Tag Archives: Walmart

Dukes v. Wal-Mart: Supreme Court Announces New Class Action Standards That Will Substantially Curtail Employment Discrimination Class Actions, As Well As Consumer, Antitrust, and Other Class Actions

On June 20, in Dukes v. Wal-Mart, the U.S. Supreme Court dealt a huge blow to plaintiffs seeking to certify employment discrimination class actions under Federal Rule of Civil Procedure 23, as well as consumer, antitrust, and other class actions. The heavily publicized case involved a proposed 1.5-million-person class of female Wal-Mart employees seeking to bring disparate impact and pattern or practice claims for discrimination in promotions and compensation. Justice Scalia wrote for the majority. In a 5-4 decision, the Court found that allegations that Wal-Mart had a “common” policy of permitting local managers to use discretion to make employment decisions based upon subjective factors did not satisfy the commonality requirement of Rule 23(a)(2). Significantly, the Court held that the commonality requirement is not met by “generalized questions” that do not meaningfully advance the litigation and is not met where named plaintiffs and members of the purported class have not suffered the “same injury.” In addition, in a unanimous decision, the Court found that claims for “individual monetary damages,” including back pay, could not be certified under Rule 23(b)(2). This decision provides defendants in class actions with a variety of tools to defeat efforts to certify large class actions involving disparately situated plaintiffs.

The Court Must Consider Certain Merits Issues in Deciding Class Certification Motions

The Court reached several conclusions that addressed, and rejected, arguments plaintiffs have made for years in support of certifying broad class actions in all contexts. For example, the Court put the final nail in the coffin of the argument that a district court must accept plaintiffs’ allegations as true and avoid any factual considerations of the “merits” in ruling upon class certification. The Court made it clear that a district judge must engage in a “rigorous analysis” before certifying a class action and must consider the merits of plaintiffs’ claims if they overlap with issues related to certification. The Court also suggested that a district court must scrutinize supposedly expert opinions offered in support of class certification. In making this ruling, the Court suggested that the standard set forth in Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579 (1993) (the Daubert standard) likely applies to expert evidence used in the class certification process.

“Commonality” Element Not Met Where Common Questions Are Not Significant

While acknowledging that even a single common question could be sufficient to establish communality, the Court held that reciting basic common questions, such as whether Title VII was violated, is not enough. A plaintiff must identify common questions that depend upon the same contention and the resolution of that contention must “resolve an issue that is central to the validity of each one of the claims in one stroke.” For example, the Court acknowledged that the case before it presented common questions like “do all of us plaintiffs indeed work for Wal-Mart?” and “do our managers have discretion over pay?” but held that “reciting these questions is not sufficient to obtain class certification.” Rather, it held that “commonality requires the plaintiff to demonstrate that the class members have suffered the same injury.” In discussing this point, the Court made clear that “commonality” does not exist merely because a purported class all allegedly suffered a violation of the same provision of law. This will be a significant benefit to defendants in defeating class actions where many purported class members have suffered no injury at all.

The Court then addressed the “wide gap” between an individual claim of discrimination and the existence of a company policy of discrimination that creates a class of individuals with the same injury as the named plaintiff, which was first acknowledged by the Supreme Court in General Telephone Co. of Southwest v. Falcon, 457 U.S. 147, 157-58 (1982). It noted that such a gap could be bridged, and commonality found, in two ways. First, it cited the case of a uniform biased testing procedure that impacted all test takers in the same way. Second, it could occur when there is “significant proof” that an employer “operated under a general policy of discrimination.” In discussing the second way, the Court made it clear that “the bare existence of delegated discretion” is not sufficient to establish commonality.

Significantly, the Court rejected three arguments routinely made by plaintiffs in arguing for class certification. First, the Court rejected the testimony of plaintiffs’ social science expert, Dr. William Bielby, who claimed that Wal-Mart had a culture that made it susceptible to gender bias, finding it useless to the salient question of whether plaintiffs could prove a general policy of discrimination. In doing so, the Court suggested that the testimony of expert witnesses used in support of class certification is subject to the Daubert standard. Second, the Court rejected the use of aggregate statistical analyses and the mere existence of gender disparities in pay, promotion, or representation as enough to meet the commonality burden in an employment case. Instead, the Court suggested that to show commonality, a plaintiff would at least need to demonstrate store-by-store disparities. Third, the Court found that affidavits from 120 individuals, or 1 out of every 12,500 class members, fell well short of meeting the burden of having “significant proof” that Wal-Mart operates under a general policy of discrimination. While these rejections occurred in the context of this employment discrimination claim, purported class plaintiffs in many other cases frequently attempt to rely on similar evidence to support class certification. For example, antitrust plaintiffs attempt to use aggregate statistical analyses of costs and prices and consumer class action lawyers use surveys, regression analyses, and purported social science analyses to establish the existence of commonality. The Court’s decision in Dukes makes clear that the Court may not merely accept plaintiffs’ efforts to homogenize out individual issues through unreliable expert testimony.

