Vol. 84, No. 11, November 2011
Wal-Mart epitomizes the word “big.” Its big-box stores draw billions of customers every year with the promise of big bargains. Wal-Mart is one of the largest private employers in the world, the United States, and many individual states, including Wisconsin. Now, as a result of Wal-Mart Stores Inc. v. Dukes, a U.S. Supreme Court decision released in the final days of the Court’s 2010-11 term, the company and its practices have made a significant impact on the legal world’s version of “big”: class action litigation.
The class action lawsuit is an exception to the general rule that litigation is conducted by the individual named parties. To justify a departure from that rule, the class representatives must show that all prospective class members share the same interest and suffered the same injury. Making this showing is more difficult than it sounds, because the boundary between an individual claim and a properly comprised class action is not clearly defined. In an effort to define this boundary, Rule 23(a) of the Federal Rules of Civil Procedure (hereinafter Rule 23) requires that the named plaintiffs be appropriate representatives of the class and that the claims be “tied together by four requirements: numerosity, commonality, typicality, and adequate representation.”1 These criteria “limit the class claims to those fairly encompassed by the named plaintiffs’ claims.”2
Wisconsin’s class action statute, Wis. Stat. section 803.08, differs from Rule 23. It states as follows:
“When the question before the court is one of a common or general interest of many persons or when the parties are very numerous and it may be impracticable to bring them all before the court, one or more may sue or defend for the benefit of the whole.”
Unfortunately, there is “scant” case law addressing the requirements for certification under section 803.08.3 Although federal case law addressing Rule 23 is not controlling with respect to class actions brought under Wisconsin law, Wisconsin recognizes federal law as persuasive authority on class-certification issues. But “there is no case or statutory law in Wisconsin governing the procedural aspects of class actions suits. … There has been no real guidance given by our Supreme Court in the area of state procedural requirements for class actions.”4 At this time, a court’s determination as to whether to certify a class action lawsuit in Wisconsin constitutes an exercise of discretion in which the court weighs the advantages of disposing of the entire controversy in one proceeding with the difficulties inherent in handling the proceeding as a single action.5 As is done under Rule 23, Wisconsin applies the commonality requirement.6
In Wal-Mart Inc. v. Dukes, the U.S. Supreme Court addressed the issue of commonality in what it described as “one of the most expansive class actions ever.”7 The Ninth Circuit Court of Appeals had approved the certification of a class comprising approximately 1.5 million plaintiffs, all current and former female employees of Wal-Mart, who claimed that they were discriminated against on the basis of sex. In addressing the Ninth Circuit’s certification decision, the Supreme Court zeroed in on the commonality requirement, which requires plaintiffs’ claims to be connected by common questions of law or fact. While the Court did not necessarily break new ground in the world of class action litigation, its analysis raises several questions and opportunities for lawyers who practice in this field.
The purpose of this article is straightforward. First, it provides an overview of Dukes and the Court’s reasoning. Second, it discusses the implications of the Court’s decision for other class action litigation. Finally, it addresses the application of Dukes to Wisconsin class action procedure, which remains somewhat undefined. This article concludes that Dukes’s restriction on the commonality requirement creates a standard that may unnecessarily foreclose legitimate class action litigation under Rule 23 and Wisconsin law.
The Facts of Dukes: Three on Behalf of 1.5 Million
Sometime in the 1990s, Betty Dukes, a Wal-Mart employee, realized that she was not being provided with the opportunities for promotions that were given to similarly situated male Wal-Mart employees. According to an expert witness’s declaration cited by the Dukes district court in 2004, women comprised about 65 percent of the hourly workers at Wal-Mart but only 33 percent of its management workers.8 Dukes and six other plaintiffs filed suit on behalf of themselves and other similarly situated female employees in an effort to secure class-wide relief for this alleged discrimination. (The court of appeals narrowed the certified class to three named representatives.) All alleged that they were passed over for promotions, withheld from management training, and paid less than men doing comparable work.
Wal-Mart employs almost 1.4 million people in the approximately 3,000 stores that it operates in the United States. Pay and promotion decisions at Wal-Mart are generally committed to its local managers’ general discretion, which is exercised in a largely “subjective manner.”9 Regional and district managers throughout the country are allowed to use their own judgment when selecting candidates for management training. This is also true when making promotions to management positions.
Betty Dukes began working at a Pittsburgh, Calif., Wal-Mart store in 1994. She started as a cashier and was later promoted to customer-service manager. In the lawsuit, Dukes did not allege that Wal-Mart had an express corporate policy that prohibited the advancement of women. Instead, she alleged that the local managers’ discretion to make promotions was exercised disproportionally in favor of men, leading to an unlawful disparate impact on female employees. Despite this subjectivity, Dukes alleged, the discrimination was common to all of Wal-Mart’s female employees. In support of this assertion, Dukes argued that Wal-Mart fostered a “corporate culture” that permitted bias against women to infect the corporate decision-making process.
