Fortunately, on June 20, 2011, the United States Supreme Court signaled a changing tide. It put the brakes on a class action lawsuit against Wal-Mart that encompassed 1.5 million past and present female employees of the retail giant. In so doing, the Court clarified the requirements for pursuing class claims and provided employers with a measure of legal respite from the claims of overly broad, tenuously affiliated classes of employees.
This decision will shape class action litigation for years to come. Read on to see just why.
In Wal-Mart Stores, Inc. v. Dukes, two current female employees and one former female employee of Wal-Mart claimed that Wal-Mart discriminated against them on the basis of their sex in the areas of job promotion and pay in violation of Title VII of the Civil Rights Act of 1964, as amended, 42 U.S.C. §2000e-1, et seq. In particular, these plaintiffs claimed that their local managers, who had discretion with respect to pay and promotion decisions, exercised that discretion disproportionately in favor of male employees which led to an unlawful disparate impact on female employees. The employees further claimed that because Wal-Mart refused to restrain its local managers’ exercise of such authority, the company was also liable for disparate treatment sex discrimination against its female employees.
The three plaintiffs in Dukes sought to represent a class comprised of “[a]ll women employed at any Wal-Mart domestic retail store at any time since December 26, 1998, who have been or may be subjected to Wal-Mart’s challenged pay and management track promotions policies and practices.” In practical terms, this class definition included more than 1.5 million women who worked at any of Wal-Mart’s approximately 3,400 stores.
Over the course of the case’s decade before the courts, the plaintiffs in Dukes convinced a Federal District Court in California to certify their case as a class action. The Ninth Circuit Court of Appeals agreed with the District Court’s certification decision, despite a strong dissent after the case was heard en banc – i.e., with all judges on the Court participating rather than simply a three-judge panel. Wal-Mart filed a motion for certiorari with the United States Supreme Court, and the Court accepted the case for review. After briefing and arguments, a five-to-four majority of the Court reversed the certification decision and, in so doing, provided much-needed clarification for when employment class actions are – and are not – appropriate.
Rule 23’s Requirements
To pursue their case as a class action, the Dukes plaintiffs were required to satisfy the requirements of Federal Rules of Civil Procedure 23. Under Rule 23(a), they were required to show that:
- The class is so numerous that joinder of all members is impracticable – the numerosity requirement;
- There are questions of law or fact common to the class – the commonality requirement;
- The claims or defenses of the representative parties are typical of the claims or defenses of the class – the typicality requirement; and
- The representative parties will fairly and adequately protect the interests of the class – the adequacy requirement.
Upon satisfaction of these requirements, the Dukes plaintiffs were required to show that class treatment was appropriate under one of the prongs of Rule 23(b). Here, they chose to proceed under the second prong, which requires that “the party opposing the class has acted or refused to act on grounds that apply generally to the class, so that final injunctive relief or corresponding declaratory relief is appropriate respecting the class as a whole.” Significantly, when a class is certified under this prong of Rule 23(b), individuals who fall within the class definition are bound by any decision rendered in the case regardless of whether they had notice of the class action or whether they, in fact, wished to be part of the class action. In contrast, the third prong of Rule 23(b) requires that all class members receive notice of the class action and have an opportunity to opt-out of the class action if they, for instance, do not agree with the claims being asserted or prefer to pursue any claims they may have in their own right outside the class action mechanism.
The Court’s Rejection Of Plaintiffs’ Commonality Evidence
In its decision, the Court first focused on whether the Dukes plaintiffs had met their burden of satisfying the commonality requirement of Rule 23(a). The Court took this opportunity to address what it viewed as an impermissible loosening of the notion of commonality.
Acknowledging that any “competently crafted” class action complaint could undoubtedly recite common questions, the Court reiterated that commonality required the plaintiffs to demonstrate that the class members suffered the same injury and that the claims of all class members depended on a common contention capable of classwide resolution. Quoting from a scholarly article, the Court explained:
What matters to class certification is not the raising of common questions – even in droves – but, rather the capacity of a classwide proceeding to generate common answers apt to drive the resolution of the litigation. Dissimilarities within the proposed class are what have the potential to impede the generation of common answers.
[Quoting Nagareda, Class Certification in the Age of Aggregate Proof, 84 N.Y.U.L. Rev. 97, 134 (2009)] (internal quotations and punctuation omitted).
