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Karlo v. Pittsburgh Glass Works, LLC

United States Court of Appeals, Third Circuit

January 10, 2017


          Argued November 9, 2016

         On Appeal from the United States District Court for the Western District of Pennsylvania District Court No. 2-10-cv-01283 District Judge: The Honorable Terrence F. McVerry

          Samuel J. Cordes [ARGUED] Bruce C. Fox Andrew J. Horowitz Obermayer Rebmann Maxwell & Hippel Counsel for Appellant

          Rachel E.A. Atterberry David S. Becker [ARGUED] Jennifer L. Fitzgerald Tina C. Wills Freeborn & Peters Robert B. Cottington Cohen & Grigsby Counsel for Appellee

          Neal D. Mollen [ARGUED] Paul Hastings Counsel for Amicus Appellee Chamber of Commerce of the United States of America

          Michael P. Bracken NT Lakis Counsel for Amicus Appellee Equal Employment Advisory Council

          Anne N. Occhialino [ARGUED] Equal Employment Opportunity Commission Counsel for Amicus Appellant Equal Employment Opportunity Commission

          Before: SMITH, Chief Judge, McKEE, and RESTREPO, Circuit Judges


          SMITH, Chief Judge.

         The Age Discrimination in Employment Act ("ADEA") protects only those individuals who are at least forty years of age. The question in this case is whether a disparate-impact claim is cognizable where a "subgroup" of employees at the upper end of that range-in this case, employees aged fifty and older- were alleged to have been disfavored relative to younger employees.

         We answer in the affirmative. Our decision is dictated by the plain text of the statute as interpreted by the Supreme Court. In particular, the ADEA prohibits disparate impacts based on age, not forty-and-older identity. A rule that disallowed subgroups would ignore genuine statistical disparities that could otherwise be actionable through application of the plain text of the statute. Although several of our sister circuits have ruled to the contrary, their reasoning relies primarily on policy arguments that we do not find persuasive.

         We will therefore reverse the judgment of the District Court based on its interpretation of the ADEA. We will also vacate the District Court's order excluding the testimony of plaintiffs' statistics expert and remand for further Daubert proceedings. We will affirm in all other respects.


         Defendant Pittsburgh Glass Works, LLC ("PGW") manufactures automotive glass in Harmarville, Pennsylvania. PGW also owns (1) GTS Services, a software business, (2) PGW Auto Glass, an automotive replacement-glass distribution business, (3) LYNX Services, an insurance claims administrator, and (4) Aquapel, a glass treatment supplier.

         In 2008, the automobile industry began to falter. PGW engaged in several reductions in force ("RIFs") to offset deteriorating sales. The RIF of relevance to this case occurred on March 31, 2009, and terminated the employment of approximately one hundred salaried employees in over forty locations or divisions. Individual unit directors had broad discretion in selecting whom to terminate. PGW did not train those directors in how to implement the RIF. Nor did PGW employ any written guidelines or policies, conduct any disparate-impact analysis, review prospective RIF terminees with counsel, or document why any particular employee was selected for inclusion in the RIF.

         Plaintiffs Rudolph A. Karlo, William S. Cunningham, Jeffrey Marietti, David Meixelberger, Mark K. McLure, Benjamin D. Thompson, and Richard Csukas[1] worked in PGW's Manufacturing Technology division. They were terminated as part of the March 2009 RIF by their supervisor, Gary Cannon. Each was over fifty years old at the time.

         In January 2010, plaintiffs filed charges of employment discrimination with the Equal Employment Opportunity Commission ("EEOC"). Thereafter, they received a Dismissal and Notice of Rights from the EEOC, and this lawsuit followed. Plaintiffs brought a putative ADEA collective action, asserting three claims: (1) disparate treatment, (2) disparate impact, and (3) retaliation as to only Karlo and McLure.

         On plaintiffs' motion for conditional certification, the District Court ruled that ADEA subgroups are cognizable, and conditionally certified a collective action to be comprised of employees terminated by the RIF who were at least fifty years old at the time. See Karlo v. Pittsburgh Glass Works, LLC, 880 F.Supp.2d 629 (W.D. Pa. 2012). In addition to the named plaintiffs, eleven individuals opted in. Three voluntarily dismissed their claims and four settled. Four opt-ins remained: Michael Breen, a former production supervisor at a plant in Crestline, Ohio; Matthew Clawson, a former Project Engineer in Evansville, Indiana; Stephen Shaw, a former marketing manager in Pittsburgh, Pennsylvania; and John Titus, a former Area Services Manager in Irving, Texas.

