Washington Legal Foundation's Media Briefing; Wal-Mart v. Dukes : The Supreme Court Examines How And When To Certify A Class Action

Monday, May 2, 2011 - 01:00

Featured speakers: Andrew Trask, Counsel, McGuireWoods LLP, Michael L. Murphy, Partner, Bailey & Glasser LLP and Rachael Weinfeld, Associate, Shook, Hardy & Bacon L.L.P. Moderator: Glenn G. Lammi, Chief Counsel, Legal Studies Division, Washington Legal Foundation.

Lammi: Welcome to our Supreme Court (the Court) briefing on the Wal-Mart v. Dukes case, in which the Washington Legal Foundation (WLF) has been involved since 2004.

Leading off is Andrew J. Trask, who is counsel at McGuireWoods LLP and has participated in the defense of more than 100 class actions. He is the coauthor of The Class Action Playbook published last year by Oxford University Press, and he also writes the Class Action Countermeasures blog, which discusses strategies in class action defense.

Our next speaker will be Michael L. Murphy, a partner with Bailey & Glasser LLP, who concentrates in consumer class actions and complex litigation. Prior to attending law school, he worked at the International Brotherhood of Teamsters in Washington, providing research and field services support for its National Bargaining Committees.

Finishing up will be Rachel Weinfeld, an associate in the Global Products Liability Group at Shook Hardy & Bacon L.L.P. She has served as pro bono counsel for WLF in our amicus briefs at both the cert and merits stages of Wal-Mart .

Trask: Wal-Mart is a plaintiff's dream - a Betty v. Goliath, to quote some reporters - in which the petitioner, Wal-Mart, has deep pockets and substantial litigation resources. On the other side, there are 63 named plaintiffs, including Betty Dukes, who, in being an African-American woman, represents two groups identified by sociological studies as being classically underpaid.

This case reached the Court because the Ninth Circuit class certification was controversial. The plaintiffs claim that Wal-Mart offers lower salaries and fewer promotion opportunities to female versus male employees.

With respect to the merits, there are two rules involved. The first is Title VII, the U.S. antidiscrimination statute that forbids gender discrimination and explicitly provides for a defense if the employer acted "for any reason other than discrimination on account of (specific factors, including gender)." Under Title VII, each Wal-Mart plaintiff may have an individual case; however, the question before the Court is whether the plaintiffs can bring their cases together. Addressing that question involves Federal Rule of Civil Procedure 23, which allows a case to proceed as a class action if the plaintiffs can demonstrate that proving one plaintiff's case would prove all class members' cases.

Rule 23(a) has four requirements: numerosity, commonality, typicality and adequacy. Given 1.6 million plaintiffs in Wal-Mart, no one debates that trying each case is impractical; thus, numerosity is satisfied. Commonality requires just one question of law or fact that is common to the entire class. For typicality, the named plaintiff's claim must be so representative that all claims could be proven using the same evidence. Finally, adequacy requires that the named plaintiff be credible and capable of defending an entire class.

Rule 23(b) has three subsections, two of which are key points in this case. The first, Rule 23(b)(2) demands that the common issue must "predominate" for all plaintiffs, and the case will not concern individual issues. The second point involves the requirement that claims seeking monetary relief fall under Rule 23(b)(3), which states that the class action device must be the superior method to resolve the case.

While Wal-Mart started as a gender discrimination case, it stands before the Court as a class action certification matter. The petitioner questions whether it is better to certify this class action under Rule 23(b)(2), for injunctive relief, or under Rule 23(b)(3), for monetary relief. While the Court invited briefs concerning all four requirements of Rule 23(a), commonality received the most attention, along with the related issue of expert testimony.

There are two dominating issues for the Court in Wal-Mart : establishing commonality in accordance with Rule 23(a)(2) and reconciling the competing definitions of equitable relief as per Rule 23(b)(2) and Title VII.

First, commonality is intentionally broad, and courts have observed that setting the bar low enough enables almost anything to become "common." Therefore, it is important to determine what level of abstraction preserves relevant issues that move the case forward.

Wal-Mart claims that baseline commonality cannot be established because the class is too large, comprising 1.6 million female employees since 1998. The plaintiffs argue that Wal-Mart's corporate culture encourages gender stereotyping, and all female employees share the pervasive issue of discrimination.

The second dominating issue deals with defining equitable relief. Rule 23(b)(2) defines equitable relief as a form of injunctive relief, while Title VII defines back pay - monetary relief - as equitable relief. Rule 23(b)(2) relief demands a change in corporate culture but offers no remedy for former employees, whereas Title VII offers relief for the 800,000 former employees who otherwise would get nothing from the class action. Plaintiffs have asked for monetary relief.

Defining equitable relief becomes complicated because monetary damages require special consideration and notices to protect the rights of class members. Further, while a company may feel confident it can win a gender discrimination employment case, certifying an injunctive relief class for monetary relief sets a precedent for other matters, such as products liability actions that use Rule 23(b)(3) to seek monetary restitution of ill-gotten gains.

