One Case Against Wal-Mart

In a case with wide-ranging implications, the jury rules for a pharmacist who claimed gender discrimination and defamation. Wal-Mart says it will appeal

On June 19, Cynthia Haddad and her husband, Bill, walked across Wendell Avenue from the Berkshire Superior Court to the public library in Pittsfield, Mass., to talk. There they waited as a jury in the Park Square courthouse deliberated over the lawsuit Haddad had filed against her former employer Wal-Mart Stores (WMT) for gender discrimination and defamation. As they exited the library hand-in-hand, the sun shone, filling Haddad with an impending sense of closure. "It was the first day of the rest of our lives no matter what the verdict," says the 45-year-old mother of four. "My story was told and I did the fight. My life would go on after that."

Shortly thereafter, Haddad was in tears. The jury awarded her nearly $2 million in punitive and compensatory damages. "It vindicated me," says Haddad. "It started to bring life back into me. Someone listened."

Under Fire

The dispute was over why Haddad had been dismissed by Wal-Mart, after more than 10 years as a pharmacist with the company. Haddad believed she was fired from the Pittsfield store in retaliation for her complaints about being paid less than male pharmacy managers and about the disappearance of controlled drugs from the pharmacy. Wal-Mart contended that Haddad was dismissed for violating company policies and failing to secure the pharmacy. The company also argued that Haddad wasn't entitled to the same pay as the other pharmacy managers, who were in fact male, because she wasn't actually a manager.

Wal-Mart is likely to appeal, and the verdict may be overturned. Spokesman John Simley says the company stands by its decision to terminate Haddad based on violations of company policy and by its contention that Haddad's sex played no role in her treatment. "The facts in this case indicate that Ms. Haddad's termination had absolutely nothing to do with her gender," says Simley. He declined to go into specifics.

Of course, even if Wal-Mart loses, $2 million is barely a blip on the radar for a company that took in more than $355 billion in revenues in its most recent fiscal year. Still, Haddad's victory comes at a difficult time for Wal-Mart, with the company struggling to defend its reputation on a number of fronts. Wal-Mart has come under fire for the wages and benefits that it provides workers and for its impact on small, local retailers. Investors have been unhappy with its stagnant stock (see, 4/30/07, "Wal-Mart's Midlife Crisis"). And it's become a favorite target among the Democratic Presidential candidates, including Barack Obama and John Edwards (see, 11/16/06, "Can Barack Wake Up Wal-Mart").

Potential Impact

Haddad's success may also have ramifications beyond her particular case. Wal-Mart is facing a separate lawsuit, a massive class action over gender discrimination, and one of the lead attorneys in that case says that Haddad's victory may give him the opportunity to broaden his case. The case, Dukes v. Wal-Mart Stores, charges the company with a pattern of gender discrimination in promotion, pay, training, and job assignment on behalf of 1.5 million to 2 million women who have worked at Wal-Mart's retail stores and wholesale clubs since 1998. Joseph Sellers, co-lead counsel for the case, says he may now look at whether to expand the case to include female pharmacists, who are not currently part of the class action. "This case might reflect the tip of the iceberg," he says.

In addition to the Dukes class action, there are more than 75 legal proceedings pending against the company, according to filings with the Securities & Exchange Commission. The majority pertain to complaints about wages and off-the-clock work.

Haddad is an example of how one employee, backed by a team of dogged attorneys, pulled out a legal victory against the giant retailer. She benefited from having a long track record at the company, complete with strong employee evaluations over many years. Even more important, her lawyers, Richard Fradette and David Belfort, were able to track down key witnesses who could put Haddad's treatment in context, especially male pharmacists who formerly or currently worked at Wal-Mart and who had faced markedly different treatment.

When Haddad started working at Wal-Mart in 1993, it was the realization of a life-long dream. She had wanted to become a pharmacist ever since she had developed a crush in the eighth grade on one of the pharmacists in her hometown. She worked for the company on quite good terms for the next 10 years.

