Tag: Wal-Mart

The Fight against Low-Wage Work

The Washington Post reports on its front page today:

Mayor Vincent C. Gray vetoed legislation Thursday that would force the District’s largest retailers to pay their workers significantly more, choosing the potential for jobs and development at home over joining a national fight against low-wage work.

That last is an interesting phrase: a national fight against low-wage work.

When laws like this are passed, there is indeed less low-wage work. As Robert J. Samuelson writes:

In the short run, even sizable increases in mandated wages may have moderate effects on employment, because businesses won’t abandon their investments in existing operations. But companies that think themselves condemned to losses or meager profits won’t expand. Not surprisingly, a study by two economists at Texas A&M finds that the minimum wage’s biggest adverse effects are on future job growth, not current employment.

In the case of the District’s proposed law, we won’t have to wait for future effects. The target of the legislation, Wal-Mart, is about to open six stores in the District of Columbia, where the unemployment rate is 8.5 percent. But the company says it won’t open three of those stores if it is forced to pay a minimum wage 50 percent higher than other retailers.

Minimum wage and “living wage” laws can reduce employment in several ways. Jobs may be eliminated—ask your father about the guys who used to pump your gas for you, or your grandfather about movie ushers, or notice how groceries and drug stores are eliminating cashiers. Firms may hire a few high-skilled, high-productivity workers rather than many low-skilled, low-productivity workers. They may shift from labor to technology.

With total U.S. employment still lower than it was in 2007, we should stop the fight against low-wage work. Many Americans would rather have low-wage work than no work at all.

Getting Class Action Rules Right Makes Markets More Efficient

Getting the rules governing class actions right means balancing the need to keep the courthouse door open for legal claims not lucrative enough to pursue individually with the need to prevent wholesale extortion by opportunistic would-be plaintiffs (and their lawyers) who know that the settlement values of class actions are generally much larger than those of individual lawsuits.

In its recent (2011) decision in Wal-Mart v. Dukes, the Supreme Court reiterated that when considering whether to certify a lawsuit as a class action (which aggregates presumptive claims from a national “class” of plaintiffs), a trial court must conduct a “rigorous analysis” to determine that the putative plaintiffs satisfy the key requirements of Federal Rule of Civil Procedure 23: (1) the class is so large that each potential plaintiff can’t join the suit individually (“numerosity”); (2) questions of law or fact are common to the class (“commonality”); and (3) the claims/defenses of the plaintiff representatives are typical of the class as a whole (“typicality”). Despite Dukes, many courts have fallen back on a misinterpretation of an earlier Supreme Court decision, Eisen v. Carlisle & Jacquelin, to hold that a court can’t consider at the class-certification stage any issue that will overlap with the merits of the case.

In Comcast v. Behrend, the Philadelphia-based U.S. Court of Appeals for the Third Circuit affirmed the district court’s certification of a class of nearly two million past and present Comcast cable customers in an antitrust action against the company. In certifying the class, the district court refused to evaluate the admissibility of testimony presented by plaintiffs’ expert witness regarding the ability to calculate class-wide damages, considering such an inquiry to go to the merits of the case. The court thus failed to conduct “rigorous analysis” with respect to that issue, and so the Supreme Court decided to review whether a class can be certified without first determining, as part of the Dukes analysis, whether a plaintiff’s methodology for calculating damages is admissible.

Cato has filed an amicus brief urging the Court to clarify that what it meant in Dukes was that a full inquiry into the reliability and admissibility of expert testimony (a so-called Daubert inquiry) is required at the class-certification stage. A lower standard would obviously prejudice defendants because class certification “magnifies and strengthens the number of unmeritorious claims” and creates “insurmountable pressure on defendants to settle.” But it would also prejudice absent class members because certification based on inadmissible evidence may distort their perception of the likelihood of success and encourage the members to stay in the class. Since all class members who don’t opt out of the class are ultimately bound by a class action judgment, there’s a large potential for harm to these potentially valid claims as well.

