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Posts Tagged ‘ginsburg’

The Supreme Court issued its opinion today in the first of what will be several class-action-related decisions this term.  As noted in my Supreme Court preview post, the primary issue in Campbell-Ewald Co. v. Gomez, No. 14-857 was whether an unaccepted offer of complete relief to a named plaintiff in a class action had the effect of mooting the plaintiff’s claim, depriving a federal court of Article III jurisdiction.  The Court said no, agreeing with the now unanimous view of the Circuit Courts of Appeals.   Click this link for a copy of the slip opinion.  Justice Kennedy sided with the liberal wing of the Court in supporting Justice Ginsburg’s majority opinion, with Justice Thomas concurring in the judgment.  Perhaps the most interesting thing about the opinion from a practitioner’s point of view is the issue that the majority expressly decline to address despite having been discussed at some length during oral argument:

We need not, and do not, now decide whether the result would be different if a defendant deposits the full amount of the plaintiff ’s individual claim in an account payable to the plaintiff, and the court then enters judgment for the plaintiff in that amount. That question is appropriately reserved for a case in which it is not hypothetical.

 

So, just as we were left with a cliffhanger when the Court decided its previous case involving offers of judgment, Genesis Healthcare Corp. v. Symczyk, we’ll have to stay tuned for the third chapter of the trilogy to find out whether paying the full amount of a plaintiff’s claim into the registry of the Court moots a class action.  Be on the lookout for a preview of this issue at a District Court near you.

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The United States Supreme Court issued its decision in Comcast Corp. v. Behrend, No. 11-864 today.  In a 5-4 decision, the Court held that the class of cable subscribers had been improperly certified.  Justice Scalia, writing for the majority, reasoned that the expert testimony offered by the plaintiff to show that antitrust damages were capable of class-wide proof addressed alleged damages that did not logically flow from the plaintiff’s theory of class-wide liability.  The majority held that the trial court had erred by refusing to consider questions concerning the expert testimony on damages that might overlap with the “merits,” while the Third Circuit had erred by accepting the plaintiffs’ contention that it had a class-wide theory of damages through expert testimony without actually scrutinizing the factual basis for that contention:

The Court of Appeals simply concluded that respondents “provided a method to measure and quantify damages on a classwide basis,” finding it unnecessary to decide “whether the methodology [was] a just and reasonable inference or speculative.” 655 F. 3d, at 206.  Under that logic, at the class-certification stage any method of measurement is acceptable so long as it can be applied classwide, no matter how arbitrary the measurements may be.  Such a proposition would reduce Rule 23(b)(3)’s predominance requirement to a nullity.

The dissenting Justices would have dismissed the writ of certiorari as having been improvidently granted.  The dissent’s criticism of the majority’s holding has more to do with the procedural posture of the case and the methodology used by the majority in reaching its factual conclusions than with the legal class certification concepts underlying the majority’s reasoning.  In particular, the dissent faulted the majority for having changed the issue on review after the conclusion of briefing and took issue with the majority’s analysis of the factual basis for the expert’s opinions.

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Many commentators correctly that the decision in Wal-Mart Stores, Inc. v. Dukes would be favorable to business interests.  However, unlike the Court’s earlier decision in AT&T Mobility v. Concepcion, the decision does not necessarily threaten to sound a death knell for class actions or even a particular category of class actions.  Instead, the decision merely clarifies the standards on which future class actions are to be evaluated in the federal courts, but it does so in a way that is likely to impact class actions in many areas of the law outside of the employment law context.  Here are some of the key issues on which the opinion will undoubtedly be cited in the future, and some thoughts on the potential impact of the decision on each issue.

1) Standard of review  – The majority’s decision clarifies a long-standing misconception about the ability of a federal court to consider questions relating to the merits of a case in the class certification phase.  For more than 30 years, plaintiffs’ counsel and many courts have cited the Court’s opinion in Eisen v. Carlisle & Jacquelin, 417 U.S. 156 (1974) as prohibiting any examination of the plaintiffs’ claims on the merits at the class certification phase.  Consistent with the majority trend in the lower federal courts, the Supreme Court’s decision in Wal-Mart Stores, Inc. confirms that a court should consider and resolve any issues of fact that are necessary to determine whether one or more elements of Rule 23 are satisfied, regardless of whether those issues may overlap or be identical to one or more issues to be decided in ruling on the merits of the plaintiff’s claims.

