by Art Gutman Ph.D., Professor, Florida Institute of Technology
As noted in a prior alert on June 21, 2011, the Supreme Court ruled against the plaintiffs in Wal-Mart v. Dukes [2011 U.S. LEXIS 4567, 6/2011]. As noted in that alert, the ruling was unanimous on one issue and divided on another issue. The bottom line is that the plaintiffs have lost on the issue of class certification, and must now advance their cases individually. Bear with me as I recount the issues in this case.
As a starting point, class certification requires meeting all four requirements of Rule 23(a) and any one of Rule 23(b)(1), 23(b)(2) or Rule 23(b)(3). These rules are available at http://www.law.cornell.edu/rules/frcp/Rule23.htm. The four criteria under Rule 23(a) are:
- numerosity (the class is large enough so that individual trials are impractical);
- commonality (the harm claimed is common to the class);
- typicality (a relationship between the named plaintiff(s) claims and claims alleged on behalf of the class); and
- adequate protection of class interest (the named plaintiff(s) will fairly and adequately represent the interest of the class).
The key comparison on the other dimension is between Rule 23(b)(2) for injunctive or declaratory relief and Rule 23(b)(3) for monetary relief. Rule 23(b)(3) is more difficult to satisfy because it requires that plaintiffs establish both predominance (that common issues predominate over individual ones) and superiority (that class action is superior to other means of resolving the dispute). In comparison, Rule 23(b)(2) permits a purely statistical analysis for the merits of the claims, thus denying the defendant to answer individual claims.
The plaintiffs alleged that a “centralized structure fosters or facilitates gender stereotyping and discrimination, that the policies and practices underlying this discriminatory treatment are consistent throughout Wal-Mart stores, and that this discrimination is common to all women who work or have worked in Wal-Mart stores.” More specifically, the allegations were that “manager’s discretion over pay and promotions is exercised disproportionately in favor of men, leading to an unlawful disparate impact on female employees.”
The plaintiffs presented two major sources of evidence to support these claims. The first was a “social framework analysis” by Dr. William Bielby who purported to study the “culture” at Wal-Mart and concluded that Wal-Mart was “vulnerable” to gender discrimination. The second source was from statistical regression analyses performed by Dr. Richard Drogin, a statistician and Dr. Marc Bendick, a labor economist. Drogin concluded "there are statistically significant disparities between men and women at Wal-Mart . . . [and] these disparities . . . can be explained only by gender discrimination" and Bendick concluded that Wal-Mart "promotes a lower percentage of women than its competitors."
In Dukes v. Wal-Mart (2004), the district court approved certification based on Rule 23(b)(2) for the pay claims for all forms of requested relief, but issued a mixed ruling on promotion claims, approving claims for punitive damages, injunctive relief, and declarative relief, but denying certification for back pay, ruling that the challenged promotions were not available for all class members. Wal-Mart challenged the reliability and validity of Dr. Bielby’s study, but the court ruled this was an issue to be decided at trial, and not at the class certification stage.
On appeal to the 9th Circuit, Wal-Mart alleged the district court erred on three issues: (1) whether Rule 23(a) was met with respect to commonality and typicality; (2) that Rule 23(b)(2) effectively eliminated their ability to respond to individual claims; and (3) that the district court erred in favoring Rule 23(b)(2) because the claims for monetary relief predominated over the claims for injunctive and declaratory relief, a no-no for a Rule23(b)(2) claim.
The appeal was first denied by a divided three-judge panel of the 9th Circuit in Dukes v. Wal-Mart (2007). Wal-Mart then appealed for an en banc ruling, which was rendered in Dukes v. Wal-Mart (2010). The en banc ruling was 6 to 5, in which the majority upheld the plaintiff’s claim for injunctive relief, declarative relief, and back pay under Federal Rule 23(b)(2), but remanded for the district court to consider whether the class for punitive damages should be certified under Federal Rule 23(b)(2) or Federal Rule 23(b)(3). The majority also remanded for consideration of whether to certify members who no longer worked at Wal-Mart.
The ruling by the Supreme Court was unanimous that Rule 23(b)(2) was inappropriate, as all nine justices agreed that monetary issues were predominant over injunctive and declaratory relief. But there was disagreement on whether the commonality requirement in Rule 23(a) was satisfied, and whether to remand the case back to the district court to determine if class certification was still suitable under Rule 23(b)(3). In a nutshell, a majority of five (Scalia speaking for Alito, Kennedy, Roberts & Thomas) ruled that there was no commonality, and as a further consequence, no support for the predominance and superiority requirements relating to Rule 23(b)(3). A minority of four (Ginsburg speaking for Bryer, Kagan & Sotomayor) argued there was sufficient evidence for commonality, and that the case should be remanded to determine if there was sufficient evidence for class certification under Rule 23(b)(3).
In rendering his ruling, Scalia explained why Rule 23(b)(3) is connected directly to commonality in Rule 23(a). Accordingly:
In this case, proof of commonality necessarily overlaps with respondents' merits contention that Wal-Mart engages in a pattern or practice of discrimination. That is so because, in resolving an individual's Title VII claim, the crux of the inquiry is "the reason for a particular employment decision," … Here respondents wish to sue about literally millions of employment decisions at once. Without 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.
Scalia considered two ways in which commonality (and typicality) could be proven. The first, according to Scalia, is if an employer:
[u]sed a biased testing procedure to evaluate both applicants for employment and incumbent employees, a class action on behalf of every applicant or employee who might have been prejudiced by the test clearly would satisfy the commonality and typicality requirements of Rule 23(a).
As important, Scalia noted that proof of adverse impact requires identification of a “specific employment practice”, and the mere showing that a “policy of discretion has produced an overall sex-based disparity does not suffice” to establish discretionary decision making as a “specific employment practice.”
The second proof according to Scalia is that:
[a]n employer operated under a general policy of discrimination [that] conceivably could justify a class of both applicants and employees if the discrimination manifested itself in hiring and promotion practices in the same general fashion, such as through entirely subjective decisionmaking processes."
Scalia ruled that proof that Wal-Mart “operated under a general policy of discrimination” centered on Dr. Bielby’s study. Accordingly:
The only evidence of a "general policy of discrimination" respondents produced was the testimony of Dr. William Bielby, their sociological expert. Relying on "social framework" analysis, Bielby testified that Wal-Mart has a "strong corporate culture," that makes it "'vulnerable'" to "gender bias." … He could not, however, "determine with any specificity how regularly stereotypes play a meaningful role in employment decisions at Wal-Mart. At his deposition . . . Dr. Bielby conceded that he could not calculate whether 0.5 percent or 95 percent of the employment decisions at Wal-Mart might be determined by stereotyped thinking. … The parties dispute whether Bielby's testimony even met the standards for the admission of expert testimony under Federal Rule of Evidence 702 and our Daubert case, see Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579, 113 S. Ct. 2786, 125 L. Ed. 2d 469 (1993). The District Court concluded that Daubert did not apply to expert testimony at the certification stage of class-action proceedings. We doubt that is so, but even if properly considered, Bielby's testimony does nothing to advance respondents' case. "[W]hether 0.5 percent or 95 percent of the employment decisions at Wal-Mart might be determined by stereotyped thinking" is the essential question on which respondents' theory of commonality depends. If Bielby admittedly has no answer to that question, we can safely disregard what he has to say. It is worlds away from "significant proof " that Wal-Mart "operated under a general policy of discrimination."
In short, Scalia dispatched with the statistical evidence by invoking the “specific employment practice” requirement, and dispatched with the “social framework” analysis calling it, in effect, junk science.