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LABOR & EMPLOYMENT LAW — 1/03/08

Ninth Circuit issues new opinion affirming class certification in Wal-Mart sex bias case

In a landmark sex discrimination case against retail giant Wal-Mart, the Ninth Circuit Court of Appeals has withdrawn its February 2007 decision (89 EPD ¶42,678) and has replaced it with a new opinion that, like the earlier decision, affirms a federal district court's certification of a class action. The appellate court's new decision, issued on December 11, 2007, also denied Wal-Mart's petition for an en banc rehearing of the February 2007 decision as moot. The Ninth Circuit's new decision slightly modified its previous decision by: (1) revising its discussion of certain evidence that supported class action certification, including expert witness testimony; (2) clarifying its discussion on the impact of back pay in evaluating class certification; and (3) finding that class certification may not be proper as to putative class members who were not Wal-Mart employees as of the date the plaintiffs' complaint was filed. (Dukes v Wal-Mart, Inc, 9thCir, 90 EPD ¶43,038)

Previous rulings. In June 2004, the district court ruled that six current and former Wal-Mart employees from California may represent, in a nationwide class action, all female employees of Wal-Mart who worked at its US stores anytime since December 26, 1998 (Dukes v Wal-Mart, Inc, NDCal, 85 EPD ¶41,688). The plaintiffs in the case are seeking class-wide injunctive and declaratory relief, lost pay, and punitive damages. They do not seek any compensatory damages on behalf of the class, which is estimated to include more than 1.5 million women. The class encompasses women employed in a range of Wal-Mart positions — from part-time, entry-level, hourly employees to salaried managers.

In its February 2007 decision, the Ninth Circuit affirmed, finding that the district court "acted within its broad discretion in concluding that it would be better to handle this case as a class action instead of clogging the federal courts with innumerable individual suits litigating the same issues repeatedly." In particular, the appellate court found that: (1) the plaintiffs met the class action pleading requirements of Federal Rule of Civil Procedure 23; (2) Wal-Mart failed to point to any specific management problems that would render a class action impracticable in this case, and the district court has the discretion to modify or decertify the class should it become unmanageable; and (3) although the size of this class action is large, mere size did not render the case unmanageable. In addition, the Ninth Circuit denied the plaintiffs' cross-appeal, ruling that the district court did not abuse its discretion when it found that back pay for promotions may be limited to those plaintiffs for whom proof of qualification and interest exists.

New decision. Regarding its discussion of why the case was appropriate for class certification, the court added a new footnote explaining that evidence concerning the factors for Rule 23 certification must be considered even if this evidence may also relate to the underlying merits of the case. On the issue of expert testimony, the revised opinion applied the standards set forth in Daubert v Merrell Dow Pharm Inc, 509 US 579 (1993) and found that they were met. Moreover, the Ninth Circuit wrote that the experts' inferences could be admitted as evidence in support of class certification even though a jury may ultimately reject those inferences.

In its discussion of back pay, the new opinion explains that, while the district court correctly labeled back pay as an equitable remedy under Title VII, that did not mean that back pay was not also a form of monetary relief for purposes of evaluating class certification under Rule 23(b)(2). Thus, the plaintiffs' request for back pay weighed against Rule 23(b)(2) certification, notwithstanding its equitable nature. That did not mean, however, that Rule 23(b)(2) certification is barred whenever back pay is requested. To rule otherwise, would not only thwart the legislative intent of Title VII but "would also put discrimination victims to the Hobson's choice of having to settle for only a partial remedy in order to proceed as a class action or having to bear the enormous costs of an individual lawsuit in order to receive the make-whole 'injunction plus back pay' remedy authorized by Title VII," the Ninth Circuit wrote. Therefore, while the plaintiffs' request for back pay did weigh against class certification under Rule 23(b)(2), the district court did not abuse its discretion in finding that a class action was certifiable under that rule.

The Ninth Circuit also modified its earlier holding regarding the number of potential class members finding that class certification may not be proper as to class members who were not Wal-Mart employees as of the date the plaintiffs' complaint was filed. Putative class members who were no longer Wal-Mart employees at the time the complaint was filed did not have standing to pursue injunctive or declaratory relief, while those who were still Wal-Mart employees as of that time did have standing to seek injunctive and declaratory relief, the court wrote. Accordingly, the Ninth Circuit remanded the case to the district court for a determination of the appropriate scope of the class.

Dissent. Judge Kleinfeld again dissented, writing that class certification violated the Rule 23 class certification criteria, likely deprived many women who have been discriminated against of the money to which they are entitled, and deprived Wal-Mart of its constitutional rights to a jury trial and due process.

For more information on this and other topics, consult CCH Employment Practices Guide or CCH Labor Relations.

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