The only way to sufficiently protect the interests of defendants and absent class members, as well as to stay faithful to the basic commonality requirement of Rule 23 — which balances the overall social interests described above — is for the Supreme Court to reverse the Third Circuit and clarify that the Daubert standard applies at the class-certification stage, not just at trial.

The Supreme Court will hear the case of Comcast v. Behrend on November 5.

Individualism in Legal Process and the Wal-Mart Case

Monday’s high court decision in Wal-Mart v. Dukes has predictably drawn a strong reaction from legal academia, much of it critical of the Court. Of particular interest are the comments of Richard Primus (Michigan) at the New York Times’s “Room for Debate” and Alexandra Lahav (Connecticut) at Mass Tort Litigation Blog. According to Primus and Lahav, the decision is the latest sign that the current Supreme Court leans toward a principle of “individualism” in applying the rules of civil litigation. Lahav in particular appears to view this as a shame, since “a more collectivist view” would carry with it more “potential for social reform.”

What does a term like “individualism” mean in the context of litigation procedure? One of its implications is that legal rights to redress on the one hand, and legal responsibility or culpability on the other, are ordinarily things that appertain to individual litigants, and ought not (absent clear authorization by statute or Constitution) be submerged into group claims on the one hand or group guilt on the other. In particular, we should be wary of proposals to deprive litigants of the choice to obtain individualized consideration of their claims or defenses on the grounds that society can accomplish more if it processes litigation in batches while accepting, say, statistical as distinct from personalized proofs.

Lahav and other scholars such as Samuel Issacharoff offer as examples numerous cases in which the Court has insisted on individualized process, often thereby frustrating the advocates of social reform in one or another area. The Court’s scruples on this matter have run into much adverse comment in the academic literature, and that’s hardly a surprise; as I argue in my book Schools for Misrule, today’s legal academy is far more keen on things like group rights and social engineering (as some of us might call it) than is the wider society.

Let me offer a few observations in defense or at least explanation of the Court’s approach:

1) The individualist leaning is by no means confined to the “conservative” justices; all nine members of the current Court partake of it to varying extents, and it is one major reason why the Court’s liberal justices joined in to make the Wal-Mart decision unanimous on one of its most practically significant issues, relating to the handling of claims for back pay.

2) Like so many other aspects of the Court’s work, this one does not fit well into simplistic accounts from some quarters about the Court’s supposed “pro-business” stance. In many circumstances business defendants actually prefer some degree of collectivization of claims, because their main practical concern is to put an end to litigation, and group resolution can do that. In the Court’s landmark 1997 Amchem Products v. Windsor decision, six of eight voting justices (Breyer and Stevens dissenting in part) struck down a giant batch settlement of asbestos litigation that had been ardently pursued by many of the nation’s biggest businesses, as well as many plaintiff advocates, on the grounds that it improperly denied claimants their right to individualized justice.

3) If the question is one of faithfulness to the constitutional vision of law held by the Founders, there really isn’t much of a question: like other Anglo-Americans of Blackstone’s era those Founders saw the courts as dispensers of individualized justice if they were to be anything at all. Much else in American law has changed beyond recognition in the intervening two-plus centuries. Fortunately, as the result in Wal-Mart v. Dukes suggests, that hasn’t.

For more commentary on the Wal-Mart case, check out (e.g.) editorials at the Washington Post, New York Daily News and Omaha World Herald (favoring the court’s view), and the <a href=”New York Times and USA Today (opposing), as well as my contributions in the Philadelphia Inquirer and at Overlawyered.

Wal-Mart v. Dukes: The Court Gets One Right

In today’s decision in Wal-Mart v. Dukes, the Supreme Court unanimously found that the Ninth Circuit had jumped the gun in certifying what would have been one of the largest class actions in history, a job-bias action against the giant retailer on behalf of female employees. A five-justice majority led by Justice Scalia found that the plaintiffs had clearly not met the requirements needed to have the case certified for class treatment; four dissenters led by Justice Ginsburg would have sent the case back for more consideration.

