Wal-Mart Stores: One Step Ahead of the Rest

I Parties In 1962, Sam Walton and his wife, Helen, opened the first Wal-Mart in Rogers, Arkansas. The discount retailer proved to be a quick success as Walton opened 15 additional stores in the following 10 years. In 1972, in hope of raising more capital and further expanding his business, Walton had an initial public offering of Wal-Mart stock on the New York Stock Exchange. The IPO went extremely well and the corporate entity was able to raise enough capital to open up another 276 stores spanning 11 states. The retail giant continued its success and has now become one of the staple corporations of American history; operating 10,000 stores nationwide while serving 176 million customers annually. However, the path to success came with a few bumps in the road; Wal-Mart has been accused of treating female employees, in both management and hourly positions, unequally compared to their male coworkers. Betty Dukes, Patricia Surgeson, Christine Kwapnoski, Deborah Gunter, and Edith Arana are current and/or former Wal-Mart employees who are accusing their employer of sexual discrimination. Mrs. Dukes began her employment for Wal-Mart in 1994. In 1999, after 5 years of minor promotions and raises, she asked to be trained for a management position but was refused. Ms. Surgeson was hired by Wal-Mart in 1997 and received 2 promotions in her 4 years of employment. While bearing more responsibility, she didn’t receive an increase to her salary. She resigned in 2001 because she was also refused a management promotion. Ms. Kwapnoski worked for Sam’s Club, a Wal-Mart held retail company, for over 20 years. During her employment, she worked at virtually every non-management position. She made many attempts to enter into the management training program but was turned away. Ms. Gunter and Ms. Arana had similar experiences to the other plaintiffs. They were both denied promotions while less qualified men received them. Although, there are only 5 named plaintiffs in this case, the women are bringing up these allegations on behalf of potentially over 1.6 million former and current Wal-Mart employees.
II Claims Against Wal-Mart The plaintiffs are alleging that Wal-Mart discriminated against them based on their sex, with respect to wages and promotion to management positions. They argue that by doing so, Wal-Mart is in clear violation of Title VII of the Civil Rights Act of 1964. Title VII of the Civil Rights Act prohibits discrimination in the workplace based on race, gender, religion, or nationality. The women are claiming that Wal-Mart used discriminating practices on 3 separate levels: unequal pay for hourly positions; unequal pay for co-manager positions; and dissent towards management promotions.
Plaintiffs claimed that there were two relief classes in this case: Injunctive and monetary. All current Wal-Mart employees were part of the Injunctive Relief Class. This meant that these workers were not entitled to any monetary damages, but the court would produce a court order against Wal-Mart for such discriminatory actions to cease. The other class, Monetary Relief Class, did seek monetary damages. This class included all workers who were subject to any one of the 3 allegations presented in the claim and have been employed anytime since December 26, 1998.
Plaintiffs planned on using statistical information to validate their claims against Wal-Mart. The retailer uses a system that reports salaries and wages to the District and Regional Managers. These reports have statistically showed that female workers were paid, on average, less than their male co-workers. The compensation difference is even more alarming when you factor in that female performance reports have always been higher than their male counterparts. Wal-Mart uses a pay raise system that does not take performance reports into account; there is no documentation or reason necessary for a pay raise. A manager has sole discretion to give any employee a raise no matter how commendable their annual performance report is. The plaintiffs claim this system of compensation has failed to create an equal chance of a raise due to a majority of management having discriminating beliefs against women.
