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Ross v. Lockheed Martin Corp.

United States District Court, District of Columbia

July 28, 2017

VERNON ROSS and DEBRA JOSEY, on behalf of themselves and all others similarly situated, Plaintiffs,



         Named Plaintiffs Vernon Ross and Debra Josey ("Plaintiffs") allege that Defendant Lockheed Martin Corporation ("Lockheed") has "engaged in a pattern or practice of employment discrimination" that is "manifest[] in Lockheed Martin's performance appraisal system." (Compl., ECF No. 1, ¶ 11.) According to Ross and Josey, Lockheed's annual employee performance review process is "flawed in both design and implementation" (id.) because "African-American non-represented, salaried employees below the level of Vice President have received lower overall ratings on their annual performance reviews as compared to similarly situated white employees" (id. ¶ 15), and the lower ratings have, in turn, resulted in "lower salaries, raises, [and] bonuses, [lower] long term incentive awards, fewer promotions, and a lower retention rate" for African Americans at Lockheed (id. ¶ 67). Plaintiffs' three-count complaint claims that Lockheed's performance review process has been systemically injurious in a manner that amounts to both intentional race discrimination (see Id. ¶¶ 65-68 (Count I)) and disparate impact race discrimination (see Id. ¶¶ 70-73 (Count II)). Plaintiff Ross further contends, solely on his own behalf, that Lockheed retaliated against him "for filing a Charge of Discrimination . . . and/or complaining to senior executives at the Company of racial discrimination faced by him and other African-American employees." (W.¶ 78 (Count III).)

         Critically, Ross and Josey seek to prosecute the race discrimination claims on behalf of the following class of plaintiffs:

[all] salaried non-represented African-American employees below the level of Vice President who received at least one performance evaluation between January 1, 2013 and February 29, 2016, with an overall rating below 'significantly exceeded commitments' while employed at Lockheed Martin.

(Id. ¶ 1.) The complaint contends that the discrimination claims are susceptible to class-action treatment because, under Lockheed's performance review process, there is an "absence of measurable indicators" of achievement, which has allegedly "resulted in inadequate safeguards against bias in the assessment of African American employees." (Id. ¶ 18; see also Id. ¶ 21 (resting the complaint's systemic discrimination allegations on the fact that "[m]anagers' comments on employee performance have not consistently relied on specific, measurable, time-sensitive measures of employees' performance "and "[a]s a result, similar or even identical performance could garner different ratings under different supervisors").)

         Plaintiffs have filed their putative class action complaint along with a proposed Settlement Agreement; therefore, this case has come to this Court fully formed. (See Compl.; Settlement Agreement, ECF No. 4-1.) One key feature of the resolution that Plaintiffs have negotiated with Lockheed (in addition to a $22.8 million settlement fund and certain changes to Lockheed's performance appraisal process) is the class members' agreement to release a broad swath of potential legal claims against the company, including claims that have nothing whatsoever to do with Lockheed's performance review procedures. (See, e.g., Settlement Agreement at 22 (stating that the class members agree to release "any and all racial employment discrimination claims of whatever nature, known or unknown, " including but not limited to all "claims of alleged racial discrimination in employment or in the provision of employee benefits claims under Title VII, Section 1981, ERISA[, ]" and "any other federal, state, or local" law).)[1]

         Also noteworthy is what is not featured in the proposed Settlement Agreement: how much money each class member can expect to receive in exchange for releasing any and all race discrimination claims "that were or could have been" asserted against Lockheed. (Id.) Plaintiffs' counsel insists that no class member's expected recovery can be determined, or even estimated, up front; rather, each class member must first formally accept the terms of the Settlement Agreement and complete a detailed form that discloses-for the first time-the potential race discrimination and/or benefits claims that she has already agreed to release. (SeeTr. of Oral Arg. at 69.) In operation, then, a putative class member must decide whether to opt out of the Settlement Agreement before knowing (1) the nature and value of the potential legal claims that she might otherwise have brought against Lockheed based on her employment history, or (2) the amount that she is likely to receive for participating in the settlement and relinquishing all of her (previously undisclosed) claims.

