CLASS ACTIONS – EXPLORATIONS OF THE SUPREME COURT’S DUKES DECISION

ABSTRACT

 

The Supreme Court’s decision in Wal-Mart v. Dukes has received wide publication, and assumed to have transformatory effect on the employment discriminationclass action lawsuits. The case was seen as a game-changer with the apprehended effect of making employment discrimination class certifications, procedurally more difficult.

This Paper tries to explore the Supreme Court’s Decision in the case of Wal-Mart Stores Inc. V. Duke and its effects on the employment discrimination class actionsas well as the applicability of the principles laid down in the case by taking into account, case laws and opinions in various judgments, and published works of scholars.

We found that, while the judgment apparently negated the number of class filings, but it didn’t not had such a landslide effect on class certifications, as it was feared, when the judgment was pronounced. The major difference the case has made is to shift the procedural requirement of class certification, while making certain opinions, peculiar to the circumstances of the case and is not supposed to disturb the landscape of employment discrimination class actions as a whole. The Courts however, have made some distinctions in the applicability of Wal-Mart decision by focusing on its nationwide scope, among others.

 

 

I.Introduction

The Supreme Court’s decision in Wal-Mart v. Dukes is considered to be the landmark judgment in reference to the employment discrimination class actions and deemed to have a transformatory effect on this area of law.After the lower court certified the plaintiffs’ almost 1.6 million-member class in carefully examined decision of the lower court and reaffirmed twice by the Ninth Circuit Court of Appeals (Wal-Mart Stores Inc V. Dukes, 2011), the matter was accepted to be heard by the Supreme Court of United States and consequently it vacated the certificate of class action by a majority of 5:4 and it was assumed that the intentional employment discrimination class action lawsuits might come to an abrupt conclusion(Greenhouse, 2011)(Savage, 2011). This judgment was supposed to be game changer as there had been a wave of such cases prior tothe Wal-Mart case(Selmi, 2003).The apprehensions that the Wal-Mart casewill be a game changer has proved to be inaccurate, as though the decision appears to have significantly affected the number of case filings, but when interpretations of Wal-Mart is reviewed, it is evident that the courts are proceeding with the certifications as Class action as they did prior to Wal-Mart Decision by the Supreme Court.

Employment discrimination class actions were never been large in numbers and were never been prima facie suggestive of certification or denial and the decision had always been taken after substantive deliberations, and that remains the case even today. However, the development in the law of employment discrimination class actions by this decision may appear to be confusing at first perusal, but when the decision is analyzed closely with its ramifications, the reasons for its limited applicability become pronounced.Wal-Mart case was a perfect storm for the conservative wing of the Supreme Court: a class claim alleging complicated issues of discrimination against a controversial defendant which was then placed in the hands of Justice Antonin Scalia. The decision was a blustery one, the exception was that the court unanimously held that class claims seeking individual monetary relief must be certified under Federal Rule of Civil Procedure 23(b)(3), rather than the far less expensive 23(b)(2) method, and that the cases cannot rely on a formula to determine damages (Wal-Mart Inc V. Dukes, 2011). This part of the opinion while being very important received minimal attention, the conversion of the procedure to 23(b)(3) imposes substantial additional costs on plaintiffs who seek to pursue class claims.

This paper explores the Supreme Court’s Duke’s decision and its ramifications on the adjudication of class action law suits along with the applicability of the principles laid down in the case.It further tries to analyze the trend of interpretations after the passing of the decision and provide insights into the future of class action law suits along with critical examination of the decision.

It can be inferred while analyzing the trends that there will be low number of class action law suits and perhaps there will be no nationwide class actions in cases that do not involve a clear challenged practice (any such cases are likely to be disparate impact cases) and that the prospect for class certification will be directly dependent on the acceptability of the claim presented and the jurisdiction where certification is sought. The three main prerequisites – no nationwide class actions, the importance of the merits- were there in existence before this Supreme Court decision and there has been only a modest change rather than a guided direction.And similarly the claims based on subjective practices remain operative and viable despite the hostility of those claims demonstrated in Wal-Mart.

