Reynolds v. Butts

PUBLISH
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT FILED
U.S. COURT OF APPEALS
ELEVENTH CIRCUIT
02/02/2000
No. 97-6349
THOMAS K. KAHN
CLERK
D.C. Docket No. CV 85-T-665-N
JOHNNY REYNOLDS, individually on behalf of himself and as representative of a
class of black employees of the Highway Department, State of Alabama, similarly
situated,
Plaintiff-Appellee-Cross-Appellant,
CECIL PARKER, et al.,
Intervenors-Appellee-Cross-Appellant,
versus
G. M. ROBERTS, in his official capacity as Director for the Alabama Department of
Transportation, et al.,
Defendants-Appellants.
Appeal from the United States District Court
for the Middle District of Alabama
(February 2, 2000)
Before TJOFLAT and DUBINA, Circuit Judges, and STORY*, District Judge
__________________________________________________
*Honorable Richard W. Story, U.S. District Judge for the Northern District of
Georgia, sitting by designation.
TJOFLAT, Circuit Judge:
This appeal arises out of a long-standing racial discrimination class action
brought by job applicants and two groups of employees and former employees against
the Alabama Department of Transportation. After the parties entered into a race-
neutral consent decree providing for prospective relief relating to job qualifications
and promotion criteria, the district court, sua sponte, entered a judgment awarding the
members of one of the employee groups (of current and former employees) back pay
in the sum of $17,450,077, plus interest in the sum of $17,282,410. Reynolds v.
Alabama Dep’t of Transp., 996 F. Supp. 1156 (M.D. Ala. 1998). The Department of
Transportation appeals. We vacate the judgment and remand the case for further
proceedings consistent with this opinion.
I.
The named plaintiffs brought this suit against the Department of
Transportation (the “Department”) in May 1985 on behalf of all black “merit” and
“non-merit” employees and former employees of the Department and all
unsuccessful black applicants for positions within the Department.1 Alleging
1
In addition to the Department, the plaintiffs sued various state officials. The lawsuit was
styled initially as Reynolds v. King. It became Reynolds v. Roberts, then Reynolds v. Alabama
Department of Transportation. Its present style is Reynolds v. Butts; Butts was the director of the
Department when the Department took this appeal. He has been replaced by G. M. Roberts. We
refer to the defendants in this case collectively as the Department.
The instant lawsuit has become intertwined with a racial discrimination suit
2
violations of Title VII of the Civil Rights Act of 1964, 42 U.S.C. §§ 2000e-2000e-
17, 42 U.S.C. § 1981, and the Equal Protection Clause of the Fourteenth
Amendment, plaintiffs sought monetary and injunctive relief under those statutes
and under 42 U.S.C. § 1983. According to the plaintiffs, the Department was
discriminating against all black employees and job applicants on account of their
race, and had been doing so since an unspecified point in time prior to May 21,
1979. The discrimination consisted of (1) using non-job related criteria that had
the effect of precluding blacks from being hired or promoted, (2) prohibiting black
employees from gaining the job experience necessary for promotion, and (3)
granting promotions and pay increases to white employees who were less qualified
than their black counterparts. The Department, in its answer, denied the plaintiffs’
allegations.2
brought by the United States against the Alabama State Personnel Board and various
state agencies. United States v. Frazer, 317 F. Supp. 1079 (M.D. Ala. 1970). After
a bench trial, the district court found that the Board and the defendant agencies had
systematically discriminated against blacks and ordered injunctive relief. See id. In
a subsequent proceeding in that case, the court found that the Department of Transportation
was using employment registers to maintain an all-white workforce and to circumvent the court’s
injunction; it therefore entered additional injunctive relief. See United States v. Frazer, No. 2709-N
(M.D. Ala. Aug. 20, 1976). In their complaint in the instant case, the plaintiffs alleged that the
Department was not complying with the injunctions in Frazer. In July 1992, the district court
consolidated the still-pending Frazer suit, now styled United States v. Ballard, with the instant case.
2
The Department’s answer also presented affirmative defenses not relevant here.
3
In October 1986, the court certified three plaintiff classes. The first class
consisted of any black person who unsuccessfully applied for a merit position in
the Department at any time after May 21, 1979. The second class included all
blacks employed by the Department at any time after May 21, 1979 who were
permanent employees under the Department’s merit system (the “merit”
employees) and therefore eligible for promotion. The third class consisted of a
portion of the blacks employed by the Department at any time after May 21, 1979
as temporary employees (the “non-merit” employees). During their employment in
the Department, these employees had applied for merit positions, but the
Department allegedly had rejected their applications on account of their race. Each
class sought injunctive relief in the form of an order directing the Department to
discontinue its current hiring and promotion policies and practices and requiring it
to implement an affirmative action program. In addition, each class member
sought injunctive and compensatory relief. The members of the first class sought
the positions they would have received but for the Department’s discriminatory
hiring policies, together with the pay they would have earned. Each member of the
second class contended that he or she had been denied promotion(s) on account of
race, and therefore sought an order granting the promotion(s) and/or back pay.
Each member of the third class contended that, while employed in the Department,
4
he or she had applied for, but had been denied, merit-employee status on account
of race, and therefore sought instatement in such status and/or back pay.
After the parties joined issue, and engaged in discovery, they entered into
settlement negotiations. In 1988, and again in 1991, they presented a proposed
consent decree to the district court for approval. On each occasion, some members
of the plaintiff classes objected to the entry of the decree; the district court
sustained their objections and refused to enter the decree.
In June 1992, the case proceeded to trial before the court. Near the end of
the plaintiffs’ case, the parties asked the court to recess the proceeding indefinitely
so that they could engage in further settlement negotiations. The court granted
their request. In November 1993, they reached a partial settlement, in the form of
a proposed consent decree. The proposed decree provided a range of prospective
class-wide injunctive relief. Among other things, it set hiring and promotion
quotas for blacks – 33% of the positions in each job classification in the
Department would be set aside for blacks. To ensure an adequate pool for this set-
aside program, the decree directed the Department to mount an aggressive
recruiting campaign at historically black colleges and universities. Finally, the
decree required the Department to establish a grievance procedure for its
employees.
