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Class Action Settlements: Costco

Costco is the largest membership warehouse chain in the United States, its third largest retailer and the ninth largest in the world. It has more than 142,000 full- and part-time employees and more than 55 million members. As of September 2009, it had total gross sales that exceeded $71 billion.

On August 17, 2004, a female Costco assistant warehouse manager filed a national sex discrimination class action lawsuit against Costco alleging that current and former female workers in America had been and were being subjected to gender discrimination in promotion to store management positions. According to the suit, only one in six Costco managers are women despite a workforce that is 50 percent female. Also, only two of its 30 executive and and senior officers are female. Lawyers for the plaintiffs advised that more than 650 current and former Costco female employees had been eligible for promotion in the preceding three years.

The suit also contended that Costco fostered an environment in which women were discouraged from applying for senior-level management positions, were not notified of promotional opportunities and were judged by subjective criteria in Costco's promotional decisions that largely benefited male employees.

Another class action suit charged that Costco had misled about 5 million members who had renewed after their memberships had expired by not resetting their renewal date. If a consumer renewed two months after his or her membership expired, the renewal actually encompassed the previous two months so that the member paid for those two months without receiving any benefits. A settlement was approved in 2009, and provided the affected members an additional one to three months of membership. The total settlement was estimated at about $40 million.

One additional class action suit against Costco involved its marketing of hot gas. It is industry practice to market gasoline at temperatures higher than 60 degrees Fahrenheit without adjusting for the fuel’s temperature. When gasoline expands, it increases in mass and not volume so that the consumer would end up paying about 2 percent more to get the same amount of energy. This was resulting in an additional average of $40 to $100 per year in gas purchases per consumer, and more for truckers.

This class action suit was settled in 2009, without any cash settlement for affected consumers. Instead, Costco agreed to install temperature-sensing pumps that would adjust the amount of fuel to the same energy content in each gallon.