Wal-Mart Faces the Big Box of Bias Suits

Aspiring attorneys learn early in law school that a civil suit pits a plaintiff claiming injury against a defendant alleged to have caused a specific harm. It sounds simple. In the real world, litigation can get a lot more complicated. That's evident in the mammoth gender discrimination suit filed against Wal-Mart Stores (WMT) by women who claim that local store managers made sexist decisions about promotions and pay and that company executives failed to stop them. Rather than just seeking redress for their individual claims, six plaintiffs have won in federal courts the right to press their suit as a class action representing what could swell to 1 million female employees of the nation's largest private employer. Many of the women included in the class aren't active participants in the legal action and have voiced no claims of wrongdoing.

Now, in an appeal filed by Wal-Mart and heralded as the most important corporate case in years, the Supreme Court is poised to consider whether the class action has gotten out of control. The dispute, set for oral argument on Mar. 29 and a decision by early summer, marks the court's first look in a dozen years at the standards that plaintiffs must meet to mount a class action. With a million potential plaintiffs, this is litigation on an industrial scale. Invoking a familiar justification for class actions, plaintiffs' lawyers say many of the workers don't have enough money to gain to warrant pressing individual suits. Wal-Mart, which denies wrongdoing, counters that the accusations are too numerous and too diverse to be tried en masse. A class action defeat could cost it billions of dollars.

More than 20 U.S. companies have filed court papers in support of the big retailer's position. They include Altria (MC), Bank of America (BAC), Intel (INTC), General Electric (GE), and Microsoft (MSFT). Business groups say allowing the suit might unleash a wave of employment, antitrust, and product-liability suits. "Employment cases are just the tip of the iceberg," the U.S. Chamber of Commerce argues in a court filing. Employee advocates say a victory for Wal-Mart would crush efforts to force change at companies tainted by bias and other bad practices.

A federal trial judge in San Francisco let the class action against Wal-Mart go forward in 2004. "Rough justice is better than the alternative of having no remedy at all for any class member," wrote U.S. District Judge Martin Jenkins then. The Ninth Circuit U.S. Court of Appeals last year substantially upheld that decision, clearing the way for a suit covering women who were working for Wal-Mart from 2001 through at least 2004. The appellate court emphasized that a class action would be better than "clogging the federal courts" with separate suits. "Mere size does not render a case unmanageable," wrote appellate Judge Michael Daly Hawkins.

Filed in 2001, the suit aimed to cover women who have worked at the retailer's Wal-Mart and Sam's Club stores at any point since 1998. The Ninth Circuit limited the class to what the majority of the appellate judges estimated would be 500,000 current employees. Lawyers for the women want to add workers who were hired after the 2004 district court ruling. "I have no doubt that the class would exceed a million," says Brad Seligman, the lead plaintiffs' lawyer.

Wal-Mart says the sheer size of the class is only part of the problem. At the time Jenkins approved the mass legal action, the company's hourly employees worked in 53 departments and were divided into 170 job classifications. The company operated in 41 regions, each with its own vice-president, and had 3,400 stores. Managers of each outlet exercise wide discretion in making pay and promotion decisions.

Allowing such a sprawling class would prevent Wal-Mart from contesting the claims of each woman individually, argues its lead outside lawyer, Theodore Boutrous, of Gibson, Dunn & Crutcher. "Class actions can be helpful for efficiency, and there's an attraction to that. But at some point they can start chopping away rights."

The case centers on the federal rules requiring that class claims raise common questions and that representative plaintiffs be "typical" of the larger group. Seligman maintains that the Wal-Mart workers—a group that includes the six women seeking to serve as class representatives and more than 100 who have filed sworn statements—have encountered similar workplace problems. His clients describe being leapfrogged by more junior male colleagues and watching as supervisors promoted male friends. The lead plaintiff, Betty Dukes, says she tried for a decade to move into management after being hired to work in Wal-Mart's Pittsburg (Calif.) store in 1994. Dukes, 61, now works as a greeter. Another plaintiff, Chris Kwapnoski, says she asked a supervisor at the Sam's Club in Concord, Calif., what was holding her back from promotion. She recalls getting a curt reply: "Blow the cobwebs off your makeup and doll up."

Wal-Mart officials say that, with almost 1.4 million employees, some of them—including supervisors—are going to err. "Is everyone perfect? No," said Gisel Ruiz, Wal-Mart's executive vice-president of people. "We have members of our team that make poor decisions and when they make poor decisions, they're faced with consequences."

Wal-Mart and its corporate allies are aiming to stem what they say is a growing number of suits seeking class action status in both state and federal court. Hundreds of would-be class actions are under way claiming to represent such divergent groups as victims of improper foreclosure practices and baseball fans miffed at not receiving prorated cable bills for games missed during last year's World Series. Plaintiffs' lawyers counter that judges already reject all but a small fraction of those bids, and a Supreme Court win for Wal-Mart would likely further that trend.

The bottom line: A Supreme Court review of a massive gender discrimination suit against Wal-Mart could usher in new rules regarding class actions.

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