SCt: No class action for Title VII disparate impact case

In a 5-4 vote pitting conservative justices against liberal justices, the Supreme Court ruled that Wal-Mart’s policy of granting local supervisors discretion in pay and promotion decisions, which allegedly has a disparate impact on female employees, did not provide a common question, as required for class certification under Rule 23(a)(2). Wal-Mart v. Dukes, No. 10-277, 2011 WL 2437013 (June 20, 2011). Justice Scalia wrote the opinion of the Court and was joined by Justices Roberts, Thomas, Kennedy, and Alito. Justice Ginsburg wrote an opinion dissenting on the Rule 23(a)(2) question and was joined by Justices Breyer, Sotomayor, and Kagan. All justices agreed that the backpay claims in the case were improperly certified under Rule 23(b)(2).

The District Court for the Northern District of California certified a class of all women employed at Wal-Mart stores at any time since December 26, 1998, which numbered approximately 1.5 million. The District Court found “questions of law or fact common to the class” under Rule 23(a)(2) by relying on statistical evidence on gender disparities related to pay and promotions, anecdotal reports of discrimination from approximately 120 Wal-Mart employees, and expert testimony that the company was “vulnerable to gender discrimination” (internal quotes omitted). The Ninth Circuit, en banc, substantially affirmed the District Court’s ruling.

The Court concluded that the evidence presented of Wal-Mart’s alleged discriminatory policies was insufficient to warrant class certification. Relying on General Telephone Co. of Southwest v. Falcon, it found that the plaintiffs needed to show “[s]ignificant proof that an employer operated under a general policy of discrimination” (457 U.S. 147, 159, n. 15 (1982)). Because the expert upon whom the plaintiffs relied was not able to specify the extent to which stereotypes affected employment decisions (“whether 0.5 percent or 95 percent”), the Court deemed that his testimony did not meet this standard.

Apart from this rejected evidence, the majority found that the plaintiffs did “not identif[y] a common mode of exercising discretion that pervades the entire company,” citing Watson v. Fort Worth Bank & Trust to declare that the plaintiffs needed to “identify[] the specific employment practice that is challenged”(487 U.S. 977, 994 (1988)). With this principle the Court proceeded to reject the plaintiff’s statistical and anecdotal evidence for failing to identify particular practices that affected the entire class. The statistical evidence, said the Court, pointed only to the existence of disparities rather than to any common practice, and the anecdotal evidence was too little and not sufficiently representative for the size of class certified. As a result, the Court concluded that “there is [not] even a single common question” that ties the class together (internal quotes omitted).

Justice Ginsburg dissented from this conclusion. After questioning the majority’s scrutiny of the District Court’s discretion regarding Rule 23(a), her opinion focused on Watson’s conclusion that practices not motivated by discriminatory intent, but that produce discriminatory results, do give rise to Title VII claims. For the instant case, it noted that managers may be susceptible to unconscious biases, and that Wal-Mart’s uniform policy of discretion does nothing to combat such biases. Thus, the dissent found a sufficient basis for class certification and asserted that the majority had mistakenly imported Rule 23(b)(3)’s requirements into 23(a)(2) and had effectively required the common questions of law or fact to predominate over individual questions. (It also dismissed Falcon, which dealt with intentional discrimination, as irrelevant, since the instant case, which involves disparate treatment, involved Wal-Mart’s companywide policies affecting all female workers.)

The Court unanimously agreed that the backpay claims in the case could not be certified under Rule 23(b)(2) because “the monetary relief is not incidental to the injunctive or declaratory relief.” It characterized the backpay claims as individualized relief against which a defendant could provide defenses against specific plaintiffs. It also noted that only Rule 23(b)(3) would be appropriate for backpay claims, since that provision, and not (b)(2), offers procedural protections like mandatory notice and the ability to opt out.

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