Today the Supreme Court granted Wal-Mart's certiorari petition, agreeing to hear the company's appeal of the Ninth Circuit's significant decision in the gender discrimination class action Dukes v. Wal-Mart Stores, Inc., 603 F.3d 571 (9th Cir. 2010) during its current 2010-11 term.
Dukes may be the most important class action case to reach the Supreme Court in decades. In Dukes, the Ninth Circuit, in a sharply divided 6-to-5 en banc decision, substantially affirmed the largest employment class in United States Court history, consisting of an estimated 1.5 million current and former female Wal-Mart employees from 3,400 different Wal-Mart stores. The class alleges that Wal-Mart's pay and promotional practices discriminate against women and seeks injunctive, declaratory, and back pay under Title VII. In granting certiorari, the Supreme Court has decided to address both an issue briefed by the parties—the split in the Circuits regarding Rule 23(b)(2)—and an issue raised sua sponte by the Court--"whether the class certification ordered under Rule 23(b)(2) was consistent with Rule 23(a)."
In its certiorari petition, Wal-Mart argued that the majority's decision created an untenable three-way circuit split on the standard for determining whether claims for monetary relief can be certified under Federal Rule of Civil Procedure 23(b)(2). Under Rule 23(b)(2), a class may be certified only if "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." While the Rule on its face applies only to claims for injunctive or corresponding declaratory relief, federal courts have generally adopted the view that a 23(b)(2) class may obtain monetary relief so long as the "predominant" relief sought by the class remains injunctive or declaratory. Consistent with this view, the Fifth, Sixth, Seventh, and Eleventh Circuits have adopted the so-called "incidental damages" test, which prohibits the certification of a Rule 23(b)(2) class that seeks monetary relief unless the monetary relief sought flows directly from liability to the class as a whole on the claims forming the basis of the injunctive or declaratory relief. The Second Circuit, on the other hand, has adopted a test that hinges on the plaintiffs' subjective intent in bringing suit.
The Ninth Circuit used this same subjective-intent test until Dukes, when the majority expressly abandoned it for a new test premised on the dictionary definition of "predominant." Using that test, the Dukes majority announced that, to satisfy Rule 23(b)(2), "a class must seek only monetary damages that are not 'superior in strength, influence, or authority' to injunctive and declaratory relief," as determined using "[f]actors such as whether the monetary relief sought determines the key procedures that will be used, whether it introduces new and significant legal and factual issues, whether it requires individualized hearings,  whether its size and nature – as measured by recovery per class member – raise particular due process and manageability concerns," and "any other factors relevant to whether monetary relief predominates when determining if certification under Rule 23(b)(2) is appropriate." 603 F.3d at 617, 621 (emphasis added). The majority found that under this open-ended multi-factor test, the plaintiff class's request for back pay did not "predominate" over its requests for injunctive and declaratory relief even though that monetary request totaled in the billions of dollars in the aggregate.
Wal-Mart argued that by rejecting the 23(b)(2) standards previously articulated and announcing a new standard, the Ninth Circuit "exacerbat[ed] the long-standing conflict and confusion on this issue in the lower courts." Having now granted Wal-Mart's petition, the Supreme Court may well resolve the circuit split on Rule 23(b)(2). The Court's sua sponte decision to take up whether the Rule 23(b)(2) class is consistent with Rule 23(a) suggests that the Court may also have questions about the commonality, typicality, and representativeness of the named plaintiffs' claims. Significantly, if the Court affirms the majority's decision in Dukes and adopts the majority's multi-factor test, companies can expect what Wal-Mart argued in its petition: "Plaintiffs who cannot satisfy the stringent requirements of Rule 23(b)(3) [will] . . . bring suit under Rule 23(b)(2), in the hopes of securing a mandatory certification under the Ninth Circuit's malleable multi-factor test." Such an outcome could lead to a significant increase in Rule 23(b)(2) class actions filed against companies – and not only in the area of employment law, but also in a variety of other areas, including antitrust, products liability, and consumer fraud.
The Supreme Court will likely issue its substantive decision by June of 2011.