The National Law Review’s Featured Guest Blogger Michael J. Hassen of Jeffer, Mangels, Butler & Mitchell LLP discusses the recent California Employment Class Action cases involving WalMart’s female employees.  

Labor Law Class Action Alleging Wal-Mart Discriminates Against Female Employees in Violation of Title VII of the Civil Rights Act of 1964 Properly Certified As Nationwide Class Action by District Court Ninth Circuit Holds

Plaintiffs filed a class action against Wal-Mart alleging violations of Title VII of the Civil Rights Act of 1964; specifically, the class action complaint alleged that Wal-Mart discriminates against its female employees. Dukes v. Wal-Mart Stores, Inc., ___ F.3d ___ (9th Cir. April 26, 2010) [Slip Opn., at 6137, 6146]. According to the allegations underlying the class action complaint (originally filed in 2004), Wal-Mart discriminated against women employees in violation of Title VII of the 1964 Civil Rights Act because “women employed in Wal-Mart stores: (1) are paid less than men in comparable positions, despite having higher performance ratings and greater seniority; and (2) receive fewer—and wait longer for—promotions to in-store management positions than men.” Id., at 6147. The class action complaint sought to represent a nationwide class on the grounds “that Wal-Mart’s strong, 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.” Id. The proposed class included “women employed in a range of Wal-Mart positions, from part-time entry-level hourly employees to salaried managers.” Id. Plaintiffs’ counsel moved the district court to certify the litigation as a class action, defined as “All 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.” Id., at 6148. Defense attorneys opposed class certification and stressed that the proposed class would consist of as many as 1.5 million current and former employees who worked at 3,400 stores in 41 regions. Id., at 6148 and n.3. The district court granted the motion and certified the litigation as a class action, id., at 6146-47. The Ninth Circuit affirmed. The Circuit Court opinion is quite lengthy, so we simply “hit the highlights” in this article. Defense attorneys may contact the author of the Blog for a more detailed discussion of the case.

The Ninth Circuit spent a considerable amount of time discussing the standard governing district court consideration of class certification under Rule 23 and clarified the “proper standard of Rule 23 adjudication.” See Dukes, at 6149-83. This analysis includes a discussion, and rejection, of the dissent’s “significant proof” standard. See id., at 6177-83. The Circuit Court then turned to the merits of the Rule 23 analysis, beginning with Rule 23(a)(1)’s numerosity requirement, which was not contested given the enormous size of the class. Id., at 6185. The Court also found that Wal-Mart had not waived its right to object to Rule 23(a)(3)’s typicality requirement, see id., at 6209-10, but concluded that the district court did not err in finding that the named-plaintiffs’ claims were sufficiently typical of those of the class: “Even though individual employees in different stores with different managers may have received different levels of pay or may have been denied promotion or promoted at different rates, because the discrimination they claim to have suffered occurred through alleged common practices—e.g., excessively subjective decision making in a corporate culture of uniformity and gender stereotyping—the district court did not abuse its discretion by finding that their claims are sufficiently typical to satisfy Rule 23(a)(3).” Id., at 6210. Moreover, “because all female employees faced the same alleged discrimination, the lack of a class representative for each management category does not undermine Plaintiffs’ certification goal.” Id., at 6211. And the Ninth Circuit found no difficulty in finding that the adequacy of representation test in Rule 23(a)(4) had been met. Id., at 6212.

The Circuit Court spent the vast majority of its time discussing Rule 23(a)(2)’s commonality test. See Dukes, at 6186-6209. The district court found that this test had been met: “Plaintiffs have exceeded the permissive and minimal burden of establishing commonality by providing: (1) significant evidence of company-wide corporate practices and policies, which include (a) excessive subjectivity in personnel decisions, (b) gender stereotyping, and (c) maintenance of a strong corporate culture; (2) statistical evidence of gender disparities caused by discrimination; and (3) anecdotal evidence of gender bias. Together, this evidence raises an inference that Wal-Mart engages in discriminatory practices in compensation and promotion that affect all plaintiffs in a common manner.” Id., at 6186-87 (citation omitted). The Ninth Circuit agreed, id., at 6287. Despite the wide-ranging nature of the class, the Court held that there was sufficient evidence of a common policy of discrimination, see id., at 6187-6207. The Circuit Court also found that the district court did not err in finding “substantial evidence suggesting common pay and promotion policies among Wal-Mart’s many stores” and that “Wal-Mart’s decision to permit its managers to utilize subjectivity in interpreting those policies offers additional support for a commonality finding.” Id., at 6207. Thus, the Court concluded at page 6209:

Plaintiffs’ factual evidence, expert opinions, statistical evidence, and anecdotal evidence provide sufficient support to raise the common question whether Wal-Mart’s female employees nationwide were subjected to a single set of corporate policies (not merely a number of independent discriminatory acts) that may have worked to unlawfully discriminate against them in violation of Title VII. Evidence of Wal-Mart’s subjective decision-making policies suggests a common legal or factual question regarding whether Wal-Mart’s policies or practices are discriminatory.

