U.S. News

Lawsuit exposes Wal-Mart to billions in potential damages

SAN FRANCISCO/NEW YORK (Reuters) - A landmark sex-discrimination lawsuit against Wal-Mart Stores Inc may proceed as a class-action case, a federal appeals court said, dealing the retailer a major blow and exposing it to billions of dollars of potential damages.

A worker brings carts back into a Walmart store in Westminster, Colorado August 14, 2008. REUTERS/Rick Wilking

More than 1 million women could be included in the class, after the 6-5 ruling by the Ninth Circuit court on Monday.

Wal-Mart said it would appeal to the U.S. Supreme Court.

The original lawsuit, hailed by lawyers as the largest sex discrimination class-action in U.S. history when it was filed in 2001, claimed that Wal-Mart paid female workers less than male colleagues and gave them fewer promotions.

Wal-Mart, the world’s largest retailer and largest private U.S. employer, had asked the Ninth Circuit Court of Appeals in San Francisco to undo class-action certification in the case that alleged discrimination in its more than 3,000 stores.

“It’s a huge win for the plaintiffs, and a tremendous loss for Wal-Mart,” said Paul Secunda, an associate professor of law at Marquette University Law School. Given the number of employees involved and many years of pay at issue, he said “the amount of liability can be many billions of dollars.”

The lawsuit’s reemergence follows years of work by Wal-Mart to improve its image, from efforts to become more eco-friendly to mobilizing resources for disaster relief.

Wal-Mart shares closed down 0.9 percent at $54.04 on the New York Stock Exchange. Analysts said the small decline may reflect that fact that investors know the case still faces years of litigation.


The class action will now cover claims made by women who have worked at Wal-Mart since June 2001.

“Although the size of this class action is large, mere size does not render a case unmanageable,” Judge Michael Daly Hawkins wrote for the majority.

A lower court will decide whether the claims of those who worked between 1998 and 2001 can join the class.

Both sides squabbled over the new size of the class in light of the court’s ruling.

Theodore Boutrous, who argued the case for Wal-Mart in front of the Ninth Circuit, said the ruling in effect whittled the size of the class down from roughly 1.6 million to 500,000. Seligman disagreed, saying claims from only about 20 percent of the class had been remanded to the lower court.

Boutrous said the ruling contradicted “numerous” decisions by other federal appeals courts, as well as the Supreme Court.

“We do not believe the claims alleged by the six individuals who brought this suit are representative of the experiences of our female associates,” Wal-Mart General Counsel Jeff Gearhart said in a statement.

The Ninth Circuit court also ordered the lower court to consider whether to certify the class for claims of punitive damages.

The six judges in the majority were appointed to the court by Democratic presidents, while four of the five dissenting judges were appointed by Republican presidents.

“No court has ever certified a class like this one, until now. And with good reason,” Judge Sandra Ikuta wrote in the lead dissent. Absent evidence of companywide discrimination, she said “there is nothing to bind these purported 1.5 million claims together in a single action.”

Also dissenting was Chief Judge Alex Kozinski, a leading conservative whose view could carry weight if Wal-Mart appeals. He wrote that the plaintiffs who make up the approved class “have little in common but their sex and this lawsuit.”


Class-action lawsuits generally make it easier for groups of plaintiffs to sue well-heeled corporations and have led to large payouts by tobacco makers, and oil and food companies.

The suit originated with Wal-Mart worker Betty Dukes who sued for sexual discrimination in 2001 with six other plaintiffs. A trial judge certified the case as a class-action in 2004.

According to plaintiffs, female workers were routinely steered away from management positions and into such jobs as cashiers, with little chance for promotion. Court documents cite one woman who was told she was not qualified to manage because she could not stack 50-pound bags of dog food.

Charles Sullivan, a professor at Seton Hall University School of Law, who specializes in employment law, said Wal-Mart would face “huge economic pressure” to settle the case if the Ninth Circuit ruling was allowed to stand.

“Even if there is only a small chance it could lose at trial, the risk of having tens of billions of dollars of potential liability is too great,” said Sullivan.

But he noted that the Supreme Court has been unsympathetic to large class-actions of late.

Additional reporting by Phil Wahba; Editing by Tim Dobbyn, Maureen Bavdek and Richard Chang