This article was co-authored by Dickinson attorney John Lande and was first published January 19, 2012, in the online journal of the Alternative Dispute Resolution Committee of the American Bar Association’s Litigation Section.

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In June of 2011, the U.S. Supreme Court issued decisions in two cases applying Federal Rule of Civil Procedure 23 and its standards for class actions: Erica P. John Fund v.Halliburton, 131 S. Ct. 2179 (2011) and Wal-Mart Stores v. Dukes, 131 S. Ct. 2541 (2011). The decision in Halliburton, while important in its own right, has limited relevance to cases not sharing a similar factual background. Specifically, Halliburton dealt with class litigation in the context of investor suits against corporate executives who allegedly inflated stock prices. Dukes, described by the Court as “one of the most expansive class actions ever,” examined at length the Rule 23(a)(2) requirement that class actions “state questions of law or fact common to the class.”  Dukes is important to examine because it represents a comprehensive analysis of the “commonality” and “predominance” standards in Rule 23 and because arbitration rules, such as the Supplementary Rules for Class Arbitration of the American Arbitration Association (AAA) and the JAMS Class Action Procedures, incorporate both the “commonality” and “predominance” standards found in Rule 23.  

Class Action Requirements
Dukes dealt with whether a class could be certified under Rule 23. For a class action to proceed, litigants must first meet Rule 23(a)’s four required standards: numerosity, commonality, typicality, and adequacy of representation. (These standards are also prerequisites to class arbitration in the AAA and JAMS rules.)  Once a proposed class surmounts these obstacles, it must then slot itself into one of the three kinds of classes described in Rule 23(b). The plaintiffs in Dukes proceeded under Rule 23(b)(2), which requires that the party opposing the class has “acted or refused to act on grounds  that apply generally to the class.”  Dukes sheds light on what the Supreme Court will require from class litigants to surmount the initial “commonality” certification hurdle.

Dukes’ Background
The proposed class included some 1.5 million women who worked in about 3,400 Wal-Mart stores across the nation. The three named plaintiffs in Dukes, who were current or former employees at three different Wal-Mart stores, alleged that they, and all women employed at Wal-Mart, had been passed over for promotions, had not received the same pay raises, and were paid less than their male counterparts. To prove these claims, the plaintiffs relied on anecdotes from current and former employees, statistical evidence, and the testimony of a sociologist who conducted a “social framework analysis” of Wal-Mart. This evidence, they contended, demonstrated a pattern and practice of discrimination throughout Wal-Mart’s stores. Wal-Mart disputed the plaintiffs’ claims, pointing to both a devolved authority structure in which local managers retain nearly all employment authority and Wal-Mart’s strong policy against sex discrimination.

The district court certified the plaintiffs as a class. A divided en banc Ninth Circuit affirmed the district court’s ruling. The majority found that the plaintiffs’ evidence of commonality was sufficient to raise the common question of whether Wal-Mart’s female employees were subject to a single set of discriminatory employment practices. This was sufficient to meet the burden set out in Rule 23(a)(2).

Two issues made their way to the Supreme Court: whether the plaintiffs had established commonality as required by Rule 23(a) and whether a court could award damages in the form of back pay to a class certified under Rule 23(b)(2). The Court unanimously disposed of the second issue, holding that under Rule 23(b)(2), the plaintiffs could not seek an award for back pay. The issue that divided the Court, and ultimately sank any class certification chances for the plaintiffs, is what it takes for a class to meet the commonality requirement under Rule 23(a).

Dukes’ Search for Commonality
The majority opinion in Dukes, delivered by Justice Scalia, interprets commonality to mean that the claims of each individual plaintiff must rest upon a common contention, the truth or falsity of which will drive a class-wide resolution of claims. To determine whether or not there are class-wide contentions on which the litigation can be resolved, the Court will look closely at both the similarities and the dissimilarities in the plaintiffs’ claims. It is insufficient to show that all class members were affected by a violation of the same statute.  The inquiry must be whether they were affected by the same violation of that statute.  This emphasis on dissimilarities between plaintiffs will illustrate whether there are any class-wide commonalities at all.

The majority examined whether there was any “glue” holding together the various discriminatory acts alleged.  The Court acknowledged that a “rigorous analysis” of whether the Rule 23(a) requirements have been met may necessitate a court to “probe behind the pleadings before coming to rest on the certification question.”   The proof of commonality “overlaps” with at least some examination of the merits of the plaintiffs’ claims.  Finding insufficient evidence of a specific employment practice that tied all 1.5 million claims together, the Court held that Rule 23(a)’s commonality requirement was not met. 

The dissent, written by Justice Ginsburg, rejected this analysis.  Justice Ginsburg argued that the majority’s interpretation of “commonality” improperly blends the Rule 23(b)(3) requirement that class questions “predominate” over individual questions with the more basic 23(a)(2) requirement that there are questions of law or fact common to the class. Specifically, the dissent rejected the majority’s focus on dissimilarities between class members when determining whether common questions of law or fact are present to meet the initial certification tests.  Instead, Justice Ginsburg argued that even a single question of law or fact common to the class will satisfy the commonality requirement.

The dissent asserted that the majority’s approach borrows too heavily from Rule 23(b)(3). Courts necessarily engage in a dissimilarities analysis under Rule 23(b)(3) because they must weigh the commonalities and the dissimilarities to determine whether the commonalities “predominate.”  Weighing similarities, according to Ginsburg, is solely a 23(b)(3) inquiry. Considering dissimilarities in the 23(a) phase imports a more exacting standard into a stage of the litigation that does not require this analysis, and may potentially defeat certification for classes that will ultimately be certified under Rule 23(b)(1) or (2), which do not have to meet the Rule 23(b)(3)  predominance requirement.

The majority responded to Justice Ginsburg’s critique by noting that any competently drafted complaint could allege a common question. Instead, the majority would ask if the common contention is capable of class-wide resolution, meaning that a determination of that issue is key to resolving “the validity of each one of the claims in one stroke.”  Finding too many dissimilarities between the prospective class members suggests the answer to that critical question is “no.”

Conclusion
Both the AAA Supplementary Rules for Class Arbitration of the American Arbitration Association and the JAMS Class Action Procedures incorporate the standards found in Rule 23 of the Federal Rules of Civil Procedure.  The JAMS rules identify Rule 23(a) and (b) specifically, while the AAA rules use language identical to the Rule 23(a)(2) commonality requirement and the Rule 23(b) predominance standard.  Cases explaining the requirements of those rules are instructive for arbitrators attempting to apply the parallel arbitration rules.

The plaintiffs in Dukes were unable to establish that any unifying civil rights violation tied together the 1.5 million members of the proposed class.  The lack of a common contention that, once resolved, would determine a central issue for all claims meant that the threshold requirement for “commonality” found in Rule 23(a)(2) was not satisfied.  To identify that common contention, it is appropriate for the court to examine the nature of the claims even if this results in an overlap with the eventual determination of the merits of the case.