         Before this Court at present is Plaintiffs' motion for preliminary certification of this case as a class action and preliminary approval of the Settlement Agreement. (See Pis.' Mot. for Preliminary Approval of Class Action Settlement Agreement ("Mot."), ECF No. 4.) In the motion, Plaintiffs request that this Court make a preliminary determination that the complaint satisfies the requirements of a viable class action under Federal Rule of Civil Procedure 23, and Plaintiffs also seek preliminary approval of the Settlement Agreement so that the class-wide notice and detailed claim forms can be distributed. (See generally Mot.; Settlement Agreement.) Plaintiffs have consistently maintained that their putative class and proposed settlement satisfy all of the necessary criteria for certification and approval under Rule 23 such that this case should be permitted to cruise right into the notice and hearing stages of the class-wide settlement process. However, for the reasons explained fully below, this Court has reluctantly concluded that it has no choice but to pump the brakes.

         In brief, Plaintiffs have failed to demonstrate that the commonality prerequisite for Rule 23 class certification can be adequately established, because they have not explained how it is that Lockheed's performance appraisal process systematically discriminates against African-Americans such that it qualifies as either a "general policy of discrimination" or a "testing procedure or other company wide evaluation method" that gives rise to discrimination claims that are susceptible to common proof. See Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338, 353 (2011). This Court also sees several fairness-related red flags when it considers the terms of the proposed Settlement Agreement, including an egregious imbalance between the particular claims alleged in the complaint and the scope of the class members' release; a draconian set of consequences that results from a putative class member's mere failure to respond to the class-wide notice; and a dearth of crucial information about the potential expected recovery in relation to the claims being released, as is required for adequate assessment of each putative class member's individual settlement position.

         Consequently, not only is this Court unable to find that Plaintiffs have defined a certifiable class for the purpose of Federal Rules of Civil Procedure 23(a) and 23(b), the Court must also conclude that the proposed Settlement Agreement cannot be preliminarily approved as "fair, reasonable, and adequate" under Rule 23(e)(2). Accordingly, the instant motion for preliminary approval of the Settlement Agreement must be DENIED. A separate order consistent with this memorandum opinion will follow.

         I. BACKGROUND

         A. Disparate Treatment And Disparate Impact Claims Under Title VII

         Claims of employment discrimination under Title VII may proceed under both "disparate treatment" and "disparate impact" theories. Ricci v. DeStefano, 557 U.S. 557, 577 (2009); see also Griggs v. Duke Power Co., 401 U.S. 424, 431 (1971).[2]"Disparate treatment occurs when ' [t]he employer simply treats some people less favorably than others because of their race, color, religion, sex, or national origin.'" Anderson v. Zubieta, 180 F.3d 329, 338 (D.C. Cir. 1999) (alteration in original) (quoting Int'l Bhd. of Teamsters v. United States, 431 U.S. 324, 335 n. 15 (1977)); see also 42 U.S.C. § 2000e-2(a)(1) (making it unlawful for an employer "to fail or refuse to hire or to discharge any individual, or otherwise to discriminate against any individual with respect to his compensation, terms, conditions, or privileges of employment, because of such individual's race, color, religion, sex, or national origin"). To make out a prima facie case of disparate treatment discrimination, a plaintiff must prove that "(i) [he or she] suffered an adverse employment action (ii) because of [his or her] race, color, religion, sex, or national origin." Brady v. Office of Sergeant at Arms, 520 F.3d 490, 493 (D.C. Cir. 2008); see also Id. at 493 & n.l (citing McDonnell Douglas Corp. v. Green, 411 U.S. 792, 802 (1973)). "Proof of discriminatory motive is critical for [disparate treatment] claims." Anderson, 180 F.3d at 338 (internal quotation marks and citation omitted).

