Supreme Court Limits Wal-Mart Discrimination Case

The U.S. Supreme Court has thrown out the largest sex discrimination lawsuit in American history — a nationwide class action lawsuit brought against Wal-Mart on behalf of 1.5 million female employees.

The 5-to-4 decision arguably leaves room for smaller lawsuits against Wal-Mart, based on alleged discrimination in a single store, region, or state. But for all practical purposes, Monday's ruling makes any nationwide class action lawsuit impossible.

By almost any marker, Monday's ruling is the most significant employment discrimination decision in more than a decade.

"This is an extremely important victory, not just for Wal-Mart, but for all companies who do business in the United States," said Theodore Boutrous, Wal-Mart's lead counsel.

"It's a great disappointment," said Joseph Seller who represents the class of female Wal-Mart employees. But "[i]t is not the end of the case by any means."

The issue before the Supreme Court was whether female employees as a group could be certified as a single class, suing Wal-Mart at a single trial. Lawyers for the women introduced evidence showing that female employees held two-thirds of the lowest-level hourly jobs at Wal-Mart, but only one-third of the management jobs, and that women overall were paid on average $1.16 per hour less than men in the same jobs, though the women had more seniority and higher performance ratings.

A federal judge, after hearing preliminary testimony, certified the class to proceed to trial, and Wal-Mart appealed all the way to the Supreme Court. On Monday, the company won.

The Decision

Writing for the five-member court majority, Justice Antonin Scalia said that in order to sue as a single class, the women would have to point to a discriminatory policy that affected all of them, and they could not do that. Indeed, Scalia noted that the company has a specific corporate policy against discrimination.

The four dissenting justices — including the court's three female justices — agreed that the lower courts had used the wrong standard in certifying the nationwide class, but they would have sent the case back to the lower courts for a second look at whether the class could be certified using a stricter standard than had been used before.

Justice Ruth Bader Ginsburg, writing for the dissenters, pointed to previous Supreme Court decisions holding that a company-wide policy against discrimination can be undermined where, as alleged here, local supervisors have so much discretion that decisions are made without standards, often on the basis of biases even unrecognized by the supervisors themselves. As one example, they cited the frequent assumption that a female employee with a family would not be willing to relocate for a promotion.

But the court's majority saw it differently. Here, wrote Scalia, some 1.5 million women who now work or previously worked in some 3,400 stores "wish to sue about literally millions of employment decisions at once. Without some glue holding the alleged reasons for all those decisions together, it will be impossible to say that examination of all the class members' claims for relief will produce a common answer to the crucial question 'why was I disfavored.'"

Joining Scalia in the majority were Chief Justice John Roberts and Justices Anthony Kennedy, Clarence Thomas and Samuel Alito, all Republican appointees. Joining Ginsburg in dissent were Justices Stephen Breyer, Sonia Sotomayor and Elena Kagan, all Democratic appointees.

Impact Of Ruling

Most experts saw the court's ruling as an expansive rejection of large employment discrimination class action suits.

"This is a disaster not only for civil rights litigants but for anyone who wants to bring a class action," said civil rights lawyer David Sanford. "[The] five-male majority decision ... represents a jaw-dropping form of judicial activism that needs an immediate congressional remedy."

Just last year, Sanford won a $175 million judgment against Novartis, a Switzerland-based pharmaceutical company, for systemic discrimination against its 6,000 female salespeople nationwide. The theory was similar to the one argued by the Wal-Mart plaintiffs — that excessive discretion by supervisors resulted in gender discrimination. Sanford said the Novartis case, which was settled out of court after an even bigger $250 million jury award — could not have been brought under Monday's ruling.

"I think it's going to change the landscape for civil rights litigation [and] it's going to change the landscape for class-action litigation," Sanford said. And without such class actions, he added, "the moral component of what we do ... to create systemic change at a company" will not be achievable.

