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Now that Wal-Mart Stores Inc. has agreed to pay $11 million to settle a government probe into the hiring of illegal aliens, both plaintiffs lawyers and the company are using the settlement as ammunition for the next battle: a national class action in Newark, N.J.’s federal court. Wal-Mart escaped criminal charges on March 15 by entering into a consent agreement with federal prosecutors and the Department of Homeland Security’s Immigration and Enforcement Division. While the $11 million fine is a record in a civil immigration case, it is a drop in the ocean for the world’s largest company. The Arkansas-based retailer, with 4,750 stores worldwide, including 3,556 in the United States, had annual sales of $300 billion and profits nearing $11 billion. More important, neither the company nor its executives or employees will be charged criminally. Wal-Mart received a target letter from a grand jury in Pennsylvania followed by an Oct. 23, 2003, raid of 61 stores in 21 states. About 245 illegal aliens hired to clean the floors at night were arrested. Two days after the raid, a class action was filed in Monmouth County, N.J., Superior Court on behalf of nine Mexicans who were nighttime janitors in stores in Piscataway and Old Bridge. Plaintiffs lawyer Gilberto Garcia, of Garcia & Kricko in Englewood Cliffs, N.J., accused Wal-Mart of a host of labor and tax law violations along with charges of discrimination and exploitation. Garcia quickly connected with plaintiffs class action lawyer James Linsey, who redrafted the complaint and filed it in federal court in Newark that November. Linsey, of New York’s 30-lawyer Cohen, Weiss & Simon, added counts of civil racketeering, civil rights violations and false imprisonment. The case, Zavala v. Wal-Mart Stores Inc., 03-5309, was assigned to U.S. District Judge Joseph Greenaway Jr. Linsey and David Murray, Wal-Mart’s lead defense attorney in the civil case, cited the language in the consent decree and an accompanying stipulation to bolster their positions in the putative class action. Linsey says the settlement shows that Wal-Mart “wants to put this shameful period behind it, pay reparations to those exploited, and move on.” Murray, of Willkie Farr & Gallagher in Washington, D.C., says the settlement exonerates Wal-Mart and lays the blame on independent contractors who recruited and hired the alien janitors, of which there were more than 10,000 nationwide. Linsey argues that company executives and managers knew of the use of illegal aliens, many from Eastern Europe. Wal-Mart’s lawyers say the company did not know of the workers’ illegal status nor that the janitors were being denied a minimum wage and overtime, as the suit alleges. “The government found no basis to proceed with its criminal investigation against Wal-Mart, and found that none of the workers were Wal-Mart employees. The consent decree is consistent with the company’s position,” says Murray. DRAFTSMANSHIP Murray and New Jersey co-counsel Robert Bernstein, an employment lawyer with Newark’s Reed Smith, sent a copy of the consent decree and stipulation to Greenaway, causing Linsey to write the judge March 28. In his letter, Linsey highlighted two sentences in the settlement, adding italics for emphasis: � “Whereas, Wal-Mart did not have knowledge, at the time the independent contracors initially were hired, that the independent contractors knowingly hired, recruited or employed unauthorized aliens.” � “Wal-Mart, acting either directly or through independent contractors used by Wal-Mart, is permanently enjoined from knowingly hiring, recruiting and continuing to employ aliens who are not legally authorized to work within the U.S.” Linsey says the stipulation and decree were “worded very carefully. It was a compromise with the government.” Defense attorney Murray, in turn, emphasizes that those sentences do not say Wal-Mart and its officials had knowledge of the hirings. Whether Wal-Mart officials knew, and encouraged or even went along with the contractors is critical to the complaint’s civil Racketeering Influenced and Corrupt Organizations Act count, which alleges that Wal-Mart, contractors and sometimes subcontractors engaged in conspiracy. Winning a RICO judgment not only “leads to the top of the corporation, making this not just simply a wage and hour case, but it carries treble damages,” Linsey says. Yet when the plaintiffs filed an amended complaint in February 2004, they dropped all 11 of the named contractor defendants. Linsey says that’s because they are too difficult to find, routinely disappear or re-emerge under different corporate names. Murray demures when asked whether the plaintiffs