In Wal-Mart Stores, Inc. v. Dukes, (— S.Ct. —-, U.S., June 20, 2011), the Supreme Court of the United States considered whether a court of appeals erred in approving the certification of a class of approximately 1.5 million current and former female employees who alleged Wal-Mart Stores, Inc., (“Wal-Mart”) discriminated against them on the basis of sex in violation of Title VII of the Civil Rights Act of 1964. The Supreme Court held the certification of the class was not consistent with federal law and reversed the lower court’s judgment.
Three current or former Wal-Mart employees sought to be representatives of a class of approximately 1.5 million women in a lawsuit alleging Wal-Mart discriminated against them based on their sex by denying them promotions and equal pay in violation of Title VII. Betty Dukes began working for Wal-Mart in 1994 in Pittsburg, California. Dukes claims she was demoted in retaliation for invoking internal complaint procedures and was disciplined for infractions that male employees were not disciplined for when they committed similar infractions. She also claims two male employees who were employed in the same position were paid more than she was. Christine Kwapnoski, who has worked at Sam’s Club stores in two states, claims that a male manager yells at her and other female employees but does not yell at male employees. She also claims the same manager “told her to ‘doll up,’ to wear some makeup, and to dress a little better.” Edith Arana worked for a Wal-Mart store in California from 1995 to 2001. She claims she was brushed off by the store manager more than once after she inquired about management training. After she attempted to initiate the internal complaint procedure, “she was told to apply directly to the district manager if she thought her store manager was being unfair.” Arana never applied for management training.
In their lawsuit, the three employees (“Employees”) never allege “Wal-Mart has any express corporate policy against the advancement of women.” They instead claim “their local managers’ discretion over pay and promotions is exercised disproportionately in favor of men, leading to an unlawful disparate impact on female employees.” The three women allege that “because Wal-Mart is aware of this effect, its refusal to cabin its managers’ authority amounts to disparate treatment.” Employees sought injunctive and declaratory relief, back pay, and punitive damages. They did not ask for compensatory damages.
Employees claim the discrimination to which they were subjected is common to all female employees of Wal-Mart. They assert “a strong and uniform ‘corporate culture’ permits bias against women to infect, perhaps subconsciously, the discretionary decisionmaking of each one of Wal-Mart’s thousands of managers—thereby making every woman at the company the victim of one common discriminatory practice.” Employees want to act as class representatives for all of Wal-Mart’s female employees in a nationwide class action to litigate Title VII sex discrimination claims against Wal-Mart.
A federal district court granted Employees’ motion to certify their proposed class of “‘all women employed at any Wal-Mart domestic retail store at any time since December 26, 1998, who have been subjected to Wal-Mart’s challenged pay and management track promotions policies and practices.” The Ninth Circuit Court of Appeals substantially affirmed the lower court’s class certification order.
Supreme Court Decision
The Supreme Court reversed the judgment of the Court of Appeals. The Court held the certification of the class of 1.5 million female Wal-Mart employees was inconsistent with federal law. Federal Rule of Civil Procedure 23 governs class certification. Rule 23(a) provides that a party who seeks class certification must show: “‘(1) the class is so numerous that joinder of all members is impracticable,’ ‘(2) there are questions of law or fact common to the class,’ ‘(3) the claims or defenses of the representative parties are typical of the claims or defenses of the class, and’ ‘(4) the representative parties will fairly and adequately protect the interests of the class.’” These four requirements are commonly referred to as numerosity, commonality, typicality, and adequate representation.
The Supreme Court noted that the crux of this case in regard to the Rule 23(a) requirements is the issue of commonality, which requires Employees to show “there are questions of law or fact common to the class.” The Court noted, “Commonality requires the plaintiff to demonstrate that the class members ‘have suffered the same injury.’” This requirement “does not mean merely they have all suffered a violation of the same provision of law.” The Court pointed out that Title VII “can be violated in many ways—by intentional discrimination, or by hiring and promotion criteria that result in disparate impact, and by the use of these practices on the part of many different superiors in a single company.” Just because employees of the same company have suffered from a Title VII injury does not mean “that all their claims can productively be litigated at once.” Instead, such employees’ “claims must depend upon a common contention—for example, the assertion of discriminatory bias on the part of the same supervisor.” The Court further explained, “That common contention, moreover, must be of such a nature that it is capable of classwide resolution—which means that determination of its truth or falsity will resolve an issue that is central to the validity of each one of the claims in one stroke.”
The Court found the Employees’ “proof of commonality necessarily overlaps with [their] merits contention that Wal-Mart engages in a pattern or practice of discrimination” because when “resolving an individual’s Title VII claim, the crux of the inquiry is ‘the reason for a particular employment decision.’” Employees desire “to sue about literally millions of employment decisions at once.” The Court opined, “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 noted there is a wide conceptual gap between an individual’s claim of discrimination and the existence of a class of persons who have suffered the same injury “such that the individual’s claim and the class claim will share common questions of law or fact and that the individual’s claim will be typical of the class claims.” There are two ways to bridge this gap. The first approach involves a situation where an employer uses a biased testing procedure to evaluate employees and potential employees. “[A] class action on behalf of every applicant or employee who might have been prejudiced by the test clearly would satisfy the commonality and typicality requirements of Rule 23(a).” This manner of bridging the conceptual gap is not applicable here because Wal-Mart did not use a testing procedure or other method of companywide evaluation. In fact, Employees argue that the discretionary decisionmaking of the managers led to the discrimination.