Based on this theory, the plaintiffs asked the district court to certify a class of “all women employed at any Wal-Mart retail store since December 26, 1998 who had been or may have been subjected to Wal-Mart’s allegedly illegal pay and promotion practices.”10 To support their theory, the plaintiffs relied on statistical evidence about pay and promotion disparities between men and women at Wal-Mart, “anecdotal reports” of discrimination from approximately 120 Wal-Mart female employees, and the testimony of a well-known sociologist, who conducted a “social framework analysis” of Wal-Mart’s corporate culture and concluded that the company was vulnerable to general discrimination. Relying on this evidence, the district court granted the plaintiffs’ motion and certified their proposed class.
The Ninth Circuit Court of Appeals affirmed. The court concluded that the plaintiffs’ evidence was sufficient to raise the “common question” as to whether Wal-Mart’s female employees were subject to a single set of illegal corporate policies. In support of this conclusion, the court gave considerable weight to the plaintiffs’ expert witness, who testified that Wal-Mart’s personnel policies and practices made pay and promotion decisions “vulnerable to gender bias.”
The U.S. Supreme Court’s Decision
In a 5-4 decision, the U.S. Supreme Court reversed the Ninth Circuit’s determination that the plaintiffs’ alleged class was tied together by common issues of law or fact. In the majority opinion, written by Justice Scalia, the Court acknowledged that the “crux of this case is commonality – the Rule requiring plaintiff to show there are questions of law or fact common to the class.”11
Here, the Court addressed a central issue in class action litigation, one that regularly surfaces in employment cases: How much aggregate proof is required to demonstrate that common questions of law or fact warrant class treatment? While commonality requires a plaintiff to demonstrate that the class members have “suffered the same injury,” the mere claim by employees of the same company that they have suffered discrimination does not necessarily mean that all their claims can productively be litigated at one time.
Instead, “their claims must depend on a common contention – for example, the assertion of discriminatory bias on the part of the same supervisor. That common contention, moreover, must be of such a nature that it is capable of class-wide resolution – which means that determination of its truth or falsity will resolve an issue that is central to the validity of each one of the claims in one stroke.”12 In reaching this conclusion, the Court tightened the standard for commonality, which now requires a showing that common answers will resolve a fundamental aspect of the case “in one stroke.”
The Dukes Court also addressed a difficult question regarding the overlap between an inquiry into the merits of the plaintiffs’ case and a proper analysis of the criteria for class certification. For years, class action plaintiffs have argued that the court is forbidden from addressing the merits of the plaintiffs’ underlying claim at the certification stage. Conversely, defense counsel argue that, to determine whether Rule 23 has been satisfied, it is necessary to address the merits of a particular claim.
In Dukes, proof of commonality necessarily overlapped with the plaintiffs’ contention that Wal-Mart engaged in a pattern or practice of discrimination. In this context, “the crux of the inquiry will be the reason for a particular employment decision.”13 Accordingly, the Court noted that it was impossible to evaluate the certification question without “some glue holding the alleged reasons for all of these decisions together.”14 Absent “significant proof” that Wal-Mart operated under a general policy of discrimination, the plaintiffs failed to demonstrate commonality.
Finally, the Court indirectly addressed another crucial question that regularly surfaces in class action lawsuits, namely, whether expert testimony is required at the certification stage. In Dukes, the district court concluded that the Daubert standard did not apply to expert testimony at the certification stage of class action proceedings. The Supreme Court rejected this assertion in dicta and disregarded testimony from the plaintiffs’ expert regarding Wal-Mart’s corporate culture of discrimination. In so doing, the Court sent a clear signal that expert testimony may be necessary to prove commonality at the certification stage.
Four justices dissented from the Court’s commonality analysis. Writing for the dissent, Justice Ginsburg rejected the majority’s insistence on written policies, noting that “discretionary employment practices” can provide common questions that are amenable to class treatment.15 According to the dissent, the majority “gives no credence to the key dispute common to the class: whether Wal-Mart’s discretionary pay and promotion policies are discriminatory.”16 Going further, the dissent argued that the majority’s emphasis on individual differences between class members “mimics the Rule 23(b)(2) inquiry into whether common questions ‘predominate’ over individual issues.” With this distinction in mind, the dissent concluded that the plaintiffs satisfied the commonality requirement by establishing that Wal-Mart had a uniform policy of delegating discretion over pay and promotions throughout all its stores.
