On February 6, 2007, the United States Court of Appeals for the Ninth Circuit, in a 2-1 decision, affirmed the district court's certification of a nationwide class of approximately 1.5 million current and former female employees who were employed at one or more of Wal-Mart's 3,400 stores across the country. The Court's ruling in Dukes v. Wal-Mart1 is significant due to the "historic" nature of the plaintiffs' motion, which sought approval of "the largest certified class in history" and because many of the court's findings, if they stand, undoubtedly will form part of the judicial debate in other jurisdictions as to the appropriate standards in analyzing the availability of class certification in large employment discrimination cases.2
The District Court's Decision
On April 28, 2003, the six named plaintiffs sought certification of a nationwide class under Title VII of the 1964 Civil Rights Act, consisting of "[a]ll women employed at any Wal-Mart domestic retail store at any time since December 26, 1998, who have been or may be subjected to Wal-Mart's challenged pay and management track promotions, policies and practices."3 Plaintiffs sought classwide injunctive and declaratory relief, lost pay and punitive damages.
On June 21, 2004, the district court issued an eighty-four page order granting in part and denying in part plaintiffs' motion for class certification. The district court certified the class with respect to plaintiffs' equal pay and promotion claims, but "decline[d] to certify a claim for lost pay with respect to the portion of Plaintiffs' promotion claim where no objective applicant data exist[ed]."4
Wal-Mart appealed the district court's ruling, arguing that the lower court erred by (i) concluding that commonality and typicality were satisfied; (ii) altering substantive law by eliminating Wal-Mart's ability to present a defense to each individual's claims; and (iii) failing to recognize that plaintiffs' claims for monetary relief predominated over claims seeking injunctive relief. Plaintiffs cross-appealed, asserting that the district court erroneously limited backpay relief for plaintiffs' promotion claims.
The Ninth Circuit's Decision
The Ninth Circuit concluded that the district court did not abuse its discretion by certifying the class. Specifically, the court found that plaintiffs had satisfied the commonality requirement of Rule 23(a)(2) of the Federal Rules of Civil Procedure, by demonstrating "questions of law or fact common to the class" through evidence of company-wide corporate practices and policies, including excessive subjectivity in personnel decisions, gender stereotyping, maintenance of a strong corporate culture and statistical evidence of gender disparities and anecdotal evidence of gender bias.5 The court also found that plaintiffs' claims were sufficiently typical because "the discrimination [the class] allegedly suffered occurred through an alleged common practice - e.g., excessive subjective decision making in a corporate culture of uniformity and gender stereotyping."6 With respect to the adequacy requirement of Rule 23(a)(4), the Ninth Circuit affirmed the district court's determination that "courts need not deny certification of an employment class simply because the class includes both supervisory and non-supervisory employees."7 Finally, the court concluded that class certification was appropriate under Rule 23(b)(2) notwithstanding plaintiffs' claims for back pay and punitive damages, reasoning that "[c]ourts should look to the plaintiffs' intent in bring the action" to determine whether injunctive or monetary relief predominates.8
Judge Kleinfeld dissented from the majority opinion on grounds that the district court's order "violates the Rule 23 class action certification criteria and deprives Wal-Mart of due process of law."9 Judge Kleinfeld further stated that the class does not satisfy Rule 23(a)(2) because "there are no questions of law or fact common to the class." Rather, the "only common question Plaintiffs identify with any precision is whether Wal-Mart's promotion criteria are excessively subjective." The dissent further found that the class lacks typicality because the claims and defenses of the named plaintiffs are not typical of the class they seek to represent. Judge Kleinfeld also raised constitutional concerns regarding plaintiffs' punitive damages claim and criticized the district court's "scheme" under which an "expert or special master" using an "unspecified formula" would allocate back and front pay to the class members without "an adjudication, by the jury or the special masters, of whether any individual women was injured by the sex discrimination."10 Judge Kleinfeld cautioned that the case "poses a considerable risk of enriching undeserving class members and counsel, but depriving thousands of women actually injured by sex discrimination of their just due."11
The Ninth Circuit's decision in Wal-Mart contains numerous conclusions of law that are highly questionable and which will likely be challenged both in that case and in cases pending around the country. What follows is an analysis of three of the most debatable holdings: 1) whether the district court conducted a sufficiently "rigorous analysis," 2) whether Wal-Mart's due process rights were violated because it was denied the right to litigate individualized defenses, and 3) whether the substantial monetary relief being sought precludes the application of class wide injunctive relief.
