Phillips v. Sec Dept Defense

NOT RECOMMENDED FOR FULL-TEXT PUBLICATION
File Name: 09a0319n.06
Filed: May 5, 2009
Case No. 07-3515
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
WILLIE S. PHILLIPS, et. al., )
)
Plaintiffs-Appellants, )
) ON APPEAL FROM THE
v. ) UNITED STATES DISTRICT
) COURT FOR THE SOUTHERN
ROBERT GATES, SECRETARY OF THE ) DISTRICT OF OHIO
DEPARTMENT OF DEFENSE, )
)
Defendant-Appellee. )
)
)
)
_______________________________________ )
BEFORE: MARTIN, BATCHELDER, and DAUGHTREY, Circuit Judges.
ALICE M. BATCHELDER, Circuit Judge. Appellants are African-American current and
former employees of the Defense Finance and Accounting Service in Columbus, Ohio (“DFAS-
CO”), an independent agency within the federal Department of Defense (“DOD”). They claim that
DFAS-CO’s promotion policies disparately impacted them on account of their race. Following a
bench trial, the magistrate judge ruled in favor of the Secretary of Defense (“Secretary”). For the
reasons that follow, we affirm.
I.
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DFAS-CO’s main function is to pay the DOD’s vendors and contractors; it also issues
disbursements and provides accounting services for smaller agencies within the DOD. DFAS-CO
was created in 1991 to consolidate the work of several regional offices. The DOD sought to recruit
employees from these offices to come to the new center in Columbus, but fewer than 10% of the
employees agreed to transfer. A significant percentage of the employees who did transfer were
African-American.
From 1991 to 1995 the DFAS-CO workforce expanded from 400-500 employees to 3,500
employees. This increase featured rapid hiring (an average of 70 new hires per month) and
numerous opportunities for promotions. Because only a small number of employees transferred from
other offices, most of the hires were “off the street” — of people from the Columbus area. Some
African-American DFAS-CO employees perceived that many of the newly-hired white employees
were being promoted at a faster rate than they were, despite the African-American employees’
seniority. These African-American employees also perceived that they had been subject to more
disciplinary actions and had received fewer awards than white employees, that promotions were
made on the basis of personal friendships and connections, and that supervisors engaged in pre-
selection — all of which, they felt, limited African-American employees’ opportunities for
promotions.
In response to employees’ complaints about the promotions process, the directors of DFAS-
CO organized a Process Action Team (“PAT”) to investigate the allegations. This team, which
included DFAS-CO employees and two outside consultants, was to address specific issues: (1)
whether only non-minorities were advancing to the GS-11 pay grade and above; (2) whether pre-
selection of jobs existed; (3) whether management selection patterns were discriminatory; and (4)
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whether personal relationships were impacting selections and promotions. In its investigation, the
team interviewed 25% of the DFAS-CO workforce and analyzed promotions and Equal Employment
Opportunity (“EEO”) statistical data for the years 1995 and 1996. The interviewed employees
included both randomly selected workers and volunteers.
In March 1997, the team released a report (“the PAT report”) finding that: (1) minorities
were promoted at lower rates than non-minorities, especially at higher grade levels; (2) several
groups, especially African-American men, were under-represented at higher grade levels; (3)
evaluation of application content was subjective; (4) there existed a strong perception that
discrimination, whether race-based or not, existed at DFAS-CO; (5) management may have
committed a prohibited personnel practice in the case of a particular white employee; (6) white
women received 72% of the exceptional performance ratings in 1995; (7) supervisors rated
employees within their own race or national origin more highly than employees from other groups;
and (8) selecting officials who were white men showed strong, ethnic preferences in awarding
promotions.
Following the release of the PAT report, Appellant Willie Phillips filed a discrimination
complaint with DFAS-CO’s EEO office. After an investigation, the EEO office issued its own report
in which it found, among other things, that African-American employees received about 22% of all
promotions in 1995-1996, which reflected the approximate percentage of African-American
employees in the DFAS-CO workforce during that period. An administrative judge subsequently
dismissed the complaint.
The Appellants then filed suit, alleging that the Secretary’s practices and procedures
regarding employee promotions had a disparate impact on African-American employees in violation
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of Title VII. The district court granted summary judgment in favor of the Secretary on the ground
that Appellants had failed to file a timely administrative complaint. We reversed, finding that
equitable tolling applied. Phillips v. Cohen, 3 F. App’x 212 (6th Cir. 2001) (“Phillips I”).
