Welcome to the featured discussion on Wal-Mart v. Dukes

Point of Law has been following the gigantic Dukes v. Wal-Mart litigation for years, and the recent Supreme Court argument certainly does nothing to lessen its importance for issues of class action certification, aggregate litigation, employment litigation, punitive damages, the use of statistical evidence by courts, and even the politicization of the judiciary. We have brought together a fascinating group of scholars and practitioners to discuss the case in this featured discussion, and are looking forward to it. In alphabetical order:

• Lester Brickman is a Manhattan Institute visiting scholar and a professor of law at the Benjamin N. Cardozo School of Law at Yeshiva University. He is the author of the recently released Lawyer Barons.

• R. Matthew Cairns is a shareholder/director at Gallagher, Callahan & Gartrell and the 2011 president of DRI.

• Jim Copland is the director of the Manhattan Institute's Center for Legal Policy.

• Richard Epstein is a Manhattan Institute visiting scholar and was appointed the Laurence A. Tisch Professor of Law at New York University School of Law in 2010. He is also a senior lecturer at the University of Chicago, where he was on the regular faculty until his retirement at the end of 2010.

• I'm Ted Frank, an adjunct fellow with the Manhattan Institute, and the founder of the Center for Class Action Fairness.

• Myriam Gilles is a a professor of law at the Benjamin N. Cardozo School of Law at Yeshiva University.

• Russell Jackson is a partner at Skadden. His blog is Consumer Class Actions & Mass Torts.

• Andrew Trask is counsel at McGuireWoods and the co-author of The Class Action Playbook. He blogs at Class Action Countermeasures.

We hope to have others join us as the discussion goes on. To start things off, let me point to Richard Epstein's essay on the case for the Hoover Institution, "Wal-Mart's Class Action Conundrum". What do others think?

Opening thoughts and questions

I'm  excited to see what some of our guests have to say on the pending Supreme Court case, Wal-Mart v. Dukes, which is in essence the mother of all employment-law class actions. Richard's piece is a good start, fleshing out how two areas of law -- employment discrimination law and class actions -- come together here. I'll start with a few questions, pulling out the key issues as I see them:

1. The class action rule at play. When I wrote about this case after initial reports that it was certified at the trial-court level, I noted how it didn't fit under a traditional 23(b)(3) schema. Of course, as is now obvious, the certification rule at play isn't (b)(3) but rather (b)(2). It would seem to me that using (b)(2) here is disingenuous. To begin with, it's hard for me to see how the damages at issue here don't force this case into a (b)(3) framework. Even Justice Ginsburg -- hardly a critic of litigation generally or employment-discrimination litigation specifically -- seemed to recognize in oral argument that there's a pretty serious issue about how to handle the damages phase in a way that doesn't adversely affect the interests of many (realistically thousands or hundreds of thousands) of class plaintiffs. Doesn't using (b)(2) here swallow the (b)(3) rule? And if so, wouldn't (b)(3) be somewhat superfluous, at least in similar types of cases? And even under a (b)(2) rationale, the injunctive remedy isn't at all clear here; it's a far cry from the nuisance abatement scenario Richard describes, and short of Wal-Mart completely centralizing and reconstructing its hiring practices, under court supervision, how exactly is an injunction supposed to work?   I'd be very interested in hearing more about these issues from some of our experts more versed in class-action practice.
2. Expert evidence at the class certification stage. A key question before the Court is of course the degree to which it's proper to rely on the plaintiffs' expert evidence to establish their theory of the case, both to establish that discrimination exists and to tie it somehow back to Wal-Mart, with respect to all of its female employees. If Daubert review isn't appropriate at the class-certification stage, I don't see how any court could evaluate claims in a case like this: effectively, any employer likely has some gender or race or other disparity in its hiring or promotion patterns, and it's always possible to concoct some theory to explain such disparities. Don't we have to have some standard to evaluate such claims before launching a class-action claim that could leave an employer's hiring practices under court control?
3. How this case intersects with "disparate impact" in employment discrimination cases. I think Richard is right to focus on disparate impact here. As some of the justices suggested at oral argument, there's some tension in the plaintiffs' theory: on the one hand, Wal-Mart is responsible for gender disparities in promotion and pay across all its stores nationwide; but it's responsible under the theory that its promotion and pay practices are too decentralized, leaving decisions up to individuals who are, at least in some cases, likely to be governed by prejudice. Isn't this rationale just a backdoor way to solidify a disparate-impact standard -- requiring that large employers centralize decision-making to avoid disparities in hiring, pay, and promotions? How does the theory here jibe with the Supreme Court's rulings on disparate impact, such as the recent (race) case Ricci v. DeStefano?