5
The parties presented the proposed decree to the district court, which, in
turn, scheduled a hearing for January 19, 1994 to entertain any objections members
of the plaintiff classes, or others likely to be affected (like white employees of the
Department), might have to the terms of the proposed decree. On January 13, a
group of white Department employees (the “Adams Intervenors”) moved the court
for leave to intervene on behalf of the Department’s non-black employees in order
to challenge the race-conscious provisions of the proposed decree – specifically,
the 33% quota requirement for all job classifications in the Department. The court
granted the motion, Reynolds v. Roberts, 846 F. Supp. 948, 953-54 (M.D. Ala.
1994), and subsequently certified an additional class, consisting of the
Department’s non-black employees.
The January 19 hearing was held as scheduled. Over 200 people attended
the hearing, including many non-black employees of the Department. The
objections to the race-conscious aspects of the proposed consent decree were such
that the parties withdrew it and, with leave of court, went back to the drawing
board. By late February 1994, the plaintiffs and the Department decided to divide
the previously proposed decree into three parts, called Consent Decrees I, II, and
III. Consent Decree I contained the provisions that all sides agreed provided only
race-neutral prospective relief. Consent Decrees II and III contained provisions
6
that were acceptable to the plaintiffs and the Department, but opposed as race-
conscious by the Adams Intervenors.
The parties submitted Consent Decree I to the district court for approval,
and, on March 7, the court held a hearing on the fairness of the proposal. No one
other than the parties’ attorneys appeared at the hearing, and no one objected to the
entry of the decree. The court approved the decree and, by order entered March
16, 1994, adopted it in full.3
Consent Decree I is composed of a series of “Articles” which revamped the
process by which the Department hires, promotes, classifies, and pays its
employees. The decree abolished the system of “employment registers” from
which positions were filled and promotions were granted, and created new
qualifications and procedures for hiring and promotion. It also created new
procedures for, among other things, rotation of job duties, recruitment, and
training.
3
Although it is not clear from the record, it appears that, after the entry of Consent Decree
I, the plaintiffs and the Department presented Consent Decrees II and III to the district court for
approval. On January 23, 1998, after the filing of this appeal, the court, over the Adams Intervenors’
objection, entered an order adopting one paragraph of Consent Decree II. See Reynolds v. Alabama
Dep’t of Transp., 996 F. Supp. 1118 (M.D. Ala. 1998). The Adams Intervenors have challenged this
action in a separate appeal to this court, No. 98-6102. That appeal is still in the briefing stage.
7
The provisions of the decree at issue in this appeal are portions of the
Preamble, Article 19 and Article 20.4 They address the race-discrimination claims
of the individual members of the three plaintiff classes – the merit employees, the
non-merit employees, and the unsuccessful job applicants – and provide for the
trial of those claims before the court in the event they are not settled.5
The Preamble to the Consent Decree states:
The following terms and provisions of this Consent Decree are
accordingly agreed to in final and complete resolution of all class
issues which have been asserted in the case, subject to the provisions
of this Decree providing for further proceedings, including but not
limited to Article[] 20. . . .
Similar language is repeated in Article 19, titled “General”:
Subject to the provisions of this Decree permitting or requiring further
proceedings, including but not limited to, Article[] 20 . . ., this Decree
constitutes full and complete relief on all claims, causes of action, and
allegations which have been asserted in this action.
Article 20 explains how the members of the three plaintiff classes and the
Department are to proceed with the individual claims of race discrimination.
4
The Articles of the decree are designated with Roman numbers. The texts of the Articles,
however, refer to the Articles in Arabic numbers. For simplicity, we employ the latter.
5
The Preamble and the relevant portions of Articles 19 and 20 in referring to the “trials” of
the class members’ claims “by the Court” are silent, as are the parties’ briefs on appeal, as to
whether such claims are to be tried to the district court or to a jury.
8
Because this article is at the heart of the dispute in this case, we reprint the article
in its entirety:
ARTICLE 20
FURTHER PROCEEDINGS REGARDING CLASS MEMBERS
1. Further negotiations and proceedings are required to resolve the
claims for monetary and non-monetary remedies for individual
members of the class[es] (including the named plaintiffs and
intervenors), provided however, that this Decree does not in and of
itself entitled [sic] any such class member to such remedies. Such
claims shall be resolved first by settlement negotiations and then, to
the extent not resolved by settlement negotiations, by the Court.
2. The parties will make all reasonable efforts to resolve all such
claims of the members of the class (including the named plaintiffs and
intervenors) according to a schedule to be mutually agreed upon
within 10 days after preliminary approval of this Decree by the Court
or, in the event the parties cannot mutually agree on such schedule
within such 10 day period, the Court will enter an Order embodying a
schedule. Regardless of whether the schedule is mutually agreed upon
by the parties or embodied in an Order entered by the Court, such
schedule shall contain specific deadlines for the exchange of
information and for offers and counter-offers to enable settlement
negotiations on such claims to take place within 90 days after the
effective date of this Consent Decree and, in the event such settlement
cannot be achieved, for trial on that phase of the case to commence no
later than 180 days after the effective date of this Decree.
3. Such schedule shall be presented to the Court for approval or
modification, and once finalized shall be entered as an Order of the
Court. In the absence of agreement on such schedule within 10 days
of the preliminary approval of this Decree, the Court will enter its own
schedule aimed at settlement negotiations taking place within 90 days
after the effective date of this Decree and scheduling that phase of the
9
trial of this case to commence no later than 180 days after the
effective date of this Decree.6
For reasons not appearing in the record, the parties could not agree on a
schedule “for the exchange of information and for offers and counter-offers,” as
required by Article 20; nor did the district court enter “its own schedule aimed at
settlement negotiation . . . and scheduling that phase of the trial of this case,”
involving the claims of the individual class members, as contemplated. Further,
neither counsel nor the court were able to adhere to the time table prescribed by
Article 20. Rather, counsel for the plaintiffs and the Department undertook to
establish a means to identify the members of the merit-employee class (both
current and former employees) who might have meritorious claims that the
Department, on account of their race, (1) either refused to assign them work that
would qualify them for promotion to a higher job classification or (although they
were qualified for such promotion) refused to promote them, or (2) treated them as
if they had been promoted to a higher job classification by assigning them work in
such classification, but refused to pay them the wage called for by that
classification. Counsel were unsuccessful in this endeavor.
