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Most justices appear skeptical of making Wal-Mart suit class action

By Bill Mears, CNN Supreme Court Producer
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Wal-mart goes to the Supreme Court
  • The Supreme Court is to decide only whether the case can proceed as a class-action suit
  • It would be the largest discrimination case of its kind
  • Wal-Mart argues the size would make case onerous

Do the women of Wal-Mart have a case? Tune in to "In the Arena" at 8 ET Tuesday night as Eliot Spitzer looks at the alleged gender bias case against the retail giant now before the Supreme Court.

Washington (CNN) -- Female workers suing retail giant Wal-Mart Stores for workplace discrimination faced an uphill battle at the Supreme Court on Tuesday in their efforts to proceed in a massive class-action lawsuit.

The case is among the most important dealing with corporate versus worker rights that the justices have ever heard, and their ruling -- expected by late June -- could eventually impact nearly every private employer, large and small.

The conservative majority on the bench appeared skeptical during oral arguments that allowing employees from across the country to band together and make their claims in one trial would be appropriate, at least in this particular case. But the three female justices each offered a spirited defense of the plaintiffs' claims of a consistent pattern of discrimination that allegedly trickled down from corporate headquarters to individual stores.

Justice Ruth Bader Ginsburg, who before joining the court was a pioneering legal advocate for gender equality on the job, said that based on the similar claims from the workers, it was "reasonable" to allow the case to proceed as a class action.

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"The company gets reports month after month showing that women are disproportionately passed over for promotion, and there is a pay gap between men and women doing the same job," she said. "It happens not once, but twice. Isn't there some responsibility on the company to say, is gender discrimination at work, and if it is, isn't there an obligation to stop it?"

But Justice Anthony Kennedy appeared skeptical there was a corporate culture of discrimination, noting Wal-Mart has a long-standing anti-discrimination policy.

"You said this is a culture where Arkansas (home of Wal-Mart) knows, the headquarters knows, everything that's going on," he told the plaintiffs' attorney. "Then in the next breath, you say, well, now these supervisors have too much discretion. It seems to me there's an inconsistency there, and I'm just not sure what the unlawful policy is."

At issue is whether as many as 1.6 million current and former female Wal-Mart employees can make a unified claim of systemic discrimination, which they say has occurred over the past decade, at least. The plaintiffs allege women were paid less than, and were given fewer opportunities for promotion than, their male counterparts. They seek back pay and punitive damages against the world's largest retailer.

A divided 6-5 ruling by the San Francisco-based 9th U.S. Circuit Court of Appeals last year had allowed the combined, multiparty litigation to move ahead to one trial, where a verdict against the company could result in tens of billions of dollars in damages.

The Supreme Court will decide only whether the original lawsuit should be handled as a class action, instead of lower courts potentially being flooded with thousands of individual discrimination claims against the company. A ruling by the justices against Wal-Mart, permitting class-action status, could put severe pressure on the company to settle the claims out of court.

The lawsuit alleges the company's "strong, centralized structure fosters or facilitates gender stereotyping and discrimination." The workers bringing suit also say women make up more than 70 percent of Wal-Mart's hourly workforce but in the past decade made up less than one-third of its store management.

The current litigation was filed in 2001 by Betty Dukes, a store greeter in Pittsburg, California, along with five of her co-workers from different facilities. She and another of the original six plaintiffs attended the arguments.

"I brought this case because I believe that there was a pattern of discrimination at Wal-Mart, not just in my store, but I believe that it is across the country," she told CNN at the court. "Since we have filed our lawsuit in 2001 I have heard from numerous women telling me basically the same story as mine of disparate treatment in lack of promotion as well as in lack of pay."

The company has protested the size of the class action, which it called "historic" in scope, saying it would be too onerous to litigate. The company has more than 4,300 U.S. facilities in 41 regions.

Gisel Ruiz, who now heads the company's human resources division, told CNN after the arguments, "Wal-Mart has had a long history of promoting and advancing women. I joined the company in 1992 as a management trainee in Medera, California, and in less than four years, I was promoted to store manager. What's wrong with this case is that three plaintiffs are trying to represent more than 1.5 million associates. I've had a very positive experience at Wal-Mart like thousands of other women, and not being able to opt out of the case is wrong."

In arguments, Theodore Boutrous, attorney for Wal-Mart, cited company figures that at "90 percent of the stores, there was no pay disparity."

But Justice Sonia Sotomayor cited information accepted by lower federal courts "including job history, job ratings, and other things, and found that the disparity could not be explained on any of the normal variables that one would expect and that the disparity was significantly much higher than the 10 competitors of Wal-Mart and what they were paying their labor force."

