Wal-Mart Loses $6.5 Million Wage-and-Hour Class Action

Wal-Mart and its lead trial counsel, Houston’s Susman Godfrey, are now 0-for-3 in wage-and-hour class action trials.

On Tuesday, after a three-month bench trial, a state court judge in Minnesota ruled that in failing to provide rest breaks, Wal-Mart broke state labor laws more than 2 million times. Judge Robert King Jr. awarded $6.5 million in compensatory damages to the class, which consists of about 56,000 Wal-Mart employees in Minnesota.

King’s ruling follows a $172 million jury verdict against Wal-Mart in California in 2005 and a $78 million jury verdict in Pennsylvania in 2006. Both cases are on appeal. Susman Godfrey represented the company in both trials and is leading the appeals as well. Partner Neal Manne, who tried all three Wal-Mart cases, declined to comment and referred questions to Wal-Mart spokesperson Daphne Moore. In an e-mail statement, Moore said, "We are pleased that the court in Minnesota ruled in Wal-Mart’s favor on many points before, during, and after trial. We respectfully disagree with portions of the decision. As part of the order, the court invited both parties to file an appeal, and we are considering that option." Wal-Mart’s national coordinating counsel, Brian Duffy of Greenberg Traurig, did not return calls for comment.

Although there was some good news for Wal-Mart in King’s ruling — he did not award the entire $25 million sought by plaintiffs and found millions fewer violations than the class had alleged — the company faces a second, potentially devastating trial on state law violations. Minnesota’s statute provides for fines of up to $1,000 per violation of state labor law, so Wal-Mart’s liability could total more than $2 billion. (That money will go to the state of Minnesota, not to class members.) The jury at the second trial, scheduled to begin in October, will also consider punitive damages, which will go to the class.

Lead lawyers for the class were Justin Perl of Maslon, Edelman, Borman & Borman; William Sieben of Schwebel, Goetz & Sieben; and Franklin Azar and Rodney Bridgers of Franklin Azar & Associates. The Azar firm, which was also co-lead counsel in the Pennsylvania and California trials, has pioneered the wage-and-hour class actions against Wal-Mart. Since 2001, according to Azar, the firm has been involved in 23 state class actions, in which 11 classes have been certified. In several other states Wal-Mart has succeeded in blocking class certification. The company has settled only one case, in Azar’s home state of Colorado.

"Wal-Mart has taken the position that they will bury the plaintiffs bar," Azar says. "They say they’ll never settle in a million years. … They say, ‘We’re going to try them until the cows come home, and we’re going to break you.’" His 25-lawyer firm, Azar says, has invested $10 million in costs alone in the Wal-Mart litigation. The three firms working on the Minnesota case, he adds, spent $3 million to $4 million in lawyer time.

Lawyers for the class depict Judge King’s ruling as a great victory for the plaintiffs, even though King did not give them everything they wanted. "He found for us on the basic premise of the case," says Sieben. "He said that employees didn’t get rest breaks and didn’t get meal breaks." Sieben says the plaintiffs lawyers chose to try the liability phase of the case to King rather than to a jury because the expected length of the trial "would have been a great burden to jurors."

Sieben also asserts that Wal-Mart is unlikely to succeed in an appeal of King’s 151-page ruling. "He did a very thorough, painstaking job," he says.

In addition to the second phase of the Minnesota trial, Wal-Mart faces at least five more wage-and-hour trials in the next 18 months, says Azar.