These so-called class-action lawsuits reward plaintiffs' lawyers handsomely if they succeed -- resulting in millions of dollars in attorneys' fees in some cases. What's more, the mere threat of a large class-action suit often forces a company into negotiating a generous settlement, even if it's undeserved, just to avoid the costs of having to defend itself in court. And we all end up paying for it in higher prices.
In Wal-Mart Stores Inc. v. Dukes, attorneys representing three female Wal-Mart employees alleged that the company engaged in discrimination against women workers. They sought back pay and other relief not just for their actual clients but also on behalf of more than 1.5 million women who work at Wal-Mart. Two lower courts had sided with plaintiffs' in certifying the case as a class action against the behemoth retailer, but the Supreme Court rejected the claim.
It's hard to imagine a flimsier case than the one offered by the attorneys on behalf of the actual women alleging discrimination by Wal-Mart.
One of the women worked first as a Wal-Mart cashier before being promoted; she was later demoted based on repeated violations of company policy, which she admitted to. Another woman received promotions to a supervisory position with the company, but alleged discrimination because a store manager yelled at her and told her "to doll-up, wear some make-up and dress a little better."
The third woman asked a store manager about management training and felt she received a brush-off, so she initiated a complaint within the company. She was told to bypass the manager and apply directly to district management for admission to the training program but never followed up. She was later fired for timekeeping violations.
In addition, the attorneys presented affidavits from 120 other women alleging sex discrimination. But even if every one of these claims had merit, does it follow that all 1.5 million female Wal-Mart employees have faced similar problems?
Judge Alex Kozinski of the Ninth Circuit didn't think so when the case was before him, and his dissenting comments were quoted in the Supreme Court majority opinion. The members of the class, he said, "held a multitude of different jobs, at different levels of Wal-Mart's hierarchy, for variable lengths of time in 3.400 stores, sprinkled across 50 states, with a kaleidoscope of supervisors (male and female), subject to a variety of regional policies that all differed. ... Some thrived while others did poorly. They have little in common but their sex and this lawsuit."
No one claimed that Wal-Mart had a policy to discriminate against women. To the contrary, the company has a vigorous anti-discrimination policy and has actually gone overboard in trying to meet diversity goals. In 2004, the then-CEO of Wal-Mart proudly announced, "If 50 percent of the people applying for the job of store manager are women, we will work to make sure that 50 percent of the people receiving those jobs are women." That sounds suspiciously like a quota.
Nonetheless, the lawyers alleged that Wal-Mart's policy of allowing a certain amount of discretion to local managers in deciding pay and promotions -- even within the company's broader anti-discrimination directives -- resulted in a "pattern and practice" of discrimination throughout the company.
But the heart of the lawyers' claim of discrimination was dubious social science "evidence." Instead of providing evidence of actual discrimination against women, the lawyers offered studies comparing the number of women promoted into managerial positions at Wal-Mart with the available pool of hourly workers regionally and comparing workforce data between Wal-Mart and its competitive retailers.
The attorneys also offered an expert witness who conducted a "social framework analysis" of Wal-Mart's "culture" and personnel practices that concluded the company was "vulnerable" to gender discrimination. But he admitted that he didn't know if his analysis applied .5 percent of the time or 95 percent of the time. This is junk science.
Had the lawyers succeeded in getting their case certified as a class action against Wal-Mart, hundreds of equally suspect cases would have followed suit. And while the intended targets are corporations, frivolous lawsuits hurt all of us. We should be thankful the Supreme Court has now made this process more difficult to abuse.