Wal-Mart v Dukes: Supreme Court changes rules on class actions

I was not surprised by the U.S. Supreme Court’s decision in Wal-Mart Stores, Inc. v. Dukes, No. 10-277 (June 20, 2011). Even so, how the Court got there reveals more agendas. It also bodes poorly for consumers.

About class actions: While class actions are often criticized, the reality is that they are one of the few tools available to consumers and middle-income Americans to fight wide-spread corporate abuse. When a bad corporate actor engages in a pattern of misconduct, the class action device allows consumers to band together to fight abuse.

About the case: The story about the case has been widely told. Wal-Mart’s female employees sought to proceed in a class action to address corporate-wide wage disparities. They claimed that Wal-Mart engaged in a pattern and practice of gender discrimination by paying female employees less and providing fewer promotions. That’s illegal discrimination under Title VII, the federal Civil Rights Act of 1964.

What the Court decided: The Court decided that the case could not go forward as a class action. Part of the opinion was unanimous, but the guts of the problem are in Part II of the Court’s opinion, and that part was 5-4. Part II radically revised class action rules, and that’s where consumers are at risk.

A new standard: Class actions are complicated. But at the front end, a class action has several requirements. They are that the class is numerous (“numerosity”) , that the named-plaintiffs’ (people who bring the lawsuit) claims are typical (“typicality”), and that there are one or more common questions of fact or law (“commonality”). Depending on the type of class, there are other requirements, but the Court did not reach those additional requirements.

Writing for the majority, Justice Scalia announced a new standard, deciding that commonality–which was always a simple showing–would now become very complicated. Now, it’s not just that there must be common questions, but, says the Court, there must also be common answers.

Ironically: For years, Justice Scalia has harangued the Court and the profession about the need to limit decisions to the text of the written law. The judicial philosophy is known as strict constructism. Funny thing: The text of the applicable part of the rule makes no mention about answers to questions. Instead it reads, “[T]here are questions of law or fact common to class.” FRCP 23(a)(2). The lack of textual support for an anti-consumer ruling causes Justice Scalia little pause, as the Court engaged in similar over-reading of federal law in AT&T Mobility LLC v. Concepcion, the case that likely ended consumer class actions.

The bigger problem: This is a tough day for the women from Wal-Mart. But apart from that the Court is slamming the door on class actions. When you add this ruling to AT&T Mobility and then add on a few other doctrines, it’s clear that the goal is to radically curtail class actions. Before Wal-Mart, the U.S. Supreme Court made clear that the merits of a consumer’s claims did not enter in to the consideration of class certification. That day is over. Without overruling prior case law, the U.S. Supreme Court examined, weighed and determined the sufficiency of the Wal-Mart plaintiffs’ evidence.

Some years ago, Congress caved to corporate interests and passed the so-called Class Action Fairness Act (“CAFA”). CAFA provides that most class actions may be removed to federal court. A few years later, the U.S. Supreme Court changed the rules on pleadings and required more specificity of those who file cases in federal court. The new pleading standards under Iqbal make it harder for consumers to proceed in federal court.

For years, federal courts have limited discovery in class action cases to issues related only class certification. But now consumers seeking to pursue class actions must make a showing on the merits. Between CAFA, Iqbal, Daubert (scientific evidence case), AT&T Mobility (mandatory arbitration) and Wal-Mart, the Court has erected great barriers to consumers seeking to proceed in class actions.

Lousy day.


Max Kennerly says

The Court dreamed up a new way for lower courts (or appellate courts) to boot out class actions they don't want to see go forward for policy reasons. "Predominance" was the go-to method, but it didn't apply to injunctive relief, so now "commonality" is another subjective, rudderless means by which courts can claim that class-wide harms are not provable in a class action.

I liked the part where they said that, even though statistical evidence showed disparate treatment of women across all of Wal-Mart, a class action across all of Wal-Mart was inappropriate because there could in theory not be that disparate at a particular store. Well, duh, that's why the class was across all of Wal-Mart, not aimed at a particular store.

David Sugerman says

Max- I don't know if you saw Andy Borowitz's quip on Twitter: Supreme Court rules 6-3 that Ginsburg, Sotomayor and Kagan must make the coffee. Made me laugh. It's been a dark year for those of us who dare to stand between greedy swine and their feeding troughs. We can either continue to fight, or we can surrender. They have a long way to go before they can stiffle us.


Comments for this post are closed.