2) Evaluation of Expert Testimony – The majority decision makes clear that it is appropriate for a federal court to conduct a Daubert analysis to consider the reliability and helpfulness of expert witness opinions at the class certification phase.  It is no longer sufficient for a plaintiff to present expert testimony and then argue that the Court may find that testimony reliable at some later point in the proceedings.  Again, in keeping with te trend among the federal circuit courts, the Court’s analysis in Wal-mart Stores, Inc. makes clear that the reliability and relevance of expert testimony proposed as “common proof” should be evaluated before granting class certification.

3) Use of Statistical Evidence in Support of Class Certification – The majority’s decision leaves open the possibility that statistical evidence might be used in establishing the existence of common proof in certain cases, but it sets a high standard for when proffered statistical evidence can be considered as adequate proof of the existence of “common issue.”  Significantly, Part III of Justice Scalia’s opinion, which was joined by all 9 justices, disapproves of the “Trial by Formula” approach to class actions, in which a sample of claims is tried on the merits, and the results of that sample are then applied proportionally to the claims of the entire class.

4) Certification of Claims Seeking Monetary Relief Under FRCP 23(b)(2) – This is perhaps the most uncontroversial aspect of the opinion in that part of the unanimous holding of the Court.  The Court’s holding is also straightforward, at least conceptually: claims for monetary relief may not be certified under FRCP 23(b)(2) unless they are merely incidental to injunctive or declaratory relief being requested on behalf of the class as a whole.  However, the devil may be in the details, as future courts (especially outside the employment law context) will be left with the task of defining what monetary relief is “incidental” to injunctive or declaratory relief and what is not.

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The Wal-Mart v. Dukes argument was held as scheduled today.  Here is a Wal-Mart v. Dukes Oral Argument Transcript.  Some initial observations:

  • The beginning of the defendant’s argument was focused on the proper standard for reviewing whether the plaintiff had sufficiently common evidence of a uniform policy.
  • It was not until later in the defendant’s argument that the questioning turned to the question certified for review: whether a Rule 23(b)(2) class action should be certified in a class action seeking monetary relief in the form of back pay.  Questioning on this issue continued into the plaintiff’s argument, but then returned to questions of what standard should apply more generally in certifying an employment discrimination class action.
  • On balance, the tougher questioning of the defendant’s attorney was from the more liberal faction of the court, and the tougher question of the plaintiff’s attorney was from the more conservative faction of the court. 
  • However, to the extent the questions can be a sign of a potential split in the Court (always a dangerous assumption), it is interesting that Justice Ginsburg seemed particularly troubled by the plaintiff’s position on the applicability of Rule 23(b)(2) to the back pay claims.
  • Overall, the sentiment seemed to be against allowing Rule 23(b)(2) to be used as a vehicle to resolve individual back pay claims (again, recognizing that the nature and tone of oral argument questions is not a very reliable way to predict outcomes).  However, there seemed to be some support among several Justices for the possibility that a case could be certified under Rule 23(b)(2) for injunctive relief only, on the ground that hiring policies are discriminatory because they are excessively subjective.

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The Supreme Court heard argument last week in the case that many commentators were calling a possible death knell for consumer class actions.  (See previous CAB posts on  Nov. 4, 2010 and Nov. 9, 2010)

So does the future of consumer class actions still seem dire after oral argument?

The basic issue is whether the Federal Arbitration Act pre-empts state contract law when state courts find class arbitration waivers unconscionable.  In other words, if an arbitration clause forecloses the possibility of a consumer class action, can state courts declare the waiver unconscionable, and therefore invalid?

Moreover, if states are permitted to find arbitration clauses that bar class actions unconscionable, will it end arbitration as a viable tool of conflict resolution?  Companies may avoid arbitration provisions in the future because none will want to deal with class arbitrations, which offer all the procedure of court litigation plus plenty of liability exposure, without the benefit of judicial review.

