In a closely-watched case, Wal-Mart Stores, Inc. v. Dukes, 564 U.S. ___ (June 20, 2011) (“Wal-Mart”), the United States Supreme Court reversed certification of “one of the most expansive class actions ever” – a class comprising approximately 1.5 million current and former female Wal-Mart employees. In their lawsuit, plaintiffs claimed that, notwithstanding Wal-Mart’s written policy of non-discrimination, the company’s managers discriminated against women in pay and promotion decisions. Plaintiffs sought injunctive and declaratory relief, as well as punitive damages and back pay for each class member, but did not seek consequential damages.
The 5-4 majority opinion, authored by Justice Antonin Scalia, joined by Justices Samuel Alito, John Roberts, Clarence Thomas, and Anthony Kennedy – with Justices Ruth Bader Ginsburg, Sonia Sotomayor, Elena Kagan and Stephen Breyer, dissenting – found that the action failed to meet the requirement of Federal Rule of Civil Procedure 23(a)(2) that there be “questions of law or fact common to the class.” The Court also unanimously rejected plaintiffs’ request for back pay under Federal Rule of Civil Procedure 23(b)(2), finding that individual money damages could not be sought under that provision of the Rule.
While the plaintiffs can still pursue their claims against Wal-Mart individually, they will not be able to proceed on a national class-wide basis.
The Majority Found That the Case Did Not Present Common Questions Whose Resolution Would Advance the Claim of Each Class Member
In order to obtain class certification, a party must meet each of the requirements of Federal Rule of Civil Procedure 23(a) – numerosity, commonality, typicality, and adequacy of representation – as well as the requirements of one of the subsections of Federal Rule of Civil Procedure 23(b). The majority ruled that the plaintiffs had failed to meet the “commonality” requirement of Rule 23(a). The Court explained that a “common” issue within the meaning of Rule 23(a)(2) is one whose “truth or falsity will resolve an issue that is central to the validity of each one of the claims in one stroke.” In other words, in order for the Wal-Mart plaintiffs to be able to pursue their individual claims of discrimination on a class-wide basis, there first had to be “some glue holding the alleged reasons for all those [claimed discriminatory] decisions together.” The Supreme Court found that Wal-Mart’s policy of allowing individual “discretion by local supervisors over employment matters” rendered pay and promotion decisions “just the opposite of a uniform employment practice that would provide the commonality needed for a class action.” Even were one able to demonstrate the impropriety of one manager’s use of discretion in a pay or promotion decision with respect to a particular plaintiff, that finding would “do nothing to demonstrate the invalidity of another” manager’s exercise of discretion, let alone advance the resolution of the claim by any other member of the class. Lacking the requisite “commonality,” the plaintiffs’ claims were not suitable for class certification.
The Court Found Unanimously That Seeking Monetary Relief in the Form of Back Pay Under Rule 23(b)(2) Is Inappropriate
The Court unanimously found plaintiffs’ attempt to obtain a monetary award under Rule 23(b)(2) to be improper. Plaintiffs had characterized their request for back pay as constituting simply “incidental” relief under Rule 23(b)(2) – the subsection of the Rule that applies where “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.” The Court indicated that plaintiffs seeking monetary relief requiring, as here, individualized determinations should properly proceed instead under subsection 23(b)(3) – which, in contrast to the mandatory nature of a 23(b)(2) class, contains procedural protections for the plaintiff, in the form of a notice requirement and the ability of individuals to opt-out of the class action, while protecting the defendant’s right to assert individualized defenses to individuals’ claims.
The Court further criticized the statistical “Trial by Formula” proposed by the plaintiffs, in which back pay awards would be derived from findings regarding a sample subset of claimants. Such extrapolation, the Court found, did not comport with the right of the defendant to “individualized determinations of each employee’s eligibility” for back pay.
Significance of the Supreme Court’s Decision
The Wal-Mart decision, by making it more difficult for plaintiffs to pursue large-scale class actions, will likely have a tremendous impact on the litigation landscape well beyond the particulars of this case. Lower courts – many of which have been historically quick to find “commonality” – will be required to examine more closely whether there is evidence of individual variability regarding the plaintiffs’ underlying claims, thereby rendering those claims improper for class certification. Furthermore, the statistical or anecdotal evidence from which plaintiffs sometimes attempt to extrapolate entitlement to aggregate relief will likely be more closely scrutinized, with the courts requiring individualized proof tailored to the individual claimant.