United States: Class Action Alert: The Future Of Class Action Suits After Wal-Mart v. Dukes

Last Updated: June 28 2011
Article by Mintz Levin Litigation Group

In a historic decision, the Supreme Court decertified a plaintiff class in Wal-Mart Stores, Inc. v. Dukes,1 which asserted claims on behalf of 1.5 million female Wal-Mart employees alleging that Wal-Mart discriminated against women on matters of pay and promotion.2 The Court's decision definitively resolves three important issues of class action law:

1. The Court held that plaintiffs now bear a heightened burden under Rule 23(a)(2) to show that there are questions of fact and law common to the class as a whole, particularly where the class claims concern the independent conduct of numerous individuals in multiple locations throughout the country.

2. The Court reaffirmed that it is permissible to address merits questions at the class certification stage to the extent necessary to determine whether the requirements of Rule 23 have been met.

3. The Court ruled that claims for back pay are not proper under Rule 23(b)(2), which governs classes seeking injunctive relief, and cast substantial doubt on whether Rule 23(b)(2) ever permits certification of classes that seek money damages.

The Supreme Court's decision has far-reaching implications for class action practice that extend well beyond employment discrimination cases.

Plaintiffs' Claims

The three named plaintiffs in Wal-Mart claim to have been the victims of adverse decisions on pay, promotions or demotions solely or primarily because they are women. The plaintiffs filed suit in the Northern District of California under Title VII of the Civil Rights Act of 1964, 42 U.S.C. § 2000e-1, et seq, which prohibits employers from engaging in gender-based discrimination. Their complaint asserted claims on behalf of a putative class of current and former female Wal-Mart employees who worked in hourly and salaried positions at the conglomerate's retail stores throughout the country.3 The plaintiffs alleged that women employed at Wal-Mart: (a) received lower pay than men in comparable positions, even when those women had longer tenure with the company and received better performance evaluations; and (b) obtained "fewer—and wait[ed] longer for—promotions to in-store management positions that men." 4

The Proceedings Below

In 2004, the trial court granted plaintiffs' motion to certify a class under Rule 23(b)(2), which permits certification of a class to pursue injunctive relief 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 proposed class, however, sought back pay and punitive damages in addition to injunctive relief. Wal-Mart appealed the certification order. After a divided panel affirmed the lower court ruling, Wal-Mart secured en banc review of the decision by the entire Ninth Circuit.

On appeal, Wal-Mart argued that the plaintiffs had failed to meet the Rule 23(a)(2) requirement to establish "questions of law or fact common to" the sprawling class certified by the district court, because the class claims arose from decisions made by thousands of Wal-Mart managers respecting the pay, performance and advancement of 1.5 million class members. Wal-Mart also argued that it was improper to use Rule 23(b)(2) to certify the class claims for back pay and other monetary damages.

The Ninth Circuit rejected Wal-Mart's arguments in a 6-5 decision that upheld most of the district court's class certification decision.5 The Ninth Circuit found that the plaintiffs satisfied the commonality requirement under Rule 23(a)(2) by providing "factual evidence, expert opinions, statistical evidence, and anecdotal evidence" that raised a common question as to the existence of a pattern or practice of discrimination by Wal-Mart.6 The court also held that back pay is recoverable under Fed. R. Civ. P. 23(b)(2) because such monetary relief did not "predominate" over the injunctive relief that the class also was seeking.7

Wal-Mart petitioned the Supreme Court to review the Ninth Circuit decision, and the Court agreed to hear the appeal.

The Supreme Court's Decision

In a decision authored by Justice Scalia that was partially divided and partially unanimous, the Supreme Court reversed the Ninth Circuit and decertified the class. The Court split 5-4 on the question of whether the requested class satisfied the commonality requirement under Rule 23(a)(2), with the majority deciding that it did not. In so ruling, the Court endorsed evaluation of merits-related issues at the class certification stage. All nine justices concurred that a so-called "mandatory" (i.e., non-opt-out) class could not be certified under Rule 23(b)(2) to pursue claims for back pay and other monetary relief sought by the Wal-Mart plaintiffs. The impact of the Court's ruling, which is not limited to employment cases, will be to impose additional burdens on plaintiffs at the class certification stage.

The sprawling class did not satisfy Rule 23(a)(2)'s commonality requirement

Possibly the most revolutionary aspect of the Court's decision was its finding that the proposed class did not satisfy Rule 23(a)(2)'s commonality requirement. Rule 23(a)(2) has ordinarily been construed to require only that there be "a single question of law or fact common to the members of the class...."8 The Supreme Court, however, had previously held that Rule 23(a)(2) obligates a plaintiff to establish that the proposed class consists of members who "have suffered the same injury."9This burden, Justice Scalia reasons, requires more than simply framing questions that are common to the class, but instead requires proof of "the capacity of a classwide proceeding to generate common answers apt to drive the resolution of the litigation."10