Plaintiffs allege that the possibility of promotion to a management position was equally, if not more, discriminating. Until 2003, Wal-Mart lacked an application system for management promotions. Candidates for promotion were chosen by District and Regional Managers on the basis of minimum tenure and age, ability to relocate, and satisfactory performance reports. Plaintiffs argued that Wal-Mart’s promotion procedure did not take into account any job criteria in their decisions and therefore women were discriminated against men on countless number of times. In 2003, Wal-Mart made a decision to introduce an application system for management promotion. This change, however, still came with criticism from female workers. Hopeful applicants had to agree on stipulations that turned many women around: traveling up to 6 weeks at a time, subject to changing schedules, working on holidays and weekends, and working overnights. Many female workers who sought a promotion had families and other responsibilities that did not allow them to agree to these terms. Plaintiffs argue that these requirements were added to the application for the sole purpose to keep men at the top; it was rare for managers to have to adhere to any of these provisions during their careers. Wal-Mart responds to criticism with some key arguments. Wal-Mart managers were instilled with the idea that males produced better leaders: On January 24, 2004, at a meeting for all District Managers, CEO Thomas Coughlin instructed his DM’s to promote more men because they were better at having “a single focus.” Wal-Marts argument against the pay differential was a statistical one: According to the U.S. Census, female workers earn 75% as much as their male peers. Wal-Mart believed that this economic phenomenon was present in their industry as well. Although, they believed they were innocent, Wal-Mart never defended their entity from the claims that were brought upon them. Instead, their strategy was to have the case dismissed by arguing that the parties in the class action lawsuit did not have enough common ground to bring their allegations as one party. This strategy, if successful, would force individual lawsuits. Wal-Mart knew that individual cases would be much rarer due to high legal expenses for the plaintiffs.

III Ninth Circuit Court Ruling
On April 26, 2010, Dukes v. Wal-Mart was brought to the Ninth District Court of California to seek assistance of the court in certification of the class. Under Rule 23 (b)(2), a district court may certify a class only if the following criteria are met: the class is so large that separate claims are impractical; the questions of law is common within the whole class; and the claims of the representative are typical of the claims of the class. Having valid personal and subject-matter jurisdiction, the statute in question was indeed federal and Wal-Mart operated 212 stores and employed 70,000 workers in California, the court came to a 6 to 5 conclusion allowing the plaintiffs to seek injunctive and monetary relief as a class action lawsuit. Judge Hawkins delivered the following conclusion, “it would be better to handle some parts of this case as a class action instead of clogging the federal courts with innumerable individual suits litigating the same issues repeatedly.” The court believed monetary relief could be awarded based on the approach that was taken in a previous case, Hilao v. Estate of Marcos, 103 F. 3d 767, 782– 787 (1996). In that case, back pay was distributed to 9,541 class members by selecting a sample set of 137 claims and apportioning equal amount of monetary relief to the rest of the plaintiffs. To no one’s surprise, Wal-Mart was displeased by the opinion of Judge Hawkins and sought a review. On April 21st, 2010, only one day after the District Court of California ruled to certify the class, Wal-Mart appealed to the Supreme Court to review the certification. The retailer believed that the district court’s ruling on the matter challenged past opinions held by appellate courts that ruled on similar cases. Wal-Mart argued that the District Courts are split when it comes to testing if monetary relief is appropriate under Rule 23(b)(2). They claimed that every court had a different method of testing to determine certification and they felt that the Supreme Court should review this case and hopefully resolve this dilemma by forcing monetary relief claims to be certified only under Rule 23(b)(3). Rule 23(b)(3) has much stricter requirements for certification of class action lawsuits seeking monetary relief.
IV Supreme Court The U.S. Supreme Court granted Wal-Mart request for an appeal and heard the case on March 29, 2011. After the first day of arguments, the future of the class action lawsuit did not look promising for the plaintiffs. Attorney representing the plaintiffs, Joseph Sellers, was aggressively questioned by the Supreme Court Justices. Justices questioned whether discrimination was less of a company pattern and more of a store by store basis. They also had harsh criticism for the method the plaintiffs were using to show discrimination was present: They believed that if employees could use statistical data to show that women were underpaid compared to men, than ever company in this country paying men more than women would have a class action lawsuit on their hands. Justice Kagen also added that for this case to go through as a class action, the plaintiffs had to show that there was a known Wal-Mart corporate policy that discriminated against women as a whole. Proving that every woman, in the class, was individually discriminated against was not enough for this lawsuit to continue as a class action one.
