Wal-Mart Stores, Inc. v. Dukes

1. Wal-Mart Stores, Inc. v. Dukes What it Means for Class Action Litigation Paul Karlsgodt

2. The Many Facets of Dukes • The Standard of Proof/Review on Class Certification. • Commonality. • Consideration of merits issues. • The use and evaluation of expert testimony on class certification. • Statistical evidence in support of class certification. • The test for certification of claims for monetary relief under FRCP 23(b)(2).

3. The Standard of Proof – The Death of Eisen • Clarifies that courts must delve into the merits at the class certification stage to the extent that issues necessary to resolving the merits are also necessary to resolve an element of FRCP 23. • Makes clear that Eisen v. Carlisle & Jacqueline, 417 U.S. 156 (1974) has been “mistakenly cited to the contrary.” • This ruling is consistent with the clear trend in the lower courts, including the 9th Circuit’s own decision in Dukes: • In re IPO Securities Lit.,471 F.3d 24, 33-34 (2d Cir. 2006). • Dukes v. Wal-Mart Stores, Inc., 603 F.3d 571, 582-94 (2010) (approving of the standards adopted in In re IPO and recognizing the misunderstanding that many courts have had about the meaning of the Eisen decision). • Note that state courts may continue to take a different approach.

4. Standard of Proof –New Teeth for Commonality • Commonality historically was a throw-away issue because the existence of one common issue of law or fact would satisfy it. • See Wal-Mart Stores, Inc. 2011 WL 2437013, *16 (Ginsburg, J., dissenting) • Id. at *11 (Scalia, J.) (recognizing that one common issue was sufficient but questioning whether there was even a single common question). • The majority opinion in Dukes appears to apply a heightened standard for determining whether a common issue exists. • Id. at *20 (Ginsburg, J., dissenting) (criticizing the majority opinion for “blend[ing] Rule 23(a)(2)’s threshold criterion for the more demanding criteria of Rule 23(b)(3), and thereby elevates the (a)(2) inquiry so that it is no longer “easily satisfied.” • Id. at *8 (Scalia, J.) (requiring “significant proof” of a general policy of discrimination to “bridg[e] the gap” between an individual claim of discrimination and a claim that a class of persons has been harmed by a policy of discrimination). • Because the majority analysis relies heavily on language from Falcon, another employment discrimination case, it is unclear whether the “significant proof” test applies only in employment cases or whether it might also apply in other cases involving an alleged common policy or practice.

5. Expert Testimony • “The District Court concluded that Daubert did not apply to expert testimony at the certification stage of class-certification proceedings. We doubt that this is so . . . .” Wal-Mart Stores, Inc., 2011 WL 2437013, at *8 (internal citation omitted). • This language is consistent with a trend in the federal circuits before Dukes. • American Honda Motor Co., Inc. v. Allen, 600 F.3d 813, 816-17 (7th Cir. 2010) (requiring Daubert analysis at the class certification stage when expert opinion is central to the argument that common evidence exists). • Sher v. Raytheon Co., --- F. App’x ---, 2011 WL 814379 (11th Cir. Mar. 9, 2011) (unpublished) (agreeing with American Honda). • But one opinion after the Dukes decision suggests that the question remains unsettled • The Eight Circuit has approved a “tailored Daubert analysis.” In re Zurn Pex Plumbing Prods. Lit., No. 10-2267, 2011 WL 2623342, at *4-6 (8th Cir. July 6, 2011) (holding that it is not necessary to conduct an exhaustive Daubert analysis at the class certification stage and to rule on the admissibility of proffered expert testimony). See alsoId. *20-21(Gruender, J., dissenting) (noting that the majority took a position on which the Supreme Court had expressed disapproval, although conceding that the above-quoted language from Dukes is dictum).

6. Statistics in Class Actions The Court addresses use of statistics in three key areas. • Existence of a common policy. • Dr. Bielby couldn’t say whether .5 percent or 95 percent of employment decisions were determined by stereotyped thinking. Wal-Mart Stores, Inc., 2011 WL 2437013, at *8. • Relationship between gender impact and discrimination (See id. at *10-12). • Majority’s view was in essence that statistics showing a disparity in pay based on gender did not give rise to an inference of gender discrimination. • Regional pay disparities might account for the nationwide differences. • Too many nondiscriminatory causes had not been ruled out, e.g. lack of qualified or interested women at a particular store. • Allowing class certification would have deprived defendant of an opportunity to defend based on individual factors. • Practical challenge—getting judges to understand the statistics: • “The Court asserts that Drogin showed only average differences at the ‘regional and national level’ between male and female employees. . . . In fact, his regression analyses showed there were disparities within stores. The majority’s contention to the contrary reflects only an arcane disagreement about statistical method—which the District Court resolved in the plaintiffs’ favor.” Id. at *18 n.5 (Ginsburg, J., dissenting). • Use of sampling to determine appropriate back-pay award. • “The Court of Appeals believed that it was possible to replace [individual damages] proceedings with Trial by Formula . . . We disapprove that novel project.” Id. at *15.

