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Wal-Mart vs. a Million Angry Women


The retailer wants the Supreme Court to block a huge gender-bias suit

Chris Kwapnoski says she watched for 15 years as one male colleague after another leapfrogged over her into management jobs at the Sam's Club in Concord, Calif. When Kwapnoski asked a supervisor what was holding her back, she recalls getting a curt reply: "Blow the cobwebs off your makeup and doll up."

Kwapnoski's lawyers say her experience is common—so common that they are seeking to sue Wal-Mart Stores (WMT), which owns the Sam's Club chain, for discrimination on behalf of more than a million female employees. The suit would be the largest job-bias case ever against a U.S. employer. Wal-Mart is seeking a Supreme Court hearing, and the dispute could become the most important business case of the court's nine-month term. It's an "800-pound gorilla," says Robin S. Conrad, who heads the U.S. Chamber of Commerce's litigation unit.

The high court will say as early as Nov. 29 whether it will review a ruling by a San Francisco-based federal appeals court, which in April let the case go forward as a class action for women working at the company since 2001. (The original lawsuit was filed nine years ago on behalf of six women.) The company, which has 4,400 Wal-Mart and Sam's Club stores, says a case involving that many workers would be so unwieldy it would violate the Constitution's due process protections, including the company's right to defend itself against the charges. The plaintiffs' legal fight has become a business unto itself, involving seven law firms and several million dollars in expenses. Lawyers built their case in part through online surveys that female workers submitted on a website devoted to the litigation.

The court, with a conservative majority led by Chief Justice John Roberts, has made little secret of its skepticism for what it views as lawyer-driven litigation. The court has already trimmed the federal securities fraud laws and required more specificity from plaintiffs when they file complaints. The Roberts court is "skeptical of litigation as a policy tool," says Jonathan Adler, a business law professor at Case Western Reserve University.

As a testament to its significance, 19 companies, including Altria Group, Bank of America, General Electric, and Microsoft, are urging the court to take up the appeal. The companies say the lower court ruling makes it too easy for workers challenging employment practices to secure class-action status and then extract large settlements. Even with meritless claims, "class certification decisions are often tantamount to a decision on the merits," the companies say in a court filing. Several companies have concrete stakes in the outcome. A suit on behalf of more than 700 women against Costco Wholesale is on hold until the Supreme Court resolves the Wal-Mart case. Altria and other tobacco companies say the Wal-Mart case may affect their challenge to a Louisiana court order requiring them to spend more than $270 million on a smoking cessation program.

For Wal-Mart, the case could mean billions in damages, though the lawyers for the women haven't specified how much they are seeking. A multibillion-dollar award would be a blow, but one Wal-Mart could absorb. The world's largest retailer had more than $400 billion in sales and $15 billion in profit over the past 12 months.

The complaint says women working for Wal-Mart have been paid less than men for the same jobs and received fewer promotions. Instead of posting management openings, Wal-Mart relied on a "tap on the shoulder" system that let managers steer jobs to male colleagues, says Joseph Sellers, a partner in the Washington-based law firm of Cohen, Milstein, Sellers & Toll who represents the women. "Wal-Mart's promotion system departed very substantially from what virtually every other large company at this time was doing," he says.

Wal-Mart, with 1.4 million U.S. employees, says any problem was isolated. Letting the case go forward would deprive the company of its right to contest the claims of each woman individually, says Theodore Boutrous, a partner with the Los Angeles law firm Gibson, Dunn & Crutcher who represents Wal-Mart before the Supreme Court. "To assume that every employee has been subject to discrimination flies in the face of the facts and really subjects the company to an extraordinarily unfair process," Boutrous says. The company says it now posts management openings.

The women will press ahead, possibly in a series of smaller class actions, if the Supreme Court rules against them, Sellers says. Kwapnoski, for one, is eager to focus public attention on her employer's treatment of female workers. Now an assistant manager, the 46-year-old says her $60,000 salary is less than half what she might be earning had she been promoted in step with her male peers. "I really, honestly would like to change the public's view of Wal-Mart," she says.

The bottom line: Wal-Mart isn't the only company with a lot at stake in a gender-bias suit the Supreme Court will soon decide whether to hear.

Stohr is a reporter for Bloomberg News.

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