On remand, the district court referred the case to a magistrate judge, who entered summary
judgment for the Secretary — this time on the grounds that Appellants had not produced any
evidence of a disparate impact or traced the alleged impact to any of the Secretary’s policies. We
again held in favor of Appellants, finding that there remained for trial a material issue of fact
regarding the existence of a disparate impact. Phillips v. Cohen, 400 F.3d 388 (6th Cir. 2005)
(“Phillips II”). We also held that the magistrate judge had failed both to assess the quality of
evidence that had been lost by Appellee, or, in violation of a court order, routinely destroyed
pursuant to the agency’s internal regulations, and to determine appropriate sanctions.
On further remand, the magistrate judge conducted a bench trial and found that Appellants
had failed to prove a disparate impact by a preponderance of the evidence. The magistrate judge also
evaluated the quality of the lost evidence and determined that the loss did not negatively impact
Appellants’ case; the judge did, however, award Appellants attorney’s fees and costs incurred in
connection with their motion for sanctions. This appeal followed.
II.
Appellants raise several arguments on appeal. First, they contend that the trial court erred
in finding that they had failed to prove a disparate impact by a preponderance of the evidence.
Second, they argue that the trial court did not sanction the Secretary harshly enough for failing to
preserve evidence. Finally, they maintain that the court erroneously dismissed Plaintiff-Appellant
Todd Brooks.
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A.
“This Court’s standard of review in a Title VII discrimination case is ‘narrow.’” Dunlap v.
TVA, 519 F.3d 626, 629 (6th Cir. 2008) (quoting Isabel v. City of Memphis, 404 F.3d 404, 411 (6th
Cir. 2005)). In a disparate impact case, a trial court’s findings of fact should stand unless clearly
erroneous. Id. “The issue is not whether the [trial] court reached the best conclusion, but whether
the evidence before the court supported the [trial] court’s findings.” Id. (citation omitted). “Also,
the [trial] court’s findings based on the credibility of the witnesses before it are entitled to great
deference on appeal.” Id. (citation omitted).
To succeed with a disparate-impact claim, a plaintiff must first “establish a prima facie case
of discrimination — i.e., the plaintiff must establish that an adverse impact has occurred.” Id. “If
he succeeds, the employer must show that the protocol in question has ‘a manifest relationship to
the employment’ — the so-called ‘business necessity’ justification.” Id. (quoting Griggs v. Duke
Power, 401 U.S. 424, 431 (1971)). “The plaintiff must then show that other tests or selection
protocols would serve the employer’s interest without creating the undesirable discriminatory effect.”
Id. (citing Albemarle Paper Co. v. Moody, 422 U.S. 405, 425, 432 (1975)).
To establish a prima facie case, the plaintiff must challenge a specific employment practice
and prove, through relevant statistical analysis, that the challenged practice has an adverse impact
on a protected group. Id. (citing Johnson v. U.S. Dep’t of Health and Human Servs., 30 F.3d 45, 48
(6th Cir. 1994)). The prima facie case is sometimes said to comprise three elements —
identification, disparate impact, and causation. See, e.g., EEOC v. Steamship Clerks Union, Local
1066, 48 F.3d 594, 601 (1st Cir. 1995). If, however, “the employee challenges the employer’s
promotion process as a whole . . . then the disparate impact and causation elements merge.” Phillips
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II, 400 F.3d at 397-98 n.8. Accepting arguendo Appellants’ argument that the DFAS-CO promotion
practices are incapable of separation,1 we consider the disparate-impact and causation elements to
address the same question: “whether the evidence in the record supported a finding that African-
American employees were promoted at a lower rate than white employees.” Id.
“In cases involving promotion policies, the relevant inquiry is comparing the number of
protected group members benefitting from promotions with the number seeking them; this figure is
then contrasted with the corresponding ratio for the non-protected group.” Id. at 399 (citing
Connecticut v. Teal, 457 U.S. 440, 448 (1982)). “[S]tatistics based on an applicant pool containing
individuals lacking minimal qualifications for the job would be of little probative value,” however.
Watson v. Ft. Worth Bank & Trust, 487 U.S. 977, 997 (1988) (citations omitted). And while
“sufficiently substantial” statistical disparities raise an inference of disparate impact, the relevant
analysis should not be “framed in terms of any rigid mathematical formula.” Id. at 994-95.