are simply focusing on the deep pockets. But he says, “We’ve been saying that they are suing the wrong party because Wal-Mart was never the employer.” FAIR LABOR CHARGES The plaintiffs also charge that, in violation of the Fair Labor Standards Act of 1934, janitors often worked up to 60 hours a week, seven days a week, with no overtime pay, vacation time or minimum wage. They further accused Wal-Mart of locking them in overnight, and of sometimes not paying them at all, exploiting their status as illegal aliens. But in a brief last May, defense attorney Bernstein called such charges absurd, arguing that workers earned above the minimum wage and sometimes were promoted and became bosses of their own cleaning crews. In fact, named plaintiff Victor Zavala was the head of a cleaning crew, Bernstein noted. As for charges that the workers were working in “virtual slavery,” Bernstein pointed out that workers returned for years because they wanted to keep their jobs. The Wal-Mart defense team also argues that it was local store managers who decided whether to outsource the janitorial services, noting that at the most, only about 1,000 stores out of more than 3,500 in the nation used contractors. What’s more, the defense adds, that figure was down to 700 or fewer at the time of the 2003 federal raid. Which way the contractors side is crucial to the case. A dozen pleaded guilty to criminal immigration charges in mid-March and together will pay $4 million in fines, in addition to the $11 million to be paid by Wal-Mart. Both sides say they intend to depose the contractors during discovery. The plaintiffs say they will rely in part on two letters submitted to the court. In December 1999, Greta McCaughrin, a German and Russian language professor at Washington and Lee University in Lexington, Va., wrote to a local district manager and to David Glass, the president and CEO of Wal-Mart at the time. She said she was asked by local police to translate for Russian and Georgian workers at the local Wal-Mart. McCaughrin said the workers had overstayed their tourist visas, adding, “They have no permit to work in the United States, and in fact some if not all have expired visas. As the managers of Wal-Mart surely know, most of them do not speak English, but are good workers, working seven days a week, eight hours per day… . They are given one day a year off.” She provided the company with details about the contractor, including addresses and telephone numbers, as well as the address of the workers. Linsey says he will depose Glass. The second letter was written in June 2002 to H. Lee Scott Jr., the CEO then and now, by Raymond Drude, the Gulf Coast regional vice president with Jani-King, an international commercial cleaning service. Drude wrote that Jani-King had lost 10 of its 15 cleaning contracts for Wal-Mart stores in three southern states to “a Ukrainian, Czech, or Russian national posing as legitimate janitorial companies.” Drude said those contractors were awarded one contract after a Ukrainian crew “was caught stealing food because they did not get paid in time to buy some.” Drude quoted an attached article stating that the foreign janitors were not receiving the minimum wage, and that no federal taxes were being deducted or paid. Drude asked Scott: “Are you going to allow this to continue? Why would Wal-Mart do business with companies that hire illegal aliens?” So far, Judge Greenaway has issued one order, last Dec. 29, which offers something to each side. For the defense, he has eliminated Wal-Mart’s 538 Sam’s Club outlets from the action. He also has shortened the period of the alleged wrongdoing, beginning in January 2000 instead of 1996, which is when the plaintiffs allege the use of illegals began. Greenaway also rejected a plea that no Wal-Mart lawyers interview potential plaintiffs in the absence of plaintiffs’ lawyers. For the plaintiffs, the judge granted their request for a court-approved notice to be posted in janitor workstations within the stores to alert possible plaintiffs of the suit. Both sides are working on the notice’s wording. New plaintiffs will have six months to sign on to the suit. Moreover, Wal-Mart is to produce the names, addresses and nationalities of all former and current janitors since January 2000, as well as all the contracts with outside contractors. Greenaway’s key call will be whether to grant Wal-Mart’s motion to dismiss, which is pending, and then decide whether to certify the class. In his December order, he certified the matter as a collective action for the labor counts, meaning that plaintiffs must opt in rather than having to affirmatively opt out of the action.

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