         By contrast, a disparate impact claim arises when "policies or practices that are neutral on their face and in intent . . . nonetheless discriminate in effect against a particular group." Id. at 339 (emphasis added; internal quotation marks and citation omitted); see also 42 U.S.C. § 2000e-2(k)(1)(A)(i) (providing that a plaintiff may establish a prima facie disparate impact violation by "demonstrating] that a respondent uses a particular employment practice that causes a disparate impact on the basis of race, color, religion, sex, or national origin").[3] "When presenting a disparate impact claim, a plaintiff must generally 'demonstrate with statistical evidence that the practice or policy has an adverse effect on the protected group.'" Greater New Orleans Fair Housing Action Ctr. v. U.S. Dep't of Housing and Urban Dev., 639 F .3d 1078, 1085-86 (D.C. Cir. 2011) (quoting Garcia v. Johanns, 444 F.3d 625, 633 (D.C. Cir. 2006)). Furthermore, and notably, a plaintiff must demonstrate that she was personally injured as a result of an employment policy with a disparate impact in order to be able to challenge the policy under Title VII. See 42 U.S.C. § 2000e-5(f) (conferring a cause of action under Title VII on a "person claiming to be aggrieved" by an unlawful employment practice);see also Melendez v. Ill. Bell Tel. Co., 79 F.3d 661, 668 (7th Cir. 1996); Young v. Covington & Burling LLP, 736 F.Supp.2d 151, 158-59 (D.D.C. 2010).

         Both disparate treatment and disparate impact theories are available to an injured plaintiff who seeks to challenge discrimination that results from an employer's policy of delegating employment decisions to individual supervisors based on subjective or discretionary criteria. See Watson v. Fort Worth Bank& Trust, 487 U.S. 977, 991 (1988). A plaintiff challenging such a policy under a disparate impact theory is relieved from having to prove that discriminatory intent motivated either the policy of delegation or the particular adverse employment decision that affected her, see Id. at 986-87; however, crucially, "the plaintiff's burden in establishing a prima facie case goes beyond the need to show that there are statistical disparities in the employer's work force." Id. at 994 (plurality opinion).[4] This is because "[i]tis completely unrealistic to assume that [employers'] unlawful discrimination is the sole cause of . . . statistical imbalances in the composition of their workforces." Id. at 992 (plurality opinion). Rather, to support a claim for disparate impact, "the plaintiff must offer statistical evidence of a kind and degree sufficient to show that the practice in question has caused the exclusion of applicants for jobs or promotions because of their membership in a protected group." Id. at 994 (plurality opinion). Put another way, "[a]s a general matter, a plaintiff must demonstrate that it is the application of a specific or particular employment practice that has created the disparate impact under attack." Wards Cove Packing Co., 490 U.S. at 657; see also 42 U.S.C. § 2000e-2(k)(1)(B)(i) (providing that, unless a disparate-impact plaintiff can establish that making such a showing is impossible, she must "demonstrate that each particular challenged employment practice causes a disparate impact").

         B. Plaintiffs' Allegations In This Case

         On December 23, 2016, Plaintiffs filed the complaint in the instant case, which alleges that Lockheed, "one of the largest aerospace, defense, and technology companies in the world" (Compl. ¶ 8), engaged in race discrimination against its African-American employees through the operation of the performance appraisal system that the company uses to evaluate all of its employees (see Id. ¶ 11). According to the complaint, over the course of a three-year period between January of 2013 and February of 2016 (see Id. ¶ 1), Lockheed's performance appraisal system "produced a disparate impact in performance ratings, and consequently in the promotions, compensation, and retention of salaried African-American employees below the level of Vice President" (id. ¶ 11). The two named plaintiffs, Vernon Ross and Debra Josey, allege that they were injured by the performance appraisal system and seek to certify a class of nearly all current and former African-American Lockheed employees below the rank of Vice President who were evaluated pursuant to the performance appraisal system during the relevant three-year period. (See Id. ¶¶ 11, 57.)

