Supreme Court blocks huge class-action suit against Wal-Mart
The ruling in the suit, filed on behalf of as many as 1.5 million female employees, may all but end big class-action cases that seek money from employers for discrimination.
 Betty Dukes was one of the plaintiffs in the discrimination suit against Wal-Mart. The Supreme Court ruled for Wal-Mart, saying that the suit didn't merit class-action status that could have involved up to 1.5 million current and former female employees. (Larry Downing, Reuters / June 20, 2011) |
Reporting from Washington—
Women and minorities who think they are underpaid will find it nearly impossible to band together to sue employers for discrimination under a Supreme Court ruling against 1.5 million female Wal-Mart employees in the most important job-bias case in a decade.
Only if there is proof a company has a policy of paying less to women or minorities can the employees get together in a class-action suit, the court said in an opinion Monday by Justice Antonin Scalia. Statistics showing that a company's female workers earn far less and get fewer promotions than men will not suffice, the court said.
Columbia University law professor John Coffee said the Wal-Mart ruling all but sounded the death knell for class-action suits that seek money from employers for discrimination. "This significantly changes the balance between employers and employees. And it largely eliminates the monetary threat facing big employers," he said. Lawsuits are expensive to bring, "and if there is no money relief at the end of the road, there is no incentive to bring the suit," he said.
The suit against Wal-Mart Stores Inc. has been seen as a key test of whether civil rights lawyers, armed with computer-generated data on wages, could force the nation's largest employer to stand trial and face billions of dollars in potential liability. Had they won against Wal-Mart, other similar suits against nationwide retailers were in the offing.
Though the justices all agreed that the employees had no right to group damages, that unanimity masked a fundamental split largely along gender lines over the extent of discrimination at Wal-Mart and the amount of proof required to proceed with a class action.
Speaking for a 5-4 conservative majority in the central holding, Scalia said the class-action claim and others like it were doomed without "convincing proof of a companywide discriminatory pay and promotion policy."
Pointing to a provision of the federal rules of civil procedure requiring a class action to have "questions of law or fact common to the class," Scalia said this suit did not get to first base.
He said Wal-Mart had 3,400 stores spread across the nation and left it up to store managers to decide on pay levels and promotions.
"In a company of Wal-Mart's size and geographical scope, it is quite unbelievable that all managers would exercise their discretion in a common way without some common direction," Scalia said. "Significant proof that Wal-Mart operates under a general policy of discrimination is entirely absent here."
Roberts and Justices Anthony M. Kennedy, Clarence Thomas and Samuel A. Alito Jr. agreed with Scalia in Wal-Mart vs. Dukes.
Scalia said the suit was flawed for another reason. A single class-action claim that supposedly speaks for a huge number of people does not entitle all of them to "an individualized award of monetary damages," he said.
Ruth Bader Ginsburg, joined by Sonia Sotomayor, Elena Kagan and Stephen G. Breyer, agreed that Wal-Mart could not be forced to pay damages to all the women without individual hearings, but they argued forcefully that there was substantial evidence of discrimination and that the case should have been allowed to proceed.
Ginsburg, who specialized in cases involving gender discrimination before joining the court, pointed to data obtained from Wal-Mart that painted a portrait of a "company culture" that was biased against women. For example, while women hold about 70% of the hourly jobs, they make up only 33% of the management employees.
"The plaintiffs' evidence, including class members' tales of their own experiences, suggests that gender bias suffused Wal-Mart's company culture," Ginsburg wrote. "Among illustrations, senior management often refer to female associates as 'little Janie Qs,' " she said.
Giving male managers a free hand to make decisions on pay and promotions can, and apparently did, lead to discrimination, she said. "Managers, like all humankind, may be prey to the biases of which they are unaware," she wrote.
The decision did not absolve Wal-Mart of the allegations that it had shortchanged its female employees. Rather, the justices decided only that the suit did not fit within the rules for class-action claims. Individuals will still be free to file discrimination suits.