For Wal-Mart, the question of whether to use the term "equitable relief" with respect to monetary damages is of utmost importance. Consider the consequences if the Court allows one billion dollars worth of back pay claims to go forward by characterizing them as equitable relief via injunction to force Wal-Mart to pay.

Mike Murphy will now talk about how the Court may rule.

Murphy: I see three options in Wal-Mart . First, the Court could affirm the Ninth Circuit, which seems unlikely. Second, the Court may align with Wal-Mart's perspective regarding employment class actions and their tendency to involve more subjective testimony and less objective standards for damage calculations. The third possible outcome would find the Court focused on broader application to class actions, along with the Rule 23 commonality and equitable relief aspects discussed earlier.

Coming out of the Ninth Circuit, the cert petition had the potential to become entrenched in due process issues, and, while they haven't disappeared entirely, plaintiffs were relieved when the case redirected its focus to Rule 23 issues. Justice Scalia recently enjoined a class settlement in the Louisiana Tobacco case, which could reignite due process issues in Wal-Mart .

While the Ninth Circuit opinion is at least defensible - particularly because there is anecdotal evidence of widespread discrimination at Wal-Mart - I believe the Court neither will affirm nor would have granted cert in the first place. Aligning with many appellate courts, the Court likely will rule that back pay is permissible as equitable relief, given its close relationship with injunctive relief in Rule 23.

The Court also will address the expert witness issue. The Ninth District did not do a full Daubert analysis, deferring this issue to the merits stage for jury determination of evidence and expert witness credibility. In Wal-Mart , the Court may establish more rigorous standards to address the inherent imbalance of information - usually in favor of defendants - during the early stages of class actions.

The far-reaching impact in Wal-Mart will be on the issue of commonality. The Court likely will raise the bar for this standard, requiring multiple common issues and more aggressively folding in the predominance factor discussed above. For defendants, the implication for future class action certification is profound and positive.

For plaintiffs, all is not lost. In Shady Grove Orthopedic Associates, P.A. v. Allstate Insurance Co., the Court found that Rule 23 preempts state bans on class actions. The Court acknowledged that the class action device serves an important function, and, overall, Wal-Mart may not be as detrimental to the plaintiffs and class action bars as was feared when the cert petition was filed one year ago.

Finally, while there is an anecdotal record of gender discrimination at Wal-Mart, it remains to be seen if the plaintiffs' claims are manageable as a class action. On balance, I think the Court will find they are not.

Rachel Weinfeld will now discuss the expert testimony issue.

Weinfeld: With my colleague, Jennifer Brown, I co-authored an amicus brief on behalf of the WLF, addressing the very discreet question of what is the required extent of expert testimony review at the class certification stage. I will provide an overview of the district court and Ninth Circuit cases and discuss why this is such an important issue.

First, Supreme Court precedent requires courts to conduct a rigorous analysis of whether a class action plaintiff meets the requirements under Rule 23(a), which includes assessment of expert testimony based on reliable principles and methodology.

In this case, the district court failed to analyze - in accordance with Daubert - the expert sociological testimony that plaintiffs submitted in support of class certification. The district court considered Daubert to be less applicable at the certification stage, and, without being definitive on the underlying issue, the Ninth Circuit did not find this to be an abuse of discretion.

The Ninth Circuit's action set the bar well below what the Court has established for expert evidence, which created a circuit split and general uncertainty. Wal-Mart presents a great opportunity for the Court to affirmatively state whether Daubert applies at the class certification stage.

Why is this issue so important? First, expert testimony may be used to meet critical standards for certification. If the court doesn't properly scrutinize that evidence, the class certification may be unreliable. When this deficiency is discovered - now well into the case - defendants are blind-sided and pressured to settle because the foundation of their case is compromised.

Second, reliance upon testimony that is not properly scrutinized may result in a conditional certification. Later, if the expert testimony is successfully challenged under Daubert , plaintiffs, defendants and even the courts have expended valuable time and resources to matters that, all along, were proceeding without viable basis.

Last, Daubert affords another level of protection for absent class members by imposing a measure of litigation quality control. If plaintiffs know their expert testimony must withstand Daubert scrutiny at the class cert level, then they have to put their best foot forward right from the start.

I hope the Court will address this last issue, which causes circuit splits and general uncertainty in the lower courts. In fact, a circuit split could lead to forum shopping. If, for example, the Ninth Circuit does not uphold the rigors of Daubert, but the Seventh Circuit does, counsel may shop for the most favorable forum for their client's case. Thus, it is important for the Court to rule in this issue and create one standard of review.

Based on its own precedent, I believe the Court will rule that a full Daubert analysis should apply at class certification when the expert testimony goes to the elements of whether Rule 23(a) can be satisfied. Stopping short of this finding - allowing a heightened but not full analysis, for example - still leaves a lot of discretion to the trial courts. As a result, the inconsistencies and uncertainty will persist.

For media briefings of the Washington Legal Foundation, go to www.wlf.org.