On June 20, the U.S. Supreme Court handed down a landmark decision when it decided Wal-Mart v. Dukes , and decertified what would have been “one of the most expansive class actions ever.” In a 5-4 decision, the court, in an opinion authored by Justice Antonin Scalia, found that the plaintiffs failed to meet the “commonality” requirement for class certification under Federal Rule of Civil Procedure 23(a), reversing both the district court and 9th U.S. Circuit Court of Appeals. Justice Ruth Bader Ginsburg, in a dissent joined by Justices Stephen G. Breyer, Sonia Sotomayor and Elena Kagan, strongly disagreed with the majority and argued that the district court’s finding of commonality “was hardly infirm.”
However, in a section of the opinion joined by all nine justices, the court held that, even where the commonality requirement is met, Rule 23(b)(2) will not support a class action in which the plaintiffs are seeking individualized monetary relief, as were the plaintiffs in Dukes. Undoubtedly, the impact of Dukes will be far reaching not only for employment discrimination class actions, but for all types of class actions, including in the antitrust context.
The named plaintiffs in Dukes were two current employees and one former employee of Wal-Mart. They filed a class action on behalf of more than 1.5 million current and former female Wal-Mart employees, claiming that the retail giant discriminated against them on the basis of their sex in violation of Title VII of the Civil Rights Act of 1964. The plaintiffs alleged that local managers favored men over women when making decisions regarding pay and promotions. The plaintiffs did not argue, however, that Wal-Mart had a corporate policy of sex discrimination. Instead, they claimed that the local managers exercised their discretion in a discriminatory manner, and that Wal-Mart knew about this, yet refused to stop it. The plaintiffs’ complaint sought injunctive relief, declaratory relief, punitive damages and backpay.
In decertifying the class, the Supreme Court majority took particular issue with the fact that plaintiffs failed to establish the second prerequisite of Rule 23(a) — commonality. In order to establish commonality, the class representative must prove that “there are questions of law or fact common to the class.” The court held that commonality requires a showing that the class members “suffered the same injury,” not just that they “suffered a violation of the same provision of law.” Even if common questions are raised en masse, what is essential to class certification is that the class action generates, the court stated, “common answers apt to drive the resolution of the litigation.”
The plaintiffs in Dukes , however, sought recovery based on varied employment decisions without an underlying corporate policy of discrimination to support those decisions. An examination of each individual plaintiff’s claims for relief would not have produced common answers proving a pattern or practice of sex discrimination necessary to support a Title VII class action. Indeed, one piece of evidence offered by the plaintiffs to show a pattern or practice of sex discrimination was the testimony of a sociological expert who, Scalia noted, “could not calculate whether 0.5 percent or 95 percent of the employment decisions at Wal-Mart might be determined by stereotyped thinking.” This same expert also presented statistical analyses, which aimed to demonstrate a culture of gender bias and discrimination.
The majority found this evidence to be “worlds away from ‘significant proof’ that Wal-Mart ‘operated under a general policy of discrimination.’” The single policy that this evidence did prove was “a policy against having uniform employment practices,” which, by itself, does not suggest a corporate practice of sex discrimination.
The dissent, however, argued that discretionary decision-making, in actuality, lends itself to a heightened risk of discrimination, particularly when the decision-makers are “predominantly of one sex, and are steeped in a corporate culture that perpetuates stereotypes.” In fact, as Ginsburg pointed out, the court has previously held that discretionary decision-making can support Title VII claims, “not only when such practices are motivated by discriminatory intent, but also when they produce discriminatory results.”
In addition to discounting the plaintiffs’ expert and his statistics, Scalia also found on appeal, for class certification purposes, that the plaintiffs’ anecdotal evidence of specific instances of discrimination was not sufficient enough to suggest that all discretionary employment decisions were discriminatory. The dissent stressed that plaintiffs’ anecdotal evidence, which included accounts of female associates being referred to as “little Janie Qs,” and managers telling employees that “men are here to make a career and women aren’t,” was sufficient to suggest that discrimination saturated the corporate culture at Wal-Mart. Nevertheless, the majority discredited the plaintiffs’ evidence, which suggests that evidence of commonality will no longer be taken at face value. Instead, plaintiffs will be required to “touch aspects of the merits in order to resolve preliminary matters.”
