Supreme Court Hands Wal-Mart Big Victory; Reverses Approval of Class Action Claim

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Reversing a federal appeals court decision that certified a massive sex discrimination class action against Wal-Mart Stores Inc., the U.S. Supreme Court June 20 ruled that the female plaintiffs failed to satisfy the requirements of Rule 23 of the Federal Rules of Civil Procedure to show common questions of law or fact affecting the class (Wal-Mart Stores Inc. v. Dukes, U.S., No. 10-277, 6/20/11).

Writing for five members of the court, Justice Antonin Scalia said the U.S. Court of Appeals for the Ninth Circuit erred in finding that the plaintiffs, who allege Wal-Mart violates Title VII of the 1964 Civil Rights Act by discriminating against women in pay and promotions nationwide, met the criteria of FRCP Rule 23(a), which requires a showing that the plaintiffs present a common issue of law or fact.

Emphasizing that Rule 23 “does not set forth a mere pleading standard,” Scalia wrote that the plaintiffs failed to show that Wal-Mart's alleged corporate policy of giving local supervisors discretion regarding pay and promotion decisions produced common factual or legal issues best addressed in a class action rather than in individual suits.

“In a company of Wal-Mart's size and geographical scope, it is quite unbelievable that all managers would exercise their discretion in a common way without some common direction,” Scalia wrote, in an opinion joined by Chief Justice John Roberts and Justices Anthony Kennedy, Clarence Thomas, and Samuel Alito. “Respondents attempt to make that showing by means of statistical and anecdotal evidence, but their evidence falls well short.”

The court also held that the plaintiffs' claims for potentially billions of dollars in back pay relief were improperly certified under FRCP Rule 23(b)(2). Although the court did not foreclose back pay awards in every Rule 23(b)(2) class action, it held that “where, as here, the monetary relief is not incidental to the injunctive or declaratory relief,” the lower courts improperly certified the action under Rule 23(b)(2).

In partial dissent, Justice Ruth Bader Ginsburg said she would hold that the plaintiffs satisfied the requirement to make a preliminary showing of common questions of law or fact under Rule 23(a). Although she agreed that the lower court erred in certifying the class under Rule 23(b)(2), Ginsburg said she would remand for further consideration of whether the plaintiffs could satisfy Rule 23(b)(3), which permits certification if common questions “predominate” over issues affecting individuals and a class action is “superior” to other modes of adjudication.

Justices Stephen Breyer, Sonya Sotomayor, and Elena Kagan joined in Ginsburg's partial dissent.

Text of the decision can be accessed at http://op.bna.com/dlrcases.nsf/id/kmgn-8hzkpu .