Wal-Mart’s win puts nail in group suits’ coffin

June 20, 2011

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

By Reynolds Holding

Wal-Mart’s win at the U.S. Supreme Court puts a nail in the coffin of big group lawsuits. The justices rightly blocked some 1.5 million female employees from banding together to sue the nation’s largest retailer. But while the ruling squares with existing law, an April decision broke new ground in an apparent effort to stop such class-action grievances.

The decision on Monday was close, but the women overreached. They argued Wal-Mart had a top-down culture of treating female workers unfairly while simultaneously giving local store managers unlimited discretion on personnel decisions. The court said the plaintiffs couldn’t have it both ways. It found that Wal-Mart policy actually barred discrimination, and so any differences in pay and promotion for men and women might be blamed on individual stores, but not the company.

Employees can still sue stores individually, though many probably won’t given their claims average out to just $1,100 apiece. It also leaves Costco, Altria and other big companies being sued nationwide with stronger arguments to shrink the group suing them. Companies traditionally have found such lawsuits so large and costly they feel pressure to settle them quickly rather than fight.

The high court had signaled its intentions in April. Then, justices went well beyond the existing rules by giving companies permission to essentially block class-action suits. California law had said customers, employees and other groups must be allowed to sue together, even if a company had forced them to resolve their disputes in private arbitration. The Supreme Court overrode that law, saying federal law favored arbitration over litigation, and that class-action suits made arbitration too costly and slow.

The upshot is that any company, including Wal-Mart, can not only stop employees or customers from filing lawsuits, but also now can keep plaintiffs from uniting against it. The latest decision represents the other shoe dropping. If folks with like-minded beefs collectively find their way to court, businesses stand a good chance of making them sue alone instead. Combined, the two cases leave aggrieved workers and consumers with precious few options.

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