Anna Segobia Masters, Esq., Partner Winston & Strawn LLP North America. Asia. Europe Phyllis W. Cheng, Esq., Director Department of Fair Employment & Housing State of California June 29, © Copyright DFEH. All Rights Reserved. Winston & Strawn LLP © Thomson Reuters. All rights reserved. 1

Phyllis W. Cheng, Esq., Director Department of Fair Employment & Housing Anna Segobia Masters, Esq., Partner Winston & Strawn LLP 2

 Overview of Wal-Mart v. Dukes.  Legal Standard for and Types of Class Action in Federal Court.  Evidence Used to Establish Class. (FRCP Rule 23(a).)  Backpay Considerations. (FRCP Rule 23(b).)  Issues Decided: Majority, Concurrence & Dissents.  Considerations for Future Litigation.  Anatomy of a successful California class action.  Long-Term Implications. 3

 In Wal-Mart v. Dukes, __ 564 U.S. __ (June 20, 2011, No ), authored by Justice Scalia, the U.S. Supreme Court set aside the class certification of the nation’s largest class action suit, because: 1. Employees failed to show a particular pattern of policy or practice of discrimination that meets the commonality requirement for class actions. 2. Employer was entitled to individual proceedings on each backpay claim. 4

 Largest private employer operating four types of retail stores with 3,400 locations and employing more than 1 million workers.  Pay and promotion at discretion of local managers.  Subjective decision-making by local managers. 5

 Three current and former employees.  Represented 1.5 class members.  Claimed sex discrimination with regard to pay and promotions in violation of Title VII. 6

 Did not allege express corporate policy against women.  Alleged local managers’ discretion over pay and promotions favored men.  Relied on anecdotal information and experts’ statistical analyses to gauge corporate culture. 7

 Legal standard under FRCP Rule 23(a): 1. Numerosity; 2. Commonality; 3. Typicality; and 4. Adequacy. 8

 Legal standard under FRCP Rule 23(b): 1. (b)(1) – Incompatible Standards/Unitary Decisions; 2. (b)(2) – Injunctive Relief Class Actions; or 3. (b)(3) – Damages Class Actions. 9

 Three forms of proof: 1. Statistical evidence about pay and promotion disparities between men and women at the company; 2. Anecdotal reports of discrimination from about 120 of Wal-Mart’s female employees; and 3. Testimony of a sociologist, Dr. William Bielby, who conducted a “social framework analysis” of Wal-Mart’s “culture” and personnel practices. 10

 Claims for monetary relief may not be certified under Rule23(b)(2), at least where the monetary relief is not incidental to the requested injunctive or declaratory relief.  Claims for individualized relief, like backpay, are excluded.  Rule 23(b)(2) applies only when a single, indivisible remedy would provide relief to each class member.  Wal-Mart is entitled to individualized determinations of each employee’s eligibility for backpay. 11

 Judge Kozinski: Class had little in common “but their sex and this lawsuit.”  Judge Ikuto: Information “ about disparities at the regional and national level does not establish the existence of disparities at individual stores, let alone raise the inference that a company-wide policy of discrimination is implemented by discretionary decisions at the store and district level.” 12

 Concurrence and dissent by Justice Ginsburg:  Agreed with majority that the class should not have been certified under Federal Rule of Civil Procedure 23(b)(2).  Disagreed that plaintiffs produced insufficient commonality to form class under Rule 23(a)(2) 13

 All 9 justices agreed suit improper for class action in seeking backpay under Rule 23(b)(2).  Majority of 5 justices held plaintiffs did not have enough commonality to form class due to lack of commonality. Minority would have found sufficient commonality.  Did not decide whether company discriminated against female employees. 14

 Heightened focus on size and geographic scope of class.  Heightened focus on ratio of actual evidence presented at certification stage vs. scope of alleged wrongdoing.  Dukes had 1 declaration for every 12,500 class members and related to 235 of 3400 stores.  Teamsters had 1 declaration for every 8 class members.  Understand different requirements and purposes under FRCP 23(b)(2) or 23(b)(3).  If individual damages sought, cannot rely on 23(b)(2).  Court was hostile to concept of class members waiving individualized damages in order to bring 23(b)(2) claim. 15

 Heightened scrutiny of experts.  In discrimination cases, the merits will need to be developed to establish “the glue” that patches together the class issues.  Smaller and regional class claims more likely to survive  Plaintiffs need to investigate sources of commonality early on:  Common Decision makers  Common Policies  Common Practices  Other common factors resulting in disparate treatment or impact 16

 Be prepared with a trial plan that will demonstrate manageability of the class.  Focus on manageability and due process issues.  Evaluate whether incorrect results could occur with sample cases or litigating too large a class with so many inherent individual issues, particularly in (b)(2) cases. 17

 Dept. Fair Employ. & Hous. v. Verizon Services Corp. (L.A. Super. Ct., Case No. B444066), $6,011,190 on CFRA class action settlement.  Case Grading Method.  Thorough investigation by Special Investigations Unit of a dozen complaints and nearly 100 potential claimants over two years.  Ensure case met elements of Cal. Gov. Code section for class/group action.  Ensure claimants met Cal. Code Civ. Proc. section 382 elements: 1.Common or general interest; 2.Of many persons; and 3.Substantial benefits to litigants and courts. 18

 Fewer class actions in federal court; more class actions in state court.  Fewer national class actions; more regional or local class actions.  Large employers more secure; mid-sized employers more vulnerable.  Decentralized management structures and decisionmaking more preferred; centralized management structures less desirable.  Impact of AT&T Mobility LLC v. Concepcion, __ 563 U. S. __ (Nov. 9, 2010, No. 09–893), allowing mandatory arbitration clauses on class action. 19

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Anna Segobia Masters, Esq., Partner Winston & Strawn Phyllis W. Cheng, Esq., Director Department of Fair Employment & Housing 21