September 29, 2010

The largest class action lawsuit in history

By The largest class action lawsuit in history

Author: Timothy Sandefur

…is Dukes v. Wal-Mart, a discrimination case in which the class of plaintiffs is larger than the entire United States military. The class is made up of every woman who’s ever worked at Wal-Mart, give or take a few, and earlier this year, the Ninth Circuit Court of Appeals upheld the trial court’s decision to let that case go forward as a class action. Now Wal-Mart is asking the U.S. Supreme Court to intervene, and Pacific Legal Foundation has filed this brief in support of the company.

The federal rule governing class action lawsuits basically requires that each member of the class was harmed in the same way by the same thing. This makes sense, because the purpose of a class action is to allow a bunch of people who have suffered an identical, but small, injury, to group their cases together and hire a lawyer—which they might not otherwise do. If, say, McDonald’s defrauds its customers by ten million dollars, by stealing a quarter from every customer, no particular customer will find it worthwhile to hire a lawyer and sue. So the class action procedure allows them to group their minor injuries together. But because basic fairness entitles McDonald’s to defend itself in court, you have to ensure that each person was hurt in basically the same way by basically the same action, so that it makes sense to treat all the customers as a single group. You can’t allow a group of people who all claim that McDonald’s hurt them in all sorts of different ways to exploit this procedure, because McDonald’s has the right to defend itself against each allegation.

This principle is called “commonality” and “typicality”: the people who actually file the class action lawsuit have to show that they suffered injuries that are common to the class and typical of the way the rest of the members of that class were harmed.

In the Wal-Mart case, the class represents every woman who was subject to Wal-Mart’s allegedly discriminatory hiring and promotion practices. But Wal-Mart doesn’t have a central policy for hiring or promotion. Those decisions are made at the local level by local managers who know their employees best and are in the best position to make choices for their stores. Since there’s no common policy, it’s not possible for every woman in the class to have suffered the same injury from the same conduct—maybe some women were discriminated against in hiring, maybe some were discriminated against in promotion, maybe some were just bad employees, maybe some worked for incompetent bosses, who knows? There are so many different permutations, it makes no sense to treat them as all having suffered the same injury.

Yet the Ninth Circuit allowed the case to go forward on the theory that Wal-Mart’s lack of a policy qualifies as a policy. According to that court, the fact that Wal-Mart has no central decision-maker on these issues created the kind of corporate structure that allowed “gender stereotypes” to influence hiring and promotion decisions—and that qualifies as a single policy that hurt everyone in the class. As PLF argues in our brief, this is akin to saying that a person who stole something from one person, shot another person, trespassed on a third person’s yard, and accidentally poked a fourth person in the eye has “harmed” all of them identically—by “acting unfairly” toward them.

The reason the decision on class certification is so important is that class action lawsuits can be so extremely expensive that defendants will virtually always settle as soon as a class is certified. Thus a trial court’s decision to allow the case to go forward as a class action is, to all intents and purposes, the same thing as a guilty verdict. In a case where the class is this huge, you can expect even Wal-Mart to pay off the plaintiffs if the Ninth Circuit’s decision stands. The Supreme Court returns to session next week, and we’ll probably know pretty soon whether they will take the Wal-Mart case.

By the way, for more on class action abuse, check out the blog run by our friends at California Citizens Against Lawsuit Abuse.

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