Class Action Litigation: U.S. Supreme Court Reverses the Largest Class Action in History, Defining Limits to Certification of Class Claims

Sullivan & Cromwell LLP - June 21, 2011

The Supreme Court of the United States yesterday issued its highly anticipated decision in a massive employment discrimination class action against Wal-Mart Stores, Inc., the nation’s largest private employer. The decision, Wal-Mart Stores, Inc. v. Dukes et al., 564 U.S. ---, 2011 WL 2437013 (2011) (No. 10-277), overrules the United States Court of Appeals for the Ninth Circuit, which last year certified a sprawling class of some 1.5 million female employees asserting claims against Wal-Mart for injunctive relief and monetary relief in the form of backpay. The case had stood as the largest class action in history, and if permitted to proceed could well have spelled huge settlement costs for Wal-Mart and untold exposure for other companies sued under similar theories.

The Court split 5-4 on whether the proposed class satisfies the “commonality” requirement for obtaining class certification under Federal Rule of Civil Procedure 23(a). The majority, in an opinion authored by Justice Antonin Scalia, held that commonality was not established, because there was no “significant proof” that Wal-Mart operates under a “general policy” that discriminated against female employees. The Court was of a single mind on whether the proposed class should have been permitted to seek backpay. Claims for such individualized relief, the Court unanimously held, are barred by Federal Rule of Civil Procedure 23(b)(2), which applies only when a single, indivisible remedy would provide relief to each class member.