Tuesday, June 21, 2011

U.S. Supreme Court’s Decision in Wal-Mart Stores, Inc. v. Dukes et al Unlikely To Significantly Impact Rule 23(b)(3) Certification

On June 20, 2011, the U.S Supreme Court reversed the Ninth Circuit’s certification decision in Wal-Mart Stores, Inc. v. Dukes et al, 564 U. S. ____ (2011), concluding that the Ninth Circuit applied improper criteria with regard to Rule 23(b)(2) (which was expected) and commonality under Rule 23(a)(2), which was somewhat surprising.

The Court’s Rule 23(a)(2) analysis unquestionably elevates the burden required to establish commonality, which up until now “has been construed permissively.” See Hanlon v. Chrysler Corp., 150 F.3d 1011, 1019 (9th Cir. Cal. 1998). As held by the Majority, this standard was improper, as the element of commonality requires a more demanding showing establishing that the defined class is not simply bound together by the same legal claim or common questions, but rather, is bound by (1) the same theory of liability that (2) is also capable of classwide resolution:
Commonality requires the plaintiff to demonstrate that the class members “have suffered the same injury,” Falcon, supra, at 157. This does not mean merely that they have all suffered a violation of the same provision of law. Title VII, for example, can be violated in many ways—by intentional discrimination, or by hiring and promotion criteria that result in disparate impact, and by the use of these practices on the part of many different superiors in a single company. Quite obviously, the mere claim by employees of the same company that they have suffered a Title VII injury, or even a disparate impact Title VII injury, gives no cause to believe that all their claims can productively be litigated at once. Their claims must depend upon a common contention—for example, the assertion of discriminatory bias on the part of the same supervisor. That common contention, moreover, must be 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.
Slip Opinion, at 19.

The clear objective of this standard, in the view of the Majority, is to produce cohesion to the class found lacking in this case.  See id., at 12 (“Without some glue holding the alleged reasons for all those decisions together, it will be impossible to say that examination of all the class members’ claims for relief will produce a common answer to the crucial question why was I disfavored.”).

As the dissent points out, however, the practical effect of the Majority's standard elevates a court's commonality analysis to the functional equivalent of a Rule 23(b)(3) predominance analysis. See Dissent, at 9 (“The Court’s emphasis on differences between class members mimics the Rule 23(b)(3) inquiry into whether common questions “predominate” over individual issues.”). The majority rejects this criticism:
The dissent misunderstands the nature of the foregoing analysis. It criticizes our focus on the dissimilarities between the putative class members on the ground that we have “blend[ed]” Rule 23(a)(2)’s commonality requirement with Rule 23(b)(3)’s inquiry into whether common questions “predominate” over individual ones. See post, at 8–10 (GINSBURG, J., concurring in part and dissenting in part). That is not so. We quite agree that for purposes of Rule 23(a)(2) “‘[e]ven a single [common] question’” will do, post, at 10, n. 9 (quoting Nagareda, The Preexistence Principle and the Structure of the Class Action, 103 Colum. L. Rev. 149, 176, n. 110 (2003)). We consider dissimilarities not in order to determine (as Rule 23(b)(3)requires) whether common questions predominate, but in order to determine (as Rule 23(a)(2) requires) whether there is “[e]ven a single [common] question.” And there is not here. Because respondents provide no convincing proof of a companywide discriminatory pay and promotion policy, we have concluded that they have not established the existence of any common question.
Slip Opinion, at 19

While it is true that the procedural standard articulated by the Majority does not focus on whether common questions predominate, the Majority’s explanation on this point does not dispute the fact that the substantive effect of this commonality standard will likely limit the requisit issues to only those capable of satisfying predominance (which seemed to be the point articulated by Justice Ginsburg).
 
While the Court's standard likely will substantially impact certification under Rule 23(b)(1) and (b)(2) moving forward, it is unlikely to have significant impact Rule 23(b)(3) certification.  It is generally held that “the commonality element is of less importance in a Rule 23(b)(3) class action … because the class must also meet the more stringent predominance requirement of Rule 23(b)(3).”  See In re Educ. Testing Serv. Praxis Principles of Learning & Teaching: Grades 7-12 Litig., 2006 U.S. Dist. LEXIS 9726, 10 (E.D. La. Mar. 13, 2006).  “The Rule 23(b)(3) predominance inquiry tests whether proposed classes are sufficiently cohesive to warrant adjudication by representation.”  See Amchem Prods. v. Windsor, 521 U.S. 591, 623 (U.S. 1997).  Based on this fact, a court’s Rule 23(b)(3) inquiry generally subsumes Rule 23(a)(2) analysis altogether.  See Hanlon v. Chrysler Corp., 150 F.3d 1011, 1022 (9th Cir. Cal. 1998) (a court’s “[Rule 23(b)(3) predominance] analysis presumes that the existence of common issues of fact or law have been established pursuant to Rule 23(a)(2)[.]”); In re Ford Motor Co. Bronco II Prod. Liab. Litig., 177 F.R.D. 360, 366 (E.D. La. 1997) (“courts usually do not spend a great deal of time addressing whether common issues exist, but instead focus on the related issue under Rule 23 (b)(3) of whether common issues predominate over individual ones.”).

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