The Constitutional Overtones of Wal-Mart

As I mentioned earlier, I am blogging on the Supreme Court's recent class action cases.  I want to continuing writing about Wal-Mart Stores, Inc. v. Dukes, which was released yesterday.  In my last post I argued that the majority opinion conflated the "commonality" requirement of Rule 23(a)(2) with a merits determination of the plaintiffs' claim.  I think that is a mistake in light of the function of the class action, as I argue in a recent paper and will argue here soon. 

But as a bit of set-up, I want to tease out the constitutional issues that lurk in the majority opinion, particularly the discussion of Rule 23(b)(2), which all of the Justices joined.  Lyle Denniston on SCOTUSblog does a fantastic job of discussing the constitutional issues implicated by the opinion, but I want to tease out in more detail the underlying view of due process that supports the Court's interpretation of Rule 23(b)(2).  In my view, Wal-Mart is a decisive turn in favor of providing defendant's interests in the class action context greater due process protection.   

In Wal-Mart the Court addressed whether the plaintiffs could certify Title VII claims for backpay under Rule 23(b)(2), which permits a class action when "the party opposing the class has acted or refused to act on grounds that apply generally to the class, so that final injunctive relief or corresponding declaratory relief is appropriate respecting the class as a whole."  The plain terms of Rule 23(b)(2) suggest that a court cannot certify a class action for monetary relief like compensatory damages under Rule 23(b)(2).  However, the accompanying notes to the Rule state that "[t]he subdivision does not extend to cases in which the appropriate final relief relates exclusively or predominantly to money damages," raising the negative implication that monetary remedies are available if they are not exclusive or predominant.  Relying on this language, a number of courts have permitted Rule 23(b)(2) class actions, mostly Title VII cases, for monetary remedies if they are an add-on or "incidental" to the injunctive relief requested.  In fact, the Court seemingly adopted the "incidental" approach used by the Fifth Circuit, which permits Rule 23(b)(2) class actions for damages where the damages would easily "flow" from the liability determinations supporting injunctive relief.  

But the Court ultimately rejected the application of Rule 23(b)(2) to the plaintiffs' backpay claims.  As an initial matter, the Court held that Rule 23(b)(2) presumptively does not apply to claims for monetary remedies, even if they are equitable in nature.  Again following the work of the late Richard Nagareda, the key distinction is whether the relief is "indivisible" to the class.   An injunction for one member is an injunction for all, but backpay requires an individualized inquiry, and thus is specific to each class member.  

The distinction between "indivisible" and "divisible" remedies matters mainly because of due process concerns.  Rule 23(b)(2) class actions are mandatory, in that they do not require a court to provide notice to the class members or an opportunity to opt out.  The premise is that if the remedy is indivisible, there is no point in a class member excluding herself from the action.  In Justice Scalia's words, notice and opt out rights are not required for indivisible remedies "presumably because it is thought (rightly or wrongly) that notice has no purpose when the class  is mandatory, and that depriving people of their right to sue in this manner complies with the Due Process Clause."  Not so for the divisible remedies.   When a remedy is divisible, such as a claim for backpay, the Court concludes that notice and an opportunity to opt-out are necessary to protect the plaintiffs' interests in their individual claims.   As in AT&T, Justice Scalia cites Philips Petroleum v. Shutts, a personal jurisdiction case, for the proposition that "[i]n the context of a class action predominantly for money damages we have held that absence of notice and opt-outviolates due process."

Now, recognition of a plaintiffs' claim as a property interest for due process purposes is nothing new.  But the Court goes further and suggests that defendants similarly have a protectable interest in defenses to claims.  This comes out most clearly when the Court considers the proposal by the Ninth Circuit to handle the backpay claims through "Trial by Formula" - essentially sampling a small number of claims and using them to extrapolate the value of the remaining claims.  The Court "disapprove[s] that novel project."  Here the Court does not cite due process, but the Rules Enabling Act, which forbids a Rule from "abridg[ing], enlarg[ing] or modify[ing] any substantive right."  The Court relies upon the statutory defenses available to defendants under Title VII, which they conclude would be "abridge[d]" if a district court employed sampling.  

Now, the Court did not invoke due process in discussing the defendant's defenses, but there is significant evidence that they would consider such "substantive right[s]" protectable interests.  In 2009, Justice Kennedy issued a statement on the denial of certiorari for DTD Enterprises, Inc. v. Wells, which was joined by Justices Sotomayor and Chief Justice Roberts.  The issue was whether a state court could order a defendant to pay for the costs of class notification.  Justice Kennedy concluded that the payment of notice costs was a deprivation of property under the Due Process Clause, which may never be recovered if the case proves to be meritless.  Thus, in Justice Kennedy's words, "there  is considerable force to the argument that a hearing in whichthe trial court does not consider the underlying merits of the class-action suit is not consistent with due process."  

Notice that the due process discussion in Wal-Mart garnered all of the Justices' votes, and that Justice Sotomayor signed on to Justice Kennedy's statement in DTD Enterprises.  Thus, there is a total consensus that defendants' rights are a matter of due process.  As Lyle Denniston notes, the Court will probably address the issue in Philip Morris USA, Inc., et al., v. Jackson (docket 10-735), where the Court will address directly whether individualized defenses are a property interest protected under the Due Process Clause.  Justice Scalia suggested as much in an order staying the state court's judgment in that case. 

A recent, excellent law review article by Mark Moller of Depaul has noted there is little historical support for viewing defenses as protected under the due process clause.  My own paper goes further, and argues that the focus on claims and defenses as the relevant property interests for due process purposes takes too blinkered a view of all of the substantive entitlements at stake.  After all, the whole point of Title VII is not to set in stone procedures for subsequent litigation, but to prevent gender discrimination.  As I will argue in subsequent posts, whether Title VII does prevent unlawful discrimination will depend a great deal on whether courts will be willing to relax other interests like a plaintiff's claim and a defendant's defenses.