KPMG headquarters on Park Ave. in Midtown Manhattan. Photo: Isabelle OHara via Shutterstock

A proposed class action suit brought against accounting giant KPMG alleging systemic job discrimination against female employees was unable to clear the hurdles established by the U.S. Supreme Court in its landmark 2011 decision, Walmart Stores v. Dukes, U.S. District Judge Lorna Schofield of the Southern District of New York has ruled.

In a 61-page decision, Schofield said the long-standing case, filed just ahead of the Walmart Stores ruling, was undone by the firm’s decentralized system of determining pay and promotion in the years since the Walmart Stores decision. The judge noted KPMG’s system was “reminiscent” of the one Walmart deployed.

As such, the plaintiffs core argument, as identified by Schofield, boiled down to KPMG managers falling back on stereotypes in pay and promotion decisions, absent meaningful guidance from above. The situation runs afoul of the Walmart Stores precedent, in which the Supreme Court made clear the delegation of discretion to local managers was not an employment practice supplying a common question sufficient to certify a class.

As the decision notes, KPMG employs more than 34,000 people in 90 offices nationwide. The case focused on female employees in the advisory and tax functions groups, which together employ more than 10,000 women. Despite their attempts, Schofield found the plaintiffs cannot show commonalty on their disparate impact claim.

The Supreme Court recognized the possibility that unlimited discretion granted to lower-level supervisors could be the basis for Title VII liability. But to prove this, plaintiffs need to show a common mode of exercising this discretion that pervades the entire company—some “glue” that holds together numerous employment decisions at once.

Schofield found the plaintiffs could not meet the factors that showed a common mode of exercising discretion existed.

The class size–at least 10,000 women–and its lack of being either centralized or localized, along with a wide variety of job types held by the potential members, worked against the plaintiffs. Similarly, the fact KPMG’s pay and promotion procedures were more about who makes discretionary decisions, rather than how, making all the potential members subject to uniform and firmwide compensation and promotion practices. The company’s evaluation and promotion criteria was also found not to be sufficiently specific to constrain discretion. Finally, the plaintiffs failed to show sufficient involvement by top management in discretion decision making.

Schofield went on to find a failure to show commonality on the plaintiffs’ disparate treatment claims. No evidence was produced to show statistically significant disparities between similarly situated men and women, and that KPMG did make efforts to remedy what issues there were.

The judge also declined to provide final certification of an Equal Pay Act collective, as the plaintiffs failed to show members of the proposed collective worked at a single establishment, as defined under the act, or were similarly situated to one another.

In a statement, KPMG spokesman Manuel Goncalves said the firm was pleased with the court’s decision.

“KPMG is committed to the advancement of women throughout the organization, and as a result is recognized as a leader for its strong commitment to supporting women in the workplace,” he said. “Diversity and inclusion have long been priorities for the Firm, and as such are woven into our culture and everything we do.”

KPMG’s legal efforts were handled by a team at Sidley Austin, led by partner Colleen Kenney. She did not immediately respond to a request for comment.

Sanford Heisler Sharp partner Kate Mueting, who co-chairs the firm’s national Title VII practice, represented the plaintiffs. She noted in an email that more than 1,100 opt-ins in the suit are still being represented in active litigation. She said the parties were considering their options for moving forward.

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