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Monday, June 20, 2011

Wal-Mart v. Dukes and Commonality

As I mentioned in my previous posts, I will be blogging on four class action cases the Supreme Court is deciding this term -  (1) AT&T Mobility LLC v. Concepcion; (2) Erica P. John Fund, Inc. v. Halliburton Co., No. 09-1403; (3) Smith v. Bayer, 09-1205; (4) Wal-Mart Stores, Inc. v. Dukes, No. 10-277.  

I have proceeded in chronological order, discussing both AT&T and Halliburton.  However, I want to skip over Smith v. Bayer to discuss the Wal-Mart decision, which was just released today, because I want to talk about one aspect of the case that dovetails well with my previous discussion of Halliburton.  I also plan on blogging some more on Wal-Mart because it implicates so many issues I touch on in my paper Mass Torts and Due Process.

Today I want to focus on probably the most controversial aspect of the majority opinion - the analysis of the "commonality" requirement of Rule 23(a)(2).  

As background, class actions in federal court are governed by Rule 23.  Rule 23(a) outlines four requirements every class action must satisfy, generally understood as (1) numerosity, (2) commonality, (3) typicality, and (4) adequacy of representation.  If a proposed class action satisfies these four requirements, then it must fit within one of the three categories defined under Rule 23(b).

By its terms, the commonality requirement under Rule 23(a)(2) only requires that "there are questions of law or fact common to the class."  Since this requirement applies to all class actions, courts have historically interpreted it pretty broadly.   In fact, the majority opinion quotes an article by the late Richard Nagareda for the proposition that "'[e]ven a single  [common] question' will do."  (p. 19 (quoting Richard Nagareda, The Preexistence Principle and the Structure of the Class Action, 103 Colum. L. Rev. 149, 176 n.110 (2003))).  The commonality requirement should be distinguished from the predominance requirement of one of the Rule 23(b) categories, Rule 23(b)(3), which requires that "questions of law or fact common to class members predominate over any questions affecting only individual members."   The class action at issue here was certified under Rule 23(b)(2), which does not have a similar "predominance" requirement.

In Wal-Mart the plaintiffs proposed a class alleging that Wal-Mart engaged in disparate treatment against women in their pay and promotion policies, in violation of Title VII.  The one aspect of the case that has caused considerable confusion, making Justice Kennedy's head explode, is that Wal-Mart really didn't have any policies on pay or promotion.  Instead, Wal-Mart delegated these decisions to regional and store managers, who exercised near total discretion in deciding pay increases and promotions.  The plaintiffs contended that this excessive subjectivity, combined with a uniform "corporate culture" that was riddled with gender stereotyping, supported an inference of discriminatory treatment against women.  Indeed, what little guidance Wal-Mart provided, such as having managers look at an employee's willingness to travel, would have an obvious discriminatory effect on female employees.  

Here it is important to keep distinct the issue of whether Wal-Mart had a discriminatory policy against women on the merits and whether resolution of whether Wal-Mart had a discriminatory policy against women would be common to the class.  The distinction is fine but not exactly rocket science.  Suppose, for example, that plaintiffs filed a complaint alleging that Target had a discriminatory policy against natives of Fiji, and that the only "proof" of this policy is that Target puts Fiji water on the bottom shelf of the beverage aisle.  Would such an allegation survive summary judgment, let alone a motion to dismiss?  No.  But is the issue common to the class of Fijian workers?  Yes.  If true, it would be true for all Fijian employees, even though the evidence in support of that discriminatory policy is scant.

In this case the majority opinion (decided 5-4 on this issue) combines both inquiries.  Following the practice in many circuits, the majority confirmed that a court may look at the merits of a class action if it overlaps with a requirement for class certification.  But it then proceeds to conflate the merits of the plaintiffs' claim of a common discriminatory policy with whether such a policy would be common to the class.  It first rejects the expert opinion of Dr. Bielby, which used a "social frameworks" analysis to establish a common corporate culture rife with gender stereotyping, even though factual findings by the lower courts are supposed to be reviewed for abuse of discretion.  It then reviewed the remaining statistical and anecdotal evidence to conclude that it wasn't enough to establish a uniform policy "beyond the bare existence of delegated discretion."    Concluding that the evidence of commonality was "entirely absent here," the Court vacated class certification.*

Setting aside whether the Court was right as to the merits of the plaintiffs' evidence in support of a common pattern-or-practice, whether there is such a common pattern-or-practice is common to the class. That's all the "commonality" requirement requires!  As Justice Ginsburg points out in dissent, Rule 23(a)(2) "demands nothing further."

So why is this a big deal?  For starters, the Court's interpretation of Rule 23(a)(2) will not be limited to cases like Wal-Mart.  Rule 23(a)(2) applies to every class action.  The Court now seemingly requires a merits analysis of whether the plaintiffs have the "same injury" before certifying any class.

More importantly, the Court is requiring the plaintiffs to effectively prove their claims to get class certification, as the Fifth Circuit tried to do in the Halliburton case.  Now, the concern with looking at the merits before certifying a class  is understandable, especially given that class actions provide plaintiffs with pretty hefty leverage.  In fact, I am sure the Court was influenced by the size of the class action and potential liability in Wal-Mart.  But, as I argue in my paper Mass Torts and Due Process, and as I will argue in a subsequent post, this gets it exactly backwards.  Courts need to certify the class before requiring proof of the merits, not after.  Otherwise, you are forcing the plaintiffs to fight with one hand tied behind their backs.

*Indeed, and as Justice Ginsburg's dissent notes, the Court's interpretation of the commonality requirement mirrors the predominance requirement of Rule 23(b)(3), particularly when the Court notes that dissimilarities among the class members counsels against commonality.  While that may be relevant to whether common issues "predominate" in the litigation, it is irrelevant to whether common issues merely exist.

Posted by Sergio Campos on June 20, 2011 at 05:03 PM | Permalink


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