Class Action Defense Review : Antitrust, Employment Discrimination, Securities Fraud and Unfair Competition Lawyer & Attorneys: Cozen O'Conner Law Firm: Philadelphia

The Supreme Court held today that a collective action under the Fair Labor Standards Act may not continue if a defendant, prior to conditional certification, has mooted the named plaintiff’s case through an offer of full relief. Four dissenting justices, however, contend that because such an offer never renders a case moot, the majority opinion has no precedential value.

A brief explanation of the procedural peculiarities in Genesis Healthcare Corp. v. Symczyk that allowed such a dispute to occur: after the plaintiff, a former Genesis Healthcare nurse, filed her complaint for statutory damages under the FLSA, Genesis served a Rule 68 offer of judgment that would have satisfied the plaintiff’s individual claim in full. The plaintiff did not accept the offer. Genesis then moved to dismiss the complaint for lack of subject matter jurisdiction, on the ground that the offer of full relief had mooted the plaintiff’s claim. The district court agreed and granted the motion.

The Third Circuit reversed, holding that although the plaintiff’s individual claim was moot, her collective action was not. The panel reasoned that allowing defendants to “pick off” named plaintiffs with Rule 68 offers would frustrate the goals of collective actions.

The Supreme Court, in today's 5-4 decision split along party lines, assumed, without deciding, that the plaintiff’s individual claim was moot. The majority opinion, written by Justice Thomas, acknowledged a circuit split as to whether an unaccepted offer that fully satisfies a plaintiff’s claim renders the claim moot. The majority declined to resolve the split, however, on the grounds that the plaintiff did not challenge the mootness determination at the district court, in the Third Circuit, or in her opposition to the petition for certiorari, but instead raised the issue for the first time in her merits brief to the Supreme Court.

The Court then held that because it had to assume that the plaintiff’s claim was moot, the plaintiff could not maintain her FLSA collective action. In reaching this decision, the Court distinguished several Rule 23 cases on which the plaintiff relied, relying in part on differences between Rule 23 class actions and FLSA collective actions. Thus, class action plaintiffs may, in turn, be able to distinguish Genesis Healthcare in fending future “pick off” attempts.

The most powerful ammunition for class counsel, however, will be Justice Kagan’s extraordinary dissent. In a tone that bordered on the snarky, Justice Kagan accused the majority of resolving “an imaginary question, based on a mistake the courts below made” in deciding that the plaintiff’s individual claim was moot. Justice Kagan, noting that the district court had dismissed the plaintiff’s claim as moot even though the plaintiff had never received any money from Genesis, wrote that the logic espoused by Genesis, the district court, and the Third Circuit was “wrong, wrong, and wrong again.” Asserting that an unaccepted settlement offer has no legal effect, Justice Kagan offered “a friendly suggestion to the Third Circuit: Rethink your mootness-by-unaccepted-offer theory. And a note to all other courts of appeals: Don’t try this at home.”

Justice Kagan then argued that the majority could and should have considered the mootness question despite the concessions and determinations below. She wrote that not only did the Court have discretion to overlook the plaintiff’s failure to seek review of the Third Circuit’s determination (since, after all, the plaintiff won in the Third Circuit), but the mootness question also was “inextricably intertwined” with the question the Court decided (whether individual mootness prevents a collective action from going forward).

Justice Kagan argued that because a plaintiff is free to reject a settlement offer—even one that offers full relief—without mooting her claim, individual claims for damages in an FLSA case can never become moot. As a result, she concluded, the Court decided a nonexistent issue. “Feel free,” she wrote, “to relegate the majority’s decision to the furthest reaches of your mind: The situation it addresses should never again arise.”

In at least one respect, Justice Kagan’s logic may be faulty. Unless and until the circuit split is resolved in favor of her position, some courts, including district courts following Third Circuit precedent, will continue to find individual FLSA claims moot when the defendant has offered full relief. And in those cases, Genesis Healthcare will require courts to prevent the collective action from proceeding. We can agree with the dissent, however, that far from resolving an FLSA certification question in a manner that might have had broad implications for Rule 23 class actions, Genesis Healthcare leaves much unresolved regarding “pick off” attempts in both contexts.
 

