One Year Later: The Consequences of Wal-Mart v. Dukes

Class-action lawsuits are a powerful tool for employees and consumers to fight for their rights against major corporations. However, thanks to the Supreme Court’s 2011 decision in Wal-Mart v. Dukes, which raised the threshold for the certification of class-action lawsuits, perhaps the correct way to have begun this post would be “Class-action lawsuits were a powerful tool.”

The tide against class-action lawsuits was never more resounding than in Wal-Mart. One year ago, the Supreme Court reversed the lower court’s grant of class certification, after female employees of Wal-Mart tried to bring a class-action lawsuit under Title VII of the Civil Rights Act of 1964 against the mega-corporation for consistently promoting and paying higher salaries to male employees. The employees presented facts showing that 70 percent of Wal-Mart’s hourly jobs are filled by women, while only a third of management positions are. Additionally, women are paid less than their male counterparts from day one and over the course of their employment (read our study here). The Court’s decision not only affected the rights of the one million current and former female Wal-Mart employees whose interests were at stake in the suit, but radically re-wrote the federal rules on class certification with implications for millions of other plaintiffs or would-be plaintiffs.

In Wal-Mart, the Court changed the commonality standard from an “easily satisfied” bar to one requiring that common issues “predominate.” The Court held that a discretionary management system that has produced disparity does not satisfy the new stricter standard. The new commonality standard means that to move forward as a class-action lawsuit, the claims must

depend upon a common contention of such a nature that it is capable of classwide 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. . . . What matters to class certification [is] the capacity of a classwide proceeding to generate common answers apt to drive the resolution of the litigation.

Now not only must plaintiffs be affected by a decision made by high-level corporate executives (rather than by lower management), but the higher-ups’ decision-making must also be conscious and intentional. Needless to say, the Wal-Mart case has far-ranging implications for fighting sex discrimination in the workplace and for class-action litigation across the board.

There are many reasons why class-action litigation is an important vehicle for the vindication of civil rights. In cases involving systemic discrimination, each plaintiff’s case becomes stronger when seen in the aggregate. Furthermore, a wide-scale lawsuit can improve the lot for more employees (or consumers, as the case may be) and so is a more efficient means of delivering more justice than individual suits. Finally, a class action can affect a corporation’s bottom line in a way that individual litigation is unlikely to, and thus class actions are more likely to inspire improvements in corporate behavior.

In the wake of Wal-Mart, several circuits have prevented class-action lawsuits from moving forward. The Fifth and Second Circuits have followed language in Wal-Mart rejecting class-action lawsuits in which plaintiffs claim separate, individual damages, while the Ninth and Eighth Circuits have focused on Wal-Mart’s heightened commonality requirement.

In a troubling decision, Bennett v. Nucor Corporation, the Eighth Circuit affirmed a lower court’s dismissal of a suit, finding that the plaintiff employees failed to meet the commonality requirement under Wal-Mart. In that case, African-American employees at an Arkansas steel mill attempted to bring a class-action lawsuit for racial discrimination against their employer under § 1981 and Title VII. The court found that the employees did not speak for the entire plant because they only worked in one of five departments of the plant, where Confederate flag-style “do-rags” were sold in the company store, actual Confederate flags and nooses were publicly displayed, and racial comments were communicated over the radio, in e-mails, and scrawled on the equipment and in bathrooms.

Some courts, including the Third, Fourth, Sixth and Seventh Circuits, have distinguished Wal-Mart in cases against the De Beers and Hearst corporations, among others. In one of the most publicized post-Wal-Mart decisions, McReynolds v. Merrill Lynch, decided in February of this year, Judge Posner of the Seventh Circuit wrote for a three-judge panel that African-American financial advisors for Merrill Lynch could bring a class-action lawsuit under Title VII and § 1981 because the issue of disparate impact on African-American employees was appropriate for class-wide treatment.

Posner came to this conclusion by distinguishing Wal-Mart. In Wal-Mart, corporate policies formally forbade sex discrimination and assigned hiring decisions to local managers. However, in Merrill Lynch, the Seventh Circuit took issue with two corporate policies: the “teaming” policy and the “account distribution” policy. The teaming policy permits brokers to form their own teams, which in turn are supposed to improve client services. The account distribution policy permits brokers to compete for the clients of departing brokers, based largely on past successes. This is an important distinction because Merrill Lynch’s policies were created in the higher echelons of management — not by local managers — and facilitated discrimination in that the African-American employees claimed that they were less likely to be selected for teams or distributed-accounts.

Meanwhile, the Wal-Mart plaintiffs have re-filed as regional classes in California and Texas courts and intend to continue pursuing their important claims.

Although some lower courts are allowing class actions to proceed under the Wal-Mart standard, the Corporate Court may not be done with rewriting the class certification rules. Just last week, the Court agreed to hear Comcast v. Behrend  during its next term, in order to address the question of what issues that bear on the merits of the case must be resolved at the class certification stage. If the Court reverses the Third Circuit’s plaintiff-friendly holding in this case, it will be erecting yet another barrier to justice for everyday Americans.

