Portfolio Media, Inc. 860 Broadway, 6th Floor New York, NY 10003 www.law360.com Phone: +1 646 783 7100 Fax: +1 646 783 7161 customerservice@law360.com Class War And The Women Of Wal-Mart Law360, New York (April 1, 2011) -- When retired school teacher Sue Brown asked her department manager at the Wal-Mart store in Louisville, Ky., why *her+ pay was lower than a high school boy s, she was told *y+ou don t have the right equipment... You aren t male, so you can t expect to be paid the same. *1+ After repeatedly denying her requests for a transfer from the toy department to the hardware department at the Wal-Mart store in Conway, Ark., Sheila Hall s support manager asked *w+e need you in toys... you re a girl, why do you want to be in hardware? *2+ These two women are among thousands involved in a class action against Wal-Mart Stores Inc., the largest private employer in the world. Originally filed by six women in the Northern District of California, Dukes v. Wal-Mart Stores Inc.[3] has grown into a massive class action alleging systemic discrimination by Wal-Mart against female employees in pay and promotion decisions. The case has garnered national attention not only because of the accusations against Wal-Mart of prevalent sexism, but also because of the controversy surrounding the certification granted to a nationwide class consisting of a half-million members. The fate of the class is now in the hands of the U.S. Supreme Court. Understanding the procedural contours of Dukes requires looking back seven years to when the class was created. The Class is Formed Dukes is a Title VII sex-discrimination lawsuit filed in 2001 against Wal-Mart by six of its employees who worked in 13 of Wal-Mart s 3,400 stores. Among these employees is Betty Dukes, a greeter in Wal- Mart s Pittsburg, Calif., store. By June 2004, more than a million female employees and former employees of Wal-Mart discount stores, super centers, neighborhood stores and Sam s Club stores sought to join in the case against Wal-Mart.
The plaintiffs allege that Wal-Mart engaged in widespread discrimination against women. This discrimination included excessive subjectivity in personnel decisions by retail store managers, gender stereotyping, and the creation and perpetuation of an insular, discriminatory corporate culture. The plaintiffs seek classwide injunctive and declaratory relief, lost pay and punitive damages, but no compensatory damages on behalf of the class. The crux of the plaintiffs case is based on statistical evidence of gender disparities. The plaintiffs rely on statistically significant disparities between men and women at Wal-Mart in terms of compensation and promotions, which they assert are classwide and can be explained only by gender discrimination. *4+ Wal-Mart argues that it uses a myriad of distinct systems for compensating and promoting in-store employees depending on the position and type of store (or store department), and that decisions regarding pay and promotions are too decentralized to create any questions common to the class. *5+ The company denies there is any pattern of discrimination at Wal-Mart and challenges the statistical models offered by the plaintiffs expert as fundamentally flawed. *6+ On June 21, 2004, U.S. District Judge Martin J. Jenkins granted the plaintiffs class certification. The judge found sufficient evidence that Wal-Mart employed a companywide culture, dubbed the Wal-Mart Way, which it implemented through the discretionary decisions of store managers, resulting in the potential for classwide injury. Accordingly, the court approved a class encompassing all women employed at any Wal-Mart domestic retail store at any time since Dec. 26, 1998, who have been or may be subjected to Wal-Mart s challenged pay and management track promotions policies and practices. *7+ The court was also satisfied that the plaintiffs claim for punitive damages was secondary to their primary goal of achieving broad equitable relief and that, pursuant to Rule 23(b) of the Federal Rules of Civil Procedure, inclusion of this claim *did+ not preclude certification of *their+ case. *8+ Wal-Mart appealed the provisional class certification order to the Ninth Circuit. In a 6-5 decision with four opinions, an en banc panel of the Court of Appeals affirmed the certification order in part. The panel remanded the claims of class members not employed by Wal-Mart when the complaint was filed in 2001, reducing the class size by about 1 million members to 500,000. The Court of Appeals remanded the claims for punitive damages to the district court so that it could consider whether a punitive damages class should be certified under Rule 23(b)(2) or (b)(3). The Ninth Circuit did not rule on Wal-Mart s constitutional challenges under the Due Process Clause and the Seventh Amendment, leaving the district court to manage the class proceedings to comply with constitutional requirements.