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The 2012-13 Supreme Court term has been a hotbed of class action activity, with the justices set to decide at least half a dozen cases that will directly affect class action litigation. Although none of this term’s decisions is likely to have the impact of the Court’s recent decisions in Wal-Mart Stores v. Dukes or AT&T Mobility v. Concepcion, the sheer number of opinions expected this spring promises significant clarifications of some murky areas. These include:
 

  • Whether a plaintiff may defeat removal under CAFA by stipulating that he or she will not seek more than the $5 million jurisdictional threshold on behalf of the class. In Standard Fire Insurance v. Knowles, the Eighth Circuit denied permission to appeal a district court’s determination that such a stipulation was sufficient, after affirming the validity of a jurisdictional stipulation in a similar case. Is the Eighth Circuit correct, or does such a stipulation improperly bind members of a class that the named plaintiff does not yet represent?

• The extent to which the Supreme Court’s 2011 decision in Wal-Mart requires courts to delve into the merits of a lawsuit when considering class certification motions. In Comcast v. Behrend, the Third Circuit affirmed the grant of class certification in an antitrust action, despite the district court’s decision not to resolve disputes about the relevant market and the existence of classwide impact at the class certification stage. Instead, the Third Circuit held that it was sufficient for the court to determine that the class could establish the relevant market through common proof, that the element of antitrust impact was capable of proof through evidence common to the class, and that the plaintiffs had presented a common methodology to determine damages on a classwide basis. Does Wal-Mart, which included a footnote implying that merits inquiries are appropriate in applying Rule 23(b), require more?

• The extent to which the plaintiff in a securities fraud class action must establish that the alleged misrepresentation was material in order to obtain class certification based on a “fraud on the market” presumption. In Amgen v. Connecticut Retirement Plans and Trust Funds, the Ninth Circuit held that a plaintiff need only plausibly allege materiality at the class certification stage. Did the Ninth Circuit get it right, or does failure to establish materiality at the class certification stage preclude a finding that classwide issues predominate?

• Whether a defendant renders a class action moot by offering full relief to the named plaintiff prior to class certification. In Genesis HealthCare v. Symczyk, the Third Circuit held that in a collective action brought under the Fair Labor Standards Act—which, unlike a Rule 23 class action, requires “class” members to affirmatively consent to participation in the class—an offer of judgment to the named plaintiff, though made before any other plaintiffs had “opted in,” did not moot the lawsuit as to the “class.” Can a defendant thwart a class action pre-certification by settling with the putative class representative, or must the Article III “case or controversy” requirement be read more broadly in class actions? And is the answer different for FLSA actions than for Rule 23 class actions?

• Whether a class arbitration waiver can be held invalid if it prevents plaintiffs from enforcing their federal statutory rights. In In re American Express Merchants’ Litigation, the Second Circuit struck down a class arbitration waiver on the ground that the waiver had the practical effect of precluding potential class members from enforcing their Sherman Act claims. Does the Supreme Court’s 2011 opinion in AT&T Mobility, which held that the Federal Arbitration Act’s general protection of arbitration clauses preempted a state common law unconscionability doctrine, apply more broadly, or is there an exception where the waiver might interfere with enforcement of another federal statute?

• How specific an arbitration clause must be in order to support a finding that the parties consented to class arbitration. In Oxford Health Plans v. Sutter, the Third Circuit affirmed an arbitrator’s finding that the parties had agreed to class arbitration based on a contractual provision mandating simply that “all” disputes be submitted to arbitration. Is such language sufficient for an arbitrator to find consent, or must an arbitrator infer that the parties did not contemplate class proceedings absent an explicit reference to class arbitration?

With all of these cases pending before the Court, as well as several controversial issues percolating in the lower federal courts, the first half of 2013 could be a high-water mark for class action developments. Stay tuned.

