lawsuits a volume business at wal-mart

Lawsuits a volume business at Wal-Mart
By Richard Willing, USA TODAY
By Matthew Minard, The Shreveport Times, for USA TODAY
Shoppers head into a Wal-Mart "Supercenter" in Bossier City, La. The retailer has been sued over matters ranging from the security of parking lots to the actions of crowds of bargain-hunters.
Wal-Mart is a legend in American business, a 39-year-old retail dynamo that trails only ExxonMobil in annual revenue. But in America's courtrooms, Wal-Mart has another distinction: As the company's sales have soared, analysts say, it appears to have become the nation's most popular private-sector target for lawsuits.
By its own count, Wal-Mart was sued 4,851 times last year — or nearly once every two hours, every day of the year. Juries decide a case in which Wal-Mart is a defendant about six times every business day, usually in favor of the Bentonville, Ark., retail giant. Wal-Mart lawyers list about 9,400 open cases.
No one keeps a comprehensive list of all the nation's litigation, but legal analysts believe that Wal-Mart is sued more often than any American entity except the U.S. government, which the Justice Department estimates was sued more than 7,500 times last year. Dozens of lawyers across the United States now specialize in suing Wal-Mart; many share documents and other information via the Internet.
But the huge volume of Wal-Mart lawsuits is only half the story.
About Wal-Mart
Founded: 1962Headquarters: Bentonville, Ark.Employees: 1.2 million worldwide2000 revenue: $191 billion2000 net income: $6.3 billionShoppers per week: Nearly 100 millionStores*• Wal-Mart stores: 1,667 • Supercenters: 998 • Sam's Clubs: 486 • Neighborhood Markets: 23International operations:* Argentina (11 stores); Brazil (21); Canada (177); China (14); Germany (93); Korea (7); Mexico (520); Puerto Rico (17); and the United Kingdom (246). * As of July 31Source: Wal-Mart Stores
Wal-Mart, which promotes itself as a down-home friendly business, is helping change the nature of corporate litigation by aggressively fighting many cases even when it would be cheaper for the company to settle, analysts say.
The policy runs counter to the strategy of "settle quickly and cut your losses" that companies have used for generations. But it is paying dividends for Wal-Mart, which in the past five years has seen the pace of its lawsuits stabilize as potential plaintiffs and their lawyers opt not to sue after weighing the costs of fighting the retailer.
Insurance companies, drug makers and other frequently sued businesses have kept an eye on the retailer's legal tactics, and have adopted some of them.
Like Wal-Mart's product line, its lawsuits come in many varieties.
Thousands are ordinary, alleging falls on slippery floors and icy parking lots. Some are grim, such as claims by the survivors of an Alabama woman killed by her husband, who had bought a rifle illegally at a Wal-Mart. Some reflect hot issues, such as a class-action employment-discrimination suit filed in San Francisco in June by six women who are current or former Wal-Mart employees.
And others, such as claims filed by those injured in a shoppers' stampede when coveted "Furby" toys went on sale just before Christmas in 1998, seem to spring from the bargain-hunting impulses so familiar to Wal-Mart shoppers.
The tenacity with which Wal-Mart fights such cases is something that Candace Hoke of Hempstead, Texas, knows well.
One day in October 1993, she dashed into her local Wal-Mart, picked up a bag of puppy food and headed for the checkout. Along the way, a couple of 25-pound boxes of bathroom tissue fell on her head. They were dropped, she contends, by a careless employee who was stocking shelves.
Eight years after the accident, seven years after she filed her lawsuit and three years after she won her case, Hoke still is trying to collect the $250,000 a jury awarded her as compensation for neck injuries. Wal-Mart says it was not at fault and is appealing.
"You see (Wal-Mart's) commercials and you think, `Gee, they're just regular folks like the rest of us,'" says Hoke, 48. "Then you try getting what you think you have coming, and they're ferocious."
Wal-Mart says it settles claims for which it is liable and fights only the cases that lack merit.