The Court concluded that the class that had been certified in Wal-Mart was too riven by dissimilarities to permit the generation of common answers. The fundamental question to be addressed as to each class member—was she a victim of gender-based discrimination—could not be tied to a single course of conduct common to all class members. Wal-Mart gave its store managers significant discretion to make decisions as to pay and promotions based on their firsthand assessments of their employees, but had a strict corporate anti-discrimination policy. Because discrimination by managers would be contrary to corporate policy, plaintiffs lacked a common thread binding the class as a whole. In the absence of a single companywide policy discriminating against women, plaintiffs offered an expert statistical analysis that purported to show that store managers' "excessive discretion" had fostered an allegedly pervasive culture of corporate bias that had manifested itself in the form of lower pay and decreased promotions for women.11 The Court, however, rejected the contention that this statistical analysis would generate common answers to the question of whether individual class members had been the victims of gender discrimination.12 Instead, the answer to that question inevitably would require individualized assessments both of the store managers' conduct and the class members' own job performance and qualifications. Thus, the Court ruled, the anecdotal and statistical evidence proffered by the Plaintiffs did not suffice to establish commonality under Rule 23(a)(2).13

Courts may address merits issues to the extent required to establish that the proposed class meets all of the requirements of Rule 23

The Court approved the examination of merits issues at the class certification stage, placing a burden on plaintiffs to move beyond the allegations in their complaints and support requests for class certification with factual evidence. In so doing, the Court relied on its own holding almost thirty years ago in General Telephone Co. of Southwest v. Falcon14 that "sometimes it may be necessary for the court to probe behind the pleadings before coming to rest on the certification question," and that certification is proper only if "the trial court is satisfied, after a rigorous analysis, that the prerequisites of Rule 23(a) have been satisfied."15In the years since Falcon was decided, some lower courts had relied on dicta in an earlier Supreme Court decision, Eisen v. Carlisle & Jacquelin,16 to forbid merits inquiries at the class certification stage. In Wal-Mart, however, the Court rejected the notion that Eisen even addresses this issue,17 and instead cities with approval Judge Easterbrook's groundbreaking 2001 opinion in Szabo v. Bridgeport Machines, Inc.,18 which revived Falcon's directive that "a rigorous analysis" that sometimes overlaps with the merits is required before a court may certify a plaintiff class.19

Back pay claims were not proper under Rule 23(b)(2)

In contrast to its split over the commonality issue, the Court unanimously held that plaintiffs' claims for back pay could not be certified under Rule 23(b)(2), which applies to classes seeking injunctive relief. Rule 23(b)(2), the Court states, applies where "the conduct is such that it can be enjoined or declared unlawful only as to all of the class members or as to none of them."20 Because injunctive relief is indivisible as to members of a class, Rule 23(b)(2) classes are not subject to the predominance, notice and opt-out provisions that apply to money damages classes under Rule 23(b)(3). Thus, the Court concludes, allowing plaintiffs to append money damages claims to a Rule 23(b)(2) class improperly circumvents provisions that are intended to protect class members' individualized interests in pursuing their own independent claims for money damages.21

Relying on the Advisory Committee Notes to Rule 23, the plaintiffs in Wal-Mart argued that it is proper to certify a Rule 23(b)(2) class for mixed injunctive and monetary relief so long as the relief sought does not relate "exclusively or predominantly to money damages."22The Court rejected this argument as unsupported by the text of Rule 23(b)(2), further noting that permitting certification of such classes would encourage plaintiffs to impose artificial limits on class member recoveries to fit within the confines of Rule 23(b)(2), thus potentially prejudicing the rights and interests of absent class members who would be powerless to opt out and pursue claims on their own.23

Ultimately, the Court concluded that the back pay claims that were asserted on behalf of the class did not present the type of undifferentiated relief that would warrant certification of a mandatory class under Rule 23(b)(2). Awarding and quantifying back pay would depend on class-member-specific proof as to positions, qualifications, conduct and work history that would devolve into hundreds of thousands of mini-trials, each resulting in highly-differentiated damages awards. Accordingly, the Court unanimously held that Rule 23(b)(2) did not permit certification of a class to seek recovery of back pay.24

The Impact of the Wal-Mart Decision

Each of the bases on which the Court decided the Wal-Mart case promises to have a significant impact on certification of class actions.

The election to stiffen the commonality requirement under Rule 23(a)(2) is certainly the most groundbreaking aspect of the case. Few courts had previously treated Rule 23(a)(2) as anything more than a preliminary hurdle to certification. Justice Ginsburg's dissent argues that the Court's decision now imbues Rule 23(a)(2) with many of the characteristics of the predominance requirement under Rule 23(b)(3).25 To the extent that is true, the impact of the Wal-Mart decision will be most pronounced in cases seeking class certification under Rules 23(b)(1) and (b)(2), neither of which requires a showing that individualized issues of fact and law predominate for the class. For all types of class actions, commonality will no longer be satisfied where a class, like the one in Wal-Mart, artificially groups together factually unrelated disputes that are framed only by a common legal theory.

The Court's endorsement of merits inquiries at the class certification stage signals agreement with decisions of the Ninth Circuit—which, ironically, had itself so held in the Dukes decision below26and of seven other circuits that had adopted such a rule.27 Plaintiffs will continue to have the burden to adduce facts beyond the four corners of the complaints to support their motions for class certification.

