Wal-Mart Gender Discrimination Ruling Spells Trouble for Costco

Judith Eve Lipton
In federal court, Costco and Wal-Mart have a lot in common.
Here in the Northwest, we like to think of Issaquah-based Costco as a liberal object lesson, ostensibly proving that you can offer tasteful goods, deep discounts and fair wages while still making a profit. Wal-Mart, on the other hand, is thought of as the anti-Costco.

But for the purposes of federal court, the two companies are linked. Both have gender discrimination suits pending against them. And the U.S. 9th Circuit Court of Appeals decided in 2008 that it would not rule on whether to affirm class-action status in the Costco suit until it had rendered a judgment on the same matter in the Wal-Mart case.

On Tuesday, the court gave a green light to class-action litigation against Wal-Mart. That's bad news for Costco.

Brad Segilman, executive director of the Impact Fund, a California-based public interest law firm that is representing plaintiffs in both cases, says he believes this week's ruling will make it easier to get class-action status in the Costco case because many of the issues are similar.

Both Costco and Wal-Mart, for instance, had attempted to dismiss the testimony of a sociologist who has done research on sex stereotyping. The companies portrayed the research as junk science, carried out in laboratories and having little to do with the real-world business environment. The 9th Circuit, however, disagreed in the Wal-Mart ruling (see pdf). The court also rejected Wal-Mart's argument that the company as a whole should not be held accountable for varying decisions at individual stores, an issue that is also at play in the Costco case.

Wal-Mart says it is likely to appeal to the U.S. Supreme Court. The 9th Circuit might thus continue its freeze on the Costco case, Segilman says. Or the appeals court could now take action, either by issuing a decision on Costco or calling the parties back in for a new hearing.

Millions of dollars are likely at stake. Currently, the Costco suit has three plaintiffs: women who contend that they were denied promotions because of their gender. But the suit will represent 750 current and former employees if it becomes a class action, greatly magnifying the amount of potential financial damages.

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