"If we haven't done anything wrong, we owe our (employees) the strongest defense possible," says Robert Rhoads, head of the company's legal department.
Tom Harrison, publisher of Lawyers Weekly USA, a legal industry newspaper, says Wal-Mart's approach is risky because it could "alienate plaintiffs' lawyers, juries, judges and ultimately customers." But "the rewards are potentially great, too. Many eyes in the (legal) profession are watching Wal-Mart, and not just to see what's on sale."
'An attractive target'
Wal-Mart was founded in 1962 by Sam Walton, a Rodgers, Ark., merchant with a novel concept: Focus on small towns and ignore downtown retail districts. Build your own "super store" from scratch on a town's outskirts. Stock the shelves with all types of goods, and sell them at bargain prices.
Wal-Mart's growth has been explosive, from 874 stores in 1985 to nearly 4,300 today. In the first six months of this year, Wal-Mart opened 147 new stores in the United States — nearly six a week.
Annual revenue and profits reflect the boom. Wal-Mart posted profits of $6.3 billion on $191 billion in revenue last year. All that growth has been accompanied by a surge in lawsuits, which the company views as inevitable.
"(Wal-Mart) stores receive 100 million visitors a week," Wal-Mart spokesman Bill Wertz says. "Not only is the number of lawsuits increasing because of our size, it's the publicity the lawsuits bring. (We've) become a more attractive target."
As the goods and services available from Wal-Mart have expanded, so has the nature of its lawsuits. Cases that were unheard of for Wal-Mart 10 years ago — those involving customers slipping and falling on spilled French fries and soft drinks, for example — have become common as the retailer has opened floor space to fast-food franchises.
In many communities across the nation, Wal-Mart is the leading seller of hunting weapons. That has exposed the retailer to lawsuits such as the Alabama case, in which it reached a settlement with the family of a Sherry Hopper White and her brother Eldredge Hopper, killed by her husband James White. Wal-Mart settled after a criminal court found that the ex-husband had been allowed to buy the weapon at his local Wal-Mart despite being under a restraining order. In 1999, he was sentenced to life in prison.
Security in vast Wal-Mart parking lots has been an issue in several lawsuits. The company continues to fight a suit by Roger McClung, a Memphis man who claims his wife was abducted from a Wal-Mart lot in 1990 and later killed. The case is before a federal appeals court; Wal-Mart won in the trial court. Some Wal-Mart cases, meanwhile, are difficult for courts to resolve. In 1996, Wal-Mart fought a lawsuit filed by a 450-pound Louisiana woman who held the retailer responsible after she was impaled while trying out an exercise bike. A trial court said she had no case, but an appeals court overturned that ruling. A trial is pending.
Then there are the Furby cases, now being scheduled for trial.
At least six plaintiffs, all women, say they were injured in 1998 when hundreds of shoppers jostled for position at Wal-Mart stores in Pennsylvania, Tennessee and Georgia for what proved to be only a few of the furry, owl-like dolls that were such hot sellers that holiday season.
Donna Unangst of Bethlehem, Pa., who was trampled at Wal-Mart's store in Lower Nazareth Township, Pa., says in her lawsuit that the retailer should have controlled the crowds. Wal-Mart denies responsibility for what it calls unruly behavior by shoppers.
'What did we do wrong?'
U.S. companies have long settled most lawsuits filed against them rather than take them to trial, regardless of the lawsuits' merits. Businesses generally find that less daunting than paying for litigators, hiring expert witnesses and risking a large and potentially embarrassing jury award to the plaintiffs.
"If a typical case is going to cost you $10,000 to defend and you can settle for $7,500, you're likely to do it," says Michael Krauss, a law professor at George Mason University in Arlington, Va., who specializes in civil suits. "It's always been considered more of a business decision than a legal decision."
In a movement led partly by Wal-Mart, some companies are trying a different tack.