Additionally, the court unanimously disagreed with the plaintiffs’ use of Rule 23(b)(2) in requesting backpay. Rule 23(b)(2) applies when “the party opposing the class has acted or refused to act on grounds that apply generally to the class, so that final injunctive relief or corresponding declaratory relief is appropriate respecting the class as a whole.” Even where the commonality requirement is met, Rule 23(b)(2) will not support a class action in which the plaintiffs are seeking individualized monetary relief.
The court explained that the basic foundation of Rule 23(b)(2) is that the declaratory or injunctive relief requested be applicable to all members of the class. The rule does not provide for class certification when each member of the class would be entitled to individualized injunctive relief, and certainly does not provide for class certification when each member of the class would be entitled to individualized monetary relief. Class certification in this instance, the court ruled, must be sought under Rule 23(b)(3), which includes several procedural protections that 23(b)(2) lacks, including predominance, superiority, mandatory notice and the right to opt out.
This landmark decision is sure to have sweeping implications in the antitrust arena. The use of class actions is a common tool in antitrust enforcement, and, until recently, the certification of antitrust classes was often a relatively low hurdle to clear. Courts typically accepted the substantive allegations of a complaint as true, and did not consider the merits of a claim when ruling on class certification. Certification was rarely denied in antitrust actions for failure to meet the commonality requirement. In fact, a single common question typically was usually sufficient to support certification.
Over the past few years, select courts had started raising the bar for antitrust class certification. Even before Dukes , courts in some circuits began insisting on a more in-depth analysis on the merits before certifying a class. For example, in 2008, In re Hydrogen Peroxide Antitrust Litigation , decided by then-Chief Judge Anthony J. Scirica and Judges Thomas L. Ambro and D. Michael Fisher of the 3rd Circuit, clarified the requirements for class certification. In the unanimous opinion, authored by Scirica, the court reversed Judge Stewart Dalzell’s class certification and stated that proper certification of a class requires “findings by the court, not merely a ‘threshold showing’ by a party, that each requirement of Rule 23 is met.”
The court further stated that, in certifying a class, all factual and legal issues must be resolved, “even if they overlap with the merits.” Hydrogen Peroxide demonstrates that prior to Dukes , the 3rd Circuit began requiring that antitrust plaintiffs make more than a cursory pleading of the requirements for class certification. What Dukes now adds to the mix is the solidification, or at least the confirmation, of a more elevated standard of proof for not only commonality, but for all the prerequisites and requirements of antitrust class certification.
The resulting landscape that Dukes paints for the future of antitrust class actions will be rugged and challenging. Class certification will be out of reach for some antitrust plaintiffs and the plaintiffs’ class action bar. Indeed, Dukes makes clear that plaintiffs in antitrust class actions will now be required to “touch aspects of the merits” in order to prove that they not only “suffered the same injury,” but also “suffered a violation of the same law.” Establishing these requirements for class certification will be difficult. This will be particularly so in antitrust cases that, for example, concern health care class actions that rely on individual medical diagnoses and differing injuries or cases where individual consumer decisions as to product choice are at issue.
Proving particular practices of antitrust defendants to be illegal is still no easier than it was for the plaintiffs in Dukes to prove the discriminatory corporate practices of Wal-Mart. This is especially true with the threshold Twombly/Iqbal hurdles in place.
The new precedent established by Dukes now means that antitrust class action plaintiffs will need to have the true grit to meet the enhanced standard of proof to launch burdensome class actions. The days of filing a class action based on nothing more than the pendency of a non-public government antitrust investigation appear over. The impact of Dukes on antitrust class actions should result in fewer class actions being filed.
This was perhaps the intended consequence of the Supreme Court majority’s decision in Dukes rendered during the frenzy of expensive and burdensome class actions that have plagued both corporate America and the courts for years. Whatever the motivating policy considerations at play, antitrust class actions that are filed in the future will have a much harder time passing muster with the courts for class certification. Stay tuned.
CARL W. HITTINGER is the chairman of DLA Piper’s litigation group in Philadelphia, where he concentrates his practice in complex commercial trial and appellate litigation with particular emphasis on antitrust and unfair competition matters. Hittinger is also a frequent lecturer and writer on antitrust issues and has extensive experience counseling clients on all aspects of civil and criminal antitrust law. He can be reached at 215-656-2449, or firstname.lastname@example.org. DLA Piper summer associate Erin Keltz assisted with the preparation of this article.