6
In providing for the disposition through settlement or trial of the claims of the individual
class members, Article 20 parenthetically includes the claims of the “intervenors,” meaning the
individual members of the Adams Intervenor class. Because the members of that class have asserted
no claims of race discrimination, we are at a loss as to why they were included in Article 20.
10
When counsel for the plaintiffs and the Department were unable to arrive at
a means to identify the meritorious claims, plaintiffs’ counsel, in January 1995,
filed a “Motion to Set Hearing to Determine Method of Back-Pay Calculation.” In
that motion, plaintiffs’ counsel asserted for the first time that Consent Decree I had
resolved that the Department had discriminated against each member of the three
plaintiff classes as alleged. In other words, in addition to conceding that its
policies and practices for hiring, job assignment, and promotion were racially
discriminatory and should be struck down, the Department had admitted that it had
discriminated against the individual members of the plaintiff classes on account of
their race when it denied them employment or promotion(s) and the wages they
would have earned. In light of such an admission of liability, plaintiffs’ counsel
contended, the litigation should proceed to the next step: a determination of the
amount of back pay due the unsuccessful job applicants (for merit positions), the
merit employees, and the non-merit employees. In short, everyone would recover
something.
The plaintiffs moved the court to determine a method for calculating back
pay in an effort to avoid a separate trial on the damages element of each individual
class member’s claim. If required to try each claim separately, plaintiffs suggested,
11
the “process would degenerate into [a] quagmire of hypothetical judgments.” One
of the methods plaintiffs proposed was
‘a formula of comparability or representative employee earnings
formula.’ With that method, ‘approximations are based on a group of
employees, not injured by the discrimination, comparable in size,
ability and length of employment – such as “adjacent persons on the
seniority list or the average progress of persons with similar seniority”
– to the class of plaintiffs.’7
The Department’s immediate response to the plaintiffs’ motion was to deny
that Consent Decree I determined that it was liable to the individual class members
as plaintiffs contended. Without deciding whether Consent Decree I had
adjudicated the Department’s liability to the individual class members for back
pay, the district court ordered the parties to begin negotiations on a class-wide
formula for determining back pay – as if the Department were liable to each class
member for back pay. The Department complied with the court’s order, but
continued to assert that, if the case did not settle, the trial, which had been
interrupted in 1992, should resume. In the Department’s view, absent a global
settlement, the parties would have to return to the courtroom and litigate (1)
whether the Department had discriminated against all black employees and job
7
The plaintiffs took this language from the former Fifth Circuit’s decision in Pettway v.
American Cast Iron Pipe Co., 494 F.2d 211, 262 (5th Cir. 1974) (Pettway III). Neither the plaintiffs’
motion nor the record indicates precisely what the quoted language was supposed to mean in the
context of the instant case.
12
applicants on account of their race, as alleged in the plaintiffs’ complaint, and, if
the Department had done so, (2) whether it had discriminated against the individual
members of the three plaintiff classes, as alleged.
The parties began their negotiations by focusing on the class consisting of
the merit employees (both current and former) who had been denied promotion(s).
They deferred to another day discussion of formulae that would apply to the
classes consisting of job applicants and non-merit employees (who were denied
instatement in merit positions) because arriving at formulae for those classes would
apparently be problematic. On August 28, 1995, the parties jointly filed a “Report
of Points of Agreement and Disagreement Regarding Formula for Determination of
Remedies under Article Twenty of Consent Decree I” (referred to herein as the
“August 28 Report”), which summarized where the parties stood in their
negotiations over a back pay formula for the merit employees.
The parties agreed to a basic framework for determining the amount a class
member should recover; they disagreed, however, as to what a class member would
have to demonstrate in order to recover. The plaintiffs’ position was that Consent
Decree I had settled the liability issue; therefore, all a class member would have to
show was the difference (if any) between what the member and a similarly situated
white employee were paid during the class member’s employment. The
13
Department agreed that the amount of a class member’s recovery should be
determined by comparing the class member’s pay with a similarly situated white
employee’s pay; it disagreed, however, as to which white employees would be
used for comparison purposes (and whether members of the merit employee class
should have the right to opt out and sue the Department separately). In addition,
the Department continued to maintain that, in order to recover anything, a class
member had to show that he or she had been denied promotion(s) on account of
race.
Having been advised of the parties’ disagreements on the issues of the
Department’s liability (to the members of the three plaintiff classes) and an
appropriate back pay formula (for the merit employees), the district court, in May
1996, held hearings on the back pay formula, and entertained testimony from
plaintiffs’ and the Department’s experts and from an expert the court had
appointed. At the beginning of these hearings, the court addressed the threshold
liability issue and announced (from the bench) that Consent Decree I had
established “class-wide liability” against the Department on the claims of the
individual members of each of the three plaintiff classes.8 The court further stated
8
The court based its ruling on statements the parties’ attorneys purportedly had made at
a previous hearing on the plaintiffs’ request for the award of interim attorney’s fees;
the court did not identify, however, the statements on which it was relying. On May
14
that its rulings on the back pay formula for the merit employees would “proceed . .
. based on that finding [of liability].” After hearing evidence from the expert
witnesses, the court struggled with the problem of identifying the white employees
who should be compared with a given class member for purposes of determining
how much back pay to award the class member. In the process of doing this, the
court apparently realized, though it did not explicitly acknowledge, that,
notwithstanding its earlier conclusion that in entering into Consent Decree I the
Department admitted that it had discriminated against every class member, the
Department had not discriminated against some class members.9 Consequently,
these class members had not been injured and therefore were not entitled to
promotion or back pay.10
By January 1997, the district court identified the members of the merit class
who were not entitled to relief (promotion or back pay): Any member of the class
who had earned as much or more than the average pay earned by comparable white
16, 1996, the court issued a written order, affirming practically verbatim what it had
stated from the bench.
