Wal-Mart takes hit with federal court ruling

What has been billed as the largest potential class-action lawsuit — Dukes v. Wal-Mart Stores — in the country was certified today (April 26) by the Ninth Circuit of Appeals.

The 6-5 decision by the court allows a case to move forward that originally included more than 1.5 million current and former female employees. The gender discrimination claim alleges Wal-Mart failed to promote and pay women as equally as men. Some estimates have the per claim payout ranging between $500,000 and $1 million, meaning a possible monetary claim could reach the hundreds of billions.

However, the court did agree to reduce the size of the original class size by up to two-thirds when it said those not employed by Wal-Mart when the complaint was first filed (June 8, 2001) “do not have standing” to pursue legal relief.

“We are pleased that the court agreed with our position on several critical issues,” Wal-Mart officials noted in a statement released Monday. “The court significantly reduced the size of the originally certified class by as much as two-thirds. Finding that the trial court ‘abused its discretion,’ the appeals court also set aside the ruling on punitive damages.”

The company also stressed that the ruling from the Ninth Circuit court was a procedural ruling and not a ruling on the merits of the case.

“We do not believe the claims alleged by the six individuals who brought this suit are representative of the experiences of our female associates. Walmart is an excellent place for women to work and fosters female leadership among our associates and in the larger business world,” the company noted.

The majority decision disagreed with Wal-Mart attorneys who argued that the case was too big in terms of class size and potential monetary relief.

With respect to costs, the court noted: “Wal-Mart contends that monetary claims necessarily predominate because this case involves claims that may amount to billions of dollars. However, such a large amount is principally a function of Wal-Mart’s size, and the predominance test turns on the primary goal and nature of the litigation — not the theoretical or possible size of the total damages award. Because Wal-Mart has not shown that the size of the monetary request undermines Plaintiffs’ claim that injunctive and declaratory relief predominate, we find that Wal-Mart’s argument fails.”

With respect to size, the court noted: “Given the tentative nature of the district court’s trial plan, we decline to address Wal-Mart’s due process and manageability challenges to that plan. We note, however, that the district court has the discretion to modify or decertify the class should it become unmanageable. Although the size of this class action is large, mere size does not render a case unmanageable.”

James Beck, a lawyer and contributor to Forbes.com, said after the ruling that he suspects the class-action matter will find its way to the U.S. Supreme Court. He also noted that the Ninth Circuit is “notorious for a high reversal rate” from the Supreme Court.

Link here to the court opinion. (Fair warning: It is a large PDF file.)