On February 6, a panel of the Ninth Circuit Court of Appeals in San Francisco reinstated a multi-billion dollar class action lawsuit against Wal-Mart in a 2-to-1 vote. As AEI scholar Ted Frank notes, the lawsuit is based on bogus statistical evidence, and the court's decision in Dukes v. Wal-Mart is permeated by intellectual dishonesty.
The class action accuses Wal-Mart of discriminating against a class of more than a million female employees, many of whom have never heard of the lawsuit and few of whom have ever alleged discrimination.
The February 6 decision was written by left-wing ideologue Harry Pregerson. Judge Pregerson is most famous for repeatedly defying the U.S. Supreme Court in the Robert Alton Harris case, in which he repeatedly blocked the execution of a vicious killer who murdered two boys in cold blood and then ate their dinner while they lay dying nearby, even after the Supreme Court had set aside his stays of execution as baseless. (Harvard Law Professor Charles Fried wrote a scholarly analysis of Pregerson's actions aptly titled Impudence). Pregerson had also dissented against life sentences for violent criminals, which he regards as typically being cruel and unusual punishment.
At his own judicial confirmation hearing before the Senate, Judge Pregerson openly boasted that if the law conflicted with his own values, he would choose to apply his own values instead of the law (Professor Fried's law review article quotes Pregerson at length). Pregerson's decision in the Wal-Mart case is a classic example of him ignoring the law when it conflicts with his ideological agenda of enriching trial lawyers and depicting corporate America as sexist.
As Ted Frank notes, in Pregerson's decision, “statistical evidence that the Supreme Court has said was insufficient was held sufficient; class members that the Supreme Court have said have no standing were given standing; [and] a punitive-damages procedure the Supreme Court has said violates due process was considered sufficient.” Pregerson's utter disdain for the rights of businesses and their shareholders contrasts sharply with his avid desire to invent freshly-minted rights for criminals.
Whether Wal-Mart will be forced to pay billions for nationwide discrimination will now be decided, not by the courts in the states where most Wal-Mart employees (and supervisors) live, but in the San Francisco court that the plaintiffs' lawyers cleverly filed the case in.
It is no accident that class actions against businesses with headquarters in Middle America tend to be filed in San Francisco, Los Angeles, and New York, which are home to large numbers of ideologically extreme jurors with a chip on their shoulder towards corporations or the white males they perceive as managing them. (The last time I drove around San Francisco, I saw large numbers of bumper stickers that read“I believe you Anita,” as well as smaller numbers of stickers saying things like “A woman needs a man like a fish needs a bicycle”). Whether Wal-Mart's managers are sexist will be determined by such people, and not by a jury of their peers.
To justify the class action the court had to find that the plaintiffs' claims were “typical” of all class members and that injunctive relief — not damages --"predominated," as is required by Federal Rule 23(b)(2).
The court's claim that the lawsuit is not primarily about money is patently ridiculous, when the compensatory and punitive damages sought by the lawsuit rise into the hundreds of billions of dollars.
And its claim that the plaintiffs' allegations are “typical” of how Wal-Mart treats female employees is rebutted by the plaintiffs' own allegation against Wal-Mart, which is not that it discriminates against women in any uniform way, but rather than it leaves so much room for “subjective” decisionmaking by individual store managers that they are free to engage in sex discrimination in promotions if they choose.
“Subjective” decisionmaking is not a corporate practice or policy that is properly challengeable in a class action. Indeed, it shows the lack of a policy. Many courts in Middle America do not allow a class action to challenge “subjective decisionmaking,” since that shows the absence of a policy, and class actions are supposed about corporate policy and typical behavior, not subjectivity or individual idiosyncracies.
Unfortunately, the federal circuit courts in San Francisco and New York City have ignored this basic rule limiting class actions, and instead allow class action lawsuits to be brought based on the (anti)policy of leaving subjective decisionmaking in the hands of local store employees.
As a result, trial lawyers sue businesses, not in their home state in Middle America, but in San Francisco or New York, where business practices that are legal in the rest of the country (such as decentralized corporate decisionmaking, a.k.a., “subjective decisionmaking”), have become potentially illegal.
The Ninth Circuit ruled that Wal-Mart could be ordered to pay damages to an entire class of more than a million female employees, without even being able to cross-examine individual employees to show whether or not they actually experienced discrimination.
That is directly contrary to the Civil Rights Act. As Judge Andrew Kleinfeld's dissent points out, "The Civil Rights Act expressly prohibits orders requiring the reinstatement, promotion, or payment of back pay to anyone injured 'for any reason other than discrimination.'"
(A different panel of the Ninth Circuit Court of Appeals issued an interesting decision today in another case, dealing with government employees and punitive damages, which I discuss in a separate blog post.)