November 12, 2012 Articles

Class Certification after Wal-Mart v. Dukes

Following Dukes, courts are likely to consider whether common questions have common answers.

By Ashish Prasad

There has been much speculation and concern over the impact of the U.S. Supreme Court’s decision in Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541 (2011), on class action litigation. While some argue that the decision will make it much more difficult for litigants to obtain class certification, others argue that in many cases, the decision will really have little or no impact on resolution of class certification issues.

The impact of Dukes likely will vary depending on the circuit in question. A majority of circuits already were applying standards much like those laid out in Dukes. Others applied much more lenient standards to class certification. The Supreme Court’s decision in Dukes may be best understood as an attempt to reconcile the different circuits’ interpretations of earlier Supreme Court cases.

This article first briefly surveys Supreme Court case history before Dukes to examine the evolution of case law regarding class certification. Next, this article examines Dukes in the context of the law on class certification at the time the decision was rendered, looking specifically at how Dukes affects class certification standards. This article then analyzes case law on standards for class certification after Dukes. Finally, this article explores the practical implications of Dukes on class action litigants.

Supreme Court Rulings on Class Certification Leading up to Dukes
To understand the relative importance of the issues and holdings in Dukes, it is important first to be aware of the landscape of case law regarding class certification leading up to that decision. Before issuing the Dukes decision, the Supreme Court had touched on issues surrounding class certification in three frequently cited cases. Although those cases provided some guidelines as to how courts should consider class certification issues, they also created confusion among the lower courts.

The language in the three Supreme Court opinions proved difficult for some courts to reconcile, and it led to the development of differing standards for class certification, depending on the circuit.

Eisen v. Carlisle & Jacquelin
In 1974, the Supreme Court issued a decision in Eisen v. Carlisle & Jacquelin, 417 U.S. 156 (1974), which would go on to divide lower courts in their interpretation of the holding as it applied to class certification issues. Rule 23(c)(2) required individual notice to all identifiable class members in a class action suit. Because the individual notice would place a huge cost burden on the petitioners, the district court held a preliminary hearing on the merits of the case. Based on that preliminary hearing, the court determined that the petitioner was more than likely to prevail and consequently allocated 90 percent of the costs of providing notice to the defendants and the remaining 10 percent of the costs to the plaintiff.

The decision ultimately reached the Supreme Court, which found that the district court lacked the authority to hold a preliminary hearing on the merits of the case for the purpose of reallocating notice costs. Instead, the Supreme Court found that the entire expense of providing notice should have fallen on the petitioner.

The Supreme Court made the following statement in dicta:

We find nothing in either the language or history of Rule 23 that gives a court any authority to conduct a preliminary inquiry into the merits of a suit in order to determine whether it may be maintained as a class action. Indeed, such a procedure contravenes the Rule by allowing a representative plaintiff to secure the benefits of a class action without first satisfying the requirements for it.

417 U.S. at 177–78.

Although the Supreme Court was criticizing the district court’s preliminary inquiry into the merits of the case as a way to allocate notice costs, the language the Supreme Court used would lead many lower courts to ban any inquiry into the merits, even when pertinent to determining whether class certification would be appropriate. As a result, some circuits developed much more lenient standards for class certification. Other circuits, however, distinguished Eisen and went on to allow inquiries into the merits if made for the purpose of evaluating whether the requirements of Rule 23 could be met.

General Telephone Co. of the Southwest v. Falcon
In 1982, the Supreme Court revisited issues surrounding class certification in General Telephone Co. of the Southwest v. Falcon, 457 U.S. 147 (1982). The decision in Falcon would serve as guidance for future courts in determining what responsibilities and restrictions they faced when analyzing class certification requirements under Rule 23, in situations where there was an overlap with inquiries into the merits of the case.

The Supreme Court held that the district court had erred in upholding certification of a class that included both employees who had been denied promotion and applicants who had been denied employment. The Supreme Court noted that there was a gap between an individual claim of discrimination and the existence of a class of people who had suffered the same injury and whose claims would share common questions of law or fact. The Supreme Court found that it was wrong of the district court to have presumed that the respondent’s claim was typical of other claims.

