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January 26, 2004.

FRANK WARREN, et. al., Plaintiffs against XEROX CORPORATION, Defendant

The opinion of the court was delivered by: ROANNE MANN, Magistrate Judge


Currently pending before this Court, on a referral from the Honorable John Gleeson, is a motion by plaintiffs Frank Warren, Clifford Brooks, Alicia Dean-Hall, Kenneth Jimerson, Dora Miller, and Gene Simms ("plaintiffs") for class certification pursuant to Rule 23 of the Federal Rules of Civil Procedure. Defendant Xerox Corporation ("defendant" or "Xerox") opposes the motion. For the reasons that follow, it is the recommendation of this Court that plaintiffs' motion for class certification be granted for the purpose of determining liability on plaintiffs' disparate impact and treatment claims.


  The six named plaintiffs are black sales employees of Xerox who worked at various locations throughout the United States, including New York and California. See Class Action Complaint and Jury Demand ("Compl.") at ¶¶ 6-11. In their Complaint, plaintiffs allege that from February 1997 through the filing of the complaint in 2001, Xerox carried out a continuing pattern and practice of race discrimination and retaliation by: "(i) systematically assigning black salespeople to inferior sales territories, often located in low-income or minority neighborhoods; (ii) refusing to promote them or to transfer them to more lucrative territories Page 2 no matter how hard they work or how well they perform; (iii) denying them sales commissions they have rightfully earned; and (iv) retaliating against black salespeople who assert their civil rights." Id., at ¶ 1; see id., at ¶ 130. Xerox's employment policies and practices, plaintiffs contend, violated various federal and state civil rights laws. See id. at ¶ 2.

  Procedural History

  On February 17, 2000, plaintiff Kenneth Jimerson filed a charge of discrimination with the Equal Employment Opportunity Commission ("EEOC"), claiming that he and a class of African-American sales representatives were being discriminated against by Xerox on account of their race. See EEOC Charge, attached as Exhibit B to Affidavit of Eugene D. Ulterino, Esq., dated July 15, 2003 ("Ulterino Aff.").*fn1 Later that year, Jimerson filed a second charge with the EEOC, this time asserting a claim of retaliation pertaining only to himself. See Charge of Retaliation [DX C]. The EEOC issued a Determination and Right to Sue letter to Jimerson on February 9, 2001. See Determination and Right to Sue Letter [DX D]. In that letter, the EEOC concluded that the "[e]vidence shows that [Xerox] relied on a nondiscriminatory reason for assigning [Jimerson] to public sector accounts rather than assigning a female who had more public sector accounts prior to the 2000 restructuring." Id. at 1.*fn2

  On August 7, 2002, in response to charges filed by other African-American sales representatives employed by Xerox, the EEOC issued a "reasonable cause" determination that Page 3 Xerox had engaged in a pattern or practice of discrimination on the basis of race. See EEOC Amended Determination, attached as Exhibit 3 to Affirmation of Douglas Hoffman, Esq., dated May 30, 2003 ("Hoffman Aff.").*fn3

  The six named plaintiffs filed this suit against Xerox on May 9, 2001, claiming that their employer conducted "a continuing pattern and practice of race discrimination and retaliation" against black sales representatives. Compl. at ¶ 1. In their Complaint, plaintiffs allege three theories of liability: (1) disparate treatment; (2) disparate impact; and (3) retaliation. See id.; Transcript of Oral Argument dated October 14, 2003 ("10/14/03 Tr.") at 29-30. Counts I and II allege violations of federal law under Title VII of the Civil Rights Act of 1964, 42 U.S.C. § 2000e et seq., and under 42 U.S.C. § 1981 et seq. See Compl, at ¶¶ 141-49. Counts III, IV, and V charge that Xerox's conduct violated state and city municipal codes, to wit, N.Y. Executive Law § 296, Title 8 of the Administrative Code of New York City, and the California Fair Employment and Housing Act. See id., at ¶¶ 150-65,

  After completion of the first phase of discovery, pertaining solely to class certification issues, this Court conducted settlement discussions on April 16, 2003, which were unsuccessful at resolving the case. See Docket Sheet at Docket No. 19. On May 30, 2003, plaintiffs moved to certify this suit as a class action. See Notice of Motion, attached to Hoffman Aff. Following Judge Gleeson's referral of the motion (see Order endorsed on Letter from Christopher D'Angelo, Esq., dated May 9, 2003), this Court heard oral argument on plaintiffs' motion for class certification on October 14, 2003, See 10/14/03 Tr. At the Page 4 conclusion of the hearing, the Court again conducted settlement discussions that proved unproductive. See id. at 86-87.

