On April 26, 2010, in a 6-5 decision, an en banc panel of the Ninth Circuit affirmed in large part a district court's certification of an employment discrimination class action involving claims for declaratory and injunctive relief, back pay, and punitive damages asserted on behalf of a class of about 1.5 million people, "encompassing all women employed by Wal-Mart at any time after December 26, 1998." See Dukes v. Wal-Mart Stores, Inc., __ F.3d __, No. 04-16688 (9th Cir. 2010) (en banc). The 137-page decision outlined extensively standards a district courts should apply to class certification motions and made important statements regarding many aspects of class certification law. Unless and until the Supreme Court reviews standards on class certification, this opinion might hold significant implications for class certification law in the Ninth Circuit.
Summary of the Decision
The en banc majority began by explaining the mode of analysis district courts must undertake in determining whether to certify a class under Rule 23. The Court explained that "district courts are not only at liberty to, but must, perform rigorous analysis to ensure that the prerequisites of Rule 23 have been satisfied, and this analysis will often, though not always, require looking behind the pleadings to issues overlapping with the merits of the underlying claims." The Court also stated that in ruling on a class-certification motion district courts may not consider any merits issues not related to class certification requirements. The Court further asserted that a district court's assessment of whether the Rule 23 requirements are met is owed great deference.
After setting forth these general principles, the Court analyzed whether the district court abused its discretion in certifying this class.
The Court focused the bulk of its analysis on the commonality requirement of Rule 23(a)(2). The Court found that plaintiffs had adequately demonstrated a common policy of discrimination through various forms of evidence, including expert testimony and statistical evidence. In particular, the Court relied on expert testimony finding that pay and promotion decisions at Wal-Mart were largely within the discretion of local managers, and that Wal-Mart's diffuse structure was common throughout the corporation.
The Court also considered statistical evidence allegedly demonstrating gender discrimination on a regional level, and found that this evidence adequately tended to support the plaintiffs theory that "'Wal-Mart's policy of decentralized, subjective employment decision making operate[s] to discriminate against female employees'" in a uniform manner throughout the company. The Court found that the district court had acted within its discretion at the class-certification stage when it credited plaintiffs' regional statistics over Wal-Mart's store-by-store statistics.
The Court then focused on the question whether this class could be certified under Rule 23(b)(2)—because "final injunctive relief or corresponding declaratory relief is appropriate respecting the class as a whole"—or instead whether monetary relief "predominates" over declaratory or injunctive relief, thus rendering Rule 23(b)(3) the only appropriate venue for potential certification. The Court held that "Rule 23(b)(2) certification is not appropriate where monetary relief is 'predominant' over injunctive or declaratory relief," rejecting the standard applied by several other Circuits under which monetary relief predominates "unless it is incidental to requested injunctive or declaratory relief." The Court found that plaintiffs' suit was appropriately brought under Rule 23(b)(2) with respect to current employees even though it includes a significant request for relief in the form of back pay, because back pay is considered an equitable remedy under Title VII.
By contrast, the Court found that monetary relief may predominate with respect to plaintiffs' bifurcated punitive damages claim, and remanded the case to the district court to determine whether a bifurcated punitive damages class met the requirements of Rule 23(b)(2), properly analyzed, or alternatively Rule 23(b)(3). The Court also concluded that monetary relief predominates as to putative class members who were no longer Wal-Mart employees when plaintiffs' complaint was filed, and remanded for the district court to determine whether the requirements of Rule 23(b)(3) were met as to those employees.
Implications of the Decision
The Ninth Circuit's analysis in Dukes could have significant implications for other class actions, in employment discrimination class actions and, perhaps, in other actions as well. The majority acknowledged that the class in Dukes "is broad and diverse, encompassing both salaried and hourly employees in a range of positions, who are or were employed at one or more of Wal-Mart's 3,400 stores across the country." The class was also certified in part on the theory that "in-store pay and promotion decisions are largely subjective and made within a substantial range of discretion by store or district level managers," and that "this is a common feature which provides a wide enough conduit for gender bias to potentially seep into the system."
As the dissent noted, Dukes marks a sharp departure from the decisions of other circuits regarding employment discrimination class actions. Generally, federal courts have required employment discrimination plaintiffs seeking class certification to show a uniform practice of actual discrimination in a manner common to the class (whether carried out through a process of ostensibly subjective decision-making or not). But in Dukes, the Ninth Circuit approved certification on the theory that decentralized decision-making had allegedly allowed discrimination to manifest itself in the work force generally. Employers therefore must be cognizant that, following Dukes, decentralizing decision-making does not necessarily block the certification of a class action involving discrimination claims in the Ninth Circuit.
At the same time, companies defending class actions in the Ninth Circuit should also remember other aspects of the Court's analysis that might bar certification in future cases:
- First, Dukes involved an "injunctive" class certified under Rule 23(b)(2), and not a "predominant common issues" class under Rule 23(b)(3). The Ninth Circuit did not address either Rule 23(b)(3)'s requirement that issues common to the class predominate over issues unique to individual class members' claims, or its demand that class treatment be superior to other methods for fairly and efficiently resolving the controversy.
- Second, the Dukes Court relied heavily on the fact that the class before it involved employment discrimination claims, and that claims for back pay (such as the monetary claims raised there) have traditionally been considered "equitable" claims more amenable to resolution in a Rule 23(b)(2) class. The same would not be true of class actions seeking conventional money damages, such as those involving securities fraud, consumer fraud, and product liability claims.
- Third, the test articulated in Dukes for determining whether a class is maintainable as a Rule 23(b)(2) injunctive class permits defendants to argue that certification under Rule 23(b)(2) is not available where individualized issues predominate over common issues. The Court identified various factors for determining whether monetary relief predominates, "such as whether the monetary relief sought determines the key procedures that will be used, whether it introduces new and significant legal and factual issues, whether it requires individualized hearings, and whether its size and nature . . . raise particular due process and manageability concerns." These factors provide a strong argument that most class actions involving monetary damage claims cannot be certified under 23(b)(2).
- Fourth, because a Rule 23(b)(2) class is not maintainable unless injunctive or declaratory relief "is appropriate respecting the class as a whole," the same sort of arguments would seem viable even where the individualized issues arise with respect to claims for equitable relief. For example, if a request for back pay required consideration of predominantly individualized evidence, the Dukes standard would support denial of a class action under 23(b)(2).
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