Supreme Court Dumps Wal-Mart Sex-Discrimination Class ActionHoward Erichson in Forbes, June 20, 2011
The U.S. Supreme Court rejected a massive class action on behalf of 1.5 million female Wal-Mart employees, saying there was no way a single court proceeding could determine whether they were all victims of sex discrimination.
In a decision penned by conservative Justice Antonin Scalia and supported in part by the entire court, the majority held that bundling together such a diverse group of employees — present and former, management and labor — into a single class failed the test of commonality required in class actions. In other words, it was impossible for the plaintiffs to show that every single woman was the victim of discrimination when Wal-Mart left most decisions up to regional managers, many of them women, overseeing 3,400 individual stores.
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. Respondents attempt to make that showing by means of statistical and anecdotal evidence, but their evidence falls well short.
The decision comes as the high court has struggled to define the limits of class actions, a powerful tool that corporate defendants say often hands plaintiffs too much power to compel a settlement. The court hasn’t consistently ruled for either side. In rulings earlier this year, for example, the court rejected attempts to make it harder for attorneys to assemble classes of investors in securities fraud cases and liberalized the evidence required to make those cases.
The Wal-Mart decision, however, shuts down a potentially lucrative avenue for employment lawyers to target huge companies with claims based largely on statistical analysis. In this case, plaintiffs relied on a sociologist who was prepared to testify that Wal-Mart’s “non-policy policy” of leaving employment and promotion decisions to individual managers could result in widespread discrimination.
“This opinion insulates companies a bit from being attacked if discrimination flourishes because they give too much discretion to individual managers,” said Howard Erichson, an expert on class action law at Fordham Law School. “What the court is emphasizing is it is really serious about requiring plaintiffs to prove commonality.”
Dissenters led by Justice Ruth Bader Ginsburg, who made her legal reputation in the area of women’s rights, agreed the case never should have been certified as a 23(b)2 class action, where the plaintiffs are seeking a court injunction to halt discriminatory policies. That was a tactical move by the plaintiff lawyers to avoid the individualized examination of back-pay claims that Wal-Mart otherwise would have been able to demand, forcing 1.5 million mini-trials. But while the mechanism is appropriate in civil-rights cases, the court refused to condone it in such a diverse employment case.
That’s good news for companies outside of the area of employment law, said Donald Falk of Mayer Brown. Car manufacturers, for example, could have faced massive class actions over allegedly defective parts that weren’t about the money, oh no! but seeking a court order to replace the part in every car.
“If that had gone the other way, you could ask for an injunction and say that’s more important,” said Falk. “It would have been a very big change in the law and that’s why that portion of the decision was 9:0.”
Ginsburg — joined by Justices Breyer, Kagan and Sotomayor — departed from the majority in Part II of the decision, where the court rejected the idea that the plaintiffs in this case could ever show they were all victims of discriminatory decisions by managers, some of whom would be in the very same class because they are female. In that section, Scalia wrote:
Without some glue holding the alleged reasons for all those decisions together, it will be impossible to say that examination of all the class members’ claims for relief will produce a common answer to the crucial question why was I disfavored.
Ginsberg said there was no need for the court to go to the evidence, when it could have simply rejected the case on because it tried to apply the wrong type of class action procedure. It’s not inconceivable, Ginsburg wrote, that the plaintiffs could show Wal-Mart’s policy of letting regional and store managers make hiring and promotion decisions could foster widespread sex discrimination.
The plaintiffs’ evidence, including class members’ tales of their own experiences, suggests that gender bias suffused Wal-Mart’s company culture. Among illustrations, senior management often refer to female associates as “little Janie Qs.”
Fordham’s Erichson said it’s important to note the decision wasn’t on the merits of the claim Wal-Mart discriminates against women. It definitely closed the door on using 24(b)2 to pull together such a case — lawyers like the rule because it relieves them of onerous requirements to provide notice to every class member and the chance to opt out. But the Equal Employment Opportunity Commission could still go after Wal-Mart for its “non-policy policy” and plaintiff lawyers can try to form smaller classes where all the women share the same claim.
The decision is yet another slapdown for the Ninth Circuit Court of Appeals in California, which has repeatedly been dressed down by the Supreme Court for rulings that expand the rights of plaintiffs in new and creative ways.