filed: August 11, 1994; As Amended August 17, 1994.
APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW JERSEY. (D.C. Civil No. 91-00693).
Before: Mansmann and Lewis, Circuit Judges, and Mckelvie, District Judge.*fn*
Appellees/cross-appellants are 23 of 28 former yard and clerical employees of Pennsylvania Truck Lines, Inc. ("PTL") who asserted that appellant/cross-appellee Pacific Rail Services ("Pacific Rail") engaged in age discrimination in violation of the New Jersey Law Against Discrimination (the "LAD") by failing to hire them in 1990. Since the trial in this case, the United States Supreme Court has issued a decision clarifying the standards by which federal employment discrimination cases are to be Judged. St. Mary's Honor Ctr. v. Hicks, 125 L. Ed. 2d 407, 113 S. Ct. 2742 (1993). Because we believe the New Jersey Supreme Court would adopt Hicks 's clarification of the test to be applied in federal discrimination cases in interpreting the LAD, we will vacate the judgment that was entered and remand for a new trial. To assist the district court on remand, we will also decide several subsidiary issues relating to individual claims and plaintiffs.
Because our resolution of the legal issues will require a new trial, it is not necessary to discuss the facts in great detail. The following, however, provides some background to the dispute.
Beginning in 1960, PTL performed lift operations -- loading and unloading freight from flat bed railroad cars -- for Consolidated Rail Corporation ("Conrail") at its North Bergen, New Jersey, terminal. In July, 1990, however, after solicitation of bids by Conrail, Pacific Rail won the North Bergen contract, effective September 1, 1990.
Upon learning that PTL had lost the North Bergen contract, PTL employees at the North Bergen terminal became interested in working for Pacific Rail at that site. Pacific Rail representatives testified at trial, however, that even before submitting its bid, Pacific Rail had decided not to simply hire all of the PTL/North Bergen yard and clerical workers "wholesale," because Pacific Rail was concerned about the attitudes and work habits of some of the workers.*fn1
Instead, upon winning the North Bergen contract, Pacific Rail apparently undertook a three-step hiring process. First, Pacific Rail offered positions to its own employees at Conrail's Elizabeth, New Jersey ("E-Rail") terminal on a "promote from within" theory. (Pay rates at North Bergen were higher than at E-Rail, so a move to North Bergen was effectively a promotion, according to the Pacific Rail representatives.) Testimony indicated that one of the six yard and clerical employees transferred from E-Rail on this basis was over 40 years old.
Pacific Rail next offered employment to three Conrail clerks and two PTL employees from the nearby Conrail/PTL terminal at Kearny, New Jersey. The three Conrail offerees (only two of whom accepted their offers) were over 40. The two PTL offerees (both of whom accepted) were under 40.
Finally, Pacific Rail hired all 11 applicants referred by the union local that represented yard and clerical employees at E-Rail. Of these, one was over 40.
As of September 1, only a limited number of positions in North Bergen remained open. Pacific Rail apparently offered employment to two former PTL/North Bergen yard employees who were over 40, but both refused the offer. Then a former PTL supervisor working for Pacific Rail recommended for hire four former PTL/North Bergen yard employees, two of whom were in their 20s and two of whom were over 40. Pacific Rail offered employment to the younger two, and they accepted. To fill a remaining clerk position, Pacific Rail made offers to two former PTL/North Bergen clerical employees, both over 40, but both declined. Ultimately, instead of simply filling the clerk position, Pacific Rail transferred a person who was over 40 from E-Rail to assist with clerical work and act as office manager.
To summarize, prior to September 1, Pacific Rail had apparently hired 21 employees, none of whom came from the pool of PTL employees at North Bergen. Only four of these 21 individuals were over 40 years old. After September 1, Pacific Rail hired either three or four more employees, at least two of whom were under 40 and from PTL/North Bergen and at least one of whom was over 40 and formerly with E-Rail.*fn2 Thus, of the 25 yard and clerical employees that the evidence showed Pacific Rail hired to work at North Bergen, either 19 or 20 were under 40 years old.
