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Mar 28, 2011

By Gerald L. Maatman, Jr.

Briefing is now complete and oral arguments are set for Tuesday March 29 before the U.S. Supreme Court in Dukes, et al. v. Wal-Mart. The defense filed its reply brief late last week ahead of its scheduled due date.

The papers filed by the parties and their supporting amici likely constitute a new modern record in Supreme Court annals. The volume of paper manifests that the case may be the most important class action decision ever for employers and employees alike in several decades.

As many readers may know from past postings on the grant of the certiorari petition, the initial defense briefing, the plaintiffs’ briefing, and both sides’ amicus filings (see them here and here), Dukes, et al. v. Wal-Mart presents cutting-edge issues relative to how employment discrimination class actions can be structured, prosecuted, and defended.

Here is some background on the case:

1. What is at stake?

  • In general – The stakes in the case are enormous and the future ruling is likely to be transformative for class action litigation. The Supreme Court’s decision likely will re-position the goal posts on the playing field of how class actions are structured, defended, and litigated.
  • For the parties to the case – For the plaintiffs and Wal-Mart, the ruling may have a dramatic effect, as a ruling in favor of one party will invest the winner with significant leverage in further prosecution or defense of the lawsuit.
  • For Corporate America – The record number of amicus submissions manifests that Corporate America understands the stakes are high. A broad rule of law may impact class action litigation for years to come; the case is therefore more than simply about Betty Dukes’ lawsuit against Wal-Mart.

2. What is the historical backdrop?

  • The issues in the case reflect the ongoing debate and tension between protecting workers’ rights vs. fundamental fairness in class action litigation.
  • The case is likely the most important case in the 44 years since the adoption of the modern version of Rule 23, which governs the manner in which class actions are litigated.

3. What is the context of the litigation before the Supreme Court?

  • To put the dispute in context, the argument comes nearly seven years after the class certification order giving rise to the appeal. The Supreme Court’s review follows a 6-5 en banc decision of the U.S. Court of Appeals for the Ninth Circuit in San Francisco which affirmed an earlier class certification order in the largest employment discrimination class action ever certified. The Ninth Circuit upheld an earlier panel decision certifying a class action gender discrimination lawsuit challenging Wal-Mart’s pay and promotions practices.

The full Ninth Circuit ruled that the U.S. District Court for the Northern District of California did not abuse its discretion in finding that the large and diverse class – encompassing approximately 1.5 million female employees, both salaried and hourly with a range of positions, who are or were employed at one or more of company’s 3,400 stores across the country – was united by a complex of company-wide discriminatory practices against women where plaintiffs presented expert opinions, factual evidence, statistical evidence, and anecdotal evidence showing a corporate policy and common pattern of discrimination imposed on female employees nationwide.

It is important to remember that the Supreme Court is not being asked to decide the merits or whether plaintiffs were victims or discrimination of if Wal-Mart violated Title VII. The Supreme Court will decide the manner in which multiple claims against the company can be combined and litigated in a class action.

4. What issues is the Supreme Court reviewing?

  • The Supreme Court is reviewing two issues. It heard argument on the following questions: (i) whether claims for monetary relief can be certified under Rule 23(b)(2) of the Federal Rules of Civil Procedure and, if so, under what circumstances; and (ii) whether the order certifying a class conforms to the requirements of Rule 23.
  • As the transcript reflects, the argument was lively, and both counsel were repeatedly interrupted with questions from the Justices on a variety of points.

5. Based on the hearing, what are the possible/likely outcomes?

Reading tea leaves from oral argument and predicting the outcome is a hazardous business. Nonetheless, here are my predictions:

  • I believe the Supreme Court did not accept Dukes to affirm what the Ninth Circuit ordered in its 6-to-5 en banc ruling. Rather, the Supreme Court is apt to re-fashion the points of law at issue. An outright affirmance or reversal is unlikely.
  • I also think the Supreme Court will split on these issues, and unanimity is unlikely. The potentially dispositive impact of those splits will shape the ultimate decision – liberal vs. conservative views; strict vs. liberal/expansive reading of the statutes and rules at issue; civil rights vs. business/employer interests; etc.
  • I predict that the majority ruling will tighten the Rule 23(a) commonality test and require more cohesiveness across the class which is pursuing employment-related claims against an employer. The commonality issues are a challenge for plaintiffs, as their claims encompass class members in 53 departments, 170 job classifications, 41 regions, 50 states, and 3,400 stores.
  • I also predict that the majority ruling will articulate additional guide posts for the Rule 23(b)(2) prerequisites that will be key to class action structuring and defense issues. This aspect of the ruling will focus on the extent to which requests for extensive money damages require heightened cohesiveness in the composition of the class and whether and to what extent relief can be afforded with or without respecting opt-out rights for class members (who wish to pursue money damages in their own lawsuits if provided notice of the case) and the impact such requests for relief have on the array of defenses to which an employer can interpose in defense of its the claims.
  • In sum, I predict the Supreme Court will send the case back for a new class certification hearing with a set of instructions that tighten the standards for injunctive relief under Rule 23 (b)(2) and monetary relief under Rule 23(b)(3).

6. What will the significance for employers? Companies? Workers? Unions? Civil Rights groups?

  • The significance will turn on the breadth of the ruling in terms of whether it applies narrowly to workplace class actions or more broadly to all types of class actions.
  • The key battleground issue likely will turn on how the legal boundaries of workplace class actions can be maintained consistent with the due process rights of an employer that must defend itself from class-wide theories of recovery. In essence, the ruling will address such questions of who can be in the class and why; how closely connected the class members and their claims must be; what does the common remedy look like that fits for the class as a whole and its members; and how should the case be managed when the facts vary from class member to class member.
  • In sum, the ultimate ruling may well stem or accelerate the volume of workplace class action litigation brought against employers over their hiring, pay, and promotional practices. It also is apt to lead employers to closely re-examine their administration of HR practices in order to stay clear of bet-the-company type of class action litigation.
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