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Thursday, July 07, 2011

Wal-Mart v. Dukes and the Heterogeneity Problem: Part 2 of 2 (Implications of the Court's Emphasis on "Dissimilarity")

My prior post discussing Wal-Mart v. Dukes introduced three terms on which this post builds.  First, the "Homogeneity Problem" in class actions arises because class members usually are not identically situated in all material respects, which complicates collective resolution of their claims.  Second, the "Aggregability" inquiry determines the extent of heterogeneity within the class by examining the record and considering whether applicable substantive law tolerates aggregate resolution of particular questions.  Third, the "Resolvability" inquiry determines the significance of heterogeneity by considering whether the presence of non-aggregable questions within a proposed class action precludes collective resolution of even the aggregable claims.  I contended that the holding in Wal-Mart primarily addressed Aggregability, but may have signaled a new approach to Resolvability.

This post considers how Wal-Mart's seemingly oblique references to Resolvability might make certification more difficult to obtain in future cases, even if those cases do not implicate the specific rule that the Wal-Mart opinions interpreted.

Resolvability is usually an issue in cases involving certification under Rule 23(b)(3) of class actions seeking damages.  When the class seeks an injunction, Rule 23(b)(2) applies, and Resolvability is less salient due to the relative simplicity of adjudicating requests for injunctive rather than monetary remedies.  (Prior to Wal-Mart, plaintiffs could complicate Rule 23(b)(2) cases by attempting to piggyback monetary claims onto injunction claims, but a unanimous portion of the Wal-Mart holding made that sort of remedial maneuvering more difficult to accomplish.)

Wal-Mart was a 23(b)(2) case rather than a 23(b)(3) case, so the opinion did not directly address Resolvability in the 23(b)(3) context.  Indeed, in a footnote the Court professed not to address the "applicability" of Rule 23(b)(3) (which the dissent noted might be a live issue on remand).  Yet some language in the opinions seems relevant to the Heterogeneity Problem in 23(b)(3) cases.

The key words in the opinion are "dissimilarity" and "resolution of the litigation," which appeared when the Court, quoting an article by Richard Nagareda, stated: "What matters to class certification . . . is not the raising of common 'questions'—even in droves—but, rather the capacity of a classwide proceeding to generate common answers apt to drive the resolution of the litigation.  Dissimilarities within the proposed class are what have the potential to impede the generation of common answers."  Slip op. at 9-10 (quoting Richard A. Nagareda, Class Certification in the Age of Aggregate Proof, 84 N.Y.U. L. Rev. 97, 132 (2009)).

The phrase "resolution of the litigation" is significant because it clarifies the object of the Resolvability inquiry. What needs to be resolved is not an isolated issue or question, but rather the entire "litigation."  A case can therefore feature many important aggregable issues and still not be resolvable as a class action, depending on the nature of lingering individualized questions.

The Court's reference to "dissimilarity" is significant for several reasons. First, the word is novel.  Until Wal-Mart, the Court had never used the word "dissimilarity" (or its variants) in the context of analyzing class cohesion.  Lawyers are justifiably attuned to new terminology addressing old problems.  "Dissimilarity" may be the sort of disruptive semantic interjection in the 23(b)(3) context that "plausibility" was in the pleading context, although the consequences will not be clear until subsequent opinions revisit the issue (just as Iqbal clarified Twombly's implications).

Second, "dissimilarity" has interesting origins that may inform its meaning.  The article by Richard Nagareda from which the Court extracted the "dissimilarities" quote addressed the "confusion" (p. 130) that has arisen because of how Rule 23(b)(3)'s text seems to fixate on "similarity at some unspecified level of generality" (p. 131).  The article went on (at pp. 131-32) to advocate an approach to the predominance requirement focused more directly on salient differences between class members' claims.  Likewise, in an article discussing resolvability, I proposed reorienting certification analysis away from its emphasis on common questions, arguing that Rule 23(b)(3) "conflates the similarity and dissimilarity inquiries into a single balancing test, thus obscuring the practical and theoretical importance of dissimilarity standing alone."  Allan Erbsen, From "Predominance" to "Resolvability," 58 Vand. L. Rev. 995, 1005 (2005).  The "dissimilarity" language that the majority and dissent seized upon thus resonates with critiques of contemporary interpretations of Rule 23(b)(3) that generated recommendations for rethinking how certification standards should operate.

Third, Justice Ginsburg seems to have recognized that "dissimilarity" is a loaded word.  Her opinion refers to the "'dissimilarities' inquiry," "a dissimilarities analysis," "The 'dissimilarities' approach," and "a 'dissimilarities' notion."  This expansive language suggests that the word "dissimilarities" is a placeholder for a broader (albeit unspecified) test, perhaps informed by the origins noted above.  Of course, Justice Ginsburg may have overemphasized the majority's use of the term for rhetorical effect.  But if so one might expect the majority to have denied that its new word signaled a new "inquiry, analysis, approach, or notion."  Yet the majority was silent on this point.

Fourth, both the majority and Justice Ginsburg seemed to agree that focusing on dissimilarities is appropriate in Rule 23(b)(3) cases.  The majority did so by favorably quoting Professor Nagareda and by not denying (as the dissent correctly contended) that his discussion of dissimilarities arose in the context of Rule 23(b)(3).  Justice Ginsburg apparently agreed when she observed that: "The Court errs in importing a 'dissimilarities' notion suited to Rule 23(b)(3) into the Rule 23(a) commonality inquiry."  If "suited" means "appropriate for" (rather than the more neutral "designed for"), then Justice Ginsburg seems to embrace a "dissimilarities" test of some sort.  Elsewhere in her opinion Justice Ginsburg observed that the effect of such a test is to "train [judicial] attention on what distinguishes individual class members, rather than on what unites them."  She clearly believed that this focus was inappropriate in a 23(b)(2) case, but arguably endorsed it (or left the door open for endorsing it) in 23(b)(3) cases.

The Court's novel use of the loaded term "dissimilarities" therefore seems significant.  Going forward, defense lawyers have an incentive to ask if the "dissimilarities inquiry" heralds a more restrictive approach to Resolvability that embraces academic critiques of the predominance test.  The Court may have either signaled such a restrictive approach, or given lower courts an opportunity to experiment.  Either way, the certification inquiry in proposed class actions seeking damages may begin to focus more directly on the consequences of heterogeneity within the class.

-Allan Erbsen

Posted by Allan Erbsen on July 7, 2011 at 11:46 AM in Civil Procedure | Permalink


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