costco AGMs are eligible for GM positions. Costco does not have any written policy explaining to employees the criteria to be considered for promotion to GM or AGM, though candidates are promoted from a list of promotable candidates. Costco does not have written guidelines explaining how candidates should be selected for the promotable lists and does not regularly inform employees about the existence of such lists. Costco does not require that more than one candidate be considered for any particular opening or that a performance evaluation or any other documents be reviewed before a recommended candidate is approved. Costco also lacks a consistent practice for interviewing potential candidates for GM and AGM openings. Costco does not keep records regarding the selection process.

Costco employs a different promotion procedure for Senior Staff Managers. Costco fills the majority of Senior Staff openings by rotating managers among the four Senior Staff positions. This rotation is part of Costco's philosophy and, in Costco's opinion, trains and develops managers for future advancement by exposing them to different aspects of Cost-co's operations. Like the GM and AGM promotion procedures, Costco has no written guidelines regarding rotation of Senior Staff Managers.

B. Ellis

Costco hired Shirley Ellis as an AGM in 1998. Prior to joining Costco, Ellis worked for nearly 20 years in retail management, including five years as a general manager for Sam's Club (Costco's chief competitor). According to Ellis, she left Sam's Club, because she was actively recruited by Costco and promised promotion to GM within a year. On the other hand, Costco claims that it recruited Ellis because she misrepresented herself as a star at Sam's Club, when she had, in fact, lost her job for poor performance.

In Ellis's first year with Costco, she transferred locations twice in order to further her goal of promotion to GM. During this time, several GM positions became available, but she did not learn of the openings until after they were filled. In 2000, Ellis transferred to Colorado to assist her sick mother. According to Ellis, a supervisor told her that it would not hurt her chances for promotion. After six months, Ellis notified Costco that she was again able to relocate anywhere as a GM. In 2002, Ellis sent a letter to her supervisors expressing a "burning desire" to help Costco be successful and advance within the company, asking how the GM selection process worked, where she stood as a candidate for promotion, and what she needed to do to become a GM.

In October 2002, Ellis, while still employed with Costco as an AGM, filed a gender discrimination charge with the Equal Employment Opportunity Commission (EEOC), alleging that she had been passed over for promotion to GM because she was female. Ellis left Costco in November 2004.

C. Horstman

Leah Horstman worked for Costco for more than 23 years beginning in 1981. In 1996, after 15 years with Costco, Horstman was promoted to be a Senior Staff Manager. By 2000, Horstman had rotated through the Administrative Manager, Merchandise Manager, and Receiving Manager positions. She had earlier worked as an Assistant Front End Manager, but did not rotate to the Front End Manager position because of scheduling conflicts and her duties as a single mother with two young daughters.

Throughout her career with Costco, Horstman repeatedly expressed her interest in advancing to AGM and GM and questioned supervisors about the requirements for both positions. Heeding the advice of a supervisor, Horstman also transferred to a high-volume store and expressed a willingness to move from California to Texas in order to become an AGM. However, in her final three annual self-performance reviews, Horstman indicated that her goal was to stay in a position similar to that which she held at the time for three to five years so that she could balance her family life and then to continue her advancement to AGM and GM. Horstman filed a discrimination charge with the EEOC in October 2003 and resigned in June 2004.

D. Sasaki

Elaine Sasaki began working for Costco in 1985. Sasaki advanced to become a Senior Staff Manager within four years. She received consistently high performance reviews, and her GM first indicated that she was ready to be promoted to AGM in 1993. Although Sasaki offered to transfer to places as far away as Hong Kong, she was not promoted to AGM until 1996. Sasaki is currently an AGM in Visalia, California.

Since Sasaki was promoted to AGM in 1996, she has not been selected for at least eight GM positions. She claims she was not aware of any of these openings until after they were filled. Sasaki has relocated four times to improve her chances of promotion to GM. In September 2003, Sasaki wrote to Costco's director of human resources expressing her concern that she had not been promoted because of her gender. At least some of her concern stems from an incident in which she claimed to rebuff the advances of her regional Senior Vice President in a hotel elevator and was later told by him that he holds her to higher standards than other AGMs. According to Costco, Sasaki has not been promoted because both her performance appraisals and her self-evaluations identify areas for improvement. Further, she has never ranked high on Costco's GM promotable list. Sasaki filed a gender discrimination charge with the EEOC on March 1, 2005. She remains employed as an AGM at Costco.

II. Procedural History

The EEOC dismissed Ellis's charge of gender discrimination, after which Ellis filed suit in federal district court "on behalf of a Title VII class of all women employed by Costco in the United States denied promotion to [AGM] and/or [GM] positions." Ellis's complaint sought class-wide injunctive relief, lost pay, and compensatory and punitive damages. Her second amended complaint included Horstman and Sasaki as named Plaintiffs. In August 2006, Plaintiffs filed a motion for class certification under Rule 23(b)(2) and (b)(3) of the Federal Rules of Civil Procedure supported by numerous declarations, deposition transcripts, and Costco company documents. Plaintiffs also submitted the declarations of three experts in support of their class certification motion: statistician Dr. Richard Drogin; labor economist Dr. Marc Bendick; and sociologist Dr. Barbara Reskin. Dr. Drogin concluded that female employees are promoted at a slower rate and are under-represented at the AGM and GM levels relative to their male peers. Dr. Bendick concluded that ...

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