Super-sized Lawsuit Looming for Super-sized Store?
By Tara Krieger
The nation’s largest retail chain could be on the verge of being charged with the largest class action lawsuit in U.S. history. Not if they can help it.
Wal-Mart Stores, Inc. has asked the Supreme Court to dismiss a sex discrimination suit that could include as many as 1.5 million current and former female employees. The suit, which alleges that women are paid less and receive fewer promotions than their male counterparts, was allowed to proceed by a 6-5 decision from the Ninth Circuit Court of Appeals in April.
Wal-Mart is arguing that the class, which encompasses all women employed by the company at any point since December 26, 1998, is too big and too diverse, both in the types of plaintiffs and the issues they bring to the table, to qualify as a single case. What mainstream media outlets failed to report, however, was the specifics of what those issues were that might lead a court to dismiss the case.
First, the basics. A class action, according to Law.com, is “filed by one or more people on behalf of themselves and a larger group of people ‘who are similarly situated.’” Rule 23 of the Federal Rules of Civil Procedure outlines the requirements for a class action suit to go forward.
Before we discuss Rule 23, let’s clear up a potential misconception about this case, short titled Dukes v. Wal-Mart. What is being argued at this stage is not whether Wal-Mart discriminates against its female employees under Title VII of the Civil Rights Act of 1964. The issue on the table right now is whether this discrimination suit should be allowed in court as a class action of this size. If the Supreme Court allows the case to proceed (or if the Court declines to hear the case, allowing the Ninth Circuit ruling to stand), a lower court – perhaps a jury – will then evaluate factually whether Wal-Mart practiced discriminatory policies. If the Court agrees with Wal-Mart that the case should not proceed as a class action of this size, the named plaintiffs can still sue Wal-Mart for discrimination, but will represent a smaller group of female employees.
The Rule 23 standard for a court to take a class action is two-pronged– first, all four parts of Rule 23(a) must be satisfied. Only then must a court find that one of three conditions in Rule 23(b) is satisfied.
According to Rule 23(a), one or more people – in this particular case, there were six – may sue on behalf of a large group (or “class”) if four prerequisites are met:
(1) numerosity (hearing each individual grievance in one lawsuit would be impracticable);
(2) commonality (plaintiffs share the same questions of law or fact);
(3) typicality (the claims of the six women are typical of everyone else they stand for);
(4) adequacy of representation (the parties are represented by competent attorneys, and there are no conflicts of interest).
Notice, however, that Rule 23(a) imposes no size limits on a class. If the class meets the Rule 23 standards, theoretically, its size can be unlimited. Joseph Sellers, an attorney for the female plaintiffs, argued that perhaps Wal-Mart was protesting the proceeding solely because “the size of the case is unusual” – and that was because Wal-Mart was such a large employer.
Judge Susan P. Graber, of the Ninth Circuit, agreed: “If the employer had 500 female employees, I doubt that any of my colleagues would question the certification of such a class.”
But did the class meet the Rule 23(a) requirements otherwise?
Rule 23(a)(1) – Numerosity
Wal-Mart does not contest the “numerosity” standard of Rule 23(a) – both sides agree that hearing each individual discrimination claim, if they are as numerous as possible, would be impracticable.
Rule 23(a)(2) – Commonality
Plaintiffs brought facts, statistics, expert opinion, and anecdotal evidence showing similar gender discrimination policies across Wal-Mart-owned stores in 41 different regions. In response, Wal-Mart contended that such information was unreliable, and often misleading: the statistics possibly tailored to the plaintiffs’ purposes; the expert opinions too subjective; the 120 anecdotes from employees too small a sample size to represent the 1.5 million potentially filing the lawsuit. But plaintiffs’ evidence was brought simply to show that common questions existed about Wal-Mart’s corporate policy with respect to all its employees. The validity of the answers to these questions need not be assessed at this point; the court that hears this case will take up those issues if the class action is allowed to go forward.
Rule 23(a)(3) – Typicality
The six women who were to represent the class made claims that were “sufficiently typical” of those covered by the class. The attorneys running the lawsuit’s Web site have seen to that by explicitly limiting the settlement to “company-wide claims of sex discrimination in pay and promotions.”
“You may have other claims, such as denial of overtime, sexual harassment or other types of discrimination claims,” the site continues. “You may also feel that Wal-Mart treats its workers unfairly. This settlement does not cover these other claims and the attorneys in this case are not handling these claims.”
On the other hand, the suit covers both employees who are paid hourly and who are salaried, both lower-level workers and those in management positions. Do the different types of positions and pay scales make the class too “excessively diverse” for the claims of discrimination to be “typical”? The Ninth Circuit said no; the suit is limited to in-store employees (not those in corporate offices), all of whom operate under a similar corporate framework, irrelevant of their wages or positions.
Rule 23(a)(4) – Adequacy of Representation
One of the strongest arguments put forth by both Wal-Mart and the five dissenting judges in the Ninth Circuit had to do with conflict of interest. How could the salaried, female in-store managers be both parties to the suit and at the same time be in charge of hiring and promoting lower-level female employees who were claiming the same type of discrimination? The majority of the Ninth Circuit rejected this argument, but did not offer its reasons for finding that the “adequate representation” prerequisite was met. If the Supreme Court hears the case, it may choose to separate in-store managers from low-level workers and force each group to file as a separate class action.
Because only one of the three conditions in Rule 23(b) needed to be satisfied for the class action to go forward, the plaintiffs chose to argue that their case fit under Rule 23(b)(2) – that Wal-Mart had discriminated “on grounds generally applicable to the class.”
This seems like another blanket “Wal-Mart has discriminated across the board,” statement – except that the rule has a caveat – it cannot apply where money “predominates” what the plaintiffs are asking for in the settlement (as opposed to, for instance, forcing promotions or salary adjustments). If Wal-Mart were forced to compensate the plaintiffs in punitive damages , then money could be the predominant compensation. The Ninth Circuit decided to send the case back down to the lower court for a further factual evaluation, to see if Rule 23(b)(2) would still apply, or perhaps one of the other conditions in Rule 23(b) could be satisfied.
Following this logic, the Ninth Circuit ruled that the class probably should exclude any members who were not employees of Wal-Mart when the case was filed on June 8, 2001 (because they could only ask for monetary compensation anyway – promotions and back pay would be irrelevant to them). Excluding those employees – which would also include three of the six women whose names are on the suit – could potentially reduce the class size by two-thirds, or to about 500,000.
But would half a million people still be too large a class when it comes to doling out individual settlements? The Ninth Circuit referenced an as-yet-untested plan of action set out by the lower court. It also cited to a class-action case that involved plaintiffs numbering over 10,000, detailing a procedure for allocating settlements that may not have been perfect, but could be extended to larger groups. So the possibility of the Ninth Circuit’s ability to deal with a large class exists, though the leap from 10,000 to 500,000 is quite a leap.
Because the Wal-Mart case raises novel questions, the Supreme Court might decide to hear it, if simply to tie up the loose ends and clarify its standards on class actions. Whatever it decides could have big implications.
UPDATE: December 8, 2010: The Supremes agree to hear the case.
UPDATE: June 20, 2011: It didn’t go well for plaintiffs at the Supreme Court.