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One of the pro-defense takeaways from the Supreme Court’s 2011 Wal-Mart Stores, Inc. v. Dukes decision was that the presence of a companywide policy delegating employment decisions to the discretion of local managers meant the absence of a common issue justifying class treatment under Rule 23(a)(2). Or so we thought.

The Seventh Circuit’s decision in McReynolds v. Merrill Lynch by Judge Posner upends such a facile conclusion. In McReynolds, the plaintiff Merrill Lynch brokers claimed that two companywide policies – both of which impacted broker compensation – exacerbated racial discrimination. The district court, following Wal-Mart, denied class certification, finding that Merrill Lynch, like Wal-Mart, delegated discretion over broker compensation decisions to local managers, and within each branch office, the brokers exercised autonomy within the framework established by the company: “The two policies in question…depend in their implementation on discretionary decisions that affect each of the class members…Consequently, even though plaintiffs might be able to raise a common question or questions, there is no capacity of a class-wide proceeding to generate common answers apt to drive the resolution of the litigation.”

Taking a hard look at the challenged policies and how they were implemented, the Seventh Circuit reversed the district court’s denial, holding instead that the two challenged companywide policies influence how the localized compensation discretion is exercised. Accordingly, the court held that these policies took the case outside of the rule set forth in Wal-Mart.

The first challenged policy, “teaming,” permits brokers in the same office to form teams. Notably, teaming is optional, and management does not select team members. However, the Seventh Circuit analogized teams to fraternities – wherein the brokers, like fraternity members, tend to choose team members who are most like themselves. And as with fraternities, the Court found that teaming may be beneficial: team members share clients with an eye toward increasing access to additional clients, securing client loyalty, and increasing client investment: “[T]here is no doubt that for many brokers team membership is a plus; certainly the plaintiffs think so.” Therefore, if the “teaming policy causes racial discrimination and is not justified by business necessity, then it violates Title VII as ‘disparate impact’ employment discrimination and whether it nonetheless is justified by business necessity are issues common to the entire class and therefore appropriate for class-wide determination.”

The second challenged policy, “account distribution,” involves the distribution of client accounts to other brokers when a broker leaves Merrill Lynch through a competition based on the generation of revenue and client base. But once a black broker is unable to join a profitable team, he will generate less revenue and have a smaller client base, and “a vicious cycle will set in.” The court held that this “spiral effect attributable to company-wide policy and arguably disadvantageous to black brokers presents another question common to the class.”

On the one hand, the Merrill Lynch supervisors can veto teams and can supply company criteria for distributions. Thus, “to the extent [supervisors] exercise discretion regarding the compensation of the brokers whom they supervise, the case is indeed like Wal-Mart.” But for the Seventh Circuit, the similarities between McReynolds and Wal-Mart ended there because, unlike in Wal-Mart, “the exercise of that discretion is influenced by the two company-wide policies at issue.” The companywide policies are practices of Merrill Lynch, not of local supervisors. Therefore, the Seventh Circuit concluded, challenging those policies is not “forbidden by the Wal-Mart decision.”

The question now becomes: After McReynolds, can an employer rely on its decentralization of employment decisions to defeat class certification where plaintiffs argue that a top-down policy of delegation in and of itself creates a disparate impact? After McReynolds, the answer may depend, in the words of the Seventh Circuit, on “which side of the line…separat[ing] a company-wide practice from an exercise of discretion by local managers” your case falls.

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The repercussions of the Supreme Court’s 2011 Wal-Mart Stores, Inc. v. Dukes decision continue to reverberate throughout federal courts in the United States. In Dukes, the plaintiffs sued on the theory that Wal-Mart’s use of subjective decision-making in its various branches created salary and promotion disparities between male and female employees. The Court held that the plaintiffs could not demonstrate a common question for class certification purposes under Rule 23(a)(2) because there was “no convincing proof of a company-wide discriminatory pay and promotion policy.” The only commonality that the plaintiffs could establish was the policy of allowing subjective discretion by local supervisors to dictate wage and employment matters for each store.