Ideally, to determine if African-American employees were promoted at a lower rate than their
white counterparts, one would compare the respective ratios of promoted African-American and
white employees to the number of qualified African-American and white applicants. The parties
could not make this comparison here, however, because under the DFAS-CO document retention
policy, applicant flow data was destroyed every two years, on a rolling basis. By the time Appellants
filed their complaint in October 1998, only data for 1997 and part of 1996 existed.
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In the second appeal in this litigation, we noted that Appellee did not challenge the magistrate judge’s finding
that DFAS-CO’s promotion process “should be considered as a whole” or Appellant’s argument that the process was
“incapable of separation.” Phillips II, 400 F.3d at 397-98. The Secretary does not argue before us that the promotion
process should be analyzed on a piecemeal basis.
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In an attempt to reconstruct the relevant ratios, Appellants and the Secretary presented
statistical experts who employed different methods. Appellants’ expert, Dr. Ramona Paetzold,
compared the racial composition of all promoted employees to the racial composition of the entire
DFAS-CO workforce. This method assumed that every DFAS-CO employee applied for every job
opening, irrespective of whether the employee would, in fact, be qualified, unqualified, or
overqualified for the position. Dr. Paetzold thus based her statistical analysis on an applicant pool
that necessarily included “individuals lacking minimal qualifications.” See Watson, 487 U.S. at 997.
Dr. Paetzold determined that African-American employees were promoted at a significantly lower
rate than were white employees.
The Secretary’s expert, Dr. John Claudy, created “constructed pools” of applicants for each
promotion. Dr. Claudy examined employee grades in pairs of successive years to determine when
promotions had occurred. For example, if an employee was listed as a grade GS-7 in 1995 but as
a grade GS-8 in 1996, then Dr. Claudy assumed that a promotion had taken place. For each
promotion, Dr. Claudy constructed a pool of employees in the same (pre-promotion) grade level and
job series as the successful applicant. This method had the advantage of using an applicant pool that
was more likely to approximate the group of employees who were qualified for and actually applied
for a given promotion. It was nonetheless flawed in that it failed to account for the fact that
sometimes employees could qualify for and would apply for promotions outside of their job series.
Dr. Claudy determined that: in some grade levels African-Americans were promoted at a rate higher
than would be expected, in other grade levels African-Americans were promoted at a rate lower than
would be expected; and in only one grade level (Grade 5) were African-Americans promoted at a
rate lower than two standard deviations from what would be expected.
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The magistrate judge noted the flaws with both approaches, found that the experts’
conclusions stood in equipoise, and determined that Appellants had failed to show a disparate impact
by a preponderance of the evidence. The magistrate judge further found that the PAT report did not
prove a disparity in promotion rates between African-Americans and whites because the report
compared the percentage of African-American employees receiving promotions at DFAS-CO to the
percentage of African-American employees in the Columbus labor force. The PAT report did not
account for minimal qualifications for the promotions, nor did it purport to analyze the alleged
disparity in terms of standard deviations. As for the EEO report, the magistrate judge determined
that its findings were skewed because its survey sample was not entirely random but included a
disproportionate number of African-American respondents. Finally, the magistrate judge found that
Appellants’ testimony did not establish a disparate impact because the individual witnesses testified
only that they were denied promotions for which they applied and for which they believed
themselves to be qualified. They did not establish that they were denied the promotions on account
of their race, and their anecdotal evidence did not prove a significant difference in the promotion
rates between whites and African-Americans at DFAS-CO.
The magistrate judge’s findings are not clearly erroneous. Although Appellants argue that
“[t]he trial court erred in finding Dr. Claudy’s expert opinion as credible and trustworthy as Dr.
Paetzold’s,” it might be better said that the magistrate judge found both expert opinions equally
problematic. He therefore accepted neither expert’s analysis, and concluded that Appellants had not
carried their burden. Although the PAT report, the EEO report, and Appellants’ testimony provided
some evidence of a perceived race-based disparity at DFAS-CO, the evidence was not sufficient to
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require a finding that Appellants had demonstrated the type of statistical disparity necessary to
establish a Title VII prima face case.
B.
“We review a district court’s imposition of sanctions for abuse of discretion.” Fieger v. Cox,
524 F.3d 770, 774 (6th Cir. 2008) (quoting Frank v. D’Ambrosi, 4 F.3d 1378, 1387 (6th Cir. 1993)
(citing in turn Cooter & Gell v. Hartmarx Corp., 496 U.S. 384, 399 (1990))).