The Court also explained that Rule 23(a) is not a mere pleading standard and that, in fact, the party seeking class certification bears the burden of proving the elements of Rule 23(a), including the commonality requirement. Significantly, the Court explained that determining whether the requirements of Rule 23 are satisfied will often necessitate a Court’s consideration of the merits of the underlying claims and that such consideration is both permitted and required, thereby rejecting the common and harmful plaintiffs’ mantra that the merits are off-limits at the class certification stage.
Having clarified the legal standard, the Court then considered the proof of commonality submitted by the Dukes plaintiffs and found it woefully inadequate. In the words of the Court, there simply was no “glue” to bind together the “literally millions of employment decisions” at issue.
The Court first explained that the plaintiffs failed to produce any evidence that Wal-Mart operated under a general policy of discrimination. To the contrary, Wal-Mart’s policy prohibited discrimination on the basis of sex. The most the Dukes plaintiffs were able to show was that the company allowed its thousands of local managers to exercise discretion in making employment decisions – a fact that amounted to a policy against any uniform discriminatory employment practice: “[D]emonstrating the invalidity of one manager’s use of discretion will do nothing to demonstrate the invalidity of another’s.”
The Court also rejected the “social framework” testimony from one of the Dukes plaintiffs’ experts, Dr. William Bielby. Although Dr. Bielby testified that Wal-Mart’s “strong corporate culture” made it “vulnerable” to “gender bias,” he was not able to determine how regularly gender bias affected employment decisions at Wal-Mart. Indeed, Dr. Bielby was unable to calculate whether one-half percent or 95 percent of Wal-Mart’s employment decisions were the result of stereotyped thinking. The Court similarly rejected testimony from the Dukes plaintiffs’ statistical expert, finding that statistical disparities at one level could do nothing to establish the “uniform, store-by-store disparity upon which the plaintiffs’ theory of commonality depends.”
Finally, the Court rejected the anecdotal evidence presented by the Dukes plaintiffs. In so doing, the Court pointed out that submitting 120 affidavits, each relating to individualized discriminatory experiences, did nothing to show a policy that could tie together the claims of 1.5 million class members. In short, the Court noted that the Dukes class members “have little in common but their sex and this lawsuit.”
The Court’s Rejection Of Back Pay Claims Under Rule 23(b)(2)
The Court next turned to a second, independent ground for reversing class certification: the inappropriateness of the Dukes plaintiffs’ pursuit ofback pay. Although the Dukes plaintiffs argued that back pay was not the “predominant” relief they sought, the Court disagreed. Instead, it found that where a class action involves claims for individualized monetary relief – like the back pay requested here – that class may not be certified under Rule 23(b)(2) even if the plaintiffs are also seeking injunctive or declaratory relief. Instead, Rule 23(b)(2) applies only where a single injunction or declaratory judgment standing alone would provide relief to all class members.
In reaching this decision, the Court suggested that the Dukes plaintiffs were attempting an end-run around the more stringent and difficult-to-meet procedural requirements under Rule 23(b)(3). The Court explained that Rule 23(b)(3)’s requirements – including notice to all class members and an opportunity to opt out of the class action – were necessary to protect the due process rights of absent class members and could not be swept under the rug. As the Court explained, if the Dukes plaintiffs’ arguments prevailed, individual class members’ claims for monetary relief could be precluded by litigation “they had no power to hold themselves apart from.”
The Court further concluded that certification under Rule 23(b)(2) was inappropriate because it denied Wal-Mart the right to individualized determinations of each class member’s entitlement to back pay. Although the Dukes plaintiffs argued that back pay awards could be determined by examining a sample of claims and extrapolating classwide back pay awards based on this information, the Court rejected this “Trial by Formula” scheme. As the Court concluded, “a class cannot be certified on the premise that Wal-Mart will not be entitled to litigate its statutory defenses to individual claims.”
Given the Court’s decision, the Dukes plaintiffs must now pursue their claims individually or not at all. This is a victory for Wal-Mart – and employers everywhere – more than a decade in the making.
Although the Supreme Court’s decision in Dukes necessarily turns on the specific claims and evidence developed through the litigation, that decision represents a departure from the expansive reading of Rule 23 that has dominated in recent years. This reigning in of the class action device is undoubtedly good news for employers.
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James J. Boutrous II
Lori A. Clary
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