Joseph Sellers, attorney for the women workers, cited what he called "the Wal-Mart way" of dealing with pay and promotions.

"The company has a very strong corporate culture," he said, adding, "the decisions of the managers will be informed by the values the company provides to these managers in training."

Chief Justice John Roberts sharply questioned that premise.

"How many examples of abuse of the subjective discrimination delegation (by mangers) need to be shown before you can say that flows from the policy rather than from bad actors?" he said. "I assume with however many thousands of stores, you're going to have some bad apples."

Roberts added that Wal-Mart's pay disparity across the company was less than the national average.

Justice Samuel Alito expressed concern about whether the claims against Wal-Mart met the criteria for establishing class-action. Citing a hypothetical business similar to Wal-Mart, he wondered, "You have the company that is absolutely typical of the entire American workforce, and let's say there weren't any variations (in an anti-discrimination policy). Every single company had exactly the same profile. Then you would say every single company is in violation" of federal civil rights laws?

Alito's colleague, Justice Antonin Scalia, followed up, pressing Sellers further: "(What) your answer assumes is if there is a disparity between the advancement of women and the advancement of men, it can only be attributed to sex discrimination."

Sellers said that was not true in every case but was true at Wal-Mart, a situation he blamed on "standardless, recordless decisions" by the company, in essence benign neglect of what he said is a nationwide pattern of discrimination at individual stores.

"Well, if it's standardless and recordless, then why is there commonality?" asked Kennedy, who could prove to be the swing vote in the case. "It seems to me that your answer that you just gave really shows a flaw in your case on commonality" of discrimination claimed by the plaintiffs.

Declaring class-action status for the lawsuit would raise the financial and judicial stakes considerably, since more individual plaintiffs could join, creating greater potential liability for the company. In federal courts, such certification must generally follow well-established principles to ensure a lawsuit would not become so large as to be impracticable, and would allow the parties to fairly represent the common interests of the larger class of plaintiffs.

Wal-Mart also has been accused in separate lawsuits of discrimination against African-American truck drivers and workers with disabilities. In 2001 the company settled 13 lawsuits by paying out $6 million.

The case is Wal-Mart Stores v. Dukes (10-277).

'I'm a fighter'

A mammoth appeal started small -- six women from California, unknown to each other at first, but sharing a common story.

"I'm a fighter if nothing else, and so are all the other women that are involved," said Christine Kwapnoski, one of the original plaintiffs. Speaking with CNN, she recounted why she brought suit against Wal-Mart in 2001.

"I was saying I want to do something more, but for whatever reason I kept getting overlooked for team leader positions," she said. "They kept hiring men off the street. Literally, I don't even know where they came from, whether they came from college, men who never even had a day's worth of Sam's Club experience were coming in and I was the one training them."

Kwapnoski, 46, began working at Sam's Club retail warehouse -- part of the Wal-Mart brand -- in 1986, eventually relocating to a store in Concord, California. By 2000 she was the longest-tenured hourly employee at the store, but claims she was being paid "virtually the same" as male associates with half her experience. She was eventually promoted in 2001, two weeks after the lawsuit was filed, and remains at the company.

Kwapnoski soon realized her experiences were similar to other female workers -- first in the San Francisco Bay area, then across the country.

"They know we're right and they just don't want to admit it," she told CNN Correspondent Kate Bolduan. "They never want to admit anything when they're wrong, they just believe that they're semi-untouchable because of their size."

Kwapnoski claims she was told by a male general manager "to doll up," wear more makeup and dress a little better as a new supervisor on the loading dock, comments she says were inappropriate. And she says mangers frequently yelled at her and other female workers, but not male counterparts.

The plaintiff's lawyer Joseph Sellers says there is a "corporate culture" at Wal-Mart, where female associates are treated as second-class employees, and that the company's "strong, centralized structure fosters or facilitates gender stereotyping and discrimination," which trickles down to individual stores.

"The store managers don't make up their own pay and promotion policy -- they follow a common set of policies that are established by headquarters in Arkansas," he said. "There is extensive oversight of the decisions they make."

Spokeswoman says people are held accountable

Wal-Mart operates 4,300 facilities in the U.S., with more than $400 billion in global sales in 2009. It employs 1.4 million people in the U.S. alone. Officials boast their anti-discrimination policy has been in place as long as the company has been around, and a recent public relations campaign has been launched to promote its diversity and inclusion.

Gisel Ruiz is an example of what Wal-Mart says is a person who started small but has risen in the company because of her talents and hard work. After beginning as a store management trainee nearly two decades ago in California, she is now executive vice president for people at Wal-Mart, responsible for human resources. Ruiz is also a representative in corporate efforts to fight these claims of discrimination.

