To (b)(2) or Not to (b)(2)?

Media reports of the Wal-Mart class certification focused on the enormous class size and the plaintiffs' allegations of a corporate culture of gender stereotyping that fostered workplace discrimination. Not surprisingly, Jenkins' order runs to 84 dense pages – the media commentary provided scant analysis of class action jurisprudence.

Certification Order Provides Grounds for Appeal

There can be little doubt that Wal-Mart will appeal Jenkins' certification order, whose prolixity provides fertile ground for appeal. Similar to the class size, the length of the Wal-Mart order frustrates meaningful distillation in 1600 words. Consequently, this article focuses on the court's decision to certify a Rule 23(b)(2) injunctive relief and punitive damages class, with notice and opt-out rights. The Northern District of California has now contributed to the national muddle over the appropriate use of the (b)(2) class.

Despite the court's verbosity, its rulings are simply stated. The class consists of “[a]ll women employed at any Wal-Mart domestic retail store at any time since December 26, 1998, who have been or may be subjected to Wal-Mart's challenged pay and management track promotions policies and practices.” Jenkins determined that the plaintiffs satisfied all threshold certification requirements under Rule 23(a) (numerosity, commonality, typicality and adequacy of representation). In addition, the court certified a Rule 23(b)(2) class for liability issues, injunctive and declaratory relief, punitive damages, and lost pay under Title VII of the Civil Rights Act of 1964 (amended 1991).

The court denied certification for class members who have no objective data to document their interest in the challenged promotions. These class members will be limited to injunctive and declaratory relief. In addition, the court bifurcated the action into liability and remedy phases, severed the individual racial discrimination allegations and ordered a scheduling conference to discuss notice issues.

In reaching these conclusions, Jenkins acknowledged two factors. First, his resolution of the certification motion “should not be construed in any manner as a ruling on the merits or the probable outcome of the case.” Second, he did not believe his order expanded class action jurisprudence: “[T]he Court does not encounter the issues raised herein on a barren legal landscape. Rather, this Court is satisfied that ample legal precedent is available to guide the Court in determining the propriety of Plaintiffs' request for certification. Indeed, while the size of the proposed class is unique, the issues are not novel, and the Plaintiffs' claims are relatively narrow in scope.”

It remains to be seen if Jenkins' adherence to the Eisen rule (against previewing the merits at class certification) is sustainable. More significantly, it is an open (and confused) question as to whether certification of a Rule 23(b)(2) injunctive relief, lost pay and punitive damages class creates novel class action jurisprudence. Whatever else may be said about the Wal-Mart certification order, the decision is anything but routine. Historically and conventionally, courts have construed Rule 23(b)(2) to permit injunctive and declaratory relief classes. Rule 23(b)(3), which provides for both notice and an opportunity to opt out of the class, was created in 1966 to provide a vehicle for damage class actions.

The class action landscape was significantly altered with the 1991 amendment of Title VII, which permits plaintiffs in employment discrimination cases to recover punitive damages. See 42 U.S.C. 1981a(b)(1). Plaintiffs may recover punitive damages if the defendant's alleged discrimination was intentional and the plaintiff proves that the employer “engaged in a discriminatory practice or discriminatory practices with malice or with reckless indifference to the federally protected rights of an aggrieved individual.”

Allison v. Citgo

In a 1998 landmark decision construing the 1991 amended act, the 5th U.S. Circuit Court of Appeals in Allison v. Citgo, 151 F.3d 402 (1998), repudiated the ability of a class to recover damages in a Rule 23(b)(2) action. The Fifth Circuit established that plaintiffs may recover monetary damages in a 23(b)(2) action only if those damages are “incidental” to the predominant form of declaratory or injunctive relief. Conversely, if monetary damages are the predominant form of relief, then the class may not be certified as a 23(b)(2) mandatory class.

The Allison court further instructed that “incidental monetary relief flows directly from liability to the class as a whole on the claims forming the basis of the injunctive or declaratory relief.” Moreover, in order for damages to be incidental to a Rule 23(b)(2) class claim, the damages should be at least capable of computation by means of objective standards and not dependent in any significant way on the intangible, subjective differences of each class member's circumstances.

The Allison approach has been adopted by several federal courts. See, eg, Murray v. Auslander, 244 F.3d 807, 812-13 (11th Cir. 2001); Miller v. Hygrade Food Prods. Corp. Nonetheless, the Allison approach was short-lived; within 1 year the Seventh Circuit, in Jefferson v. Ingersoll Int'l Inc., 195 F.3d 894 (1999), eschewed these bright-line rules. Instead, the Seventh Circuit proposed three possible options for handling Title VII claims under both rules 23(b)(2) and (b)(3) provisions, suggesting divided or hybrid class actions.

In ensuing years, the split between the Fifth and Seventh circuits inspired an array of confusing and conflicting opinions concerning the viability of Title VII (b)(2) class actions. In 2001, the Second Circuit declined to adopt the Allison approach. Robinson v. Metro-North Commuter R.R. Co., 267 F.3d 147, 165-55 (2001). In 2002, the Ninth Circuit noted that the Supreme Court in Ortiz v. Fibreboard had expressed concern over certifying mandatory classes that included monetary damages, but did not adopt a per se rule. Molski v. Gleich, 307 F.3d 1155, 1164-67 (2002).

At least three district courts have issued opinions describing the conflict among the circuit courts over the split between the Fifth Circuit and Seventh Circuit approaches. Further confounding this doctrinal disarray was the expansion of Allison principles into substantive class actions other than Title VII claims. For example, in Coleman v. GMAC, the Sixth Circuit extended Allison principles to the Equal Credit Opportunity Act, in which the court vacated and remanded certification of a mandatory 23(b)(2) damage class action. 296 F.3d 443 (6th Cir. 2002).

Further complicating this terrain, the Fifth Circuit revisited its Allison decision in 2004. See In re Monumental Life Ins. Co., 365 F.3d 408 (5th Cir. 2004). Although the Fifth Circuit reaffirmed its core concepts of predominate relief and incidental damages, the court now opined that due process requires class notice when a Rule 23(b)(2) class seeks monetary damages, while an opt-out provision is optional with the court. 365 F.3d at 416-17.

A Judge's Very Important Take On Molski

Jenkins' opinion aligns the Northern District of California with the anti-Allison courts, citing Robinson v. Metro-North Commuter R.R. Co., supra, and, ironically, In re Monumental Life Ins. Co., supra. Relying chiefly on the 9th Circuit's decision in Molski, Jenkins interpreted Molski as rejecting any bright-line distinctions between incidental and non-incidental damages. The court rejected Wal-Mart's contention that the case could not be certified under Rule 23(b)(2) because the plaintiffs' punitive damages were not “incidental.”

Instead, Jenkins read Molski to require a judge to ascertain the “intent of the plaintiffs in bringing the suit,” an inquiry which requires evaluation of the “specific facts and circumstances of each case.” Hence, Jenkins determined what he believed the plaintiffs expressed as the primary goal in the litigation: injunctive relief. “This Court has little difficulty concluding that here the equitable relief sought predominates over the claim for punitive damages,” and the plaintiffs' claims for punitive damages “appears secondary in nature.” Also, Jenkins determined that the plaintiffs' claim for punitive damages did not detract from the cohesiveness of the class, which would defeat certification under the (b)(2) provision. Also, Jenkins read Molski, Jefferson, Robinson and Monumental Life as suggesting that courts may certify a mandatory Rule 23(b)(2) punitive damages class with provision for notice and opt-out of class members.

Finally, Jenkins rejected Wal-Mart's argument that the State Farm decision relating to constitutional limits on punitive damages foreclosed the ability of the court to certify a Rule 23(b)(2) punitive damages class. See State Farm Mut. Auto Ins. Co. v. Campbell, 538 U.S. 408 (2003).

Jenkins' Wal-Mart decision has further stoked the (b)(2) controversy, albeit with a very large yule log.

Is there a person alive who does not know that Wal-Mart Stores Inc. has been sued in a gigantic class action? On June 21, U.S. District Judge Martin J. Jenkins of the Northern District of California certified the largest employment discrimination class action in American history. See Dukes v. Wal-mart Inc., No. C 01-02252 (N.D. Calif. 2004), 2004 U.S. Lexis 11365.

The putative class consists of approximately 1.5 million women who have been employed at 3400 Wal-Mart stores during the past 5 years. The magnitude of the class, and Wal-Mart's pervasive influence on American consumerism, guaranteed that Jenkins' certification order would commandeer media attention rivaling the other litigation spectacles du jour: Martha Stewart, Michael Jackson, Scott Peterson, Kenneth Lay, etc.

Jenkins, too, perceived the historical significance of his decision. He noted that he was making his ruling “in a year that marks the 50th anniversary of the Supreme Court's decision in Brown v. Board of Education, 347 U.S. 483 (1954),” which “serves as a reminder of the importance of the courts in addressing the denial of equal treatment under the law wherever and by whomever it occurs.”

Media reports of the Wal-Mart class certification focused on the enormous class size and the plaintiffs' allegations of a corporate culture of gender stereotyping that fostered workplace discrimination. Not surprisingly, Jenkins' order runs to 84 dense pages – the media commentary provided scant analysis of class action jurisprudence.

Certification Order Provides Grounds for Appeal

There can be little doubt that Wal-Mart will appeal Jenkins' certification order, whose prolixity provides fertile ground for appeal. Similar to the class size, the length of the Wal-Mart order frustrates meaningful distillation in 1600 words. Consequently, this article focuses on the court's decision to certify a Rule 23(b)(2) injunctive relief and punitive damages class, with notice and opt-out rights. The Northern District of California has now contributed to the national muddle over the appropriate use of the (b)(2) class.

Despite the court's verbosity, its rulings are simply stated. The class consists of “[a]ll women employed at any Wal-Mart domestic retail store at any time since December 26, 1998, who have been or may be subjected to Wal-Mart's challenged pay and management track promotions policies and practices.” Jenkins determined that the plaintiffs satisfied all threshold certification requirements under Rule 23(a) (numerosity, commonality, typicality and adequacy of representation). In addition, the court certified a Rule 23(b)(2) class for liability issues, injunctive and declaratory relief, punitive damages, and lost pay under Title VII of the Civil Rights Act of 1964 (amended 1991).

The court denied certification for class members who have no objective data to document their interest in the challenged promotions. These class members will be limited to injunctive and declaratory relief. In addition, the court bifurcated the action into liability and remedy phases, severed the individual racial discrimination allegations and ordered a scheduling conference to discuss notice issues.

In reaching these conclusions, Jenkins acknowledged two factors. First, his resolution of the certification motion “should not be construed in any manner as a ruling on the merits or the probable outcome of the case.” Second, he did not believe his order expanded class action jurisprudence: “[T]he Court does not encounter the issues raised herein on a barren legal landscape. Rather, this Court is satisfied that ample legal precedent is available to guide the Court in determining the propriety of Plaintiffs' request for certification. Indeed, while the size of the proposed class is unique, the issues are not novel, and the Plaintiffs' claims are relatively narrow in scope.”

It remains to be seen if Jenkins' adherence to the Eisen rule (against previewing the merits at class certification) is sustainable. More significantly, it is an open (and confused) question as to whether certification of a Rule 23(b)(2) injunctive relief, lost pay and punitive damages class creates novel class action jurisprudence. Whatever else may be said about the Wal-Mart certification order, the decision is anything but routine. Historically and conventionally, courts have construed Rule 23(b)(2) to permit injunctive and declaratory relief classes. Rule 23(b)(3), which provides for both notice and an opportunity to opt out of the class, was created in 1966 to provide a vehicle for damage class actions.

The class action landscape was significantly altered with the 1991 amendment of Title VII, which permits plaintiffs in employment discrimination cases to recover punitive damages. See 42 U.S.C. 1981a(b)(1). Plaintiffs may recover punitive damages if the defendant's alleged discrimination was intentional and the plaintiff proves that the employer “engaged in a discriminatory practice or discriminatory practices with malice or with reckless indifference to the federally protected rights of an aggrieved individual.”

Allison v. Citgo

In a 1998 landmark decision construing the 1991 amended act, the 5th U.S. Circuit Court of Appeals in Allison v. Citgo , 151 F.3d 402 (1998), repudiated the ability of a class to recover damages in a Rule 23(b)(2) action. The Fifth Circuit established that plaintiffs may recover monetary damages in a 23(b)(2) action only if those damages are “incidental” to the predominant form of declaratory or injunctive relief. Conversely, if monetary damages are the predominant form of relief, then the class may not be certified as a 23(b)(2) mandatory class.

