New Ruling Addresses Whether Dukes Will Have Far-Reaching Effects Outside Of The Employment Law Context

By Lynn Kappelman and Reema Kapur Case law following in the wake of Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541 (2011), illustrates the twists and turns of how federal district court judges are grappling with the task of applying Dukes in a variety of employment and non-employment settings. An issue being hotly debated is just how far the holdings in Dukes can be stretched outside the workplace class action setting. Not surprisingly, depending on one's litigation position, Supreme Court pronouncements are often argued as dispositive, indicative, or "apples to apples" to other disputes beyond the four corners of the litigation that spawned the SCOTUS decision. Defense lawyers are increasingly citing Dukes and asserting that it either calls into question any previously certified class or impedes plaintiffs from certifying their proposed class theories. In contrast, the plaintiffs' class action bar is contending Dukes is either narrowly decided and/or inapplicable to non-workplace class actions. Rulings applying or limiting Dukes outside of the workplace class action are instructive for corporate counsel. The recent decision in Jermyn v. Best Buy Stores, L.P., No. 08-CIV-214, 2011 WL 4336664 (S.D.N.Y. Sept. 15, 2011), is well worth a read in this regard for employment lawyers and non-employment lawyers alike. Jermyn demonstrates that, post-Dukes, courts in both the employment and non-employment settings are receptive to motions challenging a Rule 23(b)(2) class theory that improperly combines claims for injunctive and monetary relief. In the wake of Dukes, courts are rigorously scrutinizing cases where Plaintiffs' counsel have fashioned improper Rule 23(b)(2) classes mixing claims for injunctive relief with claims for damages to circumvent the stringent class notice requirements under Rule 23(b)(3). The Jermyn opinion also continues the debate regarding the applicability of Dukes' commonality requirement outside of the workplace class action setting. In Jermyn, Judge Colleen McMohan in the U.S. District Court for the Southern District of New York denied defendant's motion to decertify a class of New York consumers who allege that defendant failed to honor its advertised price match guarantee. Plaintiffs alleged claims under various common law and statutory provisions challenging defendant's allegedly deceptive business practices. The Court in Jermyn had previously certified a class of New York consumers who claimed that, in violation of its advertising campaign, defendant failed to give them a "valid" price match when they presented evidence that another store sold their item for less. It found that the class members' claims were linked by a common question – whether the defendant maintained and communicated to its local branches a corporate policy of denying "valid" price matches, and thus could be liable for false advertising under New York laws. After the class was certified, the Supreme Court issued its landmark opinion in Dukes v. Wal-Mart. Defendant subsequently argued that the class in Jermyn should be decertified in light of Dukes. Specifically, defendant argued that Dukes was a significant intervening event warranting decertification and that (1) the class in Jermyn ran afoul of Dukes' unanimous holding that a Rule 23(b)(2) class may not include claims for monetary relief if they are more than "incidental" to the injunctive relief, and (2) the class in Jermyn did not meet the commonality requirement under Rule 23(a)(2). With respect to the first issue, Judge McMohan affirmed her earlier decision to certify the class and found that plaintiffs complied with the Dukes mandate. Id. at *2, *7-8. The Court noted that the SCOTUS struck down a Rule 23(b)(2) class in Dukes because it included claims for both injunctive and monetary relief (i.e., back pay) and those claims for back pay relief were not incidental to the equitable relief Plaintiffs sought. The Court distinguished Dukes on the basis that the certified class did not include back pay claims as a separate Rule 23(b)(3) class. The Court acknowledged that the Dukes decision in this regard applied outside of the employment context, and noted that it could not have certified the class in Jermyn as a pure Rule 23(b)(2) class after Dukes. Nevertheless, the Court found that its class certification order "was entirely consistent with Dukes." Id. at *2. Judge McMohan based her reasoning on the fact that in Jermyn she had separately certified two classes – a damages class under Rule 23(b)(3) (after finding that the additional requirements under Rule 23(b)(3) of "predominance" and "superiority" were met) and an injunction class under Rule 23(b)(2), which was seeking purely statutory relief and no damages. Id. at *8. With respect to the second issue on commonality, the Court found that Dukes was distinguishable and class certification was appropriate. Id. at *3-7. For example, unlike the plaintiffs in Dukes, the plaintiffs in Jermyn had identified a corporate policy which affected all of them – a corporate policy discouraging defendants' stores from honoring the price match guarantee – and this was the "glue" that held the claims of each class member together. Id. at *1, *6. Also unlike Dukes, the plaintiffs in Jermyn "offered substantial proof that such a policy in fact existed, thereby raising a prima facie inference of broad-based, class-wide injury." Id. at *7. Discussing the factual differences between Dukes and Jermyn, the court noted: "…what plaintiffs here allege is precisely what is missing in Dukes." Id. at *6. Therefore, the court held that the class satisfied the commonality element under Rule 23(a). Id. at *7. Perhaps more important, however, is that the ruling in Jermyn expressed doubt that Dukes' commonality requirements would be so limiting outside of the workplace class action context where, as here, the claim alleged deceptive business practices. See Id. at *5. It noted: "[d]efendant tries to import [Dukes'] Title VII pleading requirements to Plaintiffs' claims which allege deceptive business practices under [New York law]…These additional requirements are designed for and unique to the context of employment discrimination…" Id. Jermyn reasoned that in a Title VII context, the "glue" holding all the individual class members' claims for disfavor in pay and promotion together was the "reason why they were disfavored." Id. at *4 (emphasis in original). Judge McMohan found that this was not so in a deceptive business practices context. Id. at *5. Unlike Title VII claims, deceptive business practices claims "do not necessarily depend on any specific motivation." Id. (citing Spagnola v. Chubb Corp., 574 F.3d 64, 74 (2d Cir. 2009)). The Court reasoned that in the deceptive business practices context where a defendant's motivation is not part of the liability determination, the "why" is "less relevant, if it is relevant at all." Id. at *5. In sum, while the Court in Jermyn re-affirmed that Rule 23(a) requires that class members' claims depend on a common contention which is capable of class-wide resolution, it opined that the Dukes requirement of "significant proof" of a "general policy of discrimination" was unique to Title VII claims. Id. In the wake of the SCOTUS decision in Dukes, we expect to see more and more federal courts distinguishing Dukes in order to find that plaintiffs bringing class actions outside of the workplace context have met their commonality requirement under Rule 23(a). (To read how other federal district courts have weighed in on this issue of late, read our recent posts about In Re Wells Fargo Residential Mortgage Lending Discrimination Litigation, as well as McReynolds v. Merrill Lynch). By the same token, we expect that federal courts will be loathe to certify classes, in any context, under Rule 23(b)(2) where the plaintiffs are seeking monetary damages which are more than incidental to their claims for injunctive relief.

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One Response to New Ruling Addresses Whether Dukes Will Have Far-Reaching Effects Outside Of The Employment Law Context

  1. Kailee says:

    I told my kids we’d play after I found what I nedeed. Damnit.

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