"From my personal experience, it's not part of the company's culture or part of the policies. My career growth has been very positive with Wal-Mart. I am in a job that I never dreamed that I would be -- it's based on my ability, my performance, my leadership abilities, but I am just one of many women," she told CNN. "I've never been exposed to the examples that have been shared by the plaintiffs. I simply haven't seen it and I will tell you that we don't have a tolerance for that kind of misconduct."

Ruiz says every employee from part-time entry level hourly workers to salaried managers must follow the rules.

"The policies against discrimination are in place for very good reasons; not only is the law, but is the right thing to do," she said. "There's oversight at a corporate level to ensure that the policies are in place, that they are relevant to today's workforce and today's workforce issues. Ultimately at store level, that's where those policies are enforced, and people are held accountable if they violate those policies."

Wal-Mart says case is too big

The workers bringing suit say women represent more than 70% of Wal-Mart's hourly workforce, but in the past decade made up less than one-third of its store management.

A federal appeals court had concluded there was enough merit in the claims to proceed to trial on a class-action track. Since the lawsuit was filed a decade ago, both sides of the dispute have held discovery hearings, where preliminary testimony was taken to establish facts.

The high court will not judge the merits of the sweeping claims at this stage, just whether a class-action trial can proceed. The parties have the option of settling the dispute out of court at some point in the future, and the company may feel great financial pressure to do if they lose at the Supreme Court on this gateway issue.

The company has protested the size of the class action, which it called "historic" in scope, saying it would be onerous, with too many disparate issues, to litigate.

"The plaintiff's lawyers in this case went way too far. It's the way the plaintiffs have framed the case, implicating every store, every person. There's no way, one woman can be representative of a million women in a case like this," said Theodore Boutrous, an experienced appellate attorney who will argue the case for Wal-Mart before the justices. "The danger is that it would expose virtually every company in America to huge, costly, baseless class actions that's bad for jobs, bad for the economy, and at the end of day it doesn't help the people on behalf the case is being brought."

The company has the support of the business community, while a variety of civil and gender rights groups and unions back the plaintiffs. The Obama administration has not weighed in on the case.

"Wal-Mart is arguing in effect there is a large-company exception -- that when the company is sufficiently large and the discrimination is sufficiently widespread -- it's just impractical to have a class action," said Sellers, attorney for the plaintiffs. "But there is no large-company exception to civil rights claims in this country."

Declaring class-action status for the lawsuit raises the financial and judicial stakes considerably, since more individual plaintiffs can now join, creating greater potential liability for the company being sued. In federal courts, such certification must generally follow well-established principles to ensure a lawsuit would not become so large as to be impracticable, and would allow the parties to fairly represent the common interests of the larger class of plaintiffs.

Wal-Mart also has been accused in separate lawsuits of discrimination against African-American truck drivers and workers with disabilities. In 2001 the company settled 13 lawsuits by paying out $6 million.

Most workplace discrimination lawsuits fail to reach a court for resolution, according to data compiled by the federal Equal Employment Opportunity Commission.

In 2003, when the Wal-Mart litigation was in its preliminary court stages, about 27,000 sex discrimination claims nationwide were resolved administratively by the EEOC, little changed from the prior decade. More than 57 percent -- some 15,000 claims -- were ruled administratively to have "no reasonable cause" and those usually were dismissed.

Just over 10 percent were judged to have merit, resulting in a total of $94.2 million in settlements, or $34,200 on average per case, according to the data, which include all such claims, not just those involving Wal-Mart.

The case is also a clash of dueling cultures -- some have dubbed it the Battle of Bentonville vs. Berkeley, for the corporate headquarters and the home to the liberal legal team outside San Francisco where the lawsuits first percolated.

Both sides have lots of data

Three women now sit on the high court and each brings their own personal and judicial approach to gender bias cases.

Whether their views will sway their male colleagues is unknown, but the court in the past three decades has restricted when class actions can proceed, saying "rigorous analysis" must first be conducted by the courts. This after women, blacks, Latinos and the disabled launched high-profile class actions beginning in the 1960s.

The problem is that both Wal-Mart and the plaintiffs have presented their own massive sets of data -- statistics and depositions -- that could overwhelm any "rigorous analysis" of the facts. The dueling numbers -- which experience shows can often be manipulated in creative ways to make the point -- paint completely different pictures of the level of discrimination.

Both sides agree the case, however it is resolved in the courts, will irrevocably alter the workplace landscape for generations to come.

The case is Dukes v. Wal-Mart Stores, Inc. (10-277).