Labor/Employment: Significant Oral Argument Today in Walmart Stores v. Dukes

Acknowledgment to SCOTUSBlog for this succinct preview into this important case — one which tests Walmart’s notion that it is too big to be sued under the Civil Rights Act.  Oh, boy ….

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Background

It is a fact of life in a complex industrial society that lawsuits can grow very complex, very expensive, and wearying in their length.  It takes a particularly hardy, or well-heeled, individual who wants to sue in that environment to go it alone.  And, often, what one person can gain by suing is not enough to make it worthwhile  — for that person, or for the lawyers.  Congress, and the states, have provided an answer:: the “class-actionm” lawsuit, combining a group of individuals who share the same complaint, pursuing it en masse.

Like many legal process inventions, the class-action lawsuit has developed problems:  the difficulty in figuring out who is in the group, whether what they claim is the same for all of them, whether there is a common remedy that would fit, and how to manage the case when the facts may vary, person by person.

Corporate America, and other large targets, have a special grievance about the way they believe the class-action lawsuit has developed.  Such lawsuits, the argument goes, can be so threatening in their cost and potential consequences that those who get sued will be driven to settle, even if they believe the claims lack merit and could not succeed, if only one or a few individuals had brought the case.

The complications of such a case, actual or potential, are such that serious constitutional questions can arise.   Justice Antonin Scalia, in an opinion he wrote with a temporary order in a case last year, commented that “the extent to which class treatment may constitutionally reduce the normal requirements of due process is an important question.”  He suggested that there was “national concern over abuse of the class-action device.”

The critics, in the business world and outside it, now are focusing on what may be the biggest class-action case ever; it almost certainly is the biggest such lawsuit filed in a civil rights case. based on a claim of sex discrimination against female workers throughout a vast chain of retail stores.

Indeed, it involves the largest private employer in America — Wal-Mart Stores, the nation’s, and maybe the world’s, dominant retailer.  The chain is a colossus, no matter what measure is used: 3,400 stores, 41 separate regions, 53 retail departments, 170 job classifications — and 1 million workers.  It is a company with such market clout that it can actually dictate the kind of consumer goods that manufacturers produce for the entire American retail industry.

The class-action lawsuit Wal-Mart now faces (it hasn’t been tried yet, although it has been in court for almost a decade) at one point involved perhaps 1.5 million women who work for the company, or previously did.  The total number, after an appeals court ruling modified the dimensions of the class, is in some dispute, but it probably is at least 500,000.  Representing that class are the six women who have been in the case almost from its very beginning in the summer of 2001.

Wal-Mart’s lawyers say there has been nothing like it in workplace law in the 44 years since Congress approved the modern version of the court rule governing such lawsuits: Rule 23 of the Federal Rules of Civil Procedure.   The case very likely will produce interpretations of the two key sections of Rule 23 that will have impact well beyond the Wal-Mart case itself.

The first part (section 23a) lays down the basic conditions for any class-action lawsuit in federal court.    One or a few individuals may file such a case, representing every one who shares the same legal claim, if the whole group is so large that the courts could not handle such a crowd, if the case raises the same questions of law and fact for all members, those representing the group raise claims typical of everyone’s, and the class representative must “fairly and adequately” protect everyone’s interests.

Those four conditions must be met in every case that is allowed  to go forward as a class action, so section a is very much at issue in the Wal-Mart case.

Beyond those conditions, Rule 23”s second part — section b — adds some further requirements.  The first of these deals with proof of the risks that would be faced if the individuals were to sue alone.  A class-action case may proceed either if there is a risk that the results in individual cases would impose differing legal duties on the party sued (say, claiming all the money available), or if there is a risk an individual case would settle the claims for every one, including those not taking part, thus depriving them of making their own claim.

The conditions continue in section b.  If either one of those risks is shown, Rule 23b allows two types of lawsuits, and they are very different.

First, if the party sued has acted or failed to act in a way that applies to the class as a whole, and a court order could provide an “appropriate” remedy for every one, then the other members of the class not in court do not have to be notified about the case, and no one can choose to opt out.   In other words, the class representatives’ remedy will be everybody’s.  That is section 23b(2).

Second, if a judge rules that the legal and factual issues of the whole group “predominate” over any issues that affect only some individuals in the group, the class device is the superior way for the case to go forward, and a class case is manageable, the judge must assure that everyone in the class is notified about the case and given a chance to opt out, preserving their own right to sue.  That is section 23b(3), and it is harder to get such a class certified because of the special conditions.

