The Supreme Court today issued its widely-anticipated decision in Wal-Mart Stores, Inc. v. Dukes, No. 10-277 (June 20, 2011). Reversing the District Court and the Ninth Circuit, the Court held that the class of 1.5 million female Wal-Mart employees -- one of the largest classes ever certified -- did not meet the requirements of Federal Rule 23. The Court, however, fundamentally disagreed on how to apply the commonality requirement of Rule 23(a)(2): arguably the most important issue presented by the case.

The class contended that their local managers’ discretion over pay and promotions was exercised disproportionately in favor of men, leading to an unlawful disparate impact on female employees in violation of Title VII. The class sought injunctive relief, declaratory relief, and back pay. The class further contended that such a claim could be litigated on a common basis through use of statistical, anecdotal and other evidence.

All class actions require, among other things, a finding that “there are questions of law or fact common to the class...” Rule 23(a). Wal-Mart appealed the decision by a divided Ninth Circuit affirming certification under a subsection of Rule 23, Rule 23(b)(2), which allows certification of certain actions primarily seeking injunctive relief. The issue of whether plaintiffs' claims could satisfy Rule 23(b)(3), which allows certification where common questions predominate over individual questions, was not part of the appeal.

The majority held that the class claim did not present common questions of law or fact under Rule 23(a)(2). Commonality requires that the class members have suffered “the same injury” and the class contention “must be of such a nature that is 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. Here, the class claims’ emphasis on individual manager discretion foreclosed a finding of commonality because “the invalidity of one manager’s use of discretion will do nothing to demonstrate the invalidity of another’s.” Id. at 15.

The dissent disagreed on this point, asserting that the majority had conflated the commonality requirement under Rule 23(a)(2) and the predominance assessment under Rule 23(b)(3). Pointing out that the class had submitted substantial evidence of discriminatory impact and that the commonality requirement has never been viewed as presenting a difficult barrier to certification, the dissent would have found a straightforward common question: “whether Wal-Mart’s discretionary pay and promotion policies are discriminatory.” Id. at 8. According to the dissent, the failure to acknowledge this common question under Rule 23(a)(2) “blends Rule 23(a)(2)’s threshold criterion with the more demanding criteria of Rule 23(b)(3), and thereby elevates the (a)(2) inquiry so that it is no longer ‘easily satisfied.’”) Id., quoting Moore’s Federal Practice, §23.23. The dissent would have, therefore, remanded the matter for evaluation under Rule 23(b)(3).

The entire Court agreed, however, that the backpay claims asserted by the class cannot be certified under Rule 23(a)(2). While reserving the question of whether claims for monetary relief are ever appropriate for class treatment under Rule 23(a)(2), the Court found that such claims must be, at most, “incidental to the injunctive or declaratory relief,” not introduce new factual or legal issues, and not entail complex individualized determinations. Slip Op., pp. 20, 26. Here, the class members’ “individualized monetary claims” were more than “incidental” to their claims for injunctive relief and therefore could not be certified under Rule 23(a)(2).

We are analyzing the opinion further and expect to circulate a fuller discussion in the near future.