Shirley “Rae” Ellis, et al v. Costco Wholesale Corp., No. 07-15838 (9th Cir. Sept. 2011), presents one of the first Court of Appeals’ efforts to apply the Supreme Court’s class action decision in Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541 (2011).  The international litigation practice rulings in the decision arise from the increased usage of “class” or “mass” claims in litigation and arbitration of international disputes (see for example our recent posting on the ICSID decision permitting such “mass” claims to be brought in the commercial context).

Costco involves class claims asserting discrimination based on gender in Costco’s promotions practice.  The Ninth Circuit affirmed in part but reversed in major part the District Court’s treatment of the class issues, principally:

First, the Ninth Circuit found that the District Court had not conducted the “rigorous analysis” required to determine whether there were common questions of law or fact among the class members’ claims.  The “rigorous analysis” standard is far older than Wal-Mart and requires a deep analysis of the actual merits of the proposed class claim.  If the District Court needs to determine disputed issues of fact in order to perform the rigorous analysis and in turn the commonality claim, then so be it.  As the Supreme Court said in Wal-Mart, “What matters to class certification is not the raising of common ‘questions’  . . . but the capacity to generate common answers apt to drive the resolution of the litigation.

Second, the Court of Appeals also ruled that, although Daubert’s standard of analysis was appropriate on a Daubert challenge (i.e., a challenge to the admissibility of proposed expert opinions, see Daubert v. Merrell Dow Pharms, Inc., 509 U.S. 579 (!993), the commonality determination required the District Court to go farther.

Third, the Ninth Circuit vacated the District Court’s findings as to “typicality” since the District Court failed to consider the “effect that defenses unique to the named Plaintiffs’ claims” would have on the typicality question. 

Fourth, based on Wal-Mart, the Court of Appeals ruled that “predominance” was not a relevant criteria in assessing whether a Rule 23(b)(2) (injunction) class could be certified.  That is, the class could not seek damages as merely incidental to an injunction.  Post-Wal-Mart, “predominance” was no longer the test for determining whether monetary damages may be included in a 23(b)(2) class action” rather, “the relevant inquiry is what procedural safeguards are required by the Due Process Clause for the type of relief sought”.