Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 06 C 4104--Joan Humphrey Lefkow, Judge.
The opinion of the court was delivered by: Easterbrook, Chief Judge.
Before EASTERBROOK, Chief Judge, and POSNER and FLAUM, Circuit Judges.
Walsh Construction Company is one of the nation's largest builders, erecting skyscrapers and paving roads, among other projects. Walsh has a central organization of permanent employees, in- cluding superintendents dispatched to manage par- ticular projects. These superintendents have discretion over hiring and pay of the hourly workers who do most of the tasks on-site. The central organization has a few policies, including rules against racial discrimination (with annual training in how to detect and prevent it), and a requirement that superintendents honor collective bargaining agreements, but for most other subjects the superintendents are in charge. This is the norm in the construction business, where the availability of labor and the tasks to be performed change frequently, making flexibility essential. When one phase of a project is completed, Walsh needs journeymen in different trades to handle the next phase. The superin- tendent and foremen also must mesh the tasks assigned to Walsh's workers with those handled by subcontractors.
The 12 plaintiffs worked for Walsh Construction in 2002 and earlier; none has worked for it since mid-2002. Plaintiffs filed suit against Walsh Group, which they described as "doing business as Walsh Construction Co." That's not accurate; the record does not imply that Walsh Group, a holding company, and its subsidiaries, including Walsh Construction, have failed to observe corporate formalities. See United States v. Bestfoods, 524 U.S. 51 (1998). Everyone has treated the suit as one directly against Walsh Construction Co., and we have reformed the caption accordingly.
Plaintiffs contend that Walsh's superintendents prac- ticed, or tolerated, two kinds of racial discrimination: in assigning overtime work, and in working conditions. Plaintiffs submitted a statistical analysis to the effect that white and Hispanic workers were more likely to work overtime hours than black workers did. Plaintiffs also contended that some superintendents and foremen, at some of Walsh's projects, used demeaning words such as "nigger" or "coon" to refer to black workers, or failed to prevent journeymen from doing so. Derogatory graffiti appeared in portable toilets, and several plain- tiffs said that hangman's nooses had been placed in toilets or break sheds. Walsh says that these were the work of subcontractors' employees, and that its super- visors painted over the graffiti and removed the nooses as they learned about them, but that potential defense on the merits is premature at this phase of the litigation.
Walsh observed that its many sites had different superintendents whose practices (and tolerance for the racism of others) differed. Plaintiffs nonetheless asked the district judge to certify the suit as a class action covering all of Walsh's 262 projects in the Chicago area since mid-2001. The district court granted this request and certified two classes. 2012 U.S. Dist. LEXIS 44352 (N.D. Ill. Mar. 30, 2012). One includes "[a]ll blacks employed by Walsh on its construction sites in the Chicago Metropolitan area during the time period June 1, 2001, through the present." The parties refer to this as the hostile-work-environment class. The other includes: "All blacks employed as journeymen by Walsh in the Chicago Metropolitan area at any time during the period June 1, 2001, through the present, who were denied opportunities to work, not afforded overtime hours or not afforded premium pay hours, because of their race." The parties refer to this as the overtime class. Walsh sought to appeal the certification order under Fed. R. Civ. P. 23(f), and a motions panel granted the request.
There are multiple problems with these class defini- tions. One is that these 12 plaintiffs can't represent either class, since none of the 12 has worked for Walsh after 2002, even though the classes extend into the indefinite future. The EEOC took a long time to issue right-to-sue letters, so the suit is timely, but the dates of plaintiffs' employment affect how a class should be defined. Federal courts used to certify what were called across-the- board classes, in which one worker who had experienced any discriminatory practice could represent a class of all employees who had experienced different kinds of discrimination. But General Telephone Co. v. Falcon, 457 U.S. 147 (1982), held that across-the-board classes are incompatible with Fed. R. Civ. P. 23. Given the employ- ment history of these plaintiffs, the class definition should not have extended past 2002. A second problem is that the overtime class defines its members as persons who did not earn more "because of their race." Using a future decision on the merits to specify the scope of the class makes it impossible to determine who is in the class until the case ends, and it creates the prospect that, if the employer should prevail on the merits, this would deprive the judgment of preclu- sive effect: any other former worker could file a new suit, given that the losing "class" lacked any members.
