The hot topic right now in the class action world is the oral argument in the Supreme Court in Wal-Mart v. Dukes (transcript; pdf). This employment case — claiming that all female employees of Wal-mart suffered discrimination in pay and promotion — was certified as a class action and certification was affirmed by a 6-5 en banc opinion of the 9th Circuit.
Most commentators seem to be predicting a victory for Wal-Mart, including the ABA Journal, SCOTUS Blog, and HR Lawyer’s Blog. That was also the consensus at a webcast I attended presented by Carter Phillips and Prof. Martin Redish, sponsored by the Defense Research Institute. The New York Times, was somewhat more reserved, as one would expect, noting the Court “appeared closely divided” on the case.
My guess, assuming the justices comments were indicative of their viewpoints, is that Wal-Mart will win the issue of whether back pay can be awarded under Rule 23(b)(2), and seems likely to also win on commonality (that could well be 5-4).
What implications will this case have for insurance class actions? My thoughts:
- The decision should be authoritative on when a class for declaratory relief can be certified under 23(b)(2) when the class is seeking damages. This issue often arises in insurance cases, see my recent post on the Seventh Circuit’s Kartman decision. Even more liberal members of the Court, including Justices Ginsburg and Sotomayor, seemed unlikely to allow the Wal-Mart case to go forward based on the plaintiffs’ theory that damages could be awarded based on a formulaic calculation. The following questions from Justice Sotomayor (for whom I worked as a law student intern years ago) got to the heart of this:
“You’re going to say through my statistical model, I will be able to identify those women in the class who are deserving of pay raises. What that doesn’t answer is when in this process is the defendant going to be given an opportunity to defend against that finding? . . . They will be precluded from attempting to show any particular evidence that a particular decision was not made?” (Transcript at 46-47)
Some justices suggested that a class seeking declaratory/injunctive relief only might work. In most insurance class actions a formulaic calculation of damages is not possible, so if the Court rules that is the only type of damages that can be awarded in 23(b)(2) cases (as most circuits have), that should make 23(b)(2) classes very difficult to bring in insurance cases. Insurance lawyers also will need to look carefully at what the opinion says, if anything, about declaratory or injunctive relief that is really a request for damages in disguise.
- A holding that the Wal-Mart case lacks commonality might reinvigorate the commonality requirement. Some courts find commonality easy to satisfy if there is any potential common question of law or fact, and focus instead on predominance. The Supreme Court majority may breathe new light into the commonality requirement. Insurance class actions often hinge on predominance, and a reinvigoration of commonality could raise the bar for certification.
- The Court might touch on the debate about the extent to which the merits can be addressed at class certification, as addressed in recent years by the Second and Third Circuits in the IPO and Hydrogen Peroxide cases. Justice Alito asked about this (transcript at 10). A favorable comment by the Court about a strong “rigorous analysis” standard will reinforce those decisions.
- The Court might say something about the use of experts at class certification. This is not a question presented by the briefs, but it is centrally at issue on the facts — at argument there was extensive discussion of both sides’ expert testimony about the what Wal-Mart women experienced, and whether back pay could be based on a expert’s formulaic calculation. Justice Sotomayor asked a question (transcript at 8) about what the standard should be. The Court might indirectly comment on whether Daubert-type challenges can be made at the class certification stage.