The 28 former PTL/North Bergen yard and clerical employees who filed this lawsuit were over 40. They alleged that Pacific Rail's failure to hire them was due to age discrimination in violation of the LAD. A jury found in favor of 18 of the 28 employees and awarded them a total of more than $7 million ($1,448,000 in back pay and $5,743,500 in front pay). Both Pacific Rail and the 18 verdict winners, plus five plaintiffs whose claims were dismissed by the district court, appeal and cross-appeal several issues.
The primary issue presented involves the delicate task of predicting how the New Jersey Supreme Court would interpret and apply the LAD in the aftermath of the United States Supreme Court's decision in St. Mary's Honor Ctr. v. Hicks, 125 L. Ed. 2d 407, 113 S. Ct. 2742 (1993). As a federal court sitting in diversity, the district court was, and we are, obliged to apply state substantive law. Erie R.R. Co. v. Tompkins, 304 U.S. 64, 82 L. Ed. 1188, 58 S. Ct. 817 (1938); Colantuno v. Aetna Ins. Co., 980 F.2d 908, 909 (3d Cir. 1992). In so doing, we are not free to impose our own view of what state law should be; we are to apply state law as interpreted by the state's highest court. Id. In the absence of guidance from that court we are to refer to decisions of the state's intermediate appellate courts for assistance in determining how the highest court would rule. Fleck v. KDI Sylvan Pools, Inc., 981 F.2d 107, 113 (3d Cir. 1992); Fisher v. USAA Casualty Ins. Co., 973 F.2d 1103, 1105 (3d Cir. 1992). In cases such as this, where neither the state supreme court nor any intermediate appellate courts have spoken to the issue at hand, our task of predicting state law becomes even more complicated. Nevertheless, we must proceed into these uncharted waters, using pronouncements from the New Jersey Supreme Court on analogous issues as our compass.
In Hicks, the Supreme Court considered "whether, in a suit against an employer alleging intentional racial discrimination in violation of [Title VII], the trier of fact's rejection of the employer's asserted reasons for its actions mandates a finding for the plaintiff." Hicks, 113 S. Ct. at 2746. Under the familiar McDonnell Douglas shifting-burden analysis applicable to federal employment discrimination cases involving indirect proof of discrimination, the plaintiff bears the burden of proving a relatively simple prima facie case, which the employer must rebut by articulating a legitimate, non-discriminatory reason for its actions. See generally Chipollini v. Spencer Gifts, Inc., 814 F.2d 893, 897 (3d Cir. 1987).*fn3 Prior to Hicks, we had held that a finding that a defendant employer had articulated false reasons mandated entry of judgment for plaintiff. See Chipollini, 814 F.2d at 898; Duffy v. Wheeling Pittsburgh Steel Corp., 738 F.2d 1393, 1395-96 (3d Cir. 1984). Hicks changed that: the Court ruled definitively that a finding that an employer had articulated a pretextual reason for its actions does not mandate judgment for a plaintiff. Instead, "a reason cannot be proved to be 'a pretext for discrimination ' unless it is shown both that the reason was false, and that discrimination was the real reason." Hicks, 113 S. Ct. at 2752. Thus, "that the employer's proffered reason [for its actions] is unpersuasive, or even obviously contrived, does not necessarily establish that the plaintiff's proffered reason of race is correct." Id. at 2756 (emphasis added). In our most recent decisions addressing this issue, we have followed this teaching that a finding of pretext may lead to a reasonable inference of discriminatory motives, but it does not automatically compel a finding of discrimination. See Miller v. CIGNA Corp., slip op. at 19-20, No. 93-1773 (3d Cir. June 28, 1994); Seman v. Coplay Cement Co., slip op. at 9, No. 93-3544 (3d Cir. June 8, 1994); Geary v. Visitation of the Blessed Virgin Mary Parish Sch., 7 F.3d 324, 329 n.4 (3d Cir. 1993).
