Wal-Mart Prevails in Historic US Supreme Court Decision: Class Actions Likely to Suffer

Wal-Mart Prevails in Historic US Supreme Court Decision: Class Actions Likely to Suffer

June, 2011

Wal-Mart is celebrating the Supreme Court’s decision to overturn the ruling of the Ninth Circuit Court of Appeals in what may be the largest employment discrimination class action in history.  While the Court was unanimous in finding that Federal Rule of Civil Procedure 23(b)(2) did not allow the plaintiffs’ “hybrid” class action to go forward in an effort to obtain monetary relief in the form of back pay; it was split 5-4 on whether the case should have been allowed to proceed for the purpose of pursuing injunctive relief.  Justice Scalia delivered the opinion of the Court, in which Roberts, Kennedy, Thomas, and Alito joined.  Justice Ginsburg filed an opinion joined by Breyer, Sotomayor, and Kagan, concurring in part and dissenting in part. Wal-Mart v. Dukes, No. 10-277, (S. Ct. June 20, 2011).

This landmark case was initiated when Betty Dukes and other female Wal-Mart employees brought a federal employment discrimination case against the retail giant. The employees sought to have themselves certified as a class comprised of all women employed at any Wal-Mart store since December 26, 1998 who may have been or will be subjected to Wal-Mart’s allegedly discriminatory practices and policies, irrespective of the specific nature of the claim. Wal-Mart appealed to the Supreme Court, arguing that the class certification did not satisfy the requirements of Federal Rules of Civil Procedure and if allowed, would wreak havoc in the defense of similar workplace claims. 

In determining whether class certification is appropriate, the courts look to factors such as numerosity of potential class members, commonality of issues of law and fact, whether the asserted claims are typical of those of the class and whether the plaintiffs and counsel are adequate representatives of the class.  If these prerequisites are met, the court will then look to other factors, including, as in this case, whether the defendant has engaged in conduct applicable to the entire class.  According to the Supreme Court, the necessary factors were not satisfied.

Because of the far-reaching and lingering implications of this case, other corporations and trade groups shared their concerns before the Court's ruling.  Several amici (“friends of the court”) supported Wal-Mart’s position on the ground that permitting massive class action suits will be economically damaging to business interests. Specifically, the U.S. Chamber of Commerce expressed its concern that “populist” judges may permit “gargantuan verdicts” against corporations, leading to stock devaluation or possible bankruptcy.  In addition to the Chamber, twenty corporations, including General Electric, Microsoft, PepsiCo, and Dole Food Company, echoed these concerns. Surprisingly, the Equal Employment Advisory Council also came out in support of Wal-Mart, contending that employment discrimination suits of this magnitude held the potential to frustrate Title VII’s goal of avoiding litigation. 

In contrast, other amici, led by the U.S. Women’s Chamber of Commerce, and independent economists, supported the employees. They argued that protecting victims of workplace sex discrimination served the larger and essential goal of gender diversity in the workplace, which in turn enhanced a corporation’s bottom line and was beneficial to the market.  In fact, protesters quickly gathered in front of the Supreme Court shortly after the decision was announced. "The Court's ruling erects substantially higher barriers for working women and men to vindicate rights to be free from employment discrimination," the plaintiffs said in a statement after the decision.

Justice Scalia opined that the plaintiffs’ failure to provide significant proof that Wal-Mart operated under a general policy of discrimination was fatal to their claim.  However, Justice Ginsburg stated that "The plaintiffs' evidence…suggests that gender bias suffused Wal-Mart's company culture" and she would have left open the future possibility for the plaintiffs to proceed under a different legal rule on class actions. 

Despite this divide, Wal-Mart is heralding this ruling a victory. Wal-Mart released the following statement through company vice president Gisel Ruiz, who said "Wal-Mart has had strong policies against discrimination for many years. The Court today unanimously rejected class certification and, as the majority made clear, the plaintiffs' claims were worlds away from showing a companywide discriminatory pay and promotion policy."

The slip opinion in Wal-Mart v. Dukes, No. 10-277, (S. Ct. June 20, 2011). is available at the Court’s website.

The materials contained in this Announcement are for informational purposes only and not for the purpose of providing legal advice. For advice about a particular problem or situation, please contact an attorney of your choice.