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Analysis: Wal-Mart ruling no knock-out blow for class actions

The end of the road for a class-action discrimination lawsuit brought by female employees of Wal-Mart Stores Inc has not spelled doom for employment lawsuits facing other big U.S. companies.
/ Source: Reuters

The end of the road for a class-action discrimination lawsuit brought by female employees of Wal-Mart Stores Inc has not spelled doom for employment lawsuits facing other big U.S. companies.

A landmark U.S. Supreme Court decision last month siding with the world's largest retailer was widely seen as a blow to many other would-be class-action plaintiffs.

But some employment class-action lawsuits, particularly those involving disputes over overtime and other wage-and-hour claims, are surviving and have even been strengthened by the ruling, as judges have issued opinions arguing the Wal-Mart decision does not apply to a given case.

The Wal-Mart case centered on whether a group of up to 1.5 million current and former workers at the retailer, who contended they were paid less than men and denied promotions, was properly certified as a class. The Supreme Court said the women could not sue jointly, finding they did not have enough in common to band together.

Plaintiffs who sue en masse have more power, because they can pool resources and combine claims into one lawsuit. Following the Supreme Court's June 20 ruling, Wal-Mart workers will now have to sue in smaller groups or as individuals.

In the past three weeks, courts and attorneys have rushed to interpret the ruling. A day after the decision, a federal judge in New York ruled that about 600 employees of Tyco International Ltd unit SimplexGrinnell can sue jointly on their claims that they were underpaid.

On June 29, a federal judge in Florida denied Starbucks Corp's attempt to decertify a class of more than 700 workers in a lawsuit on overtime pay, saying there were enough similarities to justify keeping class members together.

That same week, a federal judge in California denied trucking company C.R. England Inc's attempt to decertify a class of up to 1,000 drivers in a wage-and-hour class action, and a federal judge in Ohio upheld class certification in a similar case against nursing home company HCR ManorCare.

To be sure, the plaintiff classes so far kept intact or certified are small compared with the Wal-Mart group, and their lawsuits do not involve the same type of sex bias allegations. The Wal-Mart case is expected to have more of an impact in other nationwide discrimination class actions, including pending cases against Costco Wholesale Corp, Toshiba Corp, Goldman Sachs Group Inc, Cigna Corp and Bayer.

At least one wage-and-hour case has come apart in the wake of the Wal-Mart decision. Citing the ruling, a federal judge in California on July 7 decertified a class of several hundred Dollar Tree Inc employees that accused the discount chain of denying them overtime pay.

Lawyers defending companies in other types of lawsuits, including cases accusing banks of misleading investors about complex mortgage investments, are also citing the Wal-Mart ruling as they try to block plaintiffs from linking together to sue.


But plaintiffs' attorneys contend that class actions involving alleged wage-and-hour violations should not be affected by the ruling in the Wal-Mart case, formally known as Dukes v. Wal-Mart Stores. They cite legal arguments about the federal Fair Labor Standards Act and state labor laws.

"Plaintiffs' lawyers are looking for ways to distinguish their cases from the Wal-Mart case," said Howard M. Erichson, a professor at Fordham Law School. "They're using other case law to show it's easier to establish commonality than it was in Dukes vs. Wal-Mart."

In cases involving state labor law, plaintiffs' lawyers argue that classes of proposed plaintiffs are much narrower than the sprawling one in the Wal-Mart case. In the SimplexGrinnell case, U.S. District Judge Steven Gold upheld class certification for about 600 workers who allege the Tyco fire and safety equipment unit violated New York labor law.

"The relevant facts and circumstances in Wal-Mart have little bearing here," Gold concluded.

Cases brought under the federal Fair Labor Standards Act are also proceeding. Class certification for these cases do not have to satisfy the same strict requirements as discrimination cases, such as the Wal-Mart lawsuit, brought under Title VII of the Civil Rights Act.

Both the Starbucks and the HCR ManorCare lawsuits faced the less stringent certification standard. HCR attorneys asked Ohio federal judge Jack Zouhary to consider the impact of the Wal-Mart ruling to their wage-and-hour case. "This Court concludes the concerns expressed in Dukes simply do not exist here," Zouhary wrote in a July 1 order.

Employer-side attorneys say some judges are misinterpreting the Wal-Mart ruling, keeping alive class-actions that do not merit certification.

"A lot of the judges are reading the Dukes case narrowly," said Allan King, an employment lawyer at Littler Mendelson. "If they were to read it more broadly, plaintiffs would have to make a much stronger case much earlier in the litigation."