Rehearing and Rehearing En Banc Denied February 11, 1978.
GOLDBERG, Circuit Judge:
This complex class action employment discrimination suit, now before us for the fourth time, illustrates the difficulties inherent in judicial efforts to remedy violations of Title VII of the Civil Rights Act of 1964, 42 U.S.C. § 2000e et seq., by undoing the effects of past racial discrimination in employment. Complaints alleging racial discrimination in employment were first filed with the Equal Employment Opportunity Commission on November 22, 1965.
The complaint was dismissed by the district court on March 10, 1967 on the ground that the EEOC had failed to attempt conciliation prior to initiation of the court action. On appeal with several other actions, we reversed. Dent v. St. Louis-San Francisco Railway Co., 406 F.2d 399 (5th Cir. 1969). During the pendency of that first appeal, the defendant, American Cast Iron Pipe Company (hereinafter "ACIPCO") discharged one of the named plaintiffs. That plaintiff then sought and was denied relief in the district court. We again reversed, directing reinstatement and back pay. Pettway and Wrenn v. American Cast Iron Pipe Co., 411 F.2d 998 (5th Cir. 1969).
The district court then addressed itself to the plaintiffs' substantive charges. In 1970 the court examined the racial composition of the Board of Operatives, an advisory board composed of non-supervisory personnel elected by employees of the company. In 1922 the founder of ACIPCO, John J. Eagan, had bequeathed all the outstanding common stock of the company to the members of Board of Operatives and the Board of Management, a body composed of corporate officials elected by the Board of Directors to conduct the day to day business of the company, and their successors in office. The Boards acted as trustees for the benefit of the present and future employees of the company. From 1922 until January, 1970 the membership of the Board of Operatives was explicitly limited to "white" employees. Blacks were relegated to the Auxiliary Board, which was created to advise the other two boards on matters affecting the interests of black employees. Pettway v. American Cast Iron Pipe Co., 494 F.2d 211 (5th Cir. 1974). In 1970 the district court ordered the integration of the
The employee discrimination charges were tried in October 1971. The district court found that certain testing conducted by the company had an adverse impact on the employment opportunities of black employees and did not pass muster under Griggs v. Duke Power Co., 401 U.S. 424, 91 S.Ct. 849, 28 L.Ed.2d 158 (1971). Nevertheless, the court denied all requested relief except attorneys' fees and costs. On appeal, we again reversed the district court, and to guide the court on remand, we examined the governing law in a lengthy and detailed opinion. We instructed the court to order back pay to compensate class members for wages lost due to past discrimination and to formulate injunctive relief particularized to the circumstances of the case but as broad in scope as necessary to ensure black employees the opportunity to reach positions in the company previously denied to them by discriminatory practices. Pettway v. American Cast Iron Pipe Co., 494 F.2d 211 (5th Cir. 1974) (hereinafter cited as "Pettway III").
On remand the district court encouraged the litigants to engage in settlement negotiations directed toward the fashioning of a decree to carry out the mandate of Pettway III. The district judge played an active role in the extensive negotiations which followed. It remains unclear precisely what was resolved during these negotiations. In any event, on May 14, 1975 the court, over the plaintiffs' objections, issued a decree ordering injunctive relief and back pay. On June 12, 1975, after further negotiations concentrating primarily on the issue of back pay, the court issued its final judgment awarding one million dollars to a subclass composed of 841 members (the "back pay subclass")
On June 13, 1975 the active named plaintiffs
494 F.2d at 216 (footnote omitted). As is now evident, the fallout continues to radiate, and our earlier optimism regarding the disposition of this case has mutated to less hopeful emotions. Nonetheless, we are undaunted by the crushing weight of accumulated record and remain mindful that the Court must not diverge from the direction chartered for us by the Title VII compass, no matter how long and difficult the journey. We, thus, address ourselves to the fourth appearance of this case, determined to ensure that the victims of illegal racial discrimination receive the full measure of relief which the law accords them.
Our burden is eased considerably by the thorough and scholarly opinion written by Judge Tuttle in the prior appeal. Except where subsequent cases further elucidate our prior holding or provide necessary qualifications, we have been able to adopt the factual and legal conclusions reached in Pettway III without the need for an extensive review of previously considered authorities. Even so, our task will require an opinion of a magnitude similar to Judge Tuttle's opus.
This case presents a multitude of issues. On the one hand, we are asked to address fundamental questions at the heart of class action jurisprudence, such as the appealability of class action judgments by dissatisfied class members, the standards for settlement approval in the face of widespread dissent from the class, and the choice of the appropriate decision-maker to act on behalf of the class. We are also asked to resolve highly technical questions concerning specific affirmative modifications of present plant operating practices. Appellants' primary contentions on appeal are that the injunctive relieve portions of the judgment below are inadequate to effectuate our mandate in Pettway III, that the district court erred in denying back pay to over 1400 class members, and that the back pay settlement on behalf of the subclass was inadequate and improperly approved by the court. Before reaching these issues, however, we must consider defendant's contention that appellants lack "standing" to appeal the district court's decree. Because our analysis of both appealability and the substantive issues depends in part on whether the decree should be considered a settlement or the court's own judgment, a question upon which there is vehement disagreement, we turn first to an examination of the proceedings below which culminated in the district court's November 20, 1975 final order.
I. Settlement or the Court's Own Judgment—Entering the Twilight Zone
The role of an appellate court in reviewing a decree in a class action suit varies greatly depending on whether the decree was reached through a settlement by the litigants or whether the decree represents the judgment of the court. Compare Cotton v. Hinton, 559 F.2d 1326, 1330-31 (5th Cir. 1977) (settlement); Flinn v. FMC Corp., 528 F.2d 1169 (4th Cir. 1975), cert. denied, 424 U.S. 967, 96 S.Ct. 1462, 47 L.Ed.2d 734 (1976) (settlement); United States v. Allegheny-Ludlum Industries,
Different problems are posed by class action settlements. Lacking a fully developed evidentiary record, both the trial court and the appellate court would be incapable of making the independent assessment of the facts and law required in the adjudicatory context. Moreover, a definitive judicial determination of the facts and law would be inappropriate because compromise of legal rights is intrinsic to the settlement process. Because of the limited control exercised by any particular class member over the decision to engage in these compromises, however, the settlement process is more susceptible than adversarial adjudications to certain types of abuse. The interests of lawyer and class may diverge, as may the interest of different members of the class, and certain interests may be wrongfully compromised, betrayed, or "sold out" without drawing the attention of the court. For this reason, in addition to requiring that the trial court evaluate whether a class action settlement is "fair, adequate and reasonable and is not the product of collusion between the parties", Cotton v. Hinton, supra, 559 F.2d at 1330, the law accords special protections, primarily procedural in nature, to individual class members whose interests may be compromised in the settlement process. These protections include notice, ensuring that class members know when their rights are being compromised, and an opportunity to voice objections to the settlement.
We recognize that this neat dichotomy is in some respects over-simple. In the class action context, some of the abuses generally associated with settlements may insinuate themselves into litigation resulting in the court's own judgment. For example, in framing litigation strategy in a complex suit the class attorney and named plaintiffs might concentrate on relief for certain members of the class while ignoring the interests of others. Nevertheless, because the potential for abuse is much greater when class actions are resolved through a settlement, the procedural protections applicable to settlements are not utilized in the judgment context.
Appellants maintain that both the injunctive relief and back pay awards resulted from a settlement between ACIPCO and Mr. Adams, the original class attorney. If this characterization is accepted, appellants could then argue that the procedures prerequisite to acceptance of the settlement by the district court were not followed below and that the district court therefore abused its discretion in approving the consent decree.
The defendant, on the other hand, argues that the entire order of the district court constitutes the court's own judgment, in which event appellants were not entitled to the procedural safeguards prerequisite to judicial acceptance of a class action settlement. The court's order then could be reversed only if the district court applied an improper legal standard or misapplied the correct standards.
Our careful examination of the record reveals that the district court's order is not susceptible to easy or uniform characterization. Settlements and court judgments are distinguished not by different platonic essences, but by the processes of their creation. Thus in order to resolve the dilemma posed by the litigants, it is necessary to consider the process by which the district court reached its final order of November 20, 1975.
A. Brief History
Following remand from this court's decision in Pettway III, the district judge met with counsel in chambers on July 11, 1974 and directed the parties to fashion an appropriate decree. On August 19, 1974 the defendant submitted to both Mr. Adams and the court a proposed decree covering both back pay and injunctive relief. The plaintiffs filed objections to the proposed injunctive order and submitted a counter-proposal for back pay. After negotiations between the parties, the defendant filed a revised proposal, including an augmented back pay offer of $560,000 to the back pay subclass. The plaintiffs did not accept either the proffered injunctive relief or back pay settlement offer. Further negotiations failed to resolve this impasse, and on May 14, 1975 the court entered its May decree. This decree substantially adopted defendant's revised proposal as to injunctive relief but, in an apparent attempt to satisfy the plaintiffs' objections to the back pay award, ordered the company to utilize a modified method of calculation to compute the award for the back pay subclass.
The court's final order and modified judgment of November 20, 1975 essentially restated the provisions of the June 12 judgment with the addition of findings of fact and conclusions of law. The November 20 final order also provided dissenting subclass members with the opportunity to opt-out of the back pay award. See footnote 2 supra.
B. Injunctive Relief
Our review of the record and this procedural history compels the conclusion that the injunctive relief provisions of the decree constituted the court's own judgment. The district judge indicated his own view concerning the proper characterization of this portion of the decree during a hearing held on October 30, 1975.
The record fully supports this characterization by Judge Lynne. Mr. Adams repeatedly objected to the injunctive relief provisions of the order and at no time consented to defendant's proposed decree on injunctive relief. Nor did the district court modify any of the injunctive provisions in response to plaintiffs' objections. See footnote 8 supra. Appellants and the EEOC argue that Mr. Adams concentrated on back pay in his negotiations with the company and that as a practical matter the injunctive provisions were based on compromise and settlement. We find nothing in the record that supports this conclusion. Moreover, it can hardly be inferred from the fact that Mr. Adams concentrated on back pay during the negotiations that he consented to the injunctive relief provisions.
Our conclusion is not changed by anything found in a stipulation entered into by Mr. Adams and counsel for the defendant.
C. Defining the Back Pay Subclass
The district court's May 14 decree excluded all blacks hired by ACIPCO subsequent to July 2, 1965 from the back pay subclass. As a result, 1400 of the 2241 employees in the class were precluded from receiving any award of back pay. See note 3 supra. Despite repeated objections by Mr. Adams to the exclusion of class members from the back pay subclass, the court refused to reconsider its decision. We find no suggestion in the record that Mr. Adams ever agreed to the exclusion of 1400 class members from a share of the back pay award. In the November 20 final order, the court acknowledged that the definition of the subclass was the court's own judgment:
We therefore conclude that the exclusion of 1400 class members from the back pay subclass was the court's own judgment and not part of any settlement by the litigants.
D. The Amount of the Back Pay Award
The district court's final order of November 20, 1975 provided for the distribution of $1,000,000 to the members of the back pay subclass. If the injunctive relief and subclass determinations resisted facile classification, the manner in which the back pay determination was made defies virtually any traditional characterization. Typically, class action settlements are reached by the parties, who draft a consent decree which is submitted to the trial judge for approval. The court's role is generally limited to mediating disputes and offering suggestions. Indeed, we have recently stated that while the court in reviewing a settlement may make suggestions for modifications of the proposed decree, it may not unilaterally change the decree. Approval of the parties' settlement must be either given or withheld. See Cotton v. Hinton, supra, 559 F.2d at 1331. See also Flinn v. FMC Corp., supra, 528 F.2d at 1173-74.
The events leading to the final back pay award in this case do not conform to this model. An examination limited to the court's May decree and June judgment might suggest that the award was the court's own judgment. While changes in the back pay formula resulting in increases in the total amount of the award were made in response to plaintiffs' objections to both the defendants' back pay offer and the courts' May decree, it was the trial judge, rather than the defendant, who determined the amount of the June award. As the court stated in its June judgment when
Thus it is clear that the court did not merely accept or reject a proposed settlement.
