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Supreme Court Reverses Certification of Nationwide Class of 1.5 Million Female Workers

  • June 20, 2011

The U.S. Supreme Court has rejected class action certification in “one of the most expansive class actions ever.”  Wal-Mart Stores v. Dukes, No. 10-277 (June 20, 2011).  The case involved allegations of gender discrimination in pay and promotion decisions in violation of Title VII of the Civil Rights Act of 1964 made on behalf of all current and former female employees of Wal-Mart, estimated to number as many as 1.5 million.  Reversing a Ninth Circuit decision that upheld the class certification, the Supreme Court found the lower courts had misapplied the federal rules governing the circumstances in which class certification should be accorded and the availability of damages as an incident of class injunctive or declaratory relief.

The plaintiffs alleged that Wal-Mart permits local managers to use broad discretion in making decisions regarding pay and promotion, that managers employ their own subjective criteria in making those decisions disproportionately in favor of men, and that Wal-Mart was aware of these results.  In essence, the plaintiffs alleged that Wal-Mart’s “corporate culture” permitted bias against women to affect managers’ discretionary decisions regarding pay and promotion.

In a decision written by Justice Antonin Scalia, the Supreme Court disagreed with the lower courts’ conclusion that the plaintiffs had satisfied the class action requirements in Rule 23(a) and Rule 23(b)(2) of the Federal Rules of Civil Procedure.  Justice Scalia observed at the outset that class actions are an “exception” to the general rule that litigation may be maintained only by named parties.  While the courts’ role in keeping such actions within proper bounds may lead to class certification analyses touching the merits of the substantive claims, such overlap “cannot be helped,” he said, and must not cause courts to refrain from a “rigorous analysis” of whether plaintiffs have met the class certification standards.

Plaintiffs Cannot Establish Commonality under Rule 23(a)

Turning to Rule 23(a), which spells out the criteria for class certification, including common issues of law or fact presented by class members’ claims, the Court held that “[t]he crux of this case is commonality.”  The plaintiffs must show they all have suffered the same injury, not simply that there are common questions raised by the claims.  Moreover, the Court continued, the alleged common injury must be capable of class-wide resolution; one specific contention or issue identified by plaintiffs must be the key to all of their claims.  “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.” (Emphasis in original.) Here, where there is no allegation that Wal-Mart used a specific biased testing procedure to evaluate applicants and employees, the plaintiffs’ burden to show commonality requires “significant proof” that Wal-Mart “operates under a general policy of discrimination.” 

The plaintiffs failed to meet this burden.  The Court firmly rejected the lower courts’ finding of commonality, despite the plaintiffs’ expert’s statistical and sociological testimony, as well as anecdotal testimony from 40 employees. The expert could not determine a specific percentage or number of numerous employment decisions at Wal-Mart that were, in fact, gender-biased.  This evidence, according to the Court, was “worlds away” from meeting the “significant proof” standard. 

The Court added that the alleged policy of permitting local managers to use their broad discretion was the opposite of a uniform policy that applied across the company, especially because plaintiffs had not identified any common way that local managers exercise their discretion.  Although the plaintiffs sought to rely on statistical and anecdotal evidence to establish a common approach to employment decisions by local managers, the Court held such evidence was insufficient.   Plaintiffs, most importantly, it said, had failed to identify one specific employment practice that was applicable across the entire alleged class.  Showing merely that Wal-Mart managers use discretion and that pay and promotion disparities exist is not enough; the plaintiffs also must identify a specific practice, besides “delegated discretion,” that was implemented across the company.  Furthermore, the anecdotal evidence adduced was very limited in relation to the overall size of the purported class and did not reach all regions or states in which the company operates.

Improper to Certify Backpay Claims Under Rule 23(b)

As to the Rule 23(b)(2) issue on the viability of class’ damage claims, the Court held that it was improper to certify the class under this rule, which allows for class actions where plaintiffs seek injunctive or other declaratory relief as to the entire class.  Here, the plaintiffs sought backpay, which the Court held would necessitate different injunctions, declaratory judgments or individualized awards and thus would be inconsistent with the “indivisible nature” of the relief contemplated by Rule 23(b)(2).  Without reaching the question of whether Rule 23(b)(2) could ever apply where claims for monetary relief are asserted, the Court rejected its application where claims for individualized monetary relief are involved.
The Court found support for this conclusion in the structure of Rule 23(b)(2).  It does not allow for class members to opt out or even to receive notice of the action, and thus, is intended only for matters where the only relief sought would necessarily be class-wide.  By contrast, the Court observed, Rule 23(b)(3) — which is designed for a broader range of class actions and, specifically, cases in which common questions of law or fact predominate over individual matters and in which class treatment is a superior method of addressing the controversy — has stronger procedural protections, including notice to all class members and the opportunity to opt out.  The Court concluded that claims for individualized monetary relief may be maintained only under Rule 23(b)(3), but the issue of whether the plaintiffs’ claims meet the Rule 23(b)(3) requirements was not before the Court.

All Justices joined the portion of the decision pertaining to Rule 23(b)’s requirements. 

The Dissent

Justice Ruth Bader Ginsburg, joined by Justices Stephen Breyer, Sonia Sotomayor and Elena Kagan, dissented from the Court’s Rule 23(a) holding.  The dissenters would have held that the plaintiffs easily met the commonality requirement in Rule 23(a).  They argued that the majority had improperly imported the more stringent requirements of Rule 23(b)(3)’s predominance analysis into the Rule 23(a) determination.  In support of this, Ginsburg noted that Wal-Mart conditioned promotion on a candidate’s willingness to relocate.  According to Ginsburg, “Absent instruction otherwise, there is a risk that managers will act on the familiar assumption that women, because of their services to husband and children, are less mobile than men.”

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This is a brief summary of the decision.  Jackson Lewis attorneys are available to answer inquiries regarding this case and other workplace laws.

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