Wal-Mart Faces The Largest Employment Discrimination Class Action In History. Why Every Employer Should Be Concerned About This Decision
By Peter K. Newman
I. Introduction
On February 6, 2007, a three-judge panel of the U.S. Court of Appeals for the Ninth Circit affirmed a controversial June, 2004 class certification order from the U.S. District Court for the Northern District of California that had certified a massive class action against Wal-Mart involving more than 1.5 million employees nationwide. (Dukes, et al. v. Wal-Mart Stores, Inc.). Because this decision addresses several cutting-edge class action issues regarding employment discrimination litigation, every employer should be concerned about the potential ramifications of this decision.
II. Facts of the Case.
In 2001, six female employees sued Wal-Mart in federal court in San Francisco alleging that Wal-Mart’s corporate culture in practice and in reality meant lower pay and fewer management positions for women in violation of Title VII of the Civil Rights Act of 1964. Specifically, the plaintiff’s alleged that Wal-Mart’s subjective promotion system prevented women from applying for or being considered for management-track positions.
III. The District Court’s Opinion.
In June, 2004, district court certified the class of over 1.5 million current and former female Wal-Mart employees. The court’s rationale was that plaintiffs had shown that Wal-Mart’s pay policies were significantly uniform across stores and that the policies “contain a common feature of subjectivity” relevant to plaintiffs’ claims of class-wide sex discrimination.
IV. Significant Parts Of The Ninth Circuit’s Decision.
A. The Court Found That The Class Representatives Are Typical.
In opposing class certification, Wal-Mart argued that personnel decisions at its stores were made by thousands of individual store managers across the country, thereby making it impossible for the plaintiffs to establish commonality and typicality. The Ninth Circuit rejected Wal-Mart’s argument finding that the plaintiffs had shown: (1) sufficient evidence supporting the existence of company-wide policies and practices; (2) expert opinion supporting the existence of company-wide policies and practices; (3) expert statistical evidence of class-wide gender disparities attributable to discrimination; and (4) anecdotal evidence from class members around the country of discriminatory attitudes held or tolerated by management.
B. The Court Also Found That the Plaintiffs’ Request For Punitive Damages And Back Pay Was Not A Bar To Class Certification.
The Ninth Circuit also rejected Wal-Mart’s argument that class certification was inappropriate under Federal Rule of Evidence 23(b)(2), which requires that injunctive relief predominate over claims for monetary relief.
Wal-Mart argued that, because so many of the class members were former employees, they would not benefit from injunctive relief and, consequently, such relief could not predominate. Wal-Mart also argued that the district court abused its discretion in finding that injunctive relief predominated simply because the plaintiffs claimed that it did.
The Ninth Circuit rejected both of these arguments. The Court found that: (1) the fact that some potential class members are former employees does not alter the primary intent of the plaintiffs as a whole; and (2) Wal-Mart failed to offer any evidence to cast doubt on the plaintiffs’ motivation.
C. In addition, The Court Found That Individualized Hearings Were Unnecessary.
The most controversial parts of the Ninth Circuit decision is its findings that individualized hearings were unnecessary and (2) Wal-Mart was not harmed because it was not able to make a defense to each individual class member’s claim.
Wal-Mart argued that it was entitled to individualized hearings on both punitive damages and lost pay issues, so that it would have an opportunity to present defenses to individual employee claims. Wal-Mart also argued that class certification was impossible because the examination of these issues would turn the class action into a series of mini-trials for each class member, thereby making the action unmanageable.
In rejecting these arguments, the Ninth Circuit determined that no legal authority required individualized hearings, and that statistical methods could be used to determine the appropriate relief in a manageable fashion.
V. The Dissenting Opinion.
In a blistering dissent, Judge Kleinfeld argued that certification threatens the rights of the woman involved in the lawsuit, as well as deprives Wal-Mart of the chance to mount an appropriate defense. He also worried that by certifying the class, Wal-Mart could be forced to settle even though it may have strong defenses that should be heard in court. Judge Kleinfeld suggested that the majority’s opinion put Wal-Mart in a position where it would be forced to settle: A lawsuit, like surgery, cannot be risk-free. Defendants are ordinarily wise to settle for an amount equal to the risk of losing multiplied by the potential loss. When the potential loss is stratospheric, a rational defendant will settle even the most unjust claim.
VI. Why The Court Of Appeals’ Decision Is Important To All Employers.
Wal-Mart reportedly will seek en banc review of the decision before the entire Ninth Circuit and may well ultimately seek review by the U.S. Supreme Court. Until this case is finally resolved, the plaintiffs’ bar will undoubtedly attempt to take advantage of the very pro-plaintiff parts of the Nint h Circuit’s decision by filing copycat lawsuits against smaller employers. Although your Company is not as big as Wal-Mart, you may eventually be targeted for class action litigation.
What can you do now to avoid being targeted? Two things. First, monitor the Dukes case to find out whether the full Ninth Circuit or the U.S. Supreme Court reverses this awful decision. Second, work with your employment attorney to conduct an audit of your pay and promotional practices to determine if your Company is susceptible to the same type of claims that the plaintiffs filed in Dukes. If so, take the appropriate preventive measures so you can avoid these potential claims.
admin @ March 13, 2007