Tuesday, October 11, 2011

The Wal-Mart chronicles: part I (legal issues)

On June 20th, the U.S. Supreme Court rejected the Ninth Circuit’s certification of a class in a class action lawsuit brought by current and former employees of Wal-mart against the corporation. (See Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541 (2011); Dukes v. Wal-Mart Stores, Inc., 603 F.3d 571 (9th Cir. 2010).) The lawsuit attracted extensive media attention; with over a million employees, Wal-Mart is the largest private employer in the United States. A lot of money was at stake.

In short, the women bringing the suit alleged that they were victimized by Wal-Mart’s practice of letting local managers make subjective decisions about pay and promotions. More than 100 employees filed sworn declarations stating that they were paid less and given fewer opportunities for promotion than male colleagues.

The Supreme Court's opinion is noteworthy both for settling this high-stakes dispute, and because it sets new limits on class action suits, limits that may affect pending gender discrimination complaints against units of companies such as Cigna Corp. (CI), Goldman Sachs Group Inc. (GS), Bayer AG (BAYN), Toshiba Corp. (6502), Publicis Group SA, Deere & Co. (DE) and Costco Wholesale Corp. (COST).  Federal Rule of Civil Procedure 23, which governs class certification, sets forth four requirements. These are (1) numerosity -- the class must be so numerous that joinder of all members is impracticable; (2) commonality -- questions of law or fact common to the class; (3) typicality -- claims or defenses of the representative parties are typical of the claims or defenses of the class; and (4) adequacy of representation -- the representative, or named, parties must fairly and adequately protect the interests of the class. (Fed. R. Civ. Proc. 23.)

In its opinion, the Supreme Court ("Court") wrote that in order to prove 23(a)(2) commonality, a plaintiff must show significant proof that an employer operated under a general policy of discrimination in order to "bridge the conceptual gap" between an individual’s discrimination claim and the existence of a class of persons who have suffered the same injury. This has the potential to raise the plaintiff’s burden of proof from (A) the plaintiff’s having to prove merely that the alleged injuries were similar to (B) the plaintiff's having to show that the alleged injuries stemmed from the same "general policy" of discrimination.

The Court found that plaintiffs failed to meet that heightened burden of proof. Wal-Mart’s official company policy forbids sex discrimination, and the superstore has penalties for denials of equal opportunity. The Court found that no statistical or anecdotal evidence suggested even an informal "general policy" of sex discrimination.

The Court further found that the Ninth Circuit improperly certified the class members’ claims for backpay. Under Rule 23(b)(2) monetary relief is only available when a single, indivisible remedy would provide relief to each class member. Accordingly, it is usually incidental to injunctive or declaratory relief. Where individuals’ claims would be more fairly and efficiently adjudicated one by one, class certification is denied. (Fed. R. Civ. Proc. 23.) Backpay is a typical remedy in “pattern or practice” discrimination claims, and because it is so situation-specific, backpay tends to be easier to determine on a person-by-person basis than for a large group of people. (Interestingly, this monetary relief rule reflects an application of the basic principles of postmodernism and non-essentialism in an economic context.)

Although the Court denied class certification, the aggrieved women’s lawyers state that they will move ahead with claims on behalf of the female workers, either as individuals or as part of smaller groups.


KayZee said...

Rose Sawyer, thanks so much for this informational post about the current Wal-Mart legal battle. I think these types of stories are really pertinent to our class because we have discussed many times before, the role of the law as it pertains to gender equality and rights. I often ponder "what comes first"...the law or society? Is the law going to change and then society will follow, or is it society that must change first in order to creates the laws necessary to help fight inequality.

After reading this piece, some might think that society must change first, because sometimes it feels as though the law cannot keep up. But I've come to the conclusion that there is no set path for how to gain equality in terms of society versus law. What comes to mind is the Perry v. Schwarzenegger case. The issue of marriage equality was put to a vote in California and the people voted against it. Albeit, the case is still on appeal, but the decision at least at the district court was in favor of marriage equality. In this example, it has been law that was the bigger champion of equal rights. I suppose we'll just have to keep up the fight through both venues.

Alejandro said...

Rose Sawyer, this Supreme Court case raises some interesting issues regarding class action lawsuits and when they are appropriate. One might say the problem is how female employees can, in the future, meet such a high standard of burden that the Court has stated is the proper standard for such lawsuits. In the case to which you have referred, and as the Court noted, Wal-Mart's official policy forbids sex discrimination and penalties are issued for violations of this policy.

With regards to the commonality requirement of Rule 23(a), it is very difficult in this case to prove a general policy of discrimination given the fact that, as the plaintiffs conceded, Wal-Mart allowed local supervisors to exercise discretion over "employment matters." As the Court noted, "that is just the opposite of a uniform employment practice that would provide the commonality needed for a class action."

It will be interesting to see how future sex discrimination concerning big chain stores like Wal-Mart will develop. Undoubtedly, satisfying this heightened standard will be one of the primary obstacles to overcome in satisfying the commonality requirement of Rule 23(a).

hanestagless said...

Certainly, the case itself had high stakes, but as you and Alejandro mention, it will have lasting negative repercussions on future gender discrimination cases. Class actions are advantageous for employment discrimination cases because they provide incentives to claimants who would otherwise not sue because of small recovery or high cost. They also deter future employers from behaving similarly to the defendant. The Court is severely limiting this useful weapon in the fight against gender discrimination.

The decision appears to give companies a pass on gender discrimination as long as the company leaves pay and promotion decisions to the discretion of local managers. Despite, the plaintiff presenting statistical evidence suggesting gender discrimination existed in Wal-Mart on a nation-wide level, the Court refused to adopt the plaintiff’s theory because the statistics do not indicate what happens in individual stores. This can be said for statistics in general. Yet, we can look to statistics to tell us a larger story of what is happening at Wal-Mart.

Justice Ginsburg says in her dissent, “The practice of delegating to supervisors large discretion to make personnel decisions, uncontrolled by formal standards, has long been known to have the potential to produce disparate effects. Managers, like all humankind, may be prey to biases of which they are unaware.” Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541, 2564 (2011) (Ginsburg, J., dissenting). We have extensively discussed such gender biases that influence employment. Unfortunately, the majority fails to acknowledge that Wal-Mart’s policy for local manager discretion allows these biases to pervade the corporation. This policy and its practice affects all the women employees.

Before this case, I would have thought a class action suit would be ideal to challenge the existence of gender discrimination within Wal-Mart. Surely the class action attorneys thought similarly. Now, I’m not so sure.

Girl Talk said...

The Walmart decision will have a huge, negative impact on pattern and practice cases of discrimination. Under Walmart, companies can (and likely will) create policies that delegate more and more discretion to low-level managers in an attempt to show that it is impossible for the company to have a "practice" of discrimination when the practices of managers are different based on discretion. I believe Scalia referred to it as the "glue" that holds the class action claims together. Plaintiffs in a class action discrimination case will be unable to show that their situations share commonality because each situation is different based on the discretion of a manager (rather than a company wide policy of, say, who gets promotions or pay raises). Essentially, it is diffusion of responsibility.

There already have been repercussions of Walmart. Ellis v. Costco, a class action gender discrimination case with similar facts to Walmart, had its class certified in district court. It was appealed to the Ninth Circuit, who sent the certification back to the district court for reconsideration in light of the Walmart ruling. The Ninth suggested the class lacks commonality.

The Walmart ruling was absolutely terrible and it pulled the trigger on the beginning of the end of class actions. I fear what's ahead.