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Supreme Court’s Wal-Mart Ruling Has Dramatic Impact on Class-Action Litigation

By Joanne Deschenaux  1/18/2013
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Several Supreme Court class-action decisions issued in 2011 led to “significant change” in workplace class-action litigation in 2012, according to an annual report that law firm Seyfarth Shaw released on Jan. 14, 2013. Further, the “halo effect” of the most important of the cases—Wal-Mart Stores Inc. v. Dukes (131 S. Ct. 2541 [2011])—will continue to affect lawsuits in 2013, concludes the 9th annual edition of the firm’s Workplace Class Action Litigation Report.

In addition to the Wal-Mart decision, many of the key rulings of 2012 in class-action cases hinged on the Supreme Court’s 2011 rulings in another case, AT&T Mobility LLC v. Concepcion, the report said.

Wal-Mart Had ‘Halo Effect’

It was Wal-Mart’s impact on changing Rule 23 class-certification standards that “dominated the legal landscape in 2012.”  The decision was cited by lower courts 541 times in 2012, generating a “tidal wave” of new class-certification rulings and related decisions on a wide variety of class-action issues, the report said.

“Marked by the halo effect of Wal-Mart, this past year created a number of lasting changes in employment law that will continue to alter the legal landscape and litigation strategies for employers in 2013,” said Seyfarth’s Gerald L. Maatman Jr., co-chairman of the firm’s class-action defense group and author of the report. “Meanwhile, wage and hour claims continue to rise, with no sign of a crest in lawsuit filings, and the EEOC’s renewed focus on systemic investigations also poses high-stakes challenges for employers.”

The Wal-Mart decision held that Federal Rule of Civil Procedure 23(b)(2) cannot be used to recover individualized monetary relief for a class and established a heightened standard for Rule 23(a)’s commonality requirement, the report said. The decision caused federal and state courts to conduct a “wholesale review” of class-certification orders in pending cases. It also prompted employers to file new rounds of motions for decertification, the report stated.

The class certification that was rejected in Wal-Mart was based on an allegedly discriminatory employment policy that allowed managers to exercise discretion in pay and promotion, but the report noted that these types of claims are not completely dead.

“Courts are beginning to allow discretionary elements of an identifiable policy to be attacked” in the employment-discrimination context, the report said.

Influence of Concepcion

The Supreme Court's opinion in AT&T Mobility LLC v. Concepcion (131 S. Ct. 1740 [2011]) held that the Federal Arbitration Act pre-empts state law and allows the broad use of class-action waiver clauses in arbitration agreements.

The key issue going forward is whether class-action bans in arbitration agreements should not be enforced in cases where the plaintiff produces hard evidence that it would be too costly to pursue an individual action, the report said.

In such cases, plaintiffs argue that a class action is the only mechanism that allows them to vindicate their statutory workplace rights effectively, the report said.

Settlement Values Drop

Settlement values in the employment-discrimination class-action context fell precipitously after the Wal-Mart decision, according to the report.

The top 10 settlements in 2012 totaled $48.65 million, a sharp decline from 2010, the year prior to Wal-Mart, when the total was $346.4 million.

This trend may reverse itself in 2013, as the plaintiffs' class-action bar reboots its approach to litigation, the report predicted.

More Lawsuits, Accelerated Enforcement

The report found that wage and hour litigation outpaced all other types of workplace class actions in 2012, with a total of 7,672 Fair Labor Standards Act suits filed last year. That represented an increase of 893 from the then-record 2011 levels.

The report noted that the still-flagging U.S. economy in 2012 resulted in more class-action and collective-action litigation. This trend will likely continue in 2013 “as businesses retool operations in an improving economy and the Obama administration renews an emphasis on enforcing workplace laws.”

The report also said government enforcement remained “white hot” in 2012, with the U.S. Equal Employment Opportunity Commission garnering a fourfold increase in recoveries against employers for its systemic discrimination investigations. Government enforcement activity will accelerate even more in 2013, the report predicted.

Joanne Deschenaux, J.D., is SHRM’s senior legal editor.

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