U.S. Supreme Court Tightens the Reins on Class Action Certification

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Full text of the Court's opinion

On June 20, 2011, the U.S. Supreme Court overturned class certification in one the largest civil rights class action suits in United States history. Although the facts of Wal-Mart Stores v. Dukes dealt specifically with employment discrimination, the Court’s decision will have broad-reaching effects on all types of claims brought as class actions against companies in every industry in Ohio and across the country.

In Dukes, current and former Wal-Mart employees sought to certify a class of more than 1.5 million female employees, alleging discrimination against women in violation of Title VII of the Civil Rights Acts of 1964. Specifically, the class claimed that local Wal-Mart managers exercised their discretion over pay and promotions disproportionately in favor of men, which had an unlawful disparate impact on female employees, and that Wal-Mart's refusal to "cabin its managers’ authority" amounted to disparate treatment. The Ninth District Court of Appeals in California certified the class, finding that the class had met all of the prerequisites necessary to go forward on their claims as a class.

But the United States Supreme Court disagreed, finding that the class failed to meet several of the requirements necessary under Federal Rule 23.

First, the Court held that the Dukes class lacked commonality. Dukes makes clear that “[w]hat matters to class certification . . . is not the raising of common questions — even in droves — but rather the capacity of a classwide proceeding to generate common answers to drive the resolutions of th[e] litigation. Dissimilarities within the proposed class are what have the potential to impede the generation of common answers.” Dukes, at 10. The proposed Dukes class lacked commonality because “[w]ithout some glue holding the alleged reasons for all those decisions together, it will be impossible to say that examination of all the class members’ claims for relief will produce a common answer to the crucial question why was I disfavored.” Dukes, at 12 (emphasis in original).

Second, the Court rejected the class claims under Federal Civil Rule 23(b)(2), finding that claims for monetary relief may not be certified under subsection (b)(2), at least where the monetary relief is not incidental to the requested injunctive or declaratory relief.

Third, under Dukes, [a] party seeking class certification must affirmatively demonstrate its compliance with the Rule — that is, he must be prepared to prove that there are in fact sufficiently numerous parties, common questions of law or fact, etc.” Dukes, at 10. In other words, after Dukes, it is not enough for a plaintiff to offer his plan to prove that a numerosity or commonality exists — each element must be actually proven before a class can be certified.

Fourth, Dukes made some significant statements about the the standards for the admission of expert testimony, as set forth in Daubert v. Merrell Dow Pharmaceuticals, 509 U.S. 579 (1993), at the class certification stage. Dukes expressed “doubt” that Daubert would not apply at the certification stage. But then Dukes effectively applied Daubert by its rejection of plaintiffs’ expert opinions, analysis of defendants' experts’ criticisms and ultimate finding that plaintiffs’ expert opinions did nothing to advance their case. Dukes, at 14. Going forward, this guidance tells district courts that they too must actually analyze competing expert opinions as they relate to the Rule 23 factors at the class certification stage — kicking the can down the road on expert issues is no longer sufficient.

Finally, Dukes rejected the idea of a “Trial by Formula.” Dukes, at 27. In Dukes, the proposed Trial by Formula —establishing back pay claims by taking an average of a sub-set of all plaintiffs — was rejected because such a proposal would contravene Wal-Mart’s right “to litigate its statutory defenses to individual claims.” Id. After Dukes, this and other formulaic plans to establish common liability may be insufficient; instead, defendants must be given the right to present individual defenses on individual issues of liability.

The Supreme Court’s significant statements on commonality, the role of Daubert, the necessity to prove individual liability, and the necessary evidentiary showing at the class certification stage are all signs that the class certification hurdle has been raised. After Dukes, it is clear that class plaintiffs must in fact prove that each of the Rule 23 elements are met — even if this proof appears to overlap with the merits — in order to advance past the class certification stage.

Justice Scalia delivered the opinion of the Court, in which Chief Justice Roberts, and Justices Kennedy, Thomas and Alito, and in which Justices Ginsburg, Breyer, Solomayor and Kagan joined in part. Justice Ginsburg filed an opinion concurring in part and dissenting in part, in which Breyer, Solomayor and Kagan joined.