In an unusual procedural move, a Ninth Circuit panel issued a revised opinion and rejected—for the second time—Wal-Mart’s request to overrule a lower court decision granting class action status to a lawsuit by six women representing a class of more than 1.5 million female workers. Dukes v. Wal-Mart, Inc., Case Nos. 04-16688 and 04-16720, 2007 U.S. App. LEXIS 28551 (9th Cir. Dec. 11, 2007). The class includes all female workers—from part-time, entry-level hourly employees to full-time, salaried managers—at Wal-Mart stores from December 1998 to the present “who have been or may be subjected to Wal-Mart’s challenged pay and management track promotions, policies and practices.” The lawsuit alleges that female employees were paid less than men and given fewer promotions. If the case proceeds, it will be the largest sex discrimination case in U.S. history. The revised opinion addresses some of the criticisms directed toward the earlier opinion and changes some of the reasoning, though not the result, of the court’s earlier decision.

After initially finding that the size of the putative class was sufficient to justify a class action, the Court, deleted multiple passages from its earlier decision in an apparent attempt to correct some of its more questionable portions relating to the commonality of the factual and legal issues raised by the potential class members.   In particular, the court retreated from its watered-down standard for expert testimony at the class certification stage and from its outright rejection of Wal-Mart’s statistical expert under that standard. Instead, the court simply stated that it need not consider whether the testimony of Wal-Mart’s statistical expert was more persuasive than that of Plaintiffs’ expert.

In another move that is particularly troubling for employers, the court maintained its position that commonality existed because of Wal-Mart’s use of subjective decision-making with regard to pay and promotion decisions. The court held that decentralized, subjective decision-making in and of itself can give rise to an inference of discrimination.

The court also reaffirmed its earlier holding that Plaintiffs could certify the class under the relaxed standards of Rule 23(b)(2) and need not satisfy the more demanding requirements of Rule 23(b)(3). Plaintiffs claimed they should be allowed to certify the proposed class as one seeking injunctive and declaratory relief under Rule 23(b)(2) even though they sought billions of dollars in back pay and punitive damages. The general rule is that, in order to pursue a 23(b)(2) class action, monetary damages must not be the predominant relief sought and must be merely secondary to claims for injunctive relief. Wal-Mart argued that Plaintiffs should be required to establish predominance and superiority under Rule 23(b)(3) because of the large damages sought by the class. The Court rejected this argument, holding that the large damages sought were merely a function of the size of Wal-Mart itself and did not mean that damages were the class’s primary goal in instituting the action. The court chose to credit Plaintiffs’ self-serving statements that the primary goal of the litigation was to obtain an injunction against future discrimination—not monetary relief – even though some of the class members were no longer employed and would not benefit from such an injunction. The court added new language to its opinion recognizing that Wal-Mart correctly argued that a request for back pay did “weigh against” class certification but nonetheless held that the district court did not abuse its discretion by certifying the class under Rule 23(b)(2) notwithstanding the request. In so doing, the court deleted language from its earlier opinion that flatly rejected Wal-Mart’s contention that former employees had no interest in injunctive or declaratory relief. Instead, the court added language agreeing with Wal-Mart’s argument and holding that class certification “may not be proper” for former employees. 

Finally, in its prior opinion, the court rejected Wal-Mart’s argument that the size of the class made a trial unmanageable because Wal-Mart would not be able to conduct individualized hearings on the merits of each claim and raise defenses unique to each individual class member without incurring prohibitive expense. Instead, the court held that Wal-Mart was not entitled to individualized hearings either under existing precedent or due process, a holding that appeared to contradict not only the Supreme Court’s decision in Int’l Bd. of Teamsters v. United States, 431 U.S. 324 (1977), but also Title VII and the Civil Rights Act of 1991, 42 U.S.C. § 2000e.  In so doing, the court endorsed Plaintiffs’ plan to use statistical methods to determine liability and award back pay and punitive damages for each class member. In its revised opinion, the court deleted the language describing these holdings and instead “express[ed] no opinion regarding Wal-Mart’s objections to the district court’s tentative trial plan.” 

Following issuance of the court’s revised opinion, Wal-Mart again requested an en banc review of the court’s decision on class certification. Wal-Mart’s petition for review argues that the class was improperly certified under Rule 23(b)(2) and that the proposed class “presents intractable manageability problems.” 

Employers should take note of this case as it makes its way through the court system. The case raises a number of critical legal issues including, among others: (1) whether courts can or should rigorously review expert testimony at the class certification stage; (2) whether decisions based on subjective criteria are susceptible to a finding of commonality under Rule 23; (3) whether defendants can offer individualized defenses as to whether particular class members were discriminated against; and (4) whether plaintiffs can sidestep the demanding Rule 23(b)(3) requirements of predominance and superiority by using Rule 23(b)(2) even in cases seeking massive damages. This case is also significant because of the size of the class and the potential damages involved. It could establish a new framework that would allow classes of employees nationwide to file lawsuits against their employers alleging that a uniform policy or corporate culture, combined with subjective decisions by individual managers, resulted in discrimination. For these reasons, employment lawyers and their clients are waiting and watching to see what happens next.

Thanks to Jamie LaPlante for her assistance with this post.