Can A Business Be Too Big For A Class Action Suit?

Enlarge this image toggle caption Eric Risberg/AP Eric Risberg/AP

The U.S. Supreme Court takes on the biggest employment discrimination case in history on Tuesday — a case that pits Wal-Mart against roughly 1.5 million of its current and former female workers.

The case was filed 10 years ago, and Tuesday's argument is Wal-Mart's last-ditch effort to prevent a trial. The issue comes down to whether Wal-Mart is too big to be sued in a single nationwide class action lawsuit claiming gender discrimination.

Wal-Mart and its lawyer Ted Boutrous say the case is simply too big.

"They have brought a case that implicates 3,400 stores around the country," says Boutrous, involving "women at all different levels of the store, from the store managers to the entry-level positions."

But Joseph Sellers, the lawyer for the female plaintiffs, counters that class actions were created to deal efficiently with large numbers of similar claims.

"The majority of the women in this class have held five jobs," he says. "These are cookie-cutter type jobs, so the fact that there may be multiple stores doesn't mean the jobs are any different."

Whoever is right, what is clear is that the Supreme Court's ruling in this case could be the most significant and far-reaching employment discrimination case in more than a decade.

The issue before the high court is whether the female employees as a whole can be certified as a single group to sue Wal-Mart collectively in a single trial.

Large employers fear that a ruling allowing the case to go to trial would open the door to similar suits against them. Indeed, more than 20 major U.S. companies, including General Electric, Microsoft and Costco, have filed briefs in support of Wal-Mart out of fear that these types of class actions could ruin their businesses.

Conversely, civil rights lawyers fear that a loss could make it practically impossible to deal with systemic discrimination because individual claims — on average $1,100 in back pay at Wal-Mart — are too small to attract a lawyer and thus can't be pursued one by one. In addition, they maintain that the large class is needed to demonstrate a pattern of discrimination.

A federal judge, after hearing extensive preliminary testimony, certified the class to proceed to trial. A federal appeals court by a 6-to-5 vote upheld the ruling, with one of the dissenting judges, Sandra Ikuta, declaring that "never before has such a low bar been set for certifying such a gargantuan class."

Ultimately, the underlying issue is whether gender discrimination occurred at Wal-Mart on a large scale. When the female plaintiffs filed suit 10 years ago, their lawyers presented statistics showing that women made up 65 percent of the lower-level hourly workforce but only 33 percent of the management employees. In addition, the plaintiffs presented statistics showing that women overall were paid on average $1.16 per hour less than men in the same job, despite having more seniority, lower turnover rates and higher performance ratings.

Wal-Mart sharply disputes those statistics, contending that there is no pay difference between men and women at 90 percent of its stores and that the company has a staunch policy against discrimination.

Both sides have examples to prove their point. On one side are the half-dozen named female plaintiffs, like Christine Kwapnoski, suing on behalf of other similarly situated women.

Kwapnoski is a 46-year-old divorced mother of two who, though still employed at Wal-Mart, charges that the place is riddled with discriminatory practices. To cite one, she says that when she complained about a male employee with less experience getting more money, she was told he "had a family to support." At the time, Kwapnowski notes, she was actually paying child support.

Back when the case first started, she says, promotions were made on the basis of a "tap on the shoulder." She says jobs were rarely posted, and friends, mainly men, promoted friends, mainly men.

To counter that picture, Wal-Mart presents its vice president for human resources, Gisel Ruiz. Ruiz worked her way up from assistant manager trainee to store manager to regional vice president in charge of 150 stores before landing her current position.

"My experiences do not match up with the claims the plaintiffs are making," she says, "and I'm not the only one. I'm not an exception.

Sellers responds that is always the case in class actions, that some class members have not been the victims of discrimination, and these members typically are excluded as the case proceeds.

He contends that while Wal-Mart had a policy against discrimination on paper, it gave so much discretion to managers at every level to determine pay and promotions that discrimination was rampant.

Added to that, he claims, sexual stereotypes were promoted in all the company's management training sessions, resulting in a "culture" that pigeonholed women in certain positions.

Wal-Mart contends that the theory on which this lawsuit was brought is both spurious and radical. Spurious because the numbers are biased, and radical because the legal theory of "structural discrimination" is just that, a theory that has never been adopted by law.

"They have pushed class action rules to the breaking point," says Wal-Mart's Boutrous. "The plaintiffs swung for the fences ... to come up with a theory that would allow them to ensnare major companies in these huge class actions" to "get a quick settlement."

But the female plaintiffs maintain that Wal-Mart's corporate behavior is a throwback to an old era.

"Wal-Mart is a corporate outlier," Sellers says. "The policies that we were challenging have been abandoned by most companies decades ago."

He argues that "there is no large company exception to the civil rights laws" and "for Wal-Mart to contend that somehow this case is too big" to be pursued "is to try to carve out an exception for it and other large companies from coverage under the civil rights laws."

It may be difficult, however, to sell that view to a Supreme Court majority that is widely viewed as business-friendly.