The second way to bridge the gap is to provide “‘[s]ignificant proof that an employer operated under a general policy of discrimination,” which “conceivably could justify a class of both applicants and employees if the discrimination manifested itself in hiring and promotion practices in the same general fashion, such as through entirely subjective decisionmaking processes.’” There is no evidence Wal-Mart operated under a general policy of discrimination. “Wal-Mart’s announced policy forbids sex discrimination,” and “the company imposes penalties for denials of equal employment opportunity.” The only evidence presented by Employees of such a general policy of discrimination was the testimony of a sociological expert who claimed “Wal-Mart has a ‘strong corporate culture,’ that makes it ‘vulnerable’ to ‘gender bias.’” However, this expert’s conclusions do not constitute significant proof that Wal-Mart had a general policy of discrimination.
The Court noted, “The only corporate policy that the [Employees’] evidence convincingly establishes is Wal-Mart’s ‘policy’ of allowing discretion by local supervisors over employment matters.” However, this evidence, on its face, “is just the opposite of a uniform employment practice that would provide the commonality needed for a class action; it is a policy against having uniform employment practices.” Given Wal-Mart’s size and geographic scope, “it is quite unbelievable that all managers would exercise their discretion in a common way without some direction.” Employees’ statistical and anecdotal evidence falls short of establishing that Wal-Mart directs its managers to use discriminatory practices. The affidavits reporting experiences of discrimination represent only one of every 12,500 class members at only 235 of Wal-Mart’s 3,400 stores. The Court concluded, “Even if every single one of these accounts is true, that would not demonstrate that the entire company ‘operate[s] under a general policy of discrimination.’” Because Employees failed to provide “convincing proof of a company-wide discriminatory pay and promotion policy,” the Court “concluded that they have not established the existence of any common question.”
The Court further held Employees’ claims for backpay were improperly certified under Rule 23(b)(2). The Court found that claims for monetary relief may not be certified under Rule 23(b)(2) “where the monetary relief is not incidental to the injunctive or declaratory relief.”
In addition to satisfying the requirements of Rule 23(a), a party seeking to certify a proposed class must also satisfy at least one of Rule 23(b)’s three requirements. Here, Employees relied on Rule 23(b)(2), “which applies 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.’” The Court noted, “One possible reading of this provision is that it applies only to requests for such injunctive or declaratory relief and does not authorize the class certification of monetary claims at all.” However, the Court declined to reach this broader question because it concluded “that, at a minimum, claims for individualized relief (like the backpay at issue here) do not satisfy the Rule.” The Court found, “Rule 23(b)(2) applies only when a single injunction or declaratory judgment would provide relief to each member of the class.” The Rule “does not authorize class certification when each individual class member would be entitled to a different injunction or declaratory judgment against the defendant” or “when each class member would be entitled to an individualized award of monetary damages.”
The Court held that to allow the combination of individualized and classwide relief would be inconsistent with Rule 23(b)’s structure. Rule 23 does not provide for class members certified under (b)(1) and (b)(2) to opt out. Rule 23(b)(3) allows class certification where “the questions of law or fact common to class members predominate over any questions affecting only individual members, and that a class action is superior to other available methods for fairly and efficiently adjudicating the controversy.” A potential class member in a Rule 23(b)(3) class is entitled to mandatory notice and is allowed to withdraw at his or her option. Given these rights, the Court found that it is “clear that individualized monetary claims belong in Rule 23(b)(3).”
Employees argue their class should be certified pursuant to Rule 23(b)(2) because their backpay claims do not predominate over their requests for declaratory and injunctive relief. The Court rejected this argument finding that it “creates perverse incentives for class representatives to place at risk potentially valid claims for monetary relief.” Employees did not ask for compensatory damages and asked solely for backpay so it would be “more likely that monetary relief would not ‘predominate.’” This strategy “created the possibility (if the predominance test were correct) that individual class members’ compensatory damages claims would be precluded by litigation they had no power to hold themselves apart from.”
Finally, the Court noted that “Wal-Mart is entitled to individualized determinations of each employee’s eligibility for backpay” under Title VII. If an employer can show that it took an adverse employment action against an employee for a nondiscriminatory reason, a “court cannot order the ‘hiring, reinstatement, or promotion of an individual as an employee, or the payment to him of back pay.’” The Court found that the approach used by the Ninth Circuit Court of Appeals would deny Wal-Mart its ability to defend against individual backpay claims.
Due to the size of the proposed class, the Court of Appeals suggested that a sample set of class members would be selected and liability and backpay for each would be determined in depositions supervised by a master. The number of valid claims would then be multiplied by the average backpay award to arrive at the amount of recovery for the entire class without the benefit of further individualized proceedings. The Supreme Court rejected this method of calculating backpay because “a class cannot be certified on the premise that Wal-Mart will not be entitled to litigate its statutory defenses to individual claims.” The necessity of such litigation will therefore prevent backpay from being merely incidental to a classwide injunction.
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