Rule 23(b)(2) Cannot Be Misused to Circumvent Due Process

The Court next ruled, in the unanimous portion of the opinion that will have a substantial impact on class actions generally, that individualized claims for money damages cannot be certified under Rule 23(b)(2) and instead must be certified, if at all, under the more onerous requirements of Rule 23(b)(3). In so ruling, the Court noted that Rule 23(b)(3), unlike Rule 23(b)(2), mandates notice to the class and an opportunity for class members to opt out of the lawsuit, necessary safeguards consistent with preserving the constitutional due process rights of class members whose individual claims for monetary damages would be adjudicated if a class were certified. The Court rejected the “predominance test” established by the Ninth Circuit, which permitted the certification of claims for monetary damages as long as claims for injunctive relief “predominated” over the claims for monetary damages. It cited favorably to the “incidental damages” test first adopted by the Fifth Circuit in Allison v. Citgo Petroleum Corp., 151 F.3d 402, 415 (5th Cir. 1998), which permits certification of claims for monetary relief as long as that relief “flow[s] directly from liability to the class as a whole,” which “should not require additional hearings.” While seeming to express skepticism that monetary damages could ever be incidental to injunctive and declaratory relief, the Court declined to adopt a bright-line rule prohibiting all money damages from ever being certified under Rule 23(b)(2). This ruling has widespread implications because Rule 23(b)(3) requires plaintiffs to prove that common questions predominate over individual ones and that a class action is superior to other available methods for fairly and efficiently adjudicating the controversy. Given the Court’s cynicism regarding the use of discretionary decisionmaking as grounds for the less stringent commonality standard, this burden should be extremely difficult for plaintiffs’ attorneys to meet in employment class actions without significantly altering the types of class actions they bring.

Even in the many jurisdictions that have long been critical of Rule 23(b)(2) certification of claims for monetary damages, plaintiffs’ attorneys have previously had some success in distinguishing back pay from monetary damages and thereby getting claims for huge back pay awards certified under Rule 23(b)(2). The Supreme Court put an end to that practice as well. In a far-reaching ruling that will effectively require plaintiffs who bring class action employment discrimination lawsuits (except those solely for classwide injunctive relief) to meet the standards of Rule 23(b)(3), the Court held that back pay, regardless of whether it is characterized as equitable, cannot be certified under Rule 23(b)(2). Central to this holding was the Court’s rejection of the Ninth Circuit’s proposed sampling-based approach to doling out back pay to the class without ever permitting Wal-Mart to defend the employment decisions it made regarding each individual class member. Rather than approve this approach, which it derisively referred to as “trial by formula,” the Court held that Wal-Mart was “entitled to individualized determinations of each employee’s eligibility for backpay.” This ruling not only precludes certification of the claims for money damages under Rule 23(b)(2), but will also make it difficult for plaintiffs to certify claims for monetary damages under Rule 23(b)(3). In addition, this ruling will limit the use of Rule 23(b)(2) to obtain “restitution damages” or any other type of money damages in all kinds of cases, including consumer class actions, antitrust class actions, and products liability actions.

What Comes Next?

In general, it will be more difficult for plaintiffs to obtain class certification in all cases. District courts will now be required to scrutinize closely all alleged common questions of law and fact to determine if the proposed class action can generate common answers to those questions that are apt to drive the resolution of the litigation. In particular, variations in whether class members suffered injury will be ripe for attack given the express language of the Court’s opinion. It will not be sufficient for plaintiffs to allege a “general policy” without proving the existence of such a policy and its impact on each class member. In addition, defendants are now more likely to have challenges to expert testimony at the class certification stage heard under the Daubert standard, which will have the effect of further requiring an actual showing of commonality by plaintiffs rather than mere assertions of commonality by lawyers or their experts. Even where some level of commonality is shown, in damages cases plaintiffs will also need to meet the predominance and other standards of Rule 23(b)(3), and they will not be able to circumvent due process through the use of formulaic damages awards that do not permit defendants to address the individual variations in the claims of each class member.

We also expect this decision to be tremendously helpful to retailers and other businesses that delegate authority to the local level in all types of class actions. The Court held that decisions relevant to the case were “decentralized” and made in local Wal-Mart stores, which it found to be the “opposite” of a common practice that would justify a class action. Retail and other similar companies frequently operate in this manner with respect to employment and many other decisions. These companies will be able to argue that nationwide class actions are inappropriate where the relevant decisions are made at the local level.

