Plaintiffs filed suit against Wal-Mart in 2001, alleging Wal-Mart violated Title VII of the Civil Rights Act by systematically paying women less than men and giving women fewer opportunities for promotion. The district court certified a class of all women Wal-Mart employed at any time after December 26, 1998 – a class that could include 1.5 million women. The class asserted claims for injunctive and declaratory relief, and back pay, along with a separate "opt out" class for employees seeking punitive damages. 2010 WL 1644259 at *1.
The Ninth Circuit granted Wal-Mart's petition for leave to appeal. After initially affirming the district court, 509 F.3d 1168 (9th Cir. 2007), the court granted rehearing en banc, 556 F.3d 919 (9th Cir. 2009). In a lengthy opinion, the court ultimately determined that, with the exception of the punitive damages and claims for back pay by former employees, the district court did not abuse its broad discretion in certifying the class.
The decision is notable just for the massive scope of the class that was certified: a class of over 1.5 million members. As the dissent put it, “[n]o court has ever certified a class like this one, until now. And with good reason.” Id. at *44. But size is not the only reason the decision stands out. The finding of a common company-wide policy was based, in part, on perhaps one of the smallest statistical samples of anecdotes ever used. Corporate "culture" evidence was relied on heavily, by plaintiffs and their sociologist expert witness, even though the purported culture had no explicit link to the alleged acts of discrimination. The Ninth Circuit declined to perform a full Daubert analysis of the expert submissions on which the class decision was based, stating that Wal-Mart had only challenged the persuasiveness of the submissions and not their reliability or relevance. The court also permitted a large aggregated monetary claim to be certified under the arguably more lenient Rule 23(b)(2), and it reserved for later consideration issues that potentially go to the heart of whether a class-wide trial actually could be conducted fairly.
The decision highlights the importance of developing a comprehensive factual and expert record when opposing class certification. As the court held, “when considering class certification under Rule 23, district courts are not only at liberty to, but must, perform a rigorous analysis to ensure that the prerequisites of Rule 23 have been satisfied, and this analysis will often, though not always, require looking behind the pleadings to issues overlapping with the merits of the underlying claims.” Id. at *5. Also, a defendant opposing class certification needs to be prepared, if at all possible, with a good Daubert motion and a solid argument that a Daubert hearing is required, compelling the court to address that issue head on. And, where "anecdotal" declarants are presented to a court in support of class certification, depositions and counter-affidavits could prove critical to the opposition effort. Dukes, in short, at least supports the growing trend in case law that the class certification decision often will (or should) involve extensive evidentiary submissions. The time is quickly passing where courts will base class decisions simply on the pleadings, avoiding difficult decisions in resolving disputed issues of fact.
That said, the Dukes decision is a sweeping endorsement of perhaps an unprecedented class, made in the face of a vigorous opposition by Wal-Mart. All-in-all, Dukes is a decision that may tee-up several critical Rule 23 class certification issues for United States Supreme Court review.
II. The Majority Opinion
A. Rule 23(a)
All federal class actions must first satisfy the four requirements of Federal Rule of Civil Procedure 23(a). The class must be numerous, and it must present at least one question that is common to all class members. The representative plaintiffs' claims must be typical of the class, and the representative plaintiffs must adequately represent the absent class members.
There was no dispute that a proposed million-member class was sufficiently numerous, 2010 WL 1644259 at *20, and the Ninth Circuit rather quickly found that plaintiffs' alleged claims were typical of the class and that plaintiffs would adequately represent absent class members. 2010 WL 1644259 at *31-33.
The hotly-contested issue under Rule 23(a) was whether plaintiffs had established the existence of a common issue affecting all class members. Plaintiffs asserted Wal-Mart had a common, company-wide policy of discriminating against women. The Ninth Circuit held that plaintiffs adequately supported an inference of a common policy by submitting the following materials:
- Anecdotal evidence in the form of declarations from 120 women (.008% of the class) describing allegedly discriminatory conduct.
- Evidence that Wal-Mart had a strong, centralized corporate culture that promoted policies common to all stores. (Although, as the dissent points out, none of this evidence related to any allegedly discriminatory policies.)
- The report of a sociologist who opined that Wal-Mart's centralized corporate culture promoted uniformity in personnel policy that made Wal-Mart's "pay and promotion decisions vulnerable to gender bias." 2010 WL 1644259 at *22.
