The Supreme Court provided good news to transportation companies facing class action litigation today by issuing an opinion in the Wal-Mart v. Dukes case that reverses the Ninth Circuit Court of Appeals' class certification decision. In a 5 to 4 ruling, the Court held that plaintiffs failed to demonstrate commonality under Rule 23(a)(2), and unanimously held that the back pay claims could not be properly certified under Rule 23(b)(2). The decision will make it more difficult for plaintiffs to succeed in certifying class actions going forward.
This decision is a victory for any transportation company faced with a class action lawsuit, as the Court's decision ostensibly makes it more difficult for a putative class action to be certified going forward. This is especially so in employment law class actions in which the plaintiff cannot point to a specific employment practice of the motor carrier or other transportation entity that violates the law, but rather relies on anecdotal evidence to satisfy the rigid requirements of Rule 23. How this decision will affect other transportation class action cases such as those involving the Truth-in-Leasing Regulations is unknown at this juncture, but without proof of a class wide policy that violates the law the Wal-Mart case makes clear that certification will be difficult to obtain.
In Wal-Mart v. Dukes, the plaintiffs — a group of 1.5 million current and former Wal-Mart employees — claimed that while Wal-Mart had no express corporate policy against the advancement of women, Wal-Mart's decision to give managers discretion to make pay and promotion decisions itself was a discriminatory policy. That policy resulted in male employees earning more money than their female counterparts and holding a disproportionate number of leadership positions that could be proven on a class wide basis according to the plaintiffs. Wal-Mart maintained that the class members’ claims are not similar enough to justify certifying them as a class, as the sheer number of class members and stores, along with variations in positions the plaintiffs held and differences in managers at each location militated against litigating the case on a class wide basis.
The Court agreed. Focusing on the commonality prong of Rule 23, the Court mentioned that while the purported policy could possibly form the basis of a disparate impact claim under Title VII of the Civil Rights Act of 1964, it does not follow that every potential class member has a common claim as is required to proceed with a class action case. To prove commonality under Rule 23, the plaintiff must demonstrate that each class member “suffered the same injury” according to the Court, which the plaintiffs could not do because the employment decisions complained of were admittedly left to the discretion of each store manager. "Respondents wish to sue for millions of employment decisions at once,” Justice Antonin Scalia said. “Without some glue holding together the alleged reasons for those decisions, it will be impossible to say that examination of all the class members’ claims will produce a common answer to the crucial discrimination question.” Prior to this ruling, the commonality requirement of Rule 23 was often glossed over in any class certification analysis. This decision establishes a roadmap for approaching this issue going forward and indicates a renewed focus on commonality is warranted in any class certification inquiry.
The Court also held that a claim for monetary relief could not be certified under Rule 23(b)(2) when, as here, the monetary relief sought is not incidental to the requested injunctive or declaratory relief. Rule 23(b)(2) applies when the party opposing the class has acted or refused to act on grounds that apply generally to the class so that final injunctive or declaratory relief is appropriate for the entire class. The Court's ruling clarifies that Rule 23(b)(2) certification is only appropriate when a single, indivisible remedy would provide relief to each class member, and that when individualized monetary damages are appropriate such claims “belong in Rule 23(b)(3)”, which is arguably a more difficult certification standard to meet.
Finally, the Supreme Court also rejected plaintiffs' theory that back pay could be determined with a "Trial by Formula" calculation, i.e. that a sample of class members could be selected, and statistical modeling could yield a result for the entire class wide recovery without further individual proceedings. Such a method of calculating damages would violate the Rules Enabling Act according to the Court, as a class cannot be certified on the premise that an employer "will not be entitled to litigate its statutory defenses to individual claims."
With the renewed focus on the commonality prong of Rule 23 and the favorable findings regarding Rule 23(b)(2), the class action landscape is certainly more favorable to employers than before. And while employers should be pleased with the decision, it does not provide a silver bullet to defeat class certification. The bar for plaintiffs’ counsel to meet to certify a case however, has certainly been raised.