Liberals reacted with outrage to the decision, while business groups heaved a sigh of relief.
Nan Aron, president of the liberal Alliance for Justice, called the decision "another in a long series of cases where the conservative majority has … erected a wall of privilege and protection around big business."
This is "tantamount to closing the courthouse door on millions of women who cannot vindicate their rights one person at a time," said Marcia Greenberger, co-president of the National Women's Law Center.
The U.S. Chamber of Commerce applauded the court for ruling that "bet-the-business blockbuster class actions" were unfair and were "completely inconsistent with federal law," said Robin Conrad, lawyer and vice president for the chamber.
She said anti-discrimination law was based on the idea that individuals bring a claim of mistreatment. Business lawyers portrayed huge class-action claims as a scheme to enrich plaintiffs' lawyers at the expense of employers.
Class-action discrimination claims were a product of the civil rights era of the 1960s. In the early years, many suits accused employers, such as trucking firms, construction companies or police departments, of refusing to hire or promote blacks. Often, these cases resulted in an agreement to change the hiring practices.
In recent decades, federal courts — with the exception of the U.S. appeals courts in San Francisco and New York — have frowned on class-action claims that seek money on behalf of a large group of employees who say they were victims of discrimination.
david.savage@latimes.com
Times staff writer Salvador Rodriguez in Los Angeles contributed to this report.
Only if there is proof a company has a policy of paying less to women or minorities can the employees get together in a class-action suit, the court said in an opinion Monday by Justice Antonin Scalia. Statistics showing that a company's female workers earn far less and get fewer promotions than men will not suffice, the court said.
The decision is the latest in a series of major rulings favoring business under the stewardship of Chief Justice John G. Roberts Jr.
Columbia University law professor John Coffee said the Wal-Mart ruling all but sounded the death knell for class-action suits that seek money from employers for discrimination. "This significantly changes the balance between employers and employees. And it largely eliminates the monetary threat facing big employers," he said. Lawsuits are expensive to bring, "and if there is no money relief at the end of the road, there is no incentive to bring the suit," he said.
The suit against Wal-Mart Stores Inc. has been seen as a key test of whether civil rights lawyers, armed with computer-generated data on wages, could force the nation's largest employer to stand trial and face billions of dollars in potential liability. Had they won against Wal-Mart, other similar suits against nationwide retailers were in the offing.
Though the justices all agreed that the employees had no right to group damages, that unanimity masked a fundamental split largely along gender lines over the extent of discrimination at Wal-Mart and the amount of proof required to proceed with a class action.
Speaking for a 5-4 conservative majority in the central holding, Scalia said the class-action claim and others like it were doomed without "convincing proof of a companywide discriminatory pay and promotion policy."
Pointing to a provision of the federal rules of civil procedure requiring a class action to have "questions of law or fact common to the class," Scalia said this suit did not get to first base.
He said Wal-Mart had 3,400 stores spread across the nation and left it up to store managers to decide on pay levels and promotions.
"In a company of Wal-Mart's size and geographical scope, it is quite unbelievable that all managers would exercise their discretion in a common way without some common direction," Scalia said. "Significant proof that Wal-Mart operates under a general policy of discrimination is entirely absent here."
Roberts and Justices Anthony M. Kennedy, Clarence Thomas and Samuel A. Alito Jr. agreed with Scalia in Wal-Mart vs. Dukes.
Scalia said the suit was flawed for another reason. A single class-action claim that supposedly speaks for a huge number of people does not entitle all of them to "an individualized award of monetary damages," he said.
Ruth Bader Ginsburg, joined by Sonia Sotomayor, Elena Kagan and Stephen G. Breyer, agreed that Wal-Mart could not be forced to pay damages to all the women without individual hearings, but they argued forcefully that there was substantial evidence of discrimination and that the case should have been allowed to proceed.
Ginsburg, who specialized in cases involving gender discrimination before joining the court, pointed to data obtained from Wal-Mart that painted a portrait of a "company culture" that was biased against women. For example, while women hold about 70% of the hourly jobs, they make up only 33% of the management employees.