On June 20, 2011, Justice Scalia delivered the opinion of the court for Wal-Mart Stores Inc. v. Betty Dukes. His conclusion held that the plaintiffs could not continue as a class due to members lacking commonality. According to Justice Scalia, “the plaintiffs must show that there are questions of law or fact common to the class.” He felt that the plaintiff’s argument only demonstrates that they suffered the same Title VII violation, but it failed to show that they all suffered the same injury. Commonality requires that all the members of the class suffer the exact same injury. The Justice also agreed with Wal-Mart’s criticism of the Ninth District Court’s rulings on monetary relief. He proclaimed that under Rule 23(2)(b), injunctive, declaratory, or monetary relief must be appropriate for the whole class. In other words, every member of the class, if the lawsuit is successful, must be entitled to the exact same dollar amount of monetary relief. The plaintiffs, however, were not all seeking equal amounts because they all differentiated in store positions, locations, and tenures. With a 5-4 split decision, the Supreme Court reversed the District Court’s judgment.
V Aftermath The Supreme Court ruling in favor of Wal-Mart was heard nationwide. Sharp criticism of the court, from liberals, was already high after the AT&T ruling from just a few months prior: The Supreme Court ruled in favor of AT&T and their arbitration policy that forces their disgruntled customers to go through an expensive route to have their claims heard. With the Wal-Mart decision fresh from the presses, critics were further outraged that the court was consistently taking a conservative approach by favoring corporate entities over individuals. Both decisions went 5 to 4 in favor of the businesses and the outcome of either class action lawsuits could have been drastically different if Justices did not possess lifelong terms. Nevertheless, other companies, such as Costco and BestBuy, have voiced their agreement with the rulings. Both companies are in the midst of class action lawsuits involving sexual discrimination and the judgments in Wal-Mart v. Dukes can be held as precedents to have their own cases won. Although Wal-Mart maintained their innocence throughout this ordeal, their employment statistics still revealed the company was employing and promoting workers in an unethical manner. Wal-Mart did not receive a court order to change but they did take it upon themselves to do the right ethical thing. Only a couple months after the Supreme Court judgment, the retail giant introduced their new public relations campaign. The new plan is set to double its purchases from women owned business to $20 billion by 2016. The company also pledged to spend roughly $100 million to train women worldwide.
VI Conclusion With their backs to the wall, Wal-Mart introduced strategies that lifted the company right back up. Facing potentially billions of dollars of back pay, Wal-Mart needed to act quickly and intelligently. They could have gone to trial and gave the plaintiffs a chance to persuade a jury, or they could have settled and had a “minimal” financial loss, or they could implement a strategy to have the best of both worlds: no class action lawsuit and no financial burden. The company choose the latter approach to deal with this issue and after extensive research by their lawyers they were successful. But even with the verdict on their side, Wal-Mart still had an image issue to deal with. Even though, Betty Dukes and the rest of the plaintiffs were unsuccessful in their campaign, they did, intentionally or not, draw negative publicity to their former/current employer. So how does Wal-Mart respond? They implement their second strategy which pledges to train women worldwide and purchase products from women owned businesses. The combination of these two strategies left Wal-Mart one step ahead of the rest.

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[ 1 ]. (No author), History, http://walmartstores.com/aboutus/297.aspx, December 14, 2011.
[ 2 ]. Id.
[ 3 ]. Id.
[ 4 ]. Id.
[ 5 ]. Id.
[ 6 ]. Fourth Amended Complaint, Dukes V. Wal-Mart Stores, Inc., at 2, available at http://www.walmartclass.com/staticdata/Fourth%20Amended%20complaint%20final%20with%20exhibits.pdf.
[ 7 ]. Id at 4.
[ 8 ]. Id at 20.
[ 9 ]. Id.
[ 10 ]. Id.
[ 11 ]. Id.
[ 12 ]. Id.
[ 13 ]. Id.
[ 14 ]. Id.
[ 15 ]. Id.
[ 16 ]. Id at 5.
[ 17 ]. Id at 2.
[ 18 ]. Id.
[ 19 ]. 42 U.S.C. §§ 2000e et seq.
[ 20 ]. Fourth Amended Complaint, Supra note 6, at 2.
[ 21 ]. Id at 5.
[ 22 ]. Id.
[ 23 ]. Id.
[ 24 ]. Id.
