Jottings By An Employer's Lawyer

Monday, June 20, 2011

Wal-Mart Stores, Inc. v. Duke -- A Sigh of Relief

Analysis will come later as all I have done is read the highlight and the line up of  judges. Judge Scalia's majority opinion was joined in some parts by all justices, while Justices Ginzberg, Breyer, Sotomayor and Kagan dissented from some.

The loud sound you heard was corporate America finally relaxing.

Frankly, I don't think anyone who is serious about an orderly resolution of disputes, where all parties have a fair shot at proving their allegations or defenses, has any other feeling.

The court's opinion is here.

Update: Now that I have read the opinon, here are some more substantive thoughts.

First, an ironic and sad footnote to today's opinion. Professor Richard Nagareda achieved what I assume is something highly desired by any academician, have one of your articles play a key role in a seminal Supreme Court decision. Professor Nagareda achieved that today, as both opinions the majority by Justice Scalia and a concurrence and dissent by Justice Ginzberg cite frequently from his Class Certification in the Age of Aggregate Proof, 84 N.Y.U. L. Rev. 97 (2009).  Unfortunately, Professor Nagareda died last October at the much too early age of 47, shortly after taking a position with Vanderbilt University School of Law.

 Today's case deals with the fine points of Rule 23, which is the vehicle for creation of class versus individual trials. It was widely used in the early days of Title VII, but its use had fallen off until the last few years. In part this was tied to the Civil Rights Act of 1991 which for the first time permitted jury trials and compensatory damages.  Courts generally held the compensatory damages were not suited for class actions.

In the last few years though, a new plaintiffs strategy emerged. Get a large enough class together, don't seek compensatory damages, just back pay and punitive damages,  get it certified and then force the defendant to settle because of the costs of defending and the uncertainty and difficulty of trying such a large case.  Wal-Mart v. Dukes was the largest of all, and frankly was a good case from an employers standpoint to end up before the Court.

Today's decision is going to severely restrict the use of class actions in discrimination cases going forward. The details will be fleshed out, but the Court unaminously made clear that cases where monetary issues, including back pay dominate (i.e. almost if they exist) then certification under Rule 23(b)(2), plaintiffs' preferred suit and the one it tried in Wal-Mart, is not appropriate. (Kudo's to the 5th Circuit, for having this position in advance.)

Much more important to Wal-Mart, and probably going forward, all of us, the 5-4 majority made it much more difficult to meet the standards for any class without a very tangible, specific job practice that it can be tied to. A standardized test with a disparate impact probably meets the standard but on first blush that seems to be about the closest bright line that we have.

The 5-4 opinion seems to pull the teeth from what I have always considered one of the more dangerous Supreme Court opinions, Watson v. Fort Worth Bank and Trust, a 1988 decision which seemed to permit a disparate impact case any time an employer's promotion practices were subjective (which was every employer) and there was a disparate impact (almost every employer).

For the short term, I think the focus will shift back to individual law suits and plaintiffs, or more aptly, the plaintiffs' bar, will regroup and decide what avenues there are left to pursue cases within a class framework. 

Although this case does not deal with the Fair Labor Standards Act and the collective action it permits, which are outside the purview of Rule 23, much of what the Court said could clearly be applicable to the way such cases are now being certified and handled.  I think you can start seeing Wal-Mart v. Dukes cited to district courts in FLSA cases starting today. What I will be looking for is when the district court cases start citing it back.

Here are a few of the early reports on today's decision:


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