Finally, “Plaintiffs moved to certify the class under Rule 23(b)(2), which requires showing that ‘the party opposing the class has acted or refused to act on grounds that apply generally to the class, so that final injunctive relief . . . is appropriate respecting the class as a whole.’” Dukes, at 6214. The Circuit Court recognized that a (b)(2) class was inappropriate if the primary relief sought by the class action complaint is monetary. Id., at 6214-15. The Ninth Circuit previously had adopted “a test that focuses on the plaintiffs’ subjective intent in bringing a lawsuit.” Id., at 6215. But the Court now reversed that position and adopted an entirely new standard, set forth at page 6217 as follows:

Rule 23(b)(2) certification is not appropriate where monetary relief is “predominant” over injunctive relief or declaratory relief. To determine whether monetary relief predominates, a district court should consider, on a case-by-case basis, the objective “effect of the relief sought” on the litigation. [Citation.] Factors such as whether the monetary relief sought determines the key procedures that will be used, whether it introduces new and significant legal and factual issues, whether it requires individualized hearings, and whether its size and nature—as measured by recovery per class member—raise particular due process and manageability concerns would all be relevant, though no single factor would be determinative.

The Court then concluded: “Under this standard…, the district court’s decision to include claims for back pay in a class certified under Rule 23(b)(2) was not an abuse of its discretion. On the other hand, the district court did abuse its discretion by failing to analyze whether certifying Plaintiffs’ punitive damages claims under Rule 23(b)(2) caused monetary damages to predominate, notwithstanding its decision to require notice and an opportunity for Plaintiffs to opt-out of the punitive damages claims.” Dukes, at 6217. Thus, the Ninth Circuit reversed and remanded the matter to the district court for further consideration of the punitive damage relief claim. Additionally, the Circuit Court agreed with Wal-Mart that (b)(2) class may not be proper as to employees who no longer worked for Wal-Mart at the time the class action was filed because those individuals “do not have standing to pursue injunctive or declaratory relief.” Id., at 6228. Wal-Mart argued that since former employees lacked standing to seek injunctive relief, monetary relief would predominate for those class members. Id. But while the Court reversed the district court order to the extent it included former employees in the (b)(2) class, it remanded the matter for further consideration as to whether a (b)(3) class could be certified for such individuals noting, “The district court may, in its discretion, certify a separate Rule 23(b)(3) class of former employees for back pay and punitive damages.” Id., at 6229. Accordingly, the Court affirmed in part and reversed in part. Id., at 6236-37.

Judge Graber filed a brief concurring opinion to stress the “unremarkable” nature of the Court’s holding: “The majority and the dissent have written scholarly and complete explanations of their positions. What the length of their opinions may mask is the simplicity of the majority’s unremarkable holding: [¶] Current female employees may maintain a Rule 23(b)(2) class action against their employer, seeking injunctive and declaratory relief and back pay on behalf of all the current female employees, when they challenge as discriminatory the effects of their employer’s company-wide policies. [¶] If the employer had 500 female employees, I doubt that any of my colleagues would question the certification of such a class. Certification does not become an abuse of discretion merely because the class has 500,000 members.” See Dukes, at 6237-38.

NOTE: Judge Ikuta dissented, joined by Chief Judge Kozinski and Judges Rymer, Silverman and Bea. See Dukes, at 6238-6279. The dissent argued that “the district court abused its discretion in two ways. First, it failed to follow the Supreme Court’s direction to ‘evaluate carefully the legitimacy of the named plaintiff’s plea that he is a proper class representative under Rule 23(a),’ [citation], and to ensure ‘after a rigorous analysis’ that the prerequisites of Rule 23(a) have been met, [citation]. Second, the district court erred in ignoring Wal-Mart’s statutory right to raise defenses to liability for back pay and punitive damages under Title VII, see 42 U.S.C. § 2000e- 5(g)(2); Rules Enabling Act, 28 U.S.C. § 2072(b), and therefore abused its discretion in holding that the proposed class could be certified under Rule 23(b)(2).” Dukes, at 6243.

Chief Judge Kozinski joined the dissent and added the following concise explanation: “Maybe there’d be no difference between 500 employees and 500,000 employees if they all had similar jobs, worked at the same half-billion square foot store and were supervised by the same managers. But the half-million members of the majority’s approved class held a multitude of jobs, at different levels of Wal-Mart’s 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 depending on each class member’s job, location and period of employment. Some thrived while others did poorly. They have little in common but their sex and this lawsuit. [¶] I therefore join fully Judge Ikuta’s dissent.” Dukes, at 6279.

© 2010 Jeffer Mangels Butler & Mitchell LLP. All rights reserved.

About the Author:

Michael J. Hassen is a Litigation Partner at Jeffer Mangels Butler & Mitchell LLP with more than 23 years experience in general business and commercial litigation, including class action defense and matters involving intellectual property, securities and unfair competition.  415-984-9666 / www.jmbm.com