The Supreme Court then emphasized language from a previous opinion, noting that “‘class determination generally involves considerations that are enmeshed in the factual and legal issues comprising the plaintiff’s cause of action.’” 457 U.S. at 160, quoting Coopers & Lybrand v. Livesay, 437 U.S. 463, 469 (1978). Therefore, the Supreme Court clarified, sometimes “it may be necessary for the court to probe behind the pleadings before coming to rest on the certification question.” To make its intentions clear, the Supreme Court reiterated that any class action “may only be certified if the trial court is satisfied, after a rigorous analysis, that the prerequisites of Rule 23(a) have been satisfied.” 457 U.S. at 160–61. The language in Falcon strongly suggests that courts are required to probe into the merits of the case in situations where the merits overlap with issues relevant to determining class certification under Rule 23.

Amchem Products, Inc. v. Windsor
A 1997 case, Amchem Products, Inc. v. Windsor, 521 U.S. 591 (1997), provided further evidence that the Supreme Court was not in favor of adopting a very lenient standard for class certification. The class was composed of people who had been exposed to asbestos; some had already developed conditions or injuries as a result of their exposure, while others had not yet manifested any conditions relating to their asbestos exposure. The district court approved the certification of the class under Rule 23(b)(3) for the purpose of settlement, and the Third Circuit Court of Appeals later decertified the class. The Supreme Court agreed with the court of appeals and held that the class did not meet the requirements of Rule 23.

Among the reasons why the class did not fulfill the requirements of Rule 23(a), the Supreme Court found that the class did not meet the criteria of Rule 23(b)(3). Rule 23(b)(3) permits monetary judgments that will bind all class members except those who choose to opt out, and it requires that “questions of law or fact common to class members predominate over any questions affecting only individual members. . . .” The Supreme Court found that the class members’ shared experience of exposure to asbestos was not sufficient to meet the predominance criterion, given the greater number of individual uncommon questions within the different categories of the class. The Court warned district courts that they should exercise caution “when individual stakes are high and disparities among class members great.” 521 U.S. at 625.

Although the language in Eisen may have suggested that courts should apply lenient standards in determining class certification and should not look too closely into the merits of a case, Falcon and Amchem both showed the Supreme Court’s caution in class certifications and suggested that a higher burden of proof would be necessary to overcome barriers to class certification.

An Overview of Dukes
Dukes involved a class action suit seeking injunctive and declaratory relief, back pay, and punitive damages on behalf of a nationwide class of 1.5 million female employees. The plaintiffs alleged discrimination in violation of Title VII of the Civil Rights Act of 1964. The case ultimately reached the Supreme Court, where the issue on appeal was whether the expansive class of current and former female employees had been properly certified under Rule 23.

The Commonality Requirement of Rule 23(a)
In order for a class to be properly certified under Rule 23, the party seeking certification of the class must meet all four requirements of Rule 23(a) and must also satisfy the requirements of either Rule 23(b)(1), Rule 23(b)(2), or Rule 23(b)(3). Under Rule 23(a), those seeking to sue as representative parties on behalf of a class may only do so in the following circumstances:

  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 and 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.

One of the contentions in Dukes was that the class had not met the commonality requirement of Rule 23(a)(2) and had therefore been improperly certified as a class. The Court held that, to meet the commonality requirement, the claims of a party “must depend upon a common contention of such a nature that it is capable of class wide resolution—which means that determination of its truth or falsity will resolve an issue that is central to the validity of each one of the claims in one stroke.” In essence, the Court required not only a common question but, more specifically, a common question to which the “examination of the class members’ claims will produce a common answer. . . .” 131 S. Ct. at 2545.

