The Federal Appellate Decision for the Plaintiffs in the Sex Discrimination Class Action Against Wal-Mart:
By ANTHONY J. SEBOK
|Tuesday, Feb. 13, 2007|
In August 2004, a federal district court certified the largest class action in the history of the nation: a suit brought on behalf of 1.5 - 2.0 million women who have worked at Wal-Mart since 1998. In an earlier column, I wrote about the case just as Wal-Mart filed for interlocutory appeal (that is, an appeal occurring when the case was still ongoing) to the U.S. Court of Appeals for the Ninth Circuit.
Last week, the Ninth Circuit issued its decision in the appeal -- and Wal-Mart lost. In this column, I will discuss where Wal-Mart goes from here.
The Suit's Allegations: Sex Discrimination in Promotions and Pay
The suit, known as Dukes, et. al. v. Wal-Mart, Inc., was brought by Betty Dukes and six other women, on behalf of women employees of Wal-Mart across the nation, under Title VII of the 1964 Civil Rights Act, the federal employment discrimination statute. Dukes and her co-plaintiffs alleged that Wal-Mart has discriminated against women in two ways: in promotions and in pay. They say that women not only are less likely than men to be promoted, even if equally meritorious, but also paid less than men for the same work.
Sex discrimination cases like this one can be complicated for courts to sort out. Often, employers will defend their promotion and salary decisions with all sorts of reasons--some pretextual, some not--regarding the qualifications or work histories of the particular plaintiffs complaining of discrimination. That is why juries are so important in these cases: As factfinders, they may properly choose among conflicting claims as of what the motives behind employment decisions in fact actually were -and whether these motives were sexist or legitimate.
Class Action Status: A Fairly Common Framework for Sex Discrimination Suits
Title VII suits can be brought as class actions under Rule 23 of the Federal Rules of Civil Procedure. In fact, often makes much more sense that they be brought as class actions.
When an employer has developed a single discriminatory policy that affects multiple workers, it is simply more efficient for a court to ascertain the existence of that policy with a single trial. After that determination has been made, damages for each worker may be a matter of individual measurement, but that matter can be worked out in separate hearings or minitrials, which may proceed employee by employee.
For example, some workers might be owed two years of back pay, and others might be owed compensation for emotional distress due to the way in which the discrimination occurred. Evidence to this effect can be presented in individualized hearings. But when it comes to issues of liability, as opposed to damages, it makes sense to handle company-wide policies of discrimination under Rule 23.
Why the Duke Case Is Special: A Huge Class Size, and Wal-Mart's "Hands Off" Approach
If class actions are a familiar feature of the Title VII landscape, then what, if anything, makes the Dukes case special? As I mentioned in my earlier column, the feature that stands out the most is the sheer size of the case.
If this case is allowed to go forward as a class action, a single trial and a single jury will decide whether millions of American workers were the victims of discrimination. However, as the trial judge who certified the case noted, size alone cannot be a reason for rejecting certification. Otherwise we would be saying, in effect, that if a company got too large (or discriminated against too many workers), the law no longer applied to that company.
The other feature of the suit that stands out is that the plaintiffs have not identified any concrete policy on the part of Wal-Mart that they allege causes the discrimination about which they complain. Rather, they have identified Wal-Mart's very decentralized, almost hands-off approach, to the management of its stores, as itself a discriminatory policy.
Wal-Mart's Defense of Its Hands-Off Approach - and the Plaintiffs' Response
Wal-Mart's response to the plaintiffs' allegation that its "hands-off" approach to store management fostered discrimination, has been to point out that there may be many reasons for the adoption of this approach, none of them sinister and none of them in violation of federal antidiscrimination law.
In response, however, the plaintiffs argue, in essence, that the effect of giving managers so much freedom, coupled with a failure of the firm's headquarters to monitor whether discrimination was occurring, created the conditions under which sex discrimination could blossom. The plaintiffs, furthermore, argued that the statistics bore out their fears: Though women constituted 2/3 of Wal-Mart's employees during the relevant period of time, they made up only 1/3 of the employees among its management ranks. Furthermore, women often did the same work as men, yet were paid less because their job classifications were inferior.