         1. The Performance Appraisal System

         According to the complaint, between 2013 and 2016, Lockheed "evaluated all non-represented [i.e., non-union], salaried employees under essentially the same performance appraisal system, although with some changes over time." (Id. ¶ 12.) Lockheed used this performance appraisal system "in all of its business areas- Aeronautics, Rotary and Missions Systems, Missiles and Fire Control, Space Systems, and Enterprise Operations" (id. ¶ 13)-and the system consisted of the following basic components. First of all, every year (at the beginning of the performance appraisal cycle) each salaried employee was required to identify "commitments" that reflected the employee's individual goals for her work at Lockheed during the upcoming year, with manager approval. (See Id. ¶¶ 17-18.) Then, at the end of the calendar year, the employee would receive a performance review in which a manager evaluated that employee's work, using both written comments and numerical ratings. (See Id. ¶20.) The written comments addressed the degree to which the employee had lived up to each commitment, and the numerical ratings reflected the employee's performance (on a 5.0 scale) with respect to meeting both her individual commitments and a series of desired "behaviors" that Lockheed had prescribed across the entire company. (Id. ¶¶ 17, 20, 36.) An employee's performance review also aggregated each of these numerical rankings to calculate a single "composite score." (Id. ¶ 20.)

         Once all managers completed their performance reviews of the individual employees in their purview, groups of managers then gathered for "calibration" sessions that were held in order to determine an "ultimate tier placement" for the employees under their supervision. (Id. ¶¶ 22-23.) A tier placement reflected an overall assessment of an employee's performance vis-a-vis the identified commitments; for example, the highest tier was called "significantly exceeds commitments[.]" (Id. ¶ 57.) Notably, these calibration sessions operated on a curve: there were four possible tiers (see Id. ¶ 35), and the manager groups placed "predetermined percentages of [the] employees" that were under consideration in a given session into each of the four tiers (id. ¶ 22). In doing so, the managers purportedly took account of each employee's performance review as well as commentary from other participants in the calibration session, including participants who had not reviewed that employee's individual performance appraisal results. (See Id. ¶23.) Ultimately, an employee had the opportunity to appeal her performance review and overall tier placement under the appraisal system, but "[v]ery few appeals [were] brought or [were] successful in altering overall ratings." (Id. ¶ 24.)

         According to the complaint, the overall tier placement that an employee received after her individual performance review and the group calibration session played a prominent role in Lockheed's subsequent decisions regarding base compensation, bonus payments, and promotions. (See Id. ¶¶ 27-32.) Specifically, Plaintiffs maintain that the "standard percentage increase in salary" that Lockheed awards to employees each year was "based on their tier and their place in the salary range for their position." (Id. ¶ 28.) Lockheed also "bestow[ed] discretionary merit increases" in compensation, as well as "a variety of monetary awards and bonus programs[, ]" based in part on an employee's overall tier placement. (Id. ¶¶ 29-30.) Finally, "[f]or certain positions at Lockheed Martin, employees may advance through what are called growth promotions[, ]" which "represent movement to a higher level within the employees' existing positions" and which were "based in part on employees' . . . performance evaluations." (Id. ¶31.)

         Plaintiffs' complaint alleges that, due to flaws in the design and implementation of the performance evaluation system, Lockheed's performance review process "has produced a disparate impact based on race in evaluation ratings and, consequently, in the compensation, promotion, and retention of African-American employees." (Id. ¶ 14.) For example, with respect to the individual employee performance reviews, the complaint asserts that Lockheed failed to prescribe "measurable indicators" for managers to use when deciding how to rate an employee for a particular objective or behavior, and therefore Lockheed "ha[s] not provided adequate safeguards against bias in the assessment of African American employees." (W.¶ 19; see also id.¶ 18.) In addition, according to the complaint, managers' written comments "have not consistently relied on specific, measurable, time-sensitive measures of employees' performance[, ]" which means that "similar or even identical performance could garner different ratings under different supervisors." (Id. ¶ 21.)

