Wal-Mart’s Million-Worker Bias Case May Mean ‘Rough Justice’ for Companies

More than 100 Wal-Mart Stores Inc. (WMT) workers paint a similar picture in sworn complaints about the company: Local managers made sexist decisions about promotions and pay, and top officials did nothing to stop them.

The U.S. Supreme Court is poised to consider whether those allegations warrant a class-action suit of unprecedented size, potentially on behalf of more than 1 million female Wal-Mart workers. At issue is whether the claims point to a companywide practice of alleged discrimination or instead amount to isolated anecdotes at a company with almost 1.4 million employees.

The case, set for argument March 29, marks the court’s first look in 12 years at the standards for certifying a class action. Worker advocates say a victory for Wal-Mart would crush efforts to force change at companies steeped in bias, while corporate groups say a ruling allowing the suit might unleash a wave of employment, antitrust and product-liability suits.

“It has a huge impact for large employers,” said Lisa Blatt, a Washington appellate lawyer at Arnold & Porter LLP who filed a brief supporting Wal-Mart for the company-backed Retail Litigation Center. “If you’re an employer with a million people, you’re subject to these nationwide, massive, sprawling lawsuits.”

Photographer: J.D. Pooley/Getty Images

By any measure, the suit against Wal-Mart is massive, threatening the country’s largest private employer with billions of dollars in damages. Close

By any measure, the suit against Wal-Mart is massive, threatening the country’s largest... Read More

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Photographer: J.D. Pooley/Getty Images

By any measure, the suit against Wal-Mart is massive, threatening the country’s largest private employer with billions of dollars in damages.

By any measure, the suit against Wal-Mart is massive, threatening the country’s largest private employer with billions of dollars in damages. Filed in 2001, the suit aims to cover every woman who worked at the retailer’s Wal-Mart and Sam’s Club’s stores at any point since December 1998, including those not hired until years after the suit was filed.

At Least A Million

In letting the suit go forward, a federal appeals court said the class would consist of 500,000 women, a number that included only current employees. In certifying the class in 2004, a trial judge said the group had more than 1.5 million members, including former employees. Both figures may be low given that Wal-Mart says it has employed 3 million women since the 2004 order.

“I have no doubt that the class would exceed a million,” said Brad Seligman, the lead lawyer for the women.

Wal-Mart says the size of the class is only part of the problem. At the time of the certification order, the company’s hourly employees worked in 53 departments and with 170 job classifications. The company had divided its retail operations into 41 regions, each with its own vice president, and had 3,400 stores, each with a manager who was afforded significant discretion in making pay and promotion decisions.

Photographer: Jin Lee/Bloomberg

Signage is displayed outside of a Wal-Mart store in Secaucus, New Jersey. Close

Signage is displayed outside of a Wal-Mart store in Secaucus, New Jersey.

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Photographer: Jin Lee/Bloomberg

Signage is displayed outside of a Wal-Mart store in Secaucus, New Jersey.

Sprawling Class

Allowing such a sprawling class would deprive the company of its right to contest the claims of each woman individually, says Theodore Boutrous, Wal-Mart’s lead lawyer.

“Class actions can be helpful for efficiency, and there’s an attraction to that. But at some point they can start chopping away rights,” he said.

More than 20 companies are supporting Wal-Mart at the high court, including Intel Corp. (INTC), Altria Group Inc. (MO), Bank of America Corp. (BAC), Microsoft Corp. (MSFT) and General Electric Co. (GE)

Wal-Mart contends in its appeal that the suit doesn’t adhere to the rules that govern class actions in federal court. Under those rules, claims must have common questions and the representative plaintiffs must be typical of the class as a whole.

Seligman says the claims of the Wal-Mart workers -- a group that includes six women seeking to serve as class representatives and more than 100 who filed sworn statements about their experiences -- meet that standard. The women tell stories about being leapfrogged by more junior male colleagues into management positions and about supervisors who quietly directed promotions to their male friends.

Gender Stereotypes

“They have a system that fosters the use of gender stereotypes at all levels of the company without safeguards to protect against that,” Seligman said. Many of the Wal-Mart workers don’t have enough money at stake to warrant pressing individual suits, he said.

A second issue in the case is potentially even more consequential, according to David Frederick, an appellate lawyer at Kellogg Huber Hansen Todd Evans & Figel PLLC in Washington.

The question is whether the workers must meet the standards that normally apply to class actions seeking damages or instead the looser requirements for plaintiffs seeking an injunction. The answer is in dispute in part because courts traditionally consider back pay to be an injunctive award.

‘Hugely Important’

A ruling for Wal-Mart on that issue would be “hugely important for lots of cases outside the employment context,” Frederick said. He said such a decision could endanger some consumer-fraud suits.

A federal trial judge certified a class of past and current employees, saying that “rough justice is better than the alternative of having no remedy at all for any class member.”

The San Francisco-based 9th U.S. Circuit Court of Appeals, on a 6-5 vote, upheld that ruling as to women who were working when the lawsuit was filed. The appeals court said the trial judge might be able to create an additional class for former employees.

Writing for the 9th Circuit majority, Judge Michael Daly Hawkins said that a class action was better than “clogging the federal courts” with individual suits. “Mere size does not render a case unmanageable,” Hawkins said.

In dissent, Judge Sandra Ikuta said, “Never before has such a low bar been set for certifying such a gargantuan class.”

The Supreme Court is scheduled to rule by the end of June in the case, Wal-Mart Stores v. Dukes, 10-277.

To contact the reporter on this story: Greg Stohr in Washington at gstohr@bloomberg.net.

To contact the editor responsible for this story: Mark Silva at msilva34@bloomberg.net.

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