This article originally appeared in Bloomberg View on July 7th, 2011.

For a moment, I wondered if my phone had gone dead.

I was talking to Deondrea Thomas, who works as a sales associate in the shoe department at the Duncanville, Texas, Wal-Mart. She’d been chatting away for 10 minutes when I asked whether she’d ever used Wal-Mart’s “Open Door” policy for employees who have a complaint about their job.

Suddenly, there was dead air. Then, a burst of nervous laughter. “Nobody likes that policy,” she said, her cheerful tone turning abruptly dark. Take a concern to management and “your hours will be cut or there will be some kind of retaliation.”

Wal-Mart women aren’t doing a lot of laughing since the Supreme Court banished their class-action sex discrimination suit to a litigation dumpster. On June 20, the court said that the million-and-a-half women suing for pay and promotion discrimination could not proceed as a single class.

Individual women, 12,000 of whom contacted lawyers after the case was filed in 2001, can still carry on with lawsuits or complaints to the Equal Employment Opportunity Commission. Smaller groups may also band together against a store or a region. But the high impact of a single court case — a public affair that would shine a spotlight on the grisly anecdotes and the out-of-proportion statistics — will never happen.

‘Wal-Mart Effect’

If there was any question that the little gal has been squashed to the benefit of big-company interests, consider the exuberance of Larry Kudlow, the ferocious booster of capitalism at CNBC. “Today’s stock market rally was the Wal-Mart effect,” he wrote of the 76-point rise in the Dow Jones Industrial Average on the day the women lost. Noting that business would save “billions and billions of dollars” as a result, Kudlow declared the decision a “huge defeat for frivolous class action lawsuits.”

It’s a partisan stretch to suggest that the Wal-Mart suit, with its stack of persuasive affidavits and trove of gender-lopsided statistics, was frivolous. But I can’t argue with the notion that it’s a coup for business. Companies, in fact, get a double win. There is the giant reduction in lawsuit risk that’s been the focus of many a headline. Equally important to the corporate bottom line: Employers can continue to tap a huge pool of female labor at a discount to the market price for men.

Fallen Short

Here are some of the statistics that the court dismissed as having fallen “well short” of showing that managers were exercising pay and promotion discretion in a common way, which the women needed to prove to proceed as a class. When the suit was filed, women filled 65 percent of the hourly jobs, but only 14 percent of store manager positions. It took 4.4 years for the average woman to advance to assistant manager, while men got there in 2.9 years. Among those in hourly jobs, men made $1,100 a year more than women in similar positions. Among salaried managers, men out-earned women by $14,500 a year.

Along with the tooth fairy, we can now believe in the notion that those “Little Janie Q’s,” as the Wal-Mart women were called by male co-workers, wound up with inferior paychecks by way of some fluky black swan event at the big box store.

Wal-Mart spokesman Greg Rossiter says the anti-discrimination policy is “part of the company’s culture” and breaching the rules can lead to punishments “up to suspension or termination.”

Wal-Mart Argument

A key Wal-Mart argument was that its individual store managers, bestowed with abundant authority to make pay and promotion decisions without policy guidance from headquarters, couldn’t possibly have all been discriminating against women. Well, don’t be so sure about that.

The court minority of three women and one man referenced social science research that gave a clear example of how male bosses can overlook women during the hiring process. In a footnote, the four offered the example of a study that examined hiring by symphony orchestras. When judges were able to see the musician during an audition, fewer women were hired. When musicians played behind screens, and only musical abilities entered into the decision, suddenly more women made the cut.

Out-of-Touch

Studies like that could have played a part in shaping the court’s thinking, but instead, the majority had its own take on management behavior that must have seemed out-of-touch to any victim of sex discrimination. My personal favorite: That, “left to their own devices most managers in any corporation — and surely most managers in a corporation that forbids sex discrimination — would select sex-neutral, performance-based criteria for hiring and promotion that produce no actionable disparity at all.” Float that idea around the water cooler in the morning and stand back for the guffaws from your female co-workers.

If you take the time to flip through the 120 affidavits that accompanied the plaintiffs’ complaint, you will enter a world where a boss’s hunting and fishing buddy gets on the fast track, where multiple complaints about a sexual harasser are received with advice to “grin and bear it,” and where a black woman is advised: “We’re all rednecks here, so you might as well get used to it.”

Katheryn Johnson, who was hired at the Troy, Alabama, Wal-Mart in 1999, couldn’t even get her district manager to read her application for the management training program. She buttonholed him at work one day to ask if he’d read it yet. “Naw, Shug, I sure haven’t,” he said. She quit, and then called the 1-800-WALMART line to complain about how she’d been treated, according to her affidavit.

The ruling makes it difficult to bring class-action discrimination cases in the future, says Melissa Hart, associate professor at the University of Colorado School of Law. “One of the things that’s troubling about the decision is they seem to say you have to prove discrimination occurred in order to get certified,” she says. “It flips the order of things.”

Hart is referring to the part of the decision discussing the need for “significant proof” that an employer had operated under a policy of discrimination. Hart says that language came from the footnote of an earlier ruling that has never been considered a requirement for proving commonality of a class. Knowing that fewer women will be allowed to fight as a class, she predicts companies will monitor their diversity standards less.

Women’s groups and labor unions are mobilizing to promote two politically unpopular fixes that would outrage business: passage of the Paycheck Fairness Act, which would lift the cap on damages in pay discrimination suits and ban companies from penalizing workers who share salary information, and a fresh push for a union at Wal-Mart.