7. Claims for Monetary Relief under FRCP 23(b)(2) • Claims for monetary relief may not be certified under FRCP 23(b)(2) unless they are “incidental” to injunctive or declaratory relief being requested on behalf of the class as a whole. • What does it mean to be “incidental”? • [A]t a minimum, claims for individualized relief (like the backpay issue here) do not satisfy the Rule.” Wal-Mart Stores, Inc., 2011 WL 2437013, at *12. • Possible tests: • One possible reading is that it “does not authorize class certification of monetary claims at all.”  Id. • Damages not allowed if they are individualized but may be allowed if they are uniform: • See Id. (“The key to the (b)(2) class is the ‘individual nature of the injunctive or declaratory remedy warranted—the notion that the conduct is such that it can be enjoined or declared unlawful only as to all of the class members or as to none of them.”) • But seeParker v. Time Warner Entertainment Co., 331 F.3d 13, 23-26 (2d Cir. 2003) (Newman, J., concurring) (questioning whether statutory penalties of $1,000 per class member could be considered “incidental” to the award of injunctive relief even if they would not vary from class member to class member). • Damages susceptible to objective determination without any exercise of judicial discretion. See In re Monumental Life Ins. Co., 365 F.3d 408 (5th Cir. 2004).

8. The US Supreme Court and Class Actions • Shady Grove Orthopedic Assoc., P.A. v. Allstate Ins. Co., 130 S. Ct. 1431 (2010) – State court limits on class actions may not apply in federal court. Win for Plaintiffs. • Stolt-Nielson S.A. v. AnimalFeeds Intern. Corp., 130 S. Ct. 1758 (2010) – No class arbitration absent evidence of contractual intent that arbitration be conducted on a class-wide basis. Win for Defendants. • Smith v. Bayer Corp., 131 S. Ct. 61 (2010) – Federal courts cannot enjoin state courts from reconsidering class certification. Win for Plaintiffs. • Erica P. John Fund, Inc. v. Halliburton Co., 131 S. Ct. 856 (2011)– Federal court cannot require proof of causation on the merits at the class certification stage. Win for Plaintiffs. • AT&T Mobility LLC v. Concepcion, 131 S. Ct. 1740 (2011) – Class arbitration waivers are enforceable. Win for Defendants. • Dukes – More stringent class certification standards in federal courts. Win for Defendants.

9. Some Possible Practical Implications of Dukes • Forum Shopping/ • Will plaintiffs flock to state courts? • Supreme Court denied cert in Phillip Morris v. Jackson. • Watch for decisions in 4 cases pending before the Colorado Supreme Court - Garcia, Jackson, Patterson, and Reyher. • Smaller class actions • The majority opinion leaves open the possibility of certification on the store or regional level • Dukes may have an impact similar to cases like In re Bridgestone/Firestone, Inc., Tires Products Liability Litigation, 288 F.3d 1012 (7th Cir. 2002), – where lack of success in nationwide class actions led to multiple filings in selected states. • Limiting cases to <$5M in controversy keeps them out of federal court. • More expensive class certification discovery. • Plaintiffs will be more likely to develop the facts before certification. • More Daubert challenges. • Less of a distinction between class vs. merits discovery.

10. For Further Study • Articles • Richard A. Nagareda, Class Certification in the Age of Aggregate Proof, 84 N. Y. U. L. Rev. 97, 131–132 (2009) (cited extensively in Dukes) (http://law.nyu.edu/ecm_dlv3/groups/public/@nyu_law_website__journals__law_review/documents/documents/ecm_pro_061537.pdf) • John C. Coffee, Jr., “You Just Can’t Get There From Here”: A Primer on Wal-Mart v. Dukes, BNA Class Action Litigation Report (July 7, 2011) (subscription only). • Early Cases Interpreting Dukes • Ramos v. SimplexGrinnell LP, No. 07-CV-981 (SMG), 2011 WL 2471584 (E.D.N.Y., June 21, 2011) (distinguishes Dukes and grants class certification under FRCP 23(b)(3) of a class of employees who claimed unpaid prevailing wages for work on various public works projects). • Lee v. ITT Corp., No. C10-0618-JCC, 2011 WL 2516367 (W.D. Wash., June 24, 2011) (applies Dukes to deny certification of a class under FRCP 23(b)(2) and also denying “hybrid” certification under Rules 23(b)(2) and 23(b)(3)). • Artis v. Deere & Co., No. C 10-5289 WHA (MEJ), 2011 WL 2580621 (N.D. Cal., June 29, 2011) (rejects defendant’s argument that Dukes should preclude discovery of individual evidence regarding putative class members, including names, addresses, and telephone numbers).