"WHAT COULD MAKE THE EUROPEA? CEO OF ONE OF THE WORLD'S LARGEST COMPANIES ADMIT TO AN ATTRACTION FOR FRANCE?'' PUUNTIFF Some female workers say they're paid less than men 4isÉ CO". ¡rant Wal-Mart Vs. Class Actions The retail gianf s novel defense in a massive suit could rewrite the playbook C ORPORATE AMERICA could find it a whole lot easier to fight off employment class actions if WalMart Stores Inc. prevails in a sex discrimination case to be heard soon by the U.S. Ninth Circuit Court of Appeals. Indeed, a Wal-Mart victory could tilt the playingfieldfor virtually all of these kinds of suits, which have plagued Boeing, Coca-Cola, and dozens of other large employers over the years. Wal-Marf s ambitious legal strategy strikes at the heart of what it means to fue a class action. The company maintains that its constitutional rights would be vioiated if the court allows a suit to go for- ward involving up to 1.5 million of the retailing gianf s current and former female employees (table, page 78). Because such a case would deprive the company of its rights to defend itself against each woman's claim, it argues, the courts should allow suits only on a store-bystore basis. If the Ninth Circuit agrees and strikes down the multistate action certified by a lower court, it would Kkely kül the largest employment class action in U.S. history. More broadly, it would open vsdde the door for aU large companies to make similar arguments. "A victory for Wal-Mart might mean that plaintiffs can't bring nationvnde class actions anymore and that they might have to do them locally or regionally," says Mark S. March 21, 2005 I BusinessWeek I 73 Nani Beccalli explains why GE can't do without French high-tech. Legal Affairs Lawsuits Dichter, a management-side employment lawyer at Morgan, Lewis & Bockius LLP. Wal-Mart's case is no slam dunk. A few companies have tried similar arguments in bits and pieces and gotten nowhere. But Wal-Mart is the first to tackle the constitutional issues head-on, say Dichter and other experts. Certainly, it faces tough odds at die Ninth Circuit, one of the nation's more liberal federal appeals courts. Instead, if s probably aiming for the more conservative U.S. Supreme Court, say experts. At the same time, Wal-Mart has been hedging its bets by engaging in settlement talks with the plaintiffs for several months, say lawyers involved. ployees together into one status, allowing them to THE STAT lawsuit is to deal vnth sue on behalf of all complaints that they hold women who had worked in common. In employat Wal-Mart's U.S. stores ment discrimination cassince December, 1998. es, the problems usually Wal-Mart quickly apinvolve disparate policies pealed the class certificaor practices by the corpotion to the Ninth Circuit, Women's share of ration. Indeed, the plainwhich is due to set the Wal-Mart cashier tiffs' response is that hearing date any day. broad workforce data are The tiirust of Wal- jobs, the company's actually more reliable Marf s appeal is that the lowest wage category than individual hearings district judge ran Data: Court filings ^ ^ ^ ^ ^ ^ ^ in such cases. They point roughshod over the com^ ^ ^ ^ ^ ^ ^ out, for example, that the pan/s constitutional rights to due process and to a jury trial. De- retailer promoted hourly workers using spite the company's reputation for micro- a "tap-on-the-shoulder" method, in COURT-CLOGGER? managing down to the penny, it argued which employees couldn't apply for a STILL, THE QUESTION is whether Wal- that pay and promotion decisions are position and store managers singled out Marf s suggested store-by-store alterna- made almost entirely by local store man- promising candidates when vacancies tive makes sense. After all, the most ex- agers. So the judge should have ignored occurred. So it would be impossible to treme outcome—thousands of mini class the plaintiffs' statistics showing large na- tell now which individual women would actions—would clog the U.S. courts for tionwide disparities in the way female em- have qualified for a promotion even if years. Even the company's own predic- ployees are paid and promoted. Instead, it there had been no discrimination. "In these circumstances, the use of worktion that plaintiffs could have grounds to should hear only store-level suits. bring discrimination claims at no more Doing otherwise, the company says, force data to compute aggregate monethan 10% of its 3,400 U.S. stores would would leave it unable to prove that an in- tary relief 'has more basis in qualify as a lawyer's fuü-employment act. dividual was paid correctly or properly reality...than an individual-by-individual approach,' " the plaintiffs say, citing a prominent 1974 class action. The two sides disagree just as strongly about which approach would be fairer to the individual women involved. If the court uses aggregate company statistics, Mounting an ambitious defense, Wal-Mart argues that the U.S. Constitution as is typical in such cases, then women invalidates a federal district court ruling giving its current and former 1.5 million who never had any desire to become managers could get back pay or damfemale employees across its 3,400 stores the right to bring a sex-discriminages they're not entitied to, points out ation class action against the retailer What the company says in its appeal: John Beisner, a class action attorney at O'Melveny & Myers LLP who filed an DUE PROCESS The Fifth JURYTRIAL The Seventh INDIVIDUAL STORE TRIALS amicus brief supporting Wal-Mart on beAmendment gives WalAmendment gives the Plaintiffs should be able to half of the U.S. Chamber of Commerce. Mart a "basic due process company the right to have file class actions only at Or