Justices Skeptical About Common Policy In Wal-Mart Case

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During U.S. Supreme Court oral argument March 29 in the most highly watched employment case on the court's current docket, several justices seemed skeptical that claims about Wal-Mart's allegedly discriminatory pay and promotion policies were proper for class certification (Wal-Mart Stores Inc. v. Dukes, U.S., No. 10-277, oral argument 3/29/11).

While the female members of the bench mustered some support for the plaintiffs' articulation of a discriminatory policy common to the class, critical questioning of the plaintiffs' attorney by Justice Anthony M. Kennedy--who often casts a deciding vote--may portend a win for Wal-Mart Stores Inc.

For years, this employment discrimination case has garnered nationwide attention for both its sheer size--up to 1.5 million women are involved in this lawsuit potentially worth billions of dollars--and its David-versus-Goliath narrative. Wal-Mart is the nation's biggest retailer.

Last April, the full U.S. Court of Appeals for the Ninth Circuit narrowly affirmed under Rule 23(b)(2) of the Federal Rules of Civil Procedure certification of a class of female Wal-Mart employees seeking injunctive relief and back pay under Title VII of the Civil Rights Act of 1964 (28 HRR 455, 5/3/10). The nationwide class includes all women who worked at Wal-Mart since the complaint was filed in 2001.

The Supreme Court granted review of the case last December (28 HRR 1324, 12/13/10).

A court may certify a class after satisfying itself that the class meets the four requirements of Rule 23(a): numerosity, commonality, typicality, and adequacy of representation.

Inconsistent Theories?

Chief Justice John G. Roberts and Justices Antonin Scalia and Kennedy pressed plaintiffs' counsel on whether the plaintiffs had identified a discriminatory policy that passed Rule 23(a)'s commonality requirement, which calls for there to be questions of law or fact common to the claims.

Joseph M. Sellers, counsel for the plaintiffs, argued that Wal-Mart provided its managers with “unchecked discretion” that was used to pay women less than men who were doing the same work in the same facilities at the same time. The company also has a strong corporate culture, “the Wal-Mart way,” that informs the managers' decisions, said Sellers, who is with Cohen Milstein Sellers & Toll in Washington, D.C.

Kennedy said there seems to be an inconsistency in the plaintiffs' argument. “Your complaint faces in two directions. Number one, you said this is a culture where Arkansas knows, the headquarters knows, everything that's going on. Then in the next breath, you say, well, now these supervisors have too much discretion,” he said.

Scalia picked up on that point: “On the one hand, you say the problem is that they were utterly subjective, and on the other hand you say there is a strong corporate culture that guides all of this. Well, which is it? It's either the individual supervisors are left on their own, or else there is a strong corporate culture that tells them what to do.”

Sellers responded that the managers are given broad discretion, but that their decisions are not made in a vacuum--their decisions are informed by the company's views about how to exercise the discretion.

“If someone tells you how to exercise discretion, you don't have discretion,” Scalia said.

Roberts questioned how much evidence would be needed to show discrimination in a company the size of Wal-Mart. “How many examples of abuse of the subjective discrimination delegation need to be shown before you can say that flows from the policy rather than from bad actors? I assume with … however many thousands of stores, you're going to have some bad apples.”

Sellers responded that the court has never required a certain number. In this case, the plaintiffs submitted over 100 declarations of class members to the district court, he said.

Female Justices Show Support for Plaintiffs.

The female justices' questions showed more support for the plaintiffs' theory of discrimination.

Justice Elena Kagan pointed out that a policy of excess subjectivity--such as the one alleged here--was recognized previously as a possible basis for a discrimination claim by the Supreme Court in Watson v. Fort Worth Bank & Trust ( 487 U.S. 977, 47 FEP Cases 102 (1988)).

Justice Sonia Sotomayor said the statistics presented by the plaintiffs showing a pay disparity are not speculative, and demonstrate that Wal-Mart paid women less than its competitors.

Justice Ruth Bader Ginsburg added that the excess subjectivity described here was like a “total person test” that the Supreme Court had found in the past violates Title VII. “The idea wasn't at all complicated,” she said. “It was that most people prefer themselves; and so, a decisionmaker, all other things being equal, would prefer someone that looked like him.”

Sotomayor observed that the district court found that the plaintiffs' statistical analysis met the class certification requirements after a “rigorous analysis.” She asked Wal-Mart's attorney what legal standard the Supreme Court should use to upset that finding.

Justice Samuel A. Alito followed up and asked what the difference was between the standards at the certification stage and at the merits stage.

Wal-Mart's attorney, Theodore J. Boutrous Jr. of Gibson Dunn & Crutcher in Los Angeles, said at the certification stage the plaintiffs did not have to prove that there was an actual policy of discrimination, but they at least needed to point to a policy that was common and that “linked all of these disparate individuals and disparate locations” together.

Their argument, he said, “is that the common policy is giving tens of thousands of individual [managers] discretion to do whatever they want.”

“That is not commonality. It's the opposite,” he said.

The Problem of Back Pay.

Even if the plaintiffs win on the Rule 23(a) issue, several justices, including Ginsburg, seemed troubled about how to administer the back pay remedy available for a Rule 23(b)(2) class without time-consuming individual hearings.

Sellers suggested that a formula could be devised for calculating damages based on Wal-Mart's “robust database” that included factors such as performance, seniority, and a host of other job-related variables related to pay and promotion.

Sellers said the process allows the court to reconstruct the decisions that would have been made in the absence of discrimination in a way that having individual hearings relying on hazy memories and post hoc rationalizations does not.

Sotomayor asked when in the process the company would be given an opportunity to defend itself. Sellers suggested that Wal-Mart would have “ample opportunity” to defend itself in the process of deciding which variables to use in the formula.

Scant Attention for Rule 23(b)(2) Question.

The court spent little time on the question it originally certified: whether claims for monetary relief can be certified under Rule 23(b)(2), and, if so, under what circumstances.

Sotomayor suggested during the argument that perhaps the monetary claims in the case--which could reach into the billions of dollars--could be considered under Rule 23(b)(3), which has additional requirements for certification.

Boutrous said this possibility can raise other complications, but that it is better than “shoe-horning” the monetary relief claims that are so individualized into Rule 23(b)(2).

By Jessie Kokrda Kamens

The transcript of the oral argument can be accessed at http://op.bna.com/dlrcases.nsf/r?Open=kmgn-8fetn5.

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