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Pennsylvania Supreme Court to review Wal-Mart class action mega verdict

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The state Supreme Court has agreed to hear an appeal on whether a $187.6 million class action award against retail titan Wal-Mart over allegations that its Pennsylvania employees were not properly compensated for off-the-clock work and missed rest breaks violated Pennsylvania law.

The court granted allocatur on "whether, in a purported class action tried to verdict, it violates Pennsylvania law (including the Pennsylvania Rules of Civil Procedure) to subject Wal-Mart to a 'trial by formula' that relieves plaintiffs of their burden to produce classwide 'common' evidence on key elements of their claims."

Plaintiffs, however, dispute that there was a trial by formula in the first place. It's one or the other. Unfortunately, the Legal Intelligencer doesn't tell us which side is lying. One reading the Superior Court description of the evidence might come to the conclusion that it is the plaintiffs, but perhaps the quotation of witnesses using statistical evidence to calculate damages was one of the errors of the Superior Court opinion. The Pennsylvania Supreme Court punted on this question last year in Samuel-Bassett v. Kia Motors. Of course, extrapolating from data to decide individualized issues was criticized in the Dukes case last year, and creates due process concerns, so plaintiffs' attorneys' bluster that this will necessarily be decided on state-law grounds with no hope of appeal to the U.S. Supreme Court suggests whistling past the graveyard. But, again, the Legal Intelligencer doesn't call them on this.

Though Wal-Mart had a policy of disciplining managers who violated the company's internal rest-break rules, the jury was asked to find (and did find) that Wal-Mart's policy of seeking to reduce labor expenses—i.e., the same policy that every business has—acted to trump this and incentivized managers to shortchange employees. Thus, this rationalized a finding of "bad faith" that entitled the plaintiffs to $62 million in liquidated damages. It's hard to see how this does not transform the "good faith" defense into simple de facto strict liability, if such a flimsy theory can provide a bad-faith finding, but the Pennsylvania Supreme Court is not considering this issue.

Earlier on POL: March 2007; October 2007. More: Wajert. And as Kantke notes, the court upheld a finding that the Wal-Mart employee handbook created contractual obligations that led to liability, despite the handbook explicitly disclaiming that it was a contract.

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Rafael Mangual
Project Manager,
Legal Policy

Manhattan Institute


Published by the Manhattan Institute

The Manhattan Insitute's Center for Legal Policy.