9
In other words, although the Department had a policy of discriminating against black merit
employees on account of their race, the Department had not implemented the policy in some cases.
10
Previously, in negotiating over a method, or formula, for determining how much back pay
the members of the merit class should recover, the parties agreed that some class members were not
entitled to back pay.
15
employees had not been injured and thus would neither be promoted nor receive
back pay. The remaining members of the class would receive back pay in
accordance with a court-modified version of the formulae the parties had submitted
in the August 28 Report.11
Once the court made these rulings, the plaintiffs filed a “Motion for Entry of
Judgment.” On April 16, 1997, the court granted the motion and gave the merit
employees (who had been injured) judgment for $34,732,487. That sum consisted
of $17,450,077 in back pay and $17,282,410 in interest.12
The Department appeals this judgment.13 The plaintiffs cross appeal,
challenging the formula the district court used in identifying the class members
who were not entitled to relief and in calculating the back pay for the remainder of
the class. We conclude that the district court erred in interpreting Consent Decree I
as an admission of liability by the Department – that it had discriminated against
the three plaintiff classes, and the individual members thereof, with respect to its
11
In addition to these rulings, the court held that no member of the merit employee class
could opt out and sue the Department separately. This ruling effectively granted the Department
judgment on the claims of the non-injured members of the merit employee class.
12
The court ordered the Department to deposit the total amount of the judgment in escrow
within 60 days.
13
The judgment at issue is a partial final judgment. The court entered the judgment
pursuant to Fed. R. Civ. P. 54(b), thereby making it appealable under 28 U.S.C. § 1291.
The Adams Intervenors also appeal the district court’s judgment. Since their claims of error
are the same as the Department’s, we refer to both appeals as the Department’s appeal.
16
hiring and promotion decisions. We therefore vacate the judgment at issue and
remand the case for further proceedings. Given this disposition, the plaintiffs’
appeal is moot, and we accordingly dismiss it.
II.
The Department contends that the district court erred in interpreting Consent
Decree I to establish “class-wide liability” such that the merit employees could
obtain relief without demonstrating that they were denied promotion(s) or back pay
on account of their race. The plaintiffs, in addition to asking us to affirm the
district court’s judgment, contend that a waiver of appeal provision in Consent
Decree I bars the Department’s appeal.14 If the plaintiffs are correct, we need not
consider the Department’s appeal. We therefore address this issue first.
A.
The waiver of appeal provision relied upon by the plaintiffs appears in
Article 19 of the consent decree:
All parties agree and stipulate that there will be no appeal from this
Consent Decree or from any ruling, order, or decision entered by the
14
The plaintiffs moved this court to dismiss the Department’s appeal, and we
carried their motion with the case. We now deny their motion.
17
Court in the case relating to any issue or subject encompassed within
the terms of this Decree. Nothing herein shall prohibit the non-class
employees or any other person not a party to this Decree from having
the right to appeal any interpretation, ruling, decision or order.
As a general rule, “[a] party normally has no standing to appeal a judgment
to which he or she consented.” 5 Am. Jur. 2d Appellate Review § 619 (1995). See
White v. Commissioner of Internal Revenue, 776 F.2d 976, 977 (11th Cir. 1985).
Accordingly, the words “there will be no appeal from this Consent Decree” were
not needed to preclude appellate review of the decree’s substantive provisions.
There are exceptions to the general rule; one is that an appeal will lie if “the
judgement allegedly deviates from the terms of the parties’ agreement.” 5 Am. Jur.
2d Appellate Review § 619 (1995). The Department invokes this exception by
contending that, in interpreting the decree to create “class-wide liability,” the
district court effectively entered a new decree, one that “deviates from the terms of
the parties’ agreement.” The district court’s deviation, therefore, is subject to
appellate review.
If the Department is correct, the plaintiffs respond, Article 19's waiver-of-
appeal provision is meaningless – specifically, the words “there will be no appeal .
. . from any ruling, order, or decision entered by the Court in the case relating to
any issue or subject encompassed within the terms of this Decree.” The district
court’s interpretation of the decree to establish “class-wide liability,” including the
18
Department’s liability to the individual class members, necessarily relates to an
“issue or subject encompassed within the terms” of the decree; accordingly, the
plaintiffs contend, the interpretation is not subject to appellate review.
If the plaintiffs are correct, the waiver provision would bar appellate review
of any interpretation the district court might give the decree. The provision would
also bar appellate review of the court’s disposition of the individual claims for
instatement, promotion, or back pay – regardless of the errors the court might
commit in disposing of those claims.15 In short, the waiver provision would give
the district court unbridled discretion to rewrite Consent Decree I – as long as the
court’s “ruling, order or decision” “relat[es] to” or is “encompassed within the
terms” of the decree.
Long standing precedent evinces a strong public policy against judicial
rewriting of consent decrees. “[A] district court may not impose obligations on a
party that are not unambiguously mandated by the decree itself.” King v. Allied
Vision, Ltd., 65 F.3d 1051, 1058 (2d Cir. 1995). As the following discussion
makes clear, the district court rewrote Consent Decree I, and imposed an obligation
on the Department that the decree did not “unambiguously mandate[],” when it
15
Implicit in the decree’s provisions regarding the litigation of the individual claims for
relief – specifically, Article 20, which we quote in the text supra – is the notion that the court would
properly apply the law. In theory, Article 19's waiver provision would bar review of any error the
court might make in processing those claims, no matter how fundamental the error might be.
19
declared that the Department, in entering into the decree, had conceded “class-wide
liability,” including liability to the members of the three plaintiff classes.
Accordingly, the waiver-of-appeal provision of Article 19 does not bar the
Department’s appeal, which we now consider.
B.
As a general matter, the rules we use to interpret a consent decree are the
same ones we use to interpret a contract – since a consent decree is a form of
contract. See Jacksonville Branch, NAACP v. Duval County Sch. Bd., 978 F.2d
1574, 1578 (11th Cir. 1992). What a contract provision means, or whether it is
ambiguous, are questions of law, which we review de novo. See Equitable Life
Assurance Soc’y v. Sublett (In re Sublett), 895 F.2d 1381, 1384 (11th Cir. 1990).
