Supreme Court Takes On Massive Wal-Mart Discrimination CaseHoward Erichson in Forbes, December 06, 2010
The U.S. Supreme Court has agreed to hear Wal-Mart’s appeal of a multibillion-dollar case that tests the limits of lawyers to bundle millions of employees into a single class action over alleged discrimination.
The court this morning granted certiorari to Dukes v. Wal-Mart, in which lawyers representing female employees of the discount chain allege women were denied management positions and pay because of their sex.
The court’s decision is surprising since other than its massive size, the Dukes case looks like a typical employment case in which dueling teams of experts will use statistics to try and prove whether women were discriminated against. But Wal-Mart is the nation’s largest employer and has the support of the retail industry and other large employers. They argue class actions of this size – formed under Rule 23(b) of the federal rules of civil procedure — are inherently unmanageable and coercive.
“The larger question is whether a class action of this size and complexity is appropriate for rule 23(b) at all,” said Thomas Dewey of Dewey Pegno & Kramarsky in New York, a litigator who has handled large employment cases and class actions.
Wal-Mart argues the Ninth Circuit in California approved the class using a federal law that doesn’t allow for compensatory damages, yet permitted the lawyers to seek damages anyway. Plaintiff lawyers argue back pay isn’t compensatory and that the prime goal of the case is to obtain an injunction ordering Wal-Mart to change its practices. It doesn’t help their cause that the Ninth Circuit is the most-overturned court in the country, frequently accused of pushing the boundaries of tort law.
Companies argue that with the stakes literally in the billions of dollars, they cannot afford to take such a class action to trial and must settle with the attorneys, regardless of the merits of the case. But that cuts both ways, since if class certification is denied most of the plaintiffs would have claims too small to bother hiring a lawyer over.
“It’s not fair to say the reason class certification is important is simply because it coerces defendants into settlement,” said Howard Erichson, a professor of civil procedure and legal ethics at Fordham University Law School. “The ones with the true gun to their head are the plaintiffs.”
The Ninth Circuit opinion was narrowly decided on a 6-5 vote and conflicted with the law of several other circuits, setting up the sort of tension the Supreme Court likes to step in and resolve. Erichson said the court will be forced to decide the circumstances under which courts can use class actions formed under a rule designed to allow large numbers of plaintiffs to obtain injunctive relief, or court-ordered changes in the way an organization operates.
Injunctive class actions are easier to form and don’t include the elaborate opt-out and notice provisions designed to make sure all plaintiffs have a chance to either participate in the case or roll the dice on their own. In the Wal-Mart case, all female employees are included and the lawyers are seeking back pay, a form of compensation that some courts might find precluded them from ever suing for money again.
The high court is likely to hear arguments next spring, with a decision expected by July.
There are six named plaintiffs in the case. They contend that Wal-Mart was aware that it lagged behind other employers in terms of opportunities for women and that Wal-Mart imposes uniform rules and tight controls over its stores.
The company says the plaintiffs experts can prove a common pattern of discrimination since pay and promotion decisions are made on a store-by-store basis.
Ninth Circuit Judge Alex Kozinski, in a dissent, said:
Maybe there’d be no difference between 500 employees and 500,000 employees if they all had similar jobs, worked at the same half-billion square foot store and were supervised by the same managers. But the half-million members of the majority’s approved class held a multitude of jobs, at different levels of Wal-Mart’s hierarchy, for variable lengths of time, in 3,400 stores, sprinkled across 50 states, with a kaleidoscope of supervisors (male and female), subject to a variety of regional policies that all differed depending on each class member’s job, location and period of employment.
Dewey said the Ninth Circuit allowed the plaintiff lawyers to sidestep a number of onerous provisions of class action law by certifying the class under a provision providing for injunctive relief. Under federal employment law, Wal-Mart otherwise would have had the right to offer affirmative defenses against discrimination for each of the plaintiffs.
“The employer here is saying `How can we possibly do that when there are more than a million people?’” he said.
The Supreme Court also agreed to decide whether the case should be allowed to proceed under Rule 23 at all. Defendants argue it is a denial of their due-process rights under the constitution. Justice Antonin Scalia recently stayed a $270 million verdict in a Louisiana class action purportedly on behalf of smokers in that state, also voicing due-process concerns.