In the Wal-Mart case, a judge seven years ago approved a b(2) class, and the retailer has been trying since then to undo it.  Wal-Mart contends that the women workers who sued it for workplace discrimination cannot meet the harder test for a b(3) class, and should not have been allowed to go forward as a b(2) class.  In other words, its basic argument is that a class lawsuit was never a proper approach — an assertion that, of course, the suing women workers strenuously contest.

Actually, the case that is now before the Supreme Court started out as an individual case, filed by Betty Dukes, a “greeter” who welcomes shoppers into the Wal-Mart store in Pittsburg, Calif.  On June 8, 2001, Dukes began a lawsuit without a lawyer, claiming that, as a black employee, she was discriminated against both in her pay and in her chances for promotion.

Eleven days after Dukes sued, she was joined by five other women; the lawsuit then became a claim of sex bias on a company-wide basis, seeking court orders to remedy the discrimination the women claimed, plus backpay awards and punitive damages.  They sued under Title VII of the 1964 Civil Rights Act, the nation’s most significant workplace discrimination law.  A third version of their case was filed in September 2002.

Between 2001 and 2003, the parties’ lawyers exchanged information about the women’s claims.   Based on that process, the women’s lawyers contended that class status was proper — under Rule 23b(2) — because Wal-Mart was a “top-down” managed company that pursues common policies, known as “the Wal-Mart Way.”

Though policies are centralized, and though the company has an explicit no-discrimination policy, the women claimed that substantial discretion is given to individual store managers to govern pay and promotions for individuals within each store, and the result has been that hourly and salaried female workers throughout the chain receive significantly lower pay and fewer advancement opportunities than men employees.   The differences, the women’s lawsuit claimed, were so signfiicant that they could not have resulted from mere chance.

On June 21, 2004, U.S. District Judge Martin J. Jenkins of San Francisco approved a section b(2) class.  Encompassed within the class were “all women employed at any Wal-Mart domestic retail store at any time since December 26, 1998, who have been or may be subjected to Wal-Mart’s challenged pay and management track promotions policies and practices.”

The judge found that Wal-Mart has a systemwide corporate culture of doing things “the Wal-Mart Way,” and that this resulted in uniform policies and uniform management attitudes, with the result that discrimination within tht policy is likely to affect all of the members of the class.

The judge also concluded that if Wal-Mart were found to have committed class-wide discrimination, individual hearings would not be necessary to determine who was eligible for back pay, since that could be determined from the company’s electronic database, from which lost back pay could be calculated based on qualifications.  The judge, though, found that there was not an equivalent database for determinining a pay award on the promotion claims, and so certified a smaller class for which data did exist.

Wal-Mart appealed to the Ninth Circuit, and, in the nearly six years the case was pending before that court, two split decisions were issued by three-judge panels, and a 6-5 decision emerged from review by the en banc Court in April 2010.

The en banc decision — the one that the Supreme Court is ready to review — upheld Judge Jenkins’ order certifying a 23b(2) class, but modified the order in some significant respects, and said the case should go back to District Court to reexamine whether some of the women should be put into a class under 23b(3).    It rejected all of the rest of Wal-Mart’s objections, including its claim of a denial of its constitutional rights.

Petition for Certiorari

Near the end of last August, Wal-Mart’s lawyers filed their petition for review in the Supreme Court.  Overall, the petition had three themes: the case is not a proper one for class action because it involved hundreds of thousands of women who “held different jobs in different stores in different states under the supervision of different managers,” it involved a claim for money — back pay — when the part of Rule 23 under which the class was approved does not allow money claims under any circumstances, and the designated class was so massive and unmanageable that a trial would violate Wal-Mart’s rights under the Constitution and federal law, and the rights of women employees not directly involved in the case.

The petition raised two questions.  The first focused on the money issue.   That part of Rule 23, the petition said, permits as a remedy only an injunction or a court order declaring legal rights; no form of a money award is mentioned, so none is allowed,  It thus asked the Justices to rule that the women’s back pay claim was beyond any court’s authority to award to this class.  The money claim, the petition asserted, could result in billions of dollars of liability.

The second question was a broadside attack on the class order, contending that it violated Title VII, the Constitution’s Due Process Clause, the Seventh Amendment guarantee of a civil jury trial, and Rule 23 as well as a federal law controlling court rules (the Rules Enabling Act).