If the contract provision is ambiguous and the trial court must look to extrinsic
evidence to determine the parties’ intent, we review its findings of fact (or those of
the jury) as to the parties’ intent for clear error. United Benefit Life Ins. Co. v.
United States Life Ins. Co., 36 F.3d 1063, 1065 (11th Cir. 1994). With these
principles in mind, we consider the Department’s argument that Consent Decree I
did not establish the liability the district court found.
20
The district court did not articulate its reasons for concluding that the
consent decree rendered the Department liable for the relief the members of the
three plaintiff classes were seeking until after the Department took this appeal on
April 24, 1997. In fact, we suspended the briefing schedule for this appeal pending
the district court’s issuance of an order explaining the basis for its finding of
liability – in particular, the basis for awarding the merit employees back pay relief
without entertaining proof of their respective claims.
On March 18, 1998, the district court issued its order. Reynolds v. Alabama
Dep’t of Transp., 996 F. Supp. 1156 (M.D. Ala. 1998). In that order, the court
stated that “neither Consent Decree I, nor the August 28 report, expressly indicated
whether class-wide discrimination ha[d] been established.” In fact, the most
plausible reading of the consent decree “at first blush” was that “the issue [of
liability] had been left open, with the plaintiffs and the defendants simply to litigate
the issue upon resumption of the trial.” Id. at 1179.
Drawing on a phrase from the Preamble of the consent decree – that the
decree constituted the “final and complete resolution of all class issues” – the court
nonetheless concluded that “both the plaintiffs and the [Department] agree[d] that
the decree should not be read as silent on the liability issue.” Id. (emphasis in
original). The liability issue had been settled; the plaintiffs had made out a case for
21
class-wide liability, and the Department had consented to the entry of a decree
abolishing the Department’s allegedly discriminatory employment and promotion
policies.16 In the court’s view, the Department’s agreement that the plaintiffs did
not have to offer further proof of discrimination in order to obtain the class-wide
relief the decree provided constituted an admission that the Department had
discriminated against the plaintiff classes as alleged in the complaint. The court
expressed this point in its March 18, 1998 order: the Department’s agreement to
the relief afforded by the consent decree “[could not] be logically interpreted as
anything other than as an extensive effort to redress existing class-wide
discrimination.” Id. at 1182.
This admission, of course, did not answer the question whether the
Department had conceded that it was liable to the individual class members for the
relief they were seeking – instatement or promotion and/or back pay. To answer
that question the court took the following approach. First, it concluded that the
phrase “final and complete resolution of all class issues” in the decree’s Preamble
16
The court read the Department’s position on post-consent decree liability as this: all that
remained to be litigated were the claims of the individual class members for instatement or
promotion, and back pay. To prevail on their claims, the class members would have to satisfy the
McDonnell Douglas test by demonstrating that (1) they belonged to a protected class; (2) they were
subject to an adverse job decision; (3) the employer treated similarly situated employees outside
their classification more favorably (i.e. a white was hired or promoted instead); and (4) they were
was qualified to do the job. See McDonnell Douglas Corp. v. Green, 411 U.S. 792, 802, 93 S. Ct.
1817, 1824, 36 L. Ed. 2d 668 (1973).
22
is ambiguous. Having drawn that conclusion, the court turned to several pieces of
extrinsic evidence to resolve the ambiguity. They included: (1) a paragraph in the
notice sent to the plaintiff class members (prior to the entry of Consent Decree I)
which indicated that the case would advance to the “remedies” stage if the decree
were approved and entered;17 (2) statements made by the Department’s counsel
after the trial resumed in September 1997 (five months after the court entered the
$34 million judgment for back pay); (3) the presence of an express disclaimer of
liability in the consent decrees the parties proposed in 1988 and 1991 (which the
court rejected), and lack of an express disclaimer of liability in Consent Decree I;
and (4) plaintiffs’ counsel’s representation that, while negotiating the terms of
Consent Decree I, the Department’s attorneys conceded that the Department had
discriminated against the plaintiff classes as alleged in the complaint.18
After considering these pieces of evidence, the court found that the phrase
“final and complete resolution of all class issues” meant that the Department’s
17
A subsequent paragraph in the notice indicated that the remedies stage would involve
separate trials of the individual class members’ possessive claims for relief:
The proposed Consent Decree, by itself, does not guarantee that any particular
member of the class will be entitled to back pay or front pay, but it also does not
limit the amount of such relief to which any class member may be entitled in the
future proceedings to be held on that phase of the case.
18
Plaintiffs’ counsel made these representations to the district court on several occasions
– in their pleadings, in their memoranda filed in support of their pleadings, and in the well of the
courtroom. They made the same representations to this panel, during oral argument, and in a post-
argument submission the panel requested.
23
hiring and promotion policies, as implemented, had discriminated against all three
plaintiff classes as alleged in the complaint, and warranted not only the prospective
injunctive relief the consent decree provided, but the relief the individual class
members were claiming as well. The court went on to find that even if this
evidence did not establish such global liability, the August 28 Report rendered the
Department liable to the merit employee class for back pay because, in that report,
the Department agreed to a framework for a back pay formula.19 In effect, such
agreement constituted a settlement of the back pay claims of the merit class
members.
We cannot accept the district court’s conclusions that the consent decree
established that the Department had discriminated against the members of the three
plaintiff classes and, therefore, was liable for the class-wide prospective relief the
decree granted and relief the individual class members were seeking. Finally, we
cannot accept the contention that the August 28 Report rendered the Department
liable for the back pay the court awarded the merit employees on April 16, 1997.
We state our reasons below.
19
The court concluded that, in agreeing to the framework for a formula, the Department
conceded liability; thus, “even in the absence of a class-wide liability finding under the consent
decree, the court would still find class-wide liability under the formula.” Reynolds, 996 F. Supp.
at 1186. Presumably, the pieces of evidence cited in (1)-(4) above buttressed the
court’s finding.
24
1.
