Class Action Update: Class Action Waivers May be Enforced Under Federal Arbitration Act; But If the Case Stays in Federal Court, The Class Must Be Manageable. ATT Mobility v. Concepcion & Wal-Mart v. Dukes Highlight 2010-11 U.S. Supreme Court Term

When the United States Supreme Court decides a case, it is always an important event, but two cases in the 2010-2011 term were more important to litigators – especially labor and employment litigators – than others.

In ATT Mobility v. Concepcion, the high court ruled that a waiver of class actions contained in an arbitration agreement – while void under California precedent (see Discover Bank v. Superior Court, 36 Cal.4th 148 (2005)) – may nevertheless be enforced in federal court under the Federal Arbitration Act. 

In another key case, Wal-Mart Stores v. Dukes, the court ruled against a nationwide class of women employees who claimed that Wal-Mart’s discretionary employment policies fostered sex discrimination. The court found such a class to be beyond the parameters of Rule 23 of the Federal Rules of Civil Procedure, which states the requirements for class actions.  Pursuant to the text of Rule 23, for a case to be certified as a class action, it must involve a class of persons “so numerous that joinder of all members is impracticable” as well as “questions of law or fact common to the class.”  In addition, “the claims or defense of the representative parties” must be “typical of the claims or defense of the class” and the representative parties must be able to “fairly and adequately represent the interests of the class.”

Those requirements are found in Rule 23 (a).  A class action must also satisfy one of the conditions of Rule 23 (b) as well. In the Wal-Mart case, the class contended that it met Rule 23(b)(2) which states 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 high court opinion in Wal-Mart analyzed the proposed class in detail.  “The crux of this case is commonality—the rule requiring a plaintiff to show that “there are questions of law or fact common to the class.” 

Writing for the court, Justice Antonin Scalia noted:  “Quite obviously, the mere claim by employees of the same company that they have suffered a Title VII injury, or even a disparate impact Title VII injury, gives no cause to believe that all their claims can productively be litigated at once. Their claims must depend upon a common contention—for example, the assertion of discriminatory bias on the part of the same supervisor. That common contention, moreover, must be of such a nature that it is capable of class wide resolution—which means that determination of its truth or falsity will resolve an issue that is central to the validity of each one of the claims in one stroke.”

What doomed the class in Wal-Mart was the fact that a lot of decisions were made by different people in different locations based on different individual circumstances.  “Here,” wrote Justice Scalia, “respondents wish to sue about literally millions of employment decisions at once. Without some glue holding the alleged reasons for all those decisions together, it will be impossible to say that examination of all the class members’ claims for relief will produce a common answer to the crucial question why was I disfavored.”

Copies of both of these vitally important rulings are attached for your convenience. 

We regularly counsel clients about questions such as these. If you have an inquiry in this area, feel free to give us a call.

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