Class action employment discrimination lawyers will likely respond to this decision by modifying the types of cases they bring and how they characterize the common questions asserted in those cases. We expect plaintiffs’ attorneys to file smaller class actions focused on specific job groups and/or locations, perhaps with multiple subclasses. Joe Sellers, one of the lawyers for the plaintiffs in Dukes, has already been quoted as saying the decision will result in “more class actions at the store or regional level.” See ”Wal-Mart Case Is a Blow for Big Cases and Their Lawyers,” http://www.nytimes.com/2011/06/21/business/21class.html?_r=1&smid=tw-nytimes&seid=auto. These smaller class cases may be brought under state laws in state courts to avoid some of the impact of this decision on certification. In addition, plaintiffs may focus on more tailored challenges targeting specific aspects of employers’ personnel policies that apply to a broad range of employees. It is also likely that employers will face more multiplaintiff cases that attempt to consolidate various individual discrimination claims, including pattern or practice claims. Mr. Sellers has stated that the plaintiffs’ lawyers in Dukes have prepared “thousands” of individual charges of gender discrimination that they plan to file with the Equal Employment Opportunity Commission (EEOC). See ”Wal-Mart Women Vow to Press Bias Fight in Courts, Agency,” http://www.businessweek.com/news/2011-06-21/wal-mart-women-vow-to-press-bias-fight-in-courts-agency.html. In short, we expect to see plaintiffs’ attorneys testing various avenues to obtain the most expansive classes possible under the new standards.

We also expect to see an increase in Equal Pay Act claims. While the standard for certification in those cases is demanding, plaintiffs’ counsel may view it as a favorable alternative to proceeding under Rule 23 in light of this decision. Moreover, while class action counsel are not likely to entirely abandon theories premised upon subjectivity and stereotyping, we expect more class actions focused on objective personnel policies, such as employment tests, that apply generally to a large group of employees. The EEOC has been aggressively investigating such cases for several years as part of its focus on screening procedures and claims of systemic discrimination.

Finally, as has already started, we expect calls for government action. The EEOC has stated that it is reviewing the Dukes decision and determining whether it warrants any changes in its strategies for enforcement of Title VII. The Commission, which is not bound by Rule 23, could respond by more aggressively filing representative actions, potentially in partnership with intervening private class counsel. In addition, civil rights groups have already started calling for congressional action, including a renewed push for passage of the Paycheck Fairness Act. While the current Congress is unlikely to move forward with such legislation, as we saw with the Lilly Ledbetter Fair Pay Act, future political changes to the makeup of Congress could result in legislation designed to eat away at some of the employer-friendly aspects of the Dukes decision.

What Should Employers Do Now?

The Dukes decision is a great win for employers who no longer face the prospect of defending overbroad class claims indiscriminately attacking the individualized decisionmaking of local managers based upon ill-defined, allegedly discretionary policies. However, now is not the time for employers to become complacent. As noted above, we expect more targeted class claims as class action plaintiffs’ attorneys test the boundaries of this decision. While this next wave of cases will almost certainly focus on smaller classes than that at issue in Dukes and the other large class actions of recent years, it will still create significant risks to organizations who are sued, in terms of litigation costs, potential exposure, and public relations. Fortunately, Dukes ups the ante for plaintiffs’ attorneys as well, as they now face a much greater battle when filing class actions, and we expect that they will be more diligent in researching and selecting cases than they have been in the past. For this reason, as well as to most efficiently manage their businesses, employers should continue to develop employment practices and policies that reflect best practices, monitor those practices and policies to ensure compliance with EEO policies, and analyze the impact of such practices and policies for equity and consistency with diversity policies and goals.

United States Supreme Court Strikes Down Largest Employment Discrimination Class Action in History

On June 20, 2011, the United States Supreme Court granted employers some long-awaited relief by substantially raising the bar for plaintiffs (and their lawyers) seeking to certify large employment discrimination class actions. In Wal-Mart v. Dukes (No. 10-277), the Court reversed the Ninth Circuit Court of Appeals’ en banc decision upholding the certification of a class action filed on behalf of approximately 1.5 million hourly and salaried female employees alleging sex discrimination in pay and promotions. The potential damages were estimated to be more than a billion dollars.

As we have detailed in prior newsletters and bulletins, because of potentially large damage awards and fee-shifting provisions, employment class actions have been a boon for the Plaintiff’s bar while exposing employers to significant liability and litigation costs.  Although the Dukes decision will not put an end to class actions, it, at the very least, temporarily halts the large nationwide employment discrimination class actions. In its ruling, the Supreme Court significantly increased the plaintiffs’ burden of proof at the class certification phase and mandates that district courts look more carefully at whether class certification is appropriate, including a critical assessment of plaintiffs’ proof of class-wide discrimination.