         On June 26, 2013, the case was transferred to another district judge. PGW filed a motion to decertify the collective action. On March 31, 2014, the District Court granted the motion, concluding that the collective action should be decertified because the opt-in plaintiffs' claims are factually dissimilar from those of the named plaintiffs. See Karlo, 2014 WL 1317595.

         PGW then filed motions to exclude plaintiffs' experts. Of relevance to this appeal, PGW sought to exclude three areas of expert testimony. First, Dr. Michael Campion was prepared to offer statistical evidence in favor of plaintiffs' disparate-impact claim. Second, Dr. Campion intended to offer his expert opinion on "reasonable" human-resources practices during a RIF. And third, Dr. Anthony G. Greenwald proposed to testify as to age-related implicit-bias studies. By Order dated July 13, 2015, the District Court excluded the testimony of each. See Karlo, 2015 WL 4232600.

         PGW moved for summary judgment on each claim. On September 3, 2015, the District Court ruled on the motions, granting them in part and denying them in part. See Karlo, 2015 WL 5156913. As to plaintiffs' disparate-impact claims, the District Court granted summary judgment on two grounds: (1) plaintiffs' fifty-and-older disparate-impact claim is not cognizable under the ADEA; and (2) plaintiffs' lack of evidence to support their claim of disparate impact following the exclusion of Dr. Campion's statistics-related testimony. The District Court also granted summary judgment as to plaintiffs' disparate-treatment claims. That ruling has not been appealed. Finally, the District Court denied summary judgment as to Karlo's and McLure's individual retaliation claims.

         On October 2, 2015, the District Court certified the disparate-impact and disparate-treatment claims for final judgment pursuant to Rule 54(b) of the Federal Rules of Civil Procedure. See Karlo, 2015 WL 5782062. This appeal followed. Plaintiffs seek reversal of the District Court's summary judgment decision and statistics-related Daubert ruling regarding their disparate-impact claims. Plaintiffs also appeal the District Court's other Daubert rulings and its order decertifying the collective action.


         The District Court had jurisdiction pursuant to 28 U.S.C. § 1331. We have jurisdiction pursuant to 28 U.S.C. § 1291.

         The parties dispute whether our jurisdiction extends to one or all named plaintiffs. PGW concedes that Karlo perfected an appeal, but argues that the other remaining named plaintiffs-Cunningham, Marietti, and Meixelberger-were not identified in the Notice of Appeal, and therefore did not preserve their appellate rights under Rule 3(c) of the Federal Rules of Appellate Procedure. See Torres v. Oakland Scavenger Co., 487 U.S. 312, 317 (1988).[2] We conclude that plaintiffs complied with Rule 3(c) with respect to all named plaintiffs.

         Rule 3(c)(1)(A) requires a notice of appeal to "specify the party or parties taking the appeal by naming each one in the caption or body of the notice, " but that rule is relaxed where "an attorney [is] representing more than one party." Fed. R. App. P. 3(c)(1)(A). The attorney "may describe those parties with such terms as 'all plaintiffs, ' 'the defendants, ' 'the plaintiffs A, B, et al., ' or 'all defendants except X.'" Id.

         The Notice of Appeal here states, "Plaintiffs in the above-captioned case hereby appeal . . . an order . . . entering judgment against Plaintiffs . . . on Plaintiffs' discrimination claims . . . ." A.1 (emphases added). The use of "Plaintiffs" is equivalent to "the defendants" in the example provided by the Rule.[3] We have observed that "[t]he purpose of Rule 3(c)'s identification requirement is to provide notice to the court and the opposing parties of the identity of the appellants." In re Cont'l Airlines, 125 F.3d 120, 129 (3d Cir. 1997). Because all of the remaining named plaintiffs were identically situated as to this appeal, were represented by the same counsel, and were each identified by name in the District Court's "order . . . entering judgment against [all named] Plaintiffs, " as referenced on the face of the Notice, Rule 3(c)'s purpose is amply served, and "the intent to appeal is otherwise clear from the notice." Fed. R. App. P. 3(c)(4); see United States v. Carelock, 459 F.3d 437, 441 (3d Cir. 2006) ("The Supreme Court has stated that courts should 'liberally construe the requirements of Rule 3.'" (quoting Smith v. Barry, 502 U.S. 244, 248 (1992))).


