Large Employers Beware: Ninth Circuit's Wal-Mart Decision Affirms Class of 1.6 Million Current and Former Employees

On February 6, 2007, a divided three-judge panel of the U.S. Court of Appeals for the Ninth Circuit issued its long-awaited decision in Dukes v. Wal-Mart, Inc., ___ F.3 rd ___, 2007 WL 329022 (9th Cir. 2007) . Applying the deferential “abuse of discretion” standard, the majority affirmed the district court's certification of a class of more than 1.6 million current and former female employees of Wal-Mart – by far the largest class ever certified in an employment discrimination case. Plaintiffs allege that female employees of Wal-Mart (1) are paid less than men in comparable positions, despite having higher performance ratings; and (2) receive fewer, and wait longer for, promotions to management positions than men.

The majority held that class certification was appropriate pursuant to both Rule 23(a) and Rule 23(b)(2) of the Federal Rules of Civil Procedure. As to the former, the majority's opinion focused on the commonality element, finding “significant proof” of a “highly centralized company that promotes policies common to all stores” and statistical evidence that “was probative” of the claims and to which “Wal-Mart provided little or no proper legal or factual challenge.” The majority also noted that plaintiffs demonstrated a nexus between “subjective decision-making” and statistical evidence “demonstrating a pattern of discriminatory pay and promotions for female employees.” As to Rule 23(b)(2), the majority affirmed the district court's ruling that neither the request for backpay nor the request for punitive damages undermined the plaintiffs' claim that injunctive and declaratory relief predominate. Finally, the majority rejected Wal-Mart's claims that class certification would deny the company of its substantive defenses, including its right to individualized Teamsters hearings on each member's claim. The majority concluded that Teamsters does not require individualized hearings and that statistical methodologies can, indeed, be applied to determine appropriate relief.

In dissent, Judge Andrew Kleinfeld argued that class certification in this matter violates the requirements of Rule 23, “threatens the rights of women injured by sex discrimination,” and “threatens Wal-Mart's rights.” Judge Kleinfeld stressed that a “rational defendant will settle even the most unjust claim,” when the potential loss is “stratospheric.”

While the outcome of Wal-Mart's promised request for rehearing or en banc review is unknown, one thing is certain: the rising tide of class action employment litigation, alleging that subjective decision-making with respect to compensation, performance ratings, and promotions results in discrimination against protected classes of employees, will continue.