The Potential Upside for Class Action Plaintiffs In The Dukes v. Wal-Mart Certiorari

At Blawgletter:

The U.S. Supreme Court today granted review of a Ninth Circuit ruling that allowed a class of California women to pursue sex discrimination claims against Walmart. 

Of course, if you’re reading this legal blog, you probably already knew that. So let’s dive a bit deeper, per Blawgletter:

The Court both limited and expanded review.  Walmart’s petition presented two questions, only the first of which the Court will address:

I.  Whether claims for monetary relief can be certified under Federal Rule of Civil Procedures 23(b)(2) — which by its terms is limited to injunctive or corresponding declaratory relief — and, if so, under what circumstances.

II.  Whether the certification order conforms to the requirements of Title VII, the Due Process Claus, the Seventh Amendment, the Rules Enabling Act, and Federal Rule of Civil Procedure 23.

The Court added the following question:  "Whether the class certification ordered under Rule 23(b)(2) is consistent with Rule 23(a)."

You can see Walmart’s cert petition here, courtesy of Scotusblog.com.

The Court’s ruling in Dukes will likely settle a split in the courts of appeals over whether and when courts may certify class actions that seek money together with injunctive or declaratory relief.  Some circuit courts, such as the Second and the Ninth, tend to hold that even a claim for big monetary relief can fit within the Rule 23(b)(2) framework so long as the class also seeks serious injunctive and declaratory relief.  Other circuits, notably the Fifth, almost categorically disallow classes where the plaintiffs ask for any cash other than as purely incidental relief.

Drug and Device Law has a long explanation of the Rule 23(b)(2) "equity" versus "law" issue. I recommend you read their post, too.

As a general matter, plaintiffs’ lawyers do not like to see the Supreme Court grant certiorari of Ninth Circuit orders, particularly not those orders which affirmed certification of a class action. Four members of the Supreme Court are outright hostile to the rights of employees and consumers; all they need is one Justice on their side (typically Justice Kennedy) and they can dramatically shaped the law to deny relief.

So we’re not excited about this development, though I’m sure the Drug and Device Law folks are, since they represent big businesses, typically pharmaceutical manufacturers.

But there’s some hope here. Note this part of Drug and Device Law’s argument:

This section of Rule 23 is relatively old, dating from 1966, so it frames the injunctive vs. money distinction somewhat archaicly in terms of the distinction between "law" and "equity."  In the olden days, almost a century ago, there were two different sets of courts, one for telling people what they could and couldn’t do, and the other for telling them what they had to pay, if anything.  The first courts were "equity" and the second set was "law."

I must respectfully dissent; some form of money damages are indeed "equitable." Let me give you an example.

For years, the Supreme Court has struggled with a part of the Employee Retirement Income Security Act (ERISA) which allows for equitable damages. § 502(a)(3) of ERISA states, in pertinent parts:

Persons empowered to bring a civil action. A civil action may be brought … by a participant, beneficiary, or fiduciary (A) to enjoin any act or practice which violates any provision of this title or the terms of the plan, or (B) to obtain other appropriate equitable relief (i) to redress such violations or (ii) to enforce any provisions of this title or the terms of the plan;

The Supreme Court has twice affirmed that “the term ‘equitable relief’ in § 502(a)(3) must refer to ‘those categories of relief that were typically available in equity.’” Great-West Life & Annuity Ins. Co. v. Knudson, 534 U.S. 204, 210 (2002)(quoting Mertens v. Hewitt Associates, 508 U.S. 248, 256 (1993), emphasis in Mertens).

But what was "typically" available in equity? Consider Sereboff v. Mid Atlantic Medical Services, 547 U.S. 356 (2006):

 

In Mertens v. Hewitt Associates, 508 U. S. 248 (1993), we construed the provision to authorize only "those categories of relief that were typically available in equity," and thus rejected a claim that we found sought "nothing other than compensatory damages." Id., at 256, 255. We elaborated on this construction of § 502(a)(3)(B) in 362*362 Great-West Life & Annuity Ins. Co. v. Knudson, 534 U. S. 204 (2002), which involved facts similar to those in this case. Much like the "Acts of Third Parties" provision in the Sereboffs’ plan, the plan in Knudson reserved "`a first lien upon any recovery, whether by settlement, judgment or otherwise,’ that the beneficiary receives from [a] third party." Id., at 207. After Knudson was involved in a car accident, Great-West paid medical bills on her behalf and, when she recovered in tort from a third party for her injuries, Great-West sought to collect from her for the medical bills it had paid. Id., at 207-209.

In response to the argument that Great-West’s claim in Knudson was for "restitution" and thus equitable under § 502(a)(3)(B) and Mertens, we noted that "not all relief falling under the rubric of restitution [was] available in equity." 534 U. S., at 212. To decide whether the restitutionary relief sought by Great-West was equitable or legal, we examined cases and secondary legal materials to determine if the relief would have been equitable "[i]n the days of the divided bench." Ibid. We explained that one feature of equitable restitution was that it sought to impose a constructive trust or equitable lien on "particular funds or property in the defendant’s possession." Id., at 213. That requirement was not met in Knudson, because "the funds to which petitioners claim[ed] an entitlement" were not in Knudson’s possession, but had instead been placed in a "Special Needs Trust" under California law. Id., at 214, 207. The kind of relief Great-West sought, therefore, was "not equitable—the imposition of a constructive trust or equitable lien on particular property—but legal—the imposition of personal liability for the benefits that [Great-West] conferred upon [Knudson]." Id., at 214. We accordingly determined that the suit could not proceed under § 502(a)(3). Ibid.

That impediment to characterizing the relief in Knudson as equitable is not present here. As the Fourth Circuit explained below, in this case Mid Atlantic sought "specifically 363*363 identifiable" funds that were "within the possession and control of the Sereboffs"—that portion of the tort settlement due Mid Atlantic under the terms of the ERISA plan, set aside and "preserved [in the Sereboffs'] investment accounts." 407 F. 3d, at 218. Unlike Great-West, Mid Atlantic did not simply seek "to impose personal liability . . . for a contractual obligation to pay money." Knudson, 534 U. S., at 210. It alleged breach of contract and sought money, to be sure, but it sought its recovery through a constructive trust or equitable lien on a specifically identified fund, not from the Sereboffs’ assets generally, as would be the case with a contract action at law. ERISA provides for equitable remedies to enforce plan terms, so the fact that the action involves a breach of contract can hardly be enough to prove relief is not equitable; that would make § 502(a)(3)(B)(ii) an empty promise.

 

(Emphasis added). As the Third Circuit interpreted that, although “some forms of equitable relief — such as constructive trusts, equitable liens, or accounting for the profits derived from wrongly held property — include the payment of money . . ., these forms of relief are available in limited circumstances.” Eichorn v. AT&T Corp., 484 F.3d 644, 655 n.6 (3d Cir. 2007).

In short, If the plaintiff can show an equitable basis for the payment of money damages — such as by showing an entitlement to a constructive trust, equitable lien, or accounting for wrongfully gained profits — then they can compel the payment of money damages in equity.

Could the Dukes plaintiffs show an equitable basis for money damages against Wal-Mart? 

I don’t know — that’s a heck of a complicated question — but it’s surely a possibility if the Supreme Court applies to Rule 23(b)(2) the same analysis as it has applied in the ERISA context.  That would be a good thing for employees and consumers nationwide.

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