At the same time, observers say the February 7 split decision by the 9th U.S. Circuit Court of Appeals in San Francisco in Betty Dukes vs. Wal-Mart Inc. does not break any new legal ground, although it could wind up costing the Bentonville, Arkansas-based retailer billions of dollars.

Its primary significance, observers say, is the unprecedented size of the class action, which affects some 1.5 million employees.

Wal-Mart plans to appeal the 2-1 decision, its attorney says.

The appellate decision upholds a lower court's 2004 ruling that granted class-action status to the approximately 1.5 million women who work or have worked in one or more of Wal-Mart's 3,400 stores in 41 regions at any time since 1998.

The seven plaintiffs in the case had charged that women employed by Wal-Mart were paid less than men in comparable positions despite higher performance ratings and greater seniority and that they received fewer—and waited longer for—promotions to in-store management positions than did men. They are seeking injunctive and declaratory relief, lost pay and punitive damages.

The appellate court said its decision is based on a limited review as to whether the lower court abused its broad discretion in ruling the case should be granted class-action status.

The lower court “acted within its broad discretion in concluding that it would be better to handle this case as a class action instead of clogging the federal courts with innumerable individual suits litigating the same issues repeatedly,” the appellate panel said.

Wal-Mart “failed to point to any specific management problems that would render a class action impracticable in this case, and the district court has the discretion to modify or decertify the class should it become unmanageable,” the decision says. “Although the size of this class action is large, mere size does not render a case unmanageable.”

However, in a strongly worded dissent, Judge Andrew J. Kleinfeld said the appellate decision “poses a considerable risk of enriching undeserving class members and counsel, but depriving thousands of women actually injured by sex discrimination their just due.”

A major issue in the decision is whether Wal-Mart's female workers had enough "commonality" to be placed within the same class. Wal-Mart had argued they did not, but the appellate and district courts disagreed.

Los Angeles, says many plaintiff lawyers will be emboldened by this decision and ask themselves, “ ‘Why file a single or small class action? Why not go for broke and file an enormous class action?’ ” and hope it is certified. In many ways, he says, the Wal-Mart case provides a “road map for how to do it.”

Decisions such as these tell plaintiffs and their attorneys that there "may be blood in the water" and more suits like it may follow, says Anthony J. Oncidi, an employer attorney with Proskauer Rose in Los Angeles.

Susie Gibbons, an employer attorney with Poyner & Spruill in Raleigh, North Carolina, says the decision does not bode well for large employers. “I see this as the bellwether of the next wave of unfortunate events for employers,” she says.

—Business Insurance