The Supreme Court’s Decision in Dukes

Following an increasing trend, the Dukes plaintiffs alleged that Wal-Mart discriminated against its female employees by delegating subjective decision making authority with respect to pay and promotion decisions to its local store managers and by building a corporate culture that fostered sex bias in these managerial decisions. Both the district court and the Ninth Circuit held that plaintiffs demonstrated that their class claims were appropriate for certification by relying on:

(i) statistical evidence purportedly demonstrating disparities in the pay and promotions of males and females; (ii) anecdotal reports of discrimination by 120 female employees; and (iii) the “expert” testimony of a sociologist who concluded that Wal-Mart’s culture was susceptible to gender discrimination.

Plaintiffs Did Not Satisfy Their “Commonality” Burden under Rule 23(a)

In a strongly worded opinion, Justice Scalia, writing for the 5–4 majority, disagreed that the Dukes plaintiffs’ evidence was sufficient to support class certification because it did not meet plaintiffs’ burden of satisfying Rule 23 of the Federal Rules of Civil Procedure requirements for certification. As recast by Justice Scalia, to meet these requirements, plaintiffs must provide “significant proof” that their class claims involve a common issue the resolution of which is “central to the validity of each one of the [class members’] claims in one stroke”; for example, discriminatory bias on the part of the same manager or the use of a discriminatory test.

The majority’s decision removes any doubt that a trial court must conduct a “rigorous analysis” to ensure that plaintiffs have satisfied the Rule 23 elements, including a searching review of evidence that goes to the merits of the case. Exploration of the merits was appropriate in Dukes, the majority found, because it necessarily overlapped with the plaintiffs’ class-wide allegations that Wal-Mart engaged in a pattern and practice of discrimination.

In Dukes, the majority found plaintiffs’ evidence fell far short of the required “significant proof.” The Court did not reverse a prior decision that delegation of subjective decision making to individual managers could constitute a common discriminatory practice, but the majority found plaintiffs’ evidence lacking where Wal-Mart had a “general policy of non-discrimination” and where thousands of managers were making literally millions of pay and promotion decisions in some 3,400 stores. Specifically, the Court rejected plaintiffs’ sociological expert’s conclusion that Wal-Mart’s corporate culture made it more susceptible to gender bias in managerial decision making because the expert could not even opine, let alone show, that gender bias infected .5 percent or 95 percent of managerial decisions. The Court concluded that this was “the opposite of uniform policy that could provide commonality needed for a class action.”

The majority also found plaintiffs’ statistical and anecdotal evidence to be equally unpersuasive. Plaintiffs’ statistical expert conducted a region-by-region analysis and found that female representation in management positions was substantially less than in lower hourly positions and that females earned less than men. The Court discounted this proof, stating that any disparity at the regional level could not by itself establish that there were pay or promotion disparities at the individual stores, and even less so across all class members, which the majority stated was necessary to support plaintiffs’ theory of commonality. Furthermore, even if the statistics supported disparity at all the individual stores, the analysis did not consider potential assertions by Wal-Mart’s managers that women are not as readily available in certain store areas or the differences in the criteria used by the individual stores to make the decisions. The Court further found that the plaintiffs’ anecdotal evidence comprised of 120 affidavits representing the reporting experiences of only 1 out of every 12,500 class members and only 235 of Wal-Mart’s 3,400 stores could not show the whole company operated under a general policy of discrimination.

Plaintiffs Could Not Pursue Individualized Monetary Claims under Rule 23(b)(2)

The Court also unanimously resolved a split in the Courts of Appeal and held that the claims for backpay should not have been certified as a class action under Rule 23(b)(2) because such backpay damages were not “incidental” to the injunctive or declaratory relief sought. The Court concluded that certification under Rule 23(b)(2) is inappropriate when “each member would be entitled to an individualized award of monetary damages.”

Instead, the Court held that the monetary claims involving individualized proof must proceed under Rule 23(b)(3), which permits class certification only upon a showing that common questions of law and fact predominate over questions affecting individuals and after providing notice of the class action to potential class members and an opportunity to opt out. The Court reasoned that these procedural safeguards were necessary to protect class members’ individual interests in monetary relief.

The Court also rejected the position adopted by the Ninth Circuit that a statistical sample of class members could be used to determine the damages for the whole class without individualized proceedings. The Court reasoned that this sampling method was inconsistent with the procedures established by the Supreme Court for determining the scope or lack of individual damages in Title VII claims. The majority further suggested, without deciding, that this approach might also violate an employer’s right to individualized determinations of each class member’s eligibility for backpay.

