9th Circuit Uses Wal-Mart Decision to Deny Class in Costco Case

September 26, 2011 (PLANSPONSOR.com) – The 9th U.S. Circuit Court of Appeals has overturned a lower court’s certification of a class of employees in a lawsuit alleging Costco is discriminatory in its promotion practices and general corporate culture.

In light of the U.S. Supreme Court’s rejection of the “predominance” test in Wal-Mart v. Dukes (see High Court Says Giant Wal-Mart Class Action Cannot Move Forward), the district court must consider whether the claims for various forms of monetary relief will require individual determinations and are therefore only appropriate for a Rule 23(b)(3) class, the opinion said.  

Because at least one named plaintiff alleges a concrete injury that is both directly traceable to Costco’s allegedly discriminatory practices and is redressable by both injunctive relief and monetary damages, the appellate court affirmed the district court’s ruling on standing. However, the court vacated and remanded the district court’s ruling as to “commonality” under Rule 23(a) of the Federal Rules of Civil Procedure.  

According to the opinion, the district court failed to conduct the required “rigorous analysis” to determine whether there were common questions of law or fact among the class members’ claims. Instead it relied on the admissibility of plaintiffs’ evidence to reach its conclusion on commonality.   

The appellate court also vacated the district court’s ruling as to “typicality” under Rule 23(a), because the district court failed to consider the effect that defenses unique to the named plaintiffs’ claims have on that question.  

The 9th Circuit affirmed the district court’s ruling that plaintiff Elaine Sasaki, the one who alleged a concrete injury, is an adequate class representative under Rule 23(a). As a current employee who continues to be denied promotion, Sasaki has incentive to vigorously pursue injunctive relief as well as monetary damages on behalf of all the class members. However, it vacated the district court’s finding that the two others who brought suit could adequately represent the class, because they were former employees and had no incentive to pursue injunctive relief.   

The court vacated the district court’s certification of the class under Rule 23(b)(2).  

The opinion is here.