Eagle Forum Legislative Alerts

Friday, November 18, 2011

Wal-Mart Lawsuit Limits Class Action Suits

"Class action" lawsuits are tools for trial attorneys to get enormous legal fees by suing on behalf of thousands of people who never hired the lawyers or approved the lawsuit. When one person is overcharged $10 by a large company, he can recover only $10 in a lawsuit. But if an attorney can sue in a class action on behalf of a million people who were overcharged $10 each, then he might recover $10 million in damages and take a large fraction as his legal fee. Often class actions are brought by liberal attorneys who plow some of their profits into campaigns for liberal politicians, such as Obama for president.

In June, the U.S. Supreme Court rejected a gender discrimination lawsuit consisting of a class of 1.5 million women who now or formerly worked for the giant retailer Wal-Mart. This was "one of the most expansive class actions ever." It alleged gender discrimination on behalf of all present and former female employees of Wal-Mart, and sought back pay, which could have totaled billions of dollars.

By 9-0, the Court struck down this massive lawsuit, and by 5-4 the Court restricted the use of future class actions in federal court. The Court held that a class action for gender discrimination will be permitted only when there is "a single cause of the discrimination" against all the plaintiffs, which can be litigated in one case. Wal-Mart's decentralized structure allows local managerial discretion in promotions, and that helped save it from this billion-dollar lawsuit.

This Wal-Mart decision could shut down other employment-based class action lawsuits against big companies. Individuals can still sue for particular damages, but much of the racket of massive class actions for alleged employment discrimination may now be eliminated.

Listen to the radio commentary here:

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