While some press commentary simplistically treated this case as a “Which Side Are You On” parable of workplace sexism, both the majority and the dissent spend much time grappling with more lawyerly issues specific to class actions as a procedural format, such as the exact role of “common questions,” whose implications will inevitably be felt in litigation far removed from the employment discrimination context. To sweep hundreds of thousands of workers (or consumers or investors) into a class as plaintiffs even if they personally have suffered no harm whatsoever – to use sexism at Arizona stores to generate back pay awards in Vermont, and statistical disparities to prove bias without allowing defendants to introduce evidence that a given worker’s treatment was fair – bends the class action mechanism beyond its proper capacity. Also to the point, it is unfair.

Because both class action law and employment discrimination law are in the end creatures of federal statute, the elected branches will have the last word. Advocates of expansive employment litigation can be expected to introduce legislation in Congress to overturn key elements of today’s decision, a strategy that has worked well for them in the past on issues like back pay, “disparate-impact” law and the scope of coverage of the Americans with Disabilities Act (ADA). While we will soon be hearing a drumbeat to that effect, Congress should resist it, because the majority’s opinion today is to be preferred as a matter of policy, fairness, and liberty.

In particular – to take just one of the policy issues in employment law brought to center stage by today’s case – plaintiffs seek to establish that Wal-Mart’s policy of decentralized manager discretion over pay and promotions is itself an unlawful practice because (they argue) it allows too wide a scope for (unconscious or otherwise) bias on the part of store managers, notwithstanding the company’s adoption of overall policies banning sex bias. The majority led by Scalia marveled that Wal-Mart’s corporate non-policy – that is, its decision not to micromanage its local executives on personnel choices – would wind up being legally interpreted as amounting to an affirmative centralized decision to discriminate. But it’s not – and we should be glad lawyers at every big company aren’t yet insisting that every local HR decision be sent to a distant headquarters for fear of liability.

Wal-Mart Could Help DC in More Ways than One

It’s good news for residents of Washington, D.C., that Wal-Mart is planning on opening four stores in the District. Yet Washington Post columnist Robert McCartney reports today on one curious source of opposition:

“There’ll probably be a lot of shoplifting going on. They’ll need a lot of security,” Terriea Sutton, 35, said.

Brenda Speaks, a Ward 4 ANC commissioner, actually urged blocking construction of the planned store in her ward at Georgia and Missouri avenues NW partly because of that risk. Addressing a small, anti-Wal-Mart rally at City Hall on Monday, Speaks said young people would get criminal records when they couldn’t resist the temptation to steal.

Of course, that’s a rationale for banning all stores, not just Wal-Mart. Perhaps we should isolate these youths and consign them to abject poverty, so they’ll never be around anything worth stealing.  (A Wal-Mart spokesman commented that with regard to crime, “there is no more concern over these District locations than any other store locations.”)

Or we could recognize that Wal-Mart helps pull people out of poverty.  As Obama economic adviser Jason Furman reminds us:

Wal-Mart’s low prices help to increase real wages for the 120 million Americans employed in other sectors of the economy. And the company itself does not appear to pay lower wages or benefits than similar companies, or to cause substantially lower wages in the retail sector…

[T]o the degree the anti-Wal-Mart campaign slows or halts the spread of Wal-Mart to new areas, it will lead to higher prices that disproportionately harm lower-income families…

By acting in the interests of its shareholders, Wal-Mart has innovated and expanded competition, resulting in huge benefits for the American middle class and even proportionately larger benefits for moderate-income Americans.

Wal-Mart could do even more good for District residents if these four new stores sold guns.  That would quintuple the number of firearms retailers in the District, make self-defense affordable for low-income residents, and might just add some lobbying heft to the campaign to roll back D.C.’s ridiculous gun regulations.

