The opinion of the court was delivered by: Nicholas G. Garaufis, United States District Judge.
In this Memorandum and Order, the court resolves several issues
relating to the compensatory relief phase of the case.*fn1
After considering the positions of the parties, the court:
approves the United States' proposed method of awarding backpay
damages to individual Non-Hire and Delayed-Hire Claimants; grants the
United States' and the City's request that putative priority hires
take and pass Exam 2000 if that exam is held valid; grants the United
States' and the Plaintiff-Intervenors' request that priority hires be
paid according to their retroactive seniority as of the date they join
the fire academy; grants the parties' joint request that notice of the
anticipated fairness hearing be given to the individuals who took Exam
2000; grants the United States' and Plaintiff-Intervenors' request
that those individuals receive a thirty-day objection period; grants
the parties' joint request that the court stay consideration of the
Special Masters' recommendations; grants the United States' request
that the City reimburse it for the cost of obtaining records from the
Social Security Administration; and determines the conditions under
which Levy Ratner, P.C., and the Center for Constitutional Rights may
represent claimants in the individual claims process.
A. Method for Calculating Backpay Awards
The court first considers the parties' dueling proposals for a method of distributing the aggregate, pre-mitigation backpay award to individual claimants and reducing that award by claimants' interim earnings. The court considers the proposals for Non-Hire Claimants first, and the proposals for Delayed-Hire Claimants second.
1. The Method for Non-Hire Claimants
The three primary disagreements between Plaintiffs and the City in the context of Non-Hire Claimants are the use of a median hire date to estimate the wages a claimant would have earned as an entry-level firefighter, whether to use the number of potential claimants or the number of claimants who have submitted claim forms and actually found to be eligible to determine the probability that a claimant would have been hired by the FDNY, and the use of an annualized or aggregate method for comparing a claimant's gross award to his or her interim earnings. The court rules on these three issues first and then details the appropriate method in light of those rulings.
The City urges the court to apply a median hire date to determine the earnings a Non-Hire Claimant might have received as a firefighter. (May 3, 2012 City Mem. (Docket Entry # 868) at 4.) The Plaintiffs oppose this position. The United States notes that the court had already accepted the recommendations of its statistical expert, Dr, Siskin, and distributed the estimated "hiring shortfall candidates across academy classes and calculated the average amount of salary earned by applicants hired into those classes." (May 17, 2012 United States Reply Mem. (Docket Entry # 880) at 3.) The United States estimates that the City's proposal has the effect of reducing its previously determined amount of aggregate, pre-mitigation back pay by $8 million. (Id. at 4.) The City, on the other hand, defends its proposal on the basis that Dr. Siskin allocated shortfall hires across the academy classes for each exam and, to be consistent with that method, the court must either use a weighted average method of determining a claimant's potential earnings or, as a simpler alternative, its proposal of using a median hire date to estimate a claimant's potential lost earnings. (See May 17, 2012 City Reply Mem. (Docket Entry # 881) at 6-7.)
The City's argument misconstrues the methodology that the court relied upon in its ruling on backpay liability. The aggregate, pre-mitigation losses for each category of Non-Hire victim that the court found in that ruling-$62,202,409 for black candidates from Exam 7029, $33,754,299 for Hispanic candidates from Exam 7029, $18,193,080 for black candidates from Exam 2043, and $11,403,654 for Hispanic candidates from Exam 2043(see Backpay Op. at 35)-were weighted estimates of loss. These amounts were the United States' expert's estimates of aggregate, pre-mitigation loss, generated through a process that included, inter alia, multiplying the number of shortfall hires that had been allocated to each academy class by the average earnings of a firefighter of that class. (Id. at 31-35.) The United States' proposal for allocating amounts to individual claimants divides those weighted amounts by the number of Shortfall Hires, producing weighted averages: "Determine the aggregate back pay of one shortfall hire from each specific back pay category. This amount is determined by dividing the amount of money in a specific back pay category by the number of shortfall hires in that category." (May 3, 2012 United States Mem. at 3.) Thus, the weighted method that the City suggests would be acceptable, but simultaneously argues would be more complicated than using a median hire date, is essentially the method that Plaintiffs propose.*fn2 The court therefore denies the City's request for the use of a median hire date as the starting point for estimating potential earnings, and adheres to the weighted losses that it previously found in its backpay opinion.
