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Manhattan Institute

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These Actions Have No Class


These Actions Have No Class

September 15, 2004
Legal ReformOther

On Aug. 16, a group of 650 female employees at the Costco discount chain filed a class action employment discrimination lawsuit in federal court in San Francisco.

This filing follows news earlier this summer, in a similar case initiated by the same group of attorneys, that San Francisco U.S. District Judge Martin Jenkins had certified a class action gender discrimination claim filed on behalf of Wal-Mart’s 1.6 million women workers. Class action gender discrimination claims thus seem to be one of the newest lines of product development for the nation’s most profitable and most predatory corporate interest, what we at the Manhattan Institute have dubbed Trial Lawyers, Inc.

With over $40 billion per year in revenues, Trial Lawyers, Inc. in no way resembles its self-perpetuated image as the noble defender of the “little guy” against uncaring corporations. Indeed, the biggest difference between the lawsuit industry and most others is that rather than selling goods to willing consumers, Trial Lawyers, Inc. redistributes wealth -- in large part to itself -- through its unique access to the government’s monopoly on the use of force.

Class actions are the litigation industry’s weapons of choice because they aggregate so many claims -- hundreds, thousands, or (as in the Wal-Mart case) even millions -- that even the largest companies are forced to settle or face potential bankruptcy. Often, the numbers are so large that the merits of the case matter little. The expense of litigating the claim -- and the high verdict expected in the unlikely event of loss -- can gave the plaintiffs’ attorneys a very strong hand despite their weak legal position.

In principle, class actions are a useful and efficient vehicle to combine many similarly situated claims. Unfortunately, though, today’s courts are prone to certify class actions even when claims are not in fact similarly situated.

Employment discrimination claims such as those filed against Costco or Wal-Mart, almost invariably, are singularly unsuited for the class action device. The only common threads linking the class members are that the plaintiffs are all women who worked at the companies and failed to receive promotions. For any and each employee, however, the employer may have very good reasons for not promoting that worker. For instance, in the Wal-Mart case, one of the named plaintiffs admittedly was reprimanded for repeatedly returning late from lunch breaks, and another had been suspended for mishandling a customer refund. Costco has not yet responded in its case, but the sole named plaintiff has presented no evidence that her gender had any relationship to her non-promotion whatsoever, beyond the fact that males were promoted before her.

But in a class action lawsuit, the employer cannot mount individual defenses about such details and instead must result to statistical wars. The fact that women on average earn and are promoted less than men at a company does not establish that the company discriminated, but jurors are not typically given to statistical nuance. Moreover, class action plaintiffs’ attorneys can confuse juries by presenting what one of our recent Manhattan Institute reports called the “perfect plaintiff” -- by picking and choosing among different plaintiffs’ claims even when the claims are not consistent and not representative of the class as a whole.

Undoubtedly, some women, somewhere, have been discriminated against by companies as large as Wal-Mart and Costco. But to permit hundreds or even millions of plaintiffs to join class action suits without letting the employers address individual bias claims on their merits is to deny those employers due process of the law. Such class actions are really no more than corporate shakedowns. The companies’ employees and stockholders, and all of us as consumers, pay the price.