Co-authored by Gerald L. Maatman, Jr. and Laura Maechtlen

Today the U.S. Supreme Court heard oral argument in Dukes, et al. v. Wal-Mart Stores, Inc.

For those who enjoy reading the tea leaves from the intensely combative questioning during the argument, the hearing transcript makes for fascinating reading [link to transcript].

The stakes in the case are enormous and the future ruling is likely to be transformative for class action litigation. In short, the Supreme Court’s decision will re-position the goal posts on the playing fields of how workplace class actions are structured, defended, and litigated.

To place the dispute in context, the argument comes nearly 7 years after the class certification order giving rise to the appeal. The Supreme Court’s review follows a 6-to-5 en banc decision of the U.S. Court of Appeals for the Ninth Circuit in San Francisco – reported at 603 F.3d 571 (9th Cir. 2010) – which affirmed an earlier class certification order in the largest employment discrimination class action ever certified. The Ninth Circuit upheld an earlier panel decision certifying a class action gender discrimination lawsuit challenging Wal-Mart’s pay and promotions practices. The full Ninth Circuit ruled that the U.S. District Court for the Northern District of California did not abuse its discretion in finding that the large and diverse class – encompassing approximately 1.5 million female employees, both salaried and hourly with a range of positions, who are or were employed at one or more of company’s 3,400 stores across the country – was united by a complex of company-wide discriminatory practices against women where plaintiffs presented expert opinions, factual evidence, statistical evidence, and anecdotal evidence showing a corporate policy and common pattern of discrimination imposed on female employees nationwide.

The Supreme Court heard argument on the following questions: (i) whether claims for monetary relief can be certified under Rule 23(b)(2) of the Federal Rules of Civil Procedure and, if so, under what circumstances; and (ii) whether the order certifying a class conforms to the requirements of Rule 23.

As the transcript reflects, the argument was lively, and both counsel were repeatedly interrupted with questions from the Justices on a variety of points.

For those keeping score, here is the questioning breakdown: total questions to the defense – 34 questions (including 12 from Justice Sotomayor, 8 from Chief Justice Roberts, 5 from Justice Kagan, 3 from Justice Ginsberg, 2 from Justice Breyer, 2 from Justice Kennedy, 1 from Justice Alito, and 1 from Justice Scalia); and total questions to plaintiffs – 56 questions (including 22 from Justice Scalia, 8 from Justice Sotomayor, 8 from Justice Ginsberg, 7 from Justice Kennedy, 6 from Chief Justice Roberts, 2 from Justice Alito, 2 from Justice Breyer, and 1 from Justice Kagan). Justice Thomas was the only Justice who declined to ask any questions.

Some of the key questioning at today’s hearing focused on:

  • Whether plaintiffs’ theory of discrimination is sound insofar as it asserts the gender-bias stereotyping theory of discrimination and an absence of any constraints on that discretion in the face of the company’s strong ant-discrimination policy (as Justice Scalia commented at page 29 of the hearing transcript – “I’m getting whipsawed here. On the one hand you say the problem is they were utterly subjective, and on the other hand you say there is a…a strong corporate culture that guides all of this. Well, which is it?”);
  • Whether and to what extent experts are needed to establish commonality under Rule 23(a)(2) and the test for examining that evidence (as Justice Sotomayor indicated at page 8 of the hearing transcript, even if the company was right that the analysis of plaintiffs’ expert did not hold water, “…That begs the legal question…that there was enough here after [the district court’s] rigorous analysis?”);
  • Whether the Ninth Circuit’s standard for pursuit of monetary relief under Rule 23(b)(2) is proper, or if pursuit of class-wide damages necessitates Rule 23(b)(3)’s opt-out procedures (as Justice Sotomayor commented at page 18 of the hearing transcript, “…Couldn’t you separate out the (b)(2) issue from the (b)(3) question of whether monetary damages have enough common facts and law to warrant certification under (b)(3)?”); and
  • Whether any procedure for parceling out damages could be fair in the circumstances of the case (or as Justice Scalia commented at page 49 of the hearing transcript, “…Is this really due process?”).

Reading tea leafs from oral argument and predicting the outcome is a hazardous business. Here are our predictions:

  1. We believe the Supreme Court did not accept Dukes to affirm what the Ninth Circuit ordered in its 6-to-5 en banc ruling. Rather, the Supreme Court is apt to re-fashion the points at issue.
  2. We also think the Supreme Court will split on the issues, and unanimity is unlikely. The potentially dispositive impact of those splits will shape the ultimate decision – liberal vs. conservative views; strict vs. liberal/expansive reading of the statutes and rules at issue; civil rights vs. business/employer interests; etc.
  3. We predict that the majority ruling will tighten the Rule 23(a) commonality test and require more cohesiveness across the class which is pursuing employment-related claims against an employer.
  4. We also predict that the majority ruling will articulate additional guide posts for the Rule 23(b)(2) prerequisites that will be key to class action structuring and defense issues, and the extent to which opt-out rights become determinative when significant sums of money are at issue as in this litigation.

The key battleground issue likely will turn on how the legal boundaries of workplace class actions can be maintained consistent with the due process rights of an employer that must defend itself from class-wide theories of recovery.

The Supreme Court’s decision is expected by the last week of June. We will be waiting for what is sure to be a seminal ruling, and plan to post our analysis of the ruling as soon as is announced by the Supreme Court.