Appeal from a judgment of the United States District Court for the Southern District of New York, entered after a remand by this court.
Kearse, Pierce, and Pratt, Circuit Judges.
In his masterpiece Bleak House, Charles Dickens painted a scathing portrait of the hopeless complexity of the handling of cases in England's High Court of Chancery. Dickens wrote, "Through years and years, and lives and lives, everything goes on, constantly beginning over and over again, and nothing ever ends. And we can't get out of the suit on any terms, for we are made parties to it * * *." Mindful of the example of the never-ending litigation that marked Dickens's Chancery Court, it is with regret that we find it necessary to once again remand this nearly thirteen-year old action to the district court, for new proceedings which we can only hope will at last end the litigation between these parties.
This is a complicated sex discrimination class-action suit against Yeshiva University. The core complaint alleges that Yeshiva discriminated against women faculty members at its medical school, the Albert Einstein College of Medicine ("AECOM"), by paying them a lower salary on the basis of their gender in violation of Title VII of the Civil Rights Act of 1964, 42 U.S.C. § 2000e et seq. The alleged violations run from 1974, the earliest date for which the statute of limitations had not run at the time plaintiffs filed suit in 1975, to 1979.
After seven years of discovery, trial began in September 1982, with plaintiffs' case being carried for the most part by the intervenor, the Equal Employment Opportunity Commission ("EEOC"). After approximately three weeks of trial, the district judge took the matter under advisement, rendering his decision in June 1983, when he determined that plaintiffs had failed to establish a prima facie case of disparate treatment in faculty salaries, that their claim of disparate impact was procedurally barred, and that defendant's pension plan, based on sex-segregated mortality tables, was illegal. Sobel v. Yeshiva University, 566 F. Supp. 1166 (S.D.N.Y. 1983) (" Sobel I "). The last of these findings is not relevant to this appeal.
On appeal, this court remanded the case for reconsideration in light of the Supreme Court's intervening decision in Bazemore v. Friday, 478 U.S. 385, 106 S. Ct. 3000, 92 L. Ed. 2d 315 (1986). Sobel v. Yeshiva University, 797 F.2d 1478 (2d Cir. 1986) (" Sobel II "). On remand, the district court adhered to its initial decision, concluding that the procedural bar it had initially found to preclude plaintiffs from raising their "disparate impact" claim was a sufficient independent basis for its original decision, Bazemore and this court's remand order notwithstanding. Sobel v. Yeshiva University, 656 F. Supp. 587 (S.D.N.Y. 1987) (" Sobel III "). Because we conclude that there was no "procedural bar", and that plaintiffs' Bazemore claim, whether it is characterized as one of "disparate treatment" or "disparate impact", deserves full and fair evaluation, we again remand, but this time for a new trial on that claim. For reasons discussed below, we direct that the case be reassigned to a different district judge.
In 1972, named-plaintiff Dr. Edna Sobel, a faculty member in the pediatrics department at AECOM, began to express dissatisfaction with her salary, which she contended was too low for a full professor of her experience and stature. She complained to her then department head, Dr. Lewis Fraad, and for the next two years received so-called "out-of-guideline" increases in salary. The second of these increases, however, was not sufficiently large to satisfy Dr. Sobel, and she initiated this lawsuit, having told Dr. Fraad that "It seems that I am going to have to sue to get appropriate pay." Trial Tr. at 1144-51.
The basic structure of AECOM's faculty and salary systems are set forth in Sobel I, with which we assume familiarity. See Sobel I, 566 F. Supp. at 1169-73. By the time of trial, Sobel had been joined by Dr. Bella Clutario as named plaintiffs. The class they represented had been reduced to full-time female faculty members with M.D. degrees employed by AECOM between 1974 and 1979, a group that numbered from 49 to 60 during each year out of a total full-time faculty that ranged from 204 to 295 during the period.
The salary received by any one faculty member was a result of numerous factors, some readily quantifiable and some inherently amorphous. The parties agreed on the importance of such factors as experience, numbers of publications in scholarly journals, and the department in which the doctor worked. They further agreed that the rank held by a particular faculty member (assistant professor, associate professor, or full professor) was a factor influencing salary, although plaintiffs raised strong objections to its inclusion on grounds we will soon discuss.
