The U.S. Supreme Court on Monday held that a nationwide sex discrimination lawsuit against Wal-Mart could not proceed as a class action. In holding that the existence of a company-wide policy that allegedly facilitated gender bias did not create a "question[] of law or fact common to the class," the Court's 5-4 decision in Wal-Mart Stores v. Dukes makes clear that there is a higher bar for establishing commonality in a federal class action than some lower courts had previously found. The Court also went on to hold unanimously that monetary claims for backpay cannot be pursued under Rule 23(b)(2), but must instead proceed under the more stringent rubric of Rule 23(b)(3). And in reaching these holdings, the Court confirmed that district courts will often need to consider merits questions at the class certification stage where they overlap with the district court's analysis of class certification requirements, and it strongly suggested that expert testimony submitted in connection with class certification may be subject to the standard of Daubert v. Merrell Dow Pharmaceuticals. The breadth of the Court's opinion ensures that the impact of the decision will extend to all class actions, not just employment discrimination cases.
Background
The plaintiffs filed a class action lawsuit on behalf of all
women who worked at Wal-Mart retail stores. Their core claim was
that Wal-Mart's policy of granting local supervisors broad
discretion over personnel matters had led to systemic biases
against women in pay and promotion decisions. As a remedy for the
alleged discrimination, the plaintiffs sought injunctive and
declaratory relief, punitive damages, and backpay.
The district court certified a class of approximately 1.5 million
current and former female Wal-Mart employees under Federal Rule of
Civil Procedure 23(b)(2), which is reserved principally for suits
seeking injunctive or declaratory relief, not monetary awards.
Among other things, the district court considered statistical
evidence of gender disparities in pay and promotion at Wal-Mart,
anecdotal reports of discrimination, and expert testimony
suggesting that Wal-Mart's culture and personnel practices left
it vulnerable to gender discrimination. That evidence, the court
held, was sufficient to demonstrate that there were "questions
of law or fact common to the class"—a prerequisite
to class treatment.
The Ninth Circuit, sitting en banc, largely affirmed the district
court's class certification order on appeal. The court of
appeals agreed that the plaintiffs' evidence raised a common
question for purposes of class certification: whether the class
members suffered discrimination as a result of Wal-Mart's
corporate policies. It also held that the plaintiffs' backpay
claims were suitable for class treatment under Rule 23(b)(2). Even
though it acknowledged that backpay claims are inherently unique to
each individual, the Ninth Circuit held that the total amount of
backpay could be determined by referring a randomly selected sample
of claims to a special master for determination, and then
extrapolating from those results to the entire class.
The Supreme Court's decision
The Supreme Court reversed. In the first of two significant
holdings, a 5-4 majority held that the plaintiffs' evidence did
not satisfy Rule 23's commonality requirement. In the majority
opinion by Justice Scalia (joined in full by Chief Justice Roberts
and Justices Kennedy, Thomas, and Alito), the Court declared that
it is not enough that a case "literally raises common
'questions.'" To illustrate, the Court listed
"questions" common to the Wal-Mart class that it
viewed as immaterial to the commonality analysis, including whether
the plaintiffs actually work for Wal-Mart, whether Wal-Mart's
local supervisors have discretion over employee pay, and whether it
is unlawful for the supervisors to have so much discretion. In the
Court's view, a plaintiff seeking class certification must do
more than simply identify some common questions; the
relevant inquiry instead is whether the class members' claims
"depend upon a common contention" that is "capable
of classwide resolution—which means that determination of
its truth or falsity will resolve an issue that is central to the
validity of each one of the claims in one stroke."
Applying that exacting definition of commonality, the Court found
there were no questions common to the Wal-Mart class. To
be sure, the Court noted, Wal-Mart's policy of vesting local
supervisors with discretion over employment matters affected every
member of the class. But the policy itself did not violate Title
VII, and the plaintiffs did not identify a company-wide "mode
of exercising discretion" that might establish a common
discriminatory link among the millions of employment decisions at
issue. The Court found the plaintiffs' statistical and
anecdotal evidence to be deficient in that regard because
"merely proving that the discretionary system has produced a
racial or sexual disparity is not enough" to make out
a discrimination claim. Rather, because the "crux" of the
Title VII inquiry is "the reason for a particular employment
decision," a plaintiff seeking class certification must be
able to show that "examination of all the class members'
claims for relief will produce a common answer to the crucial
question why was I disfavored." The plaintiffs did
not make that showing, and the Court therefore held that class
certification was unwarranted.
