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In late July, Wal-Mart Stores Inc. settled a suit brought by Robert McClung, whose wife was abducted from the parking lot at a Memphis, Tenn., store in 1990 and murdered. For any other company, resolving a horrific case like this would be routine, but Wal-Mart has a long history of refusing to negotiate with plaintiffs. Indeed, for over a decade the retailing colossus fought tooth-and-nail against McClung and his lawyer, Bruce Kramer of Borod & Kramer in Memphis. When Wal-Mart first proposed mediation this past May, Kramer says he was “more than skeptical.” But the retailer’s willingness to quit fighting McClung wasn’t an anomaly, say plaintiffs’ attorneys and other company observers. Nashville solo practitioner Lewis Laska runs the Wal-Mart Litigation Project, an Internet-based clearinghouse for plaintiffs lawyers like himself. “Lawyers all over the country are calling me and asking, ‘What’s happening at Wal-Mart? They’re beginning to settle cases,’” he says. The shift in litigation strategy is just one of several significant changes in the company’s law department during the past year. In May, Robert Rhoads, who was general counsel for 17 years, retired and was replaced by newcomer Tom Mars. The Bentonville, Ark.-based company is also spending more on legal matters, nearly quadrupling the number of in-house lawyers and loosening strict fee arrangements with outside counsel. BIG TARGET, HUGE EXPOSURE With 4,300 stores worldwide and 100 million shoppers a week, Wal-Mart has more exposure than a Playboy centerfold. According to spokesman Bill Wertz, the company is sued roughly 5,000 times a year, and typically has about 10,000 pending cases. Until recently, Wal-Mart routinely reacted to these challenges by playing judicial hardball. “They absolutely would not consider settling anything,” says Mary Jo O’Neill, acting regional attorney for the Equal Employment Opportunity Commission in Phoenix. Her agency has brought dozens of employment suits against the company in the past decade. “It was part of the corporate culture.” New GC Mars declined requests for an interview, citing his brief tenure in the job. But several factors probably forced Wal-Mart to rethink its legal strategy. Among these are a string of embarrassing and expensive court losses in the late 1990s; widespread negative publicity for its hard-nosed litigation style; a threatened $18 million sanction for discovery abuse in 1999; and the 2000 appointment of a new CEO, H. Lee Scott, who appears to back the changes in the law department. “Wal-Mart has probably recognized that, based on the litigation strategy they chose in the past, they’ve created a horrible reputation for themselves among judges and lawyers,” says Gilbert Adams III, an associate in the Beaumont, Texas, practice of his father, Gilbert T. Adams. The younger Adams, who has brought several suits against the company, adds, “That horrible reputation is causing them difficulty litigating cases.” The EEOC’s O’Neill believes that changes in the company’s strategy are due partly to the hiring of attorneys with experience at other companies. In particular, she cites her dealings with Greg Muzingo, a Chrysler Corp. veteran hired by Wal-Mart in 1997 to create an in-house employment litigation group. Soon after his arrival, Muzingo proposed settling a pending EEOC case — a suggestion so unprecedented it left O’Neill “dumbfounded.” (Muzingo says the shift in employment litigation policy preceded his arrival, but declined to elaborate.) Another sign of change came last year, when the company hired Thomas Hyde for the newly created post of executive vice president for legal and corporate affairs. Rhoads no longer reported to the CEO, but to Hyde — a move that was seen as a no-confidence vote in the GC. In February of this year, Mars was hired as assistant general counsel for litigation, and three months later he replaced Rhoads as GC. CHANGES INSIDE AND OUTSIDE Imbued with founder Sam Walton’s thriftiness, Wal-Mart has a reputation for scrimping on legal costs. But it has sharply increased the size of its law department, and recently loosened its fee arrangements with outside counsel. The total number of in-house lawyers has jumped from 24 in 1998 to about 80 now. For example, Muzingo now has six employment lawyers working with him. According to O’Neill, all of the company’s employment litigation was once overseen by a single lawyer aided by a staff of paralegals. Wal-Mart has also dropped a long-standing policy of retaining only those outside counsel who would work for a flat, per-case fee. Whatever prompted it, Wal-Mart’s change of heart appears to be genuine. Plaintiffs’ attorney Kramer heads a group of more than 75 trial lawyers who routinely sue Wal-Mart. “The word from various people I’ve talked with, from all across the country, is that we’re seeing more and more settlements, and more and more willingness to negotiate in good faith,” he says. Citing half a dozen cases that have settled this summer, Kramer adds, “There definitely is a new regime and a new attitude at Wal-Mart — but the proof will be in the pudding.”

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