Wal-Mart Class-Action Ruling Gives Employers Shield From High-Dollar Suits

The U.S. Supreme Court gave the country’s largest companies a new shield from multibillion- dollar lawsuits, as the justices rejected a bid to sue Wal-Mart Stores Inc. (WMT) on behalf of more than a million female workers.

The ruling limits the ability of plaintiffs’ lawyers to win large awards through a single lawsuit, particularly against employers. It’s the second such step this year from the court, which in April said companies can channel customer and employee grievances into arbitration without the possibility of class actions.

The latest decision will have its most direct effect on job-bias cases. Five of the court’s nine justices said class- action status is incompatible with a nationwide suit alleging local store managers had too much discretion over hiring and promotion.

The ruling makes pursuit of discrimination class actions “very difficult,” said David Sanford, a Washington lawyer who won a $175 million settlement in a gender-bias suit against Novartis AG. “It hasn’t closed the door, but it’s made the challenge much harder.”

Units of Cigna Corp. (CI), Goldman Sachs Group Inc. (GS), Bayer AG (BAYN), Toshiba Corp. (6502), Publicis Group SA, Deere & Co. (DE) and Costco Wholesale Corp. (COST) all face gender discrimination complaints that seek class-action status. Sanford’s firm is pressing several of those cases, including the suits against Cigna and Bayer.

Filed in 2001, the suit aimed 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. Photo: Tim Boyle/Getty Images Close

Filed in 2001, the suit aimed to cover every woman who worked at the retailer’s... Read More

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Filed in 2001, the suit aimed 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. Photo: Tim Boyle/Getty Images

Appeals Court Ruling

(For a related story on the Supreme Court ruling's impact on class action litigation, click here. For a story on how the decision may affect company bias policies, click here. And for a related story on how the plaintiffs in the Wal-Mart case plan on pursuing their claims, click here.)

The high court was unanimous in overturning a federal appeals court ruling that approved the class action. All nine justices said the lower court was wrong to apply the relatively loose rules that apply when plaintiffs seek an end to bias, rather than the more stringent standards that govern class actions seeking damages.

Five justices went further and threw out the class-action bid altogether. Writing for that majority, Justice Antonin Scalia said plaintiffs’ lawyers failed to identify a common corporate policy that affected workers at thousands of Wal-Mart and Sam’s Club stores across the country. He pointed to an earlier Supreme Court decision requiring workers to show a “specific employment practice” that produced the discrimination.

The workers “have identified no ‘specific employment practice’ -- much less one that ties all their 1.5 million claims together,” Scalia wrote. “Merely showing that Wal- Mart’s policy of discretion has produced an overall sex-based disparity does not suffice.”

‘Baseless’ Claim

The ruling “made clear that the theory that the plaintiffs’ lawyers in this case have pursued in this case all along is baseless,” said Wal-Mart’s lead lawyer, Theodore Boutrous of Gibson Dunn & Crutcher LLP in Los Angeles.

The women’s lawyers said they would seek to move ahead with claims on behalf of aggrieved workers, either as individuals or as part of smaller groups.

“This case is not over,” said Brad Seligman, one of the two lead attorneys for the workers. “Wal-Mart is not off the hook. There are thousands of claims of discrimination that remain to be filed.”

Women’s and civil rights organization called the ruling a major setback for workers seeking to enforce anti-discrimination laws. National Women’s Law Center co-president Marcia Greenberger said the ruling is a “devastating decision undoing the rights of millions of women across the country to come together and hold their employers accountable for their discriminatory practices.”

2007 Ruling

The comments echoed the criticism that greeted a 2007 Supreme Court ruling that curbed lawsuits by workers claiming they were underpaid because of discrimination that occurred years earlier. President Barack Obama later signed legislation overturning that decision.

Some Democrats, including House Minority Leader Nancy Pelosi of California, called on Congress to similarly address yesterday’s decision. Pelosi said lawmakers should act “boldly and strongly.” The ruling “sets back the cause of equality for women and for all Americans in the workplace and in our society,” she said in a statement.

Reaction was muted in the Obama administration, which opted not to take a position in the Supreme Court case. Jay Carney, the White House spokesman, said administration lawyers would study the case to determine its impact.

Every Woman

Filed in 2001, the suit aimed 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.

The women pressing the suit claimed they and colleagues across the country were victimized by Wal-Mart’s practice of letting local managers make subjective decisions about pay and promotions. More than 100 Wal-Mart employees filed sworn statements saying they were paid less and given fewer opportunities for promotion than male colleagues.

The ruling “is a big win for very large companies,” said the lawyer who argued the case for the workers, Joseph Sellers of Cohen Milstein Sellers & Toll PLLC. The message from the court is that “there are companies that are too big to be held accountable in a single forum for these kinds of practices.”

Boutrous, the Wal-Mart lawyer, said the latest ruling gave companies an appropriate level of legal protection at a time when most companies have nondiscrimination policies and are eager to see women and racial minorities advance.

“The plaintiffs’ lawyers have been relying on outdated theories of discrimination law here that focused on the situation 30, 40 years ago, when there were still expressly discriminatory policies in society,” he said. “We’re far beyond that now.”

The case is 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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