Nonetheless, the record reveals that the size of the back pay award was determined in a process of negotiation and that the final award was determined with the consent of plaintiffs counsel. The impression that the back pay award was the court's own judgment results in part because there exists no record of the numerous conferences held between the parties and Judge Lynne on the back pay issue. Judge Lynne's own pronouncements on the question reveal that the final $1,000,000 back pay figure in the November order was arrived at through some sort of agreement by the parties. For example, at the September 5 hearing on substitution of counsel Judge Lynne stated:
At the October 30 hearing, which was held for the purpose of receiving evidence on the process by which the May and June judgments were formulated, the court reiterated this view. After stating that injunctive relief constituted the court's own judgment, Judge Lynne noted:
Finally, the district judge in his November 20 final order concluded that "the individual back pay awards were arrived at through negotiations between the parties at the urging of the Court and are in the nature of a consent settlement . . .." (A 417) (emphasis supplied).
We are thus faced with a situation in which the events leading to the back pay award do not coincide with the paradigmatic class action settlement, yet plaintiffs' counsel did in fact agree to the amount of the final award. In this context it is virtually impossible to distinguish meaningfully between a process in which each party finally acceded to a figure chosen by the trial
In these circumstances, the trial court's characterization of its back pay decree as "in the nature of" a consent settlement marks the extent of the progress we can achieve in our definitional inquiry with any sense of confidence. Recognizing the hybrid nature of the decree, we find it necessary to abandon any further attempt to pigeonhole or classify it, and look instead to the functional considerations underlying the distinctive treatment of settlements and judgments. Under this functional approach, the question becomes whether this decree is more appropriately treated, for purposes of judicial review, as a settlement, requiring certain procedural protections for members of the class, or as the court's own judgment, in which case our evaluation must focus not on the procedural protections, but on the factual and legal bases for the award. We look for guidance to those factors counselling in favor of procedural protections for class members in traditional settlements and counselling against a paradigmatic judgment.
Examining the decree in the context of this appeal by members of the back pay subclass, it becomes clear that we must treat Judge Lynne's order as a consent decree. First, we note that each of Judge Lynne's orders represented an attempt to satisfy specific objections advanced by Mr. Adams with respect to prior formulations for determining the size of the back pay award. The trial judge, in essence, was negotiating with the class. These negotiations culminated, prior to the June 12 judgment, in Mr. Adams' consent to the $1,000,000 proposal. At least from the viewpoint of the class, the decree was in fact reached by agreement. Such an agreement, which perhaps embodied compromises of class rights, calls for the procedural protections normally associated with class action settlements. To allow a class attorney to compromise the rights of class members without providing these protections would be inconsistent with the policies of Rule 23(e).
Equally important, the statements of the trial judge quoted above reveal that Judge Lynne viewed the order as a consent decree reached through a process of negotiation. The record does not indicate that the final back pay award resulted from the district court's own valuation of the economic loss to the back pay subclass resulting from the defendants' discriminatory practices as measured by the standards set out in Pettway III. To the contrary, Judge Lynne's own pronouncements demonstrate that the award was viewed by the court as a compromise between the parties.
In sum, we have determined that the injunctive relief portions of the decree and the denial of back pay to class members employed subsequent to July 2, 1965 must be considered as the court's own judgment. The back pay award to the subclass shall be treated as a consent settlement.
The company argues vigorously that appellants are procedurally disqualified from raising each of their points of error on this appeal. First, ACIPCO alleges that Mr. Wiggins has never been certified as class counsel and thus may not appeal on behalf of the class the injunctive portions of the decree or the decision to exclude 1400 class members from the subclass. The company also alleges that each of the individual appellants either lacks standing to challenge the back pay settlement on appeal or has yet to receive an appealable final judgment as to back pay. Before addressing these contentions, however, it is necessary to outline briefly the chronology of events leading to this appeal.
On June 13, 1975, the day after the court entered its June judgment, the three active named class representatives and at least twenty-eight of the thirty elected representatives of the Committee for Equal Job Opportunity
B. Injunctive Relief and Exclusion from the Back Pay Subclass
We consider first the appealability of the district court's judgment as to both injunctive
We are not aware of any cases in which the named class representatives and a large portion of the class desired to prosecute an appeal of a district court's judgment, yet the class attorney refused to do so. The issue before us is thus one of first impression, raising difficult and perplexing questions regarding the appropriate decision-maker on behalf of the class. While the "class" itself clearly has standing to appeal a judgment of the district court, see, e. g., Pettway III, supra; James v. Stockham Valves & Fittings Co., 559 F.2d 310 (5th Cir. 1977), it is far from clear who may make the final determination of whether the "class" should appeal when the desirability of an appeal is at issue. In the instant case the class attorney, Mr. Adams, concluded that an appeal would not be in the best interests of the class. Mr. Adams stated on the record that he believed the decree to be a fair one and that an appeal would only delay implementation of the rights already obtained by the plaintiffs. On the other hand, the three active class representatives, the Committee for Equal Job Opportunity, and a sizable portion of the class itself believed that the decree did not adequately vindicate the interests of the class and that an appeal was warranted.
In the context of individual-plaintiff litigation the roles of the attorney and the client are well defined. The A.B.A. Code of Professional Responsibility envisions the attorney as an advocate of the interests of the client. American Bar Ass'n, Code of Professional Responsibility, EC 7-1 [hereinafter cited as ABA Code]. Although the lawyer has some freedom to make tactical choices during litigation without consulting his client, the lawyer is expected to defer to the client's wishes on major litigation decisions. See ABA Code EC 7-1, EC 7-7, EC 7-9. Unfortunately, it remains unclear whether this model can be carried over to the class action context, as no clear concept of the allocation of decision-making responsibility between the attorney and the class members has yet emerged. See generally Developments in the Law—Class Actions, 89 Harv.L.Rev. 1318, 1578 (1976). Certainly it is inappropriate to import the traditional understanding of the attorney-client relationship into the class action context by simply substituting the named plaintiffs as the client. The interests of the named plaintiffs and those of other class members may diverge, and a core requirement for preventing abuse of the class action device is some means of ensuring that the interests and rights of each class member receive consideration by the court. Were the class attorney to treat the named plaintiff as the exclusive client, the interests of other class members might go unnoticed and unrepresented. See Gonzales v. Cassidy, 474 F.2d 67, 69-71, 76 (5th Cir. 1973); Developments in the Law, Class Actions, 89 Harv.L.Rev. 1318, 1592-95 (1976). Thus, when a potential conflict arises between the named plaintiffs and the rest of the class, the class attorney must not allow decisions on behalf of the class to rest exclusively with the named plaintiffs. In such a situation, the attorney's duty to the class requires him to point out conflicts to the court so that the court may take appropriate steps to protect the interests of absentee class members.
456 F.2d at 900-01. The same considerations may cause a class attorney who has been awarded a substantial fee by the court to conclude that an appeal of the court's judgment might result in personally unremunerative litigation or a substantial and undesirable delay in the receipt of the fee award. When the possibility that counsel's own fervor may have been exhausted by an apparently endless legal battle is added to the equation, the potential conflict between the interests of the class and those of its attorney in an appeal cannot be ignored.
It is, therefore, clear that the decision to appeal cannot rest entirely with either the named plaintiffs or with class counsel. Nonetheless, the Rule 23(a)(4) requirement that the trial court determine whether "the representative parties will fairly and adequately protect the interests of the class" contemplates that the named plaintiffs will undertake a major role in the prosecution of a class action. The requirement also provides an important guarantee of a coincidence of interest between the named plaintiffs and the class.
We considered the scope of Rule 23(a)(4) and the proper role of the class representatives in deciding whether to appeal from a class action judgment in Gonzales v. Cassidy, 474 F.2d 67 (5th Cir. 1973). Gonzales was a class member in a prior class action in which only the class representative, Gaytan, was awarded both retrospective monetary relief and prospective injunctive relief. The other members of the class, including Gonzales, were granted only prospective relief. No appeal was taken. Gonzales subsequently brought a second class action raising identical issues against the same defendant, who sought to raise res judicata as a bar to relief. We rejected the defendant's res judicata defense, finding that Gaytan's failure to appeal the earlier judgment constituted inadequate representation of the class. We stressed throughout the Gonzales opinion that it was the class representative's duty to appeal the lower court's judgment and thus it was the class representative who inadequately represented the class. Implicit in our discussion and holding in Gonzales was the conviction that, at least under the circumstances of that case, the class plaintiff and not the class attorney, was responsible for deciding whether to appeal.
The foregoing considerations convince us that, at least as an initial matter, the decision to appeal a class action judgment must rest with the class plaintiffs.
Applying these principles to the instant case, we conclude that the class representatives should have been allowed to prosecute this appeal on behalf of the class. The trial court abused its discretion in denying appellants' motion to substitute class counsel for purposes of appealing the court's judgment.
First, we note that the class representatives have provided excellent representation on behalf of the class during the ten years of this litigation. The named plaintiffs, through the representative Committee for Equal Job Opportunity, have held monthly meetings and distributed news letters to keep the class informed of the progress of the case. There is undisputed testimony in the record that at an early stage of the settlement negotiations, the named plaintiffs rejected offers of special back pay compensation to the most active class members, themselves included, and demanded equal consideration for all members of the class. (A 1163-65). Throughout the entire course of this litigation, including the post-judgment period, not a single class member has objected to the representation provided by the named plaintiffs. Nor has any class member objected to the prosecution of this appeal. The only potential conflict between the interests of the class representatives and those of other class members arose when all three class representatives were awarded relatively sizeable shares of the back pay award, while many class members received no back pay. This potential conflict disappeared, however, when all three active named plaintiffs rejected their back pay award and chose to prosecute this appeal.
We also find noteworthy the extent to which individual class members have demonstrated their interest in, and support for, this appeal. We reiterate that the sentiment of the class is but one factor in our analysis of the appealability question. Insofar as relevant, this is a factual question for which we necessarily must draw inferences from the sparse information contained in the record. Nonetheless, we find that the record clearly indicates a deep-seated and widespread dissatisfaction with the injunctive provisions of the decree. Among the 841 members of the subclass awarded back pay, 511 signed the June 20, 1975 objections to the decree and notice of intent to appeal. These objections focused on the injunctive portions of the decree in
Furthermore, there can be no doubt that an appeal from the denial of back pay is in the best interests of the 1400 class members who were excluded from the subclass. Gonzales v. Cassidy, supra, compels the conclusion that the class plaintiffs, in order to satisfy their duty to adequately represent the class, must appeal this portion of the court's order. As we noted in Gonzales:
474 F.2d at 76 (emphasis supplied). Likewise, the class members excluded from the subclass were denied any back pay relief to compensate for past discrimination by the company. As our discussion in section IV infra reveals, an appeal from this decision could hardly be characterized as patently meritless or frivolous.
Finally, we note that an appeal on the issue of injunctive relief can hardly be deemed frivolous. The trial judge was well aware of the complexity of the legal and factual issues involved and the prior history of this litigation.
In conclusion, we hold that under the circumstances of this case the trial judge abused his discretion by not granting appellants' motion to substitute class counsel for purposes of appealing the court's judgment. The decision to appeal rested as an initial matter with the named plaintiffs. These representatives chose to appeal, and an analysis of the factors considered above demonstrates that their choice should have been honored. The named plaintiffs have provided excellent representation in the past, and there is no indication in the record that their decision to appeal was based on any considerations other than the interests of the class. The decision received widespread support among the class. With regard to those who were denied back pay, there can be no doubt that an appeal is necessary to effectuate their legal rights. While we do not question the sincerity of Mr. Adams' belief that an appeal of the injunctive decree is not in the class' interest, nothing in the record convinces us that the named plaintiffs' conclusion on this question was unreasonable. See section III infra. Finally, the issues raised on appeal are neither frivolous nor insubstantial. We therefore shall treat this appeal of the injunctive relief and denial of back pay portions of the district court's decree as an appeal on behalf of the class.
C. Back Pay Award to the Subclass: Appealability of the Settlement
In subsection I(D) supra we determined that the award of back pay to the subclass must be treated as a settlement. It is well settled that dissenters to a class action settlement may retain new counsel to appeal the district court's approval of a consent decree. See Cotton v. Hinton, 559 F.2d 1326, 1329 (5th Cir. 1977); Flinn v. FMC Corp., 528 F.2d 1169, 1174 (4th Cir. 1975), cert. denied, 424 U.S. 967, 96 S.Ct. 1462, 47 L.Ed.2d 734 (1976). The company poses the rather ingenious argument that notwithstanding this general rule, none of the appellants in this case has "standing" to appeal the back pay settlement. First, the company argues that those members of the back pay subclass who failed to cash their back pay checks may not appeal the district court's approval of the settlement because under the terms of the court's November 20 final order, they have opted out of the subclass and have yet to receive an appealable final judgment as to back pay. The company then argues that those appellants who accepted their back pay award by cashing
We agree with the defendant that appellants who were excluded from the subclass and denied back pay lack standing to contest the adequacy of the awards received by other class members. However, we conclude that the decree does constitute an appealable final judgment for those awardees who opted out of the settlement by refusing to cash their back pay checks. We also find that awardees who cashed their checks pursuant to the district court's opt-in, opt-out scheme did not waive their right to appeal the back pay settlement.