 

  1. The Issues with Class Action Lawsuits

In Wal-Mart v. Dukes, Justice Antonin Scalia started by noting that “The class action is an

exception to the usual rule that litigation is conducted on behalf of the individual named parties.” (Wal-Mart Stores Inc V. Dukes, 2011) If by exception the Court meant empirically

exceptional rather than the norm, it will be hard to dispute the fact. Class actions have always comprised a small percentage of civil cases, including in the area of employment discrimination. But it can be inferred from the rest of the majority opinion that it meant somethingdifferent from a mere empirical observation. Many believe and it appears to be a majority view of the current Supreme Court that the class actions are aberrational and pose a serious risk to defendants (Bone, 2013).The class action lawsuits creates a risky situation whereby the defendant is put under substantial pressure to settle the lawsuit even in cases of weak prosecution and even when the defendant is having good chances of defending if he stands trial, because of the expensive cost of litigation. For example, Wal-Mart casewas litigated for nearly ten years before the Supreme Court decided in favor of defendants, and the potential liability of the company exceeded several billion dollars and at the same time providing incentive to the plaintiffs to pursue the case and extract a settlement. There is an incentive for the employers and there advocates for making the bringing of the class action lawsuits more stringent but the court cannot succumb to that incentive and has to remain neutral and protect the sanctity of collective claims brought to the fore under the umbrella of class actions, as class actions have been a recognized means ofadjudicating collective claims for more than seventy years (Spencer, 2013).Class actions had been central to the development of employment discriminations law jurisprudence. The early cases of employment discrimination law was actually class actions, and the entities which were behind these cases, the United State Government and the Equal Opportunity Commission were also not under any obligation to satisfy the requirements of civil procedure for private litigants (Albemarie Paper Co. V. Moody, 1975) (E. Texas Motor Freight Co. V. Rodriguez, 1977). But most of these cases were intended to resolve class discrimination and there was hardly any objection to proceeding on a collective rather than individual basis.One of the reasons behind this is that when an employer’s discriminatory practice affecting a large number of people is required to be challenged it is pragmatically viable to institute one class action instead of hundreds and thousands of individual cases(Issacharoff, 2013). Employers oppose class action, not because they are more expensive, but because most individual will not file a case even if the case is meritorious. If employers where to choose between defending hundreds and thousands of individual cases and a class action, the employer would almost certainly choose class action.

At the initial stages of employment discriminations class actions, the cases were not very complicated and objections to proceedings were rarely raised, many of the cases involved the adjudication as to whether a policy is discriminatory in law(Dothard V. Rawlinson, 1997)(L.A., Dept. of Water and Power V. Manhart, 1978). But the difficulties started in adjudication of employment discrimination class claims, when legality of subjective employment practices were questioned in court(Watson V. Forth Worth Bank, 1988). These included unguided discretions exercised by supervisors and the practices that were at issue in Wal-Mart. The history of companywide subjective employment practices can be traced out since 1980s but it further accelerated after the passage of Civil Rights Act of 1991, which made provisions for damages for intentional discrimination and include subjective decision making within its purview. The passing of Civil Rights Act, 1991 created a schism effect, as many courts held that new damages remedy will make the certification of class actions inappropriate as individual claim will be predominant(Allison V. Citgo Petroleum Corp., 1998). The employment discrimination class action lawsuits which were earlier used to involve modest lost wages, backpay and Attorney fees were now involving punitive and compensatory damages upto $300,000 per class member.

The potential problem that may arise in class action suit is that when class action is instituted and decided the individual members who is not aware cannot subsequently contest the same in court, this issue would primarily arise in 23(b)(2) class action, where a notice to class members is not required. When the Supreme Court created a right for individuals to challenge the prior settlement agreement, the congress promptly repudiated it by passing of Civil Rights Act 1991.