Implications of the Court’s Decision in Dukes

The most immediate effect of the Dukes decision is that district courts will need to reconsider the appropriateness of employment discrimination class actions on their docket that were certified under Rule 23(b)(2). In the longer run, Dukes may not have sounded the death knell for all large discrimination class actions but it has made it very difficult for plaintiffs to mount class actions that seek to cover multiple types of claims, e.g., pay and promotions, and many different job classes, facilities and/or managers. As a consequence, future class actions are more likely to focus on more discrete claims of discrimination covering fewer locales and limited to common decision makers and covering a more homogenous class. In particular, Dukes is likely to curtail the bringing of class actions under the “delegation of subjective decision making” theory. Although the Court did not articulate clear evidentiary standards for establishing “commonality,” the Court emphasized the need to demonstrate a common allegedly operative discriminatory practice and injury across all putative class members. It is difficult to see how plaintiffs will mount class actions based on “subjective decision making” given the Court’s emphasis that “demonstrating the invalidity of one manager’s use of discretion will do nothing to demonstrate the invalidity of another’s.”

The Dukes decision also, as a practical matter, will require district courts to probe more deeply into the merits at the class certification stage, and the Supreme Court endorsed the consideration of Daubert motions to exclude expert testimony before class certification to assess such testimony’s adequacy. Moreover, although Dukes is restricted to class certification requirements, its emphasis on proving that the alleged discriminatory practice applied to and may have injured all class members may also lead to higher standards of proof in establishing class-wide discrimination on the merits.

Dukes also will lessen the incentive of plaintiffs’ attorneys to bring class actions by making it more difficult to seek monetary damages for large, diffuse classes.

How plaintiffs’ attorneys will respond is open to speculation. The attorneys representing Dukes profess their intent to bring individual and more discreet, localized class actions. This may become an overall trend. Employers should keep in mind that the Dukes decision has no immediate impact on the ability of the EEOC to bring company-wide pattern and practice suits because the EEOC generally is not required to satisfy the “commonality” principles espoused by the Supreme Court. Nevertheless, the Dukes decision, which comes on the heels of the Court’s May 2011 pro-employer decision in AT&T Mobility v. Concepcion et ux. seemingly validating the use of mandatory arbitration agreements to bar employees’ ability to litigate claims on a class basis, is a welcome change for employers.

Supreme Court Limits Class Actions in Wal-Mart Victory

Supreme Court’s unanimous decision in favor of Wal-Mart restricts the ability of plaintiffs to seek certification of a class for damages.

On June 20, 2011, the Supreme Court of the United States issued its highly-anticipated ruling in Wal-Mart Stores, Inc. v. Duke.  The Court unanimously held that the Ninth Circuit Court of Appeals erred in affirming the certification of the class under Rule(b)(2) of the Federal Rules of Civil Procedure.  A 5-4 majority further held that the plaintiffs failed to carry their burden of establishing commonality under Rule 23(a)(2). 

The majority held that Rule 23(a)(2) requires a party seeking certification of a class to demonstrate more than the mere existence of common questions; rather, the party seeking certification must demonstrate that class-wide proceedings will generate common answers to those questions.  The Court ruled that the plaintiffs failed to come forward with “significant proof” that Wal-Mart operated under a general policy of discrimination.  The Court concluded that evidence that Wal-Mart’s policy of discretion produced an overall sex-based disparity was insufficient.  Because there was “no convincing proof of a company wide discriminatory pay and promotion policy,” the plaintiffs failed to establish the existence of any common question.

The majority also held that the class was improperly certified under Rule 23(b)(2) because the monetary relief sought by the plaintiffs was not merely incidental to the injunctive or declaratory relief that they requested.  The Court concluded that Rule 23(b)(2) does not authorize class certification when each class member would be entitled to an individual award of monetary damages, which, in this case, was the request for backpay.

Justice Ginsburg, Justice Breyer, Justice Sotomayor and Justice Kagan concurred in the majority’s reversal of certification of the class under 23(b)(2), but found that the majority erred in its analysis under Rule 23(a)(2).  The concurring Justices stated that the case should have been remanded to the district court for analysis under Rule 23(b)(3).  They also criticized the majority for conducting a “dissimilarities” analysis under Rule 23(a)(2) which essentially grafted onto Rule 23(a)(2) the predominance analysis required under Rule 23(b)(3).

The Court’s ruling greatly restricts the ability of plaintiffs to seek certification of a class for damages without meeting all of the requirement of Rule 23(b)(3), including predominance and superiority, by seeking certification under Rule 23(b)(2).  Plaintiffs also will no longer be able to satisfy their burden under Rule 23(a)(2) simply by identifying the common issues in the case.  Rather, plaintiffs must now present significant proof that the common questions can be answered with common proof.

Dukes v. Wal-Mart: What the Supreme Court Decision Means for Employers

In Dukes v. Wal-Mart, the United States Supreme Court reversed certification of the largest sex discrimination class action in our nation’s history. The Plaintiffs sought to certify a nation-wide class of approximately 1.5 million former and current female Wal-Mart employees. The Plaintiffs alleged that nation-wide class certification was appropriate because Wal-Mart engaged in a policy or practice of denying its female employees raises or promotions by giving its local managers discretion to determine when to give raises or promotions.