It is clear that the district court's November 20 final order constitutes a final decision within the meaning of 28 U.S.C. § 1291.
ACIPCO incorrectly asserts that the district court's order does not constitute a final judgment because the order provided subclass members who opted out of the subclass an opportunity to pursue individual damage claims in this lawsuit. We read the order to require subclass members who opted out of the subclass to pursue their damage claims in separate, independent lawsuits. In Pettway III we stated that the district court could allow claimants who were dissatisfied with their pro rata share of a class-wide back pay award to opt-out of the back pay subclass and demonstrate that they were entitled to a larger award. 494 F.2d at 263 and n. 154. The district court properly attempted to utilize this opt-out device. In the notice to all subclass members who had not yet cashed their back pay checks, mailed by the company at the court's direction on November 21, 1975, the court advised that back pay awards would become "null and void" as to all awardees who failed to cash their check prior to December 15, 1975. See November 20 Final Order and Modified Judgment, A. 418. The court's notice continued:
In the November 20 final order the court explained that a claimant who opted out of the settlement would have the right to pursue an independent action "free of the defense of res judicata or collateral estoppel insofar as his individual back pay claim is concerned." (A 417) (emphasis supplied). This language, together with the fact that the court did not afford awardees who declined to cash their back pay checks any opportunity to prove their individual damages in the proceedings of this suit, convinces us that the district court contemplated that its November final order would be the final adjudication in this suit of the rights of dissatisfied subclass members. Consequently, the court's order represents a final
We also find that those claimants who cashed their back pay checks may appeal from the lower court's approval of the settlement notwithstanding the fact that the waiver form they signed in cashing their checks could be construed as a waiver of their right to appeal.
To protect the rights of claimants to participate in a valid settlement, we conclude that the option of subclass members to opt into a back pay settlement may not be cut off before a final determination of the propriety of that settlement is made. See subsection V(B)(2) infra; cf. Ace Heating & Plumbing Co. v. Crane Co., supra. Because the district court improperly terminated the option to opt into the settlement before this appeal could be completed, thereby imposing upon the subclass members the impermissible choice of opting into what may be an unacceptable settlement or opting out of the subclass and undertaking the burdens of proving individual claims, we conclude that any waiver of appellate rights by those claimants who opted into the subclass is invalid.
Thus each of the appellants who were members of the back pay subclass may appeal from the district court's approval of the back pay settlement. Having already held that the appeal of the injunctive relief and denial of back pay portions of the district court's judgment has been brought on behalf of the class, we conclude that each of the substantive issues raised by appellants is properly before us. With both a sense of relief for having finally resolved the thorny procedural issues in the case and apprehension at what lurks ahead, we now turn to appellants' substantive claims.
III. Injunctive Relief
Having concluded in section I, supra, that the injunctive relief portions of the district court's decree constituted the court's own judgment, we now reach appellants' contention that Judge Lynne failed to follow our mandate in Pettway III in devising affirmative relief for class members. Our discussion is unavoidably complex, and we find it necessary to reverse the district court on a number of points. Underlying many of our determinations with respect to the injunctive portions of the decree are the complex and technical problems inherent in judicial attempts to remedy past employment discrimination by restructuring the multi-faceted employment practices of a large industrial concern. To a large extent, our own difficulties with the decree stem from the method by which Judge Lynne attempted to resolve these problems. We do not criticize Judge Lynne for attempting to utilize informal techniques of conciliation. We know from long experience the limitations and frustrations inherent in grappling with these problems using traditional litigative methods. We are not so bold or naive as to suggest that these complexities would dissolve if remedial responsibilities in the employment discrimination area were entrusted to an alternative institutional decision-making body, and recognize in any case that Congress has placed on the courts a responsibility to give effect to its policies of equal and non-discriminatory treatment for minorities in the employment area, as in other phases of our national life. In carrying out our responsibilities, we must and do remain alert to the possibility of utilizing innovative techniques of conciliation and problem solving. Many of our recent opinions in the Title VII area recognize the desirability of encouraging settlement among the contesting parties, particularly with respect to required modifications of plant employment and promotion practices. See, e. g., Cotton v. Hinton, 559 F.2d 1326, 1331 (5th Cir. 1977); United States v. Allegheny-Ludlum Industries, Inc., 517 F.2d 826, 846 (5th Cir. 1975), cert. denied, 425 U.S. 944, 96 S.Ct. 1684, 48 L.Ed.2d 187 (1976). We further recognize that the courts can sometimes best facilitate these conciliation efforts by utilizing informal techniques. We do not suggest here that conciliation efforts be forced into a Procrustean bed of on-the-record hearings.
Sometimes, however, settlement efforts do not achieve fruition. In these instances the trial court must alter its role and adjudicate the dispute among the parties. Such an adjudication, particularly in the context of class action litigation, presents a series of conundrums for both trial and appellate courts. Much of the information and evidence necessary to frame an adjudicated decree may be known to the district court through its participation in settlement negotiations, but will not be reflected on the record. Thus, the evidentiary support for the district court's ultimate decision will not be apparent to a reviewing court unless steps are taken to develop a satisfactory record. Evidentiary hearings and the submission of exhibits into the record may sometimes appear redundant and inefficient from the perspectives of the parties and the district court, but they are indispensable for purposes of conscientious appellate review. This court cannot properly review a district court's findings and conclusions without examining the supporting evidence. Tasby v. Estes, 572 F.2d 1010 (5th Cir. 1978).
The fundamental problem facing us in our task today is the absence of an adequately developed factual record. Following our remand in Pettway III, the district court encouraged settlement negotiations in informal proceedings held off the record. No trial or evidentiary hearing was held. As a result, almost no evidence was added to the record subsequent to our decision in Pettway III. We do not criticize the district court's attempt to resolve this dispute through informal procedures. When it became clear, however, that settlement negotiations would not bear fruit, it was incumbent on the court to base its conclusions on evidence in the record. Instead, numerous conclusions of the district court rest on factual predicates without evidentiary support
The company's failure to present evidence on the record in support of its position may be due in part to the failure of all the parties to distinguish clearly those portions of the decree which were resolved by settlement from those which were adjudicated by the court. It is likely that some portions of the injunctive decree actually were reached through the agreement of both ACIPCO and attorney Adams. Nevertheless, the decree represents the court's own judgment. See subsection I(B) supra. If it were clear precisely which portions of the injunctive decree were reached through agreement of counsel, we could treat those sections of the decree as a settlement and require the Rule 23 procedural safeguards discussed in subsection V(A), infra. As has been the case with regard to most of the factual issues raised by this appeal, however, the record is silent on this question. In any event, the district court did not draw such a distinction among portions of the injunctive decree or provide class members the requisite procedural safeguards with regard to those sections, if any, which it considered the parties to have accepted. Under the circumstances, we must require full evidentiary support for each element in the injunctive decree. Otherwise, the participants to the negotiations could compromise the legal rights of the class members free from both the procedural strictures of Rule 23 and the appellate court's review of the substantive legal requirements for framing injunctive relief.
In summary, we must reverse the district court where it misapprehended the purport of our prior mandate or where its conclusions are not supported by evidence in the record. This appeal presents multiple manifestations of ACIPCO's failure to supplement the record and of the district court's failure to base its conclusions on evidence in the record. That the errors below may flow from a single source does not, however, relieve us of the responsibility to consider and address each legal issue properly raised by appellants.
A. Two Decades of ACIPCO History
Our extensive opinion in Pettway III discusses at length the organization of the company, 494 F.2d at 217-18, its employment practices through 1974, id. at 218-222, and the present discriminatory effect of these practices necessitating affirmative relief. Id. at 222-43. While we need not repeat that discussion here, it is necessary at the outset to summarize briefly the factual and legal conclusions relevant to our disposition of the issues raised on this appeal. We shall then examine the standards outlined in Pettway III for framing affirmative relief, the district court's injunctive decree on remand, and appellants' allegations that the decree does not comply with our prior mandate.
1. Prologue: Company Organization
The company's operations are organized into various departments. The five primary production departments include the monocast department, the fittings foundry, the steel foundry, the melting department, and the steel pipe foundry. The machine
Prior to our 1974 decision in Pettway III, the method of advancement within all of ACIPCO's departments involved a wage progression schedule consisting of 15 pay groups. As of the date of the 1971 trial below, over 95% of the company's black employees worked in pay groups 1-8. Only 30% of ACIPCO's white employees held these lower paying positions. Advancement up the pay group ladder was based on departmental seniority. Until 1971 the company did not have a systematic written procedure for filling vacancies. Promotions within a department went to the senior department employee in the pay group immediately below the vacancy, with advancement within pay groups 9-15 subject to illegal testing requirements. The company discouraged transfers between different departments. Id. at 223 n. 27. In 1971 the company adopted a new procedure for filling vacancies in positions above pay group 3. First job vacancies were posted for three days within the department. If qualified bids were received, a selection was made on the basis of departmental seniority and ability. If no qualified bids were received from within the department, vacancies were posted plant wide and filled on the basis of plant-wide seniority. An employee transferring from another department did not carry over any of his accumulated seniority for purposes of seniority within the new department. Id. at 223.
2. Our Evaluation of ACIPCO's Employment Practices in Pettway III
Until 1961 ACIPCO maintained a formal policy of segregating employees by race. While this policy was discontinued after the promulgation of Presidential Executive Order No. 10925 in 1961, the resulting segregated employment profile was maintained at least through 1964, when the company instituted testing and educational requirements for hiring, intradepartmental transfer, and intradepartmental promotion. These testing and educational requirements, which were held to be illegal in Pettway III, remained in effect until as late as 1971. Pettway III, supra, 494 F.2d at 219-20, 222, 258. As a result, in 1971 only 25% of the 232 jobs in the plant were integrated. 494 F.2d at 230.
Based on these findings we concluded that "black employees have been derogated to the lower paying, non-skill departments and to the lower paying positions in all departments because of these past discriminatory employment practices." Id. at 236. We then determined that the departmental seniority system acted to maintain and effectuate the stratification of black employees in the less desirable departments and in the lower paying, non-skilled jobs within all departments. The seniority system locked black employees into their present departments because a black desiring to transfer to a department with better promotional opportunities would have to forfeit seniority and often endure a wage cut in order to transfer. An employee who did transfer would be handicapped by being unable to compete equally for promotion based on departmental seniority with a white employee situated in the department at the time of the transfer. This would be true even if the white employee had less plant
3. Pettway III Guidelines for Relief: Promotion and Transfer Procedures
In Pettway III we followed the well-established principle that on remand a remedy must be fashioned within the framework of the "rightful place" theory. 494 F.2d at 243. Under this theory, blacks must be "assured the first opportunity to move into the next vacancies in positions which they would have occupied but for the wrongful discrimination and which they are qualified to fill." Id., quoting United States v. Georgia Power Co., 474 F.2d 906, 927 (5th Cir. 1973). We therefore ordered the district court to issue an injunction requiring: "(1) the posting of all vacancies plant-wide; (2) the selection of `qualified' personnel for the vacancies on the basis of plant-wide seniority; (3) transferring members of the class shall retain their plant-wide seniority for all purposes including promotion, lay-off, reduction-in-force, and recall; (4) advance entry into jobs for which an employee in the class is `qualified' or for which no specific training is necessary; (5) red circling of members of the class . . .."