The nub of the dispute, of course, was whether plaintiffs adequately established that when such legitimate factors were accounted for in the admitted disparity between the average salaries of male and female faculty members, there remained a difference that could be explained only by reference to the person's sex.
Plaintiffs attempted to demonstrate this proposition using a common statistical tool, multiple regression analysis, which is designed to isolate the influence of one particular factor -- here, sex -- on a dependent variable -- here, salary. One of plaintiffs' expert witnesses, Dr. Orley Ashenfelter, testified that the plaintiffs' statistical model was designed to approximate the factors that influenced salary at AECOM, so that "any differences between the salaries of men and women that were not explained by the pertinent variables to be used in the model had to be the result of sex discrimination." Sobel I, 566 F. Supp. at 1174. As with any multiple regression analysis, the validity of the influence attributed to a particular variable will depend heavily on how accurately the model mimics the actual factors influencing the dependent variable, salary. For example, if the model omits an important variable that affects salaries, the portion explained by that variable will seem to be unexplained, and thus may erroneously be attributed to sex. Conversely, if an extraneous factor is erroneously credited with influencing salary, it may serve to mask the effect of sex on faculty compensation.
After considerable wrangling, the parties were able to agree on virtually all of the data to be used in the studies to be done by their experts. The data base included the names of the several hundred M.D.s employed as faculty by AECOM during the relevant period, their salaries from year to year (and, therefore, the incremental year-to-year increases in salary of each faculty member), their rank or ranks during the period, the frequency of their publications, their experience, both at AECOM and as reflected in the number of years since they received their M.D.s, and various other information.
From this agreed-upon data base, the parties proceeded in different directions. From their studies, "plaintiffs' experts determined to their satisfaction that the salary differences disfavoring women were statistically significant (at the 0.05, or two standard deviation, level) for the year 1970 and the years 1973 through 1978." Id. at 1175.
Yeshiva's experts attacked both the adequacy of a multiple regression analysis generally in this sort of employment context, and the particular study done by plaintiffs' experts. Their conclusion, based on their own study of the data, was that there was no evidence of salary discrimination, either in the initial setting of salaries or in the annual wage increases. Further, they argued that, when the proper variables were included (and the improper ones excluded), even a multiple regression did not show a statistically significant salary disparity based on sex.
The district court largely accepted the conclusions of Yeshiva's experts. It found plaintiffs' regression analysis to be riddled with "major shortcomings". Among these was the failure adequately to deal with the relative disparity in salaries between faculty members in the clinical departments, which tend to be both disproportionately male and higher paid, and in the "pre-clinical" departments, which were heavily female and relatively lowly paid. In addition, the district court faulted plaintiffs for failing to distinguish between clinicians who were primarily researchers and those whose primary activity was the practice of medicine, and for failing adequately to account for "inherent departmental stratification". Most important, the court concluded that plaintiffs' variables that attempted to act as proxies for the inherently amorphous impact of "productivity" on salary "failed to adequately account for the true productivity differences and that the consequential underadjustment for these differences resulted in an overestimate of the sex coefficients." Id. at 1179.
In order to introduce a variable that would at least approximate productivity, Yeshiva proposed, and the district court accepted, using the rank of the faculty member. Sobel strenuously objected to including rank as a variable, arguing that it was not an independent variable, because an individual's rank resulted from the same factors that determined salary increases. However, the district court believed rank served to capture intangible factors that did not affect the annual salary increase a faculty member received. Id. at 1180.
The plaintiffs also objected to using rank on a more fundamental ground. For the very reason the district court felt rank should be used -- that it reflected intangible productivity factors -- plaintiffs argued that there was a serious risk that impermissible factors would have entered into promotion decisions, and thus that rank, insofar as it determined salary, might reflect sex discrimination. Because of this risk, plaintiffs urged, "academic rank should have been included as an explanatory variable only where there was clear evidence that neutral and objective standards had consistently been followed and there was no chance that the decisions regarding rank had been affected by sexual discrimination." Id. The district judge concluded, however, "that promotions in rank * * * were in fact based on merit and were not contaminated by elements of sexual discrimination." Id. (footnote omitted).
