• U.S. Supreme Court Strengthens Existing Class Actions Requirement
  • July 7, 2011 | Author: Clifford E. Yuknis
  • Law Firm: Hinshaw & Culbertson LLP - Chicago Office
  • In one of the most important class actions in years, the U.S. Supreme Court ruled that a proposed class of approximately 1.5 million employees should not be certified. Wal-Mart Stores, Inc. v. Dukes, et al. (S. Ct. June 20, 2011). The Court clarified the requirements in Fed. R. Civ. P. 23(a) and Rule 23(b), articulating points that will be helpful to defendants in consumer and other putative class actions.

    Plaintiffs, current and/or former employees of defendant employer, sued the employer for injunctive and declarative relief, punitive damages, and back pay on behalf of themselves and a nationwide class of approximately 1.5 million employees. The employees’ lawyers argued that the employer illegally discriminated against women in violation of Title VII of the Civil Rights Act of 1964, as amended.

    Fed. R. Civ. P. 23(a)’s requirements include that there be questions of law or fact common to the class. The class members’ claims must depend upon a common contention of such a nature that it is capable of class-wide resolution. The party seeking class certification must be prepared to prove that there are in fact common questions of law or fact and that the other Rule 23(a) requirements are met. A rigorous analysis of whether Rule 23(a) requirements are satisfied frequently requires some overlap with an examination of the merits of the plaintiff’s underlying claim.

    In resolving a Title VII claim, the crux of the inquiry is the reason for an individual’s particular employment decision: without some “glue” holding the reasons for the decisions together, it would be impossible to say that an examination of all the class members’ claims for relief will produce a common answer to the crucial question of “why I was disfavored.” This was not a common question but could vary depending upon each individual employee and employment decision.

    Entirely absent was that the employer operated under a general policy of discrimination. The employees’ sociological expert conceded that he could not calculate the percentage of the subject employment decisions which might be determined by stereotyped thinking. Thus, the Supreme Court disregarded his testimony. The only corporate policy that the employees’ evidence convincingly established was the employer’s “policy” of allowing discretion by local supervisors over employment matters. However, the employees did not identify a common mode of exercising discretion that pervaded the entire company. The statistical and anecdotal evidence did not demonstrate that a commonality of issues existed. Other than the delegated discretion, the employees identified no specific employment practice, much less one that tied the approximately 1.5 million claims together. The employees provided no convincing proof of company-wide discriminatory pay and promotion policies and therefore provided no common question.

    The Court also held that the employees’ claims for back pay should not have been certified as a class under Fed. R. Civ. P. 23(b). Rule 23(b) allows class treatment when the party opposing the class has acted or refused to act on grounds that apply generally to the class so that injunctive or declaratory relief is appropriate to the class as a whole. Here, the claims for individualized relief (such as back pay) did not satisfy the rule. Rule 23(b) does not apply to an individualized award of monetary damages. The employer was entitled to individualized determination of each employee’s eligibility for backpay, and to litigate its statutory defenses to individualized claims. The necessity of that litigation would prevent backpay from being merely “incidental” to a class-wide injunction (a traditional requisite to a Fed. R. Civ. P. 23(b)(2) class). Therefore, the class should not have been certified under Rule 23(b)(2).

    Although the Supreme Court’s ruling was made in the context of an employment discrimination case, its emphasis on and clarification of certain points will affect attempts to certify consumer classes against debt collectors and others. The Court emphasized a rigorous analysis of Fed. R. Civ. P. 23(a) requirements that could overlap with the merits and that plaintiffs must affirmatively demonstrate compliance with Rule 23(a)’s requirements. It discussed common questions and the common contention being capable of class-wide resolution. The Court applied its analysis to individual store manager decisions, critically assessed the plaintiffs’ expert, and focused on individualized determinations in its discussion of both Fed. R. Civ. P. 23(a) and (b)(2). All of these points will be helpful to defendants in consumer law or other legal environments.