The Court's unanimous rejection of the use of Rule 23(b)(2) to certify plaintiffs' back pay claims resolves a prior circuit split on when money damages may be sought under a Rule 23(b)(2) class28 by casting doubt on whether such a class may ever be certified. This ruling substantially closes a notorious loophole that permitted plaintiffs to evade the rigors of the Rule 23(b)(3) predominance inquiry by linking claims for money damages to a demand for injunctive relief. By refusing to address the question of whether even claims for "incidental" money damages are permitted under Rule 23(b)(2), the Supreme Court has left it to the lower courts to explore whether any types of monetary relief might plausibly be pursued under Rule 23(b)(2) in the wake of the Wal-Mart ruling. The Court's unanimous and unequivocal rejection of such a class in the Wal-Mart case strongly suggests that the number of future cases that seek certification of claims for mixed relief under Rule 23(b)(2) will be significantly reduced.

Footnotes

1 564 U. S. ____, slip op. at 19-20 (June 20, 2011).

2 See generally id.

3 See Dukes v. Wal-Mart Stores, Inc., 603 F.3d 571, 578 (9th Cir. 2010) (recognizing that "[t]he proposed class consists of women employed in a range of Wal-Mart positions, from part-time entry-level hourly employees to salaried managers").

4 See id. at 577.

5 See id., 603 F.3d at 615.

6 See id. at 612 (stating that such evidence "provide[s] sufficient support to raise the common question whether Wal-Mart's female employees nationwide were subjected to a single set of corporate policies (not merely a number of independent discriminatory acts) that may have worked to unlawfully discriminate against them ...").

7 See generally id. at 615-23 (remanding, however, the case for a decision on punitive damages).

8 Wal-Mart, dissenting op. at 2 (Ginsburg, J.) (quoting Nagareda, The Preexistence Principle and the Structure of the Class Action, 103 Colum. L. Rev. 149, 176, n.110 (2003) (hereinafter, "Nagareda 2003").

9 See Gen. Tel. Co. of Sw. v. Falcon, 457 U.S. 147, 157 (1982).

10 Wal-Mart, slip op. at 9-10 (quoting Nagareda, Class Certification in the Age of Aggregate Proof, 84 N.Y.U. L. Rev. 97, 132 (2009) (hereinafter "Nagareda 2009")).

11 See generally id., slip op. at 12-14.

12 See generally id., slip op. at 14-20.

13 See id.

14 457 U.S. 147 (1982).

15 Id. at 160-61.

16 417 U.S. 156 (1974).

17 See Wal-Mart., slip op. at 10 n.6.

18 249 F.3d 672 (7th Cir. 2001).

19 See Wal-Mart, slip op. at 10-12.

20 See id., slip op. at 20 (quoting Nagareda 2009 at 132).

21 See id., slip op. at 21-23.

22 Id., slip op. at 23 (citing 39 F. R. D., at 102 (emphasis supplied by the Court)).

23 Id., slip op. at 24.

24 See id., slip op. at 26-27.

25 See id., dissenting op. at 2.

26 See Dukes, 603 F.3d at 581-82.

27 In addition to the Ninth Circuit, circuits that already permit merits inquiry to the extent necessary to conduct the "rigorous analysis" mandated under Falcon were the First Circuit, see New Motor Vehicle Canadian Export Antitrust Litig, 522 F.3d 6, 24 (1st Cir. 2008); the Second Circuit, see In re Initial Public Offering Securities Litig., 471 F.3d at 33-34; the Third Circuit, see In re Hydrogen Peroxide Antitrust Litig., 552 F.3d 305, 312-26 (3d Cir. 2008); the Fourth Circuit, see Gariety v. Grant Thornton, LLP, 368 F.3d 356, 366 (4th Cir. 2004); the Fifth Circuit, see Oscar Private Equity Investments v. Allegiance Telecom, Inc., 487 F.3d 261 (5th Cir. 2007); the Seventh Circuit, see Szabo, 249 F.3d at 675-76; the Eighth Circuit, see Blades v. Monsanto Co., 400 F.3d 562, 566-67 (8th Cir. 2005). The one notable dissenting jurisdiction was the Sixth Circuit, which (continued to rely on Eisen to forbid merits inquiry at the class certification stage. See Cancino v. Yamaha Motor Corp., U.S.A., 2010 WL 2607251 at *4 (S.D. Ohio June 24, 2010) (citing Beattie v. Century Tel. Inc., 511 F.3d 554, 560 (6th Cir. 2007)). The contrary authority in the Sixth Circuit has presumably been overruled by Wal-Mart.

28 Compare Allison v. Citgo Petroleum Corp.151 F.3d 402 (5th Cir. 1998) (a Rule 23(b)(2) class may assert claims for monetary relief that is "incidental" to the injunctive relief sought) with Robinson v. Metro-North Commuter Railroad Co., 267 F.3d 147 (2d Cir. 2001), cert. denied, 535 U.S. 951 (2002) (courts must, on a case-by-case basis, engage in an ad hoc balancing of the injunctive and monetary relief when evaluating whether to certify a Rule 23(b)(2) class for mixed monetary and injunctive relief).

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Topics
 
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions