WASHINGTON (Legal Newsline) -- The U.S. Supreme Court, in a significant victory for businesses, sided Monday with retail giant Wal-Mart in a challenge to a class action lawsuit alleging discrimination against its female employees.
The plaintiffs in the suit Wal-Mart Stores Inc. v. Dukes et al., originally filed in 2001, claimed they were never promoted because of their gender and that they were paid significantly less than their male counterparts. They sought backpay.
A district court had certified the class of some 1.5 million female employees, finding that they satisfied the Federal Rule of Civil Procedure 23(a).
The court also had ruled they satisifed Rule 23(b)(2)'s requirement of showing that "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 Ninth Circuit Court of Appeals affirmed, concluding that the plaintiffs met Rule 23(a)(2)'s commonality requirement and that their backpay claims could be certified as part of a (b)(2) class because those claims did not predominate over the declaratory and injunctive relief requests.
The appeals court also ruled that the class action could be "manageably tried" without depriving Wal-Mart of its right to present its statutory defenses if the district court selected a random set of claims for valuation and then extrapolated the validity and value of the untested claims from the sample set.
The nation's high court reversed the appeals court's decision, saying the lower courts were wrong to certify the class action.
The Court, in its 27-page opinion, ruled the certification of the plaintiff class was not consistent with Rule 23(a) and that the plaintiffs' backpay claims were improperly certified under Rule 23(b)(2).
"Because the Rules Enabling Act forbids interpreting Rule 23 to 'abridge, enlarge or modify any substantive right,' a class cannot be certified on the premise that Wal-Mart will not be entitled to litigate its statutory defenses to individual claims," Justice Antonin Scalia wrote for the Court.
"And because the necessity of that litigation will prevent backpay from being 'incidental' to the classwide injunction, respondents' class could not be certified even assuming that 'incidental' monetary relief can be awarded to a 23(b)(2) class."
Robin Conrad, executive vice president of the U.S. Chamber of Commerce's National Chamber Litigation Center, issued the following statement Monday in response to the Court's ruling:
"This is without a doubt the most important class action case in more than a decade. We applaud the Supreme Court for affirming that mega-class actions such as this one are completely inconsistent with federal law," she said.
"Today's ruling reinforces a fundamental principle of fairness in our court systems: that defendants should have the opportunity to present individualized evidence to show they complied with the law. Too often the class action device is twisted and abused to force businesses to choose between settling meritless lawsuits or potentially facing financial ruin. Our economy would be better served if businesses could spend more resources creating jobs and fewer resources fighting frivolous litigation."
The U.S. Chamber of Commerce, which filed two amicus briefs in support of Wal-Mart, is the world's largest business federation representing the interests of more than 3 million businesses of all sizes, sectors and regions, as well as state and local chambers and industry associations.
The Institute for Legal Reform, an affiliate of the U.S. Chamber, owns Legal Newsline.
From Legal Newsline: Reach Jessica Karmasek by e-mail at firstname.lastname@example.org.