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Thursday, April 21, 2011

The Ominous Expansion of Class-Action Suits: Walmart v. Dukes

In the largest class-action lawsuit in American history, Walmart v. Dukes, Walmart stands accused of systematically discriminating against as many as 1.5 million women in wages and promotions. The Supreme Court has agreed to a limited review, judging solely whether class-action certification was justified.

At stake are billions of dollars and the creation of a new standard for certifying class-action lawsuits, which would make such suits far more common than they are now, increasing the potential for legal harassment. Walmart disputes the grounds on which class certification was granted to female employees at 3,400 stores.

In 2000 an ex-greeter named Betty Dukes sued Walmart under Title VII of the Civil Rights Act (an obvious intervention in the market) for lack of promotion. Walmart unsuccessfully argued that Dukes had received frequent reprimands for lateness from her female supervisor, which led to a demotion.

In 2001 Dukes and several other plaintiffs asked the U.S. District Court in San Francisco to “class certify” their case. Class-action lawsuits are a “procedural mechanism” through which individual claims based on a common interest are aggregated to ensure both judicial efficiency and the ability of low-income individuals to sue.

In 2004 certification was granted; Dukes became the largest class suit ever certified on the basis of a small number of reported incidents. Walmart appealed.

In February 2007 a three-judge panel of the Ninth Circuit Court affirmed certification. Walmart filed for a rehearing before the full bench.

In April 2010 the full court affirmed the certification, 6-5. The suit was then modified; for example, past employees were excluded without prejudice, allowing them to sue separately. (The number of plaintiffs is variably cited as 1.5 million or 500,000, depending on whether the past employees and their follow-on suits are included.)

Chief Judge Alex Kozinski voiced strong dissent, stating, “[N]o court has ever certified a case like this.” He said the decision invites other class-action lawsuits “based on nothing more than general and conclusory allegations, a handful of anecdotes, and statistical disparities.” The strength of Kozinski’s dissent reflected the political and legal stakes.

The case has been heavily politicized by labor advocates. For example, in her 2004 book, Selling Women Short: The Landmark Battle for Workers’ Rights at Wal-Mart, journalist Liza Featherstone excoriated the retail giant’s labor practices. In follow-up articles and interviews she likened Dukes to civil-rights heroine Rosa Parks.

Politics has obscured the more technical legal issues.

Legally speaking, the debate over Dukes v. Walmart revolves around the nature of evidence that could be properly admitted to justify class certification, and whether the nature of the suit itself satisfied the basic requirements of class certification.

In terms of evidence, the suit set a precedent on what is admissible to class-certify a “harm.” The labor law firm Littler Mendelson commented:

[T]he court credited plaintiffs’ sociology expert’s opinions despite acknowledging they were replete with conjecture . . . [,] allowed aggregation of the statistical data at the regional and national level, and accepted the use of a formula for determining damages instead of individualized findings. . . . Most ominous, the Dukes court gave short shrift to the multiple defenses raised in opposition. . . . Roadblocks that defendants have successfully used against other class certification motions were summarily brushed aside, making molehills out of what previously were mountains.


Grounds for Dissent

Two grounds on which Walmart contested the suit’s eligibility for certification were a lack of “commonality” and “manageability.”

Ideally, all members of a class suit should have a clear “commonality” of harm, such as acquiring a disease from toxic exposure. A class should also have “manageability” to ensure an effective defense is possible; otherwise the defendant’s Fourth Amendment right to due process is jeopardized.

Commonality. The 2004 certifying court had criticized Walmart’s “excessive subjectivity” of policy, which gave managers “substantial discretion” in promotion and salary. Ironically, “subjectivity” was a key point in Walmart’s defense. The corporation argued that each outlet operates as an independent business and so women alleging bias needed to file individual lawsuits against specific stores. In short, the plaintiffs did not share a common harm.

Kozinski echoed Walmart’s argument in his dissent:

Maybe there’d be no difference between 500 employees and 500,000 employees if they all had similar jobs, worked at the same half-billion square foot store and were supervised by the same managers. But the half-million members of the majority’s approved class held a multitude of jobs, at different levels of Wal-Mart’s hierarchy, for variable lengths of time, in 3,400 stores, sprinkled across 50 states, with a kaleidoscope of supervisors (male and female), subject to a variety of regional policies that all differed depending on each class member’s job, location and period of employment. Some thrived while others did poorly. They have little in common but their sex and this lawsuit.

Nevertheless, in the certifying court’s judgment, a typical class-plaintiff was defined by sociological analysis (known as “social framework testimony”), statistical aggregation, and the vagaries of “too much” managerial discretion.

Manageability. Walmart also argued that the suit’s sheer size prevented an effective defense. The company raised not merely constitutional due-process concerns but also the violation of its rights under Title VII. Under that title Walmart has the right to defend individual pay and promotion decisions, the exercise of which becomes a practical impossibility due to Dukes’s size and lack of individual hearings.

Thus the corporation’s lead counsel, Theodore Boutros, Jr., argued that class certification violated “both due process and federal class action rules, contradicting numerous decisions of other federal appellate courts and the Supreme Court itself.” In short, the case’s manageability does not conform to controlling law.

Oral arguments before the Supreme Court took place in March. Walmart is expected to prevail. Before the Supreme Court agreed to hear the case, Professor Deborah Hensler of Stanford Law School told UPI that acceptance would “signal this business-friendly court is hostile to class actions against corporate defendants.”

If review had been declined, Walmart would have been under extreme pressure to settle and an avalanche of similar lawsuits against corporate giants might have ensued, especially in the western states overseen by the Ninth Circuit. If Walmart does not prevail, that outcome becomes likely once more.

  • Wendy McElroy is the author of over a dozen books on individualist feminism and libertarian history. Her upcoming book, "The Satoshi Revolution," applies the concepts of classical liberalism to cryptocurrency. She has been published by such diverse venues as Penn State to Penthouse, FEE to Marie Claire.