RICO claims rejected in Wal-Mart lawsuit

August 29, 2006|By Bloomberg News

NEW YORK -- A federal judge in New Jersey dismissed civil-racketeering claims against Wal-Mart Stores Inc. yesterday, narrowing the scope of a lawsuit that accused the world's largest retailer of knowingly employing illegal immigrants to clean its stores.

U.S. District Judge Joseph A. Greenaway Jr., in Newark, ruled the immigrant janitors who sued failed to adequately support the claims. The janitors said Wal-Mart kept labor costs down by using illegal immigrants, forced them into involuntary servitude and conspired with contractors to launder money.

A court "will not accept unsupported conclusions, unwarranted inferences, or sweeping legal conclusions cast in the form of factual allegations," Greenaway said in a 17-page opinion.

The ruling will cut the number of janitors in the suit to about 200 from several thousand, plaintiffs' attorney James Linsey said. Wal-Mart may still face trial on some of their claims.

Greenaway previously rejected Wal-Mart's request that he throw out allegations that the company forced janitors to work unpaid overtime and locked them in stores against their will.

"The pot of gold has just shrunk," said Art Silbergeld, a Los Angeles lawyer who isn't involved in the lawsuit. "If you can't get the type of punitive damages under RICO [Racketeer Influenced and Corrupt Organizations Act], you're limited to back pay or liquidated damages," which would be back pay doubled, he said.

Shares of Wal-Mart rose 55 cents to $44.43 yesterday on the New York Stock Exchange.

"We are pleased with the judge's decision, but there are claims pending," Wal-Mart spokesman John Simley said. A U.S. investigation resulted in Wal-Mart agreeing last year to pay $11 million for using undocumented workers and it pledged to improve oversight of its contractors.

The loss of the racketeering claims makes the New Jersey case a collective action instead of a class action, Linsey said. That means the janitors will have to pursue individual claims.

"We believe the judge's analysis is at odds with the law," Linsey said, adding that he hasn't decided whether to appeal.

Wal-Mart faces more than 70 wage-and-hour lawsuits, including class action cases charging that it docked breaks and altered timecards to cut payroll costs. Hourly employees in California won a $172 million verdict in December over unpaid meal breaks. The company faces similar trials in Philadelphia in September and Massachusetts in October.

The New Jersey lawsuit was filed in 2003 after U.S. officials arrested more than 250 suspected illegal immigrants in raids on 61 Wal-Mart stores. Twelve Wal-Mart cleaning contractors pleaded guilty to criminal charges and paid a total of $4 million. Wal-Mart wasn't charged criminally.

The suit was filed on behalf of immigrants, documented and undocumented, who were employed as janitors to clean Wal-Mart stores in the United States.

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