The Dukes legacy continued to grow in a recent case from the Western District of North Carolina. In Scott v. Family Dollar Stores, a group of female employees sought class certification for sex discrimination claims. The original complaint, filed in 2008 (pre-Dukes), alleged that the plaintiffs were discriminated against as a result of subjective decisions made at the local store levels. In 2011, after a venue transfer and several failed mediations, the defendant filed a Rule 12(b)(6) motion to dismiss the plaintiffs’ class claims, arguing that the claims were foreclosed by Dukes.

The district court determined that the instant case paralleled Dukes and that the class could not be certified. The court explained, “[F]or the same reasons [as in Dukes], plaintiffs also cannot satisfy the nearly identical commonality showing-of similarly ‘situated persons’–that is required to certify a collective action.” The court further determined that no class claims existed for individualized monetary relief, including back pay or punitive damages, because Dukes held that such relief is not available under Rule 23(b)(2). In dismissing the plaintiffs’ class allegations, the court reasoned that it would be “futile” to allow discovery to proceed because “plaintiff’s [sic] theory for class certification is simply foreclosed by Dukes.”

The court also refused to allow the plaintiffs to amend the complaint, ruling that amendment would prejudice the defendant. The court chided the plaintiffs for waiting until months after the Dukes decision to contemplate filing an amended complaint and refused to allow them to provide a “changed version of facts” to “avoid” Dukes. As in its explanation for refusing to allow the plaintiffs to proceed with discovery, the court said that amending the complaint would also be “futile” in light of Dukes, as the facts simply demonstrated no common discriminatory practice. Rather, the plaintiffs’ theory rested on discrimination arising from the subjective discretion of individual store managers around the country—which, under Dukes, does not a common discriminatory policy make.

Does Dukes signal the end of class-wide employment discrimination claims against sprawling, multi-location companies? To some extent, the plaintiffs in Scott were victims of poor timing. Having essentially pled a Dukes fact pattern before Dukes was decided, any attempt at refashioning the claims post-Dukes was destined to be tainted with a whiff of desperation. Going forward, counsel filing class complaints in employment discrimination cases, with the benefit of Dukes, presumably will not make their class theories quite so easy for defense counsel and trial courts to shoot down.  Nevertheless, as long as a defendant can show that its allegedly discriminatory policy was subjective and individualized by location, a potential class of plaintiffs will have a difficult time obtaining certification.

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Last year, in AT&T Mobility v. Concepcion, the Supreme Court upheld a class arbitration waiver in a consumer contract. Now, however, the National Labor Relations Board has struck down a similar waiver in the employment context, holding that requiring employees to submit all employment-related disputes to individual arbitration is an unfair labor practice.

In D.R. Horton, Inc. and Michael Cuda, an employer mandated that all employees sign a Mutual Arbitration Agreement (“MAA”). The MAA provided that employees would submit all employment-related disputes to final and binding arbitration, that the arbitrator could hear only individual claims, and that employees waived the right to resolve employment-related disputes in civil proceedings. In other words, the MAA prohibited employees from pursuing employment-related claims collectively.

Michael Cuda, a superintendent for homebuilder D.R. Horton, asserted that D.R. Horton had misclassified him as exempt under the Fair Labor Standards Act. He notified D.R. Horton that he intended to initiate arbitration on behalf of a nationwide class of similarly situated superintendents. D.R. Horton responded that the notice of intent to arbitrate was defective because the MAA prohibited collective arbitration. Cuda filed an unfair labor practice claim with the NLRB, alleging that prohibiting collective arbitration violated the employees’ right to engage in concerted activity under the National Labor Relations Act.

The NLRB agreed. The Board stated, “Section 7 of the NLRA vests employees with a substantive right to engage in specified forms of associational activity.” This protected activity includes joining together to address workplace grievances through collective arbitration or class action litigation. The MAA, the Board ruled, interfered with this substantive right by prohibiting employees from bringing collective claims in any forum, judicial or arbitral. As a result, requiring employees to sign the MAA as a condition of employment was a prohibited unfair labor practice.