In this LAD case, the district court instructed the jury several times that the plaintiffs bore the burden of proving that they were not hired because of their age. See App. at 91-93. The court also instructed the jury that in evaluating Pacific Rail's asserted legitimate business reasons for its actions, they were to decide whether those reasons were its true reasons or whether they "had been presented to hide or avoid disclosure of the true reason, namely: age discrimination." App. at 94. In summarizing the charge, the court said:
If I may recap for you, if you find that plaintiff has established . . . either, one, that his/her age was a determining factor "but for" which he/she would have been hired; or two, that the reasons advanced by the defendant for not hiring plaintiff were a pretext, a reason or reasons unworthy of credence, then plaintiff will have established his/her claim of intentional age discrimination and you must return a verdict in his/her favor. If, however, he/she has failed to establish either of those two propositions, then your verdict must be in favor of the defendant.
App. at 94-95 (emphasis added). Clearly, these instructions would be an incorrect statement of federal law after Hicks.*fn4
The question, however, is whether the New Jersey courts would apply Hicks in an LAD case.*fn5 Hicks, of course, involved the United States Supreme Court's interpretation of federal anti-discrimination statutes and case law. Whether the New Jersey Supreme Court will decide that the same principles apply in cases brought under the LAD is another question.
It shall be an unlawful employment practice, or, as the case may be, an unlawful discrimination:
a. For an employer, because of the race, creed, color, national origin, ancestry, age, marital status, affectional or sexual orientation, sex or atypical hereditary cellular or blood trait of any individual, or because of the liability for service in the Armed Forces of the United States or the nationality of any individual, to refuse to hire or employ or to bar or to discharge or require to retire, unless justified by lawful considerations other than age, from employment such individual or to discriminate against such individual in compensation or in terms, conditions or privileges of employment . . . .
N.J. Stat. Ann. 10:5-12(a). First enacted in 1945, well before federal legislative attempts to eliminate discrimination in the workplace, the LAD was intended by the New Jersey legislature to eradicate "the cancer of discrimination." Jackson v. Concord Co., 54 N.J. 113, 124, 253 A.2d 793, 799 (1969); see Lehmann v. Toys 'R' Us, Inc., 132 N.J. 587, 600, 626 A.2d 445, 451 (1993).*fn6 The New Jersey Supreme Court has generally looked to standards developed under federal anti-discrimination law for guidance in construing the LAD. Lehmann, 132 N.J. at 600, 626 A.2d at 452. The New Jersey Court has adopted the McDonnell Douglas framework, although it has noted that it has never "embraced the McDonnell Douglas test literally, invariably, or inflexibly." Grigoletti v. Ortho Pharm. Corp., 118 N.J. 89, 97-98, 570 A.2d 903, 907 (1990). Instead, the New Jersey Supreme Court has demonstrated a marked willingness, and has instructed New Jersey courts in general, to treat the McDonnell Douglas test as "only a general framework for analyzing unlawful discrimination claims" which "must be modified where appropriate." Erickson v. Marsh & McLennan Co., Inc., 117 N.J. 539, 550, 569 A.2d 793, 799 (1990); see generally Carrington v. RCA Global Commun., Inc., 762 F. Supp. 632, 644-45 (D. N.J. 1991) (noting that "there is little reason to believe that New Jersey courts will exhibit slavish devotion to federal law in interpreting the NJLAD").
