Alert March 22, 2012

"Commonality" Post-Wal-Mart

As any attorney who handles class action cases knows, the U.S. Supreme Court’s decision in Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541 (2011), was significant because it clarified the Rule 23 standards for class certification and strongly supported the need for a rigorous analysis of those requirements.  Of particular importance was the Court’s focus on the commonality requirement of Rule 23(a)(2) as being a real hurdle that plaintiffs must overcome before a class can be certified, and not a throw-away rule that is effectively subsumed by the predominance requirement of Rule 23(b)(3).  After Wal-Mart, a party seeking to certify a class can no longer satisfy the commonality requirement by raising issues that, while technically common to a group of people, are not central to resolving the dispute.  Instead, the common questions must “resolve an issue that is central to the validity of each of the claims in one stroke.”

Even though this holding appeared to be an important change in the way the commonality requirement is to be applied, after Wal-Mart was decided, it was not clear whether lower federal courts would view the decision as making a real change to the meaning of Rule 23(a)(2), or whether its holding would be limited to employment discrimination disputes.  This article focuses on the way that federal courts have applied Wal-Mart’s enhanced commonality rule.

Before Wal-Mart, it was rare for the commonality requirement to stand in the way of the certification of almost any class.  Class action complaints used to identify laundry lists of basic and often uncontroversial questions raised by each class member’s claim, such as whether each purchased a product from the defendant or whether the defendant had a particular company policy.  Any minimally competent plaintiffs’ attorney could draft a list of “common” issues, and, as a result, defendants were unable to seriously contest the commonality requirement.

In Wal-Mart, the Court went out of its way to give the commonality requirement independent significance.  After accepting certiorari to determine whether the putative class satisfied Rule 23(b)(2) (concerning whether injunctive or declaratory relief is proper for a class), the Court ordered briefing sua sponte on the Rule 23(a) requirements and ultimately found that “[t]he crux of this case is commonality.”

In finding that Rule 23(a)(2) was not met, the Court clarified the commonality requirement in three significant ways.  First, it put a limiting gloss on the terms of Rule 23(a)(2).  The Rule requires that there be “questions of law or fact common to the class.”  But the Court explained that this requirement is not satisfied merely by identifying any common question.  Instead, the common question must be “capable of classwide resolution,” meaning that the question must be capable of resolution “in one stroke,” yielding a “common answer[].” 

Second, Wal-Mart made the commonality requirement a real obstacle to the certification of Rule 23(b)(2) classes seeking injunctive or declaratory relief.  Because the predominance requirement of Rule 23(b)(3) does not apply to Rule 23(b)(2) classes, a strong commonality requirement is critical to ensuring that the claims of members of such classes are cohesive and rise or fall on the basis of common issues.

Wal-Mart’s third clarification was that the common question must be central to the merits of the class claims.  The Court found insufficient basic questions such as “Do all of us plaintiffs indeed work for Wal-Mart?  Do our managers have discretion over pay?  Is that an unlawful employment practice?” and “What remedies should we get?”  Because the answers to these types of questions are not “central to the validity” of the putative class members’ claims, they are insufficient to satisfy the commonality requirement.

