Wal-Mart Stores suffers class action setback

The AP reported Monday that a sharply divided federal appeals court on Monday exposed Wal-Mart Stores Inc. to billions of dollars in legal damages when it ruled a massive class action lawsuit alleging gender discrimination over pay for female workers can go to trial.

In its 6-to-5 ruling, the 9th Circuit U.S. Court of Appeals said the world's largest private employer will have to face charges that it pays women less than men for the same jobs and that female employees receive fewer promotions and have to wait longer for those promotions than male counterparts. The retailer has fiercely fought the lawsuit since it was first filed by six women in federal court in San Francisco in 2001 and said it would appeal the decision to the U.S. Supreme Court, according to AP.

The ruling "opens up every company in America that has employees to class actions like this," said Theodore Boutrous, the company's lead lawyer on the largest gender bias class action in U.S. history.

The appeals court upheld a lower court ruling allowing the lawsuit to go forward as a class action, which attorneys for the Wal-Mart employees said encompasses more than 1 million women. Wal-Mart disputes that figure and asserts fewer than 500,000 women are covered by the decision Monday.

Either way, the company could lose billions of dollars if it is found liable and required to fork over back pay to the affected women.

The appeals court did order the trial court judge to reconsider two important issues that would alter any potential pay out.

U.S. District Court Judge Vaughn Walker in San Francisco was told to determine the appropriateness of punitive damages and whether former employees at the time of the 2001 filing of the lawsuit should be part of the class action. The case was transferred to Walker after the resignation of U.S. District Court Judge Martin Jenkins, who ruled against Wal-Mart on those two issues.

Wal-Mart, which employs 1.4 million employees in the United States and 2.1 million workers in 8,000 stores worldwide, argued that the conventional rules of class action suits should not apply because each outlet operates as an independent business. Since it doesn't have a companywide policy of discrimination, Wal-Mart argued that women alleging gender bias should file individual lawsuits against individual stores.

Finally, the retailer argued that the lawsuit is simply too big to defend.

"Although the size of this class action is large, mere size does not render a case unmanageable," Judge Michael Daly Hawkins wrote for the majority court, which didn't address the merits of the lawsuit, leaving that for the trial court.

Judge Sandra Ikuta wrote a blistering dissent, joined by four of her colleagues.

"No court has ever certified a class like this one, until now. And with good reason," Ikuta wrote. "In this case, six women who have worked in thirteen of Wal-Mart's 3,400 stores seek to represent every woman who has worked in those stores over the course of the last decade -- a class estimated in 2001 to include more than 1.5 million women."