6-29-2011; The Wal-Mart v. Dukes class action ruling is good news for large employers in general; employees may have a much harder burden to certify a large class under the Federal Rules

Confirming a longstanding practice of the Federal Courts to limit class action suits and subject class certification to a greater investigation than the state courts, the ruling earlier this week in Wal-Mart v. Dukes reasserts the difficulty of certifying a class when there is no coherent commonality at issue. It’s a bit of a mixed bag for retail giant Wal-Mart – although they are no longer facing the largest class action suit in U.S. history, they are now facing potentially thousands of lesser similar claims by groups or individuals.

For corporate risk and employment practices managers across the U.S., all of this comes down to documentation, documentation and more documentation. We are confident any judgment coming from a class action this big might have been a business-busting billion-dollar verdict. It is crucial to be able to show your company doesn’t have a broad policy of ignoring complaints of discrimination.

A unanimous Supreme Court held a class of over one and a half million plaintiffs (current and former female employees of Wal-Mart) was improperly certified. It was a split decision however, in regard to how the Court got to that point. The majority decision is what we feel will control the future case law and it hinged on the “commonality” of the claims. What does that mean in laymen’s terms? In order to be certified as a “class” under the federal rules, a set of plaintiffs must do more than ask broad questions and make broad and generalized allegations. There must be some defining features of the plaintiff’s claim in common – that point to a common set of facts surrounding each instance of alleged discrimination.

Justice Scalia, writing for the Court, commented on how the courts must perform a “rigorous analysis” of the claim, requiring exploration of the claims. At times, this “will entail some overlap with the merits of the plaintiff’s underlying claim. That cannot be helped.” In the matter at bar, Plaintiffs did not allege any express corporate policy against the advancement of women, and there was no uniform policy leading to a gender bias. Their allegations were based on the claim their local managers’ discretion over pay and promotions was exercised disproportionately in favor of men, leading to an unlawful disparate impact on female employees. They alleged this occurred in all Wal-Mart stores and alleged a “corporate culture” of a bias toward female employee advancement, if only on a subconscious level.

The Court held “the mere claim by employees of the same company that they have suffered a Title VII injury, or even a disparate-impact Title VII injury, gives no cause to believe that all their claims can productively be litigated at once.”  The Court further held Plaintiffs’ “claims must depend upon a common contention—for example, the assertion of discriminatory bias on the part of the same supervisor.”  Most significant to the holding, the Court ruled “[t]hat common contention . . . must be of such a nature that it is capable of class wide resolution—which means that determination of its truth or falsity will resolve an issue that is central to the validity of each one of the claims in one stroke.”

The Court pointed out the most significant question in a Title VII inquiry is “the reason for a particular employment decision,” and noted Plaintiffs were trying to sue for millions of employment decisions, all at once. The holding was essentially stating without some glue holding together the alleged reasons for those decisions, it would be impossible to say examination of all the class members’ claims would produce a common answer to the crucial discrimination question.

This points directly to the discretionary aspect of the managers’ decisions. Justice Scalia dismissed the anecdotal evidence filed by Plaintiffs, stating “Wal-Mart’s ‘policy’ of allowing discretion by local supervisors over employment matters” was “just the opposite of a uniform employment practice that would provide the commonality needed for a class action; it is a policy against having uniform employment practices.”  Scalia also relied on the fact that Wal-Mart has a written policy of non-discrimination.

Ultimately, this ruling makes it more difficult to certify a broad class. There will have to be a certain policy or practice to point to at a centralized structure in order to bind together a class of Plaintiffs. Now, Wal-Mart may still be facing multiple smaller suits arising from local facilities, but those individual claims will be far easier to investigate.

This article was written by Arik D. Hetue, J. D. who can be reached at ahetue@keefe-law.com. Feel free to post comments on our blog at: http://keefe-law.com/kcablog.html