Presented with the case at hand, the Court found that there was a conceptual gap between one individual’s claim of discrimination and the existence of an entire class of people who were discriminated against by an employer. The Court therefore required “significant proof that an employer operated under a general policy of discrimination” in order to bridge this gap. 131 S. Ct. at 2545, citing Falcon, 457 U.S. at 159. Further, the Court made it clear that proof of commonality would necessarily overlap with the merits of the case.

The Dukes plaintiffs had presented a sociologist’s analysis, claiming that Wal-Mart’s corporate culture made it vulnerable to gender bias. As Wal-Mart had announced a policy forbidding sexual discrimination, the claim depended on Wal-Mart’s policy of allowing managerial discretion in making employment, promotion, and salary decisions. Given Wal-Mart’s size and the scope, the Court found it unlikely that all the managers would have exercised their discretion in a common way, and it also found that the anecdotal and statistical evidence proffered by experts on behalf of the class fell short of convincingly establishing a common pattern of discrimination. The Court therefore held that the certification of the class had not been consistent with Rule 23(a).

Certification under Rule 23(b)(2)
The other major question was whether the class had been properly certified under Rule 23(b)(2). The Court’s holding that the class was not properly certified under Rule 23(a) would have been enough to result in decertification of the class. Nevertheless, the Court went on to evaluate whether the class certification under Rule 23(b)(2) had been proper.

The lower court had certified the class under Rule 23(b)(2), despite claims for individual monetary relief in the form of back pay. Once all four requirements of Rule 23(a) have been met, Rule 23(b)(2) allows for class certification in situations where “the party opposing the class has acted or refused to act on grounds that apply generally to the class, so that final injunctive or corresponding declaratory relief is appropriate respecting the class as a whole. . . .” The respondents argued that certification under Rule 23(b)(2) was appropriate, regardless of individual monetary claims, because those claims did not predominate over the injunctive and declaratory relief requests.

The Court strongly disagreed, finding that certification under Rule 23(b)(2) was improper. The Court clarified that Rule 23(b)(2) applies only when “a single, indivisible remedy would provide relief to each class member.” 131 S. Ct. at 2545. Rule 23(b)(2), designed to provide equitable relief, binds all members of the class to any decision and does not provide a mechanism for class members to opt out. The Court questioned whether claims for monetary relief could ever be properly certified under Rule 23(b)(2). The Court ultimately left that question unanswered, holding instead that claims for individualized relief, such as back pay, would always be excluded under Rule 23(b)(2) and would not be considered incidental to the requested injunction. The Court found that individualized monetary claims “belong instead in Rule 23(b)(3), with its procedural protections of predominance, superiority, mandatory notice, and the right to opt out.” 131 S. Ct. at 2545.

Finally, in rejecting the contention that certification was proper under Rule 23(b)(2), the Court also rejected the Ninth Circuit’s attempt to replace the need for individualized proceedings with a “Trial by Formula.” The Court clarified that, if a plaintiff establishes the right to individualized monetary relief, “a district court must usually conduct ‘additional proceedings to determine the scope of individual relief.’” 131 S. Ct. at 2546, citing Teamsters v. United States, 431 U.S. 324, 361 (1977). To allow for trial by formula, the Court added, would wrongly prevent Wal-Mart from being able to litigate its statutory defenses to individual claims.

Placing Dukes into Context
Although Dukes specifically addresses issues involving the commonality and predominance requirements under Rule 23(a) and 23(b)(3), respectively, the decision also speaks more broadly to the standards that apply in class certification determinations. On these broader issues, Dukes clarifies the Court’s position on issues that had been creating ambiguity in a minority of circuits for some time. See, e.g., In re Initial Public Offerings Secs. Litig.,471 F.3d 24, 26 (2d Cir. 2006). In this respect, the decision does not seem to represent a radical turn in case law regarding class certification standards and is in line with a majority of circuits. See, e.g., Gariety v. Grant Thornton, LLP, 368 F.3d 356, 366 (4th Cir. 2004); Newton v. Merill Lynch, Pierce, Fenner & Smith, Inc., 259 F.3d 154, 166–67 (3d Cir. 2001); Szabo v. Bridgeport Machines, Inc., 249 F.3d 672, 676 (7th Cir. 2001). Dukes also is consistent with more recent approaches taken by the Supreme Court on class certification issues and with changes to Rule 23 itself.

