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Biggest-ever bias suit may fuel tort trend

Biggest-ever bias suit may fuel tort trend

SAN FRANCISCO—Employers are likely to face more class action lawsuits as the result of a federal appellate court decision that grants class action status to a sex discrimination lawsuit brought against Wal-Mart Stores Inc., say experts.

At the same time, observers say the split decision by the 9th U.S. Circuit Court of Appeals in San Francisco in Betty Dukes vs. Wal-Mart Inc., does not break any new legal ground, although it could wind up costing the Bentonville, Ark.-based retailer billions.

Its primary significance, observers say, is the unprecedented size of the class action, which affects some 1.5 million employees (see story, page 29).

Wal-Mart plans to appeal the 2-1 decision, its attorney says.

The appellate decision upholds a lower court's 2004 ruling that granted class action status to the approximately 1.5 million women who work or have worked in one or more of Wal-Mart's 3,400 stores in 41 regions at any time since 1998.

The seven plaintiffs in the case had charged that women employed by Wal-Mart were paid less than men in comparable positions despite higher performance ratings and greater seniority and that they received fewer—and waited longer—for promotions to in-store management positions than did men. They are seeking injunctive and declaratory relief, lost pay and punitive damages.

The appellate court said its decision is based on a limited review as to whether the lower court abused its broad discretion in ruling the case should be granted class action status.

The lower court "acted within its broad discretion in concluding that it would be better to handle this case as a class action instead of clogging the federal courts with innumerable individual suits litigating the same issues repeatedly," said the appellate panel.

Wal-Mart "failed to point to any specific management problems that would render a class action impracticable in this case, and the district court has the discretion to modify or decertify the class should it become unmanageable," the decision says. "Although the size of this class action is large, mere size does not render a case unmanageable."

However, in a strongly worded dissent, Judge Andrew J. Kleinfeld said the appellate decision "poses a considerable risk of enriching undeserving class members and counsel, but depriving thousands of women actually injured by sex discrimination their just due."

Wal-Mart attorney Theodore J. Boutros Jr., with Gibson, Dunn & Crutcher L.L.P. in Los Angeles, said, "We recognize this is another step in what is going to be a long process. It's a technical legal ruling" that only certifies the lawsuit as a class action, but does not address its merits, said Mr. Boutros.

"We think we have a very strong argument to obtain further review" from either the full 9th Circuit court or the U.S. Supreme Court, because the majority rule conflicts with many Supreme Court decisions as well as many recent decisions from other appellate courts around the country that "have rejected precisely the direction taken by the court," Mr. Boutros said. "We think we're correct on the law," he added.

However, Brad Seligman, executive director of The Impact Fund, based in Berkeley, Calif., who represents the Wal-Mart plaintiffs, said the appellate court is now the second court to rule on the class certification issue and "it's clear Wal-Mart is going to have to face the music and justify its practices, and we are very optimistic this case will ultimately be returned to trial."

The decision also may leave other employers more vulnerable to class action suits, which can be very costly, say some observers. If the principles endorsed by the appellate panel are applied elsewhere, it "would significantly broaden the class certification for employment actions against employers all around the country," said Mr. Boutros.

A major issue in the decision is whether Wal-Mart's female workers had enough "commonality" to be placed within the same class. Wal-Mart had argued they did not, but the appellate and district courts disagreed.

Michael Kun, an employer attorney with Epstein, Becker & Green P.C. in Los Angeles, said many plaintiff lawyers will be emboldened by this decision, and ask themselves the question, "'Why file a single or small class action. Why not go for broke and file an enormous class action?"' and hope it is certified. In many ways, he said, the Wal-Mart case provides a "road map for how to do it."

Decisions such as these tell plaintiffs and their attorneys that there "may be blood in the water" and more suits like it may very well follow, said Anthony J. Oncidi, an employer attorney with Proskauer Rose L.L.P. in Los Angeles.

Susie Gibbons, an employer attorney with Poyner & Spruill L.L.P. in Raleigh, N.C., said the decision "does not bode well" for large employers. "I see this as the bellwether of the next wave of unfortunate events for employers," she said.

Betty Dukes; Patricia Surgeson; Cleo Page; Deborah Gunter; Karen Williamson; Christine Kwapnoski; Edith Arana, Plaintiffs-Appellees, vs. Wal-Mart Inc., Defendant-Appellant, 9th U.S. Court of Appeals, No. 04-1668; Feb. 6, 2007.