Wal-Mart Case Is a Blow for Big Cases and Their Lawyers

The court’s decision will not just make it harder to bring big, ambitious employment class-action cases asserting discrimination based on sex, race or other factors, legal experts said. In the majority opinion, the court set higher barriers for bringing several types of nationwide class actions against a large company with many branches.

In its majority opinion, the court essentially said that if lawyers brought a nationwide class action against an employer, they would have to offer strong evidence of a nationwide practice or policy that hurt the class. In the Wal-Mart case, the court wrote that the plaintiffs had not demonstrated that Wal-Mart had any nationwide policies or practices that discriminated against women. The opinion, written by Justice Antonin Scalia, noted that Wal-Mart’s official corporate policy opposed discrimination, while the company gave the managers at its more than 3,400 stores considerable discretion over pay and promotions.

“In a company of Wal-Mart’s size and geographical scope, it is quite unbelievable that all managers would exercise their discretion in a common way without some common direction,” Justice Scalia wrote.

Heidi Li Feldman, a professor at Georgetown Law Center, said similar reasoning might make it tougher for plaintiffs to bring a class action against a mortgage lender accusing it of having a nationwide policy of defrauding borrowers. “A big mortgage broker might say, ‘At the national level, we have policies to abide by all of the rules and regulations that are applicable, and we delegate a lot of discretion to our branches,’ ” she said.

The ruling was widely hailed by business groups, some of which filed amicus briefs urging the court to limit class actions.

“We applaud the Supreme Court for affirming that mega-class actions such as this one are completely inconsistent with federal law,” said Robin S. Conrad, executive vice president of the United States Chamber of Commerce’s National Chamber Litigation Center. “Too often the class-action device is twisted and abused to force businesses to choose between settling meritless lawsuits or potentially facing financial ruin.”

The ruling will push plaintiffs’ lawyers into filing fewer huge class actions and more cases on behalf of individuals or smaller groups, lawyers said. That will raise costs and give lawyers less incentive to take on class actions and other complex litigation. The Wal-Mart case, for example, has stretched for a decade, with lawyers and the legal foundation that brought the case expecting to receive some portion of the back pay for 1.5 million current and former Wal-Mart employees if they eventually won the case in court or reached a settlement.

The Supreme Court decision “strikes a blow to those who face discrimination in the workplace to be able to join together and hold companies, especially large companies, accountable for the full range of discrimination they may be responsible for,” said Marcia D. Greenberger, co-president of the National Women’s Law Center.

In his opinion, Justice Scalia said it was unacceptable to allow employment discrimination lawsuits to proceed as huge class actions when monetary awards would be based on a broad formula per plaintiff, without having an individual assessment of how much each plaintiff had suffered.

He wrote that to allow that to happen in the Wal-Mart case, the largest employment class action in American history, would have been hugely unfair to Wal-Mart because it might have had to pay out damages without many of the plaintiffs demonstrating how much they were injured.

Paul Grossman, a lawyer in Los Angeles for the Paul Hastings firm who represents many employers, including Wal-Mart, in employment lawsuits, said employers were seeing many unmeritorious class-action cases. “Now you need a real class action with similarly situated people where common issues predominate,” he said.

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