The Feds’ Squeeze on Farmstead Cheese

This weekend the Washington Post and New York Times took a closer look at a development mentioned in this space a while back and in a related Cato audio, namely growing federal pressure on small producers of artisan and farmstead cheeses. Here’s the Post:

….artisanal cheesemakers, and their boosters in the local-food movement, say they are being unfairly targeted. They say the FDA does not understand their craft and is trying to impose standards better suited for industrial food companies. …

Listeria is ubiquitous in the environment, but the FDA has a zero-tolerance rule for it in ready-to-eat food such as cheese. If the bacteria are present, the food is considered adulterated and cannot be sold. Some countries, including cheese-loving France, tolerate minute amounts of listeria in food.

Why can’t we in America enjoy at least as much freedom at our dinner tables as the French?

Many artisan cheese producers favor the use of raw (unpasteurized) milk and the rules on that subject are coming in particular to (as it were) a non-boil. The Food and Drug Administration has long required that cheeses made from raw milk be aged for 60 days in hopes of killing all potentially harmful bacteria. Trouble is, it’s been known for a while that 60 days is not long enough to guarantee that the survival rate of such bacteria is 0.00000 percent. Here’s the Times:

The F.D.A. has not tipped its hand [on its review of the aging rule], but some in the industry fear that raw milk cheese could be banned altogether or that some types of cheese deemed to pose a higher safety risk could no longer be made with raw milk. Others say they believe the aging period may be extended, perhaps to 90 days. That could make it difficult or impossible for cheesemakers to continue using raw milk for some popular cheese styles, like blue cheese or taleggio-type cheeses, that may not lend themselves to such lengthy aging.

“A very important and thriving section of the American agricultural scene is in danger of being compromised or put out of business if the 60-day minimum were to be raised or if raw milk cheeses were to be entirely outlawed,” said Liz Thorpe, a vice president of Murray’s Cheese, a Manhattan retailer where about half the cheese is made with raw milk.

As Virginia Postrel pointed out the other day in a Wall Street Journal piece, the artisan food folks are relatively lucky: “proponents of small-scale farming are organized, ideological, and well represented in the elite media”. Other producers victimized by overreaching regulation have much more trouble getting their voices heard in New York and Washington. That’s one reason small food producers were able to achieve at least a limited and modest carve-out in the recent federal food safety bill, while small producers of children’s apparel and other craft goods continue to flounder without relief under the impossible strictures of CPSIA.

Speaking of the Times, I think it sums up everything wrong with the world that Mark Bittman has quit his stellar food column to start a NYT politics column that begins with a “manifesto” whose planks include the following public policy proposal:

Encourage and subsidize home cooking. (Someday soon, I’ll write about my idea for a new Civilian Cooking Corps.) When people cook their own food, they make better choices.

Talk about artists in uniform. Also speaking of the Times, reporter Sheryl Gay Stolberg quotes me today on Wal-Mart’s nutrition deal with Michelle Obama, which takes a series of changes the giant retailer might well have been considering anyway for market reasons, rolls it together with some long-pursued public policy objectives like getting the opportunity to open stores in big cities despite union resistance, and clothes it all in a First Lady endorsement. Clever, no?

The Ninth Circuit’s Controversial New Class Action Decision

The Ninth Circuit has issued its long-awaited en banc decision in Dukes v. Wal-Mart, a pathbreaking class action seeking relief from Wal-Mart for alleged gender discrimination on behalf of somewhere between 500,000 and 1.5 million women. The upshot: a 6-5 partial affirmance of one of the most questionable class certification approvals in recent memory.

The case is sparking considerable commentary: see here, here, and here, for starters. Cataloguing all the myriad questionable parts of the 135+ page decision, which range from the standard for admitting expert testimony in support of certification, to the permissibility of so-called “issue classes,” to due process restraints on award of class-wide punitive damages, would take a blog post rivaling the length of the Ninth Circuit’s own monster-of-an-opinion.

Here, though, are a few problems that pop out on first reading.