 Several Justices made comments suggesting a lack of comfort in telling states they can’t decide for themselves what constitutes an unconscionable contract.  If that sentiment plays out in the opinion, concerns about federalism and states rights may play a larger role in the outcome than any pro-business or pro-consumer bias or any leaning for or against class actions among the Court’s members.

 JUSTICE SCALIA: “What if — what if a State finds it unconscionable to have an arbitration clause in an adhesion contract which requires the arbitration to be held at a great distance from — from where the other party is and requires that party to pay the cost of the arbitration? Can a State not find that to be unconscionable?”

Justice Kagan followed up on the theme, questioning AT&T Mobility’s apparent position that state courts should generally have discretion to find contract provisions unconscionable, except class arbitration waivers.

JUSTICE KAGAN:  “… how about a provision prohibiting certain kinds of attorney’s fees? How about a provision prohibiting certain kinds of — a law prohibiting certain kinds of discovery provisions? And you said that would be fine, for the State courts to hold those things unconscionable, but it’s not fine for the State court to hold a class arbitration prohibition unconscionable. So what separates the two? How do we know when something is on one side of the line and something is on the other?”

In the face of arguments that California’s unconscionability law is disproportionately hostile to arbitration waivers, Justice Ginsberg, among others, observed that California applies its unconscionability doctrine equally to both arbitration contracts as well as non-arbitration contracts.

JUSTICE GINSBURG: “There is nothing that indicates that California’s laws are applying a different concept of unconscionability. You haven’t come up and said, oh, look what they did here. And in another case they said it has to shock the conscience.  Maybe across the board, California is saying: We think that unconscionability should have a broader meaning. Is it unfair to the weaker party to the bargain? Is there really no genuine agreement here? And if that is so, that will fit our definition of unconscionability.  How do we draw the line between a law that says discovery has to happen in arbitration, and one that says a — in a contract of adhesion, if the superior party retains the right to do discovery but tells the inferior party, you can’t? And a State says, that’s unconscionable.”

In response, Andrew Pincus, the attorney representing AT&T Mobility, with the help of Justice Alito, made the point that the California courts did in fact apply the state’s unconscionability doctrine differently to the class arbitration waiver in the Concepcion’s contract.  That is, the lower courts did not focus on the fairness of the contract’s terms to the Concepcions, the  actual plaintiffs before the court.  This runs contrary to the way most contract terms are assessed for fairness.  Instead, the courts focused on the contract’s fairness to a future class of possible plaintiffs.  If the lower courts had viewed the generous arbitration clause in the Concepcion’s phone contract for its fairness to the Concepcions, the contract may not have been deemed unconscionable.  Instead, the lower courts appear to have found the arbitration clause unconscionable merely because it barred the class action device.

 MR. PINCUS: “First of all, let me explain why the hypotheticals that you posit and that Justice Scalia posited and that Justice Sotomayor posited have been addressed under the traditional unconscionability doctrine that we described. In all of those cases, what courts have said is this provision — we are measuring whether it is unconscionable at the time of contracting; we are looking at the effect on the party before the court; can this person get to arbitration, is the fee too high, is it too far away. What about — we are looking at the effect on this particular person and we are deciding whether it shocks the conscience or whatever their across-the-board State standard is.  And in all of those cases, that’s what those courts do, and that’s why those provisions have been  invalidated, because they are invalidated under an evenhanded application of the unconscionability provisions that courts apply when they assess –”

 JUSTICE ALITO: “I thought that — I don’t want to interrupt your complete answer.”

 MR. PINCUS: “Sure.”

 JUSTICE ALITO: “But I thought that was the gist of your argument, the heart of your argument, that traditional unconscionability in California and elsewhere focuses on unfairness to the party who is before the tribunal. So here it would be unfairness to the Concepcions, rather than unfairness to other members of the class who are not before the court.”

 MR. PINCUS: “That’s exactly right, Justice Alito.”

 Read the entire transcript or listen to an audio recording at Scotus Blog

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