[ 25 ]. Id.
[ 26 ]. Id at 9.
[ 27 ]. Id.
[ 28 ]. Id at 10.
[ 29 ]. Id.
[ 30 ]. Id.
[ 31 ]. Id.
[ 32 ]. Id at 2.
[ 33 ]. Id at 10..
[ 34 ]. Id at 11.
[ 35 ]. Id.
[ 36 ]. Id at 12.
[ 37 ]. Id.
[ 38 ]. Id.
[ 39 ]. Id at 15.
[ 40 ]. Id.
[ 41 ]. Robert Longley, Gender Wage Gap Widening, US Census Data Shows, About.com, September 1st, 2004, (no page).
[ 42 ]. Ann Zimmerman and Nathan Koppel, Bias Suit Advances Against Wal-Mart, Wall Street Journal, April 27, 2010, (no page).
[ 43 ]. Id.
[ 44 ]. Id.
[ 45 ]. Dukes v. Wal-Mart Stores, Inc., 222 F.R.D. 137, 141-42 (N.D. Cal. 2004).
[ 46 ]. Dukes, 222 F.R.D. 137, 141-42 (N.D. Cal. 2004) at 6148.
[ 47 ]. Dukes, 222 F.R.D. 137, 141-42 (N.D. Cal. 2004) at 6167.
[ 48 ]. Fourth Amended Complaint, supra note 6, at 3.
[ 49 ]. Ann Zimmerman and Nathan Koppel, supra note 33, at (no page).
[ 50 ]. Dukes, 222 F.R.D. 137, 141-42 (N.D. Cal. 2004) at 6236.
[ 51 ]. Dukes, 222 F.R.D. 137, 141-42 (N.D. Cal. 2004) at 6170.
[ 52 ]. Hilao v. Estate of Marcos, 103 F. 3d 767, 782– 787 (1996), at 625-6.
[ 53 ]. Nathan Becker, Wal-Mart Seeks Review of Gender Case, Wall Street Journal, August 25th 2010, (no page).
[ 54 ]. Id.
[ 55 ]. Id.
[ 56 ]. Allen Smith, Supreme Court Will Review Certification of Class Action Against Wal-Mart, Shrm.org, December 6, 2010, (no page).
[ 57 ]. Id.
[ 58 ]. Id.
[ 59 ]. Jess Bravin and Ann Zimmerman, The Court Weighs Bias Claims, Wall Street Journal, March 30 2011, (no page).
[ 60 ]. Id.
[ 61 ]. Id.
[ 62 ]. Id.
[ 63 ]. Id.
[ 64 ]. Id.
[ 65 ]. Wal-Mart Stores, Inc., Petitioner v. Betty Dukes et al, 564 U.S.__(2011).
[ 66 ]. Wal-Mart, 564 U.S.__(2011) at 8.
[ 67 ]. Wal-Mart, 564 U.S.__(2011) at 8.
[ 68 ]. Wal-Mart, 564 U.S.__(2011) at 9.
[ 69 ]. Wal-Mart, 564 U.S.__(2011) at 9.
[ 70 ]. Wal-Mart, 564 U.S.__(2011) at 20.
[ 71 ]. Wal-Mart, 564 U.S.__(2011) at 20.
[ 72 ]. Jess Bravin and Ann Zimmerman, Wal-Mart Ruling to Have Wide Reach, Wall Street Journal, June 21 2011, (no page).
[ 73 ]. Id.
[ 74 ]. AT&T Mobility LLC, Petitioner v. Vincent Concipeon et ux, 563 U.S.__(2011).
[ 75 ]. Jess Bravin, Court Conservatives Prevail, Wall Street Journal, June 28 2011, (no page).
[ 76 ]. Bravin and Zimmerman, Supra note 73, at (no page).
[ 77 ]. Id.
[ 78 ]. Id.
[ 79 ]. Migual Bustillo, Wal-Mart Offers Plan to Empower Women, Wall Street Journal, September 14 2011, (no page).
[ 80 ]. Id.
[ 81 ]. Id.
[ 82 ]. Id.
[ 83 ]. Id.