The Board stated that its decision did not conflict with the Federal Arbitration Act. The Board reasoned that the FAA places private arbitration agreements only on the same footing as other contracts, and no private employment contract, including an arbitration agreement, can conflict with federal labor law. The Board pointed to the prohibition of “yellow dog” contracts – contracts forbidding employees from joining unions – as an example of this limitation on employment contracts. The analysis does not change simply because the contractual provision at issue deals with arbitration. As a result, an arbitration agreement – like any other contractual provision – must fail when it is contrary to federal labor law.

The Board stated that its decision is not inconsistent with the Supreme Court’s decision in Concepcion. In that case, the Supreme Court upheld a class action waiver in a consumer arbitration agreement, ruling that the FAA preempted state law that considered such waivers unconscionable. The Board distinguished Concepcion as involving a conflict between federal and state law, thereby invoking the Supremacy Clause. D.R. Horton, on the other hand, involved a possible conflict between two federal laws. Furthermore, the Board said, Concepcion involved consumer arbitration agreements, not federally protected employment and labor rights. Finally, the Board held that employers can restrict arbitration to individual claims as long as they do not similarly restrict civil litigation claims, easing the efficiency and fairness concerns raised in Concepcion.

The Board emphasized that its ruling applies only to NLRA-defined “employees” who are not already exempted from the FAA, and thus is not a sweeping invalidation of all arbitration agreements in employment contracts. Nevertheless, the NLRB decision will not be the last word on the issue, as D.R. Horton has filed a notice of appeal in the Fifth Circuit. Stay tuned to find out if the Fifth Circuit comes to a similar reconciliation between the FAA and federal labor law.

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A class action brought pursuant to theFair Labor Standards Act (FLSA) requires a proactive class. Unlike Rule 23 class actions, in which class members must affirmatively opt out in order to be excluded from the class, FLSA class actions require that potential class members notify the court of their desire to opt into the action. Just how far can plaintiffs go in soliciting potential class members? A recent case explores the balance between honoring the First Amendment rights of plaintiffs in communicating with a pool of potential class members and ensuring that defendants do not suffer irreparable harm.

In Hathaway v. Shawn Jones Masonry, a Kentucky district court refused to interfere with the rights of a plaintiff to communicate with other potential plaintiffs in a putative FLSA class action. Michael Hathaway sued his former employer, Shawn Jones Masonry (SJM), alleging violations of the FLSA. To encourage other employees to join the class action suit, Hathaway disseminated a letter that “guarantee[d] success,” stating: “PLEASE BE ADVISED THAT YOU ARE ENTITLED TO MONEY WHICH HAS BEEN ILLEGALLY NOT PAID TO YOU BY SHAWN JONES MASONRY . . . A COLLECTIVE ACTION SUIT IS BEING STARTED BY MIKE HATHAWAY AND BEING FILED BY: D. WES SULLENGER, ATTORNEY AT LAW.” Each letter also contained a copy of the attorney Sullenger’s business card. Sullenger denied any knowledge of the letter and agreed that such communication was improper. Sullenger instructed Hathaway to cease disseminating the letter.

SJM argued that the letter Hathaway sent to current employees caused irreparable harm. SJM contended that current employees would believe that SJM was not treating them fairly and would quit, leaving the company short-staffed. SJM asked that the court enjoin Hathaway from soliciting additional plaintiffs to join the action, as the letter violated Kentucky ethics rule prohibiting a lawyer from soliciting professional employment. Alternatively, SJM requested that Hathaway be enjoined from soliciting additional plaintiffs until the court determined whether the action was appropriate for collective class action. Hathaway, however, asserted his First Amendment rights to communicate with potential plaintiffs and potential witnesses.

