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Click here for the full text of this decision FACTS:Lufkin Industries Inc., a large manufacturing corporation located in Lufkin, is divided into four production divisions: foundry, trailer, oil field and power transmission. The company employs approximately 1,500 hourly and salaried workers. The hourly workers have been unionized for many years. Sylvester McClain, the named plaintiff, began working in Lufkin’s trailer division in 1972. In January 1995, he complained to the EEOC that his supervisor, Arden Jinkins, had discriminated against him based on his race. Among other things, McClain complained that Jinkins tried to have him demoted. Buford Thomas, a Lufkin employee since 1979, filed his EEOC charge in February 1997, a year after he was allegedly constructively discharged. Thomas complained of being denied promotional and training opportunities because of his race while working in the power transmission and oil field divisions. The EEOC issued right-to-sue letters on both charges. McClain and Thomas sued Lufkin for employment discrimination in violation of Title VII and 42 U.S.C. �1981. The plaintiffs asserted that systematic racial discrimination pervades Lufkin’s initial job assignments, training, promotions and compensation. The district court certified the plaintiffs’ disparate-impact claims as a class action involving 700 current and former Lufkin employees. The class was described as: “All Black persons employed for any period of time by defendant Lufkin Industries on or after March 6, 1994, to date, whose compensation, remuneration, benefits, job assignments, promotional opportunities, career advancements and other terms and conditions of employment have been, may have been, or may become, adversely affected by defendant Lufkin Industries’ past or present systems of administering hiring, wages, salaries, job assignments, training, evaluations, promotions, demotions, terminations, layoffs, recalls, and rehires.” The court, however, declined to certify a disparate treatment class. Two claims went to trial: 1. discrimination against blacks in Lufkin’s assignment of newly hired employees; and 2. racially discriminatory promotion practices that rested on largely subjective decision-making criteria carried out by a largely white supervisory corps. Protracted pretrial proceedings in this case included two class certification hearings, two interlocutory appeals to the 5th U.S. Circuit Court of Appeals and a two-year mediation effort. When the case finally went to bench trial, the court strictly limited each party to 20 hours for the presentation of its case. Ultimately, the district court found that Lufkin’s practice of delegating subjective decisionmaking authority to its white managers with respect to initial assignments and promotions resulted in a disparate impact on black employees in violation of Title VII. The court awarded the plaintiffs over $3.4 million in back pay, as well as attorneys’ fees and injunctive relief. Both parties appealed. HOLDING:Affirmed in part, reversed in part, and vacated and remanded in part. As a threshold matter, Lufkin argued that the district court should have dismissed the plaintiffs’ initial-assignment and promotion claims for failure to exhaust administrative remedies and for lack of standing to represent a broadly defined class. Title VII requires employees to exhaust their administrative remedies before seeking judicial relief. Private sector employees must satisfy this requirement by filing an administrative charge with the EEOC. Although McClain’s EEOC complaint and an investigation by the Office of Federal Contract Compliance Programs (OFCCP) failed to exhaust the employees’ class claims, Buford Thomas’ EEOC complaint carried part of the requisite burden. Thomas alleged to the EEOC that he was constructively discharged, denied promotional and training opportunities, and overloaded with work because of his race. He specifically stated that “[r]espondent has similarly discriminated against other black African Americans.” Thomas’ complaint presented a close question of exhaustion directed at a discriminatory, albeit neutral, company policy authorizing subjective promotion decisions. The court concluded, however, that exhaustion was sufficient. Lufkin also argued that the class failed to exhaust claims concerning Lufkin’s alleged discriminatory assignment of newly hired black employees to the foundry division. Hourly work in the foundry division is hot and heavy to a far greater extent than in the company’s other production divisions. But neither Thomas nor McClain, each with 20 or more years at Lufkin, had worked in the foundry division. Neither man could or did complain to the EEOC about foundry hiring practices. The court stated that it was persuaded that the EEOC would not reasonably have investigated discriminatory assignment of new foundry division employees based on either McClain’s or Thomas’ charge. Because of this deficiency, the court vacated the judgment awarding damages and injunctive relief against Lufkin based on allegedly discriminatory initial assignments to the foundry division. Lufkin argued that its promotion system was in fact overwhelmingly objective and that the district court’s finding of subjective decision making lacked support. In light of the evidence, the court stated that it lacked a “definite and firm conviction” that the district court erred in finding subjective decision making in Lufkin’s promotion system. Although Lufkin offered some testimony during the bench trial that would tend to refute the court’s finding, it was within the province of the district court to accord the testimony less credibility than that of the class members and their experts. Accordingly, the court could not say the court’s finding of subjective decision making in promotions amounted to clear error. Lufkin also challenged the district court’s finding that Lufkin’s promotion practices were not capable of separation for review. Lufkin argued that if the court had isolated the objective factors in promotions e.g. Lufkin’s bidding practices and seniority the court could not have found a discriminatory impact. Where the system of promotion, the court stated, is pervaded by a lack of uniform criteria, criteria that are subjective as well as variable, discretionary placements and promotions, the failure to follow set procedures and the absence of written policies or justifications for promotional decisions, the court stated that it was not required to “pinpoint particular aspects of [the system]” that are unfavorable to the protected group. There is no indication, the court stated, that the district court applied incorrect legal principles in determining that Lufkin’s practices were incapable of separation for review. Lufkin maintained that the plaintiffs failed to demonstrate a statistically significant disparate impact against black employees in promotions. A plaintiff in a Title VII suit, the court stated, need not prove discrimination with scientific certainty; rather his or her burden is to prove discrimination by a preponderance of the evidence. The court voiced its satisfaction that Dr. Richard Drogin’s regression analysis was sufficiently refined for plaintiffs to meet this burden. The plaintiffs contended that the district court erred in denying class certification of their 42 U.S.C. �1981 disparate-treatment claim seeking declaratory, injunctive and equitable back pay. The court, however, agreed with the district court’s conclusion here that if the price of a Rule 23(b)(2) disparate treatment class both limits individual opt outs and sacrifices class members’ rights to avail themselves of significant legal remedies, it is too high a price to impose. There was no error, the court stated, in this certification denial. OPINION:Jones, C.J.; Jones, C.J., and Higginbotham and Clement, JJ.

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