In the early 1990s, Eli Lilly and Co. faced a flurry of suits claiming that its depression-fighting drug Prozac produced side effects that included homicidal rages. The giant drug maker fought back and made sure that the first such case to come to trial would be one that it likely would win. Lilly did, then used the victory to persuade other plaintiffs to drop their claims or to settle on the company's terms.
In the mid-1990s, the Allstate insurance company ended a policy of automatically settling motorists' claims for soft tissue injuries, typically hard-to-document back and neck strains resulting from minor auto accidents. Instead, Allstate began making take-it-or-leave-it offers based on a computer analysis of traffic injuries. Plaintiffs' lawyers say the offers often are well below their cases' value, forcing them to take the offer or go to trial.
Like Wal-Mart, the companies have tried to take advantage of a changing legal climate that lately has favored corporate defendants. A national survey this year by Jury Verdict Research, a Horsham, Pa., firm, found that the median award in 1999 for compensatory damages — $50,000 — was the same as it had been in 1993.
"There is definitely a backlash (against) plaintiffs," says Ralph Bellafatto, an Easton, Pa., lawyer who represents two injured Furby shoppers. "With jurors now, it's like, `Why do you deserve something for your problem? I'm not getting any help with mine.' "
Wal-Mart's legal policy flows from the corporate culture instilled by Walton, who died nine years ago. Upon being sued, recalls Robert Rhoads, head of Wal-Mart's 40-lawyer legal department, "Mr. Sam's first question always was, `What did we do wrong?' "
If Wal-Mart was at fault, Rhoads says, Walton's instructions were simple: Admit it and settle the claim. If not, take 'em to court.
In practice, critics say, Wal-Mart rarely concludes that it is at fault.
Like its marketing plan, Wal-Mart's legal strategy is value-oriented. The company often saves money by using outside lawyers who usually are paid a flat fee of about $2,500 to $10,500 a case. The company routinely files motions to have cases shifted to federal courts, where judges do not need to run for re-election. Protective orders keep key company papers private. If it has to pay a settlement, Wal-Mart keeps the amount secret through a confidentiality pact.
Plaintiffs' lawyers say battling Wal-Mart is a little like patronizing its stores: Wherever you go, the experience is the same.
"In courts from Maine to California, you sue Wal-Mart and they fight you on everything," says Bruce Kramer, a Memphis attorney who heads an Association of Trial Lawyers of America group of 75 lawyers who specialize in suing Wal-Mart. "It's annoying, it's frustrating, and I've concluded it's intended to be that way."
Some of Wal-Mart's tactics have led to problems for the retailer.
Plaintiffs' lawyers frequently complain that Wal-Mart makes it difficult for them to examine company papers that the lawyers are entitled to see. In 1999, a judge in Beaumont, Texas, threatened to fine Wal-Mart $18 million for withholding an internal study of parking-lot security sought by a woman who was abducted from a Wal-Mart lot and raped. Texas Judge James Mehaffy accused Wal-Mart of "thwarting, obfuscating and obstructing" court procedure.
Wal-Mart lawyer Rhoads says the wrangling over documents was caused by "coordination problems" between corporate headquarters and the company's outside lawyers. He says such problems largely have been corrected.
Even so, there are signs the retailer is adjusting its litigation policy. Analysts say that Wal-Mart recently has seemed to make it a point to appear reasonable, appealing fewer cases and publicizing examples of disputes it resolved. The most recent example was in Charlottesville, Va., in June, when Wal-Mart reached a settlement with a black shopper who had been given a receipt with racial epithets written on it.
Analysts say such moves likely reflect Wal-Mart's desire that its aggressive legal tactics not lead to a public relations problem.
"Is Wal-Mart unfairly targeted because it's big and rich, or is it an outfit that uses its deep pockets to wear down (those who sue)?" asks Richard Cupp, law professor at Pepperdine University in Malibu, Calif. "That's the battle (for public opinion) that Wal-Mart may be fighting next. And they can't win it in a courtroom."