The U.S. Supreme Court issued its long-awaited decision in Wal-Mart Stores, Inc. v. Dukes, --- U.S. ---, No. 10-277 (June 20, 2011), ruling that the plaintiffs, who had proposed a class of an estimated 1.5 million members, could not proceed with their sex discrimination case as a class action. The decision was based on two specific requirements of Rule 23 of the Federal Rules of Civil Procedure - requirements that had been largely disregarded by some courts in employment discrimination cases. The Court's enforcement of these requirements bodes well for employers faced with future class actions and will not likely interfere with the assertion of legitimate claims.
The putative class proposed by the plaintiffs in Wal-Mart consisted of all women currently or formerly employed in any of Wal-Mart's stores, nationwide, since December 26, 1998. In general, the plaintiffs asserted that Wal-Mart had a company-wide system of giving individual store managers discretion to make promotion and pay decisions, and that store managers exercised such discretion in their respective stores to the disadvantage of female employees. They also contended that the company's strong corporate culture educated managers to exercise their discretion in favor of men. Statistical evidence, aggregated nationally and regionally, also was offered in support of the general contention that women had not fared well, in the time period indicated, versus men.
The U.S. District Court for the Northern District of California and the Ninth Circuit Court of Appeals had certified the case as a class action, permitting the named plaintiffs to present a case on behalf of all members of the proposed class. The Supreme Court reversed this decision.
A slim majority of the Supreme Court (5-4), but a majority nonetheless, found that the plaintiffs had not met the "commonality" requirement of Rule 23(a) of the Federal Rules of Civil Procedure. The Rule states that, in order to proceed with a class action, plaintiffs must show that they share at least one common question of fact or law. Many courts had become rather lax about the "commonality" requirement, finding it satisfied whenever the members of a proposed class had any single issue of fact or law in common, regardless of the issue's significance. The Supreme Court majority in Wal-Mart bolstered this requirement, explaining that Rule 23 requires plaintiffs to show that they suffered the same injury and that the common question can be resolved "in one stroke," for the entire class.
The majority of the Justices ruled that the plaintiffs had not presented significant proof of their common question of fact or law. Each individual member of the proposed class allegedly suffered gender discrimination as a result of a discretionary decision by a single manager, located somewhere in the company, but the plaintiffs did not identify anything the managers did, in common, to discriminate against women - there was no evidence that all managers relied on tests, on performance-based criteria, on education level or on any other available factor. Moreover, the statistical evidence presented a picture of the workforce at different points in time, but failed to demonstrate anything about the individual managerial decisions resulting in the snapshots.
Of perhaps greater long-term significance, the Justices ruled unanimously (9-0) that, even if the plaintiffs had proven "commonality," their putative class was not appropriately certified under Rule 23(b)(2) of the Federal Rules. That Rule relates to cases in which a proposed class is asking the court for injunctive relief. In Wal-Mart, although the plaintiffs sought injunctive relief against discriminatory practices, they also sought substantial monetary relief. By seeking such monetary relief, the Court ruled, the plaintiffs' case was not suited for (b)(2) analysis. Instead, the plaintiffs were required to establish that the common questions of law or fact in their case "predominated" over questions affecting only individual class members, and that a class action was a more fair and efficient method of deciding the controversy than individual lawsuits, under Rule 23(b)(3) of the Federal Rules. Insofar as plaintiffs typically seek monetary relief in employment discrimination cases, and as the "predominance" and "fairness/efficiency" requirements are more difficult to prove than the (b)(2) "injunctive relief" test, this conclusion could have substantial consequences in future cases.
Employers nationwide had anxiously awaited the Supreme Court's decision in this case. This ruling justifies the common corporate policy of delegating to local mangers the discretion to make operational decisions, deeming that they are best situated to determine the local requirements and to use local information. The Court's decision also validates the use of centralized corporate authority to set boundaries for local managers to prevent discrimination. In those instances where violations are committed, however, statutory remedies will be available to individual victims who pursue their claims.