"Rigorous Analysis" Requirement
The Ninth Circuit adopted the district court's view that "arguments evaluating the weight of evidence or the merits of a case are improper at the class certification stage" and, in doing so, refused to entertain a number of Wal-Mart's challenges to plaintiffs' statistical evidence.12 To reach its determination that challenges to plaintiffs' evidence of commonality are more properly considered at the merits stage, the court relied on two decisions - Caridad v. Metro-North Commuter R.R., 191 F.3d 283 (2d Cir. 1999), and In re Visa Check/Mastermoney Antitrust Litig., 280 F.3d 124 (2d Cir. 2001) - for the proposition that district courts must "avoid resolving 'the battle of the experts' at [the class certification] stage of the proceedings."13 The Second Circuit cases upon which the court relied, however, either have been abandoned or severely limited by that same circuit in the recent IPO Securities Litigation decision.14 In IPO , the Second Circuit comprehensively analyzed the class certification requirements under Rule 23 and clarified that Eisen v. Carlisle & Jacquelin, 417 U.S. 156 (1974), provides "no reason to lessen a district court's obligation to make a determination that every Rule 23 requirement is met before certifying a class just because of some or even full overlap of that requirement with a merits issue."15
Rather, Rule 23 requires a "rigorous analysis" to ensure "actual, not presumed, conformance" with the criteria for class certification.16 Accordingly, a district judge considering class certification must make a "definitive assessment of Rule 23 requirements, notwithstanding their overlap with merits issues" and "must receive enough evidence, by affidavits, documents or testimony, to be satisfied that each Rule 23 requirement has been met."17 Notwithstanding the Second Circuit's abandonment or limitation of Caridad and In re Visa Check and the Supreme Court's determination that "the class determination generally involves considerations that are enmeshed in the factual and legal issues comprising the plaintiff's cause of action,"18 the Dukes Court failed to undertake a rigorous Rule 23 analysis to determine whether plaintiffs have met their burden of proving that the action is appropriate for class treatment.
Individual Hearings And Due Process
Although under certain circumstances, courts have recognized the availability of class-wide injunctive relief under Title VII, a defendant should always be entitled to prove that individual class members are not entitled to monetary relief because such persons were not subjected to the discriminatory practice.19 Under the Ninth Circuit's ruling, however, there "will never be an adjudication, by the jury or the special master, of whether any individual woman was injured by sex discrimination."20 Accordingly, it appears as if the Ninth Circuit's decision may effectively preclude Wal-Mart from rebutting any individual class member's claim for monetary relief unless the District Court should modify its apparent plan to try the case as a class action.
Under the trial plan approved by the district court, Wal-Mart seemingly has no opportunity to defend itself by providing lawful reasons for its alleged discriminatory practices. As noted by Judge Kleinfeld in his dissent, if plaintiffs prove systemic discrimination at Stage I of the trial, the court will employ a "scheme" under which an "expert or special master" using an "unspecified formula" would allocate back and front pay to the class members without "an adjudication, by the jury or the special masters, of whether any individual women was injured by the sex discrimination."21
In rejecting individualized hearings, the court relied on Teamsters v. United States, 431 U.S. 324 (1977), for the limited proposition that a district court "has the discretion to be flexible and to fashion such relief as the particular circumstances of a case may require to effect restitution."22 In Teamsters, however, the court also explained that plaintiffs' prima facie evidence of a pattern of racial discrimination "d[oes] not conclusively demonstrate that all of the employer's decisions were part of the proved discriminatory pattern and practice."23 And, in cases where plaintiffs seek individual monetary relief, "a district court must usually conduct additional proceedings" at which point the employer can "demonstrate that the individual applicant was denied an employment opportunity for lawful reasons."24 The Teamsters Court indicated that ultimately, the trial court will be required to "make a substantial number of individual determinations in deciding which of the minority employees were actual victims of the company's discriminatory policies."25
Teamsters also appears to be distinguishable on its face inasmuch as that issue was decided at a time when Title VII did not allow for compensatory and punitive damages. The Civil Rights Act of 1991 amended Title VII to provide these additional forms of relief. Thus, future courts will undoubtedly continue to debate the applicability of Teamsters to putative class actions under Title VII where parties seek compensation and/for putative damages. See, e.g., Rutstein v. Avis Rent-A-Car Systems, Inc., 211 F. 3d 1228, 1239-1240 (11th Cir. 2000).
The Dukes decision further provides for punitive damages without consideration of actual harm to the class members. Relying on State Farm Automobile Ins. Co. v. Campbell, 538 U.S. 408, 422 (2003), Wal-Mart argued that a "punitive damages award in the absence of individualized hearings would violate its due process rights because it might punish legal conduct and award damages to non-victims."26 The Ninth Circuit "readily distinguish[ed]" State Farm on the grounds that, unlike Dukes, it "involved an action brought on behalf of one individual under state law" and because "there is no danger in this case that Wal-Mart will be punished for conduct that is legal where it occurred, because "Title VII is a federal law which applies to every Wal-Mart store in the United States."27 The Ninth Circuit's distinction of State Farm from the circumstances in the Wal-Mart case undoubtedly will be the subject of further litigation and debate in the Ninth Circuit and elsewhere.