  Plaintiffs seek an order certifying their entire case as a class action, with the class defined as "[a]ll black individuals employed at Xerox Corporation in the United States as a salesperson at any time from February 1, 1997 to the present, or who will be employed as a salesperson between the date of the filing of the Complaint in this action and the date of judgment." Notice of Motion, attached to Hoffman Aff., at 1; see also Compl, at ¶ 130. Plaintiffs contend that the class action is maintainable under Rule 23(b)(2) of the Federal Rules of Civil Procedure, or alternatively, Rule 23(b)(3). See Compl, at ¶¶ 138-39. They also request certification of three subclasses within the proposed class, comprising black salespersons employed by Xerox in the State of New York, City of New York, and State of California, respectively. See id. at ¶¶ 131-33.*fn4 Page 5

  Summary of Plaintiffs' Proof

  All six named plaintiffs provide similar anecdotal accounts of racially discriminatory territory assignment. See generally PX 4 (Warren Affidavit); PX 5 (Dean-Hall Affidavit); PX 6 (Simms Affidavit); PX 7 (Brooks Affidavit); PX 8 (Miller Affidavit); PX 13 (Excerpts from the Deposition Transcript of Kenneth Jimerson). Plaintiffs allege that they were initially assigned to small, unprofitable territories while their white counterparts were given lucrative territories with established accounts. See, e.g., Compl, at ¶¶ 41-42 (Warren); 56 (Brooks); 72-73 (Dean-Hall); 86 (Jimerson); 105 (Miller); 119 (Simms).*fn5 Five of the six contend that when they applied for promotions or better positions, they were rejected in favor of less qualified white co-workers. See id. at ¶ 43, 45, 47-48 (Warren); 58 (Brooks); 79-82 (Dean-Hall); 112 (Miller); 121-22 (Simms). Several state that the explanation given for such racially disparate treatment was that the plaintiff was not "the right fit" (id. at ¶ 82 (Dean-Hall); Dean-Hall Aff. [PX 5] at ¶ 13; Compl, at ¶ 120 (Simms); Simms Aff. [PX 6] at ¶ 9) or that the white employee "fit in better with the team." Compl, at ¶ 46 (Warren); Warren Aff. [PX 4] at ¶ ll. Additionally, four plaintiffs complain that Xerox moved them to worse territories or stripped the best accounts from their territories. See Compl, at ¶¶ 65 (Brooks); 74 (Dean-Hall); 89, 91 (Jimerson); 106, 117 (Miller). Two plaintiffs, Brooks and Jimerson, further allege that Xerox attempted to deny them commissions they earned on accounts that were either Page 6 rotated out of their territories or taken over by white colleagues. See id. at ¶¶ 57 (Brooks); 90 (Jimerson).

  Plaintiffs also detail instances of discriminatory disciplinary and/or retaliatory conduct by Xerox. Three plaintiffs — Brooks, Jimerson, and Miller — claim they were disciplined for performance deficiencies although similarly situated white colleagues were not punished. See id. at ¶¶ 59-61 (Brooks); 96 (Jimerson); 109-10, 113-14, 116 (Miller). All six plaintiffs assert that they complained to Xerox of discrimination, either to a superior (Sales Manager or Vice President), Human Resources Manager, or both. See id. at ¶¶ 44, 46 (Warren); 66, 69 (Brooks); 93-94 (Jimerson); 123-24 (Simms); Excerpts from the Deposition Transcript of Dora Miller ("Miller Dep.") [PX 15] at 31-34; Excerpts from the Deposition Transcript of Alicia Dean-Hall [PX 10] at 48-49. Three plaintiffs — Brooks, Jimerson, and Miller — allege that Xerox subsequently retaliated against them for either complaining of discrimination or supporting the allegations of other black sales representatives. See Compl, at ¶¶ 61-62 (Brooks); 100-01 (Jimerson); Miller Dep. [PX 15] at 31-36, 42.