Before Dukes,the Supreme Court had already indicated that a stricter standard for class certification was appropriate in cases like Falcon and Amchem. Under this higher standard of proof, courts should not simply take a plaintiff’s allegations at face value; courts should instead perform an inquiry and examination as to whether all of the requirements of Rule 23 have been met. Yet, before Dukes, the Supreme Court’s holding in Eisen haunted class certification issues, dividing courts and leading to differing standards and ambiguity across different circuits.

Dukes provided the Supreme Court the opportunity to clarify its position once and for all by affirming that the rigorous analysis necessary for evaluating whether the requirements of Rule 23 have been met will often “entail some overlap with the merits of the plaintiff’s underlying claim. That cannot be helped.” 131 S. Ct. at 2551. The Court in Dukes specifically repudiated the often-cited language from Eisen, that “[w]e find nothing in either the language or history of Rule 23 that gives a court any authority to conduct a preliminary inquiry into the merits of a suit in order to determine whether it may be maintained as a class action,” by holding that to the extent that it “goes beyond the permissibility of a merits inquiry for any other pretrial purpose, it is the purest dictum and is contradicted by our other cases.” Id. at 2551–52, n.6.

Case Law After Dukes
In cases following Dukes, certain patterns have emerged, three of which are discussed here. First, defendants in multiple cases have argued against certification of classes under the commonality requirement of Rule 23(a), claiming that it would cut against the defendants’ right to argue individualized defenses. Second, courts are carefully looking at the language in Dukes indicating that what is important for the commonality requirement is not a common question but the ability of a class-wide proceeding to generate common answers and resolutions. Third, courts have carefully considered which branch of Rule 23(b) would be appropriate for certification, distinguishing between equitable relief and certain types of monetary relief under the guidance of the Court’s language in Dukes.

Recently, in arguing against certification of classes, defendants have argued their right to individualized defenses as a reason for courts to reject certification. In Johns v. Bayer Corp., 2012 WL 368032 (S.D. Cal. Feb. 3, 2012), the court rejected Bayer’s argument that the decision in Dukes prohibited certification of a class because it would not allow Bayer to defend against individual claims. In doing so, the court stated that to the extent Bayer had individualized defenses, “Bayer would not be deprived of its right to try individualized defenses, and therefore Dukes does not bar certification.” 2012 WL 368032,at *7. Similarly, the defendant in Ross v. RBS Citizens, N.A., 667 F.3d 900 (7th Cir. Jan. 27, 2012), claimed that the decision in Dukes gave the defendant, Charter One, the right to present its defenses on an individualized basis and that the class should therefore not be found to meet the commonality requirement. Id. at 908, citing Dukes,131 S. Ct. at 1255. The court rejected this argument, stating that Dukes involved a class certified under Rule 23(b)(2), where the Supreme Court had addressed a statutory right to avoid equitable damages, and that Charter One did not have this right because the classes were seeking only monetary relief through Rule 23(b)(3).

Courts have been analyzing the commonality requirement a bit differently since Dukes, looking for situations in which class certification would render common answers or resolutions to issues. In addressing the commonality requirement, the court in Ross v. RBS cited Dukes for the proposition that what matters to class certification is not the raising of a common question, but rather the “capacity of a classwide proceeding to generate common answers apt to drive the resolution of the litigation.” 667 F.3d at 908. In another case granting certification of a class, the court, in analyzing the commonality requirement of Rule 23(a), also cited Dukes for the assertion that for certification purposes, what matters is the capacity of the proceedings to generate common answers that can lead to the resolution of the litigation. The court therefore rejected the contention that the plaintiffs were required to prove a common class-wide injury. Instead, the court noted that “[d]issimilarities within the proposed class are what have the potential to impede the generation of common answers.In re Ferrero Litig., 2011 WL 5557404, at *2, *4, citing Dukes, 131 S. Ct. at 2551.

