Supreme Court Rules in Wal-Mart's Favor, Finding Massive Class Action Inappropriate
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In a decision favorable to employers, the U.S. Supreme Court has held in Wal-Mart Stores, Inc. v. Dukes (pdf) that the lower court improperly certified a massive class action lawsuit. Specifically, the Court found that the plaintiffs failed to prove that their allegations of discrimination were common to all purported class members, and therefore resolution of the matter though a class action lawsuit would be inappropriate. Similarly, the Court reasoned that their claims for monetary damages were also improperly certified for class action consideration, as such remedies are necessarily determined – and defended against – on an individualized basis.
In this case, a purported class of approximately 1.5 million current and former female employees alleged that the discretion over pay and promotion decisions exercised by their company’s local supervisors violated Title VII of the Civil Rights Act. The group did not allege that the company had any express discriminatory policy, but claimed that the local managers’ discretion resulted in more favorable treatment of men, and that this alleged discrimination was applicable to all female employees. The group sought injunction and declaratory relief, as well as backpay.
In order to bring a class action lawsuit, the plaintiffs must prove, among other factors, that the questions of law or fact presented in the case are common to the entire class of plaintiffs, and the claims or defenses of the individuals bringing suit are typical of the claims or defenses of the entire class. This criteria, set forth in Federal Rule of Civil Procedure 23(a), “ensures that the named plaintiffs are appropriate representatives of the class whose claims they wish to litigate.” The Supreme Court in this case emphasized that class certification under Rule 23 requires a “rigorous analysis” and that
the mere claim by employees of the same company that they have suffered a Title VII injury, or even a disparate-impact Title VII injury, gives no cause to believe that all their claims can productively be litigated at once. Their claims must depend upon a common contention—for example, the assertion of discriminatory bias on the part of the same supervisor. That common contention, moreover, must be of such a nature that it is capable of class wide 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.
The Court further explained that a plaintiff seeking class certification must bridge the conceptual gap between an allegation she was discriminated against based on an otherwise unsupported claim that the company has a policy of discrimination, and the existence of a class of individuals who have suffered the same alleged injury and that those individuals’ circumstances share the same common questions of law and fact. In the instant case, the Court first noted that any general policy of discrimination was “entirely absent.” Since the company maintains a policy that forbids sex discrimination, the only proffered “evidence” on this point was testimony by a sociologist who was unable to say how many employment decisions may have been influenced by supervisors’ alleged “stereotyped thinking.” Because the witness could offer no insight on this commonality issue, the Court noted that his testimony was “worlds away from ‘significant proof’” of a discriminatory policy and that the Court could “safely disregard what he has to say.”
Moreover, the fact that the company permitted local supervisors to use discretion worked against the plaintiffs’ commonality claim. The Court stated that the plaintiffs “have not identified a common mode of exercising discretion that pervades the entire company,” and that because they provided “no convincing proof of a companywide discriminatory pay and promotion policy, we have concluded that they have not established the existence of any common question.” Therefore, without commonality, the class of women was improperly certified under Rule 23(a).
In addition, the Court concluded that the plaintiffs’ claim for backpay was improperly certified for a class action lawsuit. Specifically, the Court held that claims for monetary relief may not be certified under Rule 23(b)(2) – which permits class actions when “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” – if such a claim for monetary relief is not incidental to the claims for injunctive or declaratory relief. The Court stated that class certification is not authorized “when each individual class member would be entitled to a different injunction or declaratory judgment against the defendant,” nor would it be appropriate when each class member would be entitled to an individual monetary award. In the case at hand, the Court rejected the plaintiffs’ contention that their claims for backpay did not “predominate” their requests for injunctive and declaratory relief. Among other reasons, the Court said that doing so would create “perverse incentives for class representatives to place at risk potentially valid claims for monetary relief.” Moreover, according to the Court, the company “is entitled to individualized determinations of each employee’s eligibility for backpay.”
This much-anticipated decision should come as a relief to employers, who are faced with a rising number of class action lawsuits that are logistically and financially difficult to defend against.
For more information on this decision and its implications for employers, see Littler's ASAP: And the Class Certification Battle is Won: A Unanimous Supreme Court Reverses Rule 23(b)(2) Class Certification in Dukes v. Wal-Mart by Margaret Parnell Hogan and Danielle L. Kitson.
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On June 15, 2009, the United States Supreme Court granted certiorari in Stolt-Nielsen S.A. v. AnimalFeeds International Corp., 548 F. 3d 85 (2d Cir. 2008), cert. granted, 129 S. Ct. 2793 (2009). The question before the Supreme Court is whether an arbitration agreement that is “silent” on the question whether class arbitrations are permitted can ever be construed to permit such arbitrations.