Major Class Action Sex Discrimination Case Goes Before Supreme Court

The largest class-action sex-discrimination lawsuit ever will be argued before the U.S. Supreme Court March 29, pitting Wal-Mart Stores Inc. against female employees who seek billions of dollars.

The justices will decide whether the small group of women who began the case 10 years ago can represent a huge nationwide class of potentially millions of current and former employees who accuse the world’s largest retailer of discrimination.

However, the nation’s high court will not be deciding whether Wal-Mart engaged in intentional sex discrimination in pay and promotions at 3,400 U.S. stores since the end of 1998.

An eventual Supreme Court ruling, expected by late June, is likely to uphold or undo the class certification, a decision that could determine whether the lawsuit proceeds to trial.

Here are some scenarios of what could happen next:

1. Supreme Court upholds lawsuit’s class action status.

In a defeat for Wal-Mart, the case would go back to the federal judge in San Francisco, who has already proposed a two-stage trial.

In the first stage, a judge or a jury would decide whether Wal-Mart should be found liable for a pattern of intentional sex discrimination.

The second phase would decide potential remedies such as punitive damages; back pay, which makes up the difference between actual pay and the amount if there had been no discrimination; and injunctive relief, such as requiring Wal-Mart to change its pay and promotion systems.

Alexandra Lahav, a University of Connecticut law professor, wrote in a recent law review article that the case does not threaten a potential ruinous verdict for Wal-Mart.

Wal-Mart’s attorney, Theodore Boutrous, told the Supreme Court the class involved potentially millions of women with claims for billions of dollars in back pay and possible punitive damages.

Attorneys for the women did not give a total figure, but said individual claims for back pay would be small, an average of $1,100 per year for hourly workers.

Chris Graja, an Argus Research analyst who follows Wal-Mart, has said the case will keep the retailer in the spotlight.

The lawsuit “remains a major financial risk for Wal-Mart but we believe the potential expenses have been well reported on Wall Street and in the media,” he wrote in a February report when Wal-Mart issued its fourth-quarter results.

“The company continues to contest the claims and the legal proceedings related to those claims very aggressively. The recent settlement of another group of suits suggests that the company is well aware of the importance of being a good citizen and trying to look forward,” Graja said.

R.J. Hottovy, equity analyst at the Chicago-based Morningstar Inc. investment research company, said Wal-Mart has plenty of cash if it needed to make a payout.

“It would take a seismic ruling against the company to have an impact on the valuation,” he said. “When you’re dealing with the largest company out there, a lawsuit would have to be one of the larger payouts to really have a material impact on the fundamentals of the business.”

He calculated that even in the unlikely event that there was eventually a $25 billion award against Wal-Mart, that would not dramatically affect Morningstar’s valuation of the firm.

2. Supreme Court reejcts lawsuit’s class action status.

The Supreme Court could reverse the appeals court’s ruling and send the case back with instructions to decertify the class, as Wal-Mart has requested.

But the case would not be over. Individual plaintiffs who brought the lawsuit, such as Betty Dukes, a Wal-Mart greeter at a store in Pittsburg, California, could pursue their claims.

Depending on how the court rules, the plaintiffs might be allowed to collectively pursue their claims for an injunction changing employment practices, but not for money damages.

Or the court could rule the case was wrongly certified as a class action under a provision mainly used in lawsuits seeking relief such as an injunction. The court could tell the judge to consider if it can be certified under another part of the law dealing mainly with money damages.

3. There is a settlement.

Lurking in the background is a possible settlement.

Boutrous, the attorney who will argue Wal-Mart’s case, declined to speculate on a possible settlement if the company lost before the Supreme Court. An attorney for the plaintiffs also declined comment on any settlement.

Asked if there could be a deal, equity analyst Hottovy said, “That’s always a possibility, especially in a case like this where instead of dragging it out over a long period of time it may be in Wal-Mart’s favor to propose a settlement.”

Wal-Mart’s corporate supporters have said huge class-action lawsuits put inappropriate pressure on defendants to settle.

But attorneys for the female employees disagreed. “With over $400 billion in sales and $14 billion in profits last year, that is an argument that could not be credibly made,” they said in a brief filed with the court.

(Additional reporting by Jessica Wohl in Chicago, Editing by John Whitesides)