Just last week, the Supreme Court overruled the Ninth Circuit and decertified a class of 1.5 million current and former female employees of Wal-Mart. Its decision in Walmart v. Dukes -- the first significant class action ruling by the Court since Amchem in 1997 -- will have far-reaching effects in many areas of litigation, including false advertising consumer class actions.
The Dukes decision raises the bar for establishing commonality under Federal Rule of Civil Procedure 23(a)(2), a threshold requirement that all class actions must meet. Traditionally, commonality was easily satisfied. After Dukes, plaintiffs will have to do more than recite alleged common questions of law and fact, and must show factually that class members “suffered the same injury” and that their claims all “depend upon a common contention.” In so holding, the Court disavowed much-quoted language from its earlier Eisen case that had led lower courts to refuse to examine the merits at the certification stage. Dukes makes clear that the “rigorous analysis” needed to determine if plaintiffs satisfy Rule 23’s requirements “will entail some overlap with the merits of the plaintiff’s underlying claim.”
False advertising class plaintiffs will thus face increased scrutiny at the class certification stage and can no longer rely on conclusory statements without evidentiary support. Under Dukes, they will have to make a much stronger showing at class certification that absent class members were actually exposed to and acted to their detriment on challenged statements. They will have to show that class members understood the challenged statements in the same way. Plaintiffs will likely argue that under some state consumer protection laws, such reliance can be presumed, but that presumption is rebuttable. All of this should require, at a minimum, a much more probing examination of the evidence at the class certification stage of consumer false advertising cases.
The Court also held that claims for monetary relief “when each class member would be entitled to an individualized award of monetary damages” must satisfy the more stringent requirements of Rule 23(b)(3), and may not be certified under the more permissive requirements of Rule 23(b)(2). In false advertising class action cases, plaintiffs often seek injunctive relief for defendants to stop a particular practice and monetary relief for damages. False advertising classes will now have to be certified under Rule 23(b)(3), with all of its procedural safeguards (predominance, superiority, notice, opt-out), rather than Rule 23(b)(2). This will make it more difficult and more expensive for plaintiffs to bring false advertising class actions.
While the true implications will not be known for years, one thing is for sure: potential false advertising class plaintiffs cannot continue “makin’ their way, the only way they know how” because, after Dukes, “that’s just a little bit more than the law will allow.”
For a more in-depth analysis of Wal-Mart v. Dukes, click here.
UPDATE (7/8/2011): On July 22, Arnold & Porter partner, Jamie Speyer, will be participating in an ABA teleconference on this decision. To find out more and RSVP, click here.