those who suffered egregious disright" to offer a defense a jury hear its defense of individual Wal-Mart crimination at one store would get nothagainst each individual its conduct regarding each stores, which would create ing if Wal-Mart vidns. "That's the Hobplaintiff's claim of plaintiff before punitive classes of 500 to 1,000 son's choice you get when you hand discrimination damages are awarded women juries these giant cases," he says. Data; Legal filings The plaintiffs argue diat rough justice Of course, Wal-Mart may simply beheve passed over for promotion. So it could be is better than no justice at all. They say that few store-level cases would be filed in forced to pay for something it didn't do. that in the nationwide class approach, the end, although Wal-Mart's lawyers That would be a clear violation of the Wal-Mart's total habüity would be set by deny that. Still, "if even 100 suits were Fifth Amendmenf s requirement that "no looking at how all female employees fared brought, it would be a mess for Wal- person shall be... deprived of life, liberty, across the company. If some ofthat monMart," warns Joseph M. Sellers, a partner or property without due process of law." ey went to women who didn't actually at Cohen, Müstein, Hausfeld & Toll who Says Theodore J. Boutrous Jr., a Wal-Mart suffer, then women who did experience represents the plaintiffs. lawyer at Gibson, Dunn & Crutcher LLP: discrimination might get less than they The case began in 2001, when a "When you're talldng about taking mon- should have. But Wal-Mart itself would be group of female Wal-Mart employees ey from one citizen and giving it to an- no worse off. sued, claiming that the world's largest other, you can't just rely on aggregate staWal-Mart's sheer size puts it in a cateretailer systematically paid women less tistics, which don't tell you who is gory all its ovm. If it succeeds in cutting than men in the same jobs and promoted actually discriminated against." class actions down to bite-size pieces, men ahead of similarly talented women. The problem, of course, is that this large—and not so large—employers Last June a Northern California District logic undercuts the very concept of class could end up benefiting. • Court judge granted the plaintiffs class actions. The point of grouping many em-By Aaron Bernstein in Washington Do Constitutional Rights Trump Class Actions? 74 I BusinessWeek I March 21, 2005 93% ^^_. GE's European CEO Nani Beccalli says Erance has a talent for innovation. •à^^ ~ GE is as American as apple pie. What's it like doing business with the French? Firstly, GE today is a truly global company with a long history in Europe. Secondly, there is a way of doing business which Erance and the United States have in common. Just look at our 50/50 joint venture with SNECMA producing jet engines in Erance [CEM International]. It's an outstanding and extremely successful partnership. It has existed for 30 years and will probably be around for 30 more. We've become so intimate, we can't do without each other. What qualities does France have to offer? The Erendi have a passion for engineering and technology, for research and solutions that push back the boundaries. The Ecole Polytechnique is one of the best engineering schools in the w^orld and Erench technology tends to be very sophisticated. I'm a car fanatic, and I can still remember when the Citroën DS was introduced in the mid 50s. It was incredibly advanced, way ahead of its time. Has France kept that edge? Unlike most other coxmtries, Erance hasn't given up any particular element of its technology. A lot of European countries have either limited or even non-existent portfolios of technology products. Erance is different. They still have a pharmaceutical industry, aviation, space, a helicopter industry, a train industry... GE in France • Established iii France for more than 50 years • 9,500 employees, 3 R&D centers, 6 production sites • GE's partnership with SNECMA gave them a lead in the aircraft engines industry Does that make it attractive for a foreign investor? Yes it does, especially if you're trying to make a technological product. In Erance, GE has one of the world's most technologically advanced units for producing turbines as well as the technology center for our medical business. The Erench are very creative. They have a great capacity for dreaming and they're not afraid to launch large-scale projects. TGV is a perfect example. The French also value tradition. Does that make them conservative? Not at all. Respect for tradition doesn't mean you're afraid of change. I've brought my fair share of change to GE, but I have tremendous respect for tradition. You can tell by the way I dress. I'd say Erance strikes the right balance between tradition and innovation. "The French have a passion for engineering and technology, for research and solutions that push back the boundaries/' GE is a major player in financial services. How do you rate France in that department? Erance is an advanced and sophisticated country from every point of view. In an environment like that, it's natural for financial services to be thri^ring. There are 60 million consumers in Erance. That's a rich community of people that has to save money, spend money, buy houses, buy cars, take out mortgages and borrow. Would you live there? Absolutely. Paris is my favorite city. I'm Italian, but I prefer Paris to Rome by a factor of 100. Paris is a place which combines tradition with modernity. There has never been a better time to invest in France. To find out what the new France can do for your business, visit www.thenewfrance.com THE NEW FRANCE. 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