Justices Unanimous on Result, Split on Pathway, in Wal-Mart Class Action Case

In what may arguably be the Supreme Court’s most important and enduring decision from the October 2010 term – Wal-Mart Stores, Inc. v. Dukes – all nine justices agreed with the nation’s largest retailer that a class action gender discrimination lawsuit against it should not have been certified in federal court. By a five-to-four vote, the Court went even further in holding that the proposed class action did not have common questions of law or fact.

The unanimous court held that a lawsuit containing claims for monetary relief (such as back pay) cannot be certified as a class action under Federal Rule of Civil Procedure 23(b)(2) where the monetary relief is not merely “incidental” to the request for injunctive or declaratory relief. Without deciding whether claims for monetary relief would ever be certified under the rule, the Court held that the proper route for bringing such a claim would be under Rule 23(b)(3), which provides procedural protections for members of the class. If a claim for monetary relief were to fail in a certified 23(b)(2) action, members of the class who could not opt out – as they can under 23(b)(3) – may be “collaterally estopped” (prevented) from pursuing their own individual claims against the defendant.

This holding is a victory for both retailers who may be sued, and for members of potential class actions who may wish to pursue their own claims against those retailers. Both have the right to individualized determinations of each employee’s eligibility for back pay.

The Court split, however, in determining whether the putative class of 1.5 million Wal-Mart female employees had any common issue that would be able to be resolved in a single legal proceeding. Justice Scalia, writing for the five-Justice majority, stated in order to prove “commonality,” plaintiffs must prove not that they have suffered from a violation of the same provision of a law, but rather that they have suffered the same injury:

Without some glue holding the alleged reasons for all those decisions together, it will be impossible to say that examination of all the class members’ claims for relief will produce a common answer to the crucial question why was I disfavored.

The Court rejected the plaintiff’s contention that Wal-Mart engaged in a pattern or practice of gender discrimination. “Significant proof…that Wal-Mart operated under a general policy of discrimination” was “entirely absent” in this case, Justice Scalia explained.

In a victory for WLF, the Court rejected the expert testimony of Dr. William Bielby, a sociology expert for the plaintiffs, who relied on “social framework” analysis that concluded that Wal-Mart had a “strong corporate culture” that made it “vulnerable” to “gender bias.” Dr. Bielby could not determine how regularly stereotypes played a meaningful role in employment decisions on a national basis at Wal-Mart. WLF has actively urged the judiciary, since 2004, to require the plaintiffs to meet the Daubert standards for admission of expert testimony. Such an examination by the court – a “rigorous analysis” of the Rule 23(a) requirements for class certification – would keep junk science from being used to certify class actions that later may not even have the so-called expert testimony introduced into evidence at trial.

The Court doubted the lower courts’ view that the Daubert standards did not apply to the certification stage, seemingly agreeing with WLF that the same standard should be applied to analyzing class action certification as at the trial stage. Moreover, the Court found that the “expert” testimony did not advance the plaintiff’s claim for commonality among the class, as Dr. Bielby could not answer whether 0.5 or 95 percent of employment decisions at Wal-Mart “might be determined by stereotyped thinking.” That is, the Court believes, to be the “essential question on which respondents’ theory of commonality depends.”

Justice Ginsburg and three other justices disagreed with the majority’s analysis of the commonality question. Their dissent emphasizes that Wal-Mart’s “practice of delegating to supervisors large discretion to make personnel decisions” that may have had disparate effects on women employees was a decision to be made by the District Court in determining the commonality of claims for the class action. Justice Ginsburg argues that such a determination under Rule 23(a) should be “easily satisfied,” yet the majority has required a more demanding standard.

This decision’s legacy should be a more demanding standard for trial lawyers to overcome when seeking to sue national retailers – allegedly on behalf of thousands or millions of workers – for discrimination claims. Had the dissent’s view of easy satisfaction of Rule 23(a)(2)’s commonality requirement carried the day, through dubious “expert testimony” untested by the trial court at the certification stage, it may have opened the door for massive class action discrimination lawsuits against all national retailers even if they leave specific employment decisions to local managers, as most do. 

Thankfully, the Court slammed that door shut today in decertifying this class action.

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