We tempered this holding by allowing the company to demonstrate a "business necessity" for maintaining departmental lines of progression in which experience in one position is required for advancement to a higher position in the line. We stressed, however, the "heavy nature of the defendant's burden" to justify a seniority system which perpetuated past discrimination. Id. at 245. Quoting from United States v. Jacksonville Terminal Co., 451 F.2d 418, 451 (5th Cir. 1971), we stated that "the `business necessity' doctrine must mean more than that transfer and seniority policy serve legitimate management functions. . . . Necessity connotes an irresistible demand. To be preserved, the seniority and transfer system must not only directly foster safety and efficiency of a plant, but also be essential to those goals." Id. Thus business necessity justifies existing seniority and promotion systems only where the district court finds that each position in the line of progression within a department provides necessary training for the next higher job and that there are no acceptable alternatives for accomplishing the company's safety and efficiency goals. Id. at 245-46.
We then remanded the case to the district court to frame an injunctive order which would effectuate our mandate.
4. Relief on Remand
On remand the district court entered an order which effected the following changes in the company's seniority and transfer policies. Plant seniority was substituted for departmental seniority for purposes of future promotions, demotions, layoffs, and recalls, subject to a one year residency requirement for transferees to a new line of progression.
The district court, in its attempt to reconcile the rightful place requirement with the business necessity exception to plant-wide bidding for every position in the plant, also made three general revisions in the company's lines of progression.
First, the court's order created "pre-entry level" positions, consisting of unskilled jobs in the lower pay groups which do not provide experience necessary for the successful performance of the next higher-rated position. These jobs were removed from the departmental lines of progression, with the result that potential transferees can now skip over these positions and bid immediately into the higher "entry level" positions. Second, the court "boxed" together certain jobs requiring similar skills and providing roughly equivalent experience for preparing employees for the next higher position on the line. The employee with the greatest plant seniority on any job within the box would have the first opportunity to bid on the next higher-rated position. This boxing mechanism affords employees an opportunity
5. The Present Appeal
Appellants maintain on appeal that the promotion and transfer procedure outlined above is deficient in numerous respects and does not comport with our mandate in Pettway III. Before evaluating appellants' contentions, however, we must first examine the case law subsequent to Pettway III, and particularly the Supreme Court's decision in International Brotherhood of Teamsters v. United States, 431 U.S. 324, 97 S.Ct. 1843, 52 L.Ed.2d 396 (1977), to determine whether the standards enunciated in our prior decision are still applicable for purposes of this appeal.
B. The Effect of Teamsters on Our Prior Mandate
In Pettway III we concluded that the "neutral practices of the departmental seniority system and the posting and bidding procedure carry forward into the present the stratification of black employees into lower paying, non-skill departments and jobs resulting from past discrimination." 494 F.2d at 236. After reviewing the relevant authorities, we ordered specific affirmative relief. See subsection III(A)(3) supra.
The recent Supreme Court decision in United States v. International Brotherhood of Teamsters, 431 U.S. 324, 97 S.Ct. 1843, 52 L.Ed.2d 396 (1977), casts doubt upon the validity of our prior mandate insofar as it required plant-wide seniority to be calculated from the date of employment with ACIPCO. See also United Airlines, Inc. v. Evans, 431 U.S. 553, 97 S.Ct. 1885, 52 L.Ed.2d 571 (1977); Trans World Airlines, Inc. v. Hardison, 432 U.S. 63, 97 S.Ct. 2264, 53 L.Ed.2d 113 (1977). In Teamsters the Supreme Court admitted that under the rationale of Griggs v. Duke Power Co., 401 U.S. 424, 91 S.Ct. 849, 28 L.Ed.2d 158 (1971), a seniority system, not justified by business necessity, whose operation served to freeze the status quo of prior discriminatory employment practices, "would seem" to be unlawful. 97 S.Ct. at 1862. Nevertheless, the Court concluded that such a system would be legally valid under section 703(h) of Title VII,
The Court's determination that such seniority systems are not intrinsically illegal was not meant to insulate all such systems from modifications necessary to accord relief for past discrimination. With regard to relief, the Court differentiated between pre- and post-Act discriminatory practices, holding that
97 S.Ct. at 1860. As we elaborated in James v. Stockham Valves & Fittings Co., supra, after considering the effect of Teamsters on the district court's decree:
559 F.2d at 355. Thus, the Court still permits seniority modifications necessary to remedy other illegal acts, so long as those other acts are independently actionable. Teamsters does, however, limit the scope of permissible relief. With regard to bona fide seniority systems, discrimination after the effective date of Title VII can no longer engender a remedy involving retroactive seniority which antedates the Act. If a seniority system "did not have its genesis in racial discrimination . . . [and] was negotiated and has been maintained free from any illegal purpose", those "employees who suffered only pre-Act discrimination are not entitled to relief, and no person may be given retroactive seniority to a date earlier than the effective date of the Act." 97 S.Ct. at 1865.
In the case at bar, the plaintiffs filed their complaint with the EEOC on November 22, 1965, attacking both pre-Act and post-Act discrimination. It is clear that the testing and educational requirements which illegally discriminated against black employees remained in effect after the original complaint was filed. 494 F.2d at 219-20, 222-23, 236. The utilization of plant-wide seniority from the effective date of Title VII is necessary to remedy these actionable post-Act discriminatory practices, and therefore is consistent with the Teamsters decision. In Pettway III, however, we provided plant-wide seniority to all employees from the date of their original employment by ACIPCO. For some employees, this seniority will antedate the effective date of Title VII. If the departmental seniority system in effect at ACIPCO prior to our decision in Pettway III was bona fide, this portion of the relief ordered in Pettway III would be inconsistent with the Supreme Court's holding in Teamsters. If, on the other hand, the departmental seniority system was not bona fide, it would not be protected under Section 703(h), and our prior substitution of a plant-wide seniority system for the illegally maintained departmental seniority system would be consistent with the Teamsters holding.
Appellants urge this court to refrain from reexamining our prior holding in light of Teamsters. They correctly argue that under well-settled principles of law, a decision by this court at an earlier stage of the same litigation represents the law of the case. See Carpa, Inc. v. Ward Foods, Inc., 567 F.2d 1316 (5th Cir. 1978); Lehrman v. Gulf Oil Corp., 500 F.2d 659 (5th Cir. 1974), cert. denied, 420 U.S. 929, 95 S.Ct. 1128, 43 L.Ed.2d 402 (1975); Terrell v. Household Goods Carriers' Bureau, 494 F.2d 16 (5th Cir.), cert. denied, 419 U.S. 987, 95 S.Ct. 246, 42 L.Ed.2d 260 (1974). As such, the earlier decision generally precludes reconsideration of any legal question that has
Carpa, Inc. v. Ward Foods, Inc., supra, at 1319-20, quoting White v. Murtha, 377 F.2d 428, 431 (5th Cir. 1967).
The doctrine, while not a limitation on the court's power to reconsider its prior holding, is nevertheless an expression of good sense and wise judicial practice, Terrell v. Household Goods Carriers' Bureau, supra, 494 F.2d at 19, waived "only for the most cogent of reasons and to avoid manifest injustice." Id. at 19-20. Perhaps the most cogent reason possible for not following a previous decision in the same litigation is an intervening decision by the Supreme Court. Id. at 19. Indeed, this court has previously reconsidered its prior holdings on a subsequent appeal of the same case when intervening Supreme Court decisions cast doubt on the validity of the original decision. See Jennings v. Patterson, 488 F.2d 436, 441 (5th Cir. 1974); McComb v. Crane, 174 F.2d 646 (5th Cir. 1949). In McComb the judgment appealed from was rendered pursuant to a prior Fifth Circuit opinion holding that the Fair Labor Standards Act of 1938, 29 U.S.C. § 201 et seq., did not permit the Administrator to collect wage deficiencies by injunction and civil contempt proceedings. Subsequently, the Supreme Court held that the Administrator could bring civil contempt proceedings. We stated that under the circumstances, "[w]e are compelled to disavow our previous decision as the law of this case and to reverse the judgment appealed from." 174 F.2d at 647.
We find ourselves bound by our decisions in Jennings v. Patterson and McComb v. Crane and therefore must reconsider the seniority determination in our prior mandate in light of the Supreme Court's pronouncements in Teamsters. We do so mindful that Teamsters is an extraordinary case from the standpoint of stare decisis. See EEOC v. United Air Lines, supra, 560 F.2d at 235-36. In the words of Justice Marshall's dissent:
97 S.Ct. at 1876 (footnotes omitted). See also Myers v. Gilman Paper Corp., 556 F.2d 758 (5th Cir. 1977) (on petition for rehearing). We also recognize that this result is inconsistent with the policies of finality in an ongoing lawsuit. As the Second Circuit eloquently stated in affirming the district court's application of Teamsters in a somewhat similar procedural setting:
Acha v. Beame, 570 F.2d 57, 64 (2nd Cir. 1978) (No. 77-6119, January 12, 1978) (Slip op. at 1042 n. 8).
Nevertheless, the Supreme Court's decision still discloses the controlling law, which we are bound to apply. In James v. Stockham Valves & Fittings Co., supra, we considered for the first time the effect of Teamsters on our prior case law and concluded that post -Act discriminatees may receive seniority relief under Teamsters without attacking the legality of the seniority system as applied to them. Judge Wisdom, writing for the court, underscored the importance of the distinction between pre- and post-Act discriminatees:
559 F.2d at 351. As in James, the plaintiffs here have proved that the company maintained illegal testing and educational requirements and subjective selection criteria which relegated black employees to less desirable departments and to lower paying positions in all departments during the post-Act period between 1965 and 1971. They are entitled to relief from the effects of these practices, including retroactive seniority. Moreover, unlike the situation in James, there is no question here that every member of the class has been subjected to the illegal post-Act practices. As the class consists only of persons employed as of or subsequent to the effective date of Title VII, no class member suffered only from pre-Act discrimination. Every member of the class is a post-Act discriminatee. Thus every class member before us is entitled to seniority relief.
In Teamsters, however, the Court restricted the scope of permissible seniority relief for post-Act discriminatees operating under bona fide seniority system. The court stated that on remand "no person may be given retroactive seniority to a date earlier than the effective date of the Act." 97 S.Ct. at 1865. A panel of the Seventh Circuit recently concluded that the seniority system at issue was bona fide under Teamsters and accordingly modified a district court's plant-wide seniority order by redefining "company seniority" to mean "either total tenure with the company after July 2, 1965 (the effective date of the Civil Rights Act of 1964), or total departmental seniority whichever is greater." E. E. O. C. v. United Air Lines, 560 F.2d 224, 234 (7th Cir. 1977). Thus, if the departmental seniority system at ACIPCO is bona fide, plant seniority may not antedate the effective date of Title VII.
The district court should make detailed findings concerning this factor and each of the criteria outlined in James. If, based on these findings, the court concludes that the departmental seniority system was not bona fide, the plant-wide seniority provisions mandated in Pettway III should be retained. If the court finds that the departmental seniority system was bona fide, it should modify its decree by redefining "plant seniority" to mean either total tenure with the company after July 2, 1975 or total departmental seniority, whichever is greater. In either case, the remaining requirements for affirmative relief mandated in Pettway III retain their validity. We therefore shall proceed with our examination of the injunctive provisions of the decree fashioned below. Throughout our discussion we will refer to the term "plant seniority," although its precise definition must await the outcome of the district court's examination of whether the departmental seniority system in effect in 1971 was bona fide.
C. Adequacy of the Promotion and Transfer Procedures Adopted Below
Appellants allege that the promotion and transfer procedures adopted by the district court, see subsection III(A)(4) supra, are insufficient to guarantee class members their rightful place within the company and do not comport with our mandate in Pettway III. To evaluate this contention, we must first determine whether the district court's order ensures that class members reach their rightful place within the company at the first available opportunity. See Pettway III, supra, 494 F.2d at 243. If the procedures adopted by the district court do not fully effectuate this goal, we must then consider whether the impediments to the achievement by class members of their rightful place are justified by business necessity.
1. Rightful Place
To recapitulate briefly our discussion in subsection III(A) supra, class members generally are concentrated in the less desirable departments and tend to have relatively low departmental seniority and position within the lines of progression when compared to their plant seniority. In Pettway III we found that this phenomenon resulted from ACIPCO's past discriminatory practices and ordered the district court to frame an injunctive decree which utilized plant seniority as a mechanism for ensuring class members the opportunity to reach their rightful place within the company. Although the procedures adopted by the district
Other deterrents to interdepartmental transfer which we criticized in Pettway III are also not entirely eliminated by the court's order. Previously, a black employee was deterred from transferring to a department with greater promotional opportunities because he would lose his accumulated seniority and suffer a cut in pay.