In upholding Hathaway’s First Amendment rights, the court referenced Gulf Oil Co. v. Bernard, a Supreme Court decision discussing the “heightened susceptibilities of nonparty class members to solicitation amounting to barratry as well as the increased opportunities of the parties and counsel to ‘drum up’ participation in the proceeding.” Gulf Oil granted district courts the broad authority to exercise control over a class action and to enter appropriate orders governing the conduct of parties and counsel. The Supreme Court, however, emphasized the importance of limiting speech as little as possible and “only to the extent consistent with the rights of the parties under the circumstances.”

Here, SJM did not offer any evidence that current employees would quit their jobs and leave the company short-staffed. Hathaway, however, demonstrated that he would be harmed by a delay in contacting “potential witnesses, whose memories will fade over time, and potential plaintiffs[,] whose claims against Defendant are diminished on a daily basis.” The letter was admittedly improper and in potential violation of the Kentucky ethics rule, but Hathaway had already ceased disseminating it, and no specific harm had befallen SJM. In refusing to dampen Hathaway’s rights, the court nevertheless cautioned Hathaway and Sullenger to navigate the ethics rules carefully regarding future contact with prospective clients.

This case demonstrates the importance of First Amendment rights in class action suits and the need for mindfulness in contacting prospective clients. While it might be worthwhile to leave no stone unturned in pursuing potential class members, the specter of being enjoined from soliciting class members altogether represents an effective deterrent for questionable practices. If Sullenger had known about the letter or had not instructed Hathaway to cease dissemination of the letter, the lawsuit might have died a quick death, regardless of the protections of the First Amendment.

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This week, the U.S. Supreme Court granted Wal-Mart’s petition for certiorari challenging the certification of a class of 1.5 million female employees in a gender discrimination lawsuit. The Ninth Circuit affirmed the class certification in April.

The writ of certiorari limits the Court’s review to the first question presented in the petition for certiorari, but adds a second question defined by the Court. The full text of the Supreme Court’s order reads:

The petition for a writ of certiorari is granted limited to Question I presented by the petition. In addition to Question I, the parties are directed to brief and argue the following question: “Whether the class certification ordered under Rule 23(b)(2) was consistent with Rule 23(a).”

Referring the Question I from Wal-Mart’s petition for certiorari, the two questions before the Supreme Court will be:

1. Whether claims for monetary relief can be certified under Federal Rule of Civil Procedure 23(b)(2) – which by its terms is limited to injunctive or corresponding declaratory relief – and, if so, under what circumstances?
2. Whether the class certification ordered under Rule 23(b)(2) was consistent with Rule 23(a)?

The constitutional arguments argued in Wal-Mart’s petition for certiorari (whether class certification was consistent with due process or the Seventh Amendment) were not accepted for review. The question posed by the Court, however, has broader implications. It could transform the narrow question of whether a Rule 23(b)(2) certification may include cases seeking monetary damages into the broader question of whether the class certified below satisfied Rule 23’s general class action requirements (i.e., numerosity, commonality, typicality and adequacy).
 

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Ninth Circuit Certifies Class of 1.5 Million Female Employees to Pursue Title VII Discrimination Lawsuit Against Wal-Mart – Wal-Mart Responds with Cert. Petition.

Wal-Mart, reportedly the world’s largest, private employer, has a written policy barring discrimination based upon gender, but that did not prevent six putative class action plaintiffs from suing the world’s largest retailer. Plaintiffs alleged that Wal-Mart engaged in a company-wide policy discriminating against women by paying women less or promoting them less often than men. The alleged corporate policy was not created in the usual manner by dictating pay or hiring decisions from above. Instead, store managers were allegedly given “excessive discretion” to hire, fire or promote employees based upon subjective criteria with limited guidance or oversight. This culture, according to plaintiffs’ experts, created a social framework that sustained bias and gender stereotypes. Based upon declarations, statistical and other expert evidence, the District Court for the Northern District of California, located in San Francisco, certified a class under Rule 23(b)(2) consisting of women who worked at any of 3,400 Wal-Mart domestic retail stores at any time since December 1998. The class action complaint sought injunctive relief, back pay and punitive damages. On April 26, 2010, the Ninth Circuit Court of Appeals affirmed the class certification in a 6-5 opinion entitled Dukes v. Wal-Mart Stores, Inc., 603 F. 3d 571 (9th Cir. 2010).

