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U.S. Court of Appeals Rules In Wal-Mart Employment Class Action Case

Posted by: George Johnson
November 06, 2007
Topic: Employment Discrimination

At Melville Johnson, we can do this for you:

On February 6, 2007, the U.S. Court of Appeals for the Ninth Circuit affirmed the certification of the largest employment class action in American history, in a case involving sex discrimination under Title VII of the Civil Rights Act of 1964. The ruling means more than 1.5 million current and former female employees of Wal-Mart are now class members in a suit affecting over 3,400 Wal-Mart stores nationwide in Dukes v. Wal-Mart, Inc.

Seven female employees originally filed the lawsuit, alleging the Bentonville, Arkansas retailer had adversely affected women through policies resulting in lower pay and a lack of notification for promotional opportunities. The plaintiffs are seeking class-wide injunctive and declaratory relief as well as awards of backpay and punitive damages, but are foregoing compensatory damages, such as emotional distress or other pain and suffering.

In 2004, a judge in the U.S. District court for the Northern District of California was persuaded by the plaintiff's statistical argument that female employees were paid five to fifteen percent less than men in comparable jobs, and certified the lawsuit under Rule 23 of the Federal Rules of Civil Procedure with a class including all female employees of Wal-Mart since December 1998. The district court found that the Dukes plaintiffs satisfied Rule 23's certification requirement with "(1) significant evidence of company-wide corporate practices and policies, which include (a) excessive subjectivity in personnel decisions, (b) gender stereotyping, and (c) maintenance of a strong corporate culture; (2) statistical evidence of gender disparities caused by discrimination; and (3) anecdotal evidence of gender bias."

Wal-Mart's appealed the class certification to the Ninth Circuit, arguing, among other things, that the class action and its size would improperly prevent the company from responding to claims individually.

Past plaintiffs seeking certification in nationwide employment discrimination lawsuits experienced difficulty meeting Rule 23's requirement that claims of potential class members be both common and typical. They often could not show a discriminatory decision by a manager at one facility was related to an employee affected at another location. Class certification also requires numerosity and adequacy of representation. The enormous size of the class in this lawsuit meant the numerosity element was undisputable.

The seven Dukes plaintiffs, who worked in different stores, employed statistical and anecdotal evidence to allege a "corporate culture" of sex discrimination throughout the company. Their evidence showed only one third of employees in the managerial pool were women, while females accounted for two-thirds of the nonmanagerial employees. Plaintiff's anecdotal evidence showed approximately 120 women were subjected to sex discrimination.

Wal-Mart maintained the employment decisions at its stores were made by thousands of individual store managers, meaning it was impossible for plaintiffs to show the commonality and typicality required by Rule 23. The Ninth Circuit was not persuaded by Wal-Mart's argument and found the class members had presented sufficient statistical and anecdotal evidence of the discriminatory attitudes of management nationwide to establish the existence of company-wide policies and practices and to satisfy the commonality and typicality requirements.

The Ninth Circuit also rejected Wal-Mart's argument that the inclusion of female managers in the class, including many who were also decision makers in the challenged promotion decisions, presented an impermissible conflict of interest and held the class representatives and counsel were adequate representatives.

This action is not only ground-breaking due to its size, but also because the plaintiffs are seeking punitive damages on a class-wide basis before a jury ever gets to determine whether individuals have suffered harm.

Wal-Mart argued the Due Process Clause renders this approach unconstitutional because an award of punitive damages must be related to the monetary harm suffered by individual plaintiffs. Wal-Mart also argued that determining harm to individual plaintiffs requires juries to make individualized determinations that are inconsistent with a class-wide approach to assessing punitive damages. Wal-Mart argued it would completely strip the company of the ability to defend itself if the court were allowed to apply a formula to determine punitive damages and lost pay, resulting in a windfall for class members who suffered no injury.

Wal-Mart further argued it was entitled to individualized hearings on the punitive damages and lost pay issues so it would have the opportunity to defend itself on individual employee claims.

In rejecting all of Wal-Mart's arguments, the Ninth Circuit stated no law required individualized hearings and statistical methods could be used to fashion appropriate relief in a manageable way without raising any due process or other constitutional concerns. The ruling pointed out that statistical methods can be more accurate than other methods for determining class member remedies, and that numerous cases recognize the validity and potential advantage of statistical evidence and formulas.

Equally as significant were the plaintiffs claims that under Rule 23(b)(2) injunctive relief predominated over claims for monetary relief, and class certification was, therefore, appropriate. Wal-Mart countered that because many of the class members were former employees, they could not benefit from injunctive relief, arguing further that the district court's finding that injunctive relief predominated was an abuse of discretion.

The Ninth Circuit rejected both arguments, deciding that the primary interest of the plaintiffs as a whole was unaffected by the fact that some putative class members were former employees. The court also found that Wal-Mart failed to show any evidence the plaintiffs were more motivated by damages than by injunctive relief. Furthermore, the court noted that backpay, although monetary in nature, is an equitable remedy under Title VII, and thus the request for backpay did not undermine plaintiffs' claims that injunctive and declaratory relief predominate the class action for purposes of a Rule 23 class certification analysis.

This blog is largely based on an article by Lawrence Lee in the summer, 2007 edition of the American Bar Association "Labor and Employment Law" newsletter.

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U.S. Court of Appeals Rules In Wal-Mart Employment Class Action Case

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