The district court's plan also fails to rectify fully the effects of past discrimination with regard to intradepartmental promotion. Although departmental seniority is no longer determinative of intradepartmental promotion, the bidding advantage of class members with superior plant seniority is decisive only with respect to white employees at the same level on the line of progression; class members, even if plant senior, may not bid against employees occupying a higher position on the line. The competitive position of class members with relatively high plant seniority is improved by the elimination of departmental seniority as a criterion for promotion, and to the
In sum, past discriminatory practices have allowed many plant junior white employees to gain superior position within the lines of progression vis-a-vis class members. Position has now become the threshold qualification for bidding on vacancies. Thus despite the use of plant seniority to distinguish between bidders on the same level in the line, the requirement that jobs be held in a sequential order in any line of progression tends to "lock in" formerly victimized blacks, thereby perpetuating the effects of past discrimination and prolonging the journey of class members to their rightful place within the company. As we discussed above, the same is also true of the interdepartmental transfer procedure. To justify the new promotion and transfer system, the company thus bears the "heavy burden" of demonstrating that each position in a line of progression provides necessary training for the next higher position. We now turn to the crucial question of whether the new lines of progression are supported by the requisite showing of business necessity.
2. Business Necessity
a. Lines of Progression
In subsection III(A)(3) supra we noted the well-established principle that a promotion and transfer system which impedes the attainment by formerly discriminated-against class members of their rightful place within the company must be justified by business necessity. We have recently had several occasions to reiterate the heavy burden that the law places on a defendant seeking to prove that such structural impediments are essential to goals of plant safety and efficiency. See, e. g., James v. Stockham Valves & Fittings Co., 559 F.2d 310, 350 (5th Cir. 1977); Watkins v. Scott Paper Co., 530 F.2d 1159, 1183 (5th Cir. 1976).
To ensure that the decree framed on remand would effectuate the remedial purposes of Title VII, while at the same time give due regard to the company's interests in efficiency and safety, this court in Pettway III instructed the district court as follows:
494 F.2d at 248-49 (footnotes omitted) (emphasis in original). The clear import of this instruction was that as a prima facie matter every position within the company should be open to plant-wide bidding, with vacancies to be filled by the bidder with the most plant seniority who was "qualified" for the job. Only where the company clearly demonstrated on the record the existence of business necessity for particular prerequisite jobs within a line of progression could bidding be based solely on position within the line. Even then, however, we required that the line be carefully structured and that advanced entry and job skipping be allowed where requisite experience could be achieved outside the line or in lower level positions within the line itself.
Our examination of the record and the lines of progression fashioned below convinces us that the district court did not follow this mandate. In general, the district judge made only the most perfunctory and conclusory findings to support the injunctive portions of its decree.
Not only is the record bare of factual support for these findings with regard to lines of progression in many of the departments, but the record indicates that the district court failed to follow our instructions in evaluating business necessity.
In Pettway III we acknowledged that not every class member should be considered for every position within the company. "In an industry involving sophisticated machining processes such as many of the operations of this company, training of employees for skilled positions is a necessary function for the continued economic life of the business." 494 F.2d at 246. We found, however, that although "[t]he company has evidence in the record that significant portions of its operations require skillful craftsmenship," "it has failed to demonstrate that every position at the plant is so complex or specialized as to require, without exception, step by step progression within each department." Id. More specifically, we concluded after careful examining the trial record that
494 F.2d at 246-47 (emphasis supplied) (footnote omitted).
Despite this seemingly clear statement that the previous record did not support a conclusion that positions within the non-craft lines of progression were functionally related, Judge Lynne candidly remarked at the October 31 hearing that
That Judge Lynne must have relied on the 1971 trial record to support his finding of business necessity in the non-craft positions is made clear by the total absence of evidence in the record on remand concerning business necessity. This reliance by Judge Lynne on the prior record is in direct contravention of our holding in Pettway III.
We therefore conclude that Judge Lynne's finding that the lines of progression in the non-craft departments
The situation is somewhat different with regard to the craft and technical departments.
b. Transfer Procedures
We have already determined that the evidence does not support the district court's finding that the lines of progression in non-craft departments are functionally related. It necessarily follows that the evidence does not support the court's finding of business necessity for limiting interdepartmental transfer into the non-craft departments to entry level and advanced entry positions. Where it has not been demonstrated that experience in the entry level positions is necessary for successful performance in the next higher-rated positions, the company may not preclude potential transferees from bidding on the more advanced positions. Accordingly, this portion of the injunctive order must be reversed.
The district court's order also provided that employees within a department shall have an opportunity to bid on vacancies in entry level positions before those jobs are posted plant-wide. If a position is designated as entry level, experience in the line is by definition unnecessary. Under the circumstances, we do not understand how business necessity could possibly justify providing incumbent employees in a department the first opportunity to bid on an entry level vacancy. Therefore, this portion of the decree must also be reversed for both the craft and non-craft departments. The procedures for transfer into craft and technical departments are in all other respects affirmed.
ACIPCO has now had two opportunities to demonstrate business necessity for lines of progression in the non-craft departments. It has failed both times to satisfy its burden of submitting competent evidence on the record that these lines of progression are functionally related. We cannot allow the vindication of the statutory rights of black employees to await yet another proceeding below and a possible third appeal to this court. The time has come for definite, if preliminary, action. Therefore, we direct that on remand the
494 F.2d at 249.
The decree should also be modified to provide that vacancies in all entry level positions, including those in the craft and technical departments, be posted plant-wide from the outset. Employees working in a line of progression should not be given the first opportunity to bid on such vacancies.
Finally, nothing in this opinion should be construed to mean that the company must place anyone in a job for which he is not qualified. We recognize that some positions in the non-craft departments may be functionally related to other positions in the same line of progression. The provision in the decree that vacancies be given to the senior-most bidder only if he or she is "qualified" should adequately protect the company's interests in safety and efficiency in such situations. While on remand the district court shall first issue a modified injunction requiring plant-wide bidding based on plant-wide seniority for each vacancy in the non-craft departments, the court may, at its discretion, retain jurisdiction and commence further proceedings to give the defendant a final opportunity to prove business necessity for making experience in certain jobs a prerequisite for bidding on other positions in the non-craft lines of progression and for establishing residency periods consistent with our mandate in Pettway III. 494 F.2d at 249 and n.106.
To reiterate, the district court shall put into immediate effect an injunctive decree providing for plant-wide bidding on vacancies in non-craft lines of progression, limited only by objective qualifications as defined above. Determinations by the company that a class member lacks the requisite qualifications for serving in a particular position must be made on an individual basis and may not be based solely on failure to have served in the line of progression in which the vacancy occurs. Once this system is in effect, the court may, at its discretion, afford the company one final opportunity to demonstrate, by non-conclusory evidence on the record, the existence of particular functional relationships within the non-craft lines of progression. If the court is satisfied that company has met its heavy burden of demonstrating the business necessity of a particular line of progression, it shall make detailed findings to that effect and may make such modifications to the injunctive decree as are justified by the evidence in the record.
D. Red Circling
A class member wishing to transfer to a department with greater promotional opportunities might be deterred from doing so if the initial entry position in the new department paid a lower salary than his current job. The red circling remedy allows a transferee to retain his old wage rate until he has had an opportunity to learn the necessary skills to progress in the new department to a salary equal to his old departmental wage rate. See footnote 30 supra. It thereby eradicates "the obvious impediment of lowered wages to transfer to a new department." Swint v. Pullman-Standard, 539 F.2d 77, 101 (5th Cir. 1976). See Watkins v. Scott Paper Co., supra, 530 F.2d at 1173-74; Stevenson v. International Paper Co., 516 F.2d 103, 112-13 (5th Cir. 1975). In Pettway III we concluded that the red circling remedy was necessary to effectuate the rights of black employees at ACIPCO:
494 F.2d at 249 (emphasis supplied).
The district court's decree on remand provided for red circling. Appellants now argue on appeal that certain limitations placed on the red circling remedy by the district court are inconsistent with the remedial purposes of Title VII and with our mandate in Pettway III. We consider these in turn, noting initially that any restriction on the availability of the red circling remedy must be justified by business necessity if it impedes the movement of former discriminatees to their rightful place. Stevenson v. International Paper Co., 516 F.2d 103, 112-13 (5th Cir. 1975).
Appellants first object to the provision in the decree which limits the red circling remedy to class members employed at ACIPCO prior to February 18, 1968, the date that the company eliminated its illegal testing requirements for promotion within
Appellants also complain that the district court's decree sets a maximum red circle retention rate equal to the pay group 8 wage rate.
While we are sympathetic to the company's position, we cannot ignore the effect of the wage rate limitation on black employees who have reached pay groups 9 and 10 in the limited opportunity departments and now desire to transfer to a higher opportunity promotional unit from which they had previously been excluded by discriminatory practices. In Watkins v. Scott Paper Co., supra, we recently invalidated a $3 per hour wage retention limitation. Citing Pettway III we stated:
530 F.2d at 1174. Therefore, the reduction in wage for those transferees whose present wage rate exceeds the wage retention limitation
Appellants third contention is that the district court improperly limited the use of red circling rights to transfers made within three years of the decree. We disagree. In Stevenson v. International Paper Co., supra, we stated that a
516 F.2d at 113 (emphasis supplied). Appellants have not demonstrated that the three year time limitation is unreasonable or constitutes an abuse of discretion by the district court. However, because of the possibility that some discriminatees have been dissuaded by the invalid portions of the red circling provisions from exercising their transfer rights, on remand the district court should extend the permissible time for exercise of red circle rights for a reasonable period beyond the date on which its modified decree becomes effective. See Stevenson, supra, 516 F.2d at 112-113.
Finally, appellants argue that the provisions in the decree which terminate the retained rate where the employee "fails to progress" or "declines to progress" in the new line or where "104 weeks have elapsed since his transfer" are inconsistent with our mandate in Pettway III and not justified by business necessity.
In Pettway III we stated that a transferee "shall be paid" his old wage rate until he advances to a higher paying position or "until he voluntarily freezes himself in at the new job." 494 F.2d at 249 (emphasis supplied). We read the provisions in the decree terminating the retained rate where the discriminatee "fails to progress" or "declines to progress" as consistent with our prior mandate. Appellants' apprehensions that such determinations will be made unfairly by the predominantly white supervisory staff are not compelling in light of the grievance procedure provided by the decree.
The 104 week limitation, however, must be reversed. First, the district court made no findings that this period is sufficient to allow a reasonably diligent and capable employee to advance to pay group 8 from most entry level jobs in most departments. In any event, the company does not point to sufficient evidence in the record to support such a finding. More importantly, the 104 week limitation necessarily was based on
We recognize that it may take longer for an employee in, say, pay group 9 to reach this pay level in a new department than for an employee in pay group 5 to reach a pay group 5 position in a new line of progression. The court is free to consider this possibility and apply a different time limitation for each pay level. We also recognize that the same employee may not advance with equal speed in every department. The court need not take account of every possible permutation and combination of transfers which might be available to class members. The court's time limitation, however, must be long enough to allow reasonably diligent and capable class members a fair and reasonable opportunity to reach their present pay group level in the departments from which blacks have traditionally been excluded.
E. Supervisory Positions
Prior to 1971 the company's supervisory personnel were selected by department superintendents, all of whom were white. The selection criteria included performance on illegal objective tests and the subjective judgment of the superintendents. The testing was discontinued in 1971. In Pettway III we stated that the fact that only one of approximately one hundred supervisory positions was held by a black employee, when considered in conjunction with the use of illegal testing and the application of subjective standards by all-white superintendents, would normally present a conclusive showing of present discrimination. 494 F.2d at 240-41. However, because the company had terminated its testing requirements, we remanded the issue for a determination of "whether selection on the basis of subjective judgment of all-white superintendents operates independently of the testing to discriminate and helped produce this disparity." Id. at 241. We cautioned the court that in examining the evidence it should consider the possibility that a cessation of discriminatory treatment following termination of the illegal testing might indicate, not that the tests were the sole cause of the discriminatory barrier, but that the company had become aware of the possibility of legal sanctions and was building a record for purposes of this lawsuit. Accordingly, we instructed the court to examine on remand three indicia of discriminatory selection:
494 F.2d at 243 (footnotes omitted).
On remand the district court denied plaintiffs' requests for affirmative relief in the area of supervisor selection. The district court's May decree, which provided for injunctive relief, did not mention the factors outlined in Pettway III. The November 20 final order stated that business necessity had been shown for selecting supervisory personnel from the incumbents in the one or two highest positions in a line of progression and that qualified blacks were being selected for supervisory positions without regard to race. This later finding was apparently based solely on the fact that the number of black supervisors increased from two to fourteen between 1971 and
F. Reduction in Workforce and Recall Provisions
Appellants make numerous objections to the reduction in workforce and recall provisions of the decree.
