Update on Class Actions Following Dukes v. Wal-Mart
November 20, 2012
In the wake of Wal-Mart Stores, Inc. v. Dukes, federal courts throughout the country have altered their treatment of class action in important ways that affect employment cases. In addition to its high profile, due to Wal-Mart’s status as one of the largest private employers in the nation and the putative class size of 1.5 million people, Dukes garnered national attention because the Supreme Court of the United States clarified certain issues that are important for class action practitioners. This update will explain (i) brief background information about Dukes, (ii) trends in employment class actions since Dukes, (iii) an alternative theory for achieving class treatment, and (iv) the effect on collective action under the Fair Labor Standards Act.
I. Dukes Background
In the context of a sex discrimination case, the majority in Dukes explained that not every aggregation of individual claims can proceed as a class action. Rather, would-be class representatives must identify a question of law or fact that is common to all members of the putative class, and the resolution of this issue must dispose of the case. The Supreme Court also clarified the certification of individualized monetary claims, requiring such claims to proceed under Rule 23(b)(3).
The Dukes Court explained that Plaintiffs must still satisfy the Rule 23(a) requirements, i.e., numerosity, commonality, typicality, and adequacy of representation. Importantly, the Supreme Court conveyed that commonality required “glue” to bind together the claims in a manner capable of class-wide resolution. This concept altered prior decisions that held a disparate impact theory could “conceivably” be used to establish class claims if there were significant proof an employer “operated under a general policy of discrimination” and the discrimination manifested itself in hiring and promotion practices in the same general fashion. The Supreme Court in Dukes found that this theory could not determine with any specificity how often discrimination played a part in employment decisions. Also, the Supreme Court stated that plaintiffs needed to identify a “specific employment practice” as the “glue” to hold their 1.5 million claims together.
With respect to monetary claims, the Supreme Court held that applying Rule 23(b)(2) to individualized claims was unfair to plaintiffs and defendants. The Court held that monetary claims could be certified under Rule 23(b)(2), which provides for a “mandatory class,” only when they were “incidental” to injunctive and declaratory relief granted to the entire class. This same reasoning informed the Supreme Court’s rejection of calculating damages based on a random sampling of plaintiffs and their recoveries.
II. Application of Dukes
Since Dukes, several federal courts throughout the country have applied the newly clarified standards applicable to commonality under Rule 23(a). For example, in Stockwell v. City and County of San Francisco, 2011 WL 4803505 (N.D. Calif. 2011), the district court denied class certification in an age discrimination case where plaintiffs sought to certify a class consisting of police officers 40 and older who were on an old eligibility list for promotion. The police chief changed the criteria for promotion by administering a new examination, and plaintiffs did not contend the new examination was biased. The lack of causation rendered certification inappropriate. The district court held that plaintiffs did not make the necessary showing of commonality and explained that “statistical evidence of disproportionate impact, standing alone, is insufficient to establish that plaintiffs’ age discrimination claims can be proved on a classwide basis.” 2011 WL 4803505 at *7.
On the other hand, the same court held in Delagarza v. Tesoro Refining & Marketing Co., 2011 WL 4017967 (N.D. Calif. 2011) that certification was appropriate where plaintiff alleged a common set of practices that applied to all members of the class throughout the facility with only exceptional variations. The issues common to all class members included four separate issues related to meal breaks and company policies. The court looked for and identified the “glue” in the employment practices that were common to all plaintiffs, and it distinguished the case from Dukes.
The United States Court of Appeals for the Seventh Circuit reversed a district court’s denial of class certification, finding that Dukes did not apply in a race discrimination class action. McReynolds v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 672 F.3d 482 (7th Cir. 2012). The plaintiffs were African-American brokers who contended that two employment practices had a disparate impact on them: (a) brokers could form their own sales teams with others whom they chose; and (b) when brokers left Merrill Lynch, their accounts were reassigned based on past success of the brokers seeking the accounts. Plaintiffs said that African-American brokers were excluded from the voluntary teams, which resulted in a disparate impact when accounts of departing brokers were distributed. The Seventh Circuit said that Merrill Lynch’s policies gave no discretion to individual managers (as in Dukes), but gave the discretion to form sales teams directly to the individual brokers. Thus, there was an employment decision by top management that satisfied the commonality requirement of Rule 23(a)(2).
