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Wal-Mart Class Action Decision Sets Precedent, Cited in Costco Ruling

An attorney notes that the Wal-Mart decision earlier this year will make it difficult for nationwide class actions in employment law to succeed.

September 21, 2011
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An appellate court decision that reverses a district court's grant of class certification to current and former employees of the Costco Wholesale Corp. warehouse store chain reflects the impact of the U.S. Supreme Court's Wal-Mart decision in June, says an observer.

Issaquah, Washington-based Costco was charged by plaintiffs seeking class action status with promotional practices that discriminated against women.

The district court had issued its decision in Shirley "Rae" Ellis et al. vs. Costco Wholesale Corp. in 2007, before the Supreme Court's ruling this year in Wal-Mart Stores Inc. vs. Betty Dukes et al. In its Dukes ruling, the Supreme Court ruled against a proposed class of some 1.5 million members.

That ruling was frequently cited by the San Francisco-based 9th U.S. Circuit Court of Appeal in its complex Costco ruling, issued Sept. 16.

"This complicated case requires us to consider a number of issues relating to class certification," said the three-judge panel's unanimous ruling. "Several of these issues have recently been clarified by the Supreme Court's decision" in the Wal-Mart case, says the opinion.

Among other steps taken by the court, it ruled the district court "abused its discretion by applying the wrong legal standard in this analysis of commonality and typicality" under Rule 239 (a) of the Rules of Civil Procedure, which deals with the prerequisites to establishing a class action. "Accordingly, we vacate the district court's findings on those issues and remand for application of the correct standard," said three-judge panel in its unanimous decision.

Commenting on the decision, D. Gregory Valenza, a partner with San Francisco-based law firm Shaw Valenza L.L.P., who was not involved in the case, said, "The most significant takeaway is that the Wal-Mart decision is going to make it very difficult for nationwide class actions in employment law to succeed."

"It's quite clear that the nationwide promotion practices of Costco are not going to be able to litigate in a single class action," he said.

Filed by Judy Greenwald of Business Insurance, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.

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