The next issue on which the parties disagree is which figure constitutes the correct denominator to be used to determine an eligible claimant's probability of being hired. The City argues that the shortfall hires the court has previously found (see Backpay Op. at 18-19) should be divided by the number of potential claimants (each black or Hispanic test-taker who was not hired in the relevant exam period but would have been eligible to have been hired) (May 3, 2012 City Mem. at 4). The Plaintiffs propose that the number of shortfall hires be divided by the number of claimants who have submitted claim forms and been found eligible. (May 3, 2012 United States Mem. at 4.) The City defends its proposal by arguing that using the total number of eligible potential claimants is more accurate and more equitable, in that it would come closer to compensating claimants to only the extent of the probability that the claimant would have been hired, and would prevent any claimant from receiving a "windfall" award. (May 17, 2012 City Reply Mem. at 3-6.) The United States defends its proposal by noting that courts have consistently used the number of actual eligible claimants to determine the pro rata distribution of backpay awards under Title VII and by demonstrating that the City's proposal would likely lead to a substantial reduction in the City's liability even before interim earnings are taken into account, contrary to the court's backpay summary judgment opinion. (May 17, 2012 United States Reply Mem. at 5-11.)
In effect, the City's proposal would divide the aggregate, pre-mitigation backpay into shares for estimated potential claimants, but then actually award shares of backpay to only the individuals who have actually made claims and been found eligible; this would leave some number of shares unclaimed and, presumably, revert-able to the City. The court declines to adopt this proposal. First, the City's proposal is contrary to the logic and weight of precedent. Since the court has already determined that the City has inflicted an injury in the form of a shortfall hire in the amount of 293 entry-level firefighters (114 hires from among the black candidates of Exam 7029, 62 hires from among the Hispanic candidates of Exam 7029, 72 hires from among the black candidates of Exam 2043, and 45 hires from among the Hispanic candidates of Exam 2043), the court must follow the dictates of the Supreme Court and "make persons whole for injuries suffered" because of the City's violations of Title VII, Albemarle Paper Co. v. Moody, 422 U.S. 405, 418 (1975); the measure of the compensation that injured persons should receive should "be equal to the injury" that the City's actions inflicted, id. at 419, and the injured persons are those minority candidates who were otherwise eligible to be hired for the position of entry-level firefighter. In Ingram v. Madison Square Garden Center, 709 F.2d 807, 812-13 (2d. Cir. 1983), the Second Circuit held that individual relief in a Title VII case should be limited "to those class members who would have filled vacancies had there been no discrimination." The Second Circuit has also approved of pro rata distribution of monetary relief "where the number of qualified class members exceeds the number of openings lost to the class through discrimination." Robinson v. Metro-North Commuter R.R. Co., 267 F.3d 147, 161 n.6 (2d Cir. 2000) (emphasis supplied, quotation marks and citations omitted), overruled in part by Wal-Mart, Inc. v. Dukes, 131 S. Ct. 2541 (2011). The quoted language from the two cases emphasizes the importance of designing a process that gives relief to those class members who were qualified to be hired as entry-level firefighters; it would be incoherent with that concept to consider the entire number of potential claimants, whose eligibility for hire has not been determined, rather than the number of actually eligible claimants, in dividing the backpay amounts (and thus, rendering the compensation paid unequal to the injury inflicted).
