Wal-Mart v. Dukes Implications for Employment Discrimination Class Actions

1. Wal-Mart v. DukesImplications for Employment Discrimination Class Actions Phyllis W. Cheng, Esq., Director Department of Fair Employment & Housing State of California www.dfeh.ca.gov Anna Segobia Masters, Esq., Partner Winston & Strawn LLP North America . Asia . Europe www.winston.com www.thomsonreuters.com June 29, 2011 © Copyright 2011. DFEH. All Rights Reserved. Winston & Strawn LLP © 2011. 2011 Thomson Reuters. All rights reserved.

2. Phyllis W. Cheng, Esq., Director Department of Fair Employment & Housing Phyllis.Cheng@dfeh.ca.gov Anna Segobia Masters, Esq., Partner Winston & Strawn LLP AMasters@winston.com Today’s Webinar Presenters

3. Outline of Presentation • Overview of Wal-Mart v. Dukes. • Legal Standard for and Types of Class Action in Federal Court. • Evidence Used to Establish Class. (FRCP Rule 23(a).) • Backpay Considerations. (FRCP Rule 23(b).) • Issues Decided: Majority, Concurrence & Dissents. • Considerations for Future Litigation. • Anatomy of a successful California class action. • Long-Term Implications.

4. Decision Summary • In Wal-Mart v. Dukes, __ 564 U.S. __ (June 20, 2011, No. 10-277), authored by Justice Scalia, the U.S. Supreme Court set aside the class certification of the nation’s largest class action suit, because: • Employees failed to show a particular pattern of policy or practice of discrimination that meets the commonality requirement for class actions. • Employer was entitled to individual proceedings on each backpay claim.

5. Facts: Wal-Mart • Largest private employer operating four types of retail stores with 3,400 locations and employing more than 1 million workers. • Pay and promotion at discretion of local managers. • Subjective decision-making by local managers.

6. Facts: Class Members • Three current and former employees. • Represented 1.5 class members. • Claimed sex discrimination with regard to pay and promotions in violation of Title VII.

7. Plaintiffs’ Allegations • Did not allege express corporate policy against women. • Alleged local managers’ discretion over pay and promotions favored men. • Relied on anecdotal information and experts’ statistical analyses to gauge corporate culture.

8. Class Action Prerequisites • Legal standard under FRCP Rule 23(a): • Numerosity; • Commonality; • Typicality; and • Adequacy.

9. Types of Class Actions • Legal standard under FRCP Rule 23(b): • (b)(1) – Incompatible Standards/Unitary Decisions; • (b)(2) – Injunctive Relief Class Actions; or • (b)(3) – Damages Class Actions.

10. Evidence Used to Establish Class • Three forms of proof: • Statistical evidence about pay and promotion disparities between men and women at the company; • Anecdotal reports of discrimination from about 120 of Wal-Mart’s female employees; and • Testimony of a sociologist, Dr. William Bielby, who conducted a “social framework analysis” of Wal-Mart’s “culture” and personnel practices.

11. Backpay under Rule 23(b)(2) • Claims for monetary relief may not be certified under Rule23(b)(2), at least where the monetary relief is not incidental to the requested injunctive or declaratory relief. • Claims for individualized relief, like backpay, are excluded. • Rule 23(b)(2) applies only when a single, indivisible remedy would provide relief to each class member. • Wal-Mart is entitled to individualized determinations of each employee’s eligibility for backpay.

12. Adopting 9th Circuit Dissents • Judge Kozinski: Class had little in common “but their sex and this lawsuit.” • Judge Ikuto: Information “about disparities at the regional and national level does not establish the existence of disparities at individual stores, let alone raise the inference that a company-wide policy of discrimination is implemented by discretionary decisions at the store and district level.”

13. Concurring/Dissenting Opinion • Concurrence and dissent by Justice Ginsburg: • Agreed with majority that the class should not have been certified under Federal Rule of Civil Procedure 23(b)(2). • Disagreed that plaintiffs produced insufficient commonality to form class under Rule 23(a)(2)

14. Issues Decided • All 9 justices agreed suit improper for class action in seeking backpay under Rule 23(b)(2). • Majority of 5 justices held plaintiffs did not have enough commonality to form class due to lack of commonality. Minority would have found sufficient commonality. • Did not decide whether company discriminated against female employees.

15. Impact for Future Litigation • Heightened focus on size and geographic scope of class. • Heightened focus on ratio of actual evidence presented at certification stage vs. scope of alleged wrongdoing. • Dukes had 1 declaration for every 12,500 class members and related to 235 of 3400 stores. • Teamsters had 1 declaration for every 8 class members. • Understand different requirements and purposes under FRCP 23(b)(2) or 23(b)(3). • If individual damages sought, cannot rely on 23(b)(2). • Court was hostile to concept of class members waiving individualized damages in order to bring 23(b)(2) claim.

16. Impact for Future Litigation • Heightened scrutiny of experts. • In discrimination cases, the merits will need to be developed to establish “the glue” that patches together the class issues. • Smaller and regional class claims more likely to survive • Plaintiffs need to investigate sources of commonality early on: • Common Decision makers • Common Policies • Common Practices • Other common factors resulting in disparate treatment or impact

17. Litigation Considerations • Be prepared with a trial plan that will demonstrate manageability of the class. • Focus on manageability and due process issues. • Evaluate whether incorrect results could occur with sample cases or litigating too large a class with so many inherent individual issues, particularly in (b)(2) cases.

18. Anatomy of a Successful Class Action • Dept. Fair Employ. & Hous. v. Verizon Services Corp. (L.A. Super. Ct., Case No. B444066), $6,011,190 on CFRA class action settlement. • Case Grading Method. • Thorough investigation by Special Investigations Unit of a dozen complaints and nearly 100 potential claimants over two years. • Ensure case met elements of Cal. Gov. Code section 12961 for class/group action. • Ensure claimants met Cal. Code Civ. Proc. section 382 elements: • Common or general interest; • Of many persons; and • Substantial benefits to litigants and courts.

19. Long-Term Implications • Fewer class actions in federal court; more class actions in state court. • Fewer national class actions; more regional or local class actions. • Large employers more secure; mid-sized employers more vulnerable. • Decentralized management structures and decisionmaking more preferred; centralized management structures less desirable. • Impact of AT&T Mobility LLC v. Concepcion, __ 563 U. S. __ (Nov. 9, 2010, No. 09–893),allowing mandatory arbitration clauses on class action.

20. Questions

21. Contact Information Anna Segobia Masters, Esq., Partner Winston & Strawn AMasters@winston.com www.winston.com Phyllis W. Cheng, Esq., Director Department of Fair Employment & Housing Phyllis.Cheng@dfeh.ca.gov www.dfeh.ca.gov