Already, a worker support group, Organization United for Respect at Wal-Mart, or OUR Wal-Mart, has attracted former employees like Dawn Littman, who says she’s ready to assist. If a Wal-Mart woman ran into difficulties at work, “I’d tell them I’m part of an organization, Our Wal-Mart, and if you have problems, here’s my phone number.’’

Ernestine Bassett, an Our Wal-Mart member who works at the Laurel, Maryland, store, said in an e-mail that members pay $5 a month to belong. Although she said the group is not a union recruiting attempt, Our Wal-Mart received seed money — it won’t disclose how much — from the United Food and Commercial Workers International Union, and individual members including Bassett have supported unionization. Thomas, the Duncanville, Texas, sales associate, said a union tried to organize at her store several years ago, but didn’t get enough signatures. “I did sign last time,” she said. “And if they came again, I’d sign again.”

‘War on Women’

To bolster the union efforts, National Organization for Women president Terry O’Neill is talking to the UFCW “about going into specific stores and getting community support through NOW chapters.” O’Neill is furious about the Supreme Court decision, which she calls the latest attack in “a war on women that’s absolutely raging at the moment.”

NOW’s 500,000 members will be learning that what happened to Wal-Mart’s Janie Q’s could happen to them, too. If the group gets its way with legislation and a new union push, maybe the joke won’t wind up being on women after all.

This article originally appeared in Bloomberg View on June 24th, 2011.

The hundreds of thousands of Americans who own shares in publicly traded mutual-fund companies — not to mention fans of corporate accountability — should be feeling a little unsettled by a recent U.S. Supreme Court ruling.

Janus Capital Management LLC, a mutual-fund adviser, was sued for fraud in 2003 by shareholders who said Janus and its publicly traded parent company, Janus Capital Group Inc., had lied in mutual-fund prospectuses, and that those lies had cost them a lot of money. On June 13, the Supreme Court threw out their case.

Here’s why they sued: Investors dumped shares of Janus, the parent company, in September 2003 after the New York State Attorney General’s Office accused the Denver-based group of entering into secret agreements to help hedge funds and other favored customers engage in market timing. This is a controversial — but legal — practice in which select investors trade in and out of funds to take advantage of pricing inefficiencies. As far as Janus investors knew, it wasn’t happening at Janus, which said in several of its prospectuses that it deterred market timing.

The firm wound up settling various regulatory complaints for $226 million. The settlements may have addressed the alleged wrongs to buyers of the mutual funds. But investors who were stuck with sunken shares of the parent company were never made whole. Now, the Supreme Court has said they never will be, either.

Copycat Suit

Mark Perry, a lawyer for Janus, said it “paid a significant amount of money” to resolve cases with New York and the Securities and Exchange Commission, and that the “copycat suit” was properly dismissed.

To understand why the decision is a slap in the face for Janus shareholders, and potentially those of other mutual-fund companies, you need to know a little about the strange corporate structure that most mutual funds use. There are the mutual funds that investors actually purchase, such as Janus’s Mercury Fund. Investors own the funds, which generally have no employees but “retain” a separate investment adviser to run the business and decide what the funds will invest in. In this case, Janus Capital Management played the adviser role. If the fund is publicly traded, there can also be another entity, a parent corporation like Janus Capital Group.

Suing Yourself

If something goes awry, this nifty arrangement makes it impractical to sue the fund — what’s the point of suing yourself? — and with the new Supreme Court ruling, it has now become exceedingly difficult for a shareholder to take action against the company that runs the fund, too. Thus, you purchase shares of companies in the mutual-fund business at your own risk because managements are no longer answerable to shareholders if the investment vehicles they “advise” get caught in a fib. (I garnish the words “advise” and “retain” with quotation marks because mutual funds have about as much control in choosing their advisers as most of us do when picking a cable-television provider.)

In Janus’s case, the fund and the adviser shared the same business address and the funds’ officers were also officers of the adviser. “The funds are inert, on life support, dominated by Janus Capital Group,” says William A. Birdthistle, an associate professor of law at Chicago-Kent College of Law and the co-author of a Supreme Court brief supporting the investors who sued Janus.

Clintonesque Opinion

The Supreme Court, though, said that both Janus, the publicly held company, and Janus, the investment adviser, were off the hook because neither was the entity that stated in a prospectus that market timing was discouraged. In a Clintonesque “it depends on what the meaning of the word ‘is’ is” opinion, Justice Clarence Thomas wrote that the defendants didn’t “make” the misstatements in the prospectuses — the mutual fund did.

Rule 10(b) 5 of the Securities Exchange Act of 1934 says it’s unlawful for a public company “to make any untrue statement of material fact,” and if you’re going to win a lawsuit based on that rule, you need to show that someone lied. The court says only the mutual fund could have “made” any untrue statements in this case.

Big Win

So Janus is acquitted with the aid of a dictionary, and public companies have a lot less to worry about when they shade the truth to shareholders. The decision is such a big win, in fact, that Birdthistle expects corporations outside of the investment-management business to alter their legal structures to gain the same protection that funds now enjoy. “In Delaware, with 30 minutes and $50, you can create a legal entity,” he says.

In its Corporate Code of Business Conduct, Janus Capital Group counsels employees that the letter of the law isn’t always enough. “While we monitor laws and regulations that apply to our business worldwide, we trust you to do the right, ethical thing even when the law is unclear,” it says.

When it comes to shareholders, though, the letter of the law, not to mention the general vocabulary, seems not to include the word “accountability.”