class actions

Yesterday’s decision was the most momentous Supreme Court pronouncement on class actions in many years, addressing issues that go far beyond the case at hand. A sampling of early analysis:

* Some consideration of merits okay at certification stage. Paul Karlsgodt:

For more than 30 years, plaintiffs’ counsel and many courts have cited the Court’s opinion in Eisen v. Carlisle & Jacquelin, 417 U.S. 156 (1974) as prohibiting any examination of the plaintiffs’ claims on the merits at the class certification phase. Consistent with the majority trend in the lower federal courts, the Supreme Court’s decision in Wal-Mart Stores, Inc. confirms that a court should consider and resolve any issues of fact that are necessary to determine whether one or more elements of Rule 23 are satisfied, regardless of whether those issues may overlap or be identical to one or more issues to be decided in ruling on the merits of the plaintiff’s claims.

In its day the Eisen case was a milestone in the 1960s-1970s liberalization of class action procedure, and seemed at the time to authorize the plaintiff’s side to dream up all the actions it wanted while the defense side could not block the actions at the certification stage by pointing out that they were bogus on the merits. Russell Jackson bluntly assesses the case’s fate: “Stick a fork in Eisen v. Carlisle & Jacquelin. It’s done!”

* Statistical proofs can’t be used to bypass individualized defenses. At least in the context of back pay discrimination claims, all nine justices agreed that the company had a right to assert individualized defenses based on the details of particular cases rather than simply hand over a giant damage check based on some formula derived from statistical testimony. In particular, the Court said:

Because the Rules Enabling Act forbids interpreting Rule 23 to “abridge, enlarge, or modify any substantive right,” a class cannot be certified on the premise that Wal-Mart will not be entitled to litigate its statutory defenses to individual claims.

Russell Jackson draws out implications for actions far removed from the employment context:

This means that third-party-payor claims and consumer fraud class actions will not be able to prove causation or reliance using statistical proof like that proposed and rejected in McLaughlin v. American Tobacco Co., 522 F.3d 215 (2d Cir. 2008) in order to facilitate class certification. This is BIG NEWS!!!

* Subjective managerial discretion under less suspicion. Returning to the employment context, a key issue in the case is whether plaintiffs could assert the requisite common question by challenging Wal-Mart’s delegation of decentralized discretion to store managers over many issues of pay and promotion. The Court majority refused to entertain such a challenge. Michael Fox:

The 5-4 opinion seems to pull the teeth from what I have always considered one of the more dangerous Supreme Court opinions, Watson v. Fort Worth Bank and Trust, a 1988 decision which seemed to permit a disparate impact case any time an employer’s promotion practices were subjective (which was every employer) and there was a disparate impact (almost every employer).

If Fox is right, this is a giant step in the right direction, and helps correct a pernicious tendency in modern employment law to pressure large employers into maintaining more centralized (and inevitably more bureaucratic) personnel policies.

Tagged as: class actions, Supreme Court, Wal-Mart v. Dukes, workplace

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