         The central question in this case is whether so-called "subgroup" disparate-impact claims are cognizable under the ADEA. We hold that they are.

         Disparate-impact claims in ADEA cases ordinarily evaluate the effect of a facially neutral policy on all employees who are at least forty years old-that is, all employees covered by the ADEA. In this case, plaintiffs claim to have identified a policy that disproportionately impacted a subgroup of that population: employees older than fifty. But because the policy favored younger members of the protected class, adding those individuals to the comparison group washes out the statistical evidence of a disparity.

         Plaintiffs' claim is cognizable under the ADEA. Specifically, we hold that an ADEA disparate-impact claim may proceed when a plaintiff offers evidence that a specific, facially neutral employment practice caused a significantly disproportionate adverse impact based on age. Plaintiffs can demonstrate such impact with various forms of evidence, including forty-and-older comparisons, subgroup comparisons, or more sophisticated statistical modeling, so long as that evidence meets the usual standards for admissibility. A contrary rule would ignore significant age-based disparities. Where such disparities exist, they must be justified pursuant to the ADEA's relatively broad defenses.


         We begin with an overview of the statutory scheme. The Age Discrimination in Employment Act of 1967, 81 Stat. 602, as amended, 29 U.S.C. § 621 et seq., makes it unlawful for an employer:

(1) to fail or refuse to hire or to discharge any individual or otherwise discriminate against any individual with respect to his compensation, terms, conditions, or privileges of employment, because of such individual's age;
(2) to limit, segregate, or classify his employees in any way which would deprive or tend to deprive any individual of employment opportunities or otherwise adversely affect his status as an employee, because of such individual's age; or
(3) to reduce the wage rate of any employee in order to comply with this chapter.

29 U.S.C. § 623(a). "Except for substitution of the word 'age, ' for the words 'race, color, religion, sex, or national origin, ' the language of that provision in the ADEA is identical to that found in § 703(a)(2) of the Civil Rights Act of 1964 (Title VII)." Smith v. City of Jackson, 544 U.S. 228, 233 (2005). But unlike Title VII, which protects individuals of every race, color, religion, sex, and national origin, the ADEA's protection is "limited to individuals who are at least 40 years of age." 29 U.S.C. § 631(a).

         ADEA claims may proceed under a disparate-impact or disparate-treatment theory. See Smith, 544 U.S. at 231-32. Disparate treatment is governed by § 623(a)(1); disparate impact is governed by § 623(a)(2). Id. at 235 (plurality opinion); cf. Watson v. Fort Worth Bank & Trust, 487 U.S. 977, 991 (1988); Connecticut v. Teal, 457 U.S. 440, 446-47 (1982).

         The disparate-impact theory of recovery was first recognized in Griggs v. Duke Power Co., 401 U.S. 424 (1971), a Title VII case. Unlike claims of disparate treatment, disparate-impact claims do not require proof of discriminatory intent. Disparate impact redresses policies that are "fair in form, but discriminatory in operation." Id. at 431. To that end, disparate-impact claims "usually focus[] on statistical disparities . . . ." Watson, 487 U.S. at 987.

         To state a prima facie case for disparate impact under the ADEA, a plaintiff must (1) identify a specific, facially neutral policy, and (2) proffer statistical evidence that the policy caused a significant age-based disparity. Cf. NAACP v. N. Hudson Reg'l Fire & Rescue, 665 F.3d 464, 476-77 (3d Cir. 2011). Once a plaintiff establishes a prima facie case, an employer can defend by arguing that the challenged practice was based on "reasonable factors other than age"-commonly referred to as the "RFOA" defense. 29 U.S.C. § 623(f)(1); 29 C.F.R. § 1625.7.

