Metropolitan News-Enterprise


Monday, July 13, 2009


Page 1


Court: Wal-Mart Not Liable for Its Suppliers’ Labor Violations




Foreign workers for companies that supply goods to Wal-Mart Stores cannot sue the giant retailer for violations of labor standards incorporated into Wal-Mart’s contracts with their employers, the Ninth U.S. Circuit Court of Appeals ruled Friday.

The court affirmed a ruling by U.S. District Judge Andrew Guilford of the Central District of California. Guilford, in 2007, granted Wal-Mart’s motion for summary judgment rejecting contract and tort claims on behalf of workers at factories in Bangladesh, China, Indonesia, Nicaragua and Swaziland.

The judge also rejected unfair competition claims by California supermarket workers who claimed that Arkansas-based Wal-Mart’s failure to compel compliance with the “standards for suppliers” that have been included in its supplier contracts since 1992 have depressed those workers’ wages. Those plaintiffs did not appeal.

Labor Violations

 The foreign plaintiffs alleged that the companies they worked for failed to pay minimum wage, forced them to work overtime, blocked them from organizing unions, and otherwise violated the standards, which  require the suppliers to obey their own countries’ labor laws and local industry practices. Wal-Mart also reserves the right to monitor compliance, or to hire third-party monitors to do so, and to cancel its relationships with violators.

Wal-Mart contended that while it does its best to monitor conditions in its suppliers’ factories, it is under no legal obligation to do so.

The district judge and the appellate panel agreed that Wal-Mart adopted the standards for its own benefit, not the plaintiffs’. The workers thus could not sue as third-party beneficiaries of the contracts, nor did Wal-Mart owe them any duty under California or Arkansas tort law, the courts said.

Judge Ronald Gould, writing for the Ninth Circuit, said the plaintiffs were making too much of contract language saying the company would “undertake affirmative measures such as on-site inspection of production facilities, to implement and monitor” the supplier standards.

Contractual Terms

Gould explained that the company “reserved the right to inspect the suppliers, but did not adopt a duty to inspect them.” The judge noted that the contracts gave Wal-Mart the right to cancel orders or otherwise refuse to do business with non-complying suppliers, but imposed no consequences on Wal-Mart if it failed to monitor a supplier.

Since the suppliers could not enforce any commitment on the part of Wal-Mart to monitor, the purported third-party beneficiaries couldn’t either, the judge concluded.

Gould also rejected the theory that Wal-Mart was the joint employer of the plaintiffs. Wal-Mart had no control over how the plaintiffs did their work, the judge said.

The jurist went on to reject the workers’ contention that Wal-Mart was being unjustly enriched as a result of the suppliers’ substandard labor practices. To make a claim for unjust enrichment, Gould explained, a plaintiff must have a prior relationship with the defendant.

The plaintiffs were represented by Dan Stormer, Anne Richardson, and Lisa Holder of Pasadena’s Hadsell & Stormer, along with attorneys from the Washington, D.C. firm of Conrad & Scherer. Wal-Mart’s appellate counsel were from the San Francisco office of Morgan, Lewis & Bockius,

The Pacific Legal Foundation, Washington Legal Foundation, and Allied Educational Foundation filed amicus briefs supporting Wal-Mart.

The case is Doe v. Wal-Mart Stores, Inc., 08-55706.


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