"The plaintiffs' evidence, including class members' tales of their own experiences, suggests that gender bias suffused Wal-Mart's company culture," Ginsburg wrote. "Among illustrations, senior management often refer to female associates as 'little Janie Qs,' " she said.
Giving male managers a free hand to make decisions on pay and promotions can, and apparently did, lead to discrimination, she said. "Managers, like all humankind, may be prey to the biases of which they are unaware," she wrote.
The decision did not absolve Wal-Mart of the allegations that it had shortchanged its female employees. Rather, the justices decided only that the suit did not fit within the rules for class-action claims. Individuals will still be free to file discrimination suits.
Liberals reacted with outrage to the decision, while business groups heaved a sigh of relief.
Nan Aron, president of the liberal Alliance for Justice, called the decision "another in a long series of cases where the conservative majority has … erected a wall of privilege and protection around big business."
This is "tantamount to closing the courthouse door on millions of women who cannot vindicate their rights one person at a time," said Marcia Greenberger, co-president of the National Women's Law Center.
The U.S. Chamber of Commerce applauded the court for ruling that "bet-the-business blockbuster class actions" were unfair and were "completely inconsistent with federal law," said Robin Conrad, lawyer and vice president for the chamber.
She said anti-discrimination law was based on the idea that individuals bring a claim of mistreatment. Business lawyers portrayed huge class-action claims as a scheme to enrich plaintiffs' lawyers at the expense of employers.
Class-action discrimination claims were a product of the civil rights era of the 1960s. In the early years, many suits accused employers, such as trucking firms, construction companies or police departments, of refusing to hire or promote blacks. Often, these cases resulted in an agreement to change the hiring practices.
In recent decades, federal courts — with the exception of the U.S. appeals courts in San Francisco and New York — have frowned on class-action claims that seek money on behalf of a large group of employees who say they were victims of discrimination.
david.savage@latimes.com
Times staff writer Salvador Rodriguez in Los Angeles contributed to this report.
Copyright © 2011, Los Angeles Times
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Wal-Mart Case Is a Blow for Big Cases and Their Lawyers
By STEVEN GREENHOUSE
Published: June 20, 2011
With the dismissal of a sex-discrimination lawsuit brought on behalf of 1.5 million women who have worked at Wal-Mart, the Supreme Court on Monday significantly tightened the rules for how a large group of individuals can join together to sue a company for alleged harm done to them.
Larry Downing/Reuters
Protesters rallied outside the court in March. The justices came down on the side of Wal-Mart.
Room for Debate
A Death Blow to Class Action?
By siding with Wal-Mart, the Supreme Court has signaled that it wants job bias disputes handled in the workplace, not the courts.
Related
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Justices Rule for Wal-Mart in Class-Action Bias Case (June 21, 2011)
The court’s decision will not just make it harder to bring big, ambitious employment class-action cases asserting discrimination based on sex, race or other factors, legal experts said. In the majority opinion, the court set higher barriers for bringing several types of nationwide class actions against a large company with many branches.
In its majority opinion, the court essentially said that if lawyers brought a nationwide class action against an employer, they would have to offer strong evidence of a nationwide practice or policy that hurt the class. In the Wal-Mart case, the court wrote that the plaintiffs had not demonstrated that Wal-Mart had any nationwide policies or practices that discriminated against women. The opinion, written by Justice Antonin Scalia, noted that Wal-Mart’s official corporate policy opposed discrimination, while the company gave the managers at its more than 3,400 stores considerable discretion over pay and promotions.
“In a company of Wal-Mart’s size and geographical scope, it is quite unbelievable that all managers would exercise their discretion in a common way without some common direction,” Justice Scalia wrote.
Heidi Li Feldman, a professor at Georgetown Law Center, said similar reasoning might make it tougher for plaintiffs to bring a class action against a mortgage lender accusing it of having a nationwide policy of defrauding borrowers. “A big mortgage broker might say, ‘At the national level, we have policies to abide by all of the rules and regulations that are applicable, and we delegate a lot of discretion to our branches,’ ” she said.
