Lead Opinion
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.
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, — U.S. -,
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 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.,
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 stereo*109 typing 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-practiee 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 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.,
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 complaint satisfied the pleading standards as established in Bell Atlantic Corp. v. Twombly,
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,
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-WaZMart 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 Walr-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.
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.
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,
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.,
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. Asurco, Inc.,
III.
Appellants raise three primary arguments on appeal. First, Appellants con
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,
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).
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.
i.
In Walr-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.
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 “ ‘[sjignificant proof that an employer operated under a general policy of discrimination.’ ” Id. at 2253 (quoting Gen. Tel. Co. of Sw. v. Falcon,
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 practice that is challenged.” Id. at 2555 (citing Watson v. Fort Worth Bank & Trust,
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. WalMart 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 it. See
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.
ii.
Courts’ rulings on class certification since Wal-Mart bear out the principles announced herein. See McReynolds v. Merrill Lynch, Pierce, Fenner & Smith, Inc.,
A comparison of McReynolds and Bolden, both decisions from the Seventh Circuit, highlight the parameters of WalMart. In McReynolds, the plaintiff contested two national, company-wide policies — a teaming policy and an account distribution policy.
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:
*115 [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.
[Permitting 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 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).
[In McReynolds,] we held that a national class could be certified to contest the policies], 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
iii.
As a preliminary matter, we note that the class allegations in the original complaint were insufficient to satisfy the commonality standard set forth in WalMart, 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 WalMart.
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 “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 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
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 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,
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,
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 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. Appel
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 eonclusory 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 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,
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,
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
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
Notes
. 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.
. 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.,
. 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.
. 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, — U.S. -,
Dissenting Opinion
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, — U.S.-,
In the majority’s view, Wal-Mart applies only where decisions are left to the complete discretion of low-level managers, maj. op. at 117, 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.),
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 117. 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 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.
The policies cited by plaintiffs are not “built-in headwinds,” maj. op. at 116 (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.
In reaching its decision, the majority faults the district court for denying plain
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 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,
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.,
II.
A.
As to the first ground, “[wjhether an amendment is prejudicial will often be determined by the nature of the amendment and its timing.” Laber v. Harvey,
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
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.
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 “[djespite [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, 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 “[defendant engages in centralized control of compensation for
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 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,
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[] elaboration]” on the original. Maj. op. at 118. 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.
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
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 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,
The majority breezily dismisses these concerns, asserting in conclusory terms that “[t]he legal theory remains the same.” Maj. op. at 118. 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,
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 which the defendant [was] led to believe would be necessary. Belated claims which change the character of litigation are not favored.” Deasy v. Hill,
B.
The timing of a proposed pleading amendment also bears on whether the change would prejudice the opposing party. Laber,
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 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:
*125 [Allowing 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 117-18, thus comes close to establishing a per se three-year grace 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 Pis.’ Reply to Def.’s Resp. to Pis.’ 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 118-19. The crux of this dispute, however, is class certification. That issue is routinely decided pretrial. See 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
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,
A district court’s refusal to permit a pleading amendment on bad faith grounds is justified where “the plaintiffs 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 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 WalMart 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.,
Then plaintiffs adopted a dramatically different stance after the Supreme Court reversed the Ninth Circuit’s certification decision in 2011. See
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
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 incorporate factual material uncovered since the original filing. Some evolution of a plaintiffs 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.,
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 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.,
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
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,
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.’ ”
Applying these principles to employment discrimination claims, the Wal-Mart Court made clear that “[wjithout 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 “ ‘[significant 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,
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 divid*129 ed 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.
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,
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 objective criteria” for pay and promotions.
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 alleged.” J.A. 417. That pattern of dispersed managerial discretion within centralized parameters is precisely that of Wal-Mart.
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.
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,
Fourth, plaintiffs complain that corporate policies require that store managers promoted from within be paid less than those who are hired laterally. Appellants’
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,
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 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”).
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,
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. WalMart, of course, found challenges based on such a decision-making structure largely resistant to class action treatment.
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.”
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.”
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 “controlling] for non-gender factors that may affect pay such as
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.
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.”
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.” WalMart,
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.,
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 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.
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 dis
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 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,
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 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.
. 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 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.
Concurrence Opinion
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 Walr-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 “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.