Second, the City's proposal defeats a substantial reason to have a
claims process, which was designed so that the court and the parties
could determine which minority candidates who were not hired would
have been eligible to be hired. Neither the parties nor the court has
a reliable method of estimating what percentage of the candidates not
hired would not have been
eligible for hire other than the process designed to determine which
candidates were eligible for hire. While the City speculates that some
candidates who would have been eligible for hire would decline to
submit claims forms because they have been hired into well-paying jobs
and therefore lack a financial incentive to participate in the claims
process, and thus the number of actual claimants might understate the
number of minority candidates who were eligible to be hired (May 17,
2012 City Reply Mem. at 4), the court considers it equally likely that
many of the individuals who choose not to submit claim forms would do
so because they determine that they would not be eligible for relief,
and thus the number of actual claimants may accurately reflect the
number of minority candidates who were eligible for hire.*fn3
In any case, the claims process is the process the court and
the parties have to evaluate which of the minority candidates who took
the two exams were actually eligible for hire. It was incumbent on the
City to come forward with a proposed process that more accurately
determines what percentage of the individuals not hired were eligible
to be hired. It has not proposed any process that would avoid
Finally, the court notes that the City's concerns about inequity are misplaced. So long as the City is found liable for no more than the amount of the injury it inflicted-i.e., the aggregate, pre-mitigation amount of backpay lost due to the hiring shortfalls-the City has received the equity it is due. Any windfall that an eligible claimant may receive under the Plaintiffs' proposal comes not from the City but from other potentially eligible claimants who have chosen not to file claims (or who did not receive notice of this case despite the parties' efforts). If the court were to adopt the City's proposal, then the court would be obligated to impose a far more rigorous, expensive, and time-consuming process of identifying all eligible individuals and encouraging them to submit claims. For all of the reasons discussed, therefore, the court adopts the United States' proposal and will use the number of claimants found to be eligible in its method of allocating back pay.*fn5
The third disagreement between Plaintiffs and the City concerns
whether a claimant's gross award should be compared to his or her
interim earnings on an annual basis, or an aggregate one. The United
States advocates for an annualized basis (see May 3, 2012 United
States Mem. at 5; May 17, 2012 United States Reply Mem. at 11-12),
while the City advocates for an aggregate basis (see May 17, 2012
Reply Mem. at 8-10). The court notes the division of authority on this
issue-Leftwich v. Harris-Stowe State College, 702 F.2d 686, 693-94
(8th Cir. 1983), has held that an annual basis is the appropriate
method, while Sinclair v. Insurance Co. of North America, 609 F. Supp.
397, 400-02 (E.D. Pa. 1984), has held that the aggregate basis is
superior. Neither holding is binding on this court.*fn6
The court concludes, however, that the annual basis is the
appropriate method because it more closely mirrors the economic
reality that the claimants would have experienced over the many years
since the exams were administered. Pre-judgment interest will be
applied on an annualized basis, see, e.g., Robinson v. Instructional
Sys., Inc., 80 F. Supp. 2d 203, 208 (S.D.N.Y. 2000); O'Quinn v. N.Y.
University Med. Ctr., 933
F. Supp. 341, 345-46 (S.D.N.Y. 1996), and interest should be applied
to a principal amount that is determined on an annualized basis so
that claimants' losses over time are accurately calculated.
Having resolved the three contested issues discussed above, the court concludes that the United States' proposed method for allocating backpay awards to eligible claimants and reducing those awards by claimants' interim earnings is appropriate and adopts it. (See May 3, 2012 United States Mem. at 3-6.) The court summarizes each step below, but notes at the outset that the overarching goal of this process is to divide the aggregate backpay among eligible claimants pro rata (because the number of eligible claimants will most likely exceed the hiring shortfalls that the City's violations of Title VII have produced) and reduce each claimant's gross award by that claimant's interim earnings after reducing those interim earnings by the same fraction of the aggregate award that the claimant's gross award represents.
The first step is to place an eligible Non-Hire Claimant in the appropriate category: black Exam 7029 candidate, Hispanic Exam 7029 candidate, black 2043 Exam candidate, or Hispanic 2043 candidate. The fact-finder must identify the correct category because each category suffered a unique economic loss produced by that category's hiring shortfall.
The second step is to calculate the aggregate backpay of one shortfall hire for the specific backpay category for which the claimant is eligible, by dividing the aggregate backpay losses for that category by the number of shortfall hires in that hire: for black Exam 7029 claimants, $62,202,409/114 shortfall hires; for Hispanic Exam 7029 claimants, $33,754,299/62 shortfall hires; for black Exam 2043 claimants, $18,193,080/72 shortfall hires; and for Hispanic Exam 2043 claimants, $11,403,654/45 shortfall hires.
The third step is to calculate each claimant's pro rata share of the aggregate amount of backpay (or "gross backpay award"). The fact-finder accomplishes this by dividing the aggregate backpay loss for each category of Non-Hire claimant by the number ...