Pizza and Popsicles

But in 2003, Haddad complained about not receiving the same level of bonuses and pay as other pharmacy managers, who were male. She says she had agreed to serve as a pharmacy manager on a temporary basis, but ended up staying in the position for 13 months. Haddad eventually received her bonuses in two installments. Wal-Mart says that because Haddad was not officially a pharmacy manager, she was not entitled to the extra $1 per hour that such managers receive.

It was in April, 2004, that Haddad was terminated and escorted from her Wal-Mart store. According to trial materials, Haddad was dismissed for "failure to secure the pharmacy, leaving a technician alone in the pharmacy." Haddad says the statement refers to a technician's theft of a medicine for treating ulcers, called Prevacid, that took place while she was on duty 18 months before.

Haddad was devastated by the circumstances of her firing. She felt that being accused of involvement with drug theft would damage her reputation as a pharmacist and hurt her ability to get another job. She says that she refused to leave her house alone for six months. The accusation is the key reason she charged Wal-Mart with defamation. "It destroyed a lot of relationships," Haddad says. "You know how you say 'pizza' in the beginning and it comes out 'popsicles'? That's what happened to me."

Expert Testimony

In June of this year, Haddad got her day in court. To counter Wal-Mart's claim that Haddad was fired for failing to secure the pharmacy, attorneys Belfort and Fradette had tracked down male pharmacists from the store who had also been on duty when thefts occurred. Pharmacist Richard Blackbird, who replaced Haddad as pharmacy manager and has since left Wal-Mart, said he was never disciplined for a technician's theft of Vicodin that took place under his watch. He also said the technician left voluntarily rather than being fired.

In a sworn affidavit, Blackbird blamed thefts in the pharmacy on instability caused by the high turnover of district managers, "a circumstance that contributed to creating an environment that enabled the pharmacy technicians to steal and forge prescriptions."

To bolster their case, Haddad's attorneys called Harold Sparr, a pharmacist for 52 years and former president of the Massachusetts Board of Registration in Pharmacy, to testify. "This is not unusual for this to happen," Sparr tells BusinessWeek about drug thefts at pharmacies. "Massachusetts regulation allows the technician to remain in the pharmacy when the pharmacist is gone. Any technician, I don't care where it is in the country, can steal medicine if their incentive is to do that."

Julie Moore, a human resources expert who studied Wal-Mart's Pharmacy Operations Manual, testified that the company failed to communicate and enforce its policies equally or update employees on policy changes.

Fradette and Belfort also called in economics and psychology experts and pointed to Haddad's performance evaluations, in which several supervisors praised her as "a huge asset to the department" and "a very reliable pharmacist" who has "done a great job keeping the department together," according to trial exhibits.

Breaking the Chain

Wal-Mart, in its response, took issue with a number of the claims by Haddad's lawyers. The company, in court filings, denied that Haddad received "excellent reviews throughout her employment." It also denied that the termination had anything to do with Haddad's complaints, and stuck to its contention that Haddad was terminated for violating company policy by leaving a technician alone in the pharmacy.

"We are an equal opportunity employer," says Simley. "We have strict policies against discrimination. We promote diversity at all ranks and at every level."

If the ruling stands, Haddad will be entitled to $1 million in punitive damages, $95,000 in back pay, $733,307 in front pay, and $125,000 for emotional distress. The jury found Wal-Mart guilty of defamation, but did not award Haddad any money for that charge. Separately, her attorneys plan to seek legal fees from Wal-Mart.

Haddad says she brought the case to clear her name, rather than for the money. "The hard part is I have four children and each one of them has children in their class whose parents are pharmacists," says Haddad. "Now I'm just getting phone calls from people who haven't spoken to me."

Haddad, whose husband is also a pharmacist, now works at the independent Lenox Village Integrative Pharmacy in Lenox, Mass. "Kind of leery of chains," she explains with a smile.

Click here to see a slide show about the trial.

Before it's here, it's on the Bloomberg Terminal.