June 17, 2021
In Wal-Mart Stores Inc. v. Dukes, the U.S. Supreme Court on June 20, 2011, decertified a class of approximately 1.5 million women, depriving the group of the chance to vindicate claims of systemic workplace discrimination.
In doing so, the Supreme Court revised the requirements for establishing commonality, reversed decades of unanimous circuit authority permitting certification pursuant to Federal Rule of Civil Procedure 23(b)(2) for employment discrimination cases seeking back pay, in addition to injunctive relief, and required that any Title VII class action provide the employer with the opportunity to raise individual defenses. While at the time some believed that Dukes would totally preclude pursuit of employment discrimination class actions, the last decade has shown that Dukes was not a death knell for employment class actions, although some features of the ruling have impeded progress more than others, and it has driven up the expense of such litigation significantly.
Regarding commonality under Rule 23(a), and related consideration of predominance under Rule 23(b)(3), courts have certified a variety of discrimination class claims, under both disparate impact and disparate treatment theory.
Policies incorporating discretionary decision-making may demonstrate commonalty in disparate impact cases.
The Dukes court reaffirmed its 1988 holding in Watson v. Fort Worth Bank & Trust that a system of delegated discretion may give rise to liability under Title VII in appropriate cases. In order for such claims to demonstrate commonality where discretion had been delegated to multiple decision makers, the court required demonstrating a common mode of exercising discretion and identifying a specific employment practice.
In McReynolds v. Merrill Lynch Pierce Fenner & Smith Inc., the U.S. Court of Appeals for the Seventh Circuit in 2012 reversed a denial of class certification. As Judge Richard Posner explained for a unanimous panel, the existence of a companywide personnel policy distinguished the case from the delegation of discretion in Dukes, which failed to qualify as a discrete, company personnel policy.
The Seventh Circuit found dispositive that the discretion permitted by the challenged policies was exercised “within a framework established by the company.” The policies at issue in McReynolds — one that permitted brokers to form teams pursuant to criteria of their choice and another that permitted the allocation of departing brokers’ accounts pursuant to criteria of the remaining brokers’ choice — constituted discrete personnel policies that permitted those administering them broad discretion in how to implement them.
The Seventh Circuit concluded that challenges to these policies presented questions about their adverse effect that could generate answers common to the class.
Similarly, in Ellis v. Costco Wholesale Corp., the U.S. District Court for the Northern District of California in 2012 certified challenges to policies permitting discretion. Like McReynolds, the Ellis court found that exercising discretion pursuant to discrete company policies satisfied the commonality requirement of Rule 23.
A constellation of policies formed the framework for discretion: a promotion-from-within preference, a practice against posting management job vacancies, and the absence of a formal application process for promotions to certain management positions.
As the U.S. District Court for the Eastern District of New York explained in Calibuso v. Bank of America Corp. in 2012:
Dukes did not foreclose all class action claims where there is a level of discretion afforded to individual managers … here plaintiffs allege that the implementation of companywide procedures [including the compensation system] results in a disparate impact on women.
Where decision makers exercise their discretion in an environment polluted by gender stereotypes, that only reinforces the conclusion that they exercised their discretion in a common manner.
Disparate impact challenges to nondiscretionary policies continue to easily satisfy commonality.
For example, courts have found commonality based on disparate impact challenges to “tap on the shoulder” employee promotion systems, as in the U.S. District Court for the Southern District of New York’s 2012 decision in Chen-Oster v. Goldman, Sachs & Co. In other cases, policies in which pay increases are set as a percentage of existing salary can not only perpetuate but also increase disparities in pay.
Recently, challenges to reliance on prior salary in setting starting pay have been a focus of successful class certification rulings. Relocation requirements have similarly been found to raise common questions.
And of course written exams or physical abilities tests used for hiring or promotion continue to present clear cases for certification, as in the U.S. District Court for the District of Connecticut’s 2011 decision in Easterling v. State of Connecticut Department of Correction.
The existence of a single decision maker helps demonstrate commonality in both disparate impact and disparate treatment claims.
The Dukes court noted that one way plaintiffs can identify a common mode of exercising discretion is to show that the discretion was exercised through some common direction. The court also provided the example of “the assertion of discriminatory bias on the part of the same supervisor” as a type of claim that is dependent upon a common contention capable of classwide resolution.
Subsequent courts have found that where decisions are made by a single person or small group, a common mode of exercising discretion or operation of a general policy of discrimination are more readily apparent.
For example in Ellis, the court found that “[t]op management’s involvement in the promotion process [was] … consistent, and pervasive, classwide.”
And in Scott v. Family Dollar Stores Inc., the U.S. Court of Appeals for the Fourth Circuit noted that “discretionary authority exercised by high-level corporate decision-makers, which is applicable to a broad segment of the corporation’s employees, is more likely to satisfy the commonality requirement.”
