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Tuesday, December 7, 2010

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 1.5 million women in wages and promotions. Yesterday the U.S. Supreme Court said it will review the controversial lower-court ruling that permitted the case to proceed as a class action.

At stake are billions of dollars and the creation of a new standard for certifying class-action lawsuits. 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 for lack of promotion. Walmart unsuccessfully argued that Dukes had received frequent reprimands for lateness from her female supervisor.

In 2001 Dukes and several other plaintiffs asked the U.S. District Court in San Francisco to “class certify” their case.

In 2004 certification was granted. 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.

Last April the full court affirmed the certification 6-5. Chief Judge Alex Kozinski voiced strong dissent, stating, “[N]o court has ever certified a case like this”; the decision invited 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.

Underlying Issues

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 retail giant’s labor practices. In follow-up articles and interviews she likened Dukes to the civil rights heroine Rosa Parks.

Politics has obscured the more technical legal issues.

The suit sets a dangerous precedent on what evidence of harm is necessary to class certify a case. Ideally, members of a class 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.

The labor-law firm Littler Mendelson commented on how far the 2004 certification strayed from those criteria:

[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.

The certifying court also criticized Walmart’s “excessive subjectivity” of policy, which gave managers “substantial discretion” in promotion and salary.

In short, Walmart’s typical plaintiff was defined by sociological analysis, statistical aggregation, and the perception of too much managerial discretion.

Walmart contends that the plaintiffs’ lack of commonality and their unmanageable size prevent an effective defense. Thus its lead counsel, Theodore Boutros, Jr., argues 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.”

Oral arguments could occur next spring. Walmart is expected to prevail. Before the Supreme Court agreed to hear the case, Professor Deborah Hensler of Stanford Law School stated 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 a flood of similar lawsuits against corporate giants might have followed.

  • 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.