The Recorder, 08/09/05

Judges Grill Wal-Mart in Class ActionThe Recorder

By Justin Scheck

Wal-Mart's attempt to stop the nation's biggest-ever employment class action was discounted like a monthly super-saver Monday by a three-judge panel of the Ninth Circuit U.S. Court of Appeals.

The judges gave a prickly reception to arguments that certifying a class of about 1.6 million female employees is unfair to Wal-Mart, and seemed particularly nonplussed by the company's claim that a series of smaller suits would be more fair - and less unwieldy - than the class action.

But the skepticism did not mean a free pass for the class members, who claim they were paid and promoted less than their male counterparts.

The class's lead lawyer, Brad Seligman of the Berkeley-based Impact Fund, was heavily questioned by Judge Andrew Kleinfeld, who appeared to have trouble with the notion that a company can be held liable for discrimination based on a lack of companywide hiring standards.

Seligman, though, got out easy compared with Theodore Boutrous Jr., the Gibson, Dunn & Crutcher partner leading Wal-Mart's appeal effort.

Boutrous was barely three sentences into his argument when Kleinfeld and Judges Harry Pregerson and Michael Daly Hawkins began peppering him with questions ranging from the adequacy of the company's statistical evidence to whether Boutrous was responsible for writing a brief that offended at least one judge.

"It has language in it that's a little arrogant, a little offensive to the district judge," Pregerson said. "Maybe you should apologize to him."

"We meant no disrespect to the judge," replied Boutrous, who tried to focus his argument on the notion that the class is so big, and the circumstances of its members so diverse, that it did not satisfy the basic requirements of a class action.

Much of the discussion, therefore, involved expert testimony provided by both sides, and frequently devolved into questions over the merits of the underlying case, rather than whether Northern District Judge Martin Jenkins abused his discretion in approving the class.

Seligman said later that the hearing unfolded pretty much as he had expected.

"The only thing that surprised me at all was that a judge reached into the record to dig up an issue that wasn't raised on appeal," he said. Kleinfeld had asked about a specific piece of evidence that Wal-Mart had not challenged in the appeal. He also seemed troubled by the argument that a lack of explicit antidiscrimination and promotion policies leads directly to unfair practices.

"I have trouble getting from there to sex discrimination," Kleinfeld said, and pointed out that almost all hiring decisions are subjective.

The judges touched on a host of other issues brought up in Wal-Mart's briefs, including the argument that the class certification order denies Wal-Mart due process by preventing it from challenging the claims of individual class members.

Boutrous said that individual managers would not be allowed to testify at trial that they did not discriminate.

The judges seemed skeptical of that argument, too, and Hawkins questioned the value of such testimony.

"Everyone would say 'it was a non-discriminatory decision,'" Hawkins said. But, Boutrous countered, it should be up to a jury to decide the value of such testimony. "That's called a trial," he said.

As the crowds that packed the courtroom dispersed, lawyers for both sides professed confidence.

"I was able to get the issues in front of the court, and they seemed tuned into the key issues," said Boutrous, who was unwilling to speculate on which specific questions the judges would focus their ruling on.

A sanguine Seligman - who returned midway through a vacation to argue the case - echoed Boutrous and said he expects the ruling, whichever way it goes, to clearly determine the future of his case.

"The way it's in front of this court, it's all or nothing," he said.

Other plaintiff lawyers agree, saying it could help determine the future of class actions - which were overwhelmingly shifted to the federal courts by legislation passed earlier this year.

Upholding the class certification would be a signal to plaintiff lawyers that the courts are open to considering unconventionally large and diverse classes. A defeat, they said, could put limitations on class arguments.
The case, Dukes v. Wal-Mart, 04-16688, was initially filed in 2001 and seemed likely to settle earlier this year when the company hired two settlement experts to conduct negotiations.

But for reasons that remain unclear, no deal was reached before the certification hearing. Lawyers close to the case say Wal-Mart will likely settle for several billion dollars if it loses the appeal.

In the meantime, the court is left to consider a set of numbers that seem difficult for Wal-Mart to defend.

"Two-thirds of hourly employees are women," Hawkins said Monday. "One-third of employees in management positions are women."