Wal-Mart Wins Before the U.S. Supreme Court

Monday, June 20, 2011, the U.S. Supreme Court, issuing its long-awaited decision in Wal-Mart Stores, Inc. v. Dukes et al., ruled that the plaintiffs, who had proposed a class with an estimated 1.5 million members, could not proceed with their sex discrimination case as a class action.

The putative class proposed by the plaintiffs in Wal-Mart consisted of all current and former women employed in any of Wal-Mart’s stores, nationwide, since December 26, 1998. Rule 23 of the Federal Rules of Civil Procedure states that, in order to proceed with a class action, plaintiffs must show that they share at least one common question of fact or law, often referred to as “commonality.” Many courts have been rather lax about the “commonality” requirement, finding it satisfied whenever the members of a proposed class have any single issue of fact or law in common, regardless of the issue’s significance. The Supreme Court majority in Wal-Mart bolstered this requirement, explaining that Rule 23 requires plaintiffs to show that they suffered the same injury and that the common question can be resolved “in one stroke,” for the entire class. 

The plaintiffs’ theory in Wal-Mart was that statistics proved that the discretion the company gave store managers nationwide to make pay and promotion decisions affecting employees in their respective stores worked to the disadvantage of all women employees. The plaintiffs also contended that the company’s strong corporate culture educated managers to exercise their discretion in favor of men.

The Supreme Court ruled that the plaintiffs had not presented significant proof of their common question of fact or law. Each individual member of the proposed class allegedly suffered discrimination as a result of a discretionary decision by a single manager, somewhere in the company, but the plaintiffs did not identify anything the managers did in common to discriminate against women – there was no evidence that all managers relied on tests, on performance-based criteria, on education level or on any other available factor. Statistical evidence, aggregated at the regional and national level, also failed to demonstrate anything about the managers individually.

The Court in Wal-Mart also ruled that, even when plaintiffs are able to prove “commonality,” if they are seeking monetary relief, they will further be required to establish that the common questions of law or fact “predominate” over questions affecting only individual class members, and that a class action is a more fair and efficient method of deciding the controversy than individual lawsuits. This comment is based on Rule 23(b)(3) of the Federal Rules. This ruling is highly significant for future cases, as plaintiffs typically seek monetary relief, and as the “predominance” requirement is a more difficult standard to satisfy than alternatives set forth in the Rules.

Employers nationwide had anxiously awaited the Supreme Court’s decision in this case, believed to have had the largest certified class in the history of employment discrimination cases. This ruling justifies the common corporate policy of delegating to local managers the discretion to make operational decisions, deeming that they are best situated to determine the local requirements and to use local information. The Court’s decision also validates the use of centralized corporate authority to set boundaries for local managers to prevent discrimination.