The second potential problem that may arise and is also the Supreme Court’s apparent concern is that the large class actions action carries with them extortionate claims, which is also referred to as “Blackmail Settlements” where the cost of litigation encompasses the actual claim amount and the defendant is put under economic viability pressure to settle even the weak cases(Brosteen, 2009)(Korobkin, 2002). Yes, there are tools to tackle these situations including motions to dismiss and sanctions but these has to be used in a prudent manner and the courts need not manipulate the standards of class certification in order to protect defendants from weak collective claims.

It is argued by some law-and-economics-oriented scholars that the 50% probability of recovering $10,000 should be treated as 1% probability of recovering $500,000 and therefore the defendants fear of low probability of failure to defending and high claim’s stake is apparently in need of some judicial protection(Klein, 1984)(Rubinfeld, 1989).

While the Supreme Court in Some Of the cases expressed concern to protect the defendant from what they consider “Blackmail Settlements” but have not expressed any similar concern about the ability of vulnerable plaintiffs in pursuance of their claims, which is another side of the same coin. Jurisprudence behind class actions are not only to allow similarly placed plaintiffs to purse their claims collectively but also to provide a vehicle where the plaintiff can share the cost of the litigation collectively for the effective pursuance of the case. Class actions can be instituted collectively, where individual actions are not economically viable.(Am. Express Co. v. Italian Colors Rest., 2013).

As it can be inferred from the above discussion that class action poses more pronounced inherent risk of settlement, independent of the merits of the underlying claim, and therefore to curb these risks there needs to be some protection for the defendants which can be balanced and proportional with the rights of the plaintiffs to pursue their claims collectively. It can be done by tightening the procedural requirements of class certifications but that may appear inappropriate as there is no empirical evidence to reflect abuse of class actions processes in employment discrimination law suits(In re Visa Check/Mastermoney Antitrust Litig. V. Visa USA, Inc, 2001). There is not much uniformity in approach by courts while dealing with class actions after the developments of Wal-Mart case, as some courtsapproaches a class action skeptically, while others approach it neutrally, allowing them to be proceeded if they comply with the certification requirements without worrying about the protection of defendants.

 

III. THE ANALYSIS OF WAL-MART DECISION

TheWal-Mart case was undeniably the largest class action employment discrimination claim ever filed in United Sates. The defendant Wal-Mart was supposedly notorious among the liberal circles, not only for its low prices but also for low wages and destruction of Main street, and petty vendors and businesses(Lichtenstein, 2013).The case became popular not onlybecause of its size (Almost 1.5 Million members when the case reached the Supreme Court), but also because of the complexities of the issues of statistical proof of discrimination with the reliance on social science findings intended to connect the class into a common thread.

The plaintiffs demonstrated that although female employees constitute 70% of the work force of Wal-Mart,  they didn’t had a proportional representation on managerial positions and only one-third of managers were women, generally these cases are known as “pattern or practice” case. The statistical disparity demonstrated by the plaintiffs based on the number of workers on the floor and the number of workers in managerial positions was sufficient to commence a claim for intentional discrimination (Int’l Bhd. of Teamsters V. United States, 1977).

But the commencement of claim cannot take the plaintiffs home as in a “pattern or practice” case the plaintiff is needed to prove that the intentional discrimination is the employer’s “standard operating procedure”. (Int’l Bhd. of Teamsters V. United States, 1977)And in most of the cases the plaintiffs will not find a single policy which has a discriminatory objective, therefore the plaintiff has to resort to establishing employer’s culture or the cumulative effects of its practices to prove intentional discrimination. (Green, 2007)

