WASHINGTON — The U.S. Supreme Court ruled in favor of Wal-Mart Stores Inc. on Monday, stopping what would have been one of the largest gender discrimination class action lawsuits in history from moving forward.

This story first appeared in the June 21, 2011 issue of WWD. Subscribe Today.

The high court ruled that the case cannot advance as a class action, which could have potentially encompassed 1.5 million current and former female Wal-Mart employees and exposed the nation’s largest retailer to billions of dollars in liability.

Gisel Ruiz, executive vice president of people at Wal-Mart, said of the ruling, “The Court today unanimously rejected class certification and, as the majority made clear, the plaintiffs’ claims were worlds away from showing a company-wide discriminatory pay and promotion policy.”

Wal-Mart’s appeal to the Supreme Court stemmed from a lawsuit filed in 2001 by Betty Dukes and five other female employees alleging the company’s corporate structure discriminated against women regarding pay and promotions, among other accusations. Wal-Mart argued that it has a strict company-wide policy that bars discrimination.

In 2004, the U.S. District Court for Northern California conferred class action status in the case to current and former female Wal-Mart employees dating back to 1998. A sharply divided U.S. Ninth Circuit Court of Appeals in San Francisco ruled in April 2010 that the gender discrimination complaint could go to trial as a class action. The ruling affirmed the lower court’s certification and also allowed members to seek back pay and an injunction.

The attorneys for the female plaintiffs against Wal-Mart said the ruling “erects substantially higher barriers for working women and men to vindicate rights to be free from employment discrimination. The ruling does not, however, address whether Wal-Mart committed sex discrimination against its women employees. Rather, it addresses how women suing Wal-Mart must press ahead with their claims.”

The attorneys noted they plan to assist the women with individual claims against Wal-Mart, either in the courts or with the U.S. Equal Employment Opportunity Commission.

In its ruling, the high court reversed a decision by the Ninth Circuit Court of Appeals and said the case could not be certified as a class action because the plaintiffs did not meet the critical legal standard of commonality. The court was split 5 to 4 in its ruling on commonality, with the dissent penned by Justice Ruth Bader Ginsburg.

In the majority opinion, penned by Justice Antonin Scalia, the court said the plaintiffs “wish to sue about literally millions of employment decisions at once. Without some glue holding the alleged reasons for all those decisions together, it will be impossible to say that examination of all class members’ claims for relief will produce a common answer to the crucial question of ‘Why was I disfavored?’”

Wal-Mart operates about 3,400 stores. Each store has 40 to 53 separate departments and 80 to 500 staff positions, according to court documents.

Corporate lawyers hailed the Supreme Court’s ruling as a landmark decision, saying it will set the bar higher for certifying class action lawsuits and protect corporations from massive, costly class action litigation.

“This is without a doubt the most important class action case in more than a decade,” said Robin Conrad, executive vice president of the U.S. Chamber of Commerce’s National Chamber Litigation Center. “Today’s ruling reinforces a fundamental principle of fairness in our court systems: that defendants should have the opportunity to present individualized evidence to show they complied with the law. Too often the class action device is twisted and abused to force businesses to choose between settling meritless lawsuits or potentially facing financial ruin.”

On the other side, employment discrimination and civil rights attorneys said the ruling could make it more difficult for female workers at large corporations to bring sexual discrimination lawsuits.

“The bottom line is anyone who looks into investing time and money into filing a class-action case will now have to look more closely at whether it can overcome the obstacles the Supreme Court has now thrown in the way,” said Sara Kane, partner in Valli Kane & Vagnini, which handles employment discrimination and civil rights cases.

David Sanford, a partner with Sanford Wittels & Heisler, said, “The five-member majority has handed corporations a ‘get out of jail free card’ they don’t deserve, insulating large corporations from accountability if they are merely ‘too big’ or if they simply institute a policy against having uniform employment practices. Ironically, the companies now the most insulated from liability are those capable of causing the most harm.”

In a separate legal aspect of the case, the court was unanimous in its finding that the plaintiffs could not sue for back pay in the case. Had they succeeded in proving commonality, the plaintiffs in the case still would not have been able to sue for back wages.

“The most important thing the court said was you cannot get monetary damages in suits for injunctive relief,” said John Coffey Jr., professor and director of the Center on Corporate Governance at Columbia University Law School.

load comments
blog comments powered by Disqus