Court Gives Final Approval to $8 Million Pact Settling Sex Bias Class Action Against Costco

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May 29 — An $8 million settlement of sex discrimination claims by a class of 1,300 female Costco Wholesale Corp. employees who claimed the retailer discriminated in selecting general managers and assistant general managers throughout the U.S. received final approval May 27 from a federal judge in California .

The order by Judge Edward M. Chen of the U.S. District Court for the Northern District of California in a case brought under Title VII of the 1964 Civil Rights Act comes after a May 22 fairness hearing and largely adopts the terms set forth in a proposed agreement submitted to the court last December.

The $8 million fund will be used to pay claims made by class members who prevail under the process established by the agreement, as well as $10,000 service awards to three class representatives.

The settlement also includes a new promotions process, creation of a posting process for AGM promotions, and a new “registration of interest” system for GM promotions.

Any portion of the settlement fund remaining after the class claims and service award payments, and payment of up to $100,000 to an independent consultant retained by the parties as part of the programmatic relief, is to be donated to the Network of Executive Women, Consumer Products/Retail, after Chen found a “driving nexus” between that organization and the class.

The class originally sued the retail chain in August 2004.

The lawsuit alleged that Costco discriminates against female employees by using a uniform, corporate-directed system that fails to promote equally or better qualified women into GM and AGM openings, including the use of subjective decision-making and unwritten, unvalidated job criteria and the use of “ready now” ratings and “promotable lists.”

The three named plaintiffs also asserted individual claims under California's Fair Employment and Housing Act, and two of them claimed retaliation under Title VII.

The district court initially granted class certification in January 2007, but Costco appealed.

Following the U.S. Supreme Court's landmark class action decision in Wal-Mart Stores Inc. v. Dukes,131 S. Ct. 2541, 112 FEP Cases 769 (2011), the U.S. Court of Appeals for the Ninth Circuit remanded the case for the “rigorous analysis” of the requirements of Rule 23(a) of the Federal Rules of Civil Procedure and found that monetary relief to the female Costco employees under Rule 23(b)(2) was mostly foreclosed.

On remand, Chen certified the case as a hybrid class action, with one class certified for monetary relief and another for injunctive relief.

Text of the order is available at http://www.bloomberglaw.com/public/document/Ellis_v_Costco_Wholesale_Corporation_Docket_No_304cv03341_ND_Cal_/3.