United States: Fourth Circuit Argues With Itself Over Dukes’ Application

While commentators can, and often do, debate fine points regarding the technical elements of a class action claim, the result in a given case is often dictated by a more fundamental concern.  That issue is whether the judge views class action treatment as an exception to the general rule or, instead, as a fundamental right. 

Just two years ago, in Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct   2541 (2011), a majority of the Supreme Court came down on the side of viewing the class action requirements more strictly, and class action treatment to be the exception rather than the rule.  But even the opinions in that case reflected this divide, with the dissent largely taking the view that courts should enforce Rule 23's requirements more leniently to allow more and greater class action claims.

A recent Fourth Circuit case reflects that this unspoken debate continues and also raises troubling issues regarding a court's candor over whether and why a particular case should be afforded class action treatment. Scott v. Family Dollar Stores, Inc., Case No. 12-1610 (4th Cir. Oct. 16, 2013).

It is more difficult than it should be to piece together the facts in Scott because the majority and dissent vary so widely in their description of the case they are reviewing, but at its core the case concerned class-wide claims against the Family Dollar Stores chain alleging that it discriminated against women in compensation nationwide.  So far, the case looks like Dukes, right?

That was probably deliberate.  The action was originally filed in 2008, at a time when the Ninth Circuit had already held that the Dukes case could proceed as a class.  Emboldened by that ruling, the plaintiffs apparently patterned their complaint based on the claims in Dukes and claimed that the company's decentralized practices and reliance on subjective criteria ultimately discriminated against women.  In pleadings filed before the Supreme Court announced its Dukes decision, the plaintiffs even described their claims as being "virtually identical" to those in Dukes.  The plaintiffs certainly cannot be faulted for doing so, assuming the allegations were true, and followed the logical course of patterning their case after one that had, at least as of then, proven successful.

But, of course, the Supreme Court reversed in Dukes in 2011 and the plaintiffs were then saddled with their own complaint patterned after now unsuccessful claims.  Without explanation, the plaintiffs reversed course and sought to recast their complaint completely to disavow their prior allegations and to aver the types of centralized decisions that a post-Dukes class action would require. 

The District Court found that the initial complaint could not survive post-Dukes scrutiny and also rejected the plaintiffs' change of course and refused to allow the proposed amended pleading.  The plaintiffs appealed.

The court of appeals was deeply divided.  A 3-judge panel of the Fourth Circuit issued a 30-page majority opinion, 2-page concurrence, and a 32-page dissent.  The language used by both sides was so strong that at least one judge had to comment about his respect and admiration for the others notwithstanding their disputes over the merits of the case before them.  The two sides agreed that the initial complaint could not be certified as a class – which was to be expected as it was based on the complaint adjudicated in Dukes.  Where they departed was whether the district court erred in denying leave to file the requested amendment.

The majority downplayed the allegations of the initial complaint and largely characterized the proposed amendment as a mere change in theory. It found that the district court should have permitted the amendment, permitted the parties to develop a fuller record, and then later reviewed the factual allegations more closely once it had that record. 

Unless the dissent manufactured the quotes it cited from the initial complaint, however, the majority, to put it politely, was fudging.  The dissent quoted and cited at length passages in which the plaintiffs stressed the issues of decentralized control and subjective decision making in their initial complaint.  The dissent made the compelling case that the plaintiffs were abandoning their prior allegations and proposing entirely new and different factual allegations to fit within the requirements of Dukes.  The dissent pointed out that even the new allegations were problematic and reflected little more than the fact that the defendant was a nationwide employer that, like virtually every other nationwide employer, used salary bands for various positions.

It's hard to square the majority's analysis with the facts.  It may be that the majority was giving the plaintiffs a judicial Mulligan. It may have decided the case based on a view that the putative class should not be penalized for cleverly pleading a class based on another case, only to have it whisked away by an intervening Supreme Court decision.  It is troubling, however, for a court to take such a cynical view or to gloss over the plaintiffs' abrupt change of position on factual issues for purely tactical reasons.  As even the majority opinion states, however, its decision will not be the last in the case, and the district court may very well deny certification once the record is more fully developed.  The problem with that view is that the litigation, already in its sixth year, will continue with likely difficult and expensive discovery along the way.

The Bottom Line:  Courts continue to grapple with Dukes issues and basic disagreements over whether a class action is (a) a right or (b) an exception to the general rule that individual cases are to be resolved on their own merits.

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