Appellants read the crucial "descending job sequence order" phrase as allowing a less senior white worker to "bump down" a more senior black employee in a lower level position. This phrase, however, must be read in light of the provision that "layoffs . . . shall be in accordance with plant seniority." See footnote 57 supra. Thus, in the circumstance of special concern to appellants, if the employee in the highest job subject to a reduction in workforce has lower plant seniority than a black employee in the job level below him, the junior employee, even though starting from a higher position in the line of progression, would be dropped past the black worker and would continue down the line until he reached a level at which he was senior to the incumbent on the job. As so interpreted, this portion of the decree fully protects the interests of class members in reaching their rightful place in the company and is therefore affirmed.
Appellants also argue that the recall procedure devised below is invalid insofar as it gives priority to a less senior white worker, who previously held a now vacant position but was downgraded because of a reduction in workforce, over a more senior black worker who, because of past discrimination, never held the position but is now qualified for it.
On remand the court's decree should be modified to conform with our holding in Hayes, supra.
G. Selection Procedures for Apprenticeship and On-the-Job Training Programs
The company's craft positions generally require a high degree of skill and are at or near the top of the wage rate scales. Incumbent employees may train for these positions through apprenticeship and on-the-job training programs operated by the company. In Pettway III we reversed as clearly erroneous the district court's finding that the defendant had practiced no invidious racial discrimination in the administration of its apprenticeship and on-the-job training programs. More specifically, we found that the company, as a matter of deliberate policy, totally excluded all black employees from these programs until 1961. From 1961 to 1971 the company continued to restrict black participation in these programs through the use of educational and testing criteria, age requirements, and the requirement that initial consideration for entry into the on-the-job training program be limited to bids from within the craft departments. 494 F.2d at 237-40. We ordered the court on remand to frame appropriate affirmative relief. 494 F.2d at 236-40, 250-51. Appellants claim on appeal that the district court failed to carry out our mandate in framing its injunctive decree. We therefore must examine the district court's order to determine whether it effectuates our prior mandate with regard to these programs.
1. Apprenticeship Program
At the time of our decision in Pettway III, applicants for the apprenticeship program were required to be 25 years of age or under. This age requirement was relaxed by four years for those having served in the military. Applicants were not restricted by department; an employee in any department could apply for any apprenticeship position. Once selected for an apprenticeship, the trainee was required to complete a three and one-half to four year course, during which time he would progress from a group 2 or 3 pay rate to the higher rate of groups 11 or 12. On completing the apprenticeship and being placed in a craft position, the employee would be paid at the rate of pay group 12 or 13.
In Pettway III we concluded that the existing age requirement for the apprenticeship program perpetuated the effects of the discriminatory testing and education requirements discontinued in 1971. Class members who previously had been excluded from the program by the illegal testing and education requirements were subsequently excluded by the age requirement. We therefore directed the district court to enjoin the continued use of the age requirement and to substitute the limit of thirty-five years endorsed by the plaintiffs' expert, unless the company could establish business necessity for a different age limitation. We also held that the length of the apprenticeship period was unnecessarily long and that the company had made no showing that this training period was required by business necessity. We ordered that the length of the program be shortened unless business necessity was demonstrated. 494 F.2d at 250.
On remand the district court increased the maximum age limit for the apprenticeship program to thirty-five for class members who reached twenty-six years of age between July 2, 1965 and April 1, 1971, the date on which illegal testing and educational requirements were abolished. Employees covered by this provision were given four months to indicate an interest in being considered for a specific apprenticeship opening. The court also concluded that "the basic principles incorporated in the Company's apprenticeship program" were justified by business necessity and declined to reduce the length of the apprenticeship period.
Appellants vigorously object to the age limitation on applicants to the apprentice program imposed by the district court.
We recognize that in some instances this rule may provide special benefits to individual class members. For example, a hypothetical employee hired at the age of 18 one year prior to the termination of the illegal requirements would have had seven years of discrimination free eligibility for the apprenticeship program. Assuming that there is some internal business justification for the twenty-five year age limitation, it appears unfair to the company to provide this employee an additional ten years of eligibility merely because he was subjected to the discriminatory practices for one year. The injustice here, however, cannot justify the limitation adopted below which leaves many members of the class without a complete remedy for past discriminatory practices. In the Title VII context the remedy must be broad enough, consistent with business necessity, to ensure that every discriminatee is provided opportunities previously denied to him because of past discriminatory practices. See Pettway III, supra, 494 F.2d at 247-50, 260-61; See also James v. Stockham Valves & Fittings Co., supra, 559 F.2d at 154-56; Swint v. Pullman-Standard, supra, 539 F.2d at 99-103. The remedy adopted below clearly fails to accomplish this goal. Our modification is fully consistent with the requirements of business necessity. See Pettway III, supra, 494 F.2d at 250. Under the circumstances, we hold that the decree must be revised on remand as indicated above.
Appellants also object to the provision that class members who qualify for the age limitation extension must indicate in writing an interest in being considered for a "specific apprenticeship opening" within four months of the date of the decree in order to remain eligible for an apprenticeship position until reaching the age of thirty-six. We conclude that this portion of the decree places an unnecessary and unjustifiable burden on those class members who are attempting to reach their rightful place in the apprenticeship program. The record indicates that there is a very slow turnover in apprenticeship openings; by requiring potential applicants to make a specific request within four months, the court below has effectively precluded from realistic consideration many class members between the ages of twenty-six and thirty-five. The requirement has not been justified by business necessity. On remand black employees covered by the age limit extension should
Finally, we conclude that on remand the court must reconsider the length of the apprenticeship period. In Pettway III we stated that "[o]n remand, either by agreement of the parties or order of the court after a hearing, if necessary, the length of the apprenticeship should be shortened with varying periods allowed according to each craft's requirements." 494 F.2d at 250. That no agreement on this issue was reached by the parties is made clear by Mr. Adams' objections to the May decree and by his request for a hearing to establish shorter apprenticeship periods, both of which were overruled by the district court. Under our prior mandate, the district court should have permitted retention of the present apprenticeship period only if the record supported a finding of business necessity. The district court's subsequent finding of business necessity, however, cannot have been based on the record. We stated in Pettway III that "[t]he company has made no showing that the three and one-half to four years for apprenticeship . . . are periods required by business necessity," 494 F.2d at 250, and no new testimony or evidence was entered on the record subsequent to our prior opinion.
Under the circumstances, we must conclude that the court's finding of business necessity has no basis in the record. On remand, unless the parties can resolve this issue by agreement,
2. On-the-Job Training
Eligibility for craft positions in pay groups 12 and 13 can also be acquired through the on-the-job training program. Prior to 1971, illegal testing resulted in the exclusion of blacks from the program. To remedy the effect of the testing requirement, which we found was carried forward by neutral, current practices, we held in Pettway III that "the requirement that bids from within the craft departments be given initial, primary consideration must fail in light of the proof demonstrating that a large majority of black employees have been excluded from these departments." 494 F.2d at 240 (emphasis in original). We also found that the seven year training period was "unnecessarily long" and not justified on the record by business necessity. We, therefore, ordered the period shortened unless business necessity could be demonstrated. Finally, we stated that "consideration should be given to broadening the qualifying experience on jobs outside craft departments" Id. at 250.
On remand the district court ordered that plant seniority, rather than departmental seniority, be utilized in administering the on-the-job training program. The court declined to order further changes in the trainee program, finding that the other contested elements of the program were justified by business necessity. See footnote 40 supra.
Appellants now allege that the district court failed to follow our prior mandate by continuing to allow the company to give initial preference to bids from within the craft departments. The company responds that the experience necessary to enter the on-the-job training program is only obtainable in positions within these departments. We agree with the company that the record supports the finding that positions within the present lines of progression in the craft departments are functionally related. See subsection III(C)(2) supra. We are unable to discern from the present record, however, which positions in the lines of progression are necessary prerequisites for entry into the trainee program and thus cannot evaluate the district court's finding
Appellants also argue that the district court ignored our mandate in Pettway III that "the length of the on-the-job training . . . should be shortened" unless the company proved that the seven year training period was required by business necessity. 494 F.2d at 250. We stressed in our prior decision that no such showing existed on the record at that time. Id. The court on remand, without any additional evidence before it on the record, nonetheless concluded that the seven year period was necessitated by business necessity. Because this conclusion has no basis in the present record, we are compelled to reverse. On remand the court must reconsider the length of the program in light of today's holding and our prior opinion, 494 F.2d at 250-51. Additional evidence may be considered on the record, but the limits on access to the on-the-job training program must be brought within the strictures of business necessity.
In summary, the injunctive relief portion of the decree framed below is affirmed in part, reversed in part, and remanded for further proceedings consistent with this opinion. On remand, an interim order should be entered forthwith requiring that all vacancies in the non-craft departments be posted plant-wide for bidding based on plant seniority. See subsection III(C)(3) supra. Where other modifications or revisions in compliance with this opinion can be effected without further evidentiary proceedings, these changes should also be set forth in the interim order.
The parties, of course, are free to negotiate a settlement on any or all of the issues remaining on remand. Any issue resolved through the negotiation process must be explicitly and specifically denominated as a settlement. Before accepting any such settlement, the court must ensure that Rule 23 procedural requirements have been fully satisfied.
IV. Denial of Back Pay to Class Members Hired Subsequent to July 2, 1965: The Definition of the Back Pay Subclass.
In subsection I(C), supra, we determined that the exclusion of 1400 class members from the back pay subclass constituted the district court's own judgment and was not part of any settlement between the parties. The district court found "that no black employee employed subsequent to July 2, 1965 has suffered any economic loss due to the Company's testing and educational requirements or from any alleged discriminatory practice" (A 415) and therefore denied these class members back pay. In Pettway III, supra, we set out detailed instructions for determining entitlement to back pay. 494 F.2d at 258-263. Whether the substance of those guidelines was observed below is not apparent from the record. Furthermore, we are unable to determine from the record whether the evidence examined by the district court supports its conclusions. Under the circumstances we must vacate the court's denial of back pay to class members hired after July 2, 1965 and remand for further proceedings consistent with this opinion and other controlling authority. If on remand the district court determines that any particular group within the affected class is not entitled to back pay, "it must carefully articulate its findings and conclusions." United States v. United States Steel Corp., 520 F.2d 1043, 1055 (5th Cir. 1975). See Albemarle Paper Co. v. Moody, 422 U.S. 405, 95 S.Ct. 2362, 2373 n. 14, 45 L.Ed.2d 280 (1975).
To aid the district court on remand, we shall briefly summarize the legal requirements for determining entitlement to back pay which we developed in Pettway III and subsequent cases. See, e. g., Swint v. Pullman-Standard, 539 F.2d 77, 102-03 (5th Cir. 1976); United States v. United States Steel Corp., supra, 520 F.2d at 1052-57; Baxter v. Savannah Sugar Refining Co., 495 F.2d 437, 442-45 (5th Cir.), cert. denied, 419 U.S. 1033, 95 S.Ct. 515, 42 L.Ed.2d 308 (1974).
This court has established a bifurcated approach to back pay determinations in class actions. At Stage I the class must demonstrate a prima facie case of employment discrimination. During this stage, it is improper to require any particular discriminatee to prove personal monetary loss. United States v. United States Steel Corp., supra, 520 F.2d at 1054-55; Baxter v. Savannah Sugar Refining Corp., supra, 495 F.2d at 443. Once the class has proven a prima facie case of discrimination, it is presumptively entitled to move into Stage II,
The company's burden in seeking to rebut the presumption created by the class' prior prima facie showing of discrimination is substantial. As we explained in United States Steel, supra, the defendant must draw
520 F.2d at 1054.
We are unable to discern from the present record whether the company met this burden. The company points to raw statistical information contained in a computer printout of February 20, 1975, which, according to the company, demonstrates that "black and white employees hired since 1965 and of similar years of plant service in the same department have in general progressed to substantially equal higher rates of pay at the same time."