         The complaint also identifies flaws with respect to the group calibration sessions. Plaintiffs allege that the "discussion of any one employee was cursory at best"; that "employees holding different positions but at the same level were compared against one another"; that "at times, employees were represented by managers who knew little about their performance if the employees' manager was unavailable to attend a given meeting"; and that, "[a]s a result, employees may have been assigned to the forced distribution tiers by persons with little if any direct knowledge of employees' performance[.]" (Id. ¶23.) Furthermore, with respect to the appeals process, the complaint alleges that the right to appeal "does not rectify the biased assessments resulting from the Company's performance appraisal system" because employees do not have "an adequate right to appeal to a manager who was not involved in preparing the review from which [the employee is] appealing." (Id. ¶ 24.)

         The complaint maintains that, as a consequence of these alleged flaws in the performance appraisal process, Lockheed's evaluation system "allow[s] for racially biased assessments of employees." (Id. ¶ 12.) The result, Plaintiffs contend, is that "African-American non-represented, salaried employees below the level of Vice President have received lower overall ratings on their annual performance reviews as compared to similarly situated white employees[, ]" and Plaintiffs also allege, "[u]pon information and belief, " that this disparity "is statistically significant." (Id. ¶ 15.) In addition, Plaintiffs assert that the disparity in overall performance ratings has had corresponding effects "in the compensation, promotion, and retention of African-American employees." (Id. ¶ 14; see also Id. ¶ 28 (stating that, "[u]pon information and belief, " "discrimination in the performance appraisal process" caused disparities in merit salary increases); id. ¶ 32 (performance appraisal system led to disparities in growth promotions); id. ¶¶ 33-34 (performance appraisal system led to disparities in retention rates).) Thus, Plaintiffs attribute the alleged disparities in compensation, promotion, and retention to "flaws in the design and implementation of the Lockheed Martin performance appraisal system, including the nature of the calibration and validation process." (Id. ¶ 16.)[5]

         2. Allegations Regarding The Named Plaintiffs

         Plaintiffs Debra Josey and Vernon Ross allege that they have been personally injured as a result of Lockheed's performance appraisal system. (See Id. ¶¶ 35-56.) Plaintiff Josey is a current Lockheed employee and has worked at the company and its predecessors since 1983. (See Id. ¶ 7.) She is currently a Software Engineer Manager in Lockheed's Rotary and Mission Systems division in Florida, and she previously worked as an Engineering Leadership Development Program Manager in Lockheed's Information Systems and Solutions division in Maryland. (See id.) Josey alleges that she "received lower ratings than similarly situated white employees during her employment at Lockheed Martin despite her stellar performance throughout the [2013-2016] period." (Id. ¶ 35.) Josey contends that the effects of the performance appraisal system on her are manifest when one compares the relatively low overall tier placements she received during the relevant period-second tier (out of four) for her work in 2012, third tier for 2013, and third tier for 2014-with the high numerical ratings and positive written comments that she received in her individual performance reviews during that same time frame. (See Id. ¶¶ 35-37.) Josey alleges that the third-tier ratings she received for 2013 and 2014 "put her below average[, ]" notwithstanding the fact she received composite numerical ratings of 4.1 and 3.9 (out of 5.0) on her individual performance reviews in those two years-ratings that, she alleges, "show that she substantially exceeded Lockheed Martin's expectations." (Id. ¶36.) Moreover, in contrast to the third-tier rating that she received in 2014, Josey's performance review for that same year "did not have any negative comments concerning her commitments or her behavioral objectives." (Id. ¶37.) Josey maintains that the divergence between her individual performance review and her overall tier rating is attributable to the fact that, during group "calibration sessions[, ]" she was compared to employees with "markedly different roles" from hers. (Id. ¶ 38.) Josey appealed her tier placement for 2013, but her appeal was unsuccessful. (See Id. at 39.)