With a name like Dukes, you expect something larger than life. You will not be disappointed. The class size in Dukes is breathtaking with an estimated 1.5 million present and former employees in the class. If you are not impressed by numbers alone, consider the observation in Wal-Mart’s subsequent Petition for a Writ of Certiorari: the Dukes class is greater in size than all the active duty personnel in the U.S. Army, Navy, Air Force, Marines and Coast Guard combined! That a single employer has this many present and former female employees is, by itself, difficult to grasp. That all of them would be joined into a single class action is beyond comprehension.

Acknowledging that individual class members worked at different Wal-Mart stores for different managers, received different levels of pay or were promoted (or denied promotion) at different rates, the Court of Appeals was not persuaded that these differences militated against class certification. Nor was the majority troubled that the proposed class included female managers who were allegedly responsible for the discriminatory decisions. As the dissent bluntly observed, the majority opinion created the disturbing situation where the “victims and their alleged victimizers” would sit at the same counsel table as members of the same class. 

The Dukes court theorizes that the several circuit court opinions announcing class certification standards are, in reality, just different words to express the same result. But having said so, the Dukes court goes on to disprove its own hypothesis. Theory and reality diverge on the important question of what it means to “find” that Rule 23 requirements are actually met. To appreciate the difference, the Third Circuit opinion in Hydrogen Peroxide Antitrust Litigation offers a good comparison. The Third Circuit held that it is not enough to merely support each Rule 23 element with some evidence. For instance, the fact that plaintiffs offer admissible expert opinion addressing a Rule 23 requirement is not enough. The judge must weigh that expert opinion against other conflicting evidence on the same point. Then, after considering all the evidence, the district judge must conclude that the Rule 23 criteria was established by a preponderance of the evidence. Under this approach, the district judge weighs conflicting expert opinions, resolves the dispute and chooses between them. In contrast, the Dukes court said that it was enough that [plaintiffs’ expert] presented scientifically reliable evidence tending to show a common question of fact. The Dukes opinion implies that the only finding necessary is whether the plaintiffs have presented admissible evidence tending to show the Rule 23 criteria without regard to whether that evidence constitutes a preponderance of the evidence, e.g., whether it is more or less persuasive than conflicting evidence on the same point. Under Dukes, a “finding” is something less than weighing all the evidence both pro and con and concluding that the totality of evidence demonstrates the Rule 23 criteria to have been met. 

The Dukes court also set a new standard for Rule 23(b)(2) class certifications- to decide if monetary relief predominates over injunctive relief, the district court should consider the “objective effect of the relief sought on the litigation.” Literally speaking, Rule 23(b)(2) authorizes class actions seeking declaratory and injunctive relief, but it says nothing about monetary damages. Actions seeking monetary damages are typically brought as Rule 23(b)(3) class actions, but the Dukes Plaintiffs did not allege (b)(3) certification; presumably because they could not show class questions would predominate given that monetary damage claims (and defenses) would vary from person to person. One of the principal questions raised in Wal-Mart’s certiorari petition is whether Rule 23(b)(2) is amenable to class actions seeking monetary damages. Another component of the Rule 23(b)(2) dispute is that a significant number of putative class members are former Wal-Mart employees. As former employees, they could not benefit from an award of injunctive relief and therefore lacked standing to seek the remedy authorized in Rule 23(b)(2). Though the Dukes majority conceded former employees were ineligible for the proposed class, the opinion purported to solve that conundrum by remanding to the district court to consider certification of a separate class under Rule 23(b)(3).

To no one’s surprise, given the 3-way circuit split on the Rule 23(b)(2) standard, on August 25, 2010, Wal-Mart filed a petition for writ of certiorari with the Supreme Court of the United States. (Case no. 10-277). A response to the petition for writ of certiorari is due on October 25, 2010.
 

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