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Supreme Court to Tackle Nationwide Class Action Based on Decentralized Decision-Making: Wal-Mart Stores v. Dukes

In this Emerging Issues Commentary, Arthur Silbergeld and Jessica Boar discuss the recent Class Action Based on Decentralized Decision-Making: Wal-Mart Stores v. Dukes


On December 6, 2010, the Supreme Court granted Wal-Mart's petition for certiorari in Dukes, et al. v. Wal-Mart Stores, Inc. 1 Wal-Mart petitioned for certiorari after the Ninth Circuit en banc affirmed the certification of the largest employment class action in history which would cover approximately half a million women who worked for Wal-Mart since June 2001. 2 Although the merits may not be considered for years while procedural issues are disputed, at issue are plaintiffs' allegations that women employed nationwide in Wal-Mart stores, from part-time entry level hourly employees to managers, are paid less and not promoted on the same basis and frequency as their similarly-situated male counterparts.

The Court agreed to hear Question I presented by the petition, "Whether claims for monetary relief can be certified under Federal Rule of Civil Procedure 23(b)(2) and if so, under what circumstances" and fashioned its own second question for the parties to brief, "Whether the class certification ordered under Rule 23(b)(2) was consistent with Rule 23(a)."

The Role of Monetary Relief in FRCP 23(b)(2) Class Actions

Federal Rule of Civil Procedure 23(b)(2) permits a class to be certified where "the party opposing the class has acted or refused to act on grounds that apply generally to the class, so that final injunctive relief or corresponding declaratory relief is appropriate respecting the class as a whole." While the statutory language does not address the possibility of monetary relief, the Advisory Committee's notes on Rule 23(b)(2) state that Rule 23(b)(2) "does not extend to cases in which the appropriate final relief relates exclusively or predominantly to money damages."

The meaning of this standard is critical, because certifying a class pursuant to Rule 23(b)(2) is less expensive, time-consuming and simpler than tackling the Rule 23(b)(3) requirements.

Unlike Rule 23(b)(3), Rule 23(b)(2) does not require notice to members of the class to give them the opportunity to "opt out" and be excluded from the class (although the district court in Dukes allowed such an option for class members seeking punitive damages). 3 This raises due process concerns as all individuals in the class are automatically bound by a court's decision and do not have the opportunity to individually pursue their own claims. Moreover, plaintiffs do not have to demonstrate that questions of law or fact predominate and that a class action is the superior means of resolving their dispute. Rather, they simply have to satisfy the factors of Rule 23(a)(1): that (1) the class is so numerous that joinder of all members is impracticable, (2) there are questions of law or fact common to the class, (3) the claims or defenses of the representative parties are typical of the claims or defenses of the class; and (4) the representative parties will fairly and adequately protect the interests of the class.

The Circuit Split

There currently exists a three-way split among the federal circuit courts regarding the role of monetary relief in Rule 23(b)(2) class actions. The Fifth, Sixth, Seventh and Eleventh Circuits have adopted what is known as the "incidental damages" test, which permits certification under Rule 23(b)(2) only where monetary relief "flows directly from liability to the class as a whole on the claims forming the basis of the injunctive or declaratory relief." 4 Incidental damages are those that belong to the class as a whole and are easily calculable based on objective standards. They do not require consideration of particular class members' circumstances to determine the harm suffered individually that would otherwise be compensable.

The Second and Ninth Circuit (prior to the Dukes decision) took a subjective approach examining plaintiffs' intent in bringing the lawsuit. In Dukes, however, the Ninth Circuit rejected both its own test and the objective incidental damages test and announced a new standard adopted directly from the Notes of the Advisory Committee on Rules on FRCP 23: Whether monetary relief is predominant over injunctive relief or declaratory relief. Looking to the definition of predominately in Merriam-Webster's Collegiate Dictionary, 978 (11th ed. 2004), the Ninth Circuit noted that "predominately" is defined as "having superior strength, influence, or authority; prevailing." To determine whether monetary relief predominates, the Ninth Circuit explained that a district court should consider on a case-by-case-basis, the objective effect of the relief sought by considering the following factors: (1) whether the monetary relief sought determines the key procedures that will be used; (2) whether the relief sought introduces new and significant legal and factual issues; (3) whether it requires individualized hearings and (4) whether its size and nature - as measured by recovery per class member - raise particular due process and manageability concerns. Based on this standard, the Ninth Circuit found that including claims for back pay was not an abuse of discretion by the District Court. It explained that the class, which now excludes individuals who no longer worked for Wal-Mart as of June 8, 2001, is simply seeking back pay which can be awarded without individual inquiry into whether harm was suffered by class members. Moreover, it explained that the monetary damages are only large because of Wal-Mart's size and that the comparison between the amount of monetary damages per plaintiff and not collectively should be at issue when determining the predominance of monetary relief.

Wal-Mart has stressed that Rule 23(b)(2) is, on its face, limited to declaratory and injunctive relief and does not authorize the certification of any claims for monetary damages regardless of the type of monetary damages sought (i.e., back pay verses general compensatory damages). Moreover, Wal-Mart maintains that a class award of back pay will run afoul of the Rules Enabling Act by compensating non-victims and preventing it from defending against plaintiffs' claims of intentional misconduct.

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