Class Actions

by Eversheds Sutherland (US) LLP

In its noteworthy 2004 decision in Klay v. Humana, Inc.,1 the United States Court of Appeals for the Eleventh Circuit appeared to veer from its own precedents in affirming certification of a nationwide class asserting a claim under the federal Racketeer Influenced and Corrupt Organizations Act (RICO).2 During 20093 the court returned to RICO class actions in Williams v. Mohawk Industries, Inc.,4 and this time the Eleventh Circuit vacated a district court’s refusal to certify a RICO class.5 The proposed class consisted of Mohawk Industries employees who complained that Mohawk engaged in racketeering activity violating the federal and Georgia RICO6 statutes by hiring illegal aliens and depressing the employees’ wages.7 The employees sought class certification under subsections (b)(2) and (b)(3) of Federal Rule of Civil Procedure 23.8 The district court concluded that the commonality and typicality requirements of subsections (a)(2) and (a)(3) of Rule 239 were not satisfied by the employees.10 As to commonality, the district court found that Mohawk’s operations were extremely decentralized, including its use of temporary employment agencies and its wage-setting practices.11 The district court deemed the class representatives’ claims atypical because they only “worked at . . . a handful of [Mohawk’s] facilities.”12 The district court also held that the proposed class did not meet the requirements of subsections (b)(2) or (b)(3) of Rule 23.13

On appeal, the Eleventh Circuit identified the district court’s first abuse of discretion to be its finding of inadequate commonality.14 The court reasoned that “[t]he employees presented two overarching questions that are common to all members of the class: (1) whether Mohawk conducted or participated, directly or indirectly, in the conduct of an enterprise’s affairs under the federal RICO statute; and (2) whether Mohawk engaged in a pattern of racketeering activity” or a conspiracy to violate the Georgia RICO statute.15 The court rejected the district court’s reliance on employment discrimination precedents under Title VII of the Civil Rights Act of 1964.16 Citing Klay, the court observed that RICO claims, unlike Title VII claims, “are often susceptible to common proof.”17 The court concluded that the “common questions are sufficient to satisfy the low hurdle of Rule 23(a (2). 7. Williams, 568 F.3d at 1352. The Mohawk controversy has a tangled history, including a recent decision by the United States Supreme Court in an interlocutory appeal. Mohawk Indus. v. Carpenter, 130 S. Ct. 599 (2009). The plaintiff in Carpenter alleged that he was wrongfully terminated as part of an effort by Mohawk to keep him from testifying in the Williams litigation. Id. at 603. The district court granted the plaintiff’s motion to compel Mohawk’s disclosure of information concerning his pre termination interview with Mohawk’s counsel, finding that the attorney–client privilege had been implicitly waived by Mohawk through its representations in the Williams litigation. Id. at 604. Mohawk sought an interlocutory appeal, but the Supreme Court affirmed the court of appeals in refusing to hear the appeal, id. at 603, holding “that the collateral order doctrine does not extend to disclosure orders adverse to the attorney–client privilege.” Id. at 609.8.

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