         "[T]he scope of disparate-impact liability under the ADEA is narrower than under Title VII" because of "[t]wo textual differences" between the statutes. Smith, 544 U.S. at 240. First, the RFOA defense imposes a lighter burden on the employer than its Title VII counterpart, the "business necessity" defense. Under the ADEA, the employer only needs to show that it relied on a "reasonable" factor, not that "there are [no] other ways for the employer to achieve its goals . . . ." Smith, 544 U.S. at 243. Congress's decision to impose a relatively light burden on employers "is consistent with the fact that age, unlike race or other classifications protected by Title VII, not uncommonly has relevance to an individual's capacity to engage in certain types of employment." Id. at 240. The second textual difference requires ADEA plaintiffs to "isolat[e] and identify[] the specific employment practices that are allegedly responsible for any observed statistical disparities." Id. at 241 (quoting Wards Cove Packing Co. v. Atonio, 490 U.S. 642, 656 (1989)). Congress stripped that requirement from Title VII when it amended the statute in 1991, but it remains operative under the ADEA. Id. at 240; see 42 U.S.C. § 2000e-2(k).


         The ADEA's disparate-impact provision makes it unlawful for an employer "to adversely affect [an employee's] status . . . because of such individual's age." 29 U.S.C. § 623(a)(2). This plain text supports the viability of subgroup claims. See Hardt v. Reliance Standard Life Ins. Co., 560 U.S. 242, 251 (2010) ("We must enforce plain and unambiguous statutory language according to its terms."). Two aspects of the text guide our decision in this case: (1) the focus on age as the relevant protected trait, as interpreted by O'Connor v. Consolidated Coin Caterers Corp., 517 U.S. 308 (1996), and (2) the focus on the rights of individuals, as interpreted by Connecticut v. Teal, 457 U.S. 440 (1982). Our interpretation is further supported by the ADEA's remedial purpose.


         We begin with the Supreme Court's unanimous opinion in O'Connor v. Consolidated Coin Caterers Corp., 517 U.S. 308 (1996), an ADEA disparate-treatment case. O'Connor clarified that the ADEA proscribes age discrimination, not forty-and-over discrimination. The same interpretation applies to identical operative language in the ADEA's disparate-impact provision.

         The plaintiff in O'Connor was fifty-six years old when he was fired and replaced with a younger worker. 517 U.S. at 309. The plaintiff's replacement, however, was over the age of forty, and therefore within the class of individuals protected by the ADEA. Id. The Fourth Circuit held that the ADEA prima facie case requires the replacement to be younger than forty years old. Id. at 310. The Supreme Court reversed.

         The Supreme Court began its analysis with the plain text of the statute: "The discrimination prohibited by the ADEA is discrimination 'because of [an] individual's age, ' though the prohibition is 'limited to individuals who are at least 40 years of age.'" 517 U.S. at 312 (alteration in original) (citations omitted). On the basis of that text, the Court held that the ADEA

does not ban discrimination against employees because they are aged 40 or older; it bans discrimination against employees because of their age, but limits the protected class to those who are 40 or older. The fact that one person in the protected class has lost out to another person in the protected class is thus irrelevant, so long as he has lost out because of his age.

Id. Although the ADEA protects a class of individuals at least forty years old, it "prohibits discrimination on the basis of age and not class membership . . . ." Id. at 313. It is therefore "utterly irrelevant" that the beneficiary of age discrimination was also over the age of forty. Id. at 312. Accordingly, the proposed limitation on the prima facie case-replacement by an employee younger than forty- lacked a "logical connection" to the plain text of the ADEA. Id. at 311-12. As the Supreme Court later reaffirmed, "[it] is beyond reasonable doubt[] that the ADEA was concerned to protect a relatively old worker from discrimination that works to the advantage of the relatively young." Gen. Dynamics Land Sys., Inc. v. Cline, 540 U.S. 581, 590-91 (2004).

         The Supreme Court's reasoning ineluctably leads to our conclusion that subgroup claims are cognizable. Simply put, evidence that a policy disfavors employees older than fifty is probative of the relevant statutory question: whether the policy creates a disparate impact "because of such individual[s'] age." 29 U.S.C. § 623(a)(2). Requiring the comparison group to include employees in their forties has no "logical connection" to that prohibition. O'Connor, 517 U.S. at 311.

         The key insight from O'Connor is that the forty-and-older line drawn by § 631(a) constrains the ADEA's general scope; it does not modify or define the ADEA's substantive prohibition against "discriminat[ion] . . . because of such individual's age." § 623(a)(1). The ADEA protects against "age discrimination []as opposed to ...

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