Wal-Mart Court Order Freezes Class Actions

By | December 9, 2010

The class action landscape changed in an instant when the U.S. Supreme Court decided to review a mammoth sex discrimination lawsuit against Wal-Mart Stores Inc.

Even though a ruling likely will not come for months, some class-action lawsuits against other companies are already grinding to a halt as lawyers await the outcome. The Wal-Mart case is seen as huge test of the power of class actions, with the Supreme Court set to decide whether the women suing the retailer can be allowed to sue jointly.

The 9th U.S. Circuit Court of Appeals Wednesday ordered a separate gender discrimination case against Costco Wholesale Corpto be put on hold until the Supreme Court decides the Wal-Mart matter.

A lower court had certified a class of all current and former female Costco employees denied promotion to senior staff positions since 2002.

And less than 24 hours after the Supreme Court announced its Wal-Mart order Monday, plaintiffs in a race and sex-discrimination case against Best Buy Co Inc asked a federal judge in California to suspend briefing on the case, according to court filings.

The Supreme Court’s decision makes it best to conserve resources, plaintiffs argued. Best Buy opposed the request, arguing the plaintiffs should not get an advantage by withholding arguments after the company had already submitted theirs.

On Wednesday, the judge ordered plaintiffs to file one more brief, but otherwise suspended the case, according to a ruling.

The Wal-Mart lawsuit before the Supreme Court could encompass as many as 1.5 million current and former female employees, who are seeking billions of dollars in damages.

Plaintiffs claim Wal-Mart paid female workers less than male colleagues and gave them fewer promotions. Wal-Mart denied it discriminated on the basis of sex.

Earlier this year a closely divided 9th Circuit upheld class action certification in the case. The Supreme Court’s decision to review that ruling made it one of the most important business cases on the docket.

Companies often settle lawsuits if a court certifies a class, due to the cost of defending such cases.

Several attorneys say the Supreme Court’s ruling, expected to be delivered by the end of its current term, could make it more difficult for plaintiffs to litigate class actions in a range of areas, not just employment cases.

That means defense lawyers have less incentive to settle pending cases until the court weighs in, said Linda Mullenix, a class action expert at the University of Texas School of Law.

“If you’re on the plaintiff’s side of the docket, you should probably be in despair,” Mullenix said.

James Finberg, who represents the Best Buy plaintiffs, told Reuters he thinks there would have been a greater impact on settlements had the Supreme Court passed on Wal-Mart.

Many corporate lawyers already expected the high court to review the case, Finberg said.

“Defendants are going to be emboldened and are going to want to pay less money,” Finberg said. “On the other hand, if you really have a meritorious case I would still file it and I would still prosecute it.”

Some corporate lawyers do not think their clients will necessarily be able to settle cases more cheaply right away. However, litigation may be more voluminous as companies try to anticipate the Supreme Court and raise arguments they would not have otherwise, said Gerald Maatman Jr., a Seyfarth Shaw partner.

“They don’t want to be in a position to have waived an argument,” said Maatman, who is involved in the Costco case.

Overall, plaintiff lawyers must contend with a new reality after the Supreme Court action.

“I think my stomach kind of turned over,” Finberg added.

(Reporting by Dan Levine; editing by Andre Grenon)

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