The parties have paid little attention to these prob- lems, perhaps because they are reparable. The first problem could be fixed by adding plaintiffs who have worked for Walsh more recently (or are working for it today). The second problem could be fixed by changing the language "who were denied opportunities to work, not afforded overtime hours or not afforded premium pay hours, because of their race" to something like "who sought but were denied opportunities to work, overtime hours, or premium pay hours." Then the litigation could determine whether those events occurred because of race.
Walsh directs its fire to something that cannot be fixed: that both classes include workers at all of Walsh's Chicagoland sites since 2001. When the parties contested this matter in the district court, there were 262 such sites; today the number must be higher, because owners continue to hire Walsh to construct new projects. The sites had different superintendents, with different poli- cies. Many superintendents moved to new sites after finishing their projects, but, with the exception of one concrete-pouring crew that stayed together as a unit, superintendents used different groups of foremen at different sites--and many of the allegedly discrim- inatory practices depended on the foremen, who made most overtime offers, chastised (or failed to chastise) workers who used racially inflammatory language, and so on.
Different sites had materially different working condi- tions, as most of the plaintiffs conceded in their deposi- tions. They acknowledged that most superintendents they had worked with did not discriminate; their objec- tions concerned a handful of superintendents and fore- men, principally John Taheny, Robert Kuna, Arthur Crummie, Robert DeBoer, and Jim Gumber. None works for Walsh today. Taheny worked for Walsh only briefly, and plaintiffs' grievances about him concern a single site, which the parties call Skybridge. Gumber was the superintendent during later events at Skybridge, and he may have failed to deal with an inher- ited problem. Several plaintiffs testified that many sites where they worked were discrimination-free, while others were marked by severe racial hostility. The large number of sites, and the fact that plaintiffs' experi- ences differ, raise the question whether the classes satisfy Rule 23(a)(2), which says that a class may be certified only if "there are questions of law or fact common to the class". To evaluate plaintiffs' grievances about Walsh, however, a court would need site- specific, perhaps worker-specific, details, and then the individual questions would dominate the common ques- tions (if, indeed, there turned out to be any com- mon questions).
Rule 23(a)(2) is the basis of the Supreme Court's deci- sion in Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541 (2011). In Wal-Mart, as here, the plaintiffs contended that discretionary acts by local managers (of stores in Wal- Mart, of construction sites here) produced discrimina- tory effects. The Court held that Rule 23(a)(2) blocks certification of such a class, because "[c]ommonality requires the plaintiff to demonstrate that the class members 'have suffered the same injury'". 131 S. Ct. at 2551, quoting from Falcon, 457 U.S. at 157. The Court stated that Rule 23(a)(2) requires "a common conten- tion--for example, the assertion of discriminatory bias on the part of the same supervisor." 131 S. Ct. at 2551. But when multiple managers exercise independent dis- cretion, conditions at different stores (or sites) do not present a common question.
The sort of statistical evidence that plaintiffs present has the same problem as the statistical evidence in Wal- Mart: it begs the question. Plaintiffs' expert, Stan V. Smith, assumed that the appropriate unit of analysis is all of Walsh's Chicago-area sites. He did not try to demonstrate that proposition. If Walsh had 25 super- intendents, 5 of whom discriminated in awarding over- time, 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. Smith's analysis has additional problems. For example, he did not attempt to control for variables other than race. Walsh's collective bargaining agreements require it to offer overtime opportunities first to union stewards. If these stewards are more likely to be white than other journeymen, that could explain the data without any need to impute discrimination to Walsh's super- intendents. Smith did not attempt to determine the effect of the stewards-first clause. We need not determine whether Smith's study should have been excluded under Fed. R. Evid. 702. It is enough to say that it does not show any common issue that would allow a multi-site class.
Relying on Falcon, the Court in Wal-Mart explained that a multi-store (or multi-site) class could satisfy Rule 23(a)(2) if the employer used a procedure or policy that spanned all sites. In Wal-Mart, as here, the plaintiffs conceded that the employer has a policy for- bidding discrimination but contended that reposing discretion in local managers permitted that policy to be undermined. According to plaintiffs--in Wal-Mart and this case alike--local discretion had a disparate impact that justified class treatment. But Wal-Mart dis- agreed, observing that "[t]he whole point of permitting discretionary decisionmaking is to avoid evaluating employees under a common standard." 131 S. Ct. at 2553. It continued: "allowing discretion by local supervisors over employment matters ... is just the ...