Justice Scalia, writing for a 5-4 majority, gave renewed life to the requirement that plaintiffs establish common questions of law or fact when seeking to certify a class action. In reversing class certification in Dukes, Justice Scalia explained that a proper class must present both a common question and, more importantly, a common answer to the question of “why was I disfavored?” Significantly, plaintiffs must present “convincing proof” to support their contentions, instead of simply relying on allegations in a complaint. The majority of the Supreme Court agreed that the Plaintiffs had failed to establish a “common answer” because they sought to litigate over millions of employment decisions without “some glue holding the alleged reasons for all of those decisions together.” In so holding, the Supreme Court specifically noted that Wal-Mart had an EEO policy that it enforced, including providing penalties to those who violated the policy.

The Supreme Court’s reversal of class certification in Dukes is a significant victory for employers everywhere. Plaintiffs will have to narrow their class definitions. Employers may delegate authority to local managers without concern that the delegation, in and of itself, will form the basis for a class action complaint. However, to take advantage of the Dukes decision, employers should make sure to enforce their EEO policies and be aware that senior executives’ memos or emails setting forth corporate policy may well be the evidence that decides whether a company-wide or region-wide class action is appropriate.

Additionally, employers should be aware of their workplace demographics. Wal-Mart was accused of having a statistically significant bias against women in both promotions and pay. While Wal-Mart may have had a non-discriminatory explanation for these statistics, the cost of providing such an explanation may prove to be prohibitively high. Employers should consider periodically monitoring their workplace demographics to determine if any evidence of possible discrimination exists. Because it is unlawful (in most cases) to intentionally favor groups of workers, even if the goal is to avoid a perceived statistical bias, dealing with problematic demographics/statistics may be complicated and may require counsel. In almost all cases, however, employers will be better served knowing about adverse statistical evidence they find on their own, rather than learning of the evidence through the filing of a class discrimination complaint.

U.S. Supreme Court Rejects Gender Discrimination Class Action Against Wal-Mart

On June 20, 2011, the United States Supreme Court released its widely-anticipated decision in Wal-Mart Stores, Inc. v. Dukes, et al., 564 U.S. ___ (2011) (“Wal-Mart“). In Wal-Mart, the Supreme Court reversed the Ninth Circuit Court of Appeals and held that the proposed nationwide gender discrimination class action against the retail giant could not proceed. In a decision that will come as welcome news to large employers and other frequent targets of class action lawsuits, the Supreme Court (1) arguably increased the burden that plaintiffs must satisfy to demonstrate “common questions of law or fact” in support of class certification, making class certification more difficult, especially in “disparate impact” discrimination cases; (2) held that individual claims for monetary relief cannot be certified as a class action pursuant to Federal Rule of Civil Procedure 23(b)(2), which generally permits class certification in cases involving claims for injunctive and/or declaratory relief; and (3) held that Wal-Mart was entitled to individualized determinations of each proposed class member’s eligibility for backpay, rejecting the Ninth Circuit’s attempt to replace that process with a statistical formula.

The named plaintiffs in Wal-Mart were three current and former female Wal-Mart employees. They sued Wal-Mart under Title VII of the federal Civil Rights Act of 1964, alleging that Wal-Mart’s policy of giving local managers discretion over pay and promotion decisions negatively impacted women as a group, and that Wal-Mart’s refusal to cabin its managers’ authority amounted to disparate treatment on the basis of gender. The plaintiffs sought to certify a nationwide class of 1.5 million female employees. The plaintiffs sought injunctive and declaratory relief, punitive damages, and backpay.

The trial court and Ninth Circuit had agreed that the proposed class could be certified, reasoning that there were common questions of law or fact under Federal Rule of Civil Procedure 23(a), and that class certification pursuant to Rule 23(b)(2) – which permits certification in cases where “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” – was appropriate because the plaintiffs’ claims for backpay did not “predominate.” The Ninth Circuit had further held that the case could be manageably tried without depriving Wal-Mart of its due process rights by having the trial court select a random sample of claims, determine the validity of those claims and the average award of backpay in the valid claims, and then apply the percentage of valid claims and average backpay award across the entire class in order to determine the overall class recovery.

The Supreme Court reversed. A five-justice majority concluded that there were not common questions of law or fact across the proposed class, and hence Federal Rule of Civil Procedure 23(a)(2) was not satisfied. Clarifying earlier decisions, the majority made clear that in conducting this analysis, it was permitted to consider issues that were enmeshed with the merits of the plaintiffs’ claims. The majority then explained that merely reciting common questions is not enough to satisfy Rule 23(a). Rather, the class proceeding needs to be capable of generating “common answers” which are “apt to drive the resolution of the litigation.” The four-justice dissent criticized this holding as superimposing onto Rule 23(a) the requirement in Rule 23(b)(3) that “common issues predominate” over individualized issues. The dissent believed that the “commonality” requirement in Rule 23(a) could be established merely by identifying a single issue in dispute that applied commonly to the proposed class. Because the trial court had only considered certification under Rule 23(b)(2), the dissent would have remanded the case for the trial court to determine if a class could be certified under Rule 23(b)(3).

