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Supreme Court’s Wal-Mart Class Action Decision

Published by on June 28, 2011

This past Monday, the Supreme Court handed down its opinion on the much-anticipated Wal-Mart v. Dukes case.  In a 5-4 decision, the Court held that the plaintiffs could not bring a class action suit against Wal-Mart because their collective claims lacked commonality, a requirement for class actions brought under Rule 23 of the Federal Rules […]

This past Monday, the Supreme Court handed down its opinion on the much-anticipated Wal-Mart v. Dukes case.  In a 5-4 decision, the Court held that the plaintiffs could not bring a class action suit against Wal-Mart because their collective claims lacked commonality, a requirement for class actions brought under Rule 23 of the Federal Rules of Civil Procedure.  Justice Scalia, writing for the majority, found no “significant proof” that a general policy of discrimination existed at Wal-Mart.  In fact, the opinion noted, the evidence offered by the plaintiffs fell “well short” of the type of evidence required for proving that a “common mode of exercising discretion” existed on a company-wide level.  More after the break.

The plaintiffs in the suit alleged that Wal-Mart’s “corporate culture” created a bias against female employees by encouraging discretion at the store level with respect to pay and promotion decisions, and that all of Wal-Mart’s female employees were subject to the same discriminatory practice.  The court of appeals found sufficient evidence of commonality and allowed the suit to proceed as a class action.  The Supreme Court granted certiorari and reversed the lower court’s ruling as inconsistent with Rule 23’s requirements for class certification.

At the outset, the Court made clear that “Rule 23 does not set forth a mere pleading standard.”  Rule 23 requires actual compliance with its requirements and a deciding court’s analysis will frequently overlap with the merits of the case.  Here, the Court noted that “proof of commonality necessarily overlaps” with the contention that Wal-Mart engaged in a pattern or practice of discrimination.  In perhaps what may become the most quoted language of the opinion, Justice Scalia stated that the plaintiffs lacked the “glue” that binds together all of the alleged reasons for the discriminatory decisions.  Without that “glue”, the Court noted, “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.”

Citing the plaintiffs’ burden as requiring “significant proof” of a general policy of discrimination, the Court found no such evidence present here.  The Court characterized the plaintiffs’ expert testimony regarding how often gender bias played a role in employment decisions as “worlds away” from the “significant proof” required to show a general policy of discrimination.  In fact, Wal-Mart’s policy of decentralized decisionmaking, the Court found, is “just the opposite of a uniform employment practice that would provide the commonality needed for a class action.”  The Court stated that the plaintiffs had failed to identify a “common mode of exercising discretion” and that their statistical and anecdotal evidence fell “well short” of proving a discriminatory practice common to all 1.5 million class members’ claims.

The Court also concluded (unanimously) that the plaintiffs’ backpay claims were improperly certified under Rule 23(b)(2), which excludes claims for monetary relief that are not incidental to claims for injunctive or declaratory relief.  The Court made clear that Rule 23(b)(2)’s provisions do not authorize claims for individualized relief, either in the form of an injunction or monetary damages.  The Court rejected the plaintiffs’ argument that monetary claims are proper under the Rule so long as they do not predominate.  Further, the Court stated that Wal-Mart is entitled to “individualized determinations of each employee’s eligibility for backpay” which necessarily would prevent backpay from being classified as “incidental” to injunctive relief.

Writing for the dissent, Justice Ginsburg agreed with the majority that class certification under Rule 23(b)(2) was improper but opined that the plaintiffs should have been allowed to attempt certification under 23(b)(3).  The dissent also argued that by disqualifying the class under Rule 23(a), the majority had improperly imported 23(b)(3)’s more rigorous standard into 23(a)’s threshold inquiry.

The Court’s opinion can be found here.

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