Supreme Court Blocks Wal-Mart Class Action

The big news in the legal world recently came from the U.S. Supreme Court. Over the last several years, Wal-Mart has been involved in a class action lawsuit alleging that it discriminates against women in its hiring and promotion practices. The plaintiffs sought to consolidate a class of 1.5 million women – essentially all of Wal-Mart’s female employees. It was the largest employment discrimination lawsuit in the history of the United States.

It should be noted that this case has been going on for years, and no court has even ruled on the merits yet. Essentially, the dispute over the last several years has concerned whether or not such a large class of plaintiffs should be certified. So, no court has yet decided whether Wal-Mart actually discriminated against the women. It just decided that the lawsuit cannot proceed in its current form.

A class-action lawsuit is a procedure that allows a large number of individuals (the groups can range in size from a few dozen to over a million individuals) to sue a defendant, alleging that the defendant has engaged in some course of conduct that harmed all of them. Both a U.S. District Court and the 9^th Circuit Court of Appeals agreed that the class should be certified, but the Supreme Court (in a unanimous opinion, I should note) has just overturned them both.

The decision to deny class certification in this case was unanimous, but there was some disagreement on the scope of the opinion, with 4 Justices dissenting in part. Essentially, what sunk the case was the fact that the plaintiff’s lawyer sought billions of dollars in back pay from the defendant, but in filing the case, used legal procedures that are designed for class actions in which monetary damages are not the primary relief sought.

However, on another, perhaps sticker issue, the court was far more divided: voting against the plaintiffs 5-4. One requirement, of several, for certifying a class is whether or not the cases of all the plaintiffs present a “common question of law or fact.” This essentially means that, by conducting a single trial, with a single body of evidence presented by both sides, the question of whether or not every single plaintiff in the class has suffered a legally-cognizable injury can be answered.

However, the plaintiffs’ attorneys made a crucial strategic error on that front: they did not allege that Wal-Mart had a uniform policy that discouraged the promotion of women. However, Wal-Mart has a policy that gives the managers of individual stores a great deal of discretion in hiring and promotion. The lawsuit alleges that this discretion allowed managers to engage in discrimination in hiring and promotion, and this created a male-dominated culture at the company, leading to a sort of unspoken policy of gender discrimination.

However, the majority opinion noted that this fact made a class action, let alone one involving every female employee of a very large company, an inappropriate tool for relief, because the answer to the question of “why was I not promoted?” as to one employee does not answer that question as to the rest. Therefore, according to Justice Scalia, the plaintiffs do not present a common question of law or fact, and employees who believe they’ve been discriminated against would have to sue individually, or in smaller class actions.

In this session, the Supreme Court has not been kind to class action lawsuits, handing down at least two decisions that might end up severely limiting the viability of the class action as a device to vindicate the rights of consumers and employees. I’m referring to another recent decision essentially holding that companies that regularly enter into service contracts with their customers (such as phone and Internet companies) can make themselves immune to class action lawsuits brought by their customers, by placing a clause in their contract that essentially says “you can’t file a class action lawsuit against us.”

While it’s hard to predict how these decisions will affect class action lawsuits in the future, the Roberts Court seems fairly determined to steer America’s jurisprudence as far to the right as possible, perhaps to counter a perceived move to the left by Congress and the executive branch.

Whatever the reasons for the court’s shift to the right, I don’t think it’s a good idea to use consumers and employees as a punching bag in the fight. The class action lawsuit is an absolutely vital tool for consumers, employees, and others to vindicate their legal rights, when large groups of people have been wronged.

In many cases, when a legal wrong has taken place, the actual harm to individual victims is not nearly large enough to justify the cost of bringing a lawsuit individually. However, if people who have been wronged in the same way, by the same defendant, band together and file a lawsuit, the individual cost to each plaintiff, in terms of money and effort, is fairly low, which significantly alters the cost/benefit calculus.

If the class action did not exist, large companies would be able to commit “small” legal wrongs against individuals with near-impunity, knowing that few (if any) people would bother to bring a lawsuit to vindicate their rights. The class action serves as a very strong deterrent to wrongdoing.

I don’t know how these decisions will affect class actions in the future. This will depend largely on how lower courts, and eventually the Supreme Court, construe their scope and meaning. Perhaps more importantly, the future of the class action lawsuit will also hinge on whether or not Congress passes legislation making a few minor alterations to the class action procedure, to reverse the effects of these decisions.