Thus, the New Jersey Supreme Court has refused to apply the McDonnell Douglas framework in LAD cases alleging gender discrimination in the form of unequal pay, Grigoletti, supra ; modified the elements of the McDonnell Douglas prima facie case in the context of reverse discrimination failure-to-hire cases, Erickson, supra ; and shifted to employers the burden of proving the validity of their decisions in some handicap discrimination cases. Jansen v. Food Circus Supermarkets, Inc., 110 N.J. 363, 541 A.2d 682 (1988). See also Jamison v. Rockaway Twp. Bd. of Educ., 242 N.J. Super. 436, 445-47, 577 A.2d 177, 183 (1990) (establishing a variation of the McDonnell Douglas framework to apply in cases alleging a retaliatory failure to promote). Plaintiffs point to this willingness to modify the McDonnell Douglas framework as evidence that the New Jersey Supreme Court would disregard Hicks and instead hold that a plaintiff asserting a claim of employment discrimination pursuant to the LAD is entitled to judgment as a matter of law if he or she has proven a prima facie case and has demonstrated that the reason or reasons the employer gave for the challenged employment action were false.
It is true that the New Jersey Supreme Court has taken to heart the legislature's expressed intention that the LAD is to be construed liberally. See supra note 6. It is also true, however, that the legislature has admonished New Jersey courts to construe the provisions of the LAD "fairly and justly with due regard to the interests of all parties," N.J. Stat. Ann. 10:5-27, as the New Jersey Supreme Court itself recognized in Andersen v. Exxon Co., 89 N.J. 483, 496, 446 A.2d 486, 492 (1982). Read together, these admonitions are not inconsistent with one another and are both significant to and instructive in our search for guidance. As we explain more fully below, because the New Jersey legislature intended to protect and compensate victims of discrimination but not to relieve them of the burden of proving unlawful discrimination, and because the New Jersey rule regarding presumptions parallels the federal rule on presumptions upon which the Hicks Court based its decision, we predict that the New Jersey Supreme Court would endorse Hicks 's view that a plaintiff in a discrimination case is not entitled to judgment as a matter of law simply because he or she proves a prima facie case and that the reason or reasons asserted by his or her employer for the challenged action were false.
Our decision is informed by a number of observations concerning New Jersey law. First, under New Jersey law, as under federal law, plaintiffs have always retained the ultimate burden of demonstrating that the actions they challenged were due to discrimination. See, e.g., Peper v. Princeton Univ. Bd. of Trustees, 77 N.J. 55, 87, 389 A.2d 465, 478 (1978); Kearny Generating Sys. v. Roper, 184 N.J. Super. 253, 445 A.2d 1159 (1982).*fn7 Our understanding of the McDonnell Douglas framework before Hicks similarly required that the plaintiff bear the ultimate burden of proving that the challenged employment action resulted from unlawful discrimination. See, e.g., Billet v. CIGNA Corp., 940 F.2d 812, 817 (3d Cir. 1991). Our decisions finding that this burden could be borne merely by demonstrating that the asserted legitimate, non-discriminatory reasons for the employer's actions were incredible were based on the weight given to the McDonnell Douglas prima facie case as a "presumption." In other words, our (and other courts') reasoning that proving pretext entitled plaintiff to judgment reflected a belief that the presumption of discrimination raised by the plaintiff's ability to make out a prima facie case had not been rebutted and was only strengthened by the proven falsity of the reasons the employer gave for its actions, thus mandating a decision that the employer's actions had been motivated by unlawful discrimination. See Hicks, 113 S. Ct. at 2762-63 (Souter, J., Dissenting). Hicks clarified that under federal law the presumption raised by establishment of the prima facie case no longer exists once an employer has articulated a legitimate, nondiscriminatory reason for its actions. It does not hold that proving that reason false will never suffice to support a decision for a plaintiff; it merely establishes that the plaintiff does not merit judgment as a matter of law once falsity is proven.