The ruling was widely hailed by business groups, some of which filed amicus briefs urging the court to limit class actions.
“We applaud the Supreme Court for affirming that mega-class actions such as this one are completely inconsistent with federal law,” said Robin S. Conrad, executive vice president of the United States Chamber of Commerce’s National Chamber Litigation Center. “Too often the class-action device is twisted and abused to force businesses to choose between settling meritless lawsuits or potentially facing financial ruin.”
The ruling will push plaintiffs’ lawyers into filing fewer huge class actions and more cases on behalf of individuals or smaller groups, lawyers said. That will raise costs and give lawyers less incentive to take on class actions and other complex litigation. The Wal-Mart case, for example, has stretched for a decade, with lawyers and the legal foundation that brought the case expecting to receive some portion of the back pay for 1.5 million current and former Wal-Mart employees if they eventually won the case in court or reached a settlement.
The Supreme Court decision “strikes a blow to those who face discrimination in the workplace to be able to join together and hold companies, especially large companies, accountable for the full range of discrimination they may be responsible for,” said Marcia D. Greenberger, co-president of the National Women’s Law Center.
In his opinion, Justice Scalia said it was unacceptable to allow employment discrimination lawsuits to proceed as huge class actions when monetary awards would be based on a broad formula per plaintiff, without having an individual assessment of how much each plaintiff had suffered.
He wrote that to allow that to happen in the Wal-Mart case, the largest employment class action in American history, would have been hugely unfair to Wal-Mart because it might have had to pay out damages without many of the plaintiffs demonstrating how much they were injured.
Paul Grossman, a lawyer in Los Angeles for the Paul Hastings firm who represents many employers, including Wal-Mart, in employment lawsuits, said employers were seeing many unmeritorious class-action cases. “Now you need a real class action with similarly situated people where common issues predominate,” he said.
Joseph Sellers, one of the top lawyers for the women in the Wal-Mart case, said that as a result of the ruling, there would be more class actions at the store or regional level, where it might not be hard to show that local managers had engaged in sex or age discrimination.
He said the court’s ruling would hurt not just the plaintiffs, but also Wal-Mart, because “this case will be splintered into many cases that may take longer and be harder to resolve.”
Moreover, he said, Wal-Mart and other companies facing these more localized class actions might face “checkered” legal standards “where in one jurisdiction the conduct may be ruled lawful, and in another jurisdiction it may be ruled unlawful.”
Several experts said the ruling would have little effect on securities fraud cases because a misrepresentation by a corporate executive is commonly seen as injuring a company’s whole class of shareholders. Nonetheless, the ruling could make it somewhat harder to bring such securities cases and other class actions by tightening the definition of when there is a common question of law or fact.
John C. Coffee Jr., a professor at the Columbia University School of Law, said one far-reaching aspect of the ruling was that it would greatly discourage lawyers from filing class actions because the court essentially prevented lawyers from adding a claim for back pay or other financial compensation onto a class claim seeking an injunction against conduct, like a company’s discriminating against women in promotions. Under federal law, the standards to gain class-action status when seeking injunctive relief are considerably lower than for back-pay claims.
The Second and Ninth Circuit Courts of Appeal had long allowed plaintiffs to do such “bootstrapping” in injunction cases to achieve class-action status for their claims for back pay. Class actions for injunctive relief are less lucrative to plaintiffs and their lawyers than class actions that also seek back pay.
In its majority opinion, the court essentially said that if lawyers brought a nationwide class action against an employer, they would have to offer strong evidence of a nationwide practice or policy that hurt the class. In the Wal-Mart case, the court wrote that the plaintiffs had not demonstrated that Wal-Mart had any nationwide policies or practices that discriminated against women. The opinion, written by Justice Antonin Scalia, noted that Wal-Mart’s official corporate policy opposed discrimination, while the company gave the managers at its more than 3,400 stores considerable discretion over pay and promotions.
