SAN FRANCISCO — Has Wal-Mart Stores Inc., the world's largest private employer, grown too big for the U.S. justice system?
That provocative question is the key to Wal-Mart's defense against a lawsuit filed on behalf of 1.6 million former and current women employees. Lawyers pursuing the class action claim Wal-Mart systematically denied raises and promotions to women and paid them less than their male counterparts.
Wal-Mart denies any pattern of discrimination and has appealed the decision of U.S. District Judge Martin Jenkins to proceed to trial, calling the case "gargantuan," "elephantine" and "unprecedented," among other things.
But what really bothers the retailing powerhouse, based in Bentonville, Ark., is the judge's compensation plan: If companywide gender discrimination is proven at trial, it could force Wal-Mart to pay billions of dollars to all women paid less than their male counterparts, with no opportunity to dispute their individual circumstances.
Jenkins rejected the idea of 1.6 million individual hearings in the nation's largest civil rights case as "impractical on its face."
Wal-Mart calls that an unprecedented denial of due process in its appeal, which seeks to have the entire case dismissed. The 9th U.S. Circuit Court of Appeals hears arguments Monday.
Lawyers for the women — including six current and former employees who are the named plaintiffs — say a statistical compensation formula that factors in seniority, pay, gender, job description and store location does follow precedent in class-action cases, and besides, it's the only workable way to compensate such a huge class of victims.
"The fundamental purpose of federal class actions is, after all, to promote the efficient enforcement of federal rights where individual litigation is impracticable or too costly," said Bill Lann Lee, a class-action lawyer who filed a friend-of-the-court brief on behalf of Consumers Union and other groups. His firm, Lief, Cabraser, Heimann & Bernstein, is one of the nation's most prolific class-action filers.
Wal-Mart says the conventional rules of class actions should not apply in this case because its 3,400 stores, including Sam's Club warehouse outlets, operate with so much autonomy that they are like independent businesses with different management styles that affect the way women are paid and promoted.
"The nature of the individualized claims, the scope of the class, their varying jobs, their location and the number of stores and the number of people in this class action, that makes this class unmanageable," said Theodore Boutrous, Wal-Mart's lead attorney in the case. "It's unworkable: 3,400 different stores and 3,400 different managers."
Boutrous has suggested that women who allege they were discriminated against file lawsuits against individual stores.
The women's lawyers said the idea was ridiculous, and would clog the federal judiciary.
"What they're saying is, 'We're so big that you can't possibly certify a class that challenges our practices,' " said Joseph Sellers, one of the lead attorneys for the women.
Reflecting Wal-Mart's uniquely powerful role in the American economy — the company earned $10 billion last fiscal year and currently employs 1.3 million people — the appeals court has received dozens of legal briefs from groups across the nation's legal, political and economic spectrums, each predicting dire consequences.
Women's rights groups and the Consumers Union argue that Wal-Mart's assertion that it should individually try each woman's case to determine compensation is simply a ploy to get the case dismissed.
But the U.S. Chamber of Commerce and other retail groups say Wal-Mart is the victim here. The district court's formula gives Wal-Mart no chance to show it had lawful reasons to deny raises or promotions to particular employees, said attorney Evelyn Becker, who filed the chamber's brief. Such a policy would be disastrous to U.S. companies, she said.
"Under the district court's ruling, employers would lose the opportunity for their day in court and suddenly face lability for employment decisions that they could readily defend if the claims were brought in the context of an individual action," Becker said.
Legal precedent arguably supports both sides.
Jeff Fazio, a class-action attorney in Pleasanton, Calif., says companies' first line of defense is always to say they need to examine each person on the stand.
But using statistical formulas to compensate plaintiffs in class actions is not unusual. That's how the courts ordered payment to thousands of Alaskan fishermen whose livelihoods were destroyed by the 1989 Exxon Valdez oil spill, although the amount is on appeal.
"Exxon still was allowed to know whether they actually fished where the spill was," Boutrous countered. "The Wal-Mart case, it's litigation by statistics only."
In approving the class action for trial in San Francisco, Judge Jenkins ruled last year that corporations aren't immune from a 1964 civil rights law that prohibits sex discrimination, despite Wal-Mart's arguments that a single class action would be "absolutely unmanageable on a nationwide basis." The judge also ruled that lawyers for the women had enough anecdotal evidence to warrant a class action trial, although Wal-Mart produced statistics it said proved otherwise.
Wal-Mart contends the lawsuit fails to consider factors that elevate pay for certain individuals — for example, some sales jobs require a gun license, while others pay a premium for skills such as handling live crickets sold for fishing.