So, at the outset, I have lots of questions. I look forward to fleshing them out.

How do you hold a Wal-Mart sized trial?

Professor Epstein's article is a tough act to follow, since he provides an excellent summary of the issues at stake in the Wal-Mart case. (No surprise; he's been doing this for years.) So instead of arguing with him over what he did say, I'd like to focus on a slightly different issue.

As a practicing class-action lawyer--and a defense one at that--my concerns about this case are more pedestrian. The biggest question I've been wrestling with is how the Ninth Circuit envisioned a classwide trial would actually proceed. The en banc opinion doesn't say much about how to try the case. In fact, it only offers two concrete pieces of guidance: (1) that the parties may use aggregate proof in the form of statistics; and (2) that the parties might look to Hilao v. Estate of Marcos (a class action on behalf of Filipino torture victims) as an example of how to try a class action like this.

But neither of these suggestions would be much help in an actual trial. Let's say the parties did use the aggregate proof at their disposal. And let's say that the plaintiffs convinced a jury that--as their expert put it--excessive subjectivity allowed gender discrimination. Can any female Wal-Mart employee borrow that answer to prove her individual claim? No, because she hasn’t established the subjectivity caused (even in part) the discrimination against her. The same goes for the plaintiffs' social-science evidence. Does Wal-Mart's corporate culture encourage gender stereotyping? Even if we say yes, we have not established a link between that culture and any concrete act of discrimination.

This is not an abstract concern. The Eleventh Circuit recently struggled with what happens when a court certifies a class to prove toothless but common questions. Its conclusion: a trial court still must hold individual hearings to determine liability for each class member's claim.

Nor will relying on Hilao for guidance help much in this case. The Hilao case involved only 10,000 class members, less than a hundredth of the number here. And it relied in part on statistical proof.  Nonetheless, the jury in Hilao, even with the help of a special master, required eighteen months between its finding of general liability and its finding of damages. Extrapolating that trend out (and given these are adversarial proceedings, there's no reason not to), it would take a jury 150 years to determine all of the back pay in this case.

So, my question is: did the Ninth Circuit really expect this case to be tried? If so, was this method really more efficient than individual trials? And should a court certify a case expecting it will settle rather than go to trial?

My Wish List from Wal-Mart

 I come at Dukes as a defense lawyer who handles consumer fraud/mass torts class actions.  I’m no employment lawyer, and the subtleties of substantive employment discrimination law often elude me.  I’ve previously said the Ninth Circuit’s en banc opinion was in large part peculiar to its employment discrimination context.  But the Supreme Court’s opinion is likely to reach further.

I thought I’d approach Jim’s and Andrew’s questions by suggesting what I (perhaps overly-optimistically) expect to see in the Supreme Court’s Dukes opinion, which I believe will reverse certification.

1. District courts must give rigorous scrutiny to whether the class action prerequisites are met, paying special attention to how plaintiffs and defendants will introduce evidence to establish the elements of their claims and defenses.  The Court likely will reiterate the “rigorous scrutiny” standard.  Hopefully, it will actually explain what that means.  Many courts require that the parties put forward a trial plan that shows whether the elements of the class members’ claims really can be established manageably with common proof.  This goes directly to Andrew’s question.

