On April 26, 2010, in a 6-5 decision, an en banc panel of the Ninth Circuit affirmed in large measure the class certification of a sex discrimination claim brought on behalf of 500,000 to 1.5 million current and former employees of Wal-Mart, seeking declaratory and injunctive relief, back pay and punitive damages. Dukes v. Wal-Mart Stores, Inc., 603 F.3d 571 (9th Cir. 2010) (en banc). Wal-Mart has indicated it will file a petition for a writ of certiorari with the Supreme Court.

Background


The Dukes action was brought in 2001 by six current or former female employees of Wal-Mart, claiming that Wal-Mart discriminated against women based on their sex in violation of Title VII because they were paid less than men in comparable positions despite higher performance ratings and greater seniority, and because they received fewer and slower promotions for in-store management positions than men. The class was estimated to be over 1.5 million female employees and former employees who worked in Wal-Mart's 3,400 stores.

In 2004, the district court certified the class as to the plaintiffs' equal pay and promotion claims. In 2007, a three-judge panel of the Ninth Circuit, over a strong dissent, affirmed that ruling. The case was then heard by an en banc panel.

The en banc decision

In the en banc decision, the Ninth Circuit held that plaintiffs met the requirements of Rule 23(a), focusing much of its analysis on Rule 23(a)(2)'s commonality requirement. The court found that the plaintiffs had sufficiently demonstrated a common policy of discrimination based on: (1) expert testimony that pay and promotion decisions were mainly in the discretion of Wal-Mart's store managers, and that Walt-Mart's corporate culture permitted "gender stereotyping;" (2) statistical evidence of regional disparities in pay and promotion between male and female employees; and (3) declarations from representative plaintiffs and other putative class members describing anecdotal evidence of gender bias.  

The Ninth Circuit also found that the suit was appropriately brought under Rule 23(b)(2) with respect to current employees, even though it included a significant request for back pay relief, because back pay is considered an equitable remedy under Title VII. Rule 23(b)(2) requires a showing that "the party opposing the class has acted or refused to act on grounds generally applicable to the class, thereby making appropriate final injunctive relief … with respect to the class as a whole." Wal-Mart argued that, because the plaintiffs sought both back pay and punitive damages for more than a million people, the claim for monetary relief, which could amount to billions of dollars, was not "secondary" to the claim for injunctive relief. The majority agreed with the plaintiffs who were active employees; however, the majority also found that monetary relief might predominate as to the active employees' bifurcated punitive damages claim, and also as to the claims of the former employees. Therefore, the court remanded the case to the district court to determine whether Rule 23(b)(3)'s requirements were met with respect to those claims.

Key Implications


The court's decision represents a material departure from other holdings on similar class certification issues. First, the court accepted an argument that permitting "excessive" discretion in personnel decisions by store-level managers, combined with a corporate culture that allegedly tacitly promoted or accepted sex discrimination, and a promotion system in which openings were not posted and were filled on the recommendations of individual managers, was enough to meet the class action commonality requirement. This is a sharp departure from other courts, which have required class employment discrimination plaintiffs to show a uniform practice of actual discrimination.

Second, the court relied on the plaintiffs' expert an opinion that Wal-Mart's centralized coordination, reinforced by a strong organizational culture, uniformity in personnel policy and practice, and significant deficiencies in Wal-Mart's equal employment polices and practices, made pay and promotion decisions vulnerable to gender bias. The dissenters strongly disagreed, arguing that reliance on such a opinion without testing its scientific validity and reliability conflicted with the U.S. Supreme Court's decision in Daubert v. Merrell Dow Pharmaceutics, Inc., 509 U.S. 579 (1993).

Third, under the majority's Rule 23(b)(2) analysis, if the plaintiffs bring the action primarily to obtain equitable relief, then, regardless of the size of the potential damage award (including the possibility of punitive damages),  the "predominance" requirement of Rule 23(b)(2) is met. In dissent, Judge Kleinfeld noted that to many, an issue worth billions of dollars would predominate, rendering 23(b)(2) certification inappropriate.

Conclusion

Because of the differences in the reasoning between the majority and the dissent, the sheer size of the case, the appeal Wal-Mart says it will pursue before the Supreme Court will likely raise many critical class certification issues.