The same appeals court reversed a different race discrimination case where African-American construction workers asserted that the construction superintendents of 262 sites in the Chicago area denied overtime to African-Americans and condoned a racially hostile work environment to varying degrees. Bolden v. Walsh Constr. Co., ____F.3d__, 2012 WL 3194593 (7th Cir. 2012), reversing 282 F.R.D. 169 (N.D. Ill. 2012). The district judge relied on McReynolds and granted class certification. The Seventh Circuit reversed, finding that Dukes clearly applied to the Bolden case and the employment policies at issue. The construction superintendents in Bolden were given authority to make employment decisions at their sites, and the overall company policy forbade discrimination. Accordingly Dukes was applicable, and class certification was inappropriate.
In Hagler v. True Mfg. Co., Inc., 2012 WL 1025672 (E.D. Mo. 2012), a federal magistrate judge granted the defendant’s motion to dismiss a cause of action claims under the Family and Medical Leave Act, 29 U.S.C. §2601, et seq. (“FMLA”). The claim sought to certify all current and former Missouri employees who, “during the three years prior to the filing of this action, have applied for FMLA leave and have been denied, disciplined, discharged, or otherwise had their rights under the FMLA restricted” due to adverse employment actions. The court noted that Dukes pointed out how a “statute ‘can be violated in many ways,’” and it concluded the FMLA allegations were too broad to be alleged as one general class. 2012 WL 1025672 at *5. Accordingly, the court dismissed the FMLA count, finding there was no plausible claim the class could meet Rule 23(a)(2) requirements.
III. Alternative Theory for Class Certification
As an alternative for avoiding the effect of Dukes, plaintiffs and courts may be able to rely on “issue certification” under Rule 23(c)(4), which allows an action to be brought or maintained as a class action with respect to particular issues.” Several decisions have highlighted that Dukes did not preclude issue certification and that courts may certify a single cause of action as an alternative to denying certification. See e.g., Kalow & Springut v. Commence Corp., 2011 WL 3625853 (D. N.J. 2011). The McReynolds court (discussed above) also found that liability could be certified even though the damages claims were individualized. See also United States v. City of New York, 276 F.R.D. 22, 33-34 (E.D.N.Y. 2011) (holding that Dukes did not preclude issue certification under Rule 23(c)(4)).
IV. Collective Actions under the FLSA
In the context of collective actions under the Fair Labor Standards Act (“FLSA”), which are different than Rule 23 class actions in important ways, several cases since Dukes have examined whether collective actions should be subjected to the more rigorous analysis of Dukes. Section 216(b) of the FLSA allows plaintiffs to bring collective actions on behalf of themselves “and others similarly situated,” but it does not define “similarly situated.” FLSA collective actions are generally certified in a two-step process, with conditional certification being assessed under a “fairly lenient” standard. After discovery has taken place, the defendant can seek decertification, and the court at this time takes a more analytical approach to determine whether members of the collective group are “similarly situated.”
FLSA collective action cases since Dukes have generally rejected employers’ arguments that Dukes should apply to the conditional certification phase of the analysis. See e.g., Mitchell v. Acosta Sales, LLC, 841 F. Supp.2d 1105 (C.D. Calif. 2011) (holding that Dukes did not apply at the fairly lenient conditional certification phase, and that even at the more stringent second stage, the class certification factors do not apply to collective actions); Hargrove v. Ryla Teleservices, Inc., 2012 WL 489216 (E.D. Va. 2012) (finding that Dukes should not apply in conditional certifications). However, at least one court has explained that Dukes could become relevant at the close of class-related discovery, at which point the court could conduct a specific analysis of each claim to ensure each plaintiff is an appropriate party. Spellman v. Am. Eagle Express, 2011 WL 4014351 (E.D. Pa. 2011).
With multiple class action cases presently before the Supreme Court of the United States, this area of the law continues to be evolving and challenging for employers. It is clear that Dukes has altered the analysis of district courts in important ways, but certain classes will continue to be certified if they are properly defined and share “glue” in their facts. We will continue to keep you updated of future developments.