2. Rule 23 is a procedural rule that cannot alter the substantive claims or defenses.  Part of the problem with including back pay in this class action is that Wal-Mart is entitled to prove for each claimant that the decision not to promote or give a raise was for reasons other than discrimination.  The Rules Enabling Act cannot deprive Wal-Mart of this substantive right merely to promote convenience.

3. You can’t use a mandatory class to elude the prerequisites for an opt-out class.  Rule 23(b)(3) explicitly requires “predominance” and “superiority.”  Rule 23(b)(2) doesn’t.  But I’ve previously persuaded courts that 23(b)(2) has an inherent “cohesiveness” requirement that is at least as strict as predominance and superiority.  See, e.g., Compaq Computer Corp. v. LaPray, 135 S.W.3d 657 (Tex. 2004).  Everyone concedes that the Dukes class couldn’t meet the predominance and superiority requirements of an opt-out class.  It would be ironic, indeed, if it was easier – rather than harder – to bind absentees to a mandatory class judgment.

4. Money is not an available remedy under Rule 23(b)(2).  Although I doubt a bright-line actually will emerge, the rule’s plain language suggests that it should.  At the very least, money awarded under 23(b)(2) should be truly communal – just like the injunctive and declaratory relief – and incidental, such that no one would bring the claim for the monetary relief alone.  Attorneys’ fees might fit that bill.  Back pay does not.

5. The canard that the need for individualized damages determinations cannot preclude class certification should be shot.  Size matters.  And where the putative class members number in the hundreds of thousands, individualized anything precludes certification.

6. Intra-class conflicts fail the adequacy of representation requirement.  Ted Boutros painted a compelling picture of a female supervisor (and class member) being cross examined by (her) class counsel for allegedly making discriminatory decisions.  The Court is particularly sensitive to adequacy issues, and this is unquestionably one.

7. Expert testimony merits particularly close scrutiny at the class certification stage.  Even if the court doesn’t require a full-on Daubert analysis, the expert should be required to demonstrate a workable methodology that can address the elements of the claim with classwide proof.  I’ve written and posted on cases that articulate this rule compellingly.  In Dukes, you’d at least expect a showing that a reliable store-by-store model can be created to actually demonstrate discriminatory impact.  Plaintiffs made none. 

8. Although courts should not reach to judge the merits at the class certification stage, they must decide merits issues where necessary to determine whether the class action prerequisites are met.  Deciding whether admissible expert testimony can support classwide proof may trigger this rule. 

That’s my wish list.  A guy can dream, right?

The decision may be narrower than many seem to expect

Greetings, all. My name is Jeff Jacobson. I'm a litigation partner at Debevoise & Plimpton LLP and, like some other posters here, I represent clients in consumer class actions. I am a big fan of every member of the panel Ted has assembled and I am grateful to Ted for allowing me to join the discussion. (Please note the usual disclaimers: I am not involved in the Dukes case, the opinions I express aren't necessarily that of my firm or any client, etc.)

My hoped-for outcome in the case is similar to Russell Jackson's. The outcome I find myself expecting, however, is different and substantially narrower. I do not think it an accident that, since the Supreme Court decided the Falcon case in 1982 with its "rigorous analysis" language, the Court has declined chance after chance to narrow Rule 23. As many of us painfully recall, the Court did not even grant certiorari in the Visa/Mastercard antitrust litigation, after the Second Circuit upheld a district judge's certification of a multi-million merchant Leviathan of a class that, ironically, included Wal-Mart. The Second Circuit "repudiated" (its word) that horrible decision later in In re IPO, and here we are hoping that the Supreme Court now adopts an analysis similar to, if not more sweeping than, the Second Circuit's new view, when the Court refused to correct the Second Circuit's whiff in 2001. My suspicion is that we in the defense bar may be disappointed, and that the decision the Supreme Court is to issue in the Dukes case will be substantially less broad and impactful than many seem to be expecting.

