High Courts Ruling on Wal-Mart Case Could Impact Future of Class-Action Lawsuits

Businesses say they hope the U.S. Supreme Court’s eventual decision in the Wal-Mart gender discrimination case will provide much-needed guidance to courts considering massive class-action lawsuits.

Observers view the court’s agreement to even consider Wal-Mart Stores Inc. vs. Betty Dukes et al. as a strong indication that it is likely to overturn the 9th U.S. Circuit Court of Appeals’ ruling on the issue, which approved a class estimated at 1.5 million members. They note that the San Francisco-based court has a particularly high rate among federal appeals courts of having its decisions overturned by the Supreme Court.

How narrow or broad a ruling the court will make remains unknown. Oral arguments are expected in the spring, with a ruling expected during the summer.

The case involves allegations that Bentonville, Arkansas-based Wal-Mart paid female employees less than males in comparable positions despite females’ higher performance ratings and seniority. The six female employees who brought the lawsuit, initially filed in 2001, also allege that women waited longer for and received fewer in-store management positions than men.

The lawsuit seeks injunctive and declaratory relief, lost pay and punitive damages. If ultimately successful, observers estimate the lawsuit could cost Wal-Mart billions of dollars.

Although the case is said to be the largest workplace class-action lawsuit ever certified, observers noted that the Supreme Court’s decision is expected to apply to class-action lawsuits of any type, not just employment cases.

In 2007, a divided three-judge panel of the 9th Circuit upheld a lower court’s 2004 ruling that granted class-action status to women who work or have worked at any of Wal-Mart’s 3,400 stores at any time since 1998.

On April 26, an en banc 9th Circuit ruled 6-5 in agreeing with the three-judge panel in upholding on technical grounds most aspects of the district court’s ruling. It concluded that the proposed plaintiffs in the case had enough in common to create a class despite varying jobs the women held—ranging from part-time, entry-level employees to full-time, salaried managers—and the thousands of sites at which they worked.

The majority remanded the case to the district court to decide whether to certify a class with respect to punitive damages. It also remanded the issue of whether the class should include women who no longer work for Wal-Mart. Defense lawters complained, though, that the decision makes it very easy to obtain class certification.

In accepting the case for review, the Supreme Court agreed to consider one question proposed by Wal-Mart in the case, and asked for briefs on another. Both relate to federal rules of civil procedure as to when class actions can be formed and address highly technical issues as to whether members of the proposed class have enough in common.

An issue the court is expected to address also includes circumstances under which class actions can be certified when punitive damages are sought.

Business groups and defense attorneys said massive class actions put unfair pressure on businesses to settle because of the inordinate expense of defending such lawsuits, while advocates say such lawsuits are necessary to pursue justice for individuals who otherwise might not be able to recruit attorneys to represent them individually because of the relatively small sum each case likely would involve.

Mark Batten, a partner with law firm Proskauer Rose in Boston, said the court could decide to uphold the 9th Circuit decision, which he considers unlikely; it could reject the 9th Circuit’s decision and decertify the case, which would reflect the law “as we all understand it right now;” or the Supreme Court could go further and “tighten up the standards for class certification beyond what everyone sees as being the law.”

“This could be a seminal decision because it’s been several years since the Supreme Court has grappled” with the issue of class-action lawsuits, and this is an opportunity to provide lower courts with “much-needed guidance,” said Felix Shafir, a lawyer with Horvitz & Levy L.L.P. in Encino, California.

“The class-action system is way out of control and something needs to be done to rein it in,” said Richard Samp, chief counsel of the Washington Legal Foundation, which submitted an amicus brief supporting Wal-Mart in the case.

Observers say the eventual decision will not address the merits of the case. The “procedural mechanisms” for how class actions can be prosecuted will be at the decision’s heart, said Gerald Maatman Jr., a partner with law firm Seyfarth Shaw in Chicago.

Observers say if the Supreme Court rejects the 9th Circuit’s stance, it may end the case without its merits being adjudicated.

Filed by Judy Greenwald of Business Insurance, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.

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