Supreme Court Rules on Dukes v. Walmart

The U.S. Supreme Court issues its opinion in Dukes v. Walmart.  Here is the opinion.

Wal-Mart, the country's largest employer, faces the largest employment law class action ever.  We've posted about it a number of times as it made its way through the courts.  The U.S. Supreme Court decided to review the case to see if the Federal Rules of Civil Procedure authorizes a class action under the facts presented.  

The facts that give rise to the discrimination claims are as follows:

Pay and promotion decisions at Wal-Mart are generally committed to local managers’ broad discretion, which is exercised “in a largely subjective manner.” 222 F. R. D. 137, 145 (ND Cal. 2004). Local store managers may increase the wages of hourly employees (within limits) with only limited corporate oversight. As for salaried employees, such as store managers and their deputies, higher corporate authorities have discretion to set their pay within preestablished ranges. 

Promotions work in a similar fashion. Wal-Mart permits store managers to apply their own subjective criteria when selecting candidates as “support managers,” which isthe first step on the path to management. Admission to Wal-Mart’s management training program, however, does require that a candidate meet certain objective criteria,including an above-average performance rating, at least one year’s tenure in the applicant’s current position, and a willingness to relocate. But except for those requirements, regional and district managers have discretion to use their own judgment when selecting candidates for management training. Promotion to higher office—e.g., assistant manager, co-manager, or store manager—is similarly at the discretion of the employee’s superiors after prescribed objective factors are satisfied.

Thus, there is no "corporate wide" policy of intentional or even unintentional discrimination. Rather, the plaintiffs asserted the following theory regarding class-wide discrimination on behalf of hundreds of thousands of store level employees and supervisors:

local managers’ discretion over pay and promotions is exercised disproportionately in favor of men, leading to anunlawful disparate impact on female employees, see 42 U. S. C. §2000e–2(k). And, respondents say, because Wal-Mart is aware of this effect, its refusal to cabin its managers’ authority amounts to disparate treatment, see §2000e–2(a). . . . [T}the discrimination to which they have been subjected is common to all Wal-Mart’s female employees. The basic theory of their case is that 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.

The plaintiffs sought injunctive relief, monetary relief that is considered "equitable" such as back pay, and punitive damages. They did not seek individual compensatory damages for emotional distress or front pay, because doing so would be unauthorized by Federal Rule of Civil Procedure 23.

Federal Rule of Civil Procedure 23,  contains a number of requirements.  The plaintiff must satisfy all of the 23(a) provisions:

“(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”

The Supreme Court held that there was insufficient common law or fact questions.  5-4, the Court explained what "common questions of law or fact" means:

Commonality requires the plaintiff to demonstrate that the class members “have suffered the same injury,” Falcon, supra, at 157. This does not mean merely that they have all suffered a violation of the same provision of law. Title VII, for example, 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. Quite obviously,the mere claim by employees of the same company that they have suffered a Title VII injury, or even a disparate impact Title VII injury, gives no cause to believe that all their claims can productively be litigated at once. Their claims must depend upon a common contention—for example, the assertion of discriminatory bias on the part of the same supervisor. That common contention, moreover, must be of such a nature that it is capable of classwideresolution—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, 5-4, squarely rejected that a common policy of decentralized decisions can support a class action where the standard requries proof of common issues of fact:

The only corporate policy that the plaintiffs’ evidence convincingly establishes is Wal-Mart’s “policy” of allowing discretion by local supervisors over employment matters.On its face, of course, that 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.

To sustain a class action under the federal rules, the plaintiff must establish one of the elements under Rule 23(b).  The plaintiffs in Dukes relied on Rule 23(b)(2):

Rule 23(b)(2) 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 final injunctive relief or corresponding declaratory relief is appropriate respecting the class as a whole.” 

Therefore, Dukes did not rely on (b)(3), which is the familiar standard permitting damages when "common issues" predominate.  This is the basis for most class actions seeking money.  Unlike (b)(2), classes under (b)(3) are entitled to "opt out," and must receive adequate notice.  Rule 23(b)(2) is more concerned with injunctive and declaratory relief.

The question was whether the monetary relief that the plaintiffs sought was authorized under  Rule 23(b)(2). The Court (9-0) held that it was not:

Rule 23(b)(2) applies only when a single injunction or declaratory judgment would provide relief to each member of the class. It does not authorize class certification when each individual class member would be entitled to a different injunction or declaratory judgment against the defendant.

The Supreme Court held that "backpay" was not authorized generally by Rule 23(b)(2), and the only monetary relief available would be when it was intertwined with a particular injunction.  In Dukes' case, the injunction would not be common to each member of the class, anyway, so there could be no common monetary relief either.

So, we'll have an article, and you'll be hearing a lot about this case in the coming days.  I hope this brief summary was helpful.  It will result in less blockbuster class actions in federal court.  However, it does not necessarily mean that smaller class actions will be limited when there is a common practice causing a common injury.