The Significance of Dukes
Dukes is an important decision for class action lawyers, for three reasons. First, Dukes tightens the standard for commonality by requiring the plaintiff to show that the answer to a common question will resolve a central issue in the case. Second, Dukes explains how certification decisions will often require a “quick peek” into the merits of the underlying claims. Finally, the Dukes Court signaled that certification decisions will now require the introduction of substantial evidence, including testimony from qualified experts. Viewed in isolation or in the aggregate, these findings all place additional weight on plaintiffs’ burden at the certification stage.
Timothy D. Edwards, Wayne State 1989, is a partner at Axley Brynelson LLP, Madison. He is chair of the firm’s electronic discovery and record management team. Reach him at TEdwards@axley.com.
In a typical class action, plaintiffs will highlight policies, practices, and procedures that gave rise to the alleged unlawful conduct and use them to tie the class members together by common wrongdoing. In contrast, the defendants will illuminate individual variances within the class and highlight those individual variances in an effort to show that class treatment is not supported under Rule 23. This “line in the sand” often defines the gray area between a case that should be adjudicated collectively and a case that is better suited for individual resolution.
Dukes adds additional meaning to this debate. For years, courts have accepted minimal showings of commonality under Rule 23(a). In fact, courts applied more exacting scrutiny under the predominance requirement, which also requires an inquiry into the similar features of the class claims.
Dukes pulls this inquiry back into the commonality analysis. In so doing, the Court rejected a finding of commonality that was based on more than 1 million employees across the country who worked for different supervisors and were not bound by a common policy that led to discrimination. According to the Court, subjective decision-making is not the basis for a finding of commonality in such a widespread pattern of decisions. However, the requirement of a common question whose answer will resolve a central issue in the case creates a new, significant evidentiary burden for plaintiffs in class action lawsuits. Courts are certain to struggle with this directive, which will likely lead to the decertification of class action lawsuits that are not “glued together” by common questions with one answer that will dispose of a central issue in the litigation.
Implications for Wisconsin Class Action Litigation
The Supreme Court’s decision in Dukes is likely to apply to class certification decisions in Wisconsin. While not required to do so, Wisconsin courts often rely on federal law for guidance on class certification issues. In both Wisconsin and the federal court system, class plaintiffs must establish commonality as a prerequisite to certification. Absent substantial Wisconsin authority on this issue, which does not exist, Wisconsin courts are free to rely on federal cases, such as Dukes, when assessing the commonality prong of the certification analysis. If they do, Wisconsin courts will apply more scrutiny at the commonality stage based on the holding in Dukes. Conversely, Wisconsin courts may construe Wis. Stat. section 803.08 more expansively by accepting Justice Ginsburg’s approach to commonality, which accepts widespread policies of subjective decision-making as the “glue” that ties the common questions together. Given the dearth of Wisconsin law on this issue, the applicability of Dukes remains unknown.
Did the Dukes Court use a shotgun to kill a mosquito? The Court could have applied existing principles of commonality and concluded that this nationwide discrimination class action lawsuit, based on a vague practice that allowed for subjective decision-making in hundreds of stores, failed to raise common questions of law or fact. Instead, the Court took the opportunity to tighten the commonality prong of the certification analysis, which now requires common questions whose answers will resolve a central issue in the case. Although the contours of this new standard have yet to be established, it is clear that class action plaintiffs will now be required to defend merit-based inquiries that challenge the existence of such common answers, all with expert testimony. Given its reliance on federal law to resolve similar questions, it is likely that Wisconsin will follow suit and incorporate this heightened inquiry into the certification analysis.
1 Fed. R. Civ. P. 23(a).
2 General Tel. Co. of Southwest v. Falcon, 457 U.S. 147 (1982) (citations omitted).
3 See Thomas D. Roe Jr., “State and Foreign Class-Action Rules and Statutes: Differences From- And Lessons From- Federal Rule 23,” 35 W. St. U. L. Rev 147, 149 (Fall 2007).
4 Mercury Records Prods. Inc. v. Economic Consultants Inc., 91 Wis. 2d 482, 490-91, 283 N.W.2d 613 (Ct. App. 1979).
5 O’Leary v. Howard Young Med. Ctr. Inc., 89 Wis. 2d 156, 172, 278 N.W.2d 217 (Ct. App. 1979).
6 Mercury Records, 91 Wis. 2d at 490.
7 Wal-Mart Stores Inc. v. Dukes, 131 S. Ct. 2541 (2011).
8 Dukes v. Wal-Mart Stores Inc., 222 F.R.D. 137, 146 (N.D. Cal. 2004).
9 Dukes, 131 S. Ct. at 2546.
10 Id. at 2549.
11 Fed. R. Civ. P. 23(a).
12 Dukes, 131 S. Ct. at 2551.
13 Id. at 2552.
15 Id. at 2564-65 (Ginsburg, J., dissenting).
16 Id. at 2565 (Ginsburg, J., dissenting).