U.S. Supreme Court’s Landmark Wal-Mart Decision Raises the Bar on the Type of Evidence Necessary to Obtain Class Certification

While acknowledging statistical and sociological evidence that Wal-Mart’s discretionary management philosophy opened the door to individual supervisor bias against women, the U.S. Supreme Court did not find the Plaintiffs’ evidence sufficient to sustain a class-action approach in its recent ruling in the case of Wal-Mart Stores, Inc. v. Dukes et al. 2011 WL 2437013 (June 20, 2011).

The litigation was initiated by Betty Dukes, a veteran California Wal-Mart employee, who, together with approximately 1.5 million female Wal-Mart employees nationwide, sought judgment against the company for injunctive and declaratory relief, punitive damages and back pay because of Wal-Mart’s alleged discrimination against women in violation of Title VII of the Civil Rights Act of 1964.  Once certified as a Class by the Ninth District Court, the women claimed that local Wal-Mart managers disproportionately exercised their discretion over pay and promotions in favor of men, which they claimed, in turn, had an unlawful disparate impact on female employees. 

In workplace controversy and related matters that have come before the U.S. Supreme Court, Justice Chief Justice Roberts has consistently sided with private enterprise.  Davis proved no different. While the Supreme Court did not deny the possibility that individual Title VII claims could exist in Dukes, it focused on the application of Rule 23(a) of the Federal Rules of Civil Procedure, which seeks to ensure that that named plaintiffs are appropriate representatives of the class whose claims they wish to litigate.  Rule 23(a)’s four requirements-numerosity, commonality, typicality and adequate representation are generally regarded as effective in limiting class claims to those fairly encompassed by the named plaintiffs’ claims. In Dukes, The class action claims failed because, in essence, the Plaintiffs could not establish, on a class-wide basis, that Wal-Mart intended to discriminate against their female employees.

As pointed out by the Supreme Court, the only corporate policy that the plaintiffs’ evidence convincingly established was Wal-Mart’s “policy” of giving local supervisors discretion over employment matters.  However, simply recognizing that a claim “can” exist does not mean that every employee in a company with that policy has a common claim, it was pointed out.  In the Supreme Court’s view, it was unlikely that, in a company of Wal-Mart’s size and geographical scope, all of its managers would exercise their discretion in a common way (i.e., to discriminate) without some common direction.

“Other than the bare existence of delegated discretion, respondents have identified no ‘specific employment practice’-much less one that ties all their 1.5 million claims together.” the Supreme Court wrote.   “Merely showing that Wal-Mart’s policy of discretion has produced an overall sex-based disparity does not suffice.”

The Supreme Court held that the Ninth District Court had improperly certified the class according to Rule 23(a), as well as Rule 23(b)(2), which was applied to address the back pay portion of Davis action.  Rule 23(b)(2) applies to class treatment when “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.”  In a ruling which goes far beyond the employment law context, Justice Roberts’ opinion clearly stated that Rule 23(b)(2) cannot apply to any claims in which individual damages must be determined.  This makes certification of a damages class more difficult for Plaintiffs due to heightened procedural guidelines.

In the Dissent, Justice Ruth Bader-Ginsburg acknowledged that ” . . . a putative class of this type may be certifiable under Rule 23(b)(3), if the plaintiffs show that common class questions ‘predominate’ over issues affecting individuals . . . (but that) Whether the class the plaintiffs describe meets the specific requirements of Rule 23(b)(3) is not before the Court.”

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