Attempting to persuade the Court that the issues affect not only Wal-Mart, the petition asserted that, “if the Ninth Circuit decision in this case stands, virtually every employer in the land could be subject to a similar suit…This Court’s guidance is needed in this case to chart the future course of class litigation in the employment context and beyond.”

Among the petition’s specific complaints about the Ninth Circuit ruling were these: it would allow a money remedy despite the specific language of Rule 23b(2), it created a three=way split in the Circuit Courts on when a money claim might be brought under that section, it relieved the six women class representatives of any duty to prove a policy of bias affecting all women in the class, it simply scuttled the idea that the individuals would have to prove the company intended harm and prove the workers’ own injury, and it took away crucial legal defenses that Wal-Mart would normally be able to rely upon in a Title VII case — and, in the process, violated the retailer’s constitutional rights.

The petition was supported by nine separate amici filings, running from business firms or trade groups such as the U.S. Chamber of Commerce to computer hardware manufacturers and major corporations that say they, too, may now face such sweeping class-action lawsuits because they, like Wal-Mart, are large and follow common employment practices.

One brief from a host of major corporations argued that the Circuit Court ruling “threatens the sorts of benign organizational decisions that large corporations must make every day.”  The lawsuit’s attack on Wal-Mart’s “corporate culture,” those firms contended, will enable workers with grievances to turn individual claims into a nationwide class action.

Lawyers for the six women who sued for the class urged the Justices not to grant review, arguing that the case was still in a pre-trial stage, and that key issues remain undecided in the wake of the Ninth Circuit’s decision to return the case to the District Court.

The Court, the opposition brief contended, does not typically review pre-trial orders, “and for good reason…Premature review risks wasting the Court’s resources because legal issues may change or be mooted by the time of any final judgment.  Class certification orders…are especially fluid.”  Still to be decided, the brief said, are whether and how punitive damage claims could be certified for class pursuit, and whether to allow a class focused on the claims of female workers who were not working for Wal-Mart when the complaint was filed.   And, even after those issues are settled, further questions may arise as the pre-trial process unfolds further, the workers’ lawyers added.

The Court considered the case at two Conferences, then granted review on December 6.  It accepted Wal-Mart’s first question, on the availability of a money remedy under Rule 23b(2) and, if some money claims are allowed under that section, what standards should determine when that would be available.

The Court rewrote the second question, telling the lawyers on both sides to file written arguments and prepare to argue on whether the class order under 23b(2) is “consistent with” Rule 23?s section a, laying out the basis conditions for any class order.

The Court did not explain what it was getting at with that question, but one possibility is that it wanted to make sure that the female workers had cleared even the first hurdle; if not, the Court might never reach the scope of remedy available under 23b(2).

Since the rewritten question did not mention Wal-Mart’s constitutional claims, it is conceivable that the Court was signaling that it might not reach the Due Process and Seventh Amendment issues.  If it confined its decision solely to the dimensions of Rule 23, the constitutional issues might simply fall away.

The Court appears to be holding on its docket, without action, another major class-action case that is all about constitutional questions surrounding class-action procedures, Philip Morris USA Inc. v. Jackson, et al. (10-735).  That case arises under state law (Louisiana), not federal Rule 23.  Holding back on that case, though, could be an indication that the Justices might reach constitutional claims in Wal-Mart’s  case that could then affect the tobacco case.

Merits Briefs

Wal-Mart’s brief on the merits, perhaps wisely, switched the sequence of its challenges, beginning with the question the Court fashioned on whether the most basic requirements for a class approval had been met — the 23(a) issue.   No doubt sensing that that could be the whole case, the retailer’s lawyers emphasized their view that the claims of the women workers were not common or typical for the entire class, and that the representatives — it noted that only three of the original six remained in the class — could not adequately stand in for so many workers who did jobs at so many different levels, including supervisory positions.

The brief examined what it said was the testimony of the three class representatives remaining — Betty Dukes, Edith Arana and Christine Kwapnoski — and argued that it showed how different their individual experiences with Wal-Mart were.  While Dukes and Arana were disciplined (Arana was fired), that was for violating company policy, Kwapnoski had jobs at various levels and actually got a promotion to a supervisory position.

Even though the case, at this stage, does not involve the merits of the claims of discrimination, the retailer’s brief sought to attack the basis for the women’s claim that there is a top-down tolerance for “gender stereotyping and discrimination,” and argued that the women’s lawyers had not identified a single policy that actually did discriminate.  In fact, the brief insisted, Wal-Mart has — end enforces — a strong ban on discrimination and a policy explicitly promoting a diverse workforce.   The specific claims of discrimination emerged, the company contended, from mere anecdotes, sociological theory, and statistical data that does not prove its point.