Andrew Trask is correct, I think, that the Court's decision will turn on the district court's and the Ninth Circuit's inability to say how the Dukes case possibly could be tried. The district court recognized that the "usual" process of proving discrimination in any particular employee's case couldn't work here. In a usual case, even if the plaintiffs managed to demonstrate at a class action trial that Wal-Mart had some discriminatory policy, Wal-Mart still should be able, at the stage where some individual human being seeks retrospective damages, to present individual evidence it believes proves that the discriminatory policy did not affect that employee. The district court's rather radical proposal was to ban Wal-Mart from presenting individual evidence and, in the event the plaintiffs win, to let the plaintiffs rely solely on whatever statistical model ended up yielding that win to decide how much Wal-Mart should pay in damages. Though I am merely an amateur Supreme Court-watcher, it seemed clear from the oral argument that at least eight justices, and possibly all of them -- the wildcard being Justice Ginsburg -- agree that the district court's proposal was dangerously wrong. Even Justices Sotomayor and Kagan openly expressed disagreement with the district court's approach.

Justice Sotomayor, eventually joined by Justice Kagan, did not seem at all inclined to defend the district court's inclusion of back pay awards among the issues to be resolved on a class basis. Justice Sotomayor's approach, as expressed at oral argument, seemed to be to try to find a way around the problem, and let the case proceed on a class basis at least in part, by stressing the plaintiffs' request for forward-looking injunctive relief. Justice Sotomayor essentially said to the plaintiffs' lawyer, "forget back pay -- what would your prescriptive injunction look like?" The plaintiffs' counsel responded that plaintiffs would seek a set of specific steps removing managers' discretion and ensuring that future decisions at Wal-Mart are made on a more gender-neutral basis. Justices Sotomayor and Kagan seemed to like that answer, and certainly seemed more than willing to let the district court try a case about whether such a forward-looking injunction is necessary and appropriate. At the same time, however, the Justices seemed resigned to, and possibly even in agreement with, an outcome that would reverse the district court's decision to include back pay in the putative class certification.

Importantly, although Ted Boutrous made the point for Wal-Mart that class members' future-damage claims would be barred by res judicata if a back-pay case went to verdict and Wal-Mart won, no Justice asked him what (if any) res judicata effects would result if the class litigated only over Wal-Mart's supposed policy problems and the need for a forward-looking injunction to correct them, and did not litigate the question of whether or how much the now-enjoined practice may have cost individual employees in the past. I am no employment lawyer, but it would seem the right answer would be that even if the plaintiffs litigate just the policy and forward-looking case, and lose (i.e., because there was no company-wide policy to discriminate), individual employees still would be free to argue that they were discriminated against in the past and suffered damages as a result.

Let's assume for a minute that I am right, and eight or even nine justices agree that the named plaintiffs fail to satisfy Rule 23(a) on typicality grounds -- what Russell Jackson's blog and Ted Boutrous's argument both (correctly, in my view) called "cohesion." If I am right, this would suggest that the Court could issue a relatively narrow decision on that basis and command the kind of unanimity that might give such a closely-watched decision maximum legitimacy. Would the Chief Justice really pass up a 9-0 or 8-1 ruling in this case if he could get one? And, by the way, how sure are we that five votes even exist for the kind of barn-burning decision the defense bar dearly would love to see?

For these reasons, I find myself predicting such a narrowly-framed decision: Certification reversed, 9-0 or 8-1, for failure to satisfy the commonality and typicality "cohesion" requirements of 23(a), along with a concurrence by (at least) Justices Ginsburg, Sotomayor and Kagan encouraging the district court to consider certifying a true injunctive class on remand. There may be another concurrence or two from the right wishing the Court had gone further, but only a concurrence.

Even in a narrow decision, however, I think we defense types will get our wish that the Court should address the standard judges must follow when weighing competing expert testimony at the class certification stage. This is not just a matter of Daubert, though I agree with James Copland that Daubert must apply to proposed testimony related to Rule 23 issues. The bigger question, and one I think the Court should and probably will answer in the affirmative, is whether courts must *weigh* competing expert testimony and decide, after giving due consideration to the defendants' expert's conclusions, whether the plaintiffs really will be able to prove their case on a common basis. Ted Boutrous rightly stressed that the district court chose to ignore Wal-Mart's expert, finding it his responsibility only to consider whether the plaintiffs' expert put forward a theory that might hold up at trial. As the Second Circuit correctly (in my view) held in In re IPO, that simply cannot be right.

