The justices unanimously ruled that more than a million female employees nationwide could not proceed together in the lawsuit seeking billions of dollars and accusing Wal-Mart of paying women less and giving them fewer promotions.
The Supreme Court agreed with the world's largest retailer and the largest private U.S. employer the class-action certification violated federal rules for such lawsuits.
It accepted Wal-Mart's argument that the female employees in different jobs at 3,400 different stores nationwide and with different supervisors do not have enough in common to be lumped together in a single class-action lawsuit.
The ruling, cheered by business groups as the most important class action case in more than a decade, was denounced by women's groups.
"Today, the Supreme Court issued a devastating decision undoing the rights of millions of women across the country to come together and hold their employers accountable for their discriminatory practices," said National Women's Law Centre Co-President Marcia Greenberger.
It represented a major victory for Wal-Mart, which has also faced other legal battles including an attempt to unionize and to block the giant retailer from opening stores in New York and other places.
"We are pleased with today's ruling and believe the court made the right decision. Wal-Mart has had strong policies against discrimination for many years," said Bentonville, Arkansas-based Wal-Mart.
Gisel Ruiz, a company executive vice president, said the ruling effectively ended the class-action lawsuit.
Theodore Boutrous, Wal-Mart's lead attorney in the case, told reporters, "This decision will have a significant impact on other class actions."
The court rejected class-action status, but three remaining female plaintiffs still can pursue their individual claims.
CLASS ACTION ENDS BUT LITIGATION DOESN'T
Lawyers for the plaintiffs acknowledged the ruling raised substantial hurdles to bring such challenges forward, but warned that Wal-Mart may regret this route because it could lead to lengthier litigation in many more courtrooms.
"I think it is a big win for very large companies because I think part of the message from the majority's decision is ... there are companies that are too big to be held accountable in a single forum for these kinds of practices," said Joseph Sellers, a lawyer for the women who sued the retailer.
He said they were considering options that included pursuing class-action lawsuits with smaller groups of women or proceeding individually, noting that more than 12,000 people have contacted them about discrimination at Wal-Mart.
Two employees of Wal-Mart and its Sam's Club stores who were leading the class-action effort expressed disappointment with the ruling, but said that they would continue their claims against the massive retailer.
"We still are determined to go forward and we still are determined to present our case in court and I believe that we will prevail there," said Wal-Mart employee Betty Dukes.
The ruling in the biggest business case of the high court's 2010-11 term could affect pending class-action lawsuits against the tobacco industry and Costco Wholesale Corp.
Corporate defence attorneys said the ruling was a major victory for employers. "The decision pokes a big hole in the balloon of class actions for employment cases," said Michael Droke of Dorsey & Whitney LLP in Seattle. "Employers are literally breathing a collective sigh of relief."
Analysts including Brendan Burke, an employment discrimination law consultant at Navigant Economics, said the Wal-Mart decision may lead to an increase in smaller putative class-action lawsuits against large employers, which could actually increase the cost to defendants.
Justice Antonin Scalia concluded for the court majority that the class was not properly certified.
"Because respondents wish to sue about literally millions of employment decisions at once, they need some glue holding the alleged reasons for all those decisions together," he said.
The court's four other conservatives joined all of Scalia's ruling. The court's four liberals joined part of it, but dissented in another part.
Large class-action lawsuits make it easier for big groups of plaintiffs to sue corporations and they have led to huge payouts by tobacco, oil and food companies.
Companies such as Wal-Mart have sought to limit such lawsuits to individual or small groups of plaintiffs. The Supreme Court, with a conservative majority that often ruled for businesses, has rejected huge class-action lawsuits.
Shares of Wal-Mart were up 20 cents, or 0.4 percent, at $53.02 in afternoon trading after rising as much as 1.3 percent earlier in the session.
The Supreme Court case is Wal-Mart Stores Inc v. Betty Dukes, No. 10-277.
(Additional reporting by Jessica Wohl in Chicago, Moira Herbst in New York and Jeremy Pelofsky; Editing by Doina Chiacu)
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