There was nothing exceptional about the challenge in Wal-Mart case and it was placed within a series of cases raising similar issues involving job assignments and promotional practices within grocery stores, where it was common for women to be assigned the job of cash registers and departments that does not lead to managerial positions.The problem for the plaintiffs with Wal-Mart casewas to demonstrate that the disparities were the result of discrimination as the company followed the practice of decentralized recruitments and the recruitments were conducted at store levels and approved at the regional level in a perfunctory manner. (Wal-Mart Stores Inc V. Dukes, 2011). And it was difficult to demonstrate that the discriminatory employments decisions which were challenged, to be stitched under the common umbrella of class action. Store managers were empowered for hiring,promotion, and salary decisions within a range prescribed by the company, this is where the question the Supreme Courtconfronted came into play: What did the million class members have incommon? Could they, for example, point to common practices that hadled to the observed gender disparities, and if so, were those commonpractices attributable to the company? (Sylvia, 2015)The plaintiffs sought to address these questions by relying onvarious forms of evidences, including the social science evidencereferenced earlier. By way of an affidavit submitted by an eminentsociologist who had been retained as an expert witness, the plaintiffssought to show that the discretionary employment system established byWal-Mart was the very kind of system that led to discriminatoryresults. The Wal-Mart System of recruitment was described as the classic subjective employment system where the management employees, the store managers in the present are empowered to make decision on recruitment and promotions, there was substantial exercise of discretion on the part of store managers with minimal guidance from the company, and usually the store managers used to follow their own belief, which in some stances appeared to be stereotypical likewomen are secondary earners, are not likely to be willing torelocate for a managerial position, and may not even be interested in promotions. This is a well established notion, and though obsolete, there was nothing particularly controversial about the expert affidavit the plaintiffs submitted. (Secunda, 2009). In Other words, the plaintiff was putting forth an argument that a discretionary employment system is inherently discriminatory, this may have become one the drawbacks of the case for the plaintiff as the Supreme Court was unlikely to accept this argument. Further the plaintiffs relied on about 100affidavits of class members and some evidence about a culture at Wal-Mart that included stereotypical thinking about women. That culture purportedly included references to women at management meetings as “Janie Qs,” holding meetings at strip clubs, and other similar practices designed to show that women were not taken seriously

as potential management employees. (Wal-Mart Stores Inc V. Dukes, 2011)But while keeping in mind the size of the company, the decentralized employment practices were prima facie irrelevant.

Now that we have gone into the detail of how the facts presented led the court to write an opinion of the case. The opinion begins with, “We are presented with one of the most expansive class actions ever,” adding, “The District Court and the Court of Appeals approved the certification of a class comprising one and a half million plaintiffs, current and former employees of petitioner Wal-Mart who allege that the discretion exercised by their local supervisors over pay and promotion matters violates Title VII by discriminating against women.” (Wal-Mart Stores Inc V. Dukes, 2011)continuing…“Petitioner Wal-Mart is the Nation’s largest private employer . . Wal-Mart operates approximately 3,400 stores and employs more than one

million people.” (Wal-Mart Stores Inc V. Dukes, 2011)Two paragraphs later the Court again mentions the named plaintiffs represent “1.5 million members of the certifiedclass,” a fact the Court reiterated at various places in the opinion. Apparently more thanhalf of the opinion focuses on the plaintiffs’ factual allegations and evidentiary proof. The first four paragraphs notes the “discretion”vested and exercised in managerial decisions, while also emphasizing the“subjective” nature of that promotional system at the same time. The opinion on 9 occasions reiterated supervisor “discretion”, making clear that the main difficulty in certifying the case as class was that the policy at issue was “discretion” exercised by supervisors. By the size of the defendant which includes 3400 stores across the country employing more than 1 million people, the court seemed it unrealistic that in the absence of any corporate policy, all the store managers would exercise their discretion in a similar fashion. And, as noted above, the plaintiffs’ experts were not able to say more than that they might do so. (Sylvia, 2015)

In this stage, it was natural for the Court for the complete adjudication to look for a policy of the company which is discriminatory, but it was also inconceivable that any such policy will be in existence not just at Wal-Mart, but at any company today. And, the absence of such adiscriminatory policy played a significant role in the Court’s decision of vacating class certification. “The whole point of permitting discretionary decision making is to avoid evaluating employees under a common standard” the court stated at several occasions. The court pronounced the lack of commonality among the gigantic class and was nothing extraordinary in this conclusion. But, the court didn’t examined the situation from the perspective of vicarious liability of the store managers for the acts done by them under their course of employment binding the company and stitching the plaintiffs in a single class.