The district court concluded that, by inserting the phrase “final and complete
resolution of all class issues” into the Preamble of the consent decree, the parties
intended that “the decree should not be read as silent on the liability issue.” Such
an intent does not logically follow from the quoted phrase. What the phrase
obviously means is that the consent decree finally and completely resolved the
plaintiffs’ claims for prospective class-wide injunctive relief abolishing the
Department’s allegedly discriminatory practices. The Department’s
acknowledgment that, upon the entry of the decree, it became unnecessary for the
plaintiffs to offer further proof in support of their claims for class-wide relief –
which the court treated as an admission by the Department that it had engaged in
the discriminatory practices alleged in the complaint – was an obvious
consequence of the parties’ settlement of those claims. A defendant who consents
to the entry of an injunction (or other form of judgment) does not necessarily agree
that it has committed the wrongful acts alleged in the plaintiff’s complaint.
Common practice is that defendants who consent to the entry of injunctive orders
do so without admitting liability. Cf. Dennis v. County of Fairfax, 55 F.3d 151,
154 (4th Cir. 1995) (stating that, although parties agree to be bound to the remedies
in consent judgments, “in electing such a remedy, they generally admit nothing in
25
the way of guilt.”). If every consent decree constituted an admission of liability,
defendants would have little incentive to settle the case.
2.
In addition to concluding that the Preamble phrase “final and complete
resolution of all class issues” constituted an admission by the Department that it
had engaged in racially discriminatory employment practices (thus warranting the
class-wide injunctive relief provided by the consent decree), the district court also
held that the phrase meant that the Department had discriminated against the
individual class members. Thus, all the members of the merit-employee class (the
recipients of the money judgment now before us) had to show in order to recover
was the difference between what they and similarly situated white employees were
paid. This holding is flatly inconsistent with the parties’ agreement that, absent
settlement, each class member (including the members of the merit-employee
class) would have to establish entitlement to relief in post-decree proceedings
before the court.
The Preamble phrase is repeated practically verbatim in Article 19, which
states that the class-wide relief provided by the decree “constitutes full and
complete relief on all claims.” Both the Preamble and Article 19 are “subject to
the provisions of this Decree providing for further proceedings, including but not
26
limited to Article[] 20.” Article 20 states that “[f]urther negotiations and
proceedings are required to resolve the claims for monetary and non-monetary
remedies for individual members of the class[es]. . ., provided however, that this
Decree does not in and of itself entitled [sic] any such class member to such
remedies” (emphasis added). At the fairness hearing held to consider Consent
Decree I, the court emphasized this point in a colloquy with plaintiffs’ counsel
regarding the claim of Wayne Leonard, a member of the merit-employee class:
THE COURT: [The consent decree] does not require any back
pay?
[PLAINTIFF’S COUNSEL]: No, it only requires that Mr.
Leonard’s back pay be calculated in
stage two of this case, under article–
THE COURT: That assumes he prevails in Stage 2.
[PLAINTIFF’S COUNSEL]: Yes, sir. No–yes, it assumes that the
parties either agree on or that he’s
been a victim of some racially
discriminatory practice or the Court
finds that, yes sir.
....
[PLAINTIFF’S COUNSEL]: . . . [I]t is my belief that the decree
affords [Mr. Leonard] all of the relief
that he would be entitled to receive
except the issue of back pay which
would be reached in the next phase of
the case.
THE COURT: What you’re saying in effect is that the–any
claim he may have to individual relief is still
available to him?
[PLAINTIFF’S COUNSEL]: Yes.
THE COURT: If he can prove his case.
[PLAINTIFF’S COUNSEL]: Yes, completely.
27
THE COURT: Well, this decree in no way cuts off his right
to come forward with evidence of racial
discrimination. If he has it, he will prevail,
if he doesn’t, he’ll lose. That option is still
open.
[PLAINTIFF’S COUNSEL]: Yes. In Stage 2, he will be given the
opportunity to show that he’s been an
individual victim.
Plaintiff’s counsel thus represented to the court in these statements that, after entry
of the consent decree, the individual class members had the burden of proving their
respective claims. Given this representation, the district court’s statements to
counsel, and the provision of Article 20 cited above, we reject the notion that the
Preamble phrase rendered the Department liable for the relief the individual class
members are seeking.
3.
Notwithstanding these provisions of Articles 19 and 20, and its statement to
counsel concerning what Wayne Leonard would have to prove to prevail on his
claim, the district court held that several pieces of extrinsic evidence showed that
the phrase “final and complete resolution of all class issues” indicated that the
Department had conceded liability to the individual class members for the relief
they were seeking. The court considered this extrinsic evidence because it viewed
the phrase as ambiguous. This evidence included (1) the statement in the class
notice that the next stage of the case would be the “remedies” stage; (2) statements
28
the Department’s counsel made after the trial resumed; (3) the absence in Consent
Decree I of the express disclaimer the parties had inserted in earlier settlement
proposals; and (4) plaintiffs’ counsel’s representation that the Department’s
attorneys had admitted liability during the parties’ negotiations over the terms of
Consent Decree I.
We assume for sake of discussion that the phrase “final and complete
resolution of all class issues” is ambiguous, and that the court was justified in
attempting to resolve that ambiguity. To resolve the ambiguity, the court was
required to employ the principles governing the interpretation of contracts.
As in the case of an ambiguous contract provision, if a provision of a
consent decree is ambiguous, the court looks to extrinsic evidence to determine the
parties’ intent. Cf. United States v. Insurance Co. of N. Am. 131 F.3d 1037, 1042
(D.C. Cir. 1997) (ambiguous contract). The best evidence of the parties’ intent is
not what the parties or their lawyers may have said to one another – as to the
meaning of the phrase – long after the consent decree is entered. First and
foremost, the court should look to what the parties or their lawyers said to one
another in fashioning the decree. See Lanier Prof’l Servs., Inc. v. Ricci, 192 F.3d
1, 4 (1st Cir. 1999) (noting that contract negotiations between the parties is at the
top of the “descending order of importance” of admissible extrinsic evidence).
