The Seventh Circuit’s First Year of Living with Wal-Mart v. Dukes

Last summer, when the Supreme Court issued its decision in Wal-Mart Stores, Inc. v. Dukes, 131 S.Ct. 2541 (2011), some commentators said that the case foreshadowed the end of large employment class actions. Those predictions are proving incorrect, at least in the Seventh Circuit.

The Dukes decision has been discussed at length elsewhere. The plaintiffs in that case admitted that Wal-Mart had a formal policy against gender discrimination, but further alleged that the company had fostered a companywide “common culture” of discrimination against women. That common culture caused individual store managers to treat women unfairly in pay and promotion decisions, the plaintiffs claimed. Dukes, 131 S.Ct. at 2548. The Supreme Court rejected the “common culture” theory, finding that plaintiffs had “no convincing proof of a companywide pay and promotion policy.” Id. at 2556. Instead, the plaintiffs were attacking thousands of separate employment decisions, made by thousands of individual store managers. Thus, the Supreme Court held, no common class-wide questions were involved, and Rule 23(a)(2) precluded class certification. Id. at 2556-57.[1]

Now, after a year of living with that decision from Dukes, the impact of that ruling is becoming more clear. In the Seventh Circuit, the cases applying Dukes turn on whether the plaintiff has identified a company-wide (or at least a widespread) violation of the employment laws.

For example, in McReynolds v. Merrill Lynch, Pierce Fenner & Smith, Inc., 672 F.3d 482 (7^th Cir. 2012), the trial court had relied on Dukes to deny class certification in a case alleging racial discrimination in pay practices at a brokerage house. The trial court was persuaded that the pay decisions were made in branch offices that were scattered throughout the firm. In reversing that decision, the Court of Appeals began by noting that the plaintiffs were attacking both the Merrill Lynch staffing model and the Merrill Lynch system of allocating accounts among brokers. The plaintiffs argued that Merrill Lynch’s policies led to lower pay for black brokers. The Seventh Circuit held that those policies presented a class-wide common question: was there an unlawful disparate impact on the putative class? Id. at 490-91. Because the commonality requirement had been satisfied, the Court of Appeals held that the class should have been certified, notwithstanding Dukes. Id.

Similarly, in Ross v. RBS Citizens Bank NA, 667 F.3d 900 (7^th Cir. 2012), the Court affirmed that trial court’s decision to certify two related classes in an off-the-clock overtime case against a bank. Although the plaintiffs alleged that the class had unpaid overtime from hours worked at hundreds of different bank branches, and although the bank had a formal written policy prohibiting unpaid overtime, the Court found that the overtime violations arose from “an unofficial” company-wide policy that denied employees their earned-overtime compensation. Id. at 910. “This unofficial policy is the common answer that potentially drives the resolution of this litigation.” Id. (citing Dukes, 131 S.Ct. at 2551). On that basis, the Court of Appeals permitted the claims to proceed as a class action. Id.

By contrast, in Bolden v. Walsh Constr. Co., 2012 U.S. App. LEXIS 16439 (7^th Cir. Aug. 8, 2012), the Court of Appeals reversed a trial court’s decision to certify a class in a case alleging discrimination against workers at 262 different construction sites. The Court of Appeals ruled that there was no relevant company-wide policy (and no relevant area-wide policy) that violated the employment laws. Id. Applying Dukes, the Court of Appeals held that class certification was not possible.

McReynolds, Ross and Bolden all stand for the same principle: Dukes requires trial courts to determine whether a putative class action challenges a policy that comes from an employer’s top management.[2] Just as it always has, class certification turns on whether the record shows that the plaintiffs’ claims involve common questions under Rule 23.

Plainly, the Dukes decision has not meant the end of employment class actions in this Circuit.