21 June 2011
In Wal-Mart Stores, Inc v. Dukes, No. 10-277, the Supreme Court reversed the class certification of a sprawling Title VII lawsuit against Wal-Mart Stores, Inc. Although decided in the context of an employment discrimination class action, the Court’s reinvigoration of the commonality requirement of Federal Rule of Civil Procedure 23(a) makes the decision applicable to federal class-action litigation in general.
The named plaintiffs in Dukes accused Wal-Mart of discriminating against roughly 1.5 million of its female employees by fostering a corporate culture of gender stereotyping and of failing to prevent first-level managers from discriminating against female workers in pay-or-promotion decisions. They sought an injunction against the allegedly discriminatory policy accompanied by billions of dollars in backpay.
Under Rule 23, a proposed class action may not be certified unless it meets all of the requirements of Rule 23(a)—numerosity, commonality, typicality, and adequacy—and at least one of the three requirements set forth in Rule 23(b). The Ninth Circuit affirmed the certification of the class under Rule 23(b)(2), which allows certification when “final injunctive relief or declaratory relief is appropriate respecting the class as a whole.” The Supreme Court then granted certiorari to review the class certification.
In an opinion by Justice Scalia, the Court held that a class could not be certified for two reasons. The Court unanimously held that the claims for backpay were not suitable for certification under Rule 23(b)(2). That rule, the Court explained, “applies only when a single injunction or declaratory judgment would provide relief to each member of the class. It does not authorize class certification when each individual class member would be entitled to a different injunction or declaratory judgment” or “to an individualized award of monetary damages.” Slip op. 20. Claims for individualized monetary damages—such as the back pay claims sought by the Dukes plaintiffs—“belong in Rule 23(b)(3),” which provides heightened “procedural protections” for absent class members (such as the right to notice and to opt out of the class). Id. at 22.
The Court found it unnecessary to decide whether a claim for monetary damages could ever be certified under Rule 23(b)(2) consistent with due process. It made clear, however, that at a minimum claims for monetary damages could not be certified under Rule 23(b)(2) when they are merely “incidental” to a claim for injunctive relief, i.e., when the damages do not “flow directly from liability to the class as a whole, without the need for “additional hearings.” Slip op. 26 (internal quotation marks omitted). The Ninth Circuit had concluded that individual hearings on the backpay claims of the 1.5 million class members would be unnecessary because a few sample cases could be tried and the results of those sample trials could be extrapolated to the rest of the class. The Supreme Court “disapprove[d] that novel project” of “[t]rial by [f]ormula.” Id. at 27. The Court explained that Title VII gave Wal-Mart the right to raise individualized affirmative defenses against claims of discrimination, and that stripping Wal-Mart of the right to present those individualized defenses would violate the Rules Enabling Act, which “forbids interpreting Rule 23 to ‘abridge, enlarge, or modify any statutory right.’” Id.
By a 5-4 vote, the Court also held that the class had been improperly certified because the plaintiffs had failed to show the existence of a “common question” as required by Rule 23(a)(2). The Court explained that, to satisfy Rule 23(a)(2), the plaintiffs’ “claims must depend upon a common contention” that “must be of such a nature that it 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.” Slip op. 9 (internal quotation marks omitted). In other words, plaintiffs must demonstrate that the class action would “generate common answers apt to drive the resolution of the litigation.” Id. at 10 (internal quotation marks omitted). The Court emphasized that plaintiffs cannot merely plead that there are common questions; they must “prove that there are in fact . . . common questions of law or fact.” Id. And in analyzing the plaintiff’s showing of commonality, the district court must engage in a “rigorous analysis” that frequently “will entail some overlap with the merits of the plaintiff’s underlying claim.” Id. In this case, for example, the Court explained that the plaintiffs’ “proof of commonality necessarily overlaps” with their “merits contention that Wal-Mart engages in a pattern or practice of discrimination,” because “[w]ithout some glue holding the alleged reasons for all those [pay-or-promotion] 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.” Id. at 11–12.
The Court explained that the plaintiffs had failed to “bridg[e]” the “conceptual gap” between their individual and class claims for employment discrimination because they failed to show that Wal-Mart “operated under a general policy of discrimination” that “manifested itself in hiring and promotion practices in the same general fashion.” Slip op. 12. To the contrary, Wal-Mart had adopted a formal policy forbidding discrimination. The Court observed that the plaintiffs’ only evidence of a de facto general policy of discrimination was a sociologist’s expert testimony that Wal-Mart’s corporate culture led to stereotyped thinking. Wal-Mart had tried unsuccessfully to have this testimony struck under as unreliable under Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579 (1993). The Supreme Court expressed its “doubt” about the district court’s conclusion “that Daubert did not apply to expert testimony at the certification stage.” Slip op. 14. Moreover, even if the testimony were “properly considered,” the Court explained that such testimony would fail to support commonality because the expert conceded that his analysis could not explain “whether 0.5 percent or 95 percent” of Wal-Mart’s employment decisions were infected by stereotyping. Id.
The Court also sounded a note of caution about the certification of employment discrimination class actions that challenge the delegation of discretion to local supervisors. The Court explained that a policy “of allowing discretion by local supervisors” “is the opposite of a uniform employment practice that would provide the commonality needed for a class action; it is a policy against having uniform employment practices.” Slip op. 14. The Court noted that “an undisciplined system of subjective decisionmaking” can lead to “Title VII liability under a disparate-impact theory.” Id at 15. But the Court emphasized that this possibility does not mean that “every employee in a company using a system of discretion has such a claim in common.” Id.
Justice Ginsburg dissented from the Court’s ruling that the proposed class flunked the commonality requirement in an opinion joined by Justices Breyer, Sotomayor, and Kagan. The dissenters contended that the majority was blending the commonality requirement of Rule 23(a)(2) with Rule 23(b)(3)’s requirement that common questions predominate over individualized ones—a requirement that would not apply to the plaintiffs’ injunctive claims. The majority responded by noting that the myriad differences among the class members’ claims in fact precluded the finding of even a single common question: “Because [the plaintiffs] provide no convincing proof of a companywide discriminatory pay and promotion policy, * * * they have not established the existence of any common questions.” Slip op. 19.
Dukes is a significant development for class actions in federal court. Although the Court’s decision focused on whether and when employment discrimination claims may be certified as a class action, the Court’s analysis will be applied by lower courts in all types of class actions. Most significantly, the Court’s searching analysis of the commonality requirement should breathe new life into that limitation on class certification. Before Dukes, as one scholar put it, virtually any “competently pleaded” class action could be said to involve common questions. Moreover, the Court’s unanimous ruling that individualized damages claims cannot piggyback on a claim for injunctive relief and be certified under Rule 23(b)(2)’s more lenient certification standard likely will bring to an end attempts by the plaintiffs’ bar to evade Rule 23(b)(3)’s more stringent standard in a broad array of class actions in federal court.
Mayer Brown LLP filed an amicus brief in support of the petitioner on behalf of the Association of Global Automakers, Inc.
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