First, the Ninth Circuit’s certification decision depends on an exceedingly questionable understanding of federal civil rights law. As Richard Nagareda has written, the case is premised on “a bold, new conception of prohibited discrimination under Title VII - a notion that the scholarly literature encapsulates in the term ‘structural discrimination.’” The idea is that a corporation can violate federal antidiscrimination laws by structuring the workplace in a way that enables unconscious discrimination by frontline managers.

Wal-Mart is said to have engaged in this sort of scheme because it permits its managers to engage in highly subjective decision-making about pay and promotion, rather than imposing uniform objective criteria. In effect, the idea is that Wal-Mart’s laissez faire approach to personnel management masks a conscious effort to use its managers, and their unconscious biases, as a conduit for the company’s own unstated policy of gender discrimination.

As Nagareda points out, the theory of structural discrimination “has enjoyed a run in academic discourse out of line with its meager acceptance as a matter of actual doctrine.” Indeed, as he notes, “one broadly shared starting point in the literature” is that structural discrimination is not consistent with current law. Yet, the viability of this suit turns on this theory. And the trial court and the original Ninth Circuit panel in turn authorized a class without ever squarely deciding whether Title VII does, in fact, embrace this theory.

The en banc panel appears to make some (meager) effort to rectify this problem. But its elliptical treatment of the structural discrimination theory, spanning a couple of paragraphs buried deep in the belly of the mammoth opinion, is ephemeral—a far cry from Nagareda’s suggestion that the panel first “resolve the meaning of the statute squarely and forthrightly” before undertaking class certification analysis. One senses the often-reversed Ninth Circuit, fearful of the Roberts Court peering over its shoulder, is trying to bury the lede.

Second, a more technical problem: the en banc decision exacerbates an already troublesome circuit split over the conditions for approving a class under Rule 23(b)(2). This is a popular vehicle for class actions among plaintiffs’ lawyers for two reasons: first, assuming a class qualifies for treatment under it, class members are not entitled to an automatic right to exit the class (or “opt out”) and, second, Rule 23(b)(2), in addition, imposes less stringent requirements for class certification. In their advisory notes, the drafters of the federal class action rule suggest a class qualifies for treatment under Rule 23(b)(2) if injunctive relief “predominates” over monetary relief. And one might think that in a suit, such as this, seeking massive punitive damages on behalf of an veritable army of women, certification under Rule 23(b)(2) is therefore obviously inappropriate. But rather than squarely so hold, the Ninth Circuit now stakes out an entirely new, multi-factored balancing test for determining when injunctive or monetary relief predominates—creating a three-way circuit split about the meaning of Rule 23(b)(2)’s predominance test.

Another more fundamental problem: The text and structure of the Civil Rights Act also strongly suggest that in suits seeking backpay and punitive damages, defendants must have a chance to present affirmative, individualized evidence, on a case by case basis, rebutting claims they have discriminated. In addition, the Supreme Court’s due process cases also strongly suggest punitive damages should be awarded based on an individualized determination of fault. Yet, although the ultimate trial plan remains in flux, the en banc panel greenlights jettisoning the defendant’s right to present this kind of affirmative, individualized, case-by-case rebuttal evidence. It has done so, of course, in the service of facilitating the class action: if a case-by-case opportunity to affirmatively rebut discrimination is mandated by Congress, or the Fifth Amendment, in hundreds of thousands of suits seeking back pay and punitive damages, its hard to avoid concluding that those claims predominate over the request for injunctive relief, disqualifying them from Rule 23(b)(2) treatment even under the Ninth Circuit’s new “third way” test … . and raising serious concerns about whether the claims for monetary relief are certifiable at all.

Class action practice is, alas, one area where the Supreme Court has been, largely, AWOL. The result—an ever-lengthening array of circuit splits on key questions that affect when a class action can be green-lighted. Dukes—a decision chock full of questionable, boundary-pushing decisions—is the inevitable result. Some suggest Supreme Court review of this decision is close to a sure thing. Let’s hope that’s right.