The majority held that the plaintiffs had not identified any common question that satisfied Rule 23(a), because they sought “to sue about literally millions of employment decisions at once.” The majority further explained that “[w]ithout 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.”

Addressing the plaintiffs’ attempt to provide the required “glue”, the majority held that anecdotal affidavits from 120 class members were insufficient, because they represented only 1 out of every 12,500 class members, and only involved 235 out of Wal-Mart’s 3,400 stores nationwide. The majority also held that the plaintiffs’ statistical analysis of Wal-Mart’s workforce (which interpreted data on a regional and national level) was insufficient because it did not lead to a rational inference of discrimination at the store or district level (for example, a regional pay disparity could be explained by a very small subset of stores). Finally, the majority held that the “social framework” analysis presented by the plaintiffs’ expert was insufficient, because although the expert testified Wal-Mart had a “strong corporate culture” that made it “vulnerable” to gender discrimination, he could not determine how regularly gender stereotypes played a meaningful role in Wal-Mart’s employment decisions, e.g., he could not calculate whether 0.5 percent or 95 percent of the decisions resulted from discriminatory thinking. Importantly, the majority strongly suggested that the rigorous test for admission of expert testimony (the Daubert test) should be applied to use of expert testimony on motions for class certification.

The Court’s other holdings were unanimous. For one, the Court agreed that class certification of the backpay claim under Rule 23(b)(2) was improper because the request for backpay was “individualized” and not “incidental” to the requests for injunctive and declaratory relief. The Court declined to reach the broader question of whether a Rule 23(b)(2) class could ever recover monetary relief, nor did it specify what types of claims for monetary relief were and were not considered “individualized.” The Court made clear, however, that when plaintiffs seek to pursue class certification of individualized monetary claims (such as backpay), they cannot use Rule 23(b)(2), but must instead use Rule 23(b)(3), which requires showing that common questions predominate over individual questions, and includes procedural safeguards for class members, such as notice and an opportunity to opt-out.

Lastly, the unanimous Court agreed that Wal-Mart should be entitled to individualized determinations of each employee’s eligibility for backpay. In particular, Wal-Mart has the right to show that it took the adverse employment actions in question for reasons other than unlawful discrimination. The Court rejected the Ninth Circuit’s attempt to truncate this process by using what the Court called “Trial by Formula,” wherein a sample group would be used to determine how many claims were valid, and their average worth, for purposing of extrapolating those results onto the broader class. The Court disapproved of this “novel project” because it deprived Wal-Mart of its due process right to assert individualized defenses to each class member’s claim.

Looking forward, the Wal-Mart decision will strengthen the arguments of employers and other companies facing large class action lawsuits. In particular, the decision reaffirms that trial courts must closely scrutinize the evidence when deciding whether to certify a class action, especially in “disparate impact” discrimination cases. Statistical evidence that is based on too small a sample size, or is not well-tailored to the proposed class action, should be insufficient to support class certification. Likewise, expert testimony that is over-generalized and incapable of providing answers to the key inquiries in the case (here, whether a particular employment decision was motivated by gender discrimination) should also be insufficient to support class certification. Finally, the Court’s holding that defendants have the right to present individualized defenses as to each class member, and that this right cannot be short-circuited through statistical sampling, will provide defendants with a greater ability to defeat class certification where such individualized determinations would otherwise prove unmanageable.

Walker Digital Files 15 Patent Suits Against More Than 100 Companies

As reported by PC Magazine (Priceline Founder Goes on Patent Lawsuit Binge, Sues Apple, Google, More), Walker Digital filed 15 patent suits Tuesday against more than 100 companies, including Microsoft, eBay, Amazon, Facebook, WalMart, Groupon, Apple, Sony and Google.

