On June 20, 2011, the Supreme Court reversed the Ninth Circuit’s decision in Dukes, et al. v. Wal-Mart Stores, Inc., 603 F.3d 571 (9th Cir. 2010), the death knell for one of the most expansive class actions in history. In April 2010, the Ninth Circuit certified a class of one and a half million current and former female employees who worked in Wal-Mart’s 3,400 stores in 41 regions throughout 50 states and claimed that (a) they were paid less than men in comparable positions despite having higher performance ratings and greater seniority, and (b) further that they received fewer, and had to wait longer for, promotions than men.
The Court answered two questions in its opinion: (1) whether class certification was consistent with Federal Rule of Civil Procedure (“Rule”) 23(a), and (2) whether claims for monetary relief could be certified under Federal Rule of Civil Procedure 23(b)(2). The Court answered “No” to both of these questions.
The Wal-Mart Plaintiffs Could Not Bridge the Gap Between Individual and Class Claims
The Court first focused on whether class certification was consistent with Rule 23(a). Specifically, the Court considered whether there were questions of law or fact common to the class and whether the claims of the named class members were typical of the claims of the class. Although Rule 23(a) includes two other factors, numerosity and adequacy of the representative parties, these were not disputed by Wal-Mart or addressed in the opinion.
The Court rejected class certification under Rule 23(a). relying heavily on its decision in Gen. Tel. Co. of Sw. v. Falcon, 457 U.S. 147 (1982). In Falcon, the Court explained that a “rigorous analysis” is necessary when a small number of plaintiffs allege company-wide discrimination, recognizing that “if one allegation of specific discriminatory treatment were sufficient to support an across-the-board attack, every Title VII case would be a potential company-wide class action.” The Court explained that the gap between individual and class claims can be bridged by either pointing to a biased testing procedure used to evaluate applicants and incumbent employees, or by proffering significant evidence that the employer operated under a general policy of discrimination. As no testing procedure was at issue in the Wal-Mart case, the Court scrutinized whether there was significant proof that Wal-Mart operated under a general policy of discrimination. The Court held that a general policy of discrimination was “entirely absent” because Wal-Mart’s corporate policy explicitly prohibited discrimination. The plaintiffs had attempted to rely on Wal-Mart’s alleged corporate policy of allowing local supervisors individualized discretion to make employment-related decisions. The Court rejected this approach, holding that permitting such decentralized decision-making “is just the opposite of a uniform employment practice that would provide the commonality needed for class action; it is a policy against having uniform employment practices.” The Court concluded that “without some glue holding the alleged reasons for all those decisions together, it will be impossible to say that examination of all the class members’ claims for relief will produce a common answer to the crucial question why was I disfavored.”
The Court noted that the only evidence of a “general policy of discrimination” was presented by plaintiffs’ sociological expert. The Court, while not holding that such evidence was inadmissible under Federal Rule of Civil Procedure 702 and Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579 (1993), nonetheless strongly suggested that Daubert’s expert qualification standards should apply to expert testimony at the certification stage of class action proceedings. The Court also concluded that plaintiffs’ sociological expert could not determine with any specificity how regularly stereotypes play a meaningful role in employment decisions because, during deposition, the expert conceded that he could not calculate whether 5% or 95% of the employment decisions at Wal-Mart might have been determined by stereotyped thinking.
Finally, the Court rejected the plaintiffs’ statistical and anecdotal evidence. The Court explained that the regional comparison of women promoted into management positions against the percentage of women in the available pool of hourly workers was insufficient to establish disparities at individual store levels or on a company-wide basis. Moreover, the Court, relying on Watson v. Fort Worth Bank & Trust, 487 U.S. 977 (1988), held that the plaintiffs could not introduce statistical evidence because plaintiffs had failed to first identify a specific employment practice at issue, a prerequisite to offering statistical evidence of a discretionary decision-making system that leads to a sex-based disparity. The Court also concluded that the plaintiffs’ anecdotal evidence was insufficient because only one affidavit was submitted for every 12,500 class members, and because only employees from 253 out of Wal-Mart’s 3,400 stores were covered.
Individualized Monetary Claims Belong in Rule 23(b)(3), Not Rule 23(b)(2) Class Actions
In its second area of inquiry, the Court held that claims for monetary relief may not be certified for class treatment under Rule 23(b)(2) where monetary relief is not incidental to injunctive or declaratory relief. Rule 23(b)(2) permits a class to be certified where “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.” The Court explained that Rule 23(b)(2) applies only when a single injunction or declaratory judgment would provide relief to each member of the class. It does not, however, authorize class certification when each individual class member would be entitled to a different injunction or declaratory judgment against the defendant. Rule 23(b)(2) also does not authorize class certification where each class member would be entitled to an individualized award of monetary damages. Accordingly, the Court held that the Ninth Circuit improperly certified the plaintiffs’ claims for monetary relief under Rule 23(b)(2).
Significance for Employers
It is not surprising that the current business-friendly Supreme Court found that the Dukes plaintiffs failed to satisfy the commonality and typicality requirements of Rule 23(a). While it remains to be seen whether the Wal-Mart plaintiffs will proceed with their claims on an individualized basis, or as class claims under state law, nationwide employers facing claims of bias can certainly breathe a sigh of relief. Had the Supreme Court affirmed the Ninth Circuit’s decision, employers with any type of discretionary decision making process — centralized or decentralized — would have been vulnerable to class action claims.
Moreover, the Court’s holding that the plaintiffs’ claims cannot proceed as a Rule 23(b)(2) class action is important to employers because class certification pursuant to Rule 23(b)(2) is less expensive and less time-consuming for a plaintiff class than tackling Rule 23(b)(3)’s class certification requirements. Unlike Rule 23(b)(3), Rule 23(b)(2) does not require notice to members of the class allowing them the opportunity to “opt out” from the class. This, in turn, raises due process concerns as all individuals in the class are automatically bound by a court’s decision and, consequently, do not have the opportunity to individually pursue their own claims. Moreover, plaintiffs seeking to certify a class under Rule 23(b)(2) do not have to demonstrate that questions of law or fact predominate or that a class action is the superior means of resolving the dispute. Rather, they simply have to satisfy the factors of Rule 23(a)(1): (1) the class is so numerous that joinder of all members is impracticable, (2) there are questions of law or fact common to the class, (3) the claims or defenses of the representative parties are typical of the claims or defenses of the class, and (4) the representative parties will fairly and adequately protect the interests of the class. Accordingly, employers can rest easy that courts will not allow plaintiffs seeking predominately monetary damages to end-run Rule 23(b)(3)’s significant procedural requirements.
For more information on this alert, please contact any of the lawyers listed below:
John Adkins, firstname.lastname@example.org, 617.951.8551
Jenny Cooper, email@example.com, 617.951.8473
Louis Rodriques, Co-chair, Labor and Employment Group, firstname.lastname@example.org, 617.951.8340
This article was originally published by Bingham McCutchen LLP.