Based on these and other difficulties it had with plaintiffs' multiple regressions, the district court held that plaintiffs had failed to make out a case of disparate treatment in faculty salaries. One of the factors leading the court to adopt Yeshiva's view was that plaintiffs did not factor out the effects of discrimination in salaries that occurred before Title VII was made applicable to universities in 1972 ("pre-act"). Under its view of the law, discrimination originating in the pre-act period was not a valid basis for a current finding of a Title VII violation, and the trial court faulted plaintiffs' conclusion because their study "was not designed to analyze the extent to which salary differentials may have been the consequence of discriminatory acts that occurred" before 1972. Id. at 1182.
This view also led the district court to reject what it characterized as plaintiffs' "disparate impact" claim, which consisted of the contention that the women faculty members hired before 1972, who allegedly received discriminatorily low starting salaries, never "caught up" to their male counterparts. In the district court's view, this constituted a disparate impact claim because the mechanism for determining salary increases, the "guideline" system, which provided men and women with roughly equal raises in percentage terms, amounted to a facially neutral system that had the effect of keeping women's salaries on the AECOM faculty perpetually lower than men's. Such a facially neutral system that is alleged to have an effect that disproportionately harms a particular group is the essence of a "disparate impact" claim. See generally Dothard v. Rawlinson, 433 U.S. 321, 329, 53 L. Ed. 2d 786, 97 S. Ct. 2720 (1977).
As a general rule, faculty members received the "guideline" increase, which in some years was a simple percentage and in others was a percentage combined with a minimum raise in absolute terms. Some faculty members in some years received what were referred to at trial as "out-of-guideline" increases, normally given when a faculty member was able to convince his department head that his salary was inequitably low and that he should take up the professor's cause before the administration.
The district court rejected the disparate impact claim on two grounds. First, it found the argument procedurally barred, because plaintiffs had not raised it until late in the trial, after seven years of discovery; it thus seemed unfair to Yeshiva to face an entirely new claim so late in the game.
Second, the court found that any disparities in salaries perpetuated by the guideline system resulted from pre-1972 hires and pre-1972 salaries, which the court said "did not have to meet the standards established under Title VII." 566 F. Supp. at 1188.
While plaintiffs' appeal from this judgment was pending, the Supreme Court decided Bazemore, in which the Court held that a pre-act salary disparity that is carried over into the period following application of the act constitutes a violation of the act. As Justice Brennan wrote for the Court,
A pattern or practice that would have constituted a violation of Title VII, but for the fact that the statute had not yet become effective, became a violation upon Title VII's effective date, and to the extent an employer continued to engage in that act or practice, he is liable under that statute.
106 S. Ct. at 3006. Bazemore thus represented an important and dramatic shift in Title VII law. Most of the lower federal courts had interpreted the Court's decision in United Air Lines, Inc. v. Evans, 431 U.S. 553, 52 L. Ed. 2d 571, 97 S. Ct. 1885 (1977), as holding that employers did not have to equalize salaries that were discriminatory if the disparity originated prior to the application of Title VII. See, e.g., Ste. Marie v. Eastern R. Ass'n, 650 F.2d 395, 404 n.11 (2d Cir. 1981); Farris v. Board of Educ., 576 F.2d 765, 769 (8th Cir. 1978). Since Bazemore, courts have recognized as a valid claim for relief the allegation that an employer has failed to remedy the continuing effects of pre-act salary discrimination. See Trout v. Lehman, 652 F. Supp. 144, 146 (D.D.C. 1986); cf. Rodriguez v. Chandler, 641 F. Supp. 1292, 1298 n.18 (S.D.N.Y. 1986).
The Bazemore Court also addressed a key evidentiary issue: the weight to be accorded a multiple regression analysis which purports to show discrimination, but which the defendant argues fails to account for certain relevant variables. The Court held that the "failure to include variables will affect the analysis' probativeness, not its admissibility." Id. 106 S. Ct. at 3009 (footnote omitted).
In the new light cast by Bazemore, we remanded this case to the district court to afford it an opportunity to determine in the first instance what effect it might have. Sobel II, 797 F.2d 1478. On remand, however, the district court made no attempt to assess the full impact of Bazemore on plaintiffs' claims and evidence. Instead, the court adhered to its earlier judgment on the technical basis that even if Bazemore altered the law on the substantive issues, its ruling that plaintiffs had failed to raise their "disparate impact" theory until it was unfair to Yeshiva, provided a sufficient independent basis to uphold the judgment dismissing the complaint. Sobel III, 656 F. Supp. at 590-91. This second appeal followed.
