Supreme Court Tightens Class Action Requirements, Halts Unprecedented Suit

In Wal-Mart Stores, Inc. v. Dukes, No. 10-277 (June 20, 2011), the Supreme Court examined these issues and found that the class should not have been certified. The opinion, authored by Justice Scalia, was unanimous as to the ruling denying class certification under Rule 23(b)(2), but a four-member dissent authored by Justice Ginsburg criticizes the majority’s ruling as to commonality.

Commonality.

Perhaps the most far-reaching and controversial holding, which garnered a five-Justice majority, involves the “commonality” prong under Rule 23(a)(2) of the Federal Rules of Civil Procedure. That prong requires a plaintiff in any class action to show that “there are questions of law or fact common to the class” and is often given short-shrift by parties and courts alike.

Now, the Supreme Court has made it clear that commonality cannot be satisfied by merely reciting questions that the putative class members may have in common, such as, “Do all of us plaintiffs indeed work for Wal-Mart? Do our managers have discretion over pay?” Wal-Mart, at 9. A class plaintiff must instead establish “commonality” as to whether the answer to the common question is capable of class-wide resolution, “which means that determination of its truth or falsity will resolve an issue that is central to the validity of each one of the claims in one stroke.”

The Court also found that the plaintiffs’ evidence of commonality, which included statistical and anecdotal evidence, was insufficient. This finding raises serious questions about the common practice of using expert witnesses' opinions and extrapolations to support otherwise inadequate factual bases in an effort to establish commonality. Overall, the majority’s tightening of the commonality requirement is significant, as noted by the dissent, and will apply to every class action, beyond employment discrimination suits.

Rule 23(b)(2) Monetary Relief and Due Process.

In Section III of the opinion, the unanimous Court found that a class should not have been certified under Rule 23(b)(2) because, in the Wal-Mart case, individualized claims for monetary relief were inappropriately combined with the claim for injunctive or declaratory relief. Consistent with Justice Scalia’s strict constructionist approach, the Court’s analysis is a straight-forward interpretation of the language of Rule 23(b)(2). The Court concluded that monetary claims belong instead in Rule 23(b)(3).

Aside from the plain language of Rule 23(b)(2), also supporting the Court’s conclusion was the concern for due process. Rule 23(b)(3) provides protection to potential class members by requiring notice and an opportunity to opt-out of the action; Rule 23(b)(2) does not provide such protection. As such, a plaintiff’s monetary claims are better protected by Rule 23(b)(3). And, by virtue of the appellate court’s suggested “Trial by Formula,” certification of the (b)(2) class also would have deprived Wal-Mart of due process by preventing it from litigating defenses to individual claims.

Impact.

The upshot of this case is a big win not only for corporations but any entities, including governmental agencies, that may find themselves faced with a class action. While the aftermath of this opinion remains to be seen, there is no question that it is one of the most significant class action decisions in years and will be a landmark case. For more information, please contact Edward M. Waller, Jr., or Ashley Bruce Trehan in Buchanan's Tampa office.