Will the Supreme Court approve the Wal-Mart case?

To follow is an excerpt from the CQ Researcher report "Class Action Lawsuits" by Kenneth Jost on May 13, 2011.


Betty Dukes went to work for the local Wal-Mart in Pittsburg, Calif., in 1994, as a part-time cashier earning $5 an hour. Seventeen years later, she has advanced no further than store “greeter,” making $15.23 an hour.

The outcome may also send lower federal courts an important signal on how strictly to apply the procedural rules governing class actions -- the controversial form of mass litigation used by discontented workers, defrauded investors and disgruntled customers and assailed by businesses and critics of runaway civil litigation.

So far, two lower federal courts have ruled that the case can proceed as a class action on behalf of 500,000 or more women who have worked for the company’s Wal-Mart or Sam’s Club stores in the United States since 1998.

The case could just as likely peter out if the U.S. Supreme Court decides that the decade-long litigation cannot go forward as a class action. The justices heard arguments on March 29 on the question of whether to certify as a class action the suit filed in 2001 on behalf of Dukes and five other named plaintiffs. The court’s answer to that seemingly technical question likely holds the key to the outcome. “These kinds of cases settle if they’re certified,” says Michael Selmi, a professor at George Washington University Law School in Washington, D.C., who has studied employment discrimination cases for more than a decade.

Class actions are, in the words of fellow George Washington law professor Roger Trangsrud, “the most controversial” form of civil litigation today. A class action allows plaintiffs with similar claims to consolidate claims too small to litigate individually into a suit big enough for a lawyer to take on and too big for a corporate defendant to brush off.

Civil rights organizations and investor- and consumer-protection groups view class actions as an indispensable legal tool against corporate wrongdoing. “There’s often widely dispersed harm from a defendant’s unlawful conduct,” says Scott Nelson, an attorney with the nonprofit Public Citizen Litigation Group in Washington. “If a company cheats 10 million people out of $30, that’s $300 million. That’s a lot of money.”

A class action, Nelson says, is often “the only way” to pursue such claims to compensate the victims. At the same time, he notes, attorneys for the class can seek a declaratory judgment or injunction to put a stop to the alleged wrongdoing in the future.

Business groups acknowledge some role for class actions, which can benefit a company by resolving a multitude of potential claims in one “global” settlement. But they also say that class actions can coerce a company into settling a dubious case to limit litigation expenses and avoid the risk of an even larger judgment. “Some companies are just devastated by class actions,” says Matt Cairns, a lawyer in Concord, N.H., and current president of the Chicago-based organization DRI -- The Voice of the Defense Bar.

Cairns says class actions sometimes also operate to plaintiffs’ detriment, as in consumer-suit settlements that provide class members with discount or reduced-price coupons for the defendant’s product or service. Cairns and other critics say the coupons often go unused while lawyers get to pocket six- or seven-figure attorney-fee awards.

Various forms of “aggregate litigation” can be found as far back as medieval England and the 19th-century United States. Today, class actions are governed in federal court by Rule 23 of the Federal Rules of Civil Procedure, which sets out requirements for certifying a suit as a class action. In short, the claims to be consolidated must be numerous and generally similar (“common”) and the named plaintiffs typical of and an adequate representative for the potential class.

If those criteria are met, a judge can then certify the case with an additional finding that a classwide injunction would be “appropriate” or that the common questions “predominate” over different issues, and class action is the “superior” method of adjudication.

The federal judiciary, exercising rulemaking authority granted by Congress, adopted Rule 23 in 1966, in the heady days of civil and consumer rights. In recent years, federal courts have come to apply the rule more strictly than before, making it somewhat harder for plaintiffs to get suits certified as class actions. In addition, Congress passed laws in the 1990s to tighten the rules for securities class actions and another measure in 2005 to shift nationwide class actions from state courts into what business groups viewed as a more favorable forum: federal courts.

Plaintiffs’ groups are downbeat about the trend. “Class actions right now have a ‘sell’ recommendation,” says John Vail, vice president and senior litigation counsel of the Center for Constitutional Litigation in Washington. The center is an arm of the American Association for Justice (AAJ), formerly the Association of Trial Lawyers of America.

Business groups and their allies, on the other hand, approve of the changes. “The trend is generally good,” says Richard Samp, chief counsel at the pro-business Washington Legal Foundation.

Employment-discrimination cases are one of the categories of class actions affected by the changed judicial climate. “There are a lot of hurdles for class actions,” says Rebecca Hamburg, program director of the San Francisco-based National Employment Lawyers Association, a plaintiffs’ group.

Thus far, the Wal-Mart case has defied that trend. A federal judge in San Francisco and a 6-5 majority of judges on the Ninth U.S. Circuit Court of Appeals have certified the case as a class action despite all-out opposition by the Bentonville, Ark.-headquartered company buttressed by several business and conservative groups at the appellate stage.

Dukes, now 61, brought her complaint of discrimination to the Impact Fund, a nonprofit law firm in Berkeley, Calif., in early 2001. Frustrated by several years of no advancement, Dukes felt unfairly treated when she was demoted for what she described as a common practice at the store: asking another cashier to open a cash register with a one-cent sale to make change she needed for a purchase.

Brad Seligman, the fund’s founder and senior counsel, combined Dukes’ complaint with others to file the original suit in federal court in San Francisco later that year. As evidence to support the certification of the case as a class action, Seligman and his colleagues compiled statistics showing an underrepresentation of women in managerial positions at Wal-Mart and a 5 percent to 15 percent pay gap for women in all 41 of Wal-Mart’s U.S. regions. The lawyers also introduced affidavits from 120 women documenting what they depicted as a pervasive atmosphere of sexism and gender stereotyping.

Wal-Mart sharply disputed the statistics and the thrust of the anecdotal evidence. It also argued that class certification was unwarranted because a class of as many as 1.5 million women had too many differences to satisfy the federal rule’s requirements of “commonality” and “typicality.” Nevertheless, U.S. District Judge Martin Jenkins certified the class in an 84-page order on June 21, 2004. The Ninth Circuit, the appeals court for California and eight other Western states, affirmed the ruling on April 26, 2010.

The Supreme Court agreed on Dec. 6 to hear Wal-Mart’s appeal of the ruling. By then, the justices had already put two other class action cases on their calendar for the term, which ends in late June, and were to add one more on Jan. 7. “The law of class actions is currently in flux,” says Alexandra Lahav, a professor at the University of Connecticut School of Law in Storrs who helped write a friend-of-the-court brief in support of the plaintiffs at the Supreme Court.

In the only ruling issued so far, the court gave business groups a major victory on April 27 by upholding companies’ ability to enforce clauses commonly seen in consumer contracts that bar class actions in arbitration. The 5-4 ruling in AT&T Mobility LLC. v. Concepcion rejected on federal preemption grounds a California rule treating waivers of classwide arbitration as generally unenforceable.

The Issues:

  • Do class actions provide effective remedies to plaintiffs?
  • Are class actions fair to defendants?
  • Are class actions too big for courts to manage?

Click here for more information on the CQ Researcher report on "Class Action Lawsuits" [subscription required] or purchase the PDF.