“In a company of Wal-Mart’s size and geographical scope, it is quite unbelievable that all managers would exercise their discretion in a common way without some common direction,” Justice Scalia wrote.
Heidi Li Feldman, a professor at Georgetown Law Center, said similar reasoning might make it tougher for plaintiffs to bring a class action against a mortgage lender accusing it of having a nationwide policy of defrauding borrowers. “A big mortgage broker might say, ‘At the national level, we have policies to abide by all of the rules and regulations that are applicable, and we delegate a lot of discretion to our branches,’ ” she said.
The ruling was widely hailed by business groups, some of which filed amicus briefs urging the court to limit class actions.
“We applaud the Supreme Court for affirming that mega-class actions such as this one are completely inconsistent with federal law,” said Robin S. Conrad, executive vice president of the United States Chamber of Commerce’s National Chamber Litigation Center. “Too often the class-action device is twisted and abused to force businesses to choose between settling meritless lawsuits or potentially facing financial ruin.”
The ruling will push plaintiffs’ lawyers into filing fewer huge class actions and more cases on behalf of individuals or smaller groups, lawyers said. That will raise costs and give lawyers less incentive to take on class actions and other complex litigation. The Wal-Mart case, for example, has stretched for a decade, with lawyers and the legal foundation that brought the case expecting to receive some portion of the back pay for 1.5 million current and former Wal-Mart employees if they eventually won the case in court or reached a settlement.
The Supreme Court decision “strikes a blow to those who face discrimination in the workplace to be able to join together and hold companies, especially large companies, accountable for the full range of discrimination they may be responsible for,” said Marcia D. Greenberger, co-president of the National Women’s Law Center.
In his opinion, Justice Scalia said it was unacceptable to allow employment discrimination lawsuits to proceed as huge class actions when monetary awards would be based on a broad formula per plaintiff, without having an individual assessment of how much each plaintiff had suffered.
He wrote that to allow that to happen in the Wal-Mart case, the largest employment class action in American history, would have been hugely unfair to Wal-Mart because it might have had to pay out damages without many of the plaintiffs demonstrating how much they were injured.
Paul Grossman, a lawyer in Los Angeles for the Paul Hastings firm who represents many employers, including Wal-Mart, in employment lawsuits, said employers were seeing many unmeritorious class-action cases. “Now you need a real class action with similarly situated people where common issues predominate,” he said.
Joseph Sellers, one of the top lawyers for the women in the Wal-Mart case, said that as a result of the ruling, there would be more class actions at the store or regional level, where it might not be hard to show that local managers had engaged in sex or age discrimination.
He said the court’s ruling would hurt not just the plaintiffs, but also Wal-Mart, because “this case will be splintered into many cases that may take longer and be harder to resolve.”
Moreover, he said, Wal-Mart and other companies facing these more localized class actions might face “checkered” legal standards “where in one jurisdiction the conduct may be ruled lawful, and in another jurisdiction it may be ruled unlawful.”
Several experts said the ruling would have little effect on securities fraud cases because a misrepresentation by a corporate executive is commonly seen as injuring a company’s whole class of shareholders. Nonetheless, the ruling could make it somewhat harder to bring such securities cases and other class actions by tightening the definition of when there is a common question of law or fact.
John C. Coffee Jr., a professor at the Columbia University School of Law, said one far-reaching aspect of the ruling was that it would greatly discourage lawyers from filing class actions because the court essentially prevented lawyers from adding a claim for back pay or other financial compensation onto a class claim seeking an injunction against conduct, like a company’s discriminating against women in promotions. Under federal law, the standards to gain class-action status when seeking injunctive relief are considerably lower than for back-pay claims.
The Second and Ninth Circuit Courts of Appeal had long allowed plaintiffs to do such “bootstrapping” in injunction cases to achieve class-action status for their claims for back pay. Class actions for injunctive relief are less lucrative to plaintiffs and their lawyers than class actions that also seek back pay.
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