- An expert statistician's report establishing that women were under-represented in management positions in almost all of Wal-Mart's regions.
The court noted that its inquiry into Rule 23(a) commonality – whether a common question exists – may be more limited than a full Rule 23(b)(3) predominance inquiry into whether common questions of law or fact predominate. The latter might call for "more precise factual determinations," the court stated. 2010 WL 1644259 at *15.
Wal-Mart objected to the district court's consideration of the expert reports, arguing that the reports were unreliable and inadmissible under Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579, 597 (1993). The Ninth Circuit rejected Wal-Mart's argument, holding that a full-blown merits evaluation of the expert evidence was not required at the class certification stage. Rather the district court only needed to "delve into the expert testimony" enough to determine if it was scientifically reliable and sufficiently probative. 2010 WL 1644259 at *22-23. The court did not squarely address the issue of whether the Daubert inquiry is appropriate at the class stage, but cast doubt upon it. See id. at *23 n.22.
With the expert opinions supporting a finding of a common policy, the district court properly found the requirements of Rule 23(a) satisfied. (To the extent the Ninth Circuit suggests the district court need not conduct a full-scale Daubert hearing when ruling on a challenge to an expert opinion during a class certification hearing, it conflicts with the Seventh Circuit's recent decision in American Honda Motor Co. v. Allen, ___ F.3d ___, 2010 WL 1332781 (7th Cir. April 7, 2010) (per curiam). To see Wildman Harrold's bulletin on the American Honda decision, click here.)
B. Rule 23(b)(2)
Having thus upheld the district court's Rule 23(a) decision, the Ninth Circuit analyzed whether the case also satisfied Rule 23(b)(2). This required plaintiffs to establish that Wal-Mart had acted on grounds that generally apply to the class so that final injunctive relief is appropriate for the class as a whole. Because Rule 23(b)(2) focuses on class-wide injunctive relief, certification is not proper when the final relief in the case is predominantly money damages. Wal-Mart argued that, because plaintiffs sought an award of billions of dollars in back pay, money damages would clearly be the predominant relief if plaintiffs prevailed. The Ninth Circuit disagreed, holding that the predominant relief is determined by “the primary goal and nature of the litigation – not the theoretical or possible size of the damages award.” 2010 WL 1644259 at 36. It found that the potential monetary award for each individual plaintiff was not so great as to predominate over the goal of requiring Wal-Mart to change its allegedly discriminatory policies. Id.
The Ninth Circuit did, however, reverse the district court’s certification of the punitive damages claims under Rule 23(b)(2). The district court did not adequately consider whether an award of punitive damages would cause money damages to predominate over injunctive relief. The Ninth Circuit directed the district court to re-evaluate the issue in light of its opinion. Id. at *40.
Finally, the court rejected Wal-Mart’s argument that the huge class would be unmanageable and that trying the case as a class action would deprive it of its statutory right to dispute, on an individual basis, each class member’s claim that Wal-Mart denied her pay or promotion because of her gender. The court essentially found Wal-Mart’s concerns to be premature, “express[ing] no opinion regarding Wal-Mart’s objections to the district court’s tentative trial plan” and noting there are “a range of possibilities” that would allow a class trial to proceed properly. Id. at *42.
III. The Dissent
Judge Sandra Ikuta wrote a sharply critical dissent, noting that “[n]o court has ever certified a class like this one, until now. And with good reason.” Id. at *44. In Judge Ikuta’s view, plaintiffs’ evidence fell far short of establishing that Wal-Mart engaged in systematic gender discrimination. No court had ever accepted such a small sample as establishing a pattern of discrimination. Even if the six plaintiffs and the 120 declarants had valid claims, she argued, this was simply inadequate to establish a common practice affecting another 1.5 million women working in thousands of stores, under independent managers, throughout the country. Contrary to the majority’s statement, Judge Ikuta stated that the district court had not found the expert’s opinion to be “scientifically reliable.” Rather, the district court found only that the opinion was not “so flawed [as to] lack sufficient probative value,” id. at 53, and erred by relying on unreliable expert testimony. Finally, Judge Ikuta believed that allowing the case to proceed on a class basis would inevitably deprive Wal-Mart of its statutory right to contest each claim individually. Id. at 54-57.