         In the complaint, Josey alleges that, "[a]s a result of her lower-tier performance ratings, [she] has been paid less than her white counterparts with the same or less experience" (id. ¶ 40); that she did not receive any bonuses or awards in 2013 or 2014 (see Id. ¶ 41); and that her performance review ratings have "negatively impacted her ability to be promoted within the company" (id. ¶ 42). With respect to promotions, Josey alleges that she unsuccessfully applied for 55 positions between 2012 and 2015, of which at least 37 would have constituted promotions, and that in the four cases in which she knows the identity of the candidate who was selected for the position, three of the successful candidates were white employees who Josey believes were less qualified than she. (See id. ¶ 43.) In 2015, Josey was notified of her impending layoff as part of a reduction in force (a development that she believes would not have taken place "if she had received higher ratings"); however, she avoided being laid off by accepting a different position at the same level that required her to relocate from Maryland to Florida. (Id. ¶ 44.)

         Plaintiff Vernon Ross is a former Lockheed employee who worked for the company from 1991 to 2015, most recently as the Director of STEM, Generations, and Higher Education in Human Resources in Lockheed's Enterprise Operations division. (See Id. ¶ 6.) Like Josey, Ross alleges that he "received ratings lower than those of similarly situated white employees during his time at Lockheed Martin despite commendable work performance." (Id. ¶ 46.) Ross also contends that "[t]he contrast between [his] written reviews and his [tier ratings] shows that ratings have a weak relationship to performance." (Id. ¶48.) Ross was placed in the second tier out of four for 2012, the third tier for 2013, and the third tier for 2014 (see Id. ¶ 47), and alleges that these tier placements stand in contrast with the uniformly positive written comments that he received on his performance review for 2014 (see Id. ¶ 48). Ross "does not know against whom he was compared at calibration sessions, " but "his direct manager told him that he was calibrated with all Human Resources Directors, regardless of the wide variation in duties." (Id. ¶50.) Ross alleges that because of his "unique positions at Lockheed Martin throughout the period from 2011 through 2015 posing unusual challenges[, ]" there were "no proper comparators for his position." (Id.) Ross appealed the results of his 2013 performance appraisal, and although Lockheed changed two of the individual numerical ratings on his performance reviews during the appeals process, Ross's overall tier placement remained unchanged. (See id. ¶ 53.)

         The complaint alleges that Ross's relatively low tier ratings "prevented him from advancing within the Company[, ]" and that "he was repeatedly bypassed in promotions to a Vice President position in favor of white employees who often had lesser credentials than him." (Id. ¶ 52.) Ross adds that he "received only one long term incentive award" during his 24 years as a Lockheed Martin employee. (Id. ¶51.) In 2015, Lockheed notified Ross that it planned to terminate his position as part of a reduction in force (see Id. ¶¶ 55-56), and Ross then "applied to over 40 jobs within Lockheed Martin, " some at his then-current level and some at lower levels, but he did not receive any offers (id. ¶ 56). Ross alleges that he "was unable to find a new job due in significant part to the discriminatorily low appraisal ratings he had received." (Id.)

         Ross's employment was terminated at the end of 2015 (see id.), and according to the complaint, he received the initial notice of termination "[s]hortly after" he filed a charge of discrimination with the EEOC against Lockheed (id. ¶ 55). Ross also alleges that the EEOC charge was not his first formal complaint: in July of 2014, he allegedly "complained internally of the discrimination that he and other African American employees faced at Lockheed Martin." (Id. ¶ 54.)

         3. The Class Definition, Allegations, And Claims

         As mentioned above, Josey and Ross seek to bring this lawsuit as a class action on behalf of a class that the complaint defines as follows:

[A]ll African-American salaried employees below the level of Vice President employed by Defendant in the United States for at least one day between January 1, 2013 and February 29, 2016, and who received at least one performance evaluation during that period with an overall rating below "significantly exceeds commitments[.]"

(Id. ΒΆ57.) Several groups of African-American employees who might otherwise be included within this definition are expressly ...

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