Marcia Greenberger, president of the National Women's Law Center, said the ruling has "a triple whammy of a disaster effect for those who are trying to fight discrimination in the workplace." Not only does the ruling make it more difficult for women to come together to sue as a group, but that fact, she said, will make it more difficult to find lawyers to fight individual suits against large companies. Moreover, she said, the decision will create a "perverse incentive for employers" to set up structures under which individual managers may well use their discretion in discriminatory ways while the company remains immune to class action lawsuits because it has a formal policy against discrimination.

"It sets up new hurdles and new rules for making out a claim of employment discrimination and it actually sets out a perverse incentive for employers ... to be less vigilant in routing out discrimination in the workplace," Greenberger said.

Elise Bloom, who heads the class action section at Proskauer Rose LLP, a law firm that defends large companies against class action suits, agrees.

"The first thing I'm going to do," said Bloom, is to look at all the class action suits she has that are still pending "and take a look at the certification decision and specifically take a look at what the basis for [certification] was because courts always have the ability to decertify."

Stanford law professor Deborah Hensler, an expert on class action suits, says she sees Monday's ruling as a "pretty comprehensive defeat" for civil rights plaintiffs.

"I read this decision as saying" that unless a company has "a policy that is clearly discriminatory on [its] face, which is hard to imagine in this day and age, that suits against discriminatory practices will now be much more difficult to pursue," Hensler said.

'Splintered Into Lots Of Pieces'

But Joseph Sellers, the lawyer for the female employees at Wal-Mart, says that while the road may be longer, he believes the case against Wal-Mart can still be made in cases brought on a statewide, region-wide, or even store-wide basis.

"One of the things that was striking about this case — more so than in many, in my view — was how boldly and how openly managers told women and men the reason why they weren't promoting women" or "were promoting women less than men," said Sellers. "This was not a practice that was furtive; it was quite out in the open because they were so confident that they could do this."

While most class action experts saw Monday's ruling as something of a slam-dunk for Wal-Mart and for employers generally, others saw it in less epic terms.

"It's actually a limited decision," said NYU law professor Samuel Issacharoff. He says the problem with the Wal-Mart suit was that it started off big, seeking a framework for widespread damages.

"This case actually posed it backwards by saying, first, let's figure out what the comprehensive remedy would look like and then see if there are any individuals that fit under the theory of liability," said Issacharoff.

Stanford law professor Joseph Grundfest thinks that the plaintiffs might have a viable alternative in state courts. "We have a state court system and the rules in state court can be quite different. In a unanimous decision that the court issued just last week, Smith v. Bayer, the court made it entirely clear that state law can entertain class actions that are not permitted to proceed in federal court." Indeed, said Grundfest, "[i]f you can get sufficient victories in sufficiently large and populous states, you can actually create a situation where a de facto national standard evolves simply because you have to do business in large, commercially important jurisdictions."

The lawyers for the Wal-Mart women said they had amassed evidence from thousands of women, and even from company executives, documenting gender discrimination. They say they are lining up lawyers around the country to use that data in smaller cases.

"We have evidence of these kinds of statements being made in a number of places; in stores and in some cases at the regional level that we think will permit us to frame this as a series of smaller classes," Sellers said. "What the court has eliminated is the most economical and efficient way to adjudicate this case. It's now going to be splintered into lots of pieces."

Going forward, Sellers said, "What we will look for on a region- or store-wide basis is some evidence to which we can attribute to top-level people in the region or in the store, some more general bias toward women. I don't read the majority as saying you can never have a class [action] where there is evidence attributable to higher-level people."

But success in these smaller class actions is unclear. "The plaintiffs' lawyers may try to bring reconfigured cases ... but this decision makes very clear that it's their theory that is fundamentally flawed," said Wal-Mart attorney Ted Boutrous. "I think that will preclude and make it almost impossible to get anywhere with anything other than an individual claim."

Other Decisions

As important as the Wal-Mart case is, the court issued another 5-to-4 ruling with likely consequences for thousands of parents and children.

At issue in the case was whether indigent parents who have no lawyer to represent them in court can be jailed repeatedly for as much as a year for failing to make child supports payments.

