As discussed previously here on the Blawg, yesterday the U.S. Supreme Court rejected a nationwide class action brought on behalf of 1.5 million women against Wal-Mart.
The Ruling Made Simple
So, what does this historic ruling really mean? Here’s my take:
- Does it mean the end of all class actions as we know them? Not even close.
- Does it mean the end of all mega-humongous-nationwide-one-size-fits-all class actions? Maybe. Possibly. Potentially. It depends.
The Court stopped far short of condemning all class actions. It also stopped short of prohibiting nationwide class actions such as the one facing Wal-Mart. Instead, the Court ruled that for a nationwide class action to survive it must offer clear evidence of a nationwide policy or practice that actually damaged the class.
The Court found no such policy or practice on Wal-Mart’s part. Like most companies, Wal-Mart’s corporate policy officially forbade discrimination. And, like most companies, managers were given considerable discretion in enforcing the policy and making pay, promotion and other decisions.
The key sentence in the opinion (in my opinion): “In a company of Wal-Mart’s size and geographical scope, it is quite unbelievable that all managers would exercise their discretion in a common way without some common direction,” Justice Scalia wrote. For that reason, a single class action was deemed inappropriate.
What Others Are Saying
Here are some other reactions from around the nation . . .
The New York Times offered up seven different op-ed pieces expressing varying views. In its main article on the ruling (Wal-Mart Case Is a Blow for Big Cases and Their Lawyers), it offered a nice summary of the Court’s reasoning behind the decision. In short, the problem with allowing massive class actions is that plaintiffs don’t have to show real injury but instead get paid based on a formula:
In his opinion, Justice Scalia said it was unacceptable to allow employment discrimination lawsuits to proceed as huge class actions when monetary awards would be based on a broad formula per plaintiff, without having an individual assessment of how much each plaintiff had suffered.
He wrote that to allow that to happen in the Wal-Mart case, the largest employment class action in American history, would have been hugely unfair to Wal-Mart because it might have had to pay out damages without many of the plaintiffs demonstrating how much they were injured.
The Associated Press called the ruling a “blow to class actions” and opined that “mounting a large-scale bias claim against a huge company will be more difficult.
Not surprisingly, business groups (many of which filed briefs in support of Wal-Mart’s position in the case) heartily embraced the decision. “We applaud the Supreme Court for affirming that mega-class actions such as this one are completely inconsistent with federal law,” said Robin Conrad of the U.S. Chamber of Commerce. She added: “Too often the class-action device is twisted and abused to force businesses to choose between settling meritless lawsuits or potentially facing financial ruin.”
Others were decidedly less enthusiastic. Marcia Greenberger of the National Woman’s Law Center said that the ruling “strikes a blow to those who face discrimination in the workplace to be able to join together and hold companies, especially large companies, accountable for the full range of discrimination they may be responsible for.”
Joseph Sellers, the lead lawyer for the plaintiffs in the Wal-Mart case, noted that the decision would likely result in even more class actions at the store/regional level. He predicted the decision would hurt both his clients and Wal-Mart because it “will be splintered into many cases that may take longer and be harder to resolve” based on “checkered” legal standards that vary from jurisdiction to jurisdiction.
Law scholars generally agreed that the ruling will discourage plaintiffs’ lawyers from pursuing large-scale class actions. Columbia University professor John Coffee said the ruling “significantly changes the balance between employers and employees. And it largely eliminates the monetary threat facing big employers.” “Lawsuits are expensive to bring,” he said, “and if there is no money relief at the end of the road, there is no incentive to bring the suit.”
Several bloggers weighed in as well. Daniel Schwartz of The Connecticut Employment Law Blog has a nice summary here. Jon Hyman of the Ohio Employer’s Law Blog has a detailed legal analysis here. And Evil HR Lady has a piece entitled Why the Wal-Mart Ruling Is Good for Women.
The Court’s full opinion is available here.
What Should Employers Do?
Here are some lessons employers should learn from this ruling:
- Implement company-wide policies and practices prohibiting discrimination.
- Communicate the policies and practices to all employees on a regular basis.
- Train managers on proper enforcement of the policies and practices.
- Promptly and thoroughly investigate any and all complaints.
- Take appropriate steps to address any violations.
- Never ever retaliate against any complainant.
