2nd Circuit: Under Title VII “Pattern or Practice” Refers to a Method of Proof, Not a Substantive Right

Last week in Parisi v. Goldman, Sachs & Co., the Second Circuit held that the trial court should have granted defendant’s motion to compel arbitration of claims brought by former managing director Lisa Parisi – who is one of three women suing Goldman – that she was subjected to gender discrimination.  She contends that defendant engaged in “a continuing pattern and practice of discrimination based on sex against female Managing Directors, Vice Presidents, and Associates with respect to compensation, business allocations, promotions, and other terms and conditions of employment”.

The arbitration clause in plaintiff’s employment contract provides that “any dispute, controversy or claim arising out of or based upon or relating to Employment Related Matters will be finally settled by arbitration in New York City” and that “any arbitration decision and/or award will be final and binding.”  It was undisputed that this clause covered plaintiff’s Title VII claims.

The district court denied defendant’s motion to compel arbitration, on the basis that “the agreement’s preclusion of class arbitration would make it impossible for Parisi to arbitrate a Title VII pattern-or-practice claim, and that consequently, the clause effectively operated as a waiver of a substantive right under Title VII”.

The Second Circuit disagreed, finding that plaintiff did not have a substantive right to bring such a claim.  In reaching its conclusion, the court differentiated between a “method of proof”, on one hand, and a “cause of action”, on the other:

Parisi contends, and the district court agreed, that individual arbitration would preclude her from vindicating her right to bring a substantive”pattern-or-practice” claim under Title VII. But such a right does not exist. In Chin v. Port Authority of New York, 685 F.3d 135 (2d Cir. 2012), we concluded that in Title VII jurisprudence “pattern-or-practice” simply refers to a method of proof and does not constitute a “freestanding cause of action.” 685 F.3d at 148, n.8.  … [T]he Supreme Court[] observ[ed] in Int’l Bhd. of Teamsters v. United States, 431 U.S. 343 (1977), that references to “pattern-or-practice” in the statute do not confer a particular right per se—rather they enable the government to enforce Title VII on behalf of groups of employees by alleging a “regular procedure or policy” of unlawful employment discrimination under § 2000e-2. … Moreover, we also recognized that the pattern-or-practice method of proof had, in the past, been viewed as “no more than an application of the McDonnell Douglas “burden-shifting framework” to claims brought either by the government on behalf of a group of employees or by class plaintiffs. 685 F.3d at 147-148. (Emphasis added.)

The court also rejected plaintiff’s argument that Federal Rule of Civil Procedure 23, which regulates the procedural aspects of class action litigation, supported her claims:

Parisi recognizes that non-government plaintiffs can use the pattern-or-practice method only in class actions and argues that she is therefore entitled to pursue a class action in court. This logic is flawed. The availability of the class action Rule 23 mechanism presupposes the existence of a claim; Rule 23 cannot create a non-waivable, substantive right to bring such a claim. Wal-Mart Stores v. Dukes, 131 S. Ct. 2541, 2561 (2011) (holding that the Rules Enabling Act precludes Rule 23 from abridging, enlarging or modifying any substantive right). “[T]he right of a litigant to employ Rule 23 is a procedural right only, ancillary to the litigation of substantive claims.” Deposit Guar. Nat’l Bank v. Roper, 445 U.S. 326, 332 (1980). Since private plaintiffs do not have a right to bring a pattern-or-practice claim of discrimination, there can be no entitlement to the ancillary class action procedural mechanism.

The court concluded by observing that, pursuant to the rules of the fora in which plaintiff’s claims may be arbitrated (FINRA and the American Arbitration Association), plaintiff “may offer to the arbitrators evidence of discriminatory patterns, practices or policies at Goldman Sachs that she contends affected her.”

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