While we will not intrude on the factfinder's role of analyzing and tabulating the raw statistics in the first instance, we do pause to note that appellants' arguments regarding the appropriate conclusions to be drawn from the data deserve careful consideration. On remand the district court should analyze on the record the contentions to both parties regarding these statistics, bearing in mind that the burden is on the defendant to show "convincingly and with statistically fair exhibits" that black employees hired after June 1965 have suffered no economic loss as a result of the company's discriminatory practices. United States Steel Corp., supra, 520 F.2d at 1054.
The district court on remand should also consider the limited use that the defendant makes of these statistics. Defendant relies on its statistics as a basis for comparisons of black and white employees in the same department. Yet in Pettway III we stressed that "those members of the class, either currently situated or present prior to March 31, 1971, within the predominantly black departments . . . are eligible for back pay for the period 1965 to 1971 because of the restrictive effect of the discriminatory testing on their intra-department
Even if the company satisfies its burden of demonstrating that a given group of class members earned as much as white employees with comparable plant seniority, the class, or members of any definable group within the class, may still claim back pay at Stage II
United States Steel Corp., supra, 520 F.2d at 1054-55.
If the district court concludes that some or all of these class members are entitled to move to Stage II, it should follow the burden-of-proof rules respecting individual claims set forth in Pettway III, supra, 494 F.2d at 259-63; United States Steel Co., supra, 520 F.2d at 1055-1057; Baxter v. Savannah Sugar Refining Corp., 495 F.2d 437, 443-45 (5th Cir.), cert. denied, 419 U.S. 1033, 95 S.Ct. 515, 42 L.Ed.2d 308 (1974) and Johnson v. Goodyear Tire & Rubber Co., 491 F.2d 1364, 1379-80 (5th Cir. 1974). In Pettway III we stressed that "the maximum burden that could be placed on the individual claimant in this case [in Stage II] is to
The district court on remand may, of course, consider the class-wide approaches recommended in Pettway III and United States Steel for managing the "quagmire of hypothetical judgment" imposed by this complicated back pay determination. 494 F.2d at 261-62. However, in allowing the district court to avoid the quagmire associated with the uncertain terrain of individual determinations, we did not in Pettway III extend an invitation to abandon the marshes altogether. While the physical and fiscal limitations of the court in granting and supervising relief make the task a difficult one, they must not be allowed to preclude an award of back pay to each and every aggrieved employee.
In conclusion, we express full confidence in the ability of the district court on remand to achieve a result consonant with the important compensatory purposes of back pay and the legal requirements articulated in Pettway III and subsequent cases. The court is free to appoint a master to assist with Stage II, and, as always, the parties are free to negotiate a settlement.
V. The Back Pay Settlement
Those appellants who were members of the back pay subclass raise numerous objections to the district court's approval of the back pay settlement. Their primary contention is that the district court abused its discretion in approving the settlement in the face of widespread dissent by the class representatives and a large majority of the subclass. Appellants also contend that the district court failed to adhere to the required procedures for passing on a proposed consent decree. Finally, appellants argue that the time limitation imposed by the district court for opting into the settlement unfairly impinged on the awardees' rights to appellate review. They request that if the settlement is invalidated, subclass members who opted into the settlement be given an opportunity to disaffirm their award and participate in the proceedings on remand. They ask in the alternative that if the settlement approval is affirmed, awardees who opted out of the subclass by not cashing their back pay checks be given the opportunity to reconsider their decision.
A. Settlement approval
1. Scope of Review
Appellants' objections to the back pay decree raise difficult and provocative questions concerning the use of a settlement in resolving class action disputes. Before
The judgment of the district court in approving a settlement entered into by the plaintiff class will not be overturned absent a showing that the district court abused its discretion in approving the settlement. Id. at 1329; Allegheny-Ludlum Industries, Inc., supra, 517 F.2d 849-50. But in exercising that discretion the district court must carefully consider certain factors and comply with certain procedural safeguards to ensure that the settlement is in the interests of the class, does not unfairly impinge on the rights and interests of dissenters, and does not merely mantle oppression. Our task on appeal is to ensure that the proper procedures were followed below and that the district court did not abuse its discretion in approving the settlement.
2. Objections from the Subclass
Appellants' primary contention is that the district court abused its discretion in approving the settlement over the objections of the class representatives and a large majority of the subclass. In the instant case all three active class representatives objected to the proposed settlement. The elected members of the Committee for Equal Job Opportunity each objected to the settlement. Even assuming that the figures proffered by the defendant are correct, 511 members of the 841 person subclass formally objected to the settlement by signing the June 20, 1975 objections to the decree and notice of intent to appeal. See footnote 3 supra. We may assume that a large percentage of these objectors were workers currently employed in 1975, since no notice of the May decree or June judgment was sent to class members who had left the company prior to May 1975. The back pay checks were not mailed until June 27, and for many this constituted the first official notification of the award. Thus the district court should have known that the number of dissenters to the settlement might have been even greater if class members no longer employed by ACIPCO had had the opportunity to object. Indeed, an additional 78 persons who did not originally object to the settlement later voiced their objections by refusing to cash their back pay checks. See footnote 3 supra. If we treat these 78 subclass members as objectors of whom the district court should have been aware, the number of objectors climbs to 589 or 70 percent of the subclass.
These rules, however, do not mean that the approval of plaintiffs' counsel will always be determinative or that the number of objectors to the settlement is not a significant consideration. We have already discussed the potential conflict of interest between an attorney and a class. See subsection II(B), supra. As Judge Friendly aptly noted in Saylor v. Lindsley, 456 F.2d 896, 900-01 (2nd Cir. 1972), in a substantial number of class action cases the lawyer may be more prone to settle than the class. While the natural bias toward relatively small settlements and large fee awards in class actions may be controlled to a certain extent by the procedural requirements for district court approval of the settlement
We recognize that discretion on the part of the class attorney often is an unavoidable fact of class action life. We noted in our examination of the appealability question that the traditional notion of the "client" deciding important litigation questions is often problematic in the class action context because of the difficulty in identifying the client. See subsection II(B), supra. The class itself often speaks in several voices. Where there is disagreement among the class members concerning an appropriate course of action, it may be impossible for the class attorney to do more than act in what he believes to be the best interests of the class as a whole. If the attorney's decision in the face of such disagreement affects each class member more or less equally, and no allegation is made that the rights of a definable minority group within the class were sacrificed for the benefit of the majority, the attorney's views must be accorded great weight, and the trial judge's decision to ratify the attorney's action will seldom be overturned.
At least in the context of a proposed back pay settlement, however, at some point objections from the class may become so numerous that in a very real sense it can be said that "the class" has not agreed to the proposal, that counsel's perceptions of the best interests of the class are faulty, and that approval of the settlement by the district court constitutes an abuse of discretion. No simple percentages are determinative, of course, and each case must turn on its own facts. While recognizing the difficult task facing the district court in the absence of crisp guidelines and well-articulated standards for review of a settlement in the face of significant dissent from the class, we are firmly convinced that under the peculiar circumstances of this case, approval of the settlement in the face of such widespread dissent evidenced below constituted an abuse of discretion. The district court should not have placed its imprimatur upon this agreement.
One significant factor in our decision is the unanimous disapproval of the back pay settlement by the active named plaintiffs. To be sure, the assent of named plaintiffs is not a prerequisite to the approval of a settlement. See Flinn v. FMC Corp., supra, 528 F.2d at 1174 n.19 (all three class plaintiffs dissented; settlement approval affirmed); Saylor v. Lindsley, supra, 456 F.2d at 899. But where, as here, the class representatives have provided exceptional representation in the past and there is no showing of any conflict of interest, either actual or potential, between the representatives and the class, see subsection II(B), supra, and where, as here, not a single subclass member has stepped forward to object to the named plaintiffs' representation or prosecution of this appeal, we must
We also attach significance to the fact that each elected member of the Committee for Equal Job Opportunity voiced an objection to the settlement. We noted on the previous appeal that this "intense organization" was formed by a majority of the company's black employees in 1965 and has maintained a continued and vigorous participation in this litigation. 494 F.2d at 233-34 and n.53.
Of still greater importance to our decision is the opposition of 70% of the subclass to the settlement. We recognize that a settlement can be fair notwithstanding a large number of objectors. Cotton v. Hinton, supra, 559 F.2d at 1331. Indeed, in Cotton v. Hinton, we affirmed a Title VII settlement approval where a significant percentage of the class objected to the decree.
When viewed from this perspective, we must conclude that the district court was required to withhold its approval of this agreement. All of the active named plaintiffs, all of the elected representatives on the Committee for Equal Job Opportunity, and 70 percent of the subclass objected to the settlement. Attorney Adams agreed to the award without the apparent consent of any of the active class members or any significant portion of the subclass. If 100 percent of the subclass had objected we could say with complete confidence that "the class" has not settled its claim. At least under the limited circumstances of
Our resolve to reverse the district court's approval of the settlement is strengthened by considerations of judicial economy. In Cotton v. Hinton, supra, we recently commented that "[i]n these days of increasing congestion within the federal court system, settlements contribute greatly to the efficient utilization of our scarce judicial resources." 559 F.2d at 1331. Where the proportion of the class which objects to the settlement approaches 70%, considerations of economy counsel against settlement approval. The greater the number of dissatisfied subclass members, the greater the burden placed on the judicial system by subclass members who opt-out of the settlement and pursue their individual claims. After more than 10 years of litigation in this class action, the strain on the judicial system would be reduced by remanding the case for a final resolution of the dispute satisfactory to, or binding upon, the entire subclass, rather than affirming the lower court's approval of a settlement which was opposed by 70% of the subclass and actually rejected by the 52% of the subclass which ultimately opted out of the settlement.
3. Procedural Claims
Appellants also raise a number of procedural objections to the settlement approval. They argue that subclass members not employed by the defendant in May 1975 were not given notice of the proposed settlement as required by Rule 23(e),
The October 30 hearing, at which the objectors were represented, was held months after the back pay settlement was accepted by the court as its June 12, 1975 "Final Judgment". Even if appellants were given a fair opportunity to develop
In conclusion, the district court's approval of the back pay decree must be reversed. In light of objections from the 70% of the back pay subclass, including all the active class representatives and each member of the Committee on Equal Job Opportunity, we hold that the district court abused its discretion in approving the back pay settlement.
B. Opt-in, Opt-out Procedures
Appellants' final argument on appeal is that the time limitations imposed by the district court for opting into the settlement unfairly restricted the awardees' rights to appellate review. Consequently, appellants ask that those awardees who opted into the settlement be given the opportunity to reject their awards and participate in further back pay proceedings on remand. This issue is addressed in subsection V(B)(2) infra. In light of our decision to invalidate the settlement reached below, it is unnecessary to reach appellants' alternative contention that if the settlement is upheld, awardees who opted out of the subclass should be given an opportunity on remand to accept their prior award. Nonetheless, as was true with respect to the procedural aspects of the settlement approval, an important issue with regard to those who opted out of the subclass could recur on remand. In the hope of precluding any necessity for another appeal on this issue, we shall briefly examine the consequence to the awardees of opting out of the subclass.
1. Opting Out of the Subclass
As we discussed in subsection II(C), supra, the district court's November 20 final order provided that the back pay judgment would become null and void as to those subclass members who failed to cash their checks before December 15, 1975. These individuals were relegated to independent lawsuits against the company to recover back pay damages. Awardees who opted into the settlement by cashing their checks thereby released the company of all liability arising from any Title VII violations occurring on or before May 14, 1975.
529 F.2d at 736 (emphasis supplied).
See also Cotton v. Hinton, supra, 559 F.2d at 1333-4, 1338 (Consent decree establishing the right of dissatisfied claimants "to litigate [the] back pay claim in this action under pendent jurisdiction" consistent with United States Steel Corp., supra.) Thus on remand if another settlement of the back pay dispute is reached, the district court should provide those claimants who decide to opt-out of the settlement with an opportunity to assert their individual claims in this action.
2. Rights of Claimants who Opted into the Settlement
We now reach appellants' contention that those awardees who opted into the settlement be given the opportunity to reject their awards and participate in further back pay proceedings on remand. The court's November 20 order required awardees wishing to opt into the settlement to do so by December 15, 1975 or be deemed to have opted out of the subclass. This created a dilemma for dissatisfied subclass members, who were faced with the equally unpalatable alternatives of opting into a possibly invalid settlement or being relegated to individual lawsuits. A decision to opt into the settlement by endorsing the back pay check and thereby releasing the company of all liability for past discrimination might preclude entitlement to a share in a new agreement or award if the settlement were invalidated on appeal. On the other hand, a decision to opt-out of the subclass by failing to cash the tendered check would create the possibility of receiving no back pay award if the appeal were unsuccessful and an individual lawsuit proved unrealistic. As we have previously noted, the opportunity to prove individual damages, even in the same lawsuit, often is not a viable substitute to participation in a lawful settlement.