A review of recent decisions shows that lower courts have applied Wal-Mart’s commonality analysis across a range of class action cases and in ways reflecting that Wal-Mart changed the law in this area.  For example, in Corwin v. Lawyers Title Insurance Co., 276 F.R.D. 484 (E.D. Mich. Aug. 1, 2011), the court applied Wal-Mart to a dispute involving the sale of title insurance and found that commonality was not met.  Stating that the commonality requirement requires “a common issue the resolution of which will advance the litigation,” the court found commonality lacking because “the critical inquiry without which liability cannot attach requires individualized determination.”  Likewise, in Stone v. Advance America, 2011 U.S. Dist. LEXIS 142464 (S.D. Cal. Dec. 9, 2011), the court considered whether to certify a class of individuals who received payday loans and held that a common question such as “whether the defendant violated the same statute with a uniform corporate policy” did not satisfy Rule 23(a)(2) because the key facts of each person’s claim “must be resolved on a transaction-by-transaction basis.”  Because commonality was dispositive, the court did not reach any of the other Rule 23 requirements.  In Haynes v. Planet Automall, Inc., 276 F.R.D. 65 (E.D.N.Y. 2011), the court denied class certification in a case alleging that a car dealer did not disclose that certain fees it charged in connection with automobile financing were part of the finance charge, in violation of the Truth in Lending Act.  The court cited Wal-Mart and found that the commonality requirement was not met because determining “the critical … disputed question[],” whether the fees were in fact part of the finance charge, could not be “answered uniformly on a class-wide basis.”  And the court in In re OnStar Contract Litigation, 2011 U.S. Dist. LEXIS 145846 (E.D. Mich. Dec. 19, 2011), refused to certify a class of OnStar customers and found that the commonality requirement was not met because the plaintiffs “offer[ed] the same kinds of broad questions that the Court found insufficient” in Wal-Mart.

Other courts have relied on Wal-Mart’s rejection of “common questions” that do not have “common answers” as insufficient to meet Rule 23(a)(2).  In In re Bisphenol-A (BPA) Polycarbonate Plastic Products Liability Litigation, 276 F.R.D. 336 (W.D. Mo. 2011), the court denied motions for class certification in disputes over the inclusion of BPA in baby bottles and cups because key fact questions such as each person’s “actions, decisions, knowledge, and thought processes” in purchasing the products were “unique” to each class member, not common.  The court went so far as to find that the basic question whether each plaintiff even bought a product from the defendant was “not a common question because it is not capable of classwide resolution as required by [Wal-Mart].”  Likewise, in Wong v. AT&T Mobility Services LLC, 2011 U.S. Dist. LEXIS 125988 (C.D. Cal. Oct. 20, 2011), the court denied class certification because “while there might be common issues, it is relatively apparent that there will not be common resolutions of or answers to the key issues/questions.”  And in Novak v. Boeing Co., 2011 U.S. Dist. LEXIS 146676 (C.D. Cal. Dec. 19, 2011), the court found that “Boeing has presented evidence that demonstrates that the common questions asserted by Plaintiffs are not capable of common resolution.”

Wal-Mart’s commonality rule has been analyzed in employment disputes as well.  In Ellis v. Costco Wholesale Corp., 657 F.3d 970 (9th Cir. 2011), the plaintiffs challenged Costco’s promotion decisions on behalf of a company-wide class of women.  The Ninth Circuit held that in certifying a class, the district court had failed to conduct the required “rigorous analysis” of the commonality and typicality requirements of Rule 23(a) by refusing to analyze the persuasiveness of the parties’ evidence.  On remand, the district court was required to “determine whether there was ‘significant proof that [Costco] operated under a general policy of discrimination’” that formed the basis for each class member’s claim.  Absent such a policy, the plaintiffs “would face an exceedingly difficult challenge in proving” commonality (citing Wal-Mart).

This is not to say that Wal-Mart’s commonality standard cannot be met, or even that it cannot be met in employment discrimination cases.  But the bar is now higher.  For example, the Seventh Circuit recently reversed the denial of class certification of Title VII race discrimination claims because the claims did not turn on local managers’ exercise of discretion (as did Wal-Mart), but on a company-wide practice that purportedly had a disparate impact on class members.  McReynolds v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 2012 U.S. App. LEXIS 3683 (7th Cir. Feb. 24, 2012).  Even so, the Seventh Circuit noted that if the class sought damages, hundreds of separate trials would be necessary to determine whether each individual class member was adversely affected, assuming the class could establish that the practice in question caused a disparate impact. 

In sum, these developments bode well for defendants faced with motions for class certification.  Several courts have explicitly recognized that Wal-Mart established a more restrictive commonality standard.  As other courts confront situations in which core liability issues are not common, or where no single issue drives the outcome of the litigation, we expect that Wal-Mart’s commonality rule will give defendants another real chance to defeat class certification.