Hunton Employment & Labor Perspectives

The Ninth Circuit did an about-face last week by reversing its earlier decision in Sepulveda v. Wal-Mart and nixing the proposed class action.  The decision is further evidence of the post-Dukes difficulty plaintiffs face when attempting to certify Rule 23(b)(2) classes seeking monetary relief.

In 2004, plaintiffs in Sepulveda filed suit against Wal-Mart alleging that the company had misclassified its assistant managers as “exempt” under California wage and hour law.  The plaintiffs moved for class certification under Federal Rule of Civil Procedure 23(b)(2), which was denied by the district court on the grounds that Rule 23(b)(2) class treatment was inappropriate because (i) monetary relief was not incidental to injunctive relief and (ii) the duties of the proposed class members were not “susceptible to collective proof.”

In 2008, the Ninth Circuit reversed the denial of Rule 23(b)(2) class certification.  Wal-Mart moved for a re-hearing, which was stayed pending the Supreme Court’s decision in Wal-Mart Stores, Inc.  v. Dukes, et al., which was handed down last June.

Following Dukes, the Ninth Circuit reversed its earlier decision in Sepulveda and affirmed the district court’s denial of class certification.  In doing so, the Sepulveda court recognized that Dukes created two major hurdles for certifications of Rule 23(b)(2) classes.  First, in Dukes, the Supreme Court adopted the “not incidental” test, which forbids Rule 23(b)(2) certification where “monetary relief is not incidental to the injunctive or declaratory relief.”  Second, the Dukes Court held that Rule 23(b)(2) “does not authorize class certification when each class member would be entitled to an individualized award of monetary damages.”

The Sepulveda court thus found that class treatment was inappropriate for two central reasons.  First, fewer than half of the putative class members were currently employed by Wal-Mart and, thus, a majority of the class members could not benefit from injunctive relief.  Second, the damages calculation required a highly individualized proof of each plaintiff’s duties and hours.  Taking this together, the Ninth Circuit held that it was not an abuse of discretion for the district court to find that “the monetary relief sought was not incidental to the injunctive relief sought.”

In sum, the Sepulveda decision highlights the post-Dukes difficulty that plaintiffs will have certifying class actions pursuant to Rule 23(b)(2), especially with regard to employment cases which often have class members seeking individualized monetary damages.