  In addition to anecdotal evidence of discrimination, plaintiffs rely on an analysis conducted by their statistical expert, Dr. Leonard Cupingood. See Pl. Mem. at 2. After analyzing compensation data on an aggregate, company-wide basis, Dr. Cupingood concluded that during the relevant time period, and controlling for salary grade, sales experience at Xerox, and seniority, black salespeople at Xerox earned "statistically significantly less total compensation than white commission sales employees in each year from 1997 to 2001." Statistical Analysis of Commission Earnings and Total Compensation Among Commission Sales Employees at Xerox During the Period 1997-2001, by Dr. Leonard Cupingood dated Page 7 February 21, 2003 ("Cupingood Report") [PX 2] at 2.*fn6 The statistical significance of the disparity in average per-person compensation varied from year to year, but, according to Dr. Cupingood, reached a high of $15,483 in 2000, representing a difference of 6.4 standard deviations. See Pl. Mem. at 2.*fn7

  Xerox's Organizational Structure

  In opposing plaintiffs' motion, defendant proffers evidence to establish the decentralized and multifaceted process through which assignments are made at Xerox and compensation determined. Plaintiffs do not at this point refute the defense accounts but instead challenge their legal significance.

  Defendant manufactures, develops, and markets a range of document solutions, services, and systems, including various kinds of printers, presses, and copiers. See Affidavit of John DiVincenzo dated July 14, 2003 ("DiVincenzo Aff.") at ¶ 2. Nationwide, Xerox employs approximately 2,500 sales representatives, who work at 31 sales operations. See id.

  Between 1997 and 2001, Xerox on several occasions significantly restructured its direct sales operations. See id., at ¶ 6. From 1997 to 1999, direct sales were handled by two separate organizations within Xerox, United States Customer Operations ("USCO") and Xerox Business Services ("XBS"). See id. USCO, which mainly sold and leased document processing machines, systems, and equipment-services contracts, divided its sales operations Page 8 into geographic or industry-focused entities, which were further divided into several dozen Customer Business Units ("CBUs"). See id. at ¶ 7. The CBUs, which functioned as separate business organizations, were each managed by a Vice President/General Manager and were responsible for meeting centrally determined overall revenue goals. See id. at ¶¶ 7, 30.

  XBS primarily sold on-site document management services contracts. See Affidavit of Kevin Zielinski dated July 9, 2003 ("Zielinski Aff.") at ¶ 5. XBS was divided into geographic regions, each overseen by a Vice President/Region General Manager. See id., These regions were further divided into several dozen local sales operations with responsibilities similar to CBUs for "implementing sales activities" in their region and meeting overall revenue goals. See id. Each year, XBS developed its own strategies for territory coverage, marketing, and account management, and promulgated and implemented its own sales coverage guides, quota methodologies, and compensation plans, with input from Xerox corporate executives; subject to centrally determined principles and guidelines, local management was vested with considerable discretion in determining territory configuration and assignments. See id. at ¶¶ 6-7, 16-26.

  In January 1999, Xerox formed the North American Solutions Group ("NASG") and created, within USCO, a Public Sector entity, which grouped governmental, public, and academic institutions accounts. See id., at ¶ 8; DiVincenzo Aff. at ¶¶ 6-7, 10, A year later, the sales operations of USCO and XBS were merged into NASG. See DiVincenzo Aff. at ¶¶ 6, 9; Zielinski Aff. at ¶ 8. This reorganization took place pursuant to a change in Xerox's direct sales strategy from a geographic, or horizontal, focus to an industrial, or vertical, focus. See DiVincenzo Aff. at ¶ 8; Zielinski Aff. at ¶ 8. As part of the reorganization, XBS local Page 9 sales operations and USCO CBUs were consolidated into larger business units, which were realigned to service specific industry sectors. See DiVincenzo Aff. at ¶ 9.

  As soon became evident, the vertical realignment process disrupted customer relationships, adversely affected Xerox's sales, and caused substantial dissatisfaction across Xerox's sales force. See id. As a result, prior to the end of the second quarter of 2000, Xerox reorganized some of the vertical entities back into geographic sales operations. See id. at ¶ 10. The only entity that was not subsequently reorganized was the Public Sector entity, which remained unchanged. See id. By September 2000, Xerox had fully implemented its new reorganization back to a horizontal sales strategy. See id.

