Supreme Court Decertifies Massive Class Action

Summary: In one of the most closely watched cases of this term, the Supreme Court today unanimously overturned a lower court decision that certified a massive 1.5 million person class action against retailer Wal Mart Stores. The decision not to let the class action move forward was unanimous because all the justices agreed that this type of class action cannot be certified where plaintiffs seek the type of monetary damages sought in this case. The justices divided 5 4 over another aspect that may impose new limits on class action suits: in that part of the decision, the Courts majority held that the case could not proceed as a class action because the plaintiffs had failed to demonstrate that the members of the class shared a common claim. The Supreme Court explained that the plaintiffs could proceed with their own individual discrimination claims but could not represent other female employees. Scalia, J., delivered the opinion of the Court, in which Roberts, C. J., and Kennedy, Thomas, and Alito, JJ., joined; and in which Ginsburg, Breyer, Sotomayor, and Kagan, JJ., joined as to Parts I and III. Ginsburg, J., filed an opinion concurring in part and dissenting in part, in which Breyer, Sotomayor, and Kagan, JJ., joined.

The decision was a victory for Atlantic Legal Foundation, which partnered with the New England Legal Foundation in filing a friend of the court brief supporting Wal-Mart in the Supreme Court in opposing class certification.

The suit was filed by a small number of female Wal Mart employees who claim that the company denied them equal pay and promotion opportunities. The trial court certified them as representatives of a class of approximately 1.5 million current and former female employees.

A federal district court in California certified the class more than six years ago and a three judge panel of the U.S. Court of Appeals for the Ninth Circuit affirmed the certification order in 2007 and again in 2010.

The plaintiffs did not allege that Wal Mart has a company policy of discriminating against female employees because, as the Supreme Courts decision noted, Wal-Mart has a stated policy against discrimination and there was no evidence of a uniform practice of discrimination throughout the company. Rather, the company allowed individual store managers to decide on pay levels and promotions. Instead, the supposed class representatives alleged that Wal Mart maintains a corporate culture that can perpetuate gender stereotypes and which led to disparities in pay and promotion to supervisory jobs as between men and women. The Court ruled that such claims are insufficient to meet the class action requirements of Rule 23(a) of the Federal Rules of Civil Procedure, which requires that plaintiffs seeking class certification demonstrate that there are questions of law or fact common to the class. The Court explained that Rule 23(a) limits class certification to cases in which the employment discrimination result from a policy that was applicable to the entire class, and class certification is inappropriate because the alleged discrimination arose in dissimilar contexts.

The Court held that Rule 23(a) (2)s requirement of commonality was not met where there was not a single common predominant question governing the claim. The Court cited Chief Judge Kozinski, who wrote in a dissenting opinion below that the class members held a multitude of different jobs, at different levels of Wal Marts 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.

The Supreme Court also criticized the Ninth Circuit appeals court for certifying the class under the standards set forth in Rule 23(b) (2), rather than applying Rule 23(b) (3)s more exacting standards. The Court explained that Rule 23(b) (2) is only applicable when the only relief the plaintiffs are seeking is an injunction or declaratory judgment, not when they also seek a monetary award (in this case, back pay and punitive damages). The dissent agreed the class was not certifiable under Rule 23(b) (2), but argued that the Court erred to entirely disqualify the class under Rule 23(a) (2), and that the Court should have allowed the lower court to consider whether the putative class could have been certified under Rule 23(b)(3) if the common class questions predominate over individual issues.

In its brief, the Foundation focused on the trial courts erroneous decision to admit into evidence and rely on the testimony of plaintiffs sociology expert witness, who provided the class plaintiffs only evidence of a general discrimination policy by asserting that Wal Marts corporate culture made it vulnerable to gender bias, but who could not estimate what percent of Wal Mart employment decisions might be determined by stereotypical thinking. Thus this testimony was far from significant proof that Wal Mart operated under a general policy of discrimination. The Court also agreed with our argument that Rule 23(a) (2) requires a party seeking class certification to prove that the class has common questions of law or fact by providing significant proof that an employer operated under a general policy of discrimination, and that such proof of commonality necessarily overlaps with respondents contention on the merits that Wal Mart engaged in a pattern or practice of discrimination.

To view our brief, please click here.

In one of the most closely watched cases of this term, the Supreme Court today unanimously overturned a lower court decision that certified a massive 1.5 million person class action against retailer Wal Mart Stores.