29
Next, to determine the meaning of a provision, the court might look to a prior
course of performance, a prior course of dealing, or usage of trade.20
See Restatement (Second) of Contracts § 202(5) (1981). If none of these tools
resolve the ambiguity, and the meaning of the provision is in equipose, the court
may utilize accepted presumptions, including resolving the ambiguity against the
party that drafted the instrument, cf. Anderson v. Auto-Owners Ins. Co., 172 F.3d
767, 769 (11th Cir. 1999) (applying Florida law), or, in the case of a contract of
adhesion, resolving the ambiguity in favor of the adhering party, cf. Wheelock v.
Sport Kites, Inc., 839 F. Supp. 730, 736 n.6 (D. Haw. 1993) (applying Hawaii law),
or in favor of a party without sophisticated legal assistance, cf. Edwin K. Williams
& Co., Inc. v. Edwin K. Williams & Co.–East, 377 F. Supp. 418, 423 (C.D. Cal.
1974) (applying California law), rev’d in part on other grounds, 542 F.2d 1053 (9th
Cir. 1976). See generally 17A Am. Jur. 2d Contracts §§ 346-47 (1991). If none of
these means of discerning the parties’ intent resolves the ambiguity, the court has
no choice “but to leave the parties where it found them.” 4 Williston on Contracts §
627 (3d ed. 1961) (citing the classic English case of the two “Peerless” ships,
Raffles v. Wichelhaus, 2 Hurlst & Colt. (Eng) 906).
20
Neither this type of evidence nor any of the tools indicated in the following text are
applicable in the context of the instant case.
30
Each of these methods of discerning intent involves an examination of
circumstances antecedent to the formation of the contract or consent decree. Self-
serving statements made after the contract is formed – or the consent decree is
entered – as to what a given provision means are verboten. Accordingly, the
district court should not have considered item (2), the statements the Department’s
attorneys made after the trial resumed (and several months after the consent decree
was entered).21 We turn, then, to items (1), (3), and (4).
The district court found significant, in item (1), that the class notice
mentioned “remedies” as the next stage of the litigation once the court entered the
decree. In other words, the court concluded that the Department, by agreeing to
the class notice, was telling each class member that, once the court entered the
decree, the member would be entitled to an individual remedy (instatement,
promotion and/or back pay) without having to prove that he or she was a victim of
racial discrimination. The reference to “remedies,” however, when read in
conjunction with the Article 20 provision quoted above, shows only that the parties
contemplated “further proceedings.” In fact, the class notice, paraphrasing Article
21
The principal statements (by Department counsel) that the district court cited were that,
in order to recover, each class member would have to establish a prima facie case of liability as
required by the McDonnell Douglas test, Reynolds, 996 F. Supp. at 1180, n.88, and that the class
member could not rely on the disparate impact theory of liability, id. at 1182-83. Neither of these
statements sheds light on the meaning of the phrase “final and complete resolution of all class
issues.”
31
20, stated that Consent Decree I, by itself, “does not guarantee that any particular
member of the class will be entitled to back pay.”22 Item (1) thus did nothing to
resolve the ambiguity the district court found.
Item (3) is similarly unavailing. That earlier settlement proposals contained
an express disclaimer of liability while Consent Decree I is silent on the point does
not yield permissible inferences that the Department admitted that its employment
and promotion practices were discriminatory and that it had actually discriminated
against every member of the plaintiff classes because of race.23 The latter inference
is impermissible because Article 20 explicitly informed the class members that no
individual relief would be forthcoming absent proof that racial discrimination
motivated the Department’s employment or promotion decision. The former
inference is impermissible because an admission of liability concerning the
Department’s employment and promotion practices was unnecessary given the
Department’s agreement to Consent Decree I’s class-wide relief.
This brings us to item (4), plaintiffs’ counsel’s representation that, while
negotiating the terms of Consent Decree I, the Department’s attorneys admitted
22
See supra note 17.
23
We use the phrase “permissible inferences” to indicate probable, as opposed to possible,
inferences; that is, inferences established by a preponderance of the evidence. Almost any inference
is possible.
32
that the Department had discriminated against the members of the plaintiff classes
on account of their race and thus were liable for the relief being sought.
Typically, as we have noted, what the parties or their lawyers say while
negotiating the terms of a contract may be highly probative of the meaning of an
ambiguous provision in their agreement. Federal Rule of Evidence 408, however,
provides an exception for statements relating to liability made during settlement
talks. Rule 408 states, in pertinent part:
Evidence of (1) furnishing or offering or promising to
furnish, or (2) accepting or offering or promising to
accept, a valuable consideration in compromising or
attempting to compromise a claim which was disputed as
to either validity or amount, is not admissible to prove
liability for or invalidity of the claim or its amount.
Evidence of conduct or statements made in compromise
negotiations is likewise not admissible.24
Absent this exception, the district court acted properly when it considered the
statements the Department’s attorneys made to plaintiffs’ counsel as to the
meaning of the phrase “final and complete resolution of all of the class issues.”
24
In other words, while normally a court may use as evidence statements made
during negotiations to interpret ambiguous gaps in consent decrees, Rule 408
precludes such evidence to “prove liability for or invalidity of [a] claim or its
amount.” This is entirely consistent with the common law rule that judgment may
only be entered when an admission of liability by a defendant is “distinct,
unequivocal, and unconditional.” 49 C.J.S. Judgments § 193(a) (1997). See also
Backar v. Western States Producing Co., 547 F.2d 876, 880 n.4 (5th Cir. 1977)
(holding that judicial admissions must be “deliberate, clear, and unequivocal”).
33
But because of the 408 exception, plaintiffs’ counsel’s representation of what the
Department’s attorneys said in the course of negotiating the terms of Consent
Decree I about the legality of the Department’s employment and promotion
practices was inadmissible, and the court should not have considered it.25
In sum, even if the phrase at issue is considered ambiguous, the district court
had no admissible evidence before it with which to resolve the ambiguity.
Accordingly, the court should have left the parties where it found them, with the
issue of the Department’s liability – as to the classes or the individual class
members – unresolved. This having been said, we return to our earlier holding;
that is, that the phrase “final and complete resolution of all class issues” is
unambiguous.
