The United States Supreme Court heard oral arguments today in a case that could have an enormous impact on business in the United States. In Wal-mart Stores, Inc. v. Dukes, Betty, et al., 10-277, plaintiffs seek to affirm certification of a “nationwide class action consisting of all current and former female employees of Wal-Mart Stores, Inc., estimated at the time to comprise at least 1.5 million women.” Petition for a Writ of Certiorari, 2010 WL 3355820, *1 (U.S. 2010). “The millions of class members collectively seek billions of dollars in monetary relief under Title VII of the Civil Rights Act of 1964, claiming that tens of thousands of Wal-Mart managers inflicted monetary injury on each and every individual class member in the same manner by intentionally discriminating against them because of their sex, in violation of the company’s express anti-discrimination policy.” Id. at 3355820. The lower courts certified and affirmed the enormous class. Id.at *1.
In Wal-mart, the Supreme Court will decide whether to adopt a standard for certification of class actions that will make it much easier for plaintiffs to sue businesses as a group. Under Federal Rule of Civil Procedure 23, a party seeking class certification must meet all of the requirements of Rule 23(a)(numerosity, commonality, typicality, and adequacy of representation), and in addition, must meet only one of three Rule 23(b) requirements. The three Rule 23(b) options are:
- prosecuting separate actions by or against individual class members would create a risk of:
- inconsistent or varying adjudications with respect to individual class members that would establish incompatible standards of conduct for the party opposing the class; or
- adjudications with respect to individual class members that, as a practical matter, would be dispositive of the interests of the other members not parties to the individual adjudications or would substantially impair or impede their ability to protect their interests;
- the party opposing the class has acted or refused to act on grounds that apply generally to the class, so that final injunctive relief or corresponding declaratory relief is appropriate respecting the class as a whole; or
- the court finds that the questions of law or fact common to class members predominate over any questions affecting only individual members, and that a class action is superior to other available methods for fairly and efficiently adjudicating the controversy. The matters pertinent to these findings include:
- the class members’ interests in individually controlling the prosecution or defense of separate actions;
- the extent and nature of any litigation concerning the controversy already begun by or against class members;
- the desirability or undesirability of concentrating the litigation of the claims in the particular forum; and
- the likely difficulties in managing a class action.
F.R.C.P. 23(b). Many class actions must meet the specific standards of Rule 23(b)(3) because they do not fit the circumstances of 23(b)(1) or (2). The Rule 23(b)(3) standard is usually a higher hurdle.
Despite the fact that class members in Wal-mart would seek billions of dollars in back pay, the Ninth Circuit affirmed class certification under Rule 23(b)(2), because it found that plaintiffs’ monetary claims were not “‘superior in strength'” to the injunctive claims. Petition for a Writ of Certiorari, 2010 WL 3355820 at *5 (citations omitted). This approach allowed the plaintiffs to essentially by-pass the more demanding requirements of Rule 23(b)(3), which “‘imposes strict requirements of predominance, superiority and manageability…'” Id. at 9-10(citations omitted). The Supreme Court is now considering two issues: 1) “[w]hether claims for monetary relief can be certified under Federal Rule of Civil Procedure 23(b)(2)” – which by its terms is limited to injunctive or corresponding declaratory relief – and, if so, under what circumstances; and 2) “[w]hether the class certification ordered under Rule 23(b)(2) was consistent with Rule 23(a).” Id. at 3355820; Order Granting Petition for Writ of Certiorari, 2010 WL 3358931 (U.S. 2010).
The Supreme Court’s decision, expected in a few months, can have an enormous impact on business in the United States. If plaintiffs seeking billions of dollars are allowed to proceed with class actions without meeting some reasonable showing that class treatment is a fair and appropriate vehicle for resolving their claims, businesses operating in the United States will have one more hurdle to succeeding and competing in a global market.