The brief finished with arguments, little different from those made in the petition for review, that 23b(2) simply does not allow any money claims.  But, it went on, even if it did, the Ninth Circuit has deepened a conflict among the appeals courts on when such a remedy could be the basis for class treatment.

The women workers’ brief on the merits began with a summary of the top-down policies that, they claimed, result from a corporate “culture” that values women less, demeaning them with sexist nicknames, holding meetings at Hooters restaurants, disparaging women who failed to get promotions as failing to be aggressive in their climb upward.

The brief turned next to an assault on Wal-Mart’s litigation strategy, accusing the company of seeking to “dismantle several fundamental pillars” of Court precedents on class-action lawsuits over workplace bias — including an attempt to do away with claims that common practices by an employer can be attacked by insisting that each worker prove her very own individual case.  Wal-Mart, the brief asserted, is pressing “radical and far-reaching proposals to change the law,” driven by a desire to allow a class only among the smallest groups of workers.

The workers’ lawyers, seeking to show that only a class approach could work against a giant like Wal-Mart, argued that the claims add up to an annual loss of wages of only about $1,100 per worker — hardly worth pursuing in court.

The brief went to considerable effort to bridge what appears to be the most difficult of the women’s legal arguments: reconciling the claim that Wal-Mart follows workplace policies that are supposed to be the same throughout the vast company, yet get translated into acts of bias against individual women workers when local store managers use the discretion that management allows them to control wages and promotions.   The class action method, it contended, is necessary to be able to attack the company-wide approach, rather than having to attack each biased decision made at each store against each woman employee.

The amici filings on both sides of the case –15 on Wal-Mart’s side, 14 on the women workers’ side — are grouped among predictable allies.  On the retailer’s side are an array of business firms and trade groups and conservative or libertarian advocacy organizations, generally reflecting the strong current of corporate opposition to class action litigation in general, and at “gargantuan” classes (as one brief put it), with the ever-present threat of using claims that are, at most, debatable in order to generate settlement by risk-adverse companies.  On the women’s side are labor organizations, civil rights groups, and consumer organizations, viewing Wal-Mart’s challenge as the leading edge of an assault on the very idea of class treatment of workplace bias cases.  There is thus a lively debate about the role of the class-action device throughout the U.S. economy, and about whether Supreme Court approval of the device as constructed in this case will encourage lawyers to think up new legal inventions to change the nature of legal combat.

Analysis

Whatever the strength of the competing arguments, Wal-Mart goes into the oral argument with three strategic advantages.  First, the Court granted review of the case, despite the clear reality that the dimensions of the class in dispute are still far from settled; second, the Court fashioned a question for review that could give the Justices a fairly easy way to put a quick end to this case as a class matter, and, third, there is a sense among some of the Justices — perhaps a majority, perhaps not — that the class-action device has been abused.

The women workers, though, are not without some potential advantages: the Court may have some sensitivity about the reputation it seems to have, at least in some circles, that it has a bias in favor of corporate America (a sensitivity that, perhaps, has been on display in several recent rulings favoring workers’ rights over management prerogatives), and the Court now has three women on the bench, bringing perhaps some stronger inclination to take seriously the claim that gender stereotyping may, indeed, have been a fact throughout the vast retail operation of Wal-Mart.

Wal-Mart could have scored some points already with the strength of its grievances about the sheer size of the class and about the division among lower courts on when a money remedy is proper under the part of Rule 23 that is at issue in this case.  Those two factors, indeed, may have accounted for the Court’s willingness to take on the case even in its pre-trial stage.  The sheer magnitude of the corporation, though, may make somewhat less compelling its suggestion that it is genuinely threatened by this lawsuit, which, of course, has now already proceeded for a decade and the company is a long way from giving up and taking a negotiated settlement.

The women workers have on their side the common-sense notion that, in the retail world, being a female is a natural condition for receiving lower wages and fewer opportunities to advance to management.  The weakest part of the class argument may be the difficulty in translating company-wide policies into local acts of discrimination at the store level; and, without the opportunity to attack Wal-Mart system-wide, the women workers probably do not have a workable case at all.

The stakes do seem high, at least for class-action jurisprudence.   Each side, management and labor, has much to lose, or to gain, and the entire shape of Rule 23 could well be fundamentally changed — or at least clarified — when the case is over and done.