The Court, however, did not go so far as to conclude that a subjective decision-making system can never be challenged through aclass action. The testimony of the social science expert was more of a generic character rather than specific to the company, and the court didn’t had much difficulty in dismissing it. The court held that in the absence of any company policy and unfettered powers of decision making by supervisors, the class certificate was inappropriate. There can be some hypothetical situations were minor differences in the facts would have led to a different decision of the court: if there had been a policy by the company, the decision would have been different; if the size of class or defendant had been smaller, the situation might have been different; identify a specificpractice or directive that might have informed the decision-making, and again, one would be looking at a different case.

The court was excessively focused on the facts and in contrast the court’s treatment of procedural requirements was relatively vapid, despite its evident hostility. Justice Scalia relied on a 30 year old case of General Telephone Co. V. Falconand other cases of that era.(Gen. Tel. Co. of the SW V. Falcon, 1982) The “commonality” issue in the Falcon was whether there was any common interest between those denied jobs and those denied promotions. Moreover the case was about typicality rather than commonality. The most extensive discussion about commonality regarding Falcon is found in the Wal-Mart decision, which is suggestive that this was an unusual case to be made the centerpiece of employment discrimination class action and further makes Wal-Mart easily distinguishable.(Dukes v. Wal-Mart Stores, 2010)

The one way in which the court changed the law, that will impact class certification is by shifting from 23(b)(2) to 23(b)(3) when damages are atissue, as they almost always are in employment discrimination class actions and was actually overdue since long, and even in cases where the propriety of the plaintiff was dubious, they used to get away with 23(b)(2) certifications for many years.

Before the passage of Civil Rights Act, 1991, the Title VII class actions used to be certified under 23(b)(2) because the statute did not provide for damages and injunctions were the primary remedy prayed by the class. After the passage of Civil Rights Act, 1991, remedies of damages became available in cases of intentional employment discriminationbut the plaintiffs continued toseek certification under 23(b)(2) and many courts supported certification under that provision (Robinson v. Metro North Commuter R. R. Co., 2001). The prime benefit of a 23(b)(2) certification is that there is no requirement to notify potential class members before the class claim is successful, which provides for a substantial cost savings to the counsel for the class. Yet in many cases, including the Wal-Mart Case, the plaintiff classes decided to forego the claims for compensatory damages so as to certify the claims under 23(b)(2).This tactic, which potentially relinquished a significantrecovery for some or most class members, simply delayed theinevitable, which was seeking certification under 23(b)(3), a more costlybut certainly not fatal approach (Sylvia, 2015). In theWal-Mart case,the Supreme Courtclearly held that “individualized monetary claims belong in Rule23(b)(3).” (Wal-Mart Stores Inc V. Dukes, 2011).

We note that certification under 23(b)(2) has utility beyond obvious cost savings. Unlike other class actions, employment discrimination class actions will almost always seek some sort of change in employer’s practices, and reliefs sought can be essentially covered in the form of injunction encompassing the class.

 

 

  1. CONCLUSION

Class actions are considered to be one of the most important and foremost tools in eradicating systemic intentional employment discrimination.And As discussed in this paper, there are some fundamental changes made by the supreme court like shifting from procedural requirements under 23(b)(2) to 23(b)(3)to rationalize the process of certifications and not allow the class action lawsuits as a means to extort vulnerable employers, while protecting the classes of the plaintiffs.Wal-Mart didnot fundamentally change the class action landscape; rather, courts willlikely continue to approach class action claims much as they did beforethe case was decided.

 

 

 

 

 

 

 

 

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