A narrow decision, however, might well allow the Court to duck the circuit-split over when you can seek monetary damages in a (b)(2) case. If they do tackle that issue, the oral argument suggested the Court's majority will adopt the rule that damages must to flow automatically, without need for individual fact determinations. That decision hardly would surprise anyone.

The bottom line, for me, is that although I think there are at least four justices in favor of turning the Wal-Mart suit off completely, and doing so in the sweeping terms for which Russell is hoping, there may not be a fifth, and even if that's wrong, if the Chief Justice sees a chance for unanimity, a narrow decision on typicality grounds may seem a lot more attractive than a bitter split with the three women Justices on the losing side.

I am looking forward to hearing what my most esteemed colleagues think of this.

Upon Reading Concepcion While Dukes Gestates

Today the Supreme Court issued its decision in AT&T Mobility LLC v. Concepcion, No. 09-893 (U.S. Apr. 27, 2011).  At first glance, it doesn't seem that Concepcion -- which addressed whether California could use its "unconscionability" precedents to invalidate any consumer arbitration contract that included a class action waiver -- would have much to do with the issues in Dukes, which concerns whether a massive employment discrimination class action should have been certified.

And yet, in Concepcion, a five-Justice majority based its decision, in part, on just how difficult it is to create and adhere to procedures that achieve fundamental fairness in class adjudications.  The Court was expressly concerned with the due process rights of absent class members who would be bound to the decision in a class arbitration.  It mentioned the importance of opt-out rights where money damages were involved.  The Court also was worried about how to manageably conduct class discovery.  And it was concerned about the rights of defendants.

I'll confess, Jeff, that when I sat down to write my prior post, it initially felt like I was (once again) asking Santa for all of the things that my teacher-parents couldn't afford.  But as I thought more about it, many of the things on that list really are necessary to reaching the result that I think the majority will reach, which is reversal.  For example, I think they have to genuflect to the "rigorous scrutiny" standard.  And while they may not go so far as requiring plaintiffs to propound a trial plan in every case, even you and Andrew believe the focus will be on how the case would be tried.

Similarly, the notion that a (b)(2) class isn't a way around the predominance and superiority requirements of (b)(3) is something that it seems the Court has to espouse, even though it may not say money is never, ever recoverable in a (b)(2) class.

I'll admit that I'm both pleased and excited to see the mentions in Concepcion of adequacy of representation and the need for opt-out rights where money is involved.  This confirms to me that these issues are still at the forefront of the Court's mind.  And I liked Justice Scalia's statement that switching from an individual claim to a class claim sacrifices informality and is "more likely to generate procedural morass than final judgment."  Slip op. at 14.  This sounds like someone who understands the manageability problems associated with class adjudication.

I'll confess that where, as here, the case was well-argued by the defense, I'm prone to see the glass as half full.  Heck, I was even a member of the Optimist Club in my Missouri hometown.  But I wonder, Jeff, if reading Concepcion gives you even a little more hope that Dukes will be a broader, more instructive opinion?

(Lest you think I've totally drunk the Kool-Aid, I'd be happy to kvetch with you over drinks -- but not here -- about Concepcion's place in the Supreme Court's topsy-turvy preemption jurisprudence.)

Jinx

Russell,

This is getting extremely frustrating. I just finished writing up my thoughts on Concepcion, and came over here to expand on how Justice Scalia's opinion offers some insight on where the Supreme Court may go in ruling on the Rule 23(b)(2) "back pay" issue.  And you've already talked about it, both here, and at your own blog.

This is not the first time you've done this to me.  So let me at least ask: could you have the decency to get something wrong when you scoop me?  Just a morsel to disagree with.  That's all I ask.  

