A New York judge has given the go-ahead for a class-action lawsuit against KPMG by female employees claiming gender discrimination by the firm.
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KPMG had filed a motion last February to dismiss the case as well as the class-action claims and individual claims, citing the Supreme Court’s 2011 ruling in a case involving Wal-Mart female employees who had also sued the retailer for gender discrimination. In that case, the Supreme Court had ruled against giving the case class certification, saying the plaintiffs did not have enough in common to constitute a class.
However, U.S. District Judge Jesse Furman of the Southern District of New York ruled last Thursday that the class-action claims against KPMG could proceed.
A former senior manager, Donna Kassman, filed suit against the firm in 2011 when she was repeatedly denied promotion after returning from maternity leave (see KPMG Sued for Gender Discrimination). Four other female employees joined the $400 million class-action lawsuit. Women comprise approximately half of KPMG’s employees, according to the plaintiffs, but only 18 percent are partners.
In his ruling Thursday, Judge Furman rejected KPMG’s assertion that the Supreme Court’s ruling in Wal-Mart Stores Inc. v. Dukes prevented the female employees from suing as a class and said the precedent “did not close the door altogether on the possibility of certifying a class based on a policy of giving discretion to lower-level supervisors.” Furman confirmed that a motion based on Dukes’ analysis is premature if brought prior to the class certification stage.
The court also ruled that it would not read the Dukes case to deny standing to former employees to seek injunctive or programmatic relief or to seek Rule 23(b)(2) class-action certification, concluding that “it is a mistake to read Dukes as having adopted a ‘blanket rule that always denies standing to ex-employees,’ which would have implications far beyond the class-action context.”’
The judge also rejected KPMG’s claims that disparate impact claims were insufficiently pled, that New York state law did not provide a basis for a class of employees who lived or worked in New York, that the Equal Pay Act claims of the plaintiffs named in the lawsuit were insufficiently pled, that their claims were improperly joined, or that various other individual claims were insufficiently pled.
The court did agree, however, that claims for outside the statutory time period would be counted as untimely and that New York state law did not provide a basis for a nationwide class, which were positions to which the plaintiffs had mostly agreed, except for one minor point, according to their attorneys.
“First he does reject the defendants’ argument that the Dukes v. Wal-Mart Supreme Court decision should preclude the plaintiffs from asserting class claims at this stage of the litigation,” said lead counsel Katherine Kimpel, managing partner of the Washington, D.C., office of Sanford Heisler LLP. “Those class claims are nationwide, not just in New York. The nationwide class claims are able to move into discovery because of the court’s decision today. He also said, in addition to those nationwide class claims, there are New York state class claims as well, so there’s both a nationwide class and a New York state class. What the court said was they can go into discovery on a class-wide basis rather than an individual basis, and we’ll be able to seek class certification in the future.”
She believes it was an important ruling. “What KPMG was trying to do was to prevent women from joining together and using the class-action mechanism to try and prove that they as individuals, but also as a group, had experienced discrimination at KPMG,” said Kimpel. “They wanted to make each woman fight individually in individual cases and to not be able to get evidence or ask for discovery from KPMG of their overall policies, practices and procedures for how women are compensated, promoted, developed and assigned to jobs. KPMG didn’t want them to be able to get that information in discovery and used that motion to try to prevent that, and the court did not allow them to do that. The court is allowing the women to go together as a class both on behalf of themselves and on behalf of the other women to seek that information on behalf of all the women that worked there during the time period and still do.”
KPMG contends that it is committed to diversity and rejected the basis of the lawsuit. “KPMG is recognized as a leader for its strong commitment to supporting women in the workplace,” said a statement forwarded by KPMG spokesman Manuel Goncalves. “Diversity and inclusion have long been priorities for the firm, and they are woven into our culture and everything we do. We continue to believe this lawsuit is entirely without merit, and we intend to vigorously defend ourselves.”
The two sides will now go into the discovery phase of litigation with another court appearance set for next month. “The court has ordered the parties to appear before him on the 14th of March,” said Kimpel. “On that date we will set a schedule that will dictate discovery. At that point, the parties will be able to begin exchanging all of their discovery [documents]. They’re going to be able to start taking depositions. This is going to be a very intensive process. KPMG will essentially be under a microscope for its policies, practices and procedures, and how it’s made its decisions, and implemented its policies in such a way that has been to the detriment of the women who work there.”
Kimpel believes the ultimate outcome of the case could have an impact on other accounting firms besides KPMG. “As our claim lays out, statistics in the accounting industry when it comes to gender representation are really atrocious,” she said. “There is no doubt in my mind that women in the accounting industry are routinely victims of gender discrimination. Now that doesn’t mean that every person who works in accounting is intentionally discriminating. It doesn’t mean that every company is a bad company. But what it does mean is that the industry as a whole has a real problem that it needs to contend with. This decision, I think, provides a really clear rebuke to this thought that any accounting firm might have that the Supreme Court in its decision in Dukes v. Wal-Mart got rid of class actions. The Supreme Court didn’t get rid of class actions, and any accounting firm is exposed if they are discriminating against their women, either intentionally, or even if it’s unintentionally. Their policies have what’s called a disparate impact in the law. Employers, to avoid liability or violations of our anti-discrimination laws, have to make sure affirmatively that their policies, practices and procedures don’t give rise to disparities. If they do, even if those polices were implemented and designed with the best of intentions, if women are still being systematically underrepresented, under-promoted and underpaid, they’re liable for that under federal law. This decision makes very clear that while the Supreme Court decision in Dukes vs. Wal-Mart helped clarify areas of class-action law and perhaps imposed certain standards at certain points of the process for what plaintiffs have to show in order to proceed as a class, it did not get rid of class actions altogether.”