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Originally published June 22, 2011 at 4:44 PM | Page modified June 23, 2011 at 10:40 AM

Costco class-action discrimination case to be revived in wake of Wal-Mart decision

The U.S. Supreme Court ruled in favor of Wal-Mart in a decision that resurrects the Costco lawsuit and raises questions about the viability of any class-action dispute against a major employer.

Seattle Times business reporter

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A class-action lawsuit accusing Costco Wholesale of gender discrimination has been on hold for three years, awaiting a decision in a similar case against Wal-Mart.

This week, the U.S. Supreme Court ruled in favor of Wal-Mart in a decision that will revive the Costco lawsuit and raises questions about the viability of any class-action dispute against a major employer.

In a 5-4 decision, the court decided there were too many women — as many as 1.5 million — to be included in a single case against Wal-Mart. It also essentially said that employees can pursue class-action lawsuits only if a company has a stated policy of paying women or minorities less.

Justice Antonin Scalia wrote that the plaintiffs needed to point to "some glue holding the alleged reasons for all those [employment] decisions together."

He dismissed statistics showing discrepancies in the way women and men are paid and promoted at Wal-Mart, arguing that the country's largest private employer might have a dearth of qualified or interested women. Managers would say they used sex-neutral, performance-based criteria, Scalia wrote.

Still, Brad Seligman, the lead lawyer for the women in both the Wal-Mart and Costco cases, said he has hope for the lawsuit against Costco.

For one thing, it's smaller, involving only 700 or 800 women. That includes current and former female employees who were denied promotions to general manager or assistant manager since 2002.

Another big difference, he said, is Wal-Mart has a decentralized system for making decisions about pay and promotions.

"The Supreme Court said you can't assume all those managers at the bottom are going to make the same kinds of decisions," said Seligman, who works for a small nonprofit in Berkeley, Calif., called the Impact Fund.

At Costco, decisions about general and assistant managers are made at its Issaquah headquarters, he said.

In the case of general managers, he said, "[CEO] Jim Sinegal personally signs off on every one of those promotions. We're talking about the core leadership of Costco making these decisions."

Costco General Counsel Joel Benoliel said the Impact Fund's tactics have "blown up in their face."

He pointed to a more arcane aspect of the court ruling that rejected the plaintiffs' attempt to combine monetary and injunctive relief. The Costco case is set up the same way and should be dismissed, he said. No figure for monetary relief has yet been attached to the case.

"The problem is, when you're trying to do it on a massive basis, whether it's 1.5 million or 600 people, you still have the same problem with not everybody" having the same situation, he said.

Benoliel said the Supreme Court is creating a fair playing field for employers facing accusations that can be impossible to defend.

"They [plaintiffs] don't want us to defend individual cases," Benoliel said. "They want to bring in a sociologist who shows how many people should've been promoted who weren't, and therefore you're guilty. We've been fighting that concept tooth and nail from the beginning and are gratified that in the [Wal-Mart] case, the court said, 'That's right. There's got to be due process for employers as well as employees.' "

Both sides expect the Costco lawsuit to be revived soon.

U.S. District Court Judge Marilyn Patel certified the class in that case in 2007. Costco appealed the decision to the U.S. Court of Appeals for the 9th Circuit, which put the appeal on hold in 2008 awaiting the Wal-Mart decision because it is so similar.

Melissa Allison: 206-464-3312 or mallison@seattletimes.com

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