In thus clarifying the law, the Court in Hicks referred to and relied upon Federal Rule of Evidence 301, concerning presumptions.*fn8 Hicks, 113 S. Ct. at 2747; see also id. at 2749 ("The Court of Appeals' holding that rejection of the defendant's proffered reasons compels judgment for the plaintiff disregards the fundamental principle of Rule 301 that a presumption does not shift the burden of proof, and ignores our repeated admonition that the Title VII plaintiff at all times bears the 'ultimate burden of persuasion.'"). The New Jersey Supreme Court has similarly interpreted the LAD, describing the prima facie stage of the McDonnell Douglas test as establishing a "rebuttable presumption" of discrimination. Erickson, 117 N.J. at 551, 569 A.2d at 799. It has also stated that when a defendant rebuts the presumption by articulating a legitimate nondiscriminatory reason for its actions, the inference of discrimination which literally arose from the plaintiff's evidence is destroyed. Goodman v. London Metals Exch., Inc., 86 N.J. 19, 33, 429 A.2d at 341, 348 (1981). Therefore, corresponding reference to the New Jersey Rule of Evidence regarding presumptions seems appropriate, and our reference thereto provides further support for the Conclusion that New Jersey would clarify the law of the LAD as the Court in Hicks clarified Title VII jurisprudence.
Like Federal Rule of Evidence 301, New Jersey Rule of Evidence 301*fn9 provides that the introduction of evidence to rebut a presumption destroys that presumption, leaving only that evidence and its inferences to be Judged against the competing evidence and its inferences to determine the ultimate question at issue (in an LAD case, the question of whether the defendant illegally discriminated against the plaintiff). Specifically, it states that "if evidence is introduced tending to disprove the presumed fact, the issue shall be submitted to the trier of fact for determination unless the evidence is such that reasonable persons would not differ as to the existence or nonexistence of the presumed fact." The commentary to the rule provides that "a valid presumption can be used to establish a prima facie case, but the presumption normally disappears in the face of conflicting evidence. Nevertheless, any logical inference which can be drawn from the basic fact remains." N.J. R. Evid. 301, 1994 supplemental comment.*fn10 Therefore, the rule states with regard to state law exactly what Hicks has explained to be the operation of federal anti-discrimination law under the McDonnell Douglas shifting burden analysis. The New Jersey Supreme Court may choose, as a policy matter, to interpret the LAD even more broadly, so that the usual rules governing presumptions do not apply in LAD cases, cf. N.J. R. Evid. 301 (rule governs "except as otherwise provided . . . by other law"), but in the face of this explicit explanation of the operation of presumptions under New Jersey law, we cannot make that state law policy decision for it. Compare Schweigert v. Provident Life Ins. Co., 503 N.W.2d 225, 288-29 (N.D. 1993) (refusing to adopt Hicks formulation because of different state rule on presumptions).
This is particularly true in light of the New Jersey courts' general adoption of federal anti-discrimination law as their guidepost. Indeed, the courts' willingness to depart from federal precedent in the anti-discrimination area has occurred in only three contexts, involving either modification of the McDonnell Douglas framework to fit specific factual situations (e.g., Erickson and Jansen), departure from that framework in accordance with cases decided by various federal courts of appeals (Grigoletti), or departure from the standards we apply in favor of what it believes to be a more sensible interpretation of United States Supreme Court precedent (Lehmann). It has never rejected outright the United States Supreme Court's approach to federal anti-discrimination law; to the contrary, it has noted that there exists "an imputed but strong legislative intent to harmonize the State's anti-discrimination statutes with the dominant federal view to maximize the protections for the victims of discrimination and . . . to benefit all of society by these efforts." Grigoletti, 118 N.J. at 108, 570 A.2d at 913.
Finally, the New Jersey Supreme Court's decision in Goodman provides further support for our decision, if only by implication. In Goodman, the court considered a case in which a company and its principals argued that a hearing examiner in the New Jersey Division on Civil Rights had misapplied the burden of proof. The complainant, a female job applicant, established a prima facie case that she had not been hired because of her gender. The respondents contended that she was not granted an interview because her attitude had been unpleasant. The hearing examiner nevertheless ruled for the complainant, stating that the "'case ultimately turns on credibility'" and that he believed the ...