Wal-Mart Faces Tough Questioning by Judges

Wal-Mart Stores Inc. ran into hostile questioning Monday from judges deciding whether the nation’s biggest employer must face the country’s biggest lawsuit claiming men were favored over women on the job.

Two of three judges on a federal appeals panel grilled the retail behemoth’s attorney, bringing up facts harmful to the company’s defense and faulting him for using “arrogant” language in criticizing the trial court judge.

The most forceful of the three, U.S. 9th Circuit Court of Appeals Judge Harry Pregerson, left little doubt that he was inclined to uphold a San Francisco federal judge’s ruling last year that allowed more than 1.5 million female employees and former employees to proceed toward trial as a class, rather than force them to sue as individuals or on a store-by-store basis. Wal-Mart has about 3,600 stores.

“I’ve read the decision” by U.S. District Judge Martin Jenkins, Pregerson said. “It’s very thorough and painstaking in its detail, and that’s what we’re here for -- to see whether he abused his discretion.” Sitting before scores of spectators in a packed courtroom, Pregerson told Wal-Mart attorney Theodore Boutrous Jr. of Los Angeles that he ought to apologize to Jenkins for accusing him of “trampling” on the company’s rights.

The 4-year-old lawsuit claims that Wal-Mart has systematically discriminated against women in pay and promotion, and that analysis of the company’s payroll records shows female employees earn an average of 5% less than men with the same titles, even when women have more seniority and better performance scores.

As appellate Judge Michael Hawkins reminded Boutrous, women account for about two-thirds of Wal-Mart’s hourly employees, but just one-third of its salaried managers.

Employer defense lawyers and trade associations say that if the case proceeds as a class action, Wal-Mart may be forced to settle rather than risk paying out billions of dollars in back pay and punitive damages. They say that will encourage more sweeping suits to be brought against big companies.

Only Judge Andrew Kleinfeld, the sole Republican appointee on the panel, directed many pointed questions at Brad Seligman, the Oakland lawyer representing at least six women and potentially every woman who worked at Wal-Mart or Sam’s Club stores since 1998.

Kleinfeld said he was concerned that each store had a fair degree of autonomy in deciding whom to promote and what to pay, making it questionable whether the women could hold higher management to account.

“If I understand correctly the core of the plaintiffs’ challenge, it is that there is a national policy at Wal-Mart of not having a national policy,” Kleinfeld said. But Seligman countered that regional managers reviewed many store-level decisions and kept a homogeneous culture by moving store managers around.

Kleinfeld said solid statistics could convince him of a national problem. In response, Seligman pointed to findings by an expert witness for the plaintiffs that showed a pay disparity in each of Wal-Mart’s 41 regions.

Some evidence that had been presented by an expert witness for the defense -- including a disputed study that found no disparity at 90% of the chain’s stores -- was thrown out by the lower court, and none of the appeals judges seemed tempted to agree with the defense that the exclusion was grounds for voiding the class action.

Bentonville, Ark.-based Wal-Mart will be free to introduce new statistics in a trial, Hawkins said. If the company loses there, additional hearings would be held on how to compensate the women. Members of the class could get money even if they haven’t heard of the case.

After the hourlong proceeding, Seligman was jubilant. “The next stop is a San Francisco jury,” he said.

In fact, both sides said they would ask for a rehearing or for a hearing before all of the 9th Circuit judges, and, if need be, appeal to the U.S. Supreme Court.

Boutrous said he couldn’t predict the outcome of Monday’s hearing, and he made no apology for his language faulting Judge Jenkins.

“We wrote a hard-hitting brief, and I think our arguments are correct,” Boutrous said.