The Class Certification Issue: Why It Was Difficult to Resolve
At this point, the intersection of class action law and antidiscrimination law makes this case more difficult than the average Title VII case. Here's why:
To certify a class action under Rule 23, a court must determine (1) that the class is so numerous that other procedural devices, such as joinder (that is, joining together multiple suits into a single larger non-class-action suit), are impracticable; (2) that there are questions of law or fact common to the class; (3) that the class representatives are typical of the class; and (4) that the class representatives will fairly and adequately protect the interests of the class.
Wal-Mart's main challenge to the class certification was to argue that there were no common questions of fact or law that predominated in the case. Their argument was that if discrimination occurred in any of their 3,400 stores, then the allegation of discrimination should be adjudicated with evidence of the actions of the management of that store in particular - not evidence of corporate management's hands-off policy.
The trial court saw things differently, however. It held that there were indeed sufficient common questions, among the individual cases, to justify class action treatment - for it ruled that since the plaintiffs were alleging that a national policy of inattention permitted discrimination at its various stores, the plaintiffs had raised a question that was "common" to the class of millions of Wal-Mart workers.
How the Plaintiffs Made the Class Action Question Easier: Opting to Sue for Injunctive Relief
Furthermore, the trial court pointed out that the lawyers for the class were not suing for compensatory damages--just injunctive relief. That would mean that the way women were treated going forward could change dramatically - but that, in the context of the class action, compensation for injuries such as emotional distress would not be remedied. (Plaintiffs are, however, seeking punitive damages and back pay, which is technically part of the injunctive relief; I will comment further on the punitive damages component of their case below.)
This was a very important strategic decision on the plaintiff's part. On one hand, it meant they gave up a potentially large award of compensatory damages. On the other hand, it made it much easier for the class to be certified. After all, if the trial court would not have to deal with the highly individualistic question of compensatory damage for emotional distress, but just the general question of what Wal-Mart had to do in the future to change its ways, then a class action might seem manageable not only at the liability stage, but also at the remedies stage, too.
As a public relations matter, fashioning the suit as one for injunctive relief was also quite canny. The lead attorney for the class, Brad Seligman of the public interest Impact Fund, could say to the media that all Betty Dukes wanted was for Wal-Mart to change its ways, and thereby avoid the accusation that he or his clients were just in it "for the money."
The Ninth Circuit's Decision Upholding Class Certification
In last week's decision, a three-judge panel of the U.S. Court of Appeals for the Ninth Circuit upheld the district court's certification order. The two-judge majority's opinion, written by Judge Harry Pregerson, did not break any new legal ground. Rather, it basically just repeated the conclusions of the district court. But in blistering dissent, the third judge, Judge Andrew Kleinfeld, raised some uncomfortable questions that suggest that the Wal-Mart case may be a candidate for either a rehearing en banc (that is, by a larger panel of the Circuit) or a petition for review by the U.S. Supreme Court.
First, Judge Kleinfeld pointed out that the question of fact or law that were allegedly common to all the class members was based on the argument that Wal-Mart's national policies left women "vulnerable" to sex discrimination at individual stores. But leaving someone vulnerable to an illegal act is necessarily not the same as being the legal cause of the illegal act. Leaving someone vulnerable to discrimination might be a "but for" cause of the discrimination - in that the discrimination would not have happened but for the vulnerability. However, "but for" causation is not always sufficient under the law.
Thus, Judge Kleinfeld argued that the plaintiffs would also have to show that the discrimination at the individual stores was more directly caused by the national policies -- something he noted that their statistical evidence, as far as he could tell, was not able to show.
