SAN FRANCISCO - A federal appeals court ruled Tuesday that Wal-Mart Stores Inc., the world's largest private employer, must face a class-action lawsuit alleging female employees were discriminated against in pay and promotions.
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The ruling by the 9th U.S. Circuit Court of Appeals upholds a 2004 federal judge's decision to let the nation's largest class-action employment discrimination lawsuit go to trial. The suit claims that as many as 1.5 million current and former female employees earned less than men and were bypassed for promotions.
The lawsuit exposes the Bentonville, Ark.-based retailing powerhouse to the possibility of billions of dollars in damages.
Wal-Mart claimed that the conventional rules of class actions should not apply in the case because its 3,400 stores, including Sam's Club warehouse outlets, operate like independent businesses, and that the company did not have a policy of discriminating against women.
But the court, in a 2-1 decision, disagreed.
"Plaintiff's expert opinions, factual evidence, statistical evidence and anecdotal evidence present significant proof of a corporate policy of discrimination and support plaintiff's contention that female employees nationwide were subjected to a common pattern and practice of discrimination," the court wrote.
U.S. District Judge Martin Jenkins, the San Francisco trial court judge who said the case could proceed, had ruled that lawyers for the women had enough anecdotal evidence to warrant a class-action trial. Wal-Mart took the case to the San Francisco-based appeals court.
Jenkins said if companywide gender discrimination is proven at trial, Wal-Mart could be forced to pay billions of dollars to women who earned less than their male counterparts, with no opportunity to dispute their individual circumstances.
Jenkins said it was "impractical on its face" to have individual hearings for each plaintiff and had planned to use a statistical formula to compensate the women.
Wal-Mart, in seeking dismissal of the case, called that an unprecedented denial of its rights. Wal-Mart said women who allege they were discriminated against can file lawsuits against individual stores. The women's lawyers said the idea was ridiculous, and would clog the federal judiciary.
"Although size of this class action is large, mere size does not render a case unmanageable," Judge Harry Pregerson wrote for the majority, which upheld Jenkins' decision in its entirety.
Brad Seligman, one of the attorneys who represented the women suing Wal-Mart, said he suspected Wal-Mart would ask the appeals court to rehear the case with a panel of 15 judges. But he said the decision would hurt the company's reputation.
"No amount of PR by Wal-Mart is going to allow it to deal with its legacy of discrimination," Seligman said.
Wal-Mart spokeswoman Mona Williams said the company was not immediately prepared to comment.
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Eds: The cases are Dukes v. Wal-Mart, 04-16688, 04-16720.
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