On June 20, 2011, the U.S. Supreme Court held in Wal-Mart Stores, Inc. v. Dukes, 564 U.S. ___ (2011), that a district court had erred in certifying a class of up to 1.5 million current and former female Wal-Mart employees alleging gender-based employment discrimination. The plaintiffs had alleged that Wal-Mart’s practice of giving local supervisors discretion over pay and promotion decisions discriminates against female employees in violation of Title VII, and sought injunctive and declaratory relief and backpay. The district court certified a class of all women employed by Wal-Mart since December 1998, and the Ninth Circuit substantially affirmed. 

The Supreme Court reversed. The Court unanimously held that the plaintiffs could not maintain a class action seeking the individualized relief of backpay under Federal Rule of Civil Procedure 23(b)(2), which contemplates class-wide injunctive or declaratory relief. In so holding, the Court squarely rejected the Ninth Circuit’s position that backpay claims could be adjudicated as a class by trying a random subset of individual claims and then extrapolating from that to estimate the number and value of the untried claims.

Dividing 5-4, the Court further held that the plaintiffs could not satisfy Rule 23(a)’s threshold requirement — applicable to every class action — of showing “questions of law or fact common to the class.” The commonality requirement, the Court emphasized, requires plaintiffs to demonstrate that class members “have suffered the same injury” — not in the mere sense of alleging a violation of the same law, but rather that the claims “depend upon a common contention . . . capable of classwide resolution.” Wal-Mart makes clear this is more than a mere pleading standard:  a court may “probe behind the pleadings” and rigorously examine the plaintiffs’ proof of commonality, an inquiry that will often overlap with the merits of the underlying claims. In that vein, the Court suggested (but did not hold) that the standards for evaluating the reliability of expert testimony under Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579 (1993), would apply to such proceedings. Performing that “rigorous[]” review, the Court found certification improper, because in alleging that Wal-Mart’s delegation of discretion to local managers led to discrimination, the plaintiffs failed to show the company operated under any “general policy” of discrimination. The Court found insufficient the plaintiffs’ expert testimony about Wal-Mart’s general corporate culture, statistical information about disparities at a regional and national level, and anecdotal evidence about individual personnel decisions. That evidence, the Court concluded, did not demonstrate a commonality of issues — i.e., that the entire company operated under a general policy of discrimination.

What Wal-Mart­ May Mean for Defendants in Antitrust Class Actions
Although Wal-Mart arose in the context of employment discrimination, several aspects of the Court’s opinion may have broader significance for class actions generally.  In the antitrust field, for instance, public companies that receive a grand jury subpoena often quickly face follow-on class actions by direct and indirect purchasers of their products. In recent years, such suits have frequently arisen in the semiconductor industry, relating to memory, screen, and disk drive technologies, among others. Private plaintiffs in such suits may lack specific information about the alleged conspiracy, leading defendants to invoke the heightened pleading standards of Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007), and to challenge the appropriateness of class certification.

Wal-Mart may strengthen the antitrust defendant’s hand in such disputes in at least two ways. First, the decision explicitly recognizes that the class certification inquiry frequently “overlaps” with the plaintiffs’ arguments on the merits. Wal-Mart directs district courts to undertake a “rigorous analysis” of whether common claims “in fact” exist, requiring plaintiffs to demonstrate — with evidence beyond the pleadings — that their claims satisfy Rule 23’s commonality requirement. The Court’s probing treatment of the Wal-Mart plaintiffs’ sociological, statistical, and anecdotal evidence demonstrates that the standard is a demanding one.

Second, and relatedly, Wal-Mart reaffirms that class certification is appropriate only where prospective class members “have suffered the same injury,” such that their claims involve a “common contention . . . capable of classwide resolution.” In recent years, antitrust plaintiffs have, following the announcement of criminal investigations, sought certification of classes that encompass direct and indirect purchasers (e.g., both original equipment manufacturers and retail purchasers), and involve a range of very different end products. Under Wal-Mart, courts can be expected to examine closely the specific elements of the plaintiffs’ claims, and to closely scrutinize class certification where factual distinctions between plaintiffs show that their claims depend on individualized determinations inappropriate for common resolution.

For more information, please contact Vinson & Elkins lawyers Matt Jacobs, John Elwood, or Craig Seebald. Visit our website to learn more about V&E's Antitrust and Appellate practices, or e-mail one of the Antitrust or Appellate practice contacts.