Wal-Mart to Fight
Ruling in Suit
Retailer Seeks
Rehearing On Class-Action Status;
Billions of Dollars
in Claims
By GARY MCWILLIAMS
and ANN ZIMMERMAN, WSJ February 7, 2007
Wal-Mart Stores Inc., following a
legal setback in a sex-discrimination suit involving billions of dollars in
claims, said it will contest the decision and ask for a larger appeals-court
panel to rehear the case.
Yesterday, a three-judge panel of the Ninth Circuit Court of Appeals in San
Francisco affirmed class-action status for a suit alleging gender discrimination
in pay and promotion. More than 1.5 million past and present female
Wal-Mart employees are included in the suit
The world's largest retailer by revenue said it would ask a 15-member panel of
the Ninth Circuit Court to review the case. Wal-Mart said it would appeal
to the U.S. Supreme Court, if needed. It declined to comment on settlement
talks, and ruled out taking an accounting reserve for potential damages as a
result of yesterday's decision.
"We're still at a very early stage in this process," said Theodore J. Boutrous
Jr., Wal-Mart's lead counsel and a partner at Gibson, Dunn & Crutcher LLP.
The appeals court decision failed to consider Wal-Mart's evidence of
nondiscrimination and ignored recent court rulings that supported its position,
he said. Mr. Boutrous frequently represents Dow Jones & Co., publisher of The
Wall Street Journal, in legal proceedings.
In a harshly worded 2-1 opinion, the three-judge court said a lower court heard
"significant proof of a corporate policy of discrimination" in reaching its
decision. The appeals court sternly rejected Wal-Mart's argument that
class-action status shouldn't be allowed because its stores are individually
managed and run, saying there was "substantial evidence" of centralized
policies.
The suit, filed in 2001 by six female employees, alleges the Bentonville, Ark.,
retailer systematically paid women with similar qualifications less than men and
frequently overlooked women for promotions. Persuaded by the plaintiffs'
statistical data that Wal-Mart paid women workers 5% to 15% less than men in
comparable jobs, a federal district court judge in San Francisco ruled in 2004
that the lawsuit could apply to all women who have worked for Wal-Mart since
December 1998. Since then, the potential number of women eligible to join
the case has climbed to more than two million.
Wal-Mart had appealed the district court's certification on procedural grounds
and the size of the class, arguing that a class-action would improperly restrict
it from responding to claims individually.
The case originated as Wal-Mart was gathering increased attention by unions and
others for labor practices critics said were unfair to workers. Since
then, courts in Pennsylvania, California and Colorado have issued judgments of
as much as $100 million against the company in cases where store employees were
made to work off the clock and through rest breaks.
"We're confident based on the decisions of two courts that the women of Wal-Mart
will have their day in court," said Brad Seligman, the plaintiffs' co-lead
counsel. Joseph M. Sellers, co-lead counsel, said the decision
"demonstrates that big companies like Wal-Mart can be held to the same standards
as everyone else."
In his 40-page opinion affirming the lower court's decision, Judge Harry
Pregerson wrote "it would be better to handle this case as a class action
instead of clogging the federal courts with innumerable individual suits."
He also rejected Wal-Mart's arguments that class-action status would undermine
its ability to defend the suit: "Although the size of the class action is
large, mere size does not render a case unmanageable."
Judge Andrew J. Kleinfeld, who wrote the dissenting opinion, argued that the
size of the class alone would force most defendants to settle. "When the
potential loss is stratospheric, a rational defendant will settle even the most
unjust claim," he said in his eight-page dissent.
It's not common for the appeals court to reconsider its own rulings.
However, Carl Tobias, a law professor at the University of Richmond, said
procedural changes at the Ninth Circuit Court of Appeals could help Wal-Mart get
a type of hearing called limited en banc by a 15-judge panel. "It has been
more favorable recently. In the past they've heard about 20 [appeals] a
year. They're now hearing maybe 40 or 50 a year," he said.
The largest sex-discrimination settlement to date has been a $508 million
payment by the federal government to 1,100 women who said they were denied jobs
at the Voice of America and the U.S. Information Agency. A $240 million
settlement in 1992 by State Farm Insurance is the biggest corporate gender-bias
settlement to date.
The company denied it discriminates and maintains that any pay disparities were
isolated. In its appeal request, Wal-Mart had said while the district
court looked at companywide data, pay and promotion decisions are made by local
managers on a store-by-store basis. It claimed store-by-store statistics
show that individual stores didn't discriminate against women.
Write to Gary McWilliams at
gary.mcwilliams@wsj.com and Ann
Zimmerman at
ann.zimmerman@wsj.com
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