The procedure adopted by the district court, by requiring claimants to choose whether or not to opt into the settlement before they could exercise their right to appellate review, unfairly burdened the rights of awardees to appeal the settlement and thereby significantly undermined one of the most important procedural protections associated with the approval of a settlement. We hold that the ability of subclass members to opt into a back pay settlement may not be terminated before a final determination of the propriety of that settlement is made.
Those subclass members who were dissatisfied with their award but who nonetheless cashed their back pay checks were denied the opportunity to appeal before choosing whether or not to opt into the settlement. Accordingly, the 399 subclass members who opted into the subclass must be given the opportunity on remand to reject their awards and participate in further back pay proceedings.
If, after further proceedings on remand, the litigants are able to settle their back pay dispute, the period during which awardees may opt into the settlement must remain
On remand the court should reformulate the back pay subclass to include the 442 individuals who declined to accept the back pay tender and any other awardees who disaffirm their award in compliance with the procedures to be established by the district court. A number of options are then open to the court. Appellants in their brief indicate that if provided an opportunity for discovery and hearings to evaluate the adequacy of the settlement, the subclass members might be willing to accept their individual awards. In its discretion the court may wish to permit such discovery. The court might also encourage further settlement negotiations to arrive at a satisfactory subclass award for the remaining claimants. If these procedures prove unsuccessful, the court could compute an appropriate comparability formula as its own judgment or utilize one of the other classwide remedies discussed in Pettway III, supra, 494 F.2d at 260-63, and United States Steel Corp., supra, 520 F.2d at 1055-56, taking care to articulate fully its findings and conclusions in support of the decree. United States Steel Corp., supra, 520 F.2d at 1055. As a last resort the court may utilize the individual-by-individual approach discussed in section IV supra.
Title VII is a vital, though sometimes unwieldy and inefficient, instrument in the long struggle of minority employees for equality of opportunity. This case presents a striking illustration of the limitations of a court, and particularly an appellate court, in resolving satisfactorily the complex and difficult issues that are raised in the Title VII context. The questions before us today have been at once highly technical and disturbingly elusive. They have required an examination of a voluminous and at times impenetrable record and have necessitated an exceedingly lengthy opinion. After twelve years in the courts and scores of pages of appellate consideration, we still
The judgment of the district court is affirmed in part, reversed in part, and remanded for further proceedings consistent with this opinion.
AFFIRMED IN PART, REVERSED IN PART, and REMANDED.
The parties are in agreement that 661 members of the class (the "objectors") filed objections to the June judgment by signing the June 20, 1975 motion for reconsideration which indicated intent to appeal all aspects of the court's order. The litigants also agree that 147 of these objectors were awardees who cashed the proffered back pay checks. The parties disagree as to the composition of the remainder of the objector group. Appellants and the EEOC urge that all the objectors are members of the back pay subclass; the company maintains that 150 of the remaining objectors were excluded from the back pay subclass. We do not view this dispute as decisive of any issue in this appeal and are content, in light of our resolution of the case, to accept the company's statistics. Accordingly, we find that a total of 511 of the objectors (661-150) are members of the back pay subclass, 147 of whom cashed their back pay checks and 364 (511-147) of whom did not. In addition to these 511 subclass members who objected to the court's decree by signing the notice of appeal, another 78 (442-364) subclass members, while not signing the notice of appeal, manifested their dissatisfaction with at least the back pay award by refusing to cash their back pay checks. Thus, a total of 589 (511 + 78) members of the 841 person subclass expressed their dissatisfaction with the back pay award either in writing or by opting out of the subclass. The figures are set forth below in schematic form:
560 F.2d at 229 n.7.
494 F.2d at 248 n.99. Red circling is discussed in greater detail in subsection III(D) infra.
494 F.2d at 218 n. 10.
Appellants maintain that Teamsters does not affect our prior holding to the extent that it was grounded in 42 U.S.C. § 1981. Two of our sister circuits have recently split on this issue, the Fourth Circuit holding that bona fide seniority systems which are protected by section 703(h) of Title VII are not violative of section 1981 and the Third Circuit reaching a contrary conclusion that section 703(h) does not affect the remedial powers of the federal courts under section 1981. Johnson v. Ryder Truck Lines, Inc., 575 F.2d 471 (4th Cir. 1978), 46 U.S.L.W. 2610 (May 23, 1978); Bolden v. Pennsylvania State Police, 578 F.2d 912 (3rd Cir. 1978), 46 U.S.L.W. 2618 (May 23, 1978). Assuming, as we must, that Congress intended section 703(h) to accord absolute protection to pre-Act seniority rights which accrued under bona fide seniority systems, Congress could not have intended such seniority rights to remain subject to revision under section 1981. The same protections should apply whether the seniority system is challenged under Title VII or section 1981. We therefore agree with the Fourth Circuit's holding in Johnson that the protection accorded bona fide seniority systems by section 703(h) apply whether suit is brought under Title VII or section 1981.
The Court finds and concludes from all the evidence:
While we readily admit that we are capable of making mistakes, the three examples of trial testimony quoted in the defendant's reply brief which purport to demonstrate the functional relationship of jobs in the non-craft lines fail to convince us that a mistake has been made here. The company first quotes the following testimony from the superintendent of the steel foundry department:
Next, the following testimony from the Melting Superintendent, Mr. Carlson, is reproduced:
Finally, defendant's reply brief quotes the following colloquy between the court and an ACIPCO Vice President:
This not so astonishing response by an ACIPCO official and the general conclusory statements by Mr. McCauley and Mr. Carlson simply do not support a finding of business necessity. To paraphrase a recent Eighth Circuit opinion, this testimony does not constitute "evidence that each job was an essential prerequisite to the next higher job in every line of progression. Some general evidence only was presented about general structures of lines of progression and their business convenience. But that evidence was not specific enough to meet the test of business necessity." Rogers v. International Paper Co., 510 F.2d 1340 (8th Cir.), vacated on other grounds, 423 U.S. 809, 96 S.Ct. 19, 46 L.Ed.2d 29 (1975). In Pettway III we required that functional relationships to support a finding of business necessity be demonstrated for each position. The testimony quoted above fails to demonstrate such a relationship either position by position, line by line, or verse by verse. Likewise, our examination of those portions of the 1971 trial record cited in the defendant's reply brief reaffirms our conclusion in Pettway III that the record is insufficient to support a finding that positions in the non-craft lines of progression are functionally related.
Finally, we note that this appeal is not the proper vehicle for presenting defendant's disagreement with this court's holding in Pettway III. Alleged errors in a prior decision are properly raised in petitions for rehearing or by writ of certiorari to the Supreme Court. The "law of the case" doctrine, discussed in subsection III(B) supra, precludes reconsideration of decided questions on a subsequent appeal, absent the most cogent reasons such as the avoidance of manifest injustice. Terrell v. Household Goods Carriers' Bureau, 494 F.2d 16, 19-20 (5th Cir.), cert. denied, 419 U.S. 987, 95 S.Ct. 246, 42 L.Ed.2d 260 (1974). See also Carpa, Inc. v. Ward Foods, Inc., 567 F.2d 1316 (5th Cir. 1978). No such reasons are present here.
Qualifications considered in promotion are:
Insofar as this definition of "qualifications" allows the company to fill vacancies on the basis of comparative skill, knowledge, and training before seniority is considered, it is inconsistent with our mandate in Pettway III. If accepted, this definition would allow the company in almost every case to place an incumbent in the line because he was "more qualified" than a transferee, even though the transferee may be fully qualified and have superior plant seniority. On remand the court must provide that bidding be based initially on plant seniority. The company may then reject the senior-most bidder only if he fails to meet a threshold level of skill, knowledge, and training necessary to perform that job adequately.
This provision perpetuates the effects of past discrimination by giving preference for high level jobs to predominantly white employees in similar jobs in other departments over those blacks who could successfully bid on the jobs based on plant seniority and qualifications but for this preference. It has not been justified by business necessity. See Hayes, supra, 456 F.2d at 118.
Judge Wisdom's concurring opinion in Robinson v. Union Carbide Corp., 544 F.2d 1258, 1261 (5th Cir. 1977) discusses standards for Rule 23(d)(2) notice in a similar context. The same standards are applicable here. See id. at 1265. Such notice is important in this Rule 23(b)(2) class action because class members who do not supply the requested information would be precluded from relief in this action, but would be bound by the judgment and precluded from pursuing individual relief in another suit. See subsection V(B)(1) infra.
We deem it appropriate to consider the 78 subclass members as dissenters whose dissatisfaction with the back pay award should have been considered by the district court for two reasons. First, the district court was aware that a substantial portion of the subclass had not cashed their back pay check at the time of the October 30 hearing, because its November 20 final order extended the deadline for opting into the subclass until December 15, 1975. Equally important, subclass members received no notice that the back pay decree had been reached by settlement or that each subclass member had a right to object to the proposed settlement. Such notice is required by Rule 23(e). See Mandujano v. Basic Vegetable Products, Inc., 541 F.2d 832, 835 (9th Cir. 1976). Thus the district court also should have been aware of the possibility that subclass members other than the 511 who signed the June 20 objections might have expressed dissatisfaction with the decree if, as required by Rule 23, they had been given the opportunity to do so.
ACIPCO asserts that the May 21, 1975 letter from the company to all class members then employed by ACIPCO constitutes sufficient Rule 23(e) notice to subclass members of the proposed back pay settlement. The letter, which summarized the May 14 decree, was accompanied by a copy of that degree. The company points to paragraph 15(c) of the May decree, which provides:
This sentence, hidden in the middle of a lengthy and complicated decree, does not constitute adequate Rule 23(e) notice. First, the May 21 letter was sent only to class members presently employed by ACIPCO. Thus subclass members who had left the company prior to May 21, 1975 did not receive this notice. Furthermore, the fact that the company's letter was accompanied by a copy of the May decree makes clear that no settlement could have been contemplated, since the settlement at issue was embodied only in the subsequent June 12 judgment. It thus is not surprising that the sentence relied on by ACIPCO utterly fails to inform the subclass of their rights to raise objections to the settlement or of the options that are open to them in connection with the settlement approval proceedings. See Grunin v. International House of Pancakes, 513 F.2d 114 (8th Cir. 1975); Mandujano v. Basic Vegetable Products, Inc., supra, 541 F.2d 835.
We stress the failure of subclass members to receive notice of any opportunity to object to the settlement because this fact should have influenced the district judge's perception concerning the degree of dissatisfaction within the subclass. The district judge should have realized that many back pay awardees, particularly those no longer employed by ACIPCO on May 21, 1975, lacked realistic opportunity to sign the June 20 objections to the decree because of the company's failure to send adequate notice. Under the circumstances, we deem it appropriate to treat the 78 subclass members who did not sign the June 20 objections but who later refused to cash their back pay checks as having voiced their objections to the court.
We note in passing that even this 70% figure may understate the actual level of dissatisfaction by failing to consider those members of the subclass no longer employed by ACIPCO who received no notification of the appeal and cashed their checks, despite possible dissatisfaction, because they were unaware of any opportunity to voice their dissatisfaction.
If the parties are able to reach an agreement on the back pay issue, the district court should provide full Rule 23(e) notice to all subclass members still eligible for back pay whether or not they are presently employed by the defendant. See, e. g., Mandujano v. Basic Vegetable Products, Inc., supra, 541 F.2d at 835-36.
Paragraph 15-D of the May 14, 1975 decree states
494 F.2d at 263 n. 154.
Consent decrees approved in this circuit have also provided that back pay shall become available to eligible employees only upon exhaustion of all appellate proceedings. See, e. g., United States v. United States Steel Corp., 520 F.2d 1043, 1056-57 (5th Cir. 1975).
The situation with regard to the viability of appeal changes dramatically, however, when a sizable portion of the class does not opt into the settlement. In such circumstances, if the back pay settlement is held invalid on appeal, a classwide remedy remains a viable alternative on remand.