4.
Putting aside the question whether the “final and complete resolution”
phrase is ambiguous, the district court concluded that the members of the merit-
employee class were entitled to back pay because the Department effectively
admitted liability for such pay by agreeing, in the August 28 Report, to a formula
for determining back pay. In essence, the court found that, by jointly filing the
25
The obvious teaching of Rule 408 is that parties negotiating consent decrees should not
use ambiguous language when drafting provisions relating to the issue of liability.
34
August 28 Report with the court, the Department and the plaintiffs settled the back
pay issue for the merit-employee class.
The court’s conclusion is erroneous, and we accordingly disregard it, for two
reasons. First, nothing in the report could reasonably be construed as the
Department’s admission of liability for the back pay the court subsequently
awarded. Second, in submitting the report, the Department was simply following
the court’s command – that the parties negotiate a “formula” for determining back
pay. As it turned out, the parties were able to agree on a framework for a formula;
they disagreed, though, as to precisely what the formula should be. Because the
court had nothing before it on which to base its holding of liability on the back pay
issue, we need not decide whether the Department’s concession in the August 28
Report if, indeed, that is what it was – is inadmissible under Rule 408, because it
related not only to liability but also damages. There can be little doubt that
whatever the Department did was done in a court-ordered effort to arrive at a
compromise on either or both of those issues.
III.
For the reasons we have given, we vacate the district court’s determination
that Consent Decree I operated as an admission, and therefore an adjudication, of
35
the Department’s liability as to both the class claims for prospective injunctive
relief and the class member’s claims for individual relief. We also vacate the
judgment for back pay the court awarded the members of the merit-employee class.
Finally, we remand the case for further proceedings.
With the exception of the prospective injunctive relief Consent Decree I has
provided, the paths the parties have followed in litigating this case have led to
nothing but the expenditure of time and considerable resources. For the most part,
counsel have simply engaged in shadow boxing – all at the expense of the
taxpayers of the State of Alabama and other litigants whose cases are awaiting the
district court’s attention. We therefore consider it necessary to explain the present
posture of this case and what remains to be litigated.
First, the prospective injunctive relief provided by Consent Decree I remains
undisturbed. Second, that decree did not adjudicate the Department guilty of
anything.26 Third, as Article 20 of the decree states, in order to obtain individual
26
The district court, in its order of March 18, 1998 (explaining the court’s ruling that
Consent Decree I established Department liability for the unlawful conduct alleged in the
complaint), held that the post-decree stage was controlled by Pettway v. American Cast Iron Pipe
Co., 494 F.2d 211 (5th Cir.1974) (Pettway III). This is not a Pettway case. In Pettway, the district
court, following a trial on the allegations of the plaintiff classes (black job applicants and
employees) that the employer’s hiring and promotion decisions were being made on the basis of
race, held in favor of the plaintiffs. The case then moved to the remedies stage, and the question
before the former Fifth Circuit dealt with the extent to which the class members could use the district
court’s finding of class-wide discrimination in proving their individual claims of discrimination.
Here, because the parties settled the plaintiffs’ claims for prospective relief (concerning the hiring
and promotion criteria the Department should use), there is no adjudication that the Department
36
relief, the members of the three plaintiff classes must prove that the Department
discriminated against them on account of their race when it failed to hire or
promote them (to a higher position, in the case of the merit employees, or to merit
status, in the case of the non-merit employees). A member will establish a prima
facie case of racial discrimination if he or she satisfies the McDonnell Douglas test.
If it appears that, as a matter of policy or practice, the Department’s hiring or
promotion decisions were based on race, a class member may rely on such fact in
countering the Department’s lawful excuse for not hiring or promoting the
member.27
discriminated against the plaintiff classes on the basis of race in deciding whether to hire or promote.
27
Whether the Department followed a discriminatory policy in deciding whether to hire or
promote a person is an issue that may be susceptible to resolution in a consolidated proceeding
involving representative members of each of the three plaintiff classes, so that the findings of fact
yielded by such proceeding would operate as collateral estoppel in the litigation of the individual
class members’ claims under the framework provided by McDonnell Douglas. See Gulf Tampa
Drydock Co. v. Germanischer Lloyd, 634 F.2d 874, 877 n.4 (5th Cir. 1981) (stating that collateral
estoppel “would ‘preclude a party from relitigating an issue decided against him in a prior action,
even if the party asserting the estoppel was a stranger to the prior action . . . unless it appears that
the party against whom the estoppel is asserted [did not have] a full and fair opportunity to litigate
the issue in the prior proceeding and that application of the doctrine [would] result in an injustice.’
”) (quoting Rachel v. Hill, 435 F.2d 59, 62 (5th Cir. 1970)).
We emphasize that a finding, in such consolidated proceeding, that the
Department implemented a racially discriminatory policy, would not necessarily
create an inference that a given class member was denied employment or a promotion
because of race. That is, a finding that the employer has been discriminating against
job applicants and employees does not, standing alone, entitle a person to relief; other
facts must be present – including that the person seeking relief was qualified for the
position in question – if that person is to carry the day. In Pettway v. American Cast
Iron Pipe Co., 494 F.2d 211 (5th Cir. 1974) (Pettway III), which we discuss in the
37
SO ORDERED.
previous footnote, the district court found, after a full trial on the merits, that the
defendant essentially froze all of its black employees in less desirable positions by
using testing requirements unrelated to business necessity. See id. at 217-43. The
former Fifth Circuit held that those facts supported a “reasonable inference” that an
individual member was the victim of discrimination. Id. at 260.
In the instant case, it is undisputed that the Department hired thousands of
blacks; these black employees, in fact, make up the merit and non-merit classes of
employees. It is also clear that the Department promoted some members of the merit-
employee class and gave some members of the non-merit employee class merit status.
In light of this, there can be no inference that the Department’s policies and practices
injured every member of the plaintiff classes by discriminating against him or her on
account of race. It is for this reason that, in litigating an individual class member’s
case, the establishment of the facts that give rise to a McDonnell Douglas presumption
of discrimination is important.
38