Wal-Mart’s moment of reckoning at the U.S. Supreme Court has begun. On March 29, the highest court in the nation has begun hearing arguments from both the retailer and attorneys representing the plaintiffs as to whether the potential multi-billion suit against Wal-Mart should be upheld as class action litigation.
The legal sparring has continued for more than a decade when six women originally filed suit against Wal-Mart Stores. The women claimed that company executives failed to stop local store managers from making sexist decisions about promotions and pay. Instead of seeking redress for their individual claims, the six plaintiffs have won several decisions in lower federal courts preserving the right to press their suit as a class action representing what could be as many as 1.6 million female employees at the nation’s largest retailer.
It is expected that a final decision by the Supreme Court will handed down early this summer and that action will decide whether the suit will go forward as a class action. It marks the court’s first look in 12 years at the standards that plaintiffs must meet to mount a class action. Invoking a familiar justification for class actions, the plaintiffs’ lawyers say many of the workers don’t have enough money to gain to justify suing individually. Of course, the parties have the option of settling the dispute out of court, which some analysts feel may be Wal-Mart’s best choice if the Supreme Court rules that the case can continue as a class action suit.
Wal-Mart has continually denied any intentional wrongdoing, despite the fact that the retailer was reportedly warned by their lawyers in 1995 that a sexual discrimination lawsuit was possible after it was found that men earned 19 percent more than women and were five times more likely to be promoted. The company contends that the accusations are too numerous and too diverse to be tried as a class. A class action defeat could cost the retailer billions of dollars.
More than 20 U.S. companies have filed papers in support of the company’s position.
In a decision which was substantially upheld by the Ninth Circuit U.S. Court of Appeals in San Francisco, U.S. District Judge Martin Jenkins held that rough justice is better than having no remedy for any class member. In upholding this decision, appellate Judge Michael Daly Hawkins emphasized that having a class action suit was better than clogging the court system with individual suits stating that size alone does not make a case unmanageable.
The suit, which was filed in 2001 covered women who have worked at the retailer’s Wal-Mart and Sam’s Club stores since 1998. The Ninth Circuit limited the class to what the majority of the appellate judges estimated would be 500,000 current employees. Lawyers for the women want to add workers who were hired after the 2004 district court ruling. “I have no doubt that the class would exceed a million,” says Brad Seligman, the lead plaintiffs’ lawyer.
Allowing such a broad class would prevent Wal-Mart from defending against the claims of each woman individually, argued its lead lawyer, Theodore Boutrous. “Class actions can be helpful for efficiency, and there’s an attraction to that. But at some point they can start chopping away rights.”
The case centers on the federal rules requiring that class claims raise common questions and that representative plaintiffs be typical of the larger group. Seligman maintains that the Wal-Mart workers—a group that includes the six women seeking to serve as class representatives and more than 100 who have filed sworn statements—have encountered similar workplace problems. The plantiffs described more junior male employees as well as male friends of supervisors being promoted ahead of them. Wal-Mart officials say that, with almost 1.4 million employees, some of them—including supervisors—are going to have errors in judgment.
In related Wal-Mart news, the Bentonville, AR merchant will officially unveil its smaller format Wal-Mart “Express” stores in the second quarter, and according to Bill Simon, the chain’s president and CEO of its U.S, operation, will open hundreds or more smaller stores under multiple brands in the coming years.
Simon spoke at the Bank of America Merrill Lynch consumer conference in New York last month. Despite a modest sales slump, which has resulted in the company posting identical store declines for seven consecutive quarters, Simon noted that “sales have been very encouraging” since after snowstorms hit much of the country and kept consumers homebound in early February,
“We’ve seen an improving positive trend in the business over the last four weeks,” Simon stated. He added that its first quarter results will be driven by how well Wal-Mart fares during its Easter selling season.
Simon told the analysts that part of Wal-Mart’s problem is that it had strayed from its core selling principles of offering the lowest cost and biggest selection. It will run television ads to promote its policy to match any competitor’s advertised prices on all merchandise, as well as its broad selection.
The first Wal-Mart “Express” store will be 14,440 square feet and open in Gentry, AR, a town of 3,158 located about 20 miles southwest of the company’s Bentonville headquarters. Other “Express” sites are expected to open soon after in the rural Arkansas towns of Prairie Grove and Gravette. The new stores will feature a pharmacy, however not all “Express” units will offer a pharmacy, so the company can evaluate which model works better. The “Express” stores are expected to cost in the $1.2 million range. The retailer will reportedly test different mixes of products in the initial stores as it fine tunes its new format which will be expanded to both rural and urban locations. The first unit is expected to open by mid-summer.
Simon also noted that the world’s largest chain has brought back “action alley,” an area of the store where its most popular discounted merchandise is aggressively merchandised, noting that the restoration of “action alley” adds 10 to 20 basis points of same-store sales growth.
In his presentation to the analysts, Simon asserted that Wal-Mart’s past efforts to reduce SKUs as well as decrease the physical size of some departments, like toys and apparel, backfired, as customers went elsewhere to buy the products Wal-Mart no longer carried.
He also addressed the chain’s Neighborhood Market stores, Wal-Mart’s previous attempt at downsizing its “division one” and SuperCenter models. Those units he acknowledged haven’t done as well as hoped and will get rebranded as Wal-Mart Market, with more of those stores to be opened in the future, too. Simon added that debut Wal-Mart “on campus” store, at the University of Arkansas, is exceeding the company’s expectations thus far.
In other topics covered by Simon, the company is expanding its “pick up today” program nationwide, with approximately 3,600 stores expected to participate by June. The program allows customers to order about 20,000 items online with free, same-day pickup at their local Wal-Mart unit.
Simon also unveiled three new commercials. In one spot, several Wal-Mart associates express their disenchantment when a customer claims that a competitor is offering a product for 20 cents less than Wal-Mart. The background music is the instrumental from Twisted Sister’s song, “We’re Not Gonna Take It.”
“Everyday low price, broadest assortment possible,” Simon asserted. “Everyday low price, broadest assortment possible. That’s who we are, that’s where we’ve been, that’s where we’re going.”