The Allison court further instructed that “incidental monetary relief flows directly from liability to the class as a whole on the claims forming the basis of the injunctive or declaratory relief.” Moreover, in order for damages to be incidental to a Rule 23(b)(2) class claim, the damages should be at least capable of computation by means of objective standards and not dependent in any significant way on the intangible, subjective differences of each class member's circumstances.

The Allison approach has been adopted by several federal courts. See, eg, Murray v. Auslander , 244 F.3d 807, 812-13 (11th Cir. 2001); Miller v. Hygrade Food Prods. Corp. Nonetheless, the Allison approach was short-lived; within 1 year the Seventh Circuit, in Jefferson v. Ingersoll Int'l Inc. , 195 F.3d 894 (1999), eschewed these bright-line rules. Instead, the Seventh Circuit proposed three possible options for handling Title VII claims under both rules 23(b)(2) and (b)(3) provisions, suggesting divided or hybrid class actions.

In ensuing years, the split between the Fifth and Seventh circuits inspired an array of confusing and conflicting opinions concerning the viability of Title VII (b)(2) class actions. In 2001, the Second Circuit declined to adopt the Allison approach. Robinson v. Metro-North Commuter R.R. Co. , 267 F.3d 147, 165-55 (2001). In 2002, the Ninth Circuit noted that the Supreme Court in Ortiz v. Fibreboard had expressed concern over certifying mandatory classes that included monetary damages, but did not adopt a per se rule. Molski v. Gleich , 307 F.3d 1155, 1164-67 (2002).

At least three district courts have issued opinions describing the conflict among the circuit courts over the split between the Fifth Circuit and Seventh Circuit approaches. Further confounding this doctrinal disarray was the expansion of Allison principles into substantive class actions other than Title VII claims. For example, in Coleman v. GMAC, the Sixth Circuit extended Allison principles to the Equal Credit Opportunity Act, in which the court vacated and remanded certification of a mandatory 23(b)(2) damage class action. 296 F.3d 443 (6th Cir. 2002).

Further complicating this terrain, the Fifth Circuit revisited its Allison decision in 2004. See In re Monumental Life Ins. Co., 365 F.3d 408 (5th Cir. 2004). Although the Fifth Circuit reaffirmed its core concepts of predominate relief and incidental damages, the court now opined that due process requires class notice when a Rule 23(b)(2) class seeks monetary damages, while an opt-out provision is optional with the court. 365 F.3d at 416-17.

A Judge's Very Important Take On Molski

Jenkins' opinion aligns the Northern District of California with the anti-Allison courts, citing Robinson v. Metro-North Commuter R.R. Co., supra, and, ironically, In re Monumental Life Ins. Co., supra. Relying chiefly on the 9th Circuit's decision in Molski, Jenkins interpreted Molski as rejecting any bright-line distinctions between incidental and non-incidental damages. The court rejected Wal-Mart's contention that the case could not be certified under Rule 23(b)(2) because the plaintiffs' punitive damages were not “incidental.”

Instead, Jenkins read Molski to require a judge to ascertain the “intent of the plaintiffs in bringing the suit,” an inquiry which requires evaluation of the “specific facts and circumstances of each case.” Hence, Jenkins determined what he believed the plaintiffs expressed as the primary goal in the litigation: injunctive relief. “This Court has little difficulty concluding that here the equitable relief sought predominates over the claim for punitive damages,” and the plaintiffs' claims for punitive damages “appears secondary in nature.” Also, Jenkins determined that the plaintiffs' claim for punitive damages did not detract from the cohesiveness of the class, which would defeat certification under the (b)(2) provision. Also, Jenkins read Molski, Jefferson, Robinson and Monumental Life as suggesting that courts may certify a mandatory Rule 23(b)(2) punitive damages class with provision for notice and opt-out of class members.

Finally, Jenkins rejected Wal-Mart's argument that the State Farm decision relating to constitutional limits on punitive damages foreclosed the ability of the court to certify a Rule 23(b)(2) punitive damages class. See State Farm Mut. Auto Ins. Co. v. Campbell , 538 U.S. 408 (2003).

Jenkins' Wal-Mart decision has further stoked the (b)(2) controversy, albeit with a very large yule log.