The Court's second key holding—a unanimous
one—confirmed that Rule 23(b)(2) is not an appropriate
vehicle for classwide resolution of backpay claims. That Rule, the
Court held, is reserved for claims seeking an injunction or a
declaratory judgment that will apply uniformly to all members of
the class. But backpay determinations are inherently idiosyncratic;
different salary levels and different lengths of service will
produce different awards for different plaintiffs. The Court
therefore declared that Rule 23(b)(2) "does not authorize
class certification when each class member would be entitled to an
individualized award of monetary damages." (The Court left
open the possibility, embraced by several courts of appeals, that
Rule 23(b)(2) permits the certification of monetary relief that is
merely "incidental" to the requested injunctive or
declaratory relief.)
Nor could the Ninth Circuit's "random sample" procedure serve as a substitute for individual backpay determinations. Not only did the Supreme Court squarely reject that approach, but it strongly suggested that such an approach would violate a defendant's constitutional right to due process. According to the Court, the "random sample" method of adjudication endorsed by the Ninth Circuit threatened to unfairly deprive Wal-Mart of its right to litigate its defenses to individual claims.
The dissent
Justice Ginsburg, joined by Justices Breyer, Sotomayor, and Kagan, dissented from the Court's commonality ruling. She argued that the majority had adopted an unduly restrictive understanding of the word "question," which she suggested refers simply to "a dispute, either of fact or of law, the resolution of which will advance the determination of the class members' claims." In Justice Ginsburg's view, the district court properly identified a question common to the class—whether Wal-Mart's pay and promotions policies gave rise to unlawful discrimination. The majority ignored that question, she contended, and instead focused on the dissimilarities among the class members. According to the dissent, that shift in focus impermissibly conflates the commonality inquiry with the Rule 23(b)(3) predominance inquiry, which asks whether common questions predominate over individual questions. "If courts must conduct a 'dissimilarities' analysis at the Rule 23(a)(2) stage, no mission remains for Rule 23(b)(3)." Justice Ginsburg therefore rejected the majority's mode of analysis and concluded that it was sufficient for commonality purposes to resolve the plaintiffs' claims of biased decisionmaking by examining "particular policies and practices alleged to affect, adversely and globally, women employed at Wal-Mart's stores."
Practical implications of the decision
Because the commonality requirement of Rule 23(a) applies across
the board to every class action, the Wal-Mart decision
will likely have a broad impact on class action law beyond the
employment context. Now that the Supreme Court has carefully
limited what may—and may not—qualify as a
common question of law or fact, lower courts may have to reexamine
the oft-recited adage that commonality is "easily
satisfied." That may have been true when plaintiffs needed
only to identify some questions of common application to the entire
class. But under Wal-Mart that will no longer do.
Defendants can now urge the district court to disregard ostensibly
common "questions" because they are insufficiently
"central" to the validity of the plaintiffs' claims.
The result is that courts are likely to scrutinize the
plaintiffs' legal theory and proof at an earlier stage in the
proceedings. Moreover, the Supreme Court's treatment of the
plaintiffs' statistical, anecdotal, and sociological evidence,
and its disapproval of the Ninth Circuit's "random
sample" procedure, may signal a more cautious attitude toward
aggregate proof in class actions.
The Wal-Mart decision is also notable for three of its less visible
aspects. First, the Court discarded contrary dictum from one of its
previous decisions that had caused confusion in the lower courts
about whether a district court could properly examine merits
questions at the class-certification stage. The opinion confirms
that district courts often must examine issues relating to the
merits in order to assess whether there actually exist common
questions of law or fact that are "central" to the claims
being advanced. Second, the Court strongly suggested that expert
testimony submitted in connection with class certification may be
subject to the standard of Daubert v. Merrell Dow
Pharmaceuticals—a point that has been subject to
uncertainty in the lower courts. Finally, the Court's
restrictive interpretation of Rule 23(b)(2) will make it more
difficult for litigants to use that device to circumvent Rule
23(b)(3)'s exacting predominance standard, certification
requirements, notice provisions, and opt-out procedures. These
aspects of the decision may not receive as much attention as the
core holdings of Wal-Mart, but they are likely to affect the
day-to-day mechanics of class action practice.
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