One Angry Dwarf and One Million Walmart Ladies

Split 5-4, the Court shut down a class-action lawsuit against Wal-Mart on behalf of as many as 1 million of the chain’s female employees.  The Court also ruled — unanimously — that the women could not bring a claim for backpay, as a remedy for discrimination, in a Type 2 class action.  The ruling was based primarily on the Court’s interpretation of the commonality requirement for class certification.  But there were overtones of constitutional protection for companies facing money claims in a class-action case, ensuring that they must be able to mount a full defense in trying to fend off such claims.

Both opinions were written by Justice Scalia, the Court’s most ardent skeptic about the class-action litigation — a method that allows a large group of individuals, whose own claims may not be worth enough to justify a lawsuit, to join forces as “a class” to pursue grievances that all of them share.  Almost certainly the most significant part of the new ruling was the stress it put on the Rule 23 demand that all of those in the class must have a “common” legal claim — in a workplace bias case, each must show, up front, that the bias they claim was targeted at each of them.

The claim that the Wal-Mart women made, as Justice Scalia summarized it, is that Wal-Mart’s “corporate culture” institutionalized a bias against female workers, “making every woman at the company the victim of one common discriminatory practice.”   Focusing the case on Rule 23′s requirement of “commonality,” the Court decided that the Wal-Mart women could not meet that standard.  They were suing, the opinion said, “about literally millions of employment decisions at once.”

The  lawsuit, the Court said further, lacked “some glue holding” its claims together, and that “glue” would be the actual reasons behind each of those decisions.  Without that, it added, ” it will be impossible to say that examination of all the class members’ claims for relief will produce a common answer to the crucial question why was I disfavored.”  There is, in this case, too wide a gap between an individual’s workplace bias grievance and the existence of a class of persons suffering exactly the same injury, according to the Court majority.

In order to bridge that gap, Justice Scalia wrote, the Wal-Mart women were obliged to offer “significant proof that Wal-Mart operated under a general policy of discrimination. That is entirely absent here.”  Wal-Mart, in fact, has a national policy against sex bias, the opinion noted, and the statistical evidence that the women’s lawyers had offered did not establish that the “corporate culture” implementing that policy translates such a valid policy into illegal discrimination down at the retail store level.

The assessments of alleged bias at the local level, made by the Wal-Mart women’s expert statistician, the Court said, were “worlds away from ‘significant proof’ that Wal-Mart operated under a general policy of discrimination.”   And the company’s policy of decentralizing actual workplace decisions on pay and promotions “is just the opposite of a uniform employment practice that would provide the commonality needed for a class action; it is a policy against having uniform employment practices.  It is also a very common and presumptively reasonable way of doing business.”

While Justice Scalia noted that the Court has allowed workplace bias lawsuits where lower-level supervisors used their discretion to engage in biased practices, falling harder on women or minorities, the existence of that kind of case “does not lead to the conclusion that every employee in a company using a system of discretion has such a claim in common.”  The Wal-Mart women, he summed up, “have not identified a common mode of exercising discretion that pervades the entire company.”

The opinion added: “In a company of Wal-Mart’s size and geographical scope, it is quite unbelievable that all managers would exercise their discretion in a common way without some common direction.”  The evidence offered “falls well short” of proving that, it said.

The overall problem with this lawsuit, Scalia said, quoting the comment of a lower-court judge in the case, was that the Wal-Mart women “have little in common but their sex and this lawsuit.”

For large companies in general, the opinion offers some guidance: the bigger the company, the more varied and decentralized its job practices, the less likely it will have to face a class-action claim.  Only workers who have a truly common legal claim may sue as a group, the Court majority made clear — and, even that claim will require rigorous proof that every single worker suffered from exactly the same sort of bias.  Sample statistics and anecdotes won’t do.

The dissenters argued that the evidence the women’s lawyers had offered “suggests that gender bias suffused Wal-Mart’s company culture.”  Their evidence also indicated that the differences in pay and promotions between women and men workers could only be explained by bias, not “neutral variables,” the dissenters added, leaving the clear impression that the dissenters agreed with that assessment.

Repeatedly, the dissenting opinion offered positive reactions to the women’s claims of how the Wal-Mart “corporate culture” actually worked to bolster discretion at the store level, with that discretion exercised predominantly by men influenced by a culture of discrimination.

The part of the ruling that had the support of all of the Justices declared that the section of Rule 23 that permits class-action requests for injunctions or declaratory rulings does not generally allow claims for money payments, such as backpay in a workplace bias case, unless that kind of remedy is merely incidental to the type of court orders that section authorizes.

Because of the Court’s ruling on the “commonality” question, closing the class-action claim against Wal-Mart, this second part of the decision had little practical impact other than clarifying when a class-action lawsuit could pursue a money remedy.  The dissenters said they would have left the Wal-Mart women with a further opportunity to try a different section of Rule 23 for their backpay claim, but the majority had scuttled that by ending the class-action case altogether.

The constitutional overtones that seemed to lie behind some of Justice Scalia’s observations about the need to ensure that companies sued in class-action cases get a full opportunity to defend themselves by challenging each class member’s claims may figure in what the Court now does with another class-action case on its docket.  That is the case of Philip Morris USA, Inc., et al., v. Jackson (docket 10-735).  That is a case that turns entirely on constitutional questions — a massive class-action lawsuit against the nation’s major cigarette companies in Louisiana state court that resulted in an award of $270 million to a class of former smokers.

Justice Scalia stayed that ruling last September.  The Court has been holding the case until it decided the Wal-Mart case.  It now is expected to take action on that case; its options include granting the case, or sending it back to Louisiana courts to consider the impact of the Wal-Mart decision.   Since the Wal-Mart decision turns mainly upon the meaning of a federal court rule (Rule 23) that does not apply to class-action lawsuits in state court, it is unclear how much specific guidance state courts could take from Monday’s decision.


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