Commonality for a disparate treatment claim may be proved through statistical and anecdotal evidence.
Although the Supreme Court has not explained precisely what constitutes “significant proof” of a general policy of discrimination, sufficient to satisfy the commonality requirement for class certification under a disparate treatment theory, multiple courts have addressed this issue.
In Brown v. Nucor Corp., the Fourth Circuit in 2015 held that statistical and anecdotal evidence could provide the “glue” satisfying the commonality standard set by Dukes, and therefore could be sufficient to show a general policy of discrimination causing injury across the class. The Brown court noted that unlike a disparate impact claim, “a showing of disparate treatment does not require the identification of a specific employment policy responsible for the discrimination.”
Thus, statistical and anecdotal evidence showing a pattern of discrimination “can alone support a disparate treatment claim, even where the pattern is the result of discretionary decision-making.”
As the Supreme Court explained in International Brotherhood of Teamsters v. United States in 1977, a decision the Dukes court reaffirmed, pattern or practice claims may establish liability upon showing that discrimination was the “regular rather than the unusual practice.”
Statistically significant disparities between the observed and expected results in the challenged personnel practices are sufficient to establish liability, although individual accounts of discrimination bring “the cold numbers convincingly to life.”
Statistical analyses must account for the decision maker to ensure that observed disparities are not the result of just a few bad apples. And while an analysis at the decision maker level may be required for some claims, courts examining disaggregated results must consider the pattern of those results.
A company’s response to disparities as a classwide issue demonstrates commonality.
In Ellis, the court found that the plaintiffs had provided sufficient proof of commonality in part by showing that the defendant regarded gender disparities as a companywide issue, and had taken steps to increase diversity within the company in response to those widespread disparities.
Thus, when a company addresses a lack of diversity as a classwide problem, this itself demonstrates the existence of a common issue capable of classwide resolution.
Rule 23(b) Issues
The Walmart v. Dukes decision has proved a bigger obstacle to satisfying Rule 23(b). For all but the simplest cases, the ruling bars certification under Rule 23(b)(2) of claims to back pay.
Thus, most class certifications have proceeded either under Rule 23(b)(3), when common questions can be shown to predominate, or certification of issues common to the class under Rule 23(c)(4).
With respect to predominance, courts have expressed relatively little concern about the formulation of damages in evaluating predominance, but have exhibited somewhat greater concern over whether individual defenses will predominate. The existence of some individual defenses does not necessarily defeat predominance.
Moreover, some defenses that may be raised individually can be resolved with common evidence for everyone in the class as to whom the defense is raised. If the liability finding or other classwide evidence can resolve whether a certain factor is a legitimate basis for a difference in pay or denial of promotion, then the availability of that factor as a defense to individual remedial claims may be addressed with evidence common to the class that satisfies the predominance standard.
For those courts that have been hesitant to certify the class claims in their entirety, they have with increasing frequency certified those issues that can be adjudicated with evidence common to the class pursuant to Rule 23(c)(4).
While the plaintiffs in the Dukes case sought certification of their claims under Rule 23(b)(2) and, as a backup, under Rule 23(b)(3), they never pursued, and the Supreme Court never addressed, certification of discrete issues under Rule 23(c)(4). Courts have considerable discretion to certify issues pursuant to Rule 23(c)(4) when doing so would materially advance the resolution of the action.
And an earlier split in the circuits has largely been resolved in confirming that only those issues subject to Rule 23(c)(4) need satisfy the Rule 23(b)(3) predominance requirement, not the entirety of the case. As a result, certification is often sought pursuant to Rule 23(b)(3) and Rule 23(c)(4) in the alternative.
The Legacy of Walmart v. Dukes
While the Walmart v. Dukes decision did not bring an end to certification of employment discrimination claims, it raised the bar for certification, making certification more expensive and time-consuming to achieve.
Courts applying the Dukes decision have wrestled with the meaning of the new standards it announced, such as what qualifies as “significant proof” of a pattern of discrimination, the common mode of exercising discretion, and what was meant by “trial by formula” — which the Supreme Court clarified in Tyson Foods Inc. v. Bouaphakeo in 2016.
Class certification was once addressed early in the litigation, but regrettably, the Dukes decision has typically delayed it to a much later stage, where it now resembles adjudication of the merits.
More discovery is needed before class certification can even be fairly presented to the court,
driving up the cost of class certification, which has made pursuit of those claims prohibitively expensive for some. Moreover, in what must be a development welcomed by employers, after the Dukes decision, class claims have typically been smaller in scope, as they seek to follow guidance by the court to focus their claims challenging discretionary decision-making on a single or small group of decision makers.
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Disclosure: Sellers and Webber represented Dukes and the plaintiff class in Wal-Mart Stores v. Dukes, and Sellers argued the case before the Supreme Court.
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The complete Law360 Employment Authority article can be accessed here.
A PDF of the complete Law360 Employment Authority article can be accessed here.