  Compensation of Sales Representatives

  Although a number of elements influenced the compensation of Xerox sales representatives, four factors predominated, namely "base salary, sales territory, territory quota or budget, and individual performance (revenue produced)." Id., at ¶ 15. Sales representative compensation typically comprised two elements: a fixed base salary and a "pay-at-risk" portion, the latter of which an employee could influence through performance. Id. at ¶¶ 1516. The specific base salary for a sales representative was set by Xerox at the local level by the sales manager for that (NASG/USCO) CBU or (XBS) local sales operation (hereinafter collectively referred to as "the local sales entities"), within centrally determined parameters and with instructions and guidance from Xerox's Human Resources Department. See id. at 15; Affidavit of Edward Ciaschi dated July 11, 2003 ("Ciaschi Aff.") at ¶¶ 23-26. Thus, each sales position or title was assigned a salary grade, and the base salary would be set at the local level within the predetermined salary range for that grade. See Ciaschi Aff. at ¶¶ 23. The Page 10 pay-at-risk element of compensation was composed of commission rates and bonuses based on the sales representative's individual performance. See DiVincenzo Aff. at ¶ 16. NASG/USCO and XBS each issued written directives specifying the "typical base/at-risk compensation split and the formulas for commissions and bonuses for each type of sales position." Id. The salary/incentive ratios ranged from the "most common" ratio for NASG/USCO — sixty percent salary/forty percent incentives, see id. at ¶¶ 16, 24 — to XBS's "typical" ratios, ninety (or seventy) percent salary/ten (or thirty) percent incentives, depending upon the job position or title. See Zielinski Aff. at ¶ 9.*fn8

  Pursuant to a "pay for performance" incentive, each sales representative was assigned a quota — "a specific numerical value that represented the revenue expectation of a given sales territory" — against which his or her performance would be measured to determine additional compensation above the base salary. DiVincenzo Aff. at ¶ 17. In theory, the sales quota was designed to ensure fairness in compensation by reflecting the revenue potential of the territory, with sales expectations rising in conjunction with revenue potential. See id., at ¶ 18. Commissions were calculated according to a base rate for all sales revenue up to the quota, with an overachievement rate applied to sales exceeding the quota. See id.

  Although the local entities were provided headcount and sales goals, see DiVincenzo Aff. at ¶¶ 30-31; Zielinski Aff. at ¶¶ 16-17, 20, 22, they controlled, to a large extent, who would comprise their sales staff and how that staff would be compensated. See DiVincenzo Page 11 Aff. at ¶ 33; Zielinski Aff. at ¶ 23. To that end, sales managers at the local entities determined and allocated territory configurations and quota assignments for their sales representatives, taking into account strategic business plans and revenue forecasts projected by Xerox headquarters. See DiVincenzo Aff. at ¶¶ 30-32; Zielinski Aff. at ¶¶ 16-17, 23. Territories were not usually configured or assigned from scratch, but, on an annual basis, were modified by managers from an existing territory base of accounts and establishments, with the modifications taking into account centrally determined sales coverage guidelines and marketing strategies for the upcoming year. See DiVincenzo Aff. at ¶¶ 31-32; Zielinski Aff. at ¶ 18.

  After territories were configured, local entity sales managers set a "quota" (NASG/USCO) or "budget" (XBS) specific to each territory. See DiVincenzo Aff. at ¶ 34; Zielinski Aff. at ¶ 24, During the existence of XBS from 1997 through 1999, "[l]ocal management assigned a revenue budget for each account in accordance with nationally-published budget guidelines." Zielinski Aff. at ¶ 25. Within NASG/USCO, the quota or revenue target for that area often took into account important business metrics such as potential page volume, actual page volume, and historical revenue. See DiVincenzo Aff. at ¶ 34. Although a territory's quota was initially determined using a formula comprised of those business metrics, without any regard to the identity of the assigned sales representative, the local sales manager had the discretion to adjust the territory's quota in the event of "extenuating local circumstances." Id. at ¶¶ 34-35.*fn9 Page 12

  While local sales managers typically made the final territory assignment decisions, their discretion to match sales representatives to territories was limited by a desire to minimize disruption of customer relationships. See DiVincenzo Aff. at ¶ 33; Zielinski Aff. at ¶ 20, 23. Therefore, once a sales representative was assigned to a territory, that assignment was unlikely to change significantly "unless the territory was eliminated, a new territory was created, the sales representative bid for and was awarded a new position . . . or a sales representative moved laterally into an open territory." DiVincenzo Aff. at ¶ 33; see also Zielinski Aff. at ¶ 23.

  Company Policy Regarding Diversity

  During the relevant time period (from 1997 to 2001), Xerox's formal human resource policy proscribed discrimination in all terms and conditions of employment on the ground of any protected class status, including race. See Human Resource Policy 201, attached as Exhibit A to Ciaschi Aff.; see also Ciaschi Aff. at ¶ 5. Xerox developed affirmative action plans for each organization, which were implemented and monitored by its Corporate Human Resources Affirmative Action/Equal Employment Opportunity ("EEO") Office. See Ciaschi Aff. at ¶ 8. Within the local entities, general managers, with the ...

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