In August 2010, Wal-Mart filed its petition for review in the Supreme Court. As grounds for review, Wal- Mart first contended that the plaintiffs claims did not satisfy Rule 23(a) s commonality, typicality or adequacy requirements. Second, because the plaintiffs monetary claims predominated, Wal-Mart argued certification was inconsistent with Rule 23(b)(2), which is limited to claims for injunctive relief or corresponding declaratory relief. Finally, Wal-Mart asserted that a trial on the merits would be unmanageable and in violation of its constitutional rights and those of the absent class members. The Supreme Court granted Wal-Mart s petition on Dec. 6, 2010. The court accepted (and reworded) Wal-Mart s questions regarding whether claims for monetary relief may be certified under Rule 23(b)(2), and whether the class met the prerequisites for certification in Rule 23(a). The court did not accept review of Wal-Mart s constitutional claims. The Inconsistency The Supreme Court held oral argument on March 29.[9] The 61-minute hearing focused, first and foremost, on the discriminatory policies and practices alleged by the plaintiffs. Several of the justices wondered how the so-called Wal-Mart Way could, on the one hand, create a culture of uniformity throughout thousands of Wal-Mart stores and, on the other, bestow unlimited discretion upon local store managers to decide workers pay and promotions. For Justice Anthony Kennedy, the... complaint face[d] in two directions. Number one, you said this is a culture where Arkansas knows, the headquarters knows, everything that s going on. Then in the next breath, you say, well, now these supervisors have too much discretion. It seems to me there s an inconsistency there, and I m just not sure what the unlawful policy is. *10+ I m getting whipsawed here, said Justice Antonin Scalia.*11+ On the one hand, you say the problem is that they were utterly subjective, and on the other hand you say there is a strong corporate culture that guides all of this. Well, which is it? It s either the individual supervisors are left on their own, or else there is a strong corporate culture that tells them what to do. *12+ The plaintiffs attorney, Joseph M. Sellers, attempted to persuade Justices Kennedy and Scalia that specific features of the pay and promotion process *were+ totally discretionary, but that the decisions of the managers [were] informed by the values the company provides to these managers in training. *13+ His explanation, however, seemed to fall flat. Some justices were more receptive to the plaintiffs and less sympathetic to Wal-Mart. When Wal-Mart s lawyer, Theodore Boutrous, argued that the lawsuit was unjustified given the company s nondiscrimination policy, Justice Ruth Bader Ginsberg pushed back: Is there any responsibility if... *t+he company gets reports month after month showing that women are disproportionately passed over for promotion, and there is a pay gap between men and women doing the same job. It happens not once, but twice. Isn t there some responsibility on the company to say, is gender discrimination at work, and if it is, isn t there an obligation to stop it? *14+
Boutrous responded that the plaintiffs haven t shown a pattern across the map but instead added all the data together and pointed to disparities. *15+ Justice Sonia Sotomayor saw it differently: Counsel, I thought their expert didn t aggregate them together... He did it regionally... and found that... the disparity was significantly much higher than the 10 competitors of Wal-Mart and what they were paying their labor force. *16+ Boutrous suggested the plaintiffs identified no uniform policy resulting in discrimination against all members of the class. But Justice Elena Kagan disagreed: I don t think that s quite fair... I think their argument was that the common policy was one of complete subjectivity, was one of using factors that allowed gender discrimination to come into all employment decisions. Still, Justices Ginsburg, Kagan and Sotomayor expressed concern about how such a large employment discrimination case could be managed. Finally, the court seemed troubled by the plaintiffs reliance on statistical modeling as proof of discrimination within Wal-Mart. If judges must rely on statistics