Michael Turner was jailed for one year in South Carolina for failing to pay the nearly $6,000 he owed in child support. He was unemployed and had no lawyer because he couldn't afford one. It was not the first time he had been jailed for failure to pay, nor would it be the last.

While most states do provide lawyers for indigent parents facing jail for nonpayment, South Carolina does not. When Turner's case reached the U.S. Supreme Court, his pro bono lawyers argued that a state that sends a deadbeat dad to prison without a lawyer is creating a modern form of debtor's prison, depriving individuals of their right to liberty without due process of law.

The Constitution provides that criminal defendants are entitled to a lawyer, and if they are too poor to afford one, the state must provide counsel. But deadbeat parents are cited for civil, not criminal, contempt of court — the idea being that civil defendants "have the keys" to their own jail cell; that if they comply, they get out of prison. In most deadbeat dad cases, however, where the dad is indigent, he doesn't have the money to get himself out of prison. So, the question was, in these circumstances, does the state have to provide a lawyer?

By a 5-to-4 vote, the court said the Constitution does not automatically require a state-paid lawyer, but if the state does not provide counsel, it must provide mechanisms to protect the basic rights of the parent who is threatened with prison.

In Turner's case, the Supreme Court said, South Carolina provided neither a lawyer nor alternative systems that would have protected Turner's rights.

He was never told his ability to pay was the crucial question at his civil contempt hearing; he was not provided a form that would have disclosed his inability to pay; the judge made no finding of his ability or inability to pay. Under these circumstances, said the court, Turner's imprisonment violated the Constitution's guarantee to due process of law.

Justice Breyer wrote the majority decision, joined by Justices Kennedy, Ginsburg, Breyer, Sotomayor and Kagan. Dissenting were Justices Thomas, Scalia, Alito and Chief Justice Roberts.

Both sides cited the research work of Elaine Sorensen, of the Urban Institute, author of an article titled "Deadbeats and Turnips in Child Support Reform." Deadbeats are parents who could but don't pay. Turnips are parents who can't pay, as in "You can't get blood out of a turnip," says Sorensen, adding that those who end up in prison "are more likely to be a turnip than a deadbeat."

Indeed, statistics cited by Turner's pro bono lawyers show that in South Carolina at least 13 percent of the county jail population consists of deadbeat dads, and that 98 percent of them did not have lawyers.

Climate Change Lawsuit Blocked

In yet another important ruling, the court by an 8-to-0 vote, limited the rights of states to sue utilities for carbon emissions.

Six states – New York, California, Connecticut, Rhode Island, Iowa and Vermont – along with the City of New York sued five major electric power companies – American Electric Power Co., Duke Energy Corp., Southern Co., Xcel Energy, Inc., and the federal Tennessee Valley Authority, all of which combine to produce approximately 10 percent of U.S. annual carbon emissions.

The suit sought to impose emission caps on these power companies under the theory that the emissions constituted a "public nuisance," a long-standing court-created claim separate from the federal regulatory scheme administered by the Environmental Protection Agency under the Clean Air Act.

The court unanimously rejected the nuisance claim and ruled that the Clean Air Act entrusts the "complex balancing" of carbon dioxide emissions policy to the expertise of the EPA.

Writing for the court, Justice Ginsburg said that the Clean Air Act leaves "no room for a parallel track" of regulation by federal judges. Put plainly, Ginsburg said when announcing the decision from the bench, this is a question of "who decides"; that is, which branch of government is empowered to decide whether and to what extent emissions caps should be imposed – the courts or an executive agency pursuant to congressionally delegated authority to promulgate regulations.

Finding that Congress "vested decision-making authority" on carbon emissions in the EPA, said Ginsburg, "the plaintiffs cannot bypass the EPA's rulemaking" authority by resorting to the courts to impose the emissions caps.

The court remanded the case to the lower court to determine whether the lawsuit could proceed under state tort law.

Justice Sotomayor was recused.