Read more »

Corporate Court Starts Filling Its Docket for Next Term

The Supreme Court’s 2011-12 term, which will end this week with a hotly anticipated ruling on the constitutionality of the Affordable Care Act, has been dubbed the “term of the century” by some legal observers. But at the same time that the Court is issuing landmark rulings on topics from juvenile justice to immigration enforcement to health care reform, the Court is also deciding which cases it will hear next term — accepting a number of cases with tremendous implications for corporate accountability. The Court’s grants of certiorari in these cases are a worrying sign that the Court is prepared to travel even further down the road of stifling corporate accountability.

Here are a few of the corporate cases that the Court agreed to hear next term:

Comcast v. Behrend deals with the ability of plaintiffs to collectively hold cable provider Comcast accountable for violations of antitrust law. As is often the case with class action lawsuits, the theoretical option of each plaintiff to sue individually isn’t a real option, because the financial cost of Comcast’s alleged violations to each individual is a small amount. Unless plaintiffs have the option of proceeding as a class, corporations like Comcast can violate the law without accountability. Comcast argued unsuccessfully before the Third Circuit that the plaintiffs should not be permitted to proceed as a class unless they first made a number of onerous merits showings. However, the Supreme Court — which has recently shown hostility to class action lawsuits in cases like Wal-Mart v. Dukes and AT&T v. Concepcion — may be poised to reverse the Third Circuit and erect additional barriers to corporate accountability through collective consumer lawsuits.

FTC v. Phoebe Putney Health System deals with the question of whether healthcare provider Phoebe Putney Health System can escape federal antitrust liability when it achieves monopoly status through the intervention of the state legislature. The Eleventh Circuit Court of Appeals held that the doctrine of state action immunity, which prevents states from being held liable for violations of federal antitrust law, extends to Phoebe Putney, a private provider of health care services that achieved monopoly status after an agency of the Georgia state government, acting at Phoebe’s behest, purchased Phoebe’s largest competitor and then sold it to Phoebe. A decision by the Supreme Court to affirm the Eleventh Circuit’s opinion in this case would carry dramatic implications for antitrust accountability, allowing private entities to avail themselves of antitrust immunity simply by persuading state agencies to become complicit with them in anti-competitive practices.

Vance v. Ball State University deals with the question of whether an employee who has been the victim of racial harassment in the workplace may hold her employer liable under Title VII of the Civil Rights Act of 1964 if the party engaging in the harassment lackedthe authority to fire or formally reprimand the employee. The plaintiff, Maetta Vance, was the sole African-American employee of Ball State University’s Banquet and Catering Department. Over a period of more than two years, she was subjected to physical abuse and racial taunts by co-workers who formally lacked the authority to fire or reprimand her, but who had been directed to supervise her work. She eventually filed a complaint with the Equal Employment Opportunity Commission, seeking to hold the university vicariously liable for the harassment under a rule that establishes vicarious liability for a supervisor’s violations of Title VII. The Seventh Circuit, however, rejected Vance’s vicarious liability claim. If the Supreme Court affirms this ruling, it will have the effect of allowing employers to escape accountability for failing to prevent sexual and racial harassment in their workplaces, even where, as in Vance’s case, the employer ignored repeated internal complaints that the victim of the harassment filed.

Finally, the Supreme Court accepted a series of cases involving environmental damage caused by corporations. Georgia-Pacific West v. Northwest Environmental Defense Center and Decker v. Northwest Environmental Defense Center both deal with challenges to the Ninth Circuit Court of Appeals’ determination that rainwater runoff from ditches and drainpipes associated with logging roads falls into the category of pollutant sources that require a permit from the Environmental Protection Agency under the National Pollutant Discharge Elimination System. The Ninth Circuit’s ruling has come under heavy attack by the logging industry, which claims that the economic impact of a rule requiring them to pay for pollution of rainwater runoff from industry roads would place too great a burden on their industry.

Additionally, the Court agreed to hear the case of LA County Flood Control District v. Natural Resources Defense Council, which raises a question regarding the interpretation of the Clean Water Act (“CWA”). The Court has previously stated that transfer of water within a single body cannot constitute a “discharge” within the meaning of the act. The LA County Flood Control District case raises the question of whether that precedent can protect the LA County Flood Control District from liability under the CWA for discharging pollutants into the Los Angeles and San Gabriel rivers through the municipal storm sewer system.

Together, these cases raise the possibility that the Court is prepared to bow to corporate pressures to roll back the Clean Water Act’s protections against spoliation of natural resources. The defendants in these cases have taken an extreme position that they should be beyond the reach of the laws and agencies put in place to protect our environment: In the words of one witness in the LA County Flood Control case, they “could not be held accountable even if its discharges “were so polluted with oil and grease that they were on fire as they came out of the system.”

This coming Supreme Court term may not rival the “term of the century” that will draw to a close this week in terms of media attention, but if the cases on the docket are any indication, it will nonetheless be an important term for those who care about corporate accountability. We will see whether the the Court intends to continue down the path that it has traveled in cases like Citizens United v. FEC and AT&T Mobility v. Concepcion, or whether it will turn back the legacy of corporation-friendly rulings that has earned it the moniker the Corporate Court.

Read more »