This morning, the Supreme Court unanimously held that the three class representatives (i.e., named plaintiffs) who brought the nationwide class action against Wal-Mart proceeded under the incorrect Rule of Civil Procedure. Wal-Mart Stores, Inc. v. Dukes, No. 10-277. Because the plaintiffs sought back pay on behalf of each member of the class of 1.5 million women – and the amount of that back pay would differ for each of the 1.5M members of the class – the lawsuit should have been brought – if at all – under Civil Rule 23(b)(3) (which requires notice to the class and option to opt-out) instead of Civil Rule 23(b)(2). However, the Court split 5-4 on whether the plaintiffs satisfied the threshold requirements in Civil Rule 23(a), with the majority finding that there was insufficient proof that the 3 plaintiffs and 120 fact witnesses adequately demonstrated that each subjective employment decision being challenged shared a common question of law or fact with all of the 1.5M class members.
The provisions of Civil Rule 23 which are at issue are in relevant part:
(a) Prerequisites. One or more members of a class may sue or be sued as representative parties on behalf of all members only if:
(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.
(b) Types of Class Actions. A class action may be maintained if Rule 23(a) is satisfied and if:
. . .
(2) the party opposing he class has acted or refused to act on grounds that apply generally to the class, so that final injunctive or corresponding declaratory relief is appropriate respecting the class as a whole; or
(3) the court finds that the questions of law or fact common to the 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. The matters pertinent to these findings include: (A) the class members' interests in individually controlling the prosecution or defense of separate actions; (B) the extent and nature of any litigation concerning the controversy already begun by or against class members; (C) the desirability or undesirability of concentrating the litigation of the claims in the particular forum; (D) the likely difficulties in managing a class action.
There was no dispute at the Court that seeking relief for individualized back pay awards could never be obtained under Civil Rule 23(b)(2). Wal-Mart would have a separate defense for each of the 1.5M class members and the Court of Appeals' proposal to randomly select class members was rejected. The amounts of back pay awarded would vary by class member based on length of employment, job title, location, comparison to wages of male counterparts, etc.
The Court also agreed on other facts: There were only three plaintiffs and anecdotal testimony from only 120 women of alleged discrimination. Wal-Mart's corporate policy prohibited discrimination on the basis of sex, but promotion and compensation decisions were left to the individual store, district and regional managers based on their own discretion. There is no national corporate policy on factors to be utilized in making promotion or compensation decisions and no national oversight of such decisions. The plaintiffs' primary complaint is that the national hands-off policy and corporate culture has effectively resulted in discrimination against women, allegedly in violation of Title VII. The Court also agreed that subjective decisionmaking can be the basis of a disparate impact employment discrimination lawsuit in certain circumstances.
The dissent noted that 70% of Wal-Mart hourly employees are women, but only 33% of management is female.
The plaintiffs' "largely uncontested descriptive statistics" also show that women working in the company's stores "are paid less than men in every region" and "that the salary gap widens over time even for men and women hired into the same jobs at the same time." 222 F. R. D., at 149. The selection of employees for promotion to in-store management "is fairly characterized as a 'tap on the shoulder' process," in which managers have discretion about whose shoulders to tap. Id., at 148. Vacancies are not regularly posted; from among those employees satisfying minimum qualifications, managers choose whom to promote on the basis of their own subjective impressions.
The majority in turn noted that the evidence was misleading because most, or even all, of the alleged discrimination could be coming from only a few stores or a couple of regions and it does not logically follow that every manager (whether male or female) is discriminating against all women as alleged in the lawsuit. No evidence was put on about employment practices in 14 states and only one or two witness was produced to represent alleged discrimination in another 25 states. Moreover, there was only evidence produced about 235 of Wal-Mart's 3,400 stores. "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," Falcon, supra, at 159, n. 15, which is what respondents must show to certify a companywide class." In other words, a lawsuit might have been appropriate in some states and in some regions, but the truth of that does not mean that a national class action is appropriate.
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 class wide 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.
. . .
To be sure, we have recognized that, "in appropriate cases," giving discretion to lower-level supervisors can be the basis of Title VII liability under a disparate-impact theory—since "an employer's undisciplined system of subjective decision making [can have] precisely the same effects as a system pervaded by impermissible intentional discrimination." Id., at 990–991. But the recognition that this type of Title VII claim "can" exist does not lead to the conclusion that every employee in a company using a system of discretion has such a claim in common. To the contrary, left to their own devices most managers in any corporation—and surely most managers in a corporation that forbids sex discrimination—would select sex-neutral, performance-based criteria for hiring and promotion that produce no actionable disparity at all. Others may choose to reward various attributes that produce disparate impact—such as scores on general aptitude tests or educational achievements, see Griggs v. Duke Power Co., 401 U. S. 424, 431–432 (1971). And still other managers may be guilty of intentional discrimination that produces a sex based disparity. In such a company, demonstrating the invalidity of one manager's use of discretion will do nothing to demonstrate the invalidity of another's. A party seeking to certify a nationwide class will be unable to show that all the employees' Title VII claims will in fact depend on the answers to common questions.
. . .
Even if [the statistical evidence] established (as it does not) a pay or promotion pattern that differs from the nationwide figures or the regional figures in all of Wal-Mart's 3,400 stores, that would still not demonstrate that commonality of issue exists. Some managers will claim that the availability of women, or qualified women, or interested women, in their stores' area does not mirror the national or regional statistics. And almost all of them will claim to have been applying some sex-neutral, performance-based criteria—whose nature and effects will differ from store to store. . . . 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. Merely showing that Wal-Mart's policy of discretion has produced an overall sex-based disparity does not suffice.
While the dissent argued that the majority was confusing Rule 23(a)(2) with 23(b)(3) and that the plaintiffs should be given the opportunity on remand to proceed under Civil Rule 23(b)(3), the majority contended that there was not a single question of common law or fact under Civil Rule 23(a) tying all 1.5M women together because they ""held a multitude of different jobs, at different levels of Wal-Mart's hierarchy, for variable lengths of time, in 3,400 stores, sprinkled across 50 states, with a kaleidoscope of supervisors (male and female), subject to a variety of regional policies that all differed. . . . Some thrived while others did poorly. They have little in common but their sex and this lawsuit."
NOTICE: This summary is designed merely to inform and alert you of recent legal developments. It does not constitute legal advice and does not apply to any particular situation because different facts could lead to different results. Information here can change or be amended without notice. Readers should not act upon this information without legal advice. If you have any questions about anything you have read, you should consult with or retain an employment attorney.
