Employment Law Monitor : Employment Lawyer & Attorney : Cole Schotz Meisel Forman & Leonard Law Firm : NJ, Mid-Atlantic Wage & Hour, Wrongful Termination

On June 20, 2011, the United States Supreme Court issued an opinion in Wal-Mart Stores, Inc. v. Dukes, No. 10-277, which clarifies how certain class actions will be defined and litigated in the lower federal courts.  In Wal-Mart, the plaintiffs sought to certify a class of up to 1.5 million current and former Wal-Mart employees alleging gender bias in pay and promotions in violation of Title VII of the Civil Rights Act of 1964.  Specifically, the plaintiffs sought class certification under Federal Rule of Civil Procedure (“Fed. R. Civ. P.”) 23(b)(2), which prescribes the rules for class actions seeking injunctive relief rather than money damages.  The Wal-Mart plaintiffs were also seeking billions of dollars in damages in addition to their request for injunctive relief.

Class certification is governed by Federal Rule of Civil Procedure 23.  Under Rule 23(a), the party seeking certification must demonstrate, first that: (1) the class is so numerous that joinder of all members is impracticable, (2) there are questions of law or fact common to the class, (3) the claims or defenses of the representative parties are typical of the claims or defenses of the class, and (4) the representative parties will fairly and adequately protect the interests of the class.  Second, the proposed class must satisfy at least one of the requirements listed under Rule 23(b).  As stated above, in Wal-Mart, the plaintiffs relied on Rule 23(b)(2) which applies when the “party opposing the class has acted or refused to act on grounds that apply generally to the class, so that final injunctive relief or corresponding declaratory relief is appropriate respecting the class as a whole.”

The Wal-Mart Court made several important findings.  First, the Court held that claims for monetary relief may not be certified under Fed. R. Civ. P. 23(b)(2) unless they are merely incidental to injunctive or declaratory relief being requested on behalf of the class as a whole.  Specifically, the Court found the plaintiffs’ back pay claims could not be certified as incidental.  The Court held that Wal-Mart was entitled to individualized determinations of each employee’s eligibility for back pay.

Secondly, the Court addressed the commonality requirement for class certification.  In that regard, the Court rejected the notion that Wal-Mart’s alleged policy of giving local managers discretion regarding pay and promotion decisions presented common issues of law or fact best addressed in a Fed. R. Civ. P. 23(a)(2) class action.  The Court explained that although the plaintiffs sought to litigate millions of employment decisions at once, “without some glue holding the alleged reasons for all of those decisions together” it would be impossible to say that examination of all the class members’ claims for relief would produce a common answer to the crucial question of “why I was disfavored.”  The Court found that without the answer to that question, class wide treatment was inappropriate.

Additionally, the Court in Wal-Mart the held that a party seeking class certification must prove that the Fed. R. Civ. P. 23 requirements are satisfied, even if the issues overlap the merits and must be proven again at trial.  Therefore, regardless of whether certain issues may overlap or be identical to one or more issues to be decided in ruling on the merits of the plaintiff’s claims, a court must resolve any issues of fact that are necessary to determine whether one or more elements of Rule 23 are satisfied.

Finally, the Court’s decision in Wal-Mart is important because it held that claims for individual monetary relief cannot be replaced with “Trial by Formula” where damages are determined by a formula derived from a sample class.  Specifically, the “Trial by Formula” approach to class actions results where a sample of claims is tried on the merits, and the results of the sample are then applied proportionally to the claims of the entire class.  The Court unanimously disapproved of this method.

Overall, the Court’s decision in Wal-Mart is significant for negating the largest employment class action ever certified in any United States court.  The implications of the Court’s decision will continue to be seen in the future.

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In a ruling applauded by employers, the United States Supreme Court ruled in Gross v. FBL Financial Services Inc., No. 08-441 (June 18, 2009), that an employee must demonstrate that age is the decisive, “but-for” cause of the employer’s adverse employment decision in order to prevail in age discrimination claims brought under the federal Age Discrimination in Employment Act (“ADEA”). Prior Court holdings required employees to establish that age was only a “motivating factor” in the employer’s decision and gave the employer the opportunity to show that it would have taken the same action regardless of age.
 

In Gross, Gross claimed that FBL discriminated against him because of his age when it reassigned him, at age 54, to a different position and transferred many of his responsibilities to a new position created for a woman in her early forties. During trial, he presented evidence that FBL was motivated in carrying out its action, at least in part, by his age. The company denied this claim and maintained that his demotion was part of a larger corporate restructuring. Relying on the burden-shifting framework set forth in Price Waterhouse v. Hopkins, 490 U.S. 228 (1989), the trial court held that Gross had to prove by a preponderance of the evidence that his age was a “motivating factor” in the Company’s decision to demote him. See Price Waterhouse v. Hopkins, 490 U.S. 228 (1989) (addressing burden of proof in “mixed motive” cases where employer is motivated by both illicit and lawful reasons). The jury then returned a verdict for Gross. On appeal, the U.S. Court of Appeals for the Eighth Circuit held that the trial court failed to properly instruct the jury about the Price Waterhouse burden-shifting framework, and sent the case back to the trial court.
 

In reviewing this case, the Supreme Court surprised employers and employees alike in vacating application of the Price Waterhouse framework for ADEA cases, although lower federal courts had applied this framework to such cases for years. The Court found a distinction between Title VII cases, to which the Price Waterhouse framework clearly applies, and ADEA cases. Reading the text of each statute, Justice Clarence Thomas noted that Title VII itself provides that an unlawful employment practice is established where an employee proves that an unlawful criterion was a “motivating factor” in the employer’s decision. Dissimilarly, the ADEA does not have any such “motivating factor” language. Based on the ADEA’s clear terms, the Court held that application of the Price Waterhouse framework is not appropriate in ADEA cases.
 

Practically, and because typically plaintiffs lack any direct evidence of age discrimination, the Gross decision will make it increasingly difficult for employees to prevail in ADEA claims. It remains to be seen whether Congress will amend the ADEA to address Gross, as it did in response to the Lilly Ledbetter case.
 

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