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Wal-Mart Ruling to Reverberate in Other Employee Class-Action Suits

Source: WSJ - Jess Bravin, Ann Zimmerman

Posted on 21 Jun 2011

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The decision by the Supreme Court to throw out a sweeping sex-discrimination lawsuit against Wal-Mart Stores Inc. is sure to reverberate in other employment class actions, with lower courts scrutinizing more carefully the factors that constitute a class for the purpose of bringing mass claims.

The case split the court 5-4 along its ideological divide, with Justice Antonin Scalia's majority opinion concluding the allegations against Wal-Mart were too vague and the evidence too weak to establish the common injury essential to encompass all women employed since 1998 in the roughly 3,400 U.S. Wal-Mart stores.

Wal-Mart defense attorney Theodore Boutrous said the ruling would have a significant impact on other pending gender class-action suits, including against Costco Wholesale Corp. The Costco suit alleges a "glass ceiling" for women at the store level. Costco, which has denied the allegations, declined to comment Monday. Brad Seligman, a lawyer for the Wal-Mart plaintiffs who also represents the Costco plaintiffs, said the latter case is far narrower, focusing on two job classifications—store manager and assistant store manager—and is unlikely to be affected by Monday's ruling.

The impact of the ruling on other cases will depend in part on companies' personnel policies, said John C. Fox of Fox Wang & Morgan PC, a San Jose, Calif., law firm that represents employers. Regulated industries—including utilities, transportation and telecommunications—generally use rigid formulas for personnel decisions that remain open to class-action suits, if they produce work forces that significantly disadvantage employees of a particular race or sex, he said. In contrast, he said, high-tech companies in competition for engineers tend to make ad hoc salary and promotional decisions that lack the commonality Justice Scalia wrote was essential for class actions.

"Wal-Mart is in some ways anachronistic because it allowed so much discretion among local managers," Mr. Fox said.

Even before the ruling, the case was affecting pending class-action suits. Last week, workers and Best Buy Co. agreed to settle a case that alleged the electronics retailer systematically discriminated against women and minorities in hiring and promotions. The company agreed to change its personnel policies and pay monetary awards of only $290,000, to be divided among the nine named plaintiffs.

The pending Wal-Mart decision was an "incentive for both sides to settle," said James Finberg, the attorney for the Best Buy plaintiffs. "The Wal-Mart decision reaffirms the settlement we did was a good one."

The Supreme Court's conservative majority gave businesses another shield against class actions in an April case from California, upholding an AT&T Inc. cellphone contract that required consumers to go through individual arbitration.

The Wal-Mart lawsuit, filed in 2001, accused the world's largest retailer of systematically paying female workers less than men and providing them fewer opportunities for promotion. Wal-Mart consistently denied the claims, which could have resulted in billions of dollars in back pay and punitive damages, and said it had a strict policy against discrimination.

Wal-Mart praised the ruling. "As the majority made clear, the plaintiffs' claims were worlds away from showing a companywide discriminatory pay and promotion policy," it said in a statement. The company said it is a good place for women to work and "will continue its efforts to build a robust pipeline of future female leaders."

Lawyers for the women who claim they were victimized said they would regroup.