Judge Pregerson's majority opinion responded to this argument by Judge Kleinfeld by noting that Wal-Mart was trying to defeat the motion for class certification by raising a question regarding the case's legal merits - more specifically, by challenging the plaintiffs' theory of how discrimination emanated from Bentonville through its national policy. Yet a class certification hearing is not a hearing on the merits of the parties' arguments, noted Judge Pregerson, who cited the U.S. Supreme Court's 1974 opinion in Eisen v. Carlisle & Jacquelin in support of that proposition.
The Controversial Question of How to Separate a Class Certification Hearing from a Mini-Trial on the Merits
Judge Pregerson is right that, for years, courts have repeated the mantra that a class certification hearing should not turn into a minitrial on the merits of the case. But there has been increasing frustration, among both academics and judges, stemming from a feeling that perhaps Eisen's rule has at times been abused by plaintiffs who get courts to "certify first and ask questions later."
After all, by the end of the Twentieth Century, it was well- known to all observers that if a court certified a class, a defendant would be very likely to seek settlement. Thus, certification was not, empirically, a true precursor to the evaluation of the merits of the case. Rather, it was, in effect, a preemption of the discussion of the merits of the case. And that meant, many argued, that meritless would-be class actions could still prompt sizable settlements, if they simply made it past the class certification hearing stage.
Judge Pregerson's attitude, however, was that the plaintiffs merely had to make "some showing" based on the testimony of their expert witnesses that that there were common issues of law or fact. It is interesting to contrast this approach with the U.S. Court of Appeals for the Second Circuit's approach in the 2006 Miles v. Merrill Lynch & Co. (In re Initial Pub. Offering Sec. Litig.) decision. There, the Second Circuit held that "we can no longer continue to advise district courts that 'some showing,' . . . will suffice . . . or that an expert's report will sustain a plaintiff's burden so long as it is not 'fatally flawed.'"
This much tougher attitude towards what must be shown to secure class certification has also been adopted by the U.S Court of Appeals for the Seventh Circuit. Thus, if the Ninth Circuit upholds Dukes upon review by an en banc panel, then there may be a battle brewing over the meaning of Eisen that only the United States Supreme Court can settle - by resolving the "Circuit Split" that seems to be imminent unless the Ninth Circuit en banc panel disagrees with the three-judge panel and the opinion written by Judge Pregerson.
The Role Punitive Damages May Play Here
The other point that Judge Kleinfeld raised is that Judge Pregerson seemed unconcerned by the fact that the trial judge had approved a trial plan by which the plaintiffs would seek punitive damages, as well as injunctive relief. In 1991, Title VII was amended to permit victims of discrimination to seek punitive damages. But Congress could not have anticipated then how much the Supreme Court has changed the federal constitutional law of punitive damages in the interim.
In a number of recent cases, the Supreme Court has tried to limit the size of punitive damages by demanding that there be a "reasonable relationship" between them and the compensatory damages awarded in the same case, or that they not exceed a ratio in the "single digits" (such as 9-to-1, but not 10-to-1) in relation to the compensatory award in a case. (I discussed some of the case law in a recent column.)
In a case like Dukes where injunctive relief is requested, how is the trial court supposed to apply the Supreme Court's new rules? What is the "reasonable relationship" between the work of a court-appointed monitor in fashioning particular remedies to ensure a company no longer does business in a discriminatory way, and a punitive damages award of, say, $600 million? How does one even begin to calculate the "ratio"?
My prediction is that, contrary to the conventions of the modern class action game, Wal-Mart will resist settling the Dukes case just because a class was certified in the case. They will surely seek an en banc review, and, given the deep divisions between the conservatives on the Ninth Circuit and liberals like Pregerson, their wish may be granted.
Moreover, even if the Ninth Circuit en banc panel does not give Wal-Mart what it wants, the United States Supreme Court may see the Dukes case as an excellent opportunity to take up some serious questions that a mega-employment discrimination class action case raises. And if it does, it will be interesting to see what the conservative, pro-business Roberts Court ends up doing.