Class Action Gender Discrimination Suit Against Costco is Alive—For Now

In June of this year, the Supreme Court ruled in favor of Wal-Mart in a class action case that many observers predicted would make it much harder for employees to sue large companies for discrimination. In light of that case, the 9th Circuit Court of Appeals recently ruled that a similar case from San Francisco against Costco might not be able to go forward, as well-though it left the door open to possibility.

The question in both cases had to do with the very nature of class actions. In a class action case, the court recognizes that many people have experienced the same problem, and are thus entitled to share in any awards of damages that may come out of the case. For instance, in the Wal-Mart case, the plaintiffs sued on behalf of the up to 1.5 million female Wal-Mart employees, alleging that Wal-Mart has a pattern of discrimination against promoting women to senior positions. For a case like this to proceed, the court must agree that there are questions of law or fact that are common to all the plaintiffs.

In the Wal-Mart case, the Supreme Court felt that the 1.5 million women represented too diverse a group to truly qualify as a class. In making this ruling, the high court stressed that in the future, lower courts were going to have to take a very close look at how closely-connected the class is before allowing a class action to proceed. In doing this, the Supreme Court in effect moved much of the job of fact-finding from happening later at trial to happening in the preliminary stages. Large companies often prefer to settle class action cases before they get to the trial stage, but the Wal-Mart ruling could derail the lawsuits before they even get going.

The new case from San Francisco, Shirley "Rae" Ellis et al. v. Costco Wholesale Corp., dealt with similar issues of gender discrimination, but was certified as a class before the Supreme Court made its recent ruling. Costco appealed the case to the 9th District Court of Appeals, which said that the trial court did not give enough consideration to whether the plaintiffs had the common issues of law or fact that are necessary to be a class. But the ruling merely says the trial court must reconsider the question of commonality-it does not definitively say that the women in the Costco case don't have enough in common. Thus the case is still alive for now, and it will be up to the trial court to once again determine whether it can go forward.