Well, now we know what Justice Scalia thinks of this stuff

A lot of ink will be spilled discussing Concepcion.  Yesterday's decision may well have killed off, at least for companies that enter into validly-formed contracts with their customers, the kind of "spoils for the lawyers, crumbs for the class" class action that is of recent (<20 years) vintage and really deserves to die.  Indeed, one could almost hear Justice Scalia thinking of Russell's "Tort Twits" as he was writing the majority opinion.

That five Justices don't like consumer class actions very much isn't a surprise.  Just how broadly impactful the Concepcion decision will be, however, remains to be seen.  I, for one, will be mighty interested to watch what the Second Circuit does if it is asked to reconsider its decision from last month in the American Express Merchants' Litigation matter.  In that antitrust case, the Second Circuit refused to compel individual arbitration, as Amex's card acceptance agreement would require, because antitrust litigation is (in the court's view) so expensive to litigate that it would be economically irrational to do so if there can be no pot of class action gold for the lawyers at the end of the rainbow.  Removing the possibility of class certification, the court believed, would frustrate the purpose of the antitrust laws and leave the aggrieved merchants without a remedy.  If the Second Circuit reverses field in light of Concepcion, and sends that case to arbitration despite its misgivings, we will be able to hear the plaintiffs' bar screaming "Katy, bar the door."  If it does not, however, that decision will poke one very big hole in Concepcion that the Supreme Court will be asked to fill (but may not).  There are other potential holes in Concepcion, too, as I have written in an article I hope will be published next week.  More on that later.

(There's also that awfully pregnant footnote 6 in Concepcion, where Justice Scalia invites states to adopt a patchwork of regulations governing adhesive arbitration agreements, subject to what can only be described, with apologies to Justice Scalia, as an "undue burden"-like test to judge whether the state has made it too hard to arbitrate.  But now I'm really digressing from the topic at hand.)

The question on the table is whether Concepcion presages a blowout victory for Wal-Mart in Dukes.  I can't deny that Concepcion moves the needle in that direction.  For some reason, however -- be it actual wisdom or sheer stubbornness -- I still just don't think so.

I do agree with most everything in Russell's last post.  I believe the Court's decision in Dukes will (1) strongly reaffirm the idea of "rigorous scrutiny," (2) stress that district judges must have a clear and workable (i.e., lawful) plan as to how a class case will be tried, and (3) preclude using (b)(2) classes in situations that really must be scrutinized under (b)(3).  But now ask yourself:  Did the oral argument in Dukes suggest that a single Justice disagrees with any of these points?  (The district judge in Dukes had a trial plan, but as even the sympathetic Justices noted, that plan would have unlawfully prevent Wal-Mart from raising defenses it has a legal right to assert.)  Indeed, since the Second Circuit, in In re IPO, repudiated its earlier decision in In re Visa/MasterCard Antitrust Litigation ("we don't have to listen to the defense expert on certification issues if the plaintiff's expert's certification theory isn't facially insane"), has any Court of Appeals -- other than, of course, the Ninth Circuit in Dukes, by a mere one-judge majority -- diverged from these views even a little bit? 

I think, then, that Russell can get everything on his wish list, in language clear enough for every district judge in the country to understand, in an 8-1 or 9-0 opinion.  The question remains, however, whether the five-justice Concepcion majority will want to go further, blocking any kind of certification in Dukes and doing so in terms that blast Rule 23 to smithereens, or whether the Justices will agree unanimously, or close to it, to reverse the back pay certification but leave open the possibility of a narrow class that focuses on whether past discrimination, if proved, should yield a prospective injunction.

Will the five conservative Justices who agreed in Concepcion forego a chance for consensus if it exists?  I can't pretend to have special insight, but I don't think so.  If I'm wrong about this outcome, it's likely to be because I'm overestimating the Concepcion minority's hostility toward what the lower courts did in Dukes.  If Justices Breyer, Ginsberg, Kagan and Sotomayor want to write an opinion that would uphold the lower court's certification order in (or close) to its entirety, the winning five, who clearly disagree, might as well go to town when reversing.  But I just don't see it.