Dec. 6 (Bloomberg) -- The U.S. Supreme Court, heeding calls from companies to consider curbing class actions, agreed to decide whether Wal-Mart Stores Inc. must face a gender-bias suit on behalf of potentially 1 million of its workers.
The justices today said they will review a federal appeals court decision that approved a single suit to cover women who worked at the retailer’s 4,400 Wal-Mart and Sam’s Club stores since 2001. Wal-Mart, facing billions of dollars in potential liability, contends the lower court made it too easy for workers with different job histories to band together in a single case.
A decision throwing out the suit, the largest-ever U.S. employment class action, might affect several pending cases. A suit on behalf of more than 700 women against Costco Wholesale Corp. is on hold until the Supreme Court resolves the Wal-Mart case. Tobacco companies including Altria Group Inc. say the Wal-Mart case may affect their challenge to a Louisiana court order requiring them to spend more than $270 million on a smoking cessation program.
The lower court ruling “would dramatically broaden the circumstances where classes can be certified in all types of cases against all types of companies,” Wal-Mart’s lawyer, Theodore Boutrous, said in an interview.
Wal-Mart faults the lower courts for allowing a type of class action generally used when plaintiffs are seeking an injunction, rather than damages.
No Damage Estimate
Wal-Mart hasn’t set funds aside to pay any damages in the case, according to a regulatory filing released in September, and said it can’t estimate what the amount would be. The company, the world’s largest retailer and the largest U.S. private employer, had $15 billion in profit and more than $400 billion in sales over the past 12 months.
The Bentonville, Arkansas-based company fell 13 cents to $54.49 at 4 p.m. in trading on the New York Stock Exchange.
Wal-Mart is accused in the nine-year-old suit of paying women less than men for the same jobs and giving female workers fewer promotions. Six women are seeking to serve as class representatives, including Betty Dukes, a Wal-Mart greeter in Pittsburg, California.
Too Much Discretion
The women say that at the time the suit was filed Wal-Mart’s corporate policies gave local managers too much discretion over hiring and pay decisions. The result was a “tap on the shoulder” system that let managers steer opportunities toward their male colleagues, said Joseph Sellers, who represents the women.
“There’s a large body of social science research that shows, when left to their own devices, people tend to pick people like themselves,” Sellers said in an interview.
Wal-Mart says that any problems were isolated ones and that the claims of women around the country would be too varied to proceed fairly as part of a single case. The workers in the class come from 41 regions and 400 districts and carry 170 different job classifications, the company said in its appeal.
Wal-Mart says the case would be so unwieldy it would violate the procedural rules that govern civil cases in federal court and the Constitution. The company argues that it should have a chance to defend against the allegations on a case-by-case basis.
1.5 Million Workers
A federal trial judge certified a class of as many as 1.5 million 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.”
Nineteen companies, including Bank of America Corp. and Microsoft Corp., urged the justices to take up the Wal-Mart appeal. They said the lower court opinion makes it too easy for workers challenging employment practices to secure class-action status and then extract large settlements.
One of the companies, DuPont Co., said it weighed in “to reinforce the important role that corporate policies and guidelines play in creating a workplace that embraces diversity at all levels.” DuPont’s chief executive officer, Ellen Kullman, is the first woman to hold that role in the company’s 208-year history.
Wal-Mart said in a statement it was pleased the Supreme Court granted review. “The current confusion in class-action law is harmful for everyone - employers, employees, businesses of all types and sizes and the civil justice system,” the company said.
Sellers said the plaintiffs welcomed review. “We are confident that the decision to certify the class was sound,” he said in a statement.
The justices will hear arguments early next year, most likely in March or April, and probably rule by July. The case “likely will be the most important business case this term,” said Carter Phillips, a Washington lawyer who filed a brief backing Wal-Mart on behalf of DRI, a defense-attorney group.
‘Might Be Huge’
“If the court were to affirm, it would be an enormous decision,” Phillips said. “If it reverses, then it might be huge or it might be relatively limited.”
One issue in the case is a technical one involving the rules that govern lawsuits in federal court. The trial judge certified the class action under Rule 23(b)(2) of the Federal Rules of Civil Procedure. Classes certified under that provision are mandatory, meaning potential plaintiffs can’t opt out of the case or file their own suit.
Wal-Mart says workers should have had to meet the stricter standards that normally apply to class actions seeking damages.
The justices also suggested they would consider broader issues, telling the two sides to discuss the prerequisites for any type of class action. Those include the requirements that the class members’ claims raise common questions and that the representative plaintiffs can adequately protect the interests of the other class members.
The case is Wal-Mart Stores v. Dukes, 10-277.
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