The changing Court brings an end to a major case
on Feb 26, 2016 at 2:56 pm
In the first direct response by lawyers and clients to the change in the Supreme Court, Dow Chemical Co. said on Friday it had settled a billion-dollar class-action case it has pending before the Justices, rather than risk a loss following the death of Justice Antonin Scalia. Without admitting that it had done anything wrong in this plastics pricing case, the company said in a press release that it moved to end the case because its legal position was relying heavily upon two five-to-four decisions written for the Court by Scalia.
For the time being, only eight Justices will be deciding cases this Term, and could split four to four, leaving lower court decisions undisturbed. In Dow Chemical’s case, a jury in 2013 awarded damages that, after being tripled, stood at $1,060,847,117, plus interest, to be paid to a court-approved class of some 2,400 businesses that had bought chemicals from Dow to produce polyurethane products — a form of plastic used to make such items as seat cushions, mattresses, insulation, building materials, coatings, adhesives, and sealants.
In settling with that class, Dow agreed to pay $835 million, and reached agreement on post-judgment interest and a probable award of attorney’s fees.
For the past several years, the Court’s majority led by Scalia has grown increasingly skeptical of class-action lawsuits, lamenting that they often deprive the companies sued in such cases of the opportunity to defend themselves against individual claims, and that they frequently force companies into settling cases even if they believe they have strong arguments against the claims, in order to avoid the heavy costs of litigation.
That skepticism is being newly tested this Term in the case of Tyson Foods v. Bouaphakeo, which the Court — including Scalia — had heard on November 10. That case has not yet been decided, although the Court presumably has cast at least a preliminary vote on a potential outcome and one or more draft opinions have been circulating among the Justices. If, without Scalia, that case would be left with a four-to-four tie, the Court would have to decide whether to release it as a tied decision, setting no precedent but finalizing the lower court decision, whether to order it re-argued later, or whether it could find a way to convert the voting into a majority by working out a narrower result.
In Dow’s press release Friday, it said that “growing political uncertainties due to recent events within the Supreme Court and increased likelihood for unfavorable outcomes for businesses involved in class action suits have changed Dow’s risk assessment of the situation.” The company noted that it had been arguing, and still believes, that the ruling setting up the plastics pricing challengers as a class violated the law governing class actions, and it added that this is so especially as that law has been spelled out in opinions Scalia wrote in Wal-Mart v. Dukes in 2011 and Comcast v. Behrend in 2013.
In both of those cases, striking down class certification orders, the Court divided five to four. At the time of each decision, and just before Scalia’s death, the Court had the same line-up of Justices, and they divided in the same way in those two cases on at least some aspects of the Court majority’s narrowing of the opportunity to gain class status.
The Dow case (Dow Chemical Co. v. Industrial Polymers, Inc., docket 14-1091) was filed at the Court in March of last year, but presumably the Court has been holding onto it until it had decided the Tyson Foods cases. In both cases, the Court is being asked to decide whether a lawsuit class could be approved in federal court if not all members of the class had suffered an injury, and if the effect the challenged conduct in the case had on the class members could be measured by some form of statistical modeling, rather than by evidence related to each individual entity in the class.
Just before the Dow case went to trial, as a class action, the chemical company’s lawyers sought to have the class de-certified. That did not happen, and the trial resulted in the billion-dollar damages award. Both that verdict and the class approval were upheld by the U.S. Court of Appeals for the Tenth Circuit, leading Dow to move on to the Supreme Court.
In announcing its settlement, the company stressed that this move was “the right decision for the company and our shareholders,” and noted that it “continues to believe strongly in its legal position.” Further, it said, it believes it was not a part of any conspiracy to set prices for the chemicals used to make polyurethane products. It said that it negotiates separately with buyers of those chemicals, and thus there is a highly varied pattern of price levels. The lower federal courts, however, while conceding that not all the purchasers had suffered specific injuries, it was established at trial that they all felt the impact of Dow’s corporate conduct.
The class settlement still has to be approved by a federal district court in Kansas. If that occurs, a routine dismissal of its petition in the Supreme Court would be expected to follow.