Look for a post here soon describing the patents.  In the meantime, there is a list of the suits and the patents in each below:

Docket Number* Case Name Date Filed Patents
1:2011-cv-00311 Walker Digital LLC v. Google Inc. et al 04/11/2011 7801802
1:2011-cv-00315 Walker Digital LLC v. Amazon.com Inc. et al 04/11/2011 7236942
1:2011-cv-00312 Walker Digital LLC v. MasterCard International Incorporated 04/11/2011 60187186434534

7430521

6144948
1:2011-cv-00320 Walker Digital LLC v. American Airlines Inc. et al 04/11/2011 61381056601036
1:2011-cv-00314 Walker Digital LLC v. Citigroup Inc. et al 04/11/2011 61637717844550
1:2011-cv-00322 Walker Digital LLC v. Activision Blizzard Inc. et al 04/11/2011 59701435768382
1:2011-cv-00318 Walker Digital LLC v. Myspace Inc. et al 04/11/2011 58842705884272
1:2011-cv-00313 Walker Digital LLC v. Facebook Inc. et al 04/11/2011 78314707827056
1:2011-cv-00308 Walker Digital LLC v. Compasslearning Inc. et al 04/11/2011 59477476616458

7483670
1:2011-cv-00310 Walker Digital LLC v. Arrow Security Inc. et al 04/11/2011 67209907593033

7602414

7605840

7719565

7817182
1:2011-cv-00319 Walker Digital LLC v. e2interactive Inc. et al 04/11/2011 6381582
1:2011-cv-00316 Walker Digital LLC v. Avaya Inc. et al 04/11/2011 64872916222920
1:2011-cv-00309 Walker Digital LLC v. Apple Inc. et al 04/11/2011 6199014
1:2011-cv-00321 Walker Digital LLC v. Ayre Acoustics Inc. et al 04/11/2011 6263505
1:2011-cv-00317 Walker Digital LLC v. BuyWithMe Inc. et al 04/12/2011 62497726754636

7039603

7689468
1:2011-cv-00326 Walker Digital LLC v. Cannon U.S.A. Inc. et al 04/12/2011 7924323

*(All cases were filed in the United States District Court for the District of Delaware)

Walmart to Pay $440,000 to Settle EEOC Suit for Harassment of Latinos

Mexican-American Subjected Other Hispanic Employees to Ethnic Slurs at Fresno Sam’s Club, Federal Agency Charged

FRESNO, Calif. – Sam’s Club, the wholesale chain store owned and operated by Walmart, will pay $440,000 and furnish other relief to settle a national origin harassment lawsuit filed by the U.S. Equal Employment Opportunity Commission (EEOC), the agency announced today.

The EEOC contends that at least nine employees of Mexican descent at the Sam’s Club in Fresno, along with one who was married to a Mexican, endured ethnic slurs and derogatory remarks by a fellow co-worker who is Mexican-American. Since late 2005, the victims were barraged with near-daily insults about Mexicans such as “f—-n’ wetbacks,” and references to Mexicans only being good for cleaning the harasser’s home, according to the EEOC. The harasser even threatened to report three of the victims to immigration authorities despite their legal status. The victims and harasser – all female – worked in the demonstration department, serving food samples to customers.

The victims complained about the hostile work environment to management as early as April 2006 to no avail. Instead, the complaints only intensified the harassment and led to intimidation, said the EEOC. Another employee also began deriding a victim for her inability to speak English. It was not until after an official EEOC charge of discrimination was filed in October 2006 that Sam’s Club finally discharged the harasser in December 2006.

In May 2009, the EEOC filed its lawsuit in U.S. District Court, Eastern District of California (EEOC v. Walmart Stores, Inc. dba Sam’s Club, et al., Case No. 09-CV-00804), claiming that the harassment, and Walmart’s failure to appropriately address it, were in direct violation of Title VII of the Civil Rights Act of 1964. Aside from the monetary relief, the parties entered into a three-year consent decree which requires Walmart to comply with the following at its Sam’s Club locations in Fresno and/or Bakersfield, Calif.:

  • review and make available its policies against and complaint procedures for national origin discrimination, harassment and retaliation;
  • provide training to non-management employees in the Fresno location regarding anti-discrimination laws, including national origin discrimination and harassment;
  • provide separate training to management employees in the Fresno and Bakersfield locations which will including training on how to receive, investigate, or report to designated officials complaints of national origin discrimination, harassment and retaliation;
  • set up a record-keeping procedure for the Fresno location that provides for the centralized tracking system for such complaints;
  • report the handling of such complaints and compliance with the decree to the EEOC; and
  • provide neutral references for the victims upon inquiry.

“We commend Walmart for taking the issues of national origin harassment seriously and implementing preventative measures,” said Anna Y. Park, regional attorney for the EEOC’s Los Angeles District Office, which includes Fresno in its jurisdiction. “A work environment that is free of harassment ensures a more productive and vibrant workplace for all.”

Melissa Barrios, director of the EEOC’s Fresno Local Office, added, “National origin discrimination remains a serious problem in this region, and it is important to remember that harassment can manifest even within the same ethnic group. Employers failing to take immediate action send a message that such behavior is tolerated, giving license for others to do the same.”

According to company information, Walmart Stores, Inc. is an Arkansas-based international retailer, operating more than 8,300 stores worldwide, including Sam’s Club warehouses.