On Tuesday, the U.S. Supreme Court heard oral argument on Wal-Mart’s appeal of the Ninth Circuit’s en banc decision upholding the certification of a class action gender discrimination lawsuit in Dukes v. Wal-Mart Stores, Inc. As noted by a number of commentators (among them The Wall Street Journal, Forbes, The Christian Science Monitor, and CNN), the tone of the Court’s questioning indicates that the Court is likely to rule in Wal-Mart’s favor.
This appeal stemmed from a federal court’s certification of a nationwide class of female employees of Wal-Mart who were allegedly subjected to discriminatory pay and promotion policies. The class seeks injunctive relief and money damages (back pay) for all women employed since December 1998 in positions ranging from entry-level hourly employees to salaried managers. The class certified in 2004 included 1.5 million women; it currently is estimated to include 3 million women. The district court and Ninth Circuit certified the class after concluding that statistics and sociological expert testimony could allow Plaintiffs to show that Wal-Mart’s culture, when combined with its decentralized decision-making structure, resulted in discrimination against Wal-Mart’s female employees. Those courts approved class certification despite (1) Wal-Mart’s written policy of anti-discrimination, (2) evidence that there was no gender-based pay disparity at 90% of Wal-Mart’s stores, (3) an admission by plaintiff’s expert that he could not say whether discrimination was happening .05% or 95% of the time, and (4) a class that included at least 544 female store managers who would have been both victim and discriminator, under the plaintiffs’ theory.
Several Justices expressed strong skepticism of the merits of Plaintiff’s charge of company-wide sex discrimination. After confirming that subjective decision-making is not necessarily illegal, Chief Justice Roberts asked how much discrimination needs to be shown to conclude that it was caused by corporate policy, rather than a few bad actors. He also pointed out that Wal-Mart’s pay disparity is less than the national average. Justices Kennedy and Scalia challenged Plaintiff’s counsel to describe the unlawful policy, asserting that it is inconsistent to argue both that Wal-Mart has a strong corporate culture and knows everything at its headquarters, and that individual managers have too much discretion. Justice Scalia grilled Plaintiff’s counsel at length about what evidence established intentional discrimination based on sex, particularly given Wal-Mart’s written anti-discrimination policy. Justice Kennedy questioned the Plaintiffs’ ability to use statistics to establish that discrimination was at work, asking whether a company with X% disparity could be held liable if there was also the same X% disparity in the retail industry generally, and whether there was a need to also show deliberate indifference. Justice Alito similarly asked whether a company could be liable for sex discrimination if it had exactly the same statistical profile as every other American company. And Justice Scalia challenged the assumption that if a disparity exists, it must be due to sex discrimination.
The Court also appeared to be skeptical of Plaintiffs’ ability to certify a class. Justices Breyer, Scalia and Kennedy all questioned how a policy could truly be common to all women employees. Justice Scalia pointed out that the class included women who were not underpaid, and Justice Kennedy observed that if the decisions were truly “standardless” then they could not be common. Justice Roberts asked whether a loss on the merits would bind class members and bar them from bringing individual actions. Justice Ginsburg said that “a very serious problem” is how to calculate backpay for each class member, given the impossibility of holding individual hearings. She also questioned the certification of a large damages class under Rule 23(b)(2), which does not provide class members with notice and an ability to opt out of the class.
The most skeptical questioning concerned a defendant’s ability (or inability, in this case) to defend itself in such a large class action. Justices Ginsburg and Sotomayor both asked when and how a defendant could show that an individual class member was not entitled to back pay because she should have been fired or disciplined. Plaintiffs’ answer – that Wal-Mart could defend itself by arguing what variables should be used in the statistical model determining backpay awards – did not appear to satisfy Justice Sotomayor. It also prompted Justice Scalia to observe that “it’s more reliable to have a hearing with evidence on the particular promotion or dismissal of the individual … I don’t care how admirable a statistical guess you make.” When Plaintiff’s counsel replied that individual hearings were not feasible because Wal-Mart had not kept the necessary records, Justice Scalia retorted: “We should use that in jury trials, too, for really old cases. We should just put a statistical model before the jury and say, you know, this stuff is too old; we’ll do it on the basis of – is this really due process?”
To be sure, the argument was not completely one-sided. Some of the Court’s questions suggested that it might be willing to certify a (b)(2) class solely for injunctive relief. And the Court did struggle with the issue of when a company could and should be held liable for allowing discrimination to go unchecked. As phrased by Justice Ginsburg: “Isn’t there some responsibility on the company to say, is gender discrimination at work, and if it is, isn’t there an obligation to stop it?” The tenor of the argument, however, strongly suggested that the Court is likely to reverse certification of the class and rule in favor of Wal-Mart.