The Dukes decision has heightened awareness of the different considerations for categorizing class certifications under Rule 23(b). Courts are showing more caution when considering whether a class would fit better under Rule 23(b)(2) or Rule 23(b)(3). In Donovan v. Philip Morris, 2012 WL 957633, at *4 (D. Mass. Mar. 21, 2012), the defendant, Philip Morris, filed a motion to decertify a class, based partly on the new decision in Dukes, which had been rendered subsequent to class certification in Donovan. The defendant argued that because the relief sought by the plaintiff was monetary and not injunctive, it should be certified under Rule 23(b)(3) instead of Rule 23(b)(2). The defendant further claimed that under Dukes, the plaintiffs did not meet the requirements for commonality. The court rejected the contention that the language in Dukes precluded certification under Rule 23(b)(2), finding that the remedy sought was wholly equitable and injunctive and did not fail the predominance requirement.

On the other hand, the court in Ellis v. Costco Wholesale Corp., 657 F.3d 970 (9th Cir. 2011), vacated certification of a class after the Dukes decision came down. In that case, the Title VII class alleging gender discrimination sought both injunctive relief and individual monetary awards for back pay. After Dukes, the court in Ellis rejected the plaintiffs’ request for certification under Rule 23(b)(2) because the Dukes decision explicitly precluded claims for individualized monetary relief in the form of back pay under Rule 23(b)(2).

Practical Implications of Dukes
Following Dukes, courts may be more careful in conducting a thorough analysis before certifying a class. Many circuits, however, have long been acting in accordance with Dukes. In those circuits, the class certification standards are not likely to undergo much change, but certain aspects of the analysis conducted in determining class certification may change as a result of Dukes. Those potential changes should be understood by counsel litigating class certification determinations.

Courts may apply more exacting standards not only in evaluating the requirements under Rule 23(b) but also in considering the requirements under Rule 23(a). Certainly, Dukes has reduced ambiguity by stressing that lenient standards in determining class certification where pleadings are taken at face value will not be appropriate. Courts will be more likely to conduct a more thorough analysis of the evidence, require more discovery, and place more of a burden on plaintiffs to show that they meet all of the class certification requirements of Rule 23. Mere anecdotal evidence, even when accompanied by expert testimony, may no longer suffice. Plaintiffs attempting to certify a class must be prepared for the possibility of a hearing that will touch on the merits of the case if (as is often the case) the merits are entangled with the question of class certification.

Time and again, the Supreme Court has been wary of “sprawling classes” when deciding on class certification issues. Dukes is no different. Plaintiffs should exercise caution in defining their class, as the more diversity in issues among members of a class, the less likely that the class will be certified.

Litigants seeking class certification should also carefully consider which section of Rule 23(b) best fits. Although Dukes does not ban the recovery of damages under Rule 23(b)(2), the decision strongly questions whether monetary damages would ever be appropriate under Rule 23(b)(2), which is meant to provide remedies in equity. Class members seeking monetary damages may find themselves held to the stricter requirements of Rule 23(b)(3), which may prove harder to meet.

Furthermore, to the extent that any damages or recovery involves individual determinations, Dukes cuts against any application of a “trial by formula” to determine individual damages without individual adjudications. 131 S. Ct. at 2561. Defendants are more likely to argue against class certification under the notion that they are entitled to individualized defenses. Plaintiffs should now be prepared to argue against that by distinguishing the circumstances of their case from those in Dukes.

Perhaps the biggest change in the analysis for determining class certification following Dukes is that from now on, courts are likely to consider whether common questions have common answers and resolutions. Litigants should bear this in mind when arguing in favor of class certification.

Keywords: litigation, pretrial practice and discovery, commonality, predominance, injunctive relief, declaratory relief, back pay, monetary relief, punitive damages, equitable remedies

Ashish Prasad is the chief executive officer of Discovery Services LLC. The author would like to thank Gabriela Grinblat for her contributions to this article.


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