Monetary v. Injunctive Relief
In addition to the requirements of Rule 23(a), the plaintiff also must demonstrate that a class action can be maintained under one of the three categories described in Rule 23(b). In Dukes, plaintiffs sought certification pursuant to Rule 23(b)(2), which requires that "the party opposing the class has acted or refused to act on grounds generally applicable to the class, thereby making appropriate final injunctive relief . . . with respect to the class as a whole." The court reasoned that Rule 23(b)(2) class actions may include claims for money damages "so long as such damages are not the 'predominant' relief sought, but instead are secondary to the primary claim for injunctive or declaratory relief."28
In Dukes, the Ninth Circuit addressed whether the action could be certified under Rule 23(b)(2), notwithstanding plaintiffs' request for monetary relief in the form of back pay and punitive damages. The issue, as framed by Judge Kleinfeld's dissent, was how could "injunctive and declaratory relief 'pre-dominate' even for those still employed who might benefit from an injunction, when they seek billions of dollars in punitive damages."29
The Supreme Court has recognized the "substantial possibility" that actions seeking monetary damages "can be certified only under Rule 23(b)(3), which permits opt out, and not under Rules 23(b)(1) and (b)(2), which do not."30 There is a "split among circuits on how a court determines whether monetary relief predominates in a Rule 23(b)(2) class suit."31 Relying on the court's earlier decision in Molski v. Gleich, 318 F.3d 937. 946 (9th Cir. 2003), however, the court stated that it must "focus[ ] predominantly on the plaintiffs' intent in bringing the suit."32 The court held that the district court acted within its discretion when it concluded that plaintiffs' claims for punitive damages do not predominate over claims for injunctive and declaratory relief because plaintiffs "stated that their primary intention in bringing this case was to obtain injunctive and declaratory relief-not money damages - and Wal-Mart has failed to effectively rebut Plaintiffs' statements or cast doubt on their reliability."33
Litigation in the Wal-Mart case over this unprecedented class certification decision continues. On February 20, 2007, Wal-Mart filed a petition for rehearing en banc by the entire Ninth Circuit. Whatever the outcome of that petition, it seems inevitable that one side or the other is likely to file a petition for certiorari to the U.S. Supreme Court. Thus, this case will continue to be a focus of discussion and debate in the courts for at least the immediate future, and possibly for years to come. 1 Dukes v. Wal-Mart, Inc., 474 F.3d 1214 (9th Cir. 2007) ("Dukes II").
2 Id. at 1237.
3 Dukes v. Wal-Mart Stores, Inc., 222 F.R.D. 137, 141-42 (N.D. Cal. 2004) ("Dukes I").
4 Id. at 182.
5 Dukes II, 474 F.3d at 1225-1231.
6 Dukes II, 474 F.3d at 1232.
7 Id. at 1233.
8 Id. at 1234.
9 Id. at 1244 .
10 Id. at 1248.
12 See id. at 1225 (The district court noted that Wal-Mart's challenges-specifically its challenge that Dr. Bielby failed to identify specific stereotyping policies or incidents-"are of the type that go to the weight, rather than the admissibility, of the evidence").
13 Id. at 1239.
14 In re Initial Public Offering Sec. Litig., 471 F.3d 24, 51-52 (2d Cir. 2006).
15 IPO, 471 F.3d at 41-42.
16 Gen. Tel. Co. v. Falcon, 457 U.S. 147, 160-61 (1982).
17 IPO, 471 F.3d at 51-52.
18 IPO, 471 F.3d 24 (2d Cir. Dec. 5, 2006) (quoting Gen. Tel. Co ., 457 U.S. at 460).
19 See Price Waterhouse v. Hopkins, 490 U.S. 228, 244 n.10 (1989) ("Title VII does not authorize affirmative relief for individuals as to whom . . . the existence of systemic discrimination had no effect").
20 See Dukes II, 474 F.3d at 1241, 1248 ("Wal-Mart contends that individualized hearings, and not the analysis of aggregated data, are necessary to preserve its due process rights. We disagree.").
21 Dukes II, 474 F.3d at 1248.
22 Id. at 1238.
23 Teamsters, 431 U.S. at 359 n.45.
24 Id. at 361-62.
25 Id. at 371-72.
26 Dukes II, 474 F.3d at 1242.
27 Id. (emphasis in original).
28 Id. at 1233-34.
29 Dukes II, 474 F.3d at 1238.
30 Ticor Title Ins. Co. v. Brown, 511 U.S. 117, 121(1994).
31 Richards v. Delta Air Lines, Inc., 453 F.3d 525 (D.C. Cir. 2006). Compare Allison v. Citgo Petroleum Corp., 151 F.3d 402, 415 (5th Cir. 1998) ("[M]onetary relief predominates in (b)(2) class actions unless it is incidental to requested injunctive or declaratory relief.") with Molski v. Gleich, 318 F.3d 937, 949-50 (9th Cir. 2003) (A court must "focus[ ] predominantly on the plaintiffs' intent in bringing the suit").
32 Dukes II, 474 F.3d at 1234.
33 Id. at 1236.
Jeffrey S. Klein chairs the firm's national Employment Litigation practice. Nicholas J. Pappas is a Partner in the Litigation/Regulatory department where he concentrates on employment and ERISA litigation. Reprinted with permission from the ISSUE DATE edition of the New York Law Journal. 2007 ALM Properties Inc. All rights reserved. Further duplication without permission is prohibited. Please refer to our website, www.metrocorpcounsel.com, for the text of the footnotes in this article.