I. The "Procedural Bar" to Plaintiffs' Disparate Impact Claim.
We first address the district court's holding that plaintiffs were precluded from raising a disparate impact claim against Yeshiva because of their failure to raise the claim "until the last minute", Sobel III, 656 F. Supp. at 590, that is, "midway through the trial." Sobel I, 566 F. Supp. at 1186. While we recognize that the district court is vastly more familiar than are we with the details of the seven years of pretrial proceedings in this case, we are, frankly, somewhat perplexed by this finding of a "procedural bar". In our view, the essence of plaintiffs' case was well known to Yeshiva throughout -- and in fact long before -- the trial, and it consisted of precisely the claim the district court found not to have been raised until midway through trial. Moreover, the distinction between "disparate treatment" and "disparate impact" cases drawn by the district court artificially and unrealistically pigeon-holed plaintiffs' claim. Finally, even were we to agree that there was some distinct disparate impact claim that was not raised by plaintiffs until midway through trial, the district court on remand should not have precluded the claim because of the change in the law wrought by Bazemore. We address these points in turn.
A. The Timeliness of Plaintiffs' Claim.
While it is true that a litigant may be barred from raising a claim if it would work an unfair surprise on her adversary, see Ste. Marie, 650 F.2d at 399 n.2 (attempt on appeal to argue that evidence supported disparate impact theory not argued at trial rejected as "belated"); Presseisen v. Swarthmore College, 442 F. Supp. 593, 603 (E.D.Pa. 1977), aff'd without op., 582 F.2d 1275 (3d Cir. 1978); cf. Rossini v. Ogilvy & Mather, Inc., 798 F.2d 590, 604-05 (2d Cir. 1986) (where plaintiff raised only disparate treatment argument at trial, "it would have been unfair to evaluate the evidence under the disparate impact theory after trial"), the critical question is whether the claim was in fact not raised until it was too late. We need not consider here whether the point indicated by the district court when plaintiffs allegedly first raised the disparate impact claim ("midway through the trial") would have been too late, since the record contradicts the district court's view and shows the claim was raised well in advance of trial.
The district court, and to some degree the parties, became caught up in the labels applied to claims, as opposed to the actual nature of them. Sobel argues on appeal that the single mention of the magic phrase "disparate impact" in the EEOC's pre-trial memorandum was sufficient to raise the claim. This argument misses the point; what is important is whether the defendant was reasonably aware of the claim, not whether plaintiffs at some time in the pre-trial period happened to use the right phrase. See Mir v. Fosburg, 646 F.2d 342, 347 (9th Cir. 1980) (question is whether the time at which defendants were made aware of the thrust of plaintiff's case "will unfairly prejudice the defendants in their defense"); see also 5 C. Wright & A. Miller, Federal Practice and Procedure, § 1219 at 145-46 (1969 & 1987 Supp.).
Having examined the trial transcript and reviewed the pre-trial documents in the record on appeal, we are convinced that Yeshiva was fully cognizant that plaintiffs' claim consisted of the central allegation that the system of guideline salary increases left the plaintiff class perpetually behind their male counterparts on the AECOM faculty. The trial brief jointly submitted by plaintiffs and the EEOC contained the following argument:
While it may not have been unlawful for AECOM to discriminate against women prior to 1972, such conduct did become unlawful after March 24, 1972. AECOM officials had broad discretion to set and adjust salaries, including discretion to correct salary inequities and * * * this discretion provided a ready mechanism for remedying salary in equities based on sex. Accordingly, each time AECOM paid a faculty member after 1972, by regularly issued pay checks * * * it reasserted its prior discriminatory salary determinations.
Assume an employer in 1963 hired white vice-presidents at a salary of $10,000 per year and black vice-presidents at $8,000 per year. * * * In 1965, when private employers became subject to the provisions of Title VII, this hypothetical employer would have had a clear obligation under law to equalize the salaries of the white and black vice-presidents. If the employer merely awarded * * * raises on a nondiscriminatory basis, the prior racial classifications would not only continue, but indeed be created anew with each paycheck.
Plaintiffs' Trial Br. at 14-15. This argument was not lost on Yeshiva, for it went to some lengths to respond. For example, Point III of Yeshiva's trial brief was addressed to what Yeshiva saw as a fatal flaw in plaintiffs' regression: that it failed to separate out the effects of pre-act salary disparities, which were not illegal and, in ...