rather than individualized proof, said Justice Scalia, *w+e must have a pretty bad judicial system. *17+ Reading the Tea Leaves Dukes has re-energized the debate over the desirability, workability and limitations of class actions. Women s and labor rights organizations highlight the important role that class actions like Dukes play in combating across-the-board gender bias in the workplace, i.e., the gender gap. They argue that the benefit of class litigation lies in its deterrent effect and its ability to effectuate organizationwide policy changes that ensure a fairer work environment. They caution that a victory for Wal-Mart would derail efforts to usher in change at companies tainted by gender bias. Companies and business groups, meanwhile, worry that granting the Dukes plaintiffs class status would drastically increase the exposure of American businesses to abusive, potentially bankrupting class actions arising from common employment practices. They assert that allowing an attack en masse on Wal-Mart s corporate culture would unleash a wave of employment, antitrust and product liability suits brought by loosely defined classes of workers who could impose onerous and inappropriate settlement pressure on defendants. Ultimately, Dukes will emerge either as the largest sex discrimination suit against a private employer or as the first Supreme Court case in years to clarify the standards for class certification. The relatively onesided questioning by the justices hints at a decision remanding the case to be decertified based on Wal- Mart s commonality challenge. Then again, the court may permit the plaintiffs to collectively pursue their claims for equitable relief but not for money damages. Where the court comes down is anyone s guess. Hopefully, the justices will provide practitioners with some guidance on the standards for certifying classes under Rule 23(b)(2) and the extent to which courts should consider the merits at the class certification stage.
The court will likely save for another day the question of how large and diverse a single class can be before it becomes what Wal-Mart calls wholly unmanageable. *18+ One way or the other, the answer for the women suing Wal-Mart will dramatically shape the legal boundaries of future workplace class actions. --By Jason L. Drori, Sherin and Lodgen LLP Jason Drori is an associate in the litigation department of Sherin and Lodgen in Boston. He represents clients in complex commercial litigation, including matters involving regulatory compliance, qui tam defense and government investigations. The opinions expressed are those of the author and do not necessarily reflect the views of the firm, its clients, or Portfolio Media, publisher of Law360. This article is for general information purposes and is not intended to be and should not be taken as legal advice. [1] See Declaration of Sue Brown in Support of Plaintiffs Motion for Class Certification, 5, Dukes v. Wal-Mart Stores Inc., 222 F.R.D. 137 (N.D. Cal. 2004) (No. C-01-2252). *2+ See Declaration of Sheila Hall in Support of Plaintiffs Motion for Class Certification, 2, Dukes v. Wal-Mart Stores Inc., 222 F.R.D. 137 (N.D. Cal. 2004) (No. C-01-2252). *3+ 222 F.R.D. 137, 145 (N.D. Cal. 2004) aff d sub nom. Dukes v. Wal-Mart Inc., 474 F.3d 1214 (9th Cir. 2007) opinion withdrawn and superseded on denial of reh g, 509 F.3d 1168 (9th Cir. 2007) on reh g en banc sub nom. Dukes v. Wal-Mart Stores Inc., 603 F.3d 571 (9th Cir. 2010) and aff d sub nom. Dukes v. Wal-Mart Inc., 509 F.3d 1168 (9th Cir. 2007) on reh g en banc sub nom. Dukes v. Wal-Mart Stores Inc., 603 F.3d 571 (9th Cir. 2010) and aff d and remanded in part, 603 F.3d 571 (9th Cir. 2010), cert. granted in part,131 S. Ct. 795, 178 L. Ed. 2d 530 (U.S. 2010). [4] Dukes, 222 F.R.D. at 154. [5] Id. at 145. [6] Id. at 156. [7] Id. at 188. [8] Id. at 171. [9] A transcript of the oral argument is available here: http://www.supremecourt.gov/oral_arguments/argument_transcripts/10-277.pdf. [10] Transcript of Oral Argument at 28-29, Dukes v. Wal-Mart Stores Inc., 131 S. Ct. 795 (U.S. 2010) (No. 10-277).
[11] Id. at 29. [12] Id. [13] Id. at 28-29. [14] Id. at 6-7. [15]Id. at 7. [16] Id. [17] Id. at 48. [18] Dukes, 222 F.R.D. at 170. All Content 2003-2011, Portfolio Media, Inc.