On June 20, 2011, the United States Supreme Court issued its opinion in the Wal-Mart Stores, Inc. v. Dukes. The decision makes it much more difficult for very large groups of employees to join to sue an employer for alleged discrimination — at least in federal court.
Betty Dukes, a greeter at a Wal-Mart in Pittsburg, California alleged that Wal-Mart violated Title VII of the Civil Rights Act of 1964 by engaging in gender discrimination in both pay and promotions on a national basis. In the lawsuit, Dukes sought to certify a class action consisting of approximately 1.5 million female employees who worked for Wal-Mart after December 26, 1998. The issue before the Supreme Court was whether the plaintiffs satisfied the requirements for certifying a class action under Federal Rule of Civil Procedure 23 so as to proceed with one national gender discrimination case against Wal-Mart. The Court did not address the merits of the case, i.e., whether Wal-Mart engaged in gender discrimination.
Despite the fact that Wal-Mart’s official written policy prohibited discrimination of any kind, Dukes alleged that Wal-Mart’s (1) corporate culture of stereotyping women, and (2) its policy allowing mid-level managers to make pay and promotion decisions (rather than having them made at a higher level) resulted in discrimination against women for many years. Dukes alleged that these policies constituted discrimination under both disparate impact and disparate treatment theories.
The district court made several findings justifying its decision to certify the employees as a class. It found significant evidence of company-wide practices and policies that resulted in gender discrimination, including gender stereotyping, excessive subjectivity in personnel decisions and the maintenance of a strong corporate culture. The court also found statistical evidence that discrimination caused gender disparities and anecdotal evidence of bias. The Ninth Circuit Court of Appeals upheld the district court’s decision to certify the employees as a class.
In its appeal to the United States Supreme Court, Wal-Mart challenged the certification of the case as a class action on the grounds that the claims of the putative class members were not common (i.e., a requirement to certify a group of individuals as a class). To support its argument, Wal-Mart argued that its official policy strictly prohibited discrimination and that the plaintiffs’ evidence of an alleged pattern of disparate pay and promotions was too insignificant to establish a company-wide practice of gender discrimination. Instead, Wal-Mart argued that since thousands of different supervisors and managers were delegated with authority to make decisions about pay and promotion, and since the plaintiffs’ own expert witnesses could not say what percentage of those decisions were “infected” by the alleged corporate culture of stereotyping women, plaintiffs’ evidence was insufficient to support class certification under Federal Rule of Civil Procedure 23.
Justice Scalia, writing for the majority, agreed with Wal-Mart and ruled that the plaintiffs failed to satisfy Rule 23(a)’s commonality requirement. Both the majority and the minority decisions also held that the district court and the Ninth Circuit improperly certified the class under Rule 23(b)(2) because the plaintiffs’ claim for back pay was not “incidental” to their request for injunctive and declaratory relief.
With respect to the commonality requirement, the majority held that there must be a common answer to a common question of law or fact — not simply a common question of law or fact in the first instance. In the employment law context, this means that a class action plaintiff must show that there is a common reason for the employment decisions at issue. For example, if one person were responsible for making the thousands of pay or promotion decisions that the Dukes plaintiffs sought to certify, then there would be a common link to the adverse employment decisions – an alleged discriminatory decision maker. But, where those decisions are made by thousands of different supervisors or managers considering a host of different variables, the majority held that the plaintiffs’ statistical evidence of disparate impact was too insignificant to create an inference of discrimination on a national, company-wide basis.
Another significant aspect of the majority’s opinion is that class actions seeking monetary relief (as opposed to injunctive or declaratory relief) in all likelihood must proceed under Rule 23(b)(3), which has more procedural safeguards (e.g., a court must find that common questions of law or fact predominate, that a class action is superior to individual actions, mandatory notice and the right of a plaintiff to opt-out, etc.) than class actions certified under Rule 23(b)(2). Justice Scalia, writing for the majority, also believed it was unacceptable to allow discrimination lawsuits to proceed as large class actions when monetary awards to plaintiffs would be based on a broad formula using something akin to representative sampling. The majority held that an employer is entitled to individualized determinations of each employee’s eligibility for back pay, and Wal-Mart would be deprived of that right if the Ninth Circuit’s “Trial by Formula” plan were to be sanctioned.
The bottom line is that this decision will be helpful to employers who are sued in federal court class action lawsuits for alleged discriminatory employment practices so long as the employer’s personnel decision makers are de-centralized. Whether this decision will impact class actions brought in state court, however, remains an open question.