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June 20, 2011 5:41 PM

Justices Hand Wal-Mart Big Win in Class Action Battle

Posted by Ed Shanahan

By Tony Mauro from The National Law Journal

The U.S. Supreme Court on Monday handed a sweeping victory to Wal-Mart, the nation's largest employer, in the company's decadelong effort to thwart a discrimination class action filed on behalf of more than 1 million female current and former workers. The ruling is likely to hobble other large employment class actions as well.

Justice Antonin Scalia, writing for a 5-4 majority, said the plaintiffs failed to provide proof of a common companywide policy of discrimination, which he said is necessary to certify a class under Federal Rule of Civil Procedure 23(a)(2). "To sue about literally millions of employment decisions at once, [plaintiffs] need some glue holding the alleged reasons for all those decisions together," said Scalia in summarizing his ruling from the bench. He added that the plaintiffs' evidence of commonality among the plaintiffs was "entirely absent" and "worlds away" from what is required under the Court's 1982 Falcon precedent.

In a separate, unanimous part of the ruling that amounted to a one-two punch, the Court also said that the plaintiffs' quest for back pay in addition to injunctive relief ran afoul of Rule 23(b)(2) of the federal rules.  Scalia dismissed that effort as "a sort of trial by formula," which would award back pay based on a sample set of plaintiffs. "Wal-Mart is entitled to individualized determinations of each employee's eligibility for back pay," Scalia said.

The long-awaited ruling in Wal-Mart Stores Inc. v. Dukes broke along ideological as well as gender lines. All three women on the Court—justices Ruth Bader Ginsburg, Sonia Sotomayor and Elena Kagan—dissented, joined by Justice Stephen Breyer. Ginsburg's dissent said the plaintiffs' evidence showed that "gender bias suffused Wal-Mart’s company culture." The conservative majority was led by Scalia and joined by Chief Justice John Roberts, Jr., and justices Anthony Kennedy, Clarence Thomas, and Samuel Alito, Jr.

Coupled with another decision issued Monday on climate-change lawsuits, the Wal-Mart ruling revived criticism of the Roberts Court as too biased toward business interests. "Whether it is Lilly Ledbetter suing her employer for gender discrimination, or a group of consumers suing their phone company for deceptive practices, an activist majority of the Supreme Court is making it more and more difficult for Americans to have their day in court," said Senate Judiciary Committee chairman Patrick Leahy (D-Vt.). 

"This class action is over," said Theodore Boutrous of Gibson, Dunn & Crutcher, who argued the case for Wal-Mart before the Court in April. Other big class actions, including a suit against Costco Wholesale Corp., could be affected, Boutrous said. Despite plaintiffs' claims otherwise, Boutrous added that the decision "doesn't leave the [Wal-Mart] plaintiffs any running room" to reconfigure a class action in smaller form. 

Joseph Sellers of Cohen Milstein Sellers & Toll, who argued the case for the Wal-Mart women, disagreed. While the decision "substantially raised the hurdles workers have to surmount" to gain certification as a class, Sellers said the Wal-Mart litigation could continue, "splintered in many pieces."

Brad Seligman, another lead lawyer for the female workers at Wal-Mart, also said, "This case is not over. Wal-Mart is not off the hook." Women will now be able to file individual claims against the company with the Equal Employment Opportunity Commission and eventually in court, he said. “The Court has not ruled that Wal-Mart did not discriminate."

Women's groups viewed the ruling a blow to the ongoing campaign for workplace equality. Debra Ness, president of the National Partnership for Women & Families, called the decision a “deep and painful disappointment to all of us who care about ending employment discrimination in this country, and a setback for the women of Wal-Mart and women workers everywhere." Said National Organization for Women President Terry O'Neill, "This Court has turned its back on the more than [one] million women who only sought simple justice. The women of Wal-Mart deserve respect and fair treatment, and we will continue to stand up for their rights." O'Neill said women's rights advocates would push for passage of a pending bill called the Paycheck Fairness Act.

Critics of the ruling said big companies now will be able to defeat class certification by hiding behind seemingly decentralized personnel policies that nonetheless disadvantage women or minorities. To meet the Court's standard articulated on Monday, said David Sanford of plaintiffs' firm Sanford Wittels & Heisler, plaintiffs would have to prove that Wal-Mart had "a sign in each of its premises that reads "Women Paid Less than Men at Wal-Mart: Apply Here."

Business advocates applauded the Court's adoption of a high standard of proof for class certification. "Today's ruling reinforces a fundamental principle of fairness in our court systems: that defendants should have the opportunity to present individualized evidence to show they complied with the law," said Robin Conrad, executive vice president of the U.S. Chamber of Commerce’s National Chamber Litigation Center in a statement. "Too often the class action device is twisted and abused to force businesses to choose between settling meritless lawsuits or potentially facing financial ruin."

Scott Smith of Bradley Arant Boult Cummings, head of the appellate committee of the DRI–The Voice of the Defense Bar, said, "Employers and businesses will be able to use these bright lines to better defend against sprawling class actions."

In criticizing the plaintiffs’ case for class certification, Scalia in his decision zeroed in on the testimony of sociologist William Bielby, who said Wal-Mart’s corporate culture made it "vulnerable" to gender bias. Scalia said Bielby could not calculate whether “0.5 percent or 95 percent" of Wal-Mart's employment decisions were influenced by gender stereotypes. "If Bielby has no answer to that question, we can safely disregard what he has to say," Scalia said.

That and other portions of the ruling will make it harder for plaintiffs to use statistics and extrapolations to show that class members have common issues or to calculate remedies. "Trial by formula cannot transform individualized issues into common ones where the supposedly common issue does not tell you anything meaningful about each individual's claim for relief," said Don Falk of Mayer Brown in reaction to the ruling.

Class action litigator Fred Isquith of Wolf Haldenstein Adler Freeman & Herz took some solace from the Court’s focus on the specifics and the uniqueness of Wal-Mart. "Its effect should be limited to the facts in the Wal-Mart case, where the plaintiff attempted to sue for women throughout a vast enterprise. I do not read the opinion as affecting cases arising in the normal business context."

The decision was another rebuke to the U.S. Court of Appeals for the Ninth Circuit. In upholding the class certification, an en banc panel of the circuit last year accepted the anecdotal evidence of bias against women presented by the plaintiffs, as well as the social science testimony criticized by Scalia.

Circuit judge Michael Hawkins, writing for the 6-5 en banc majority, agreed with the district court that, "It would be better to handle some parts of this case as a class action instead of clogging the federal courts with innumerable individual suits litigating the same issues repeatedly." In dissent, Judge Sandra Ikuta said the class was too large and unwieldy.  "On its face, a class action of this sort makes no sense." In another dissent, Judge Alex Kozinski said that, with a "kaleidoscope" of supervisors and different work settings, the women in the proposed class “have little in common but their sex and this lawsuit.” That view of the case held sway with the high court majority.

 

Tony Mauro

 

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