The U.S. Supreme Court’s rejection of a nationwide class action for female workers suing Wal-Mart Stores Inc. doesn’t foreclose the ability of employees to bring similar suits for many other types of claims against companies.
The ruling “is adding a higher burden” of proof before an employment discrimination class action can be certified, said Cyrus Mehri, a Washington lawyer who represents workers in such cases. Plaintiffs lawyers said other class actions against companies, including those alleging bias over a written company policy, product liability for items such as defective medicines or claims against banks for illegal fees, may not be affected.
“To get a class certified, there will have to be a closer link between cause and effect,” said Mehri, who recently won a $32 million settlement in a gender bias lawsuit against Wells Fargo & Co. “In the employment area, it’s a steeper climb for plaintiffs.”
Class certification allows workers to pursue their claims as a group, pooling resources and putting greater pressure on defendants to settle. Companies often seek to avoid classes, instead attempting to fight employees one-by-one, forcing them to use their own financial resources to litigate.
The Supreme Court said today that lawyers for women suing Bentonville, Ark.-based Wal-Mart failed to point to a common corporate policy that led to gender discrimination at thousands of its U.S. stores. The court said the women couldn’t pursue their claims in a nationwide class action because they hadn’t shown a sufficient connection between their claims.
“Because respondents provide no convincing proof of a companywide discriminatory pay and promotion policy, we have concluded that they have not established the existence of any common question,” Justice Antonin Scalia wrote for the majority, reversing a lower court ruling. Use of statistical and anecdotal evidence to show managers discriminated and exercised these decisions in a common way fell “well short,” he said.
The ruling limits the ability of plaintiffs’ lawyers to win multimillion dollar damages through a single lawsuit, particularly against employers. Units of Cigna Corp., Goldman Sachs Group Inc., Bayer AG, Toshiba Corp., Publicis Group SA, Deere & Co. and Costco Wholesale Corp. all face gender discrimination complaints that seek class-action status.
More than 20 companies supported Wal-Mart at the Supreme Court, including Intel Corp., Altria Group Inc., Bank of America Corp., Microsoft Corp. and General Electric Co.
The lawsuit, filed in 2001, claimed Wal-Mart engaged in a pattern of discrimination against women in pay and promotions nationwide and sought to cover every woman who worked at the company’s stores from 1998 onward.
The court “reversed about 40 years of jurisprudence,” said Joseph Sellers, attorney for the women suing Wal-Mart. The decision forces a consideration of the merits of a claim at the class certification stage, contrary to prior practice, Sellers said at a news conference today.
Sellers and co-counsel Brad Seligman said the lawyers would be pursuing individual actions against the company and may pursue smaller class actions.
“There are a number of options still available,” he said. “None of them are as efficient” as a nationwide class action. “Wal-Mart may regret the day” it sought a rejection of class certification, he said.
“The case is not over,” said Seligman. “Wal-Mart is not off the hook.”
About 12,000 women nationwide have contacted the lawyers suing Wal-Mart to join the case, Seligman said. The company said in a statement that the ruling “effectively ends this class- action lawsuit.”
“The plaintiffs’ claims were worlds away from showing a companywide pay and promotion policy,” Wal-Mart said.
Mehri said the justices added a new hurdle for plaintiffs.
Previously, plaintiffs’ lawyers seeking to have a class action allowed “had to show that there is a common issue of fact,” the lawyer said. Today’s decision would require lawyers to “show that the common issue predominates,” he said.
Plaintiffs’ lawyers would have to provide more evidence before seeking a class certification decision, he said.
“There has to be greater proof of causation, so you see the disparities,” Mehri said in an interview.
The decision may have limited effect on some other pending bias class actions, said Seligman. He is also representing women suing Issaquah, Washington-based Costco over gender discrimination. “Costco was a much narrower case,” covering two types of managers who were affected by decisions made above the store level, he said.
The justices “focus very specifically on our case,” Seligman said of today’s ruling. “It’s not at all clear on the impact” on these other cases, he said.
Today’s decision may change how plaintiffs’ lawyers pursue claims, Mehri said. While the decision doesn’t affect cases already settled, it may alter a lawsuit he’s pursuing claiming gender bias against Ruth’s Chris Steak House, Mehri said.
“We will be informed by the Supreme Court on how we shape our filings,” he said. “It doesn’t stop the case by any stretch.”
The decision isn’t likely to affect other class actions alleging other types corporate wrongdoing, said attorney Michael Donovan, who represents Wal-Mart workers in Pennsylvania suing the company over wage-and-hour claims.
“I don’t think it has that much significance for most general class actions,” Donovan said in an interview. “It was pretty much tied to whether the plaintiffs could prove a companywide policy or practice of discrimination.”
The plaintiffs claimed in the Wal-Mart case that allowing individual store managers’ discretion to make their own decisions may provide the basis of a disparate impact theory — that women were affected more adversely than men under the policy.
While the judges found that such a theory can be pursued in a class action lawsuit, that the claim can “exist does not lead to the conclusion that every employee in a company using a system of discretion has such a claim in common,” Scalia wrote.
The workers’ lawyers “have identified no ‘specific employment practice’ — much less one that ties all their 1.5 million claims together,” Scalia wrote. “Merely showing that Wal-Mart’s policy of discretion has produced an overall sex- based disparity does not suffice.”
Donovan said this aspect of the ruling “makes it difficult for employees to sue for corporate culture claims where there isn’t any direct evidence but for the impact.” Lawsuits outside the employment arena often have business records plaintiffs can use to prove claims, he noted.
The Supreme Court decision would preclude class actions only in lawsuits where there wasn’t some sort of test or policy or uniform condition, or business records pointing to those items, Donovan said.
“There’s not a whole lot of cases like that out there.”
The court ruling makes pursuit of discrimination class actions “very difficult,” said David Sanford, a Washington lawyer who won a $175 million settlement in a gender bias suit against Novartis AG.
“It’s not impossible. It hasn’t closed the door, but it’s made the challenge much harder,” Sanford said in an interview.
“The Supreme Court has articulated a view that if you have a policy of not discriminating, and if you have a company that’s big, and you’re a plaintiff suing that company, if you cannot identify a policy that suggests sex discrimination, then you’re in trouble,” he said.
Lawyers representing workers may begin filing claims with subclasses, rather than as companywide actions, he said.
Sanford has multiple bias lawsuits seeking class action status against companies including Philadelphia-based Cigna, Bayer, Eaton Corp. and Toshiba. All these cases are in “fairly early stages of litigation,” and motions for class certification haven’t been filed, he said.
The precise impact of today’s decision on these cases hasn’t been determined, he said.
“We’re going to have to look at it very carefully,” he said.
Sanford said he used the same theory of law in his Novartis case that lawyers for the Wal-Mart plaintiffs used in theirs -- that the company’s policies allowed a disparate impact on pay and promotions for women.
“That’s a theory that plaintiffs won’t be able to avail ourselves of going forward,” he said. “We’re going to have to look at ways to alter our theory.”
Another change that may result from today’s ruling is to the plaintiffs’ employment bar, Sanford said.
“There aren’t many plaintiffs lawyers who do this work,” he said. “That number will shrink further.”
The case is Wal-Mart Stores v. Dukes, 10-00277, U.S. Supreme Court (Washington)
© Copyright 2013 Bloomberg News. All rights reserved.