On December 18, 1998, the district court issued a retention order that required DFAS-CO
to preserve existing records related to this litigation. By that time, however, DFAS-CO already had
destroyed almost all of the applicant flow data for the years 1996 and earlier because its document-
retention policy called for such materials to be destroyed on a two-year, rolling basis. Thomas Gary,
head of Togar and Associates, the outside consultant that assisted DFAS-CO with the PAT report,
testified that he took with him two boxes of materials used in the creation of the PAT report. These
materials would have included only data for the years 1995-1996 and likely did not include all
applicant flow data even from that period. Gary testified that in late 1997 or early 1998 he sent the
boxes to DFAS-CO headquarters in Arlington, Virginia. The magistrate judge held that if DFAS-CO
had taken steps to look for those materials immediately after the district court’s order, DFAS-CO
might have been able to locate the PAT documents. The magistrate judge granted Appellants
attorney’s fees and costs incurred in pursuing their motion for sanctions.
Appellants claim that this sanction was not enough and that the magistrate judge should have
“lowered the bar” on differences in the promotion rate or allowed an inference of adverse impact
pursuant to 29 C.F.R. § 1607.4(D). That regulation provides in part:
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Where the user has not maintained data on adverse impact as required by the
documentation section of applicable guidelines, the Federal enforcement agencies
may draw an inference of adverse impact of the selection process from the failure of
the user to maintain such data, if the user has an underutilization of a group in the job
category, as compared to the group’s representation in the relevant labor market or,
in the case of jobs filled from within, the applicable work force.
Nothing in this regulation requires federal judges to impose any particular sanction on an entity that
has failed to preserve records that may bear on adverse employment impacts. It permits, but does
not require, federal enforcement agencies to draw inferences. It does not abrogate the discretion trial
judges have in imposing appropriate sanctions. Moreover, both statistical experts at trial testified
that the data from the PAT investigation would not have substantially altered their analyses because
it would only have included a sample of information from a two-year period and would not have
helped to establish promotion rates for the total period in question. We find no abuse of discretion
here.
C.
We review for abuse of discretion a trial court’s decision to dismiss a party. Sutherland v.
Michigan Dep’t of Treasury, 344 F.3d 603, 612 (6th Cir. 2003); see FED . R. CIV . PRO . 21 (“On
motion or on its own, the court may at any time, on just terms, add or drop a party.”). We therefore
“affirm the dismissal of a party for misjoinder unless this court is left with a definite and firm
conviction that the trial court committed a clear error of judgment.” Sutherland, 344 F.3d at 612
(citation and internal quotation marks omitted).
The magistrate judge dismissed Plaintiff-Appellant Todd Brooks because he was unable to
be physically present at trial. Appellants argue that Brooks’s individual testimony was unnecessary
because it would have been “cumulative and redundant”: he, like all the other plaintiffs, would have
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testified that he was denied promotions for which he was qualified and that he believed those denials
were racially-based. His testimony, Appellants insist, would have been required only if the trial had
proceeded to the damages phase.
This argument is without merit. Although Brooks most likely would have testified to being
denied promotions in much the same way as the other plaintiffs allegedly were, his testimony would
not for that reason have been “cumulative” or “redundant.” As a plaintiff in this action, Brooks was
required to prove that DFAS-CO’s allegedly discriminatory promotions policy injured him in some
way. Whether Brooks was denied promotions for which he was qualified was an issue of fact for
determination in the trial’s liability phase.
Appellants further argue that instead of dismissing Brooks, the trial court should have
admitted his affidavit into evidence. Quoting McIntyre v. Reynolds Metals Co., 468 F.2d 1092, 1094
(5th Cir. 1972), Appellants maintain that the affidavit would not have been inadmissible hearsay
because “[w]hen a witness . . . affirms the truth of a prior statement, the earlier statement is to be
considered not only as bearing on the credibility of the witness but also as affirmative evidence.”
McIntyre, however, addressed a situation where a deposition witness explicitly affirmed a prior
statement, and opposing counsel had the opportunity at the deposition to cross-examine the witness
regarding the statement. Here, the Secretary never had the opportunity to cross-examine Brooks
about the statements in his affidavit. Appellants argue that the Secretary could have deposed Brooks
if he had wished, but this argument misses the mark — a defendant does not waive a hearsay
objection by waiting to confront a plaintiff at trial. The magistrate judge did not abuse his discretion
in dismissing Brooks.
CONCLUSION
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Accordingly, this Court AFFIRMS the judgment of the district court.
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