The Court after Scalia: Uncertain first principles for class actions
on Sep 7, 2016 at 2:06 pm
Allyson N. Ho and Scott T. Schutte are partners at Morgan, Lewis & Bockius LLP.
What effect might a new conservative Justice have on the Court’s class-action jurisprudence? The short answer is “not much.” The Roberts Court has adopted a moderate-conservative approach on class actions predicated on three key assumptions. This approach has garnered a narrow – if reliable – majority. A “conservative” replacement of Justice Antonin Scalia would almost certainly preserve that majority.
The Court’s current assumptions about class actions
Three basic assumptions undergird the Court’s class-action jurisprudence. First, the Court’s approach reflects the belief that class actions fundamentally depart from “normal” bilateral litigation. Second, the Court’s decisions reflect an understanding that class-action rules balance two dangers – the costs incurred when individuals cannot practically bring meritorious claims, but also the costs imposed when too lax interpretations of class-action doctrines allow classes to extract settlements through artificially high demands made principally to increase leverage in settlement negotiations. And third, the Court’s jurisprudence rests on the view that the class action is a procedural device, not a right or a remedy.
These three assumptions mutually reinforce one another. The belief that individual litigation is sufficient to vindicate most claims tends to foster suspicion regarding the common class-action litigation strategy of advancing the largest possible class to maximize settlement leverage against a defendant. Serious competing concerns about the costs this strategy imposes on businesses and consumers incline the Court to police large classes diligently. And the Court’s view of the class action as a procedural device justifies the Court’s refusal to create special exceptions simply to preserve classes, because injured individuals retain the right to bilateral litigation.
These assumptions give rise to the Court’s guiding principle on class actions: restrictions on classes must be taken seriously and cannot be whittled away through judicial exceptions. These restrictions come in two general forms – extrinsic restrictions and intrinsic restrictions.
Enforcing extrinsic restrictions on classes
The Court is vigilant in maintaining what may be called extrinsic restrictions on classes – i.e., limits on the ability of classes to litigate that are unrelated to the class-action procedures of Federal Rule of Civil Procedure 23. In layman’s terms, this means the Court endeavors to treat class actions like any other case, refusing to craft exceptions that would make classes easier to maintain.
One constitutional example is the Article III “case or controversy” requirement. The Court has made clear that classes are subject to ordinary standing requirements, going out of its way this year in Spokeo v. Robins to reaffirm that the designation of a lawsuit as “a class action . . . adds nothing to the question of standing.” There, a class representative was required to show his own concrete, particularized injury – despite the high likelihood that some class member could show one. We can reasonably infer that the Court would not permit a lower court to certify a class that necessarily includes individuals without Article III standing for the same reason.
Nor did the Court exempt class action claims from mootness doctrines. Indeed, it described the holding in Genesis Healthcare Corp. v. Symczyk as “straightforward application of well-settled mootness principles.” There, a defendant in a putative class action offered a class representative full satisfaction of her individual claim. The Court accepted a key concession below – that the unaccepted offer of judgment mooted the class representative’s individual claim. Applying traditional mootness doctrines, the Court held that the individual plaintiff’s mooted claim thereby mooted her class, denying Laura Symczyk recourse to several inapplicable class-mootness exceptions.
Along the way, the Court rejected several arguments at odds with the underlying assumptions outlined above, such as the argument that dismissing the proposed class for mootness would “frustrate” the “efficient resolution of common claims,” or that Symczyk had an interest in the collective resolution of her dispute – i.e., that the class action was a right, not just a procedural device. (Of course, when the Court examined Symczyk’s key assumption – that an unaccepted offer under Federal Rule of Civil Procedure 68 mooted an individual claim – it rejected that assumption as well. The decision this year in Campbell-Ewald Company v. Gomez limits the effectiveness of Rule 68 offers to dismantle classes, but confirms the Court’s application of general mootness doctrines to class actions.)
Likewise, the Court has applied core principles underlying the Federal Arbitration Act to proposed class arbitrations in the same way it applies them to arbitration agreements generally. Here, the Court’s familiar maxim is that arbitration is a matter of consent – grounded in typical contract principles – rather than coercion. The Court’s assumptions shape its class-action decisions here in several ways.
First, the Court’s view that class litigation is a serious break from (normal) bilateral litigation leads it to conclude that arbitrating parties view it in the same way. As a consequence, the Court refused in Stolt-Nielsen S.A. v. AnimalFeeds International Corp. to construe consent to arbitrate individually as consent to arbitrate collectively. And without that consent, a binding arbitration agreement precludes both class litigation and class arbitration – effectively requiring plaintiffs to raise claims individually.
Similarly, the Court has applied its belief that individual and collective arbitration are fundamentally different when ascertaining whether lower courts’ state-law doctrines interfere with (and are thus preempted by) an arbitration agreement governed under the Act. That understanding animated the Court’s discussion in AT&T Mobility v. Concepcion, in which the moderate-conservative consensus rested in relevant part on the assessment that “the switch from bilateral to class arbitration sacrifices the principal advantage of arbitration.”
Second, the Court has proven unwilling to privilege practical concerns flowing from an individual-arbitration requirement over the Arbitration Act’s default rule of arbitration as a matter of contract. The Court expressly rejected arguments invoking the “effective vindication” (i.e., economically viable vindication) of the antitrust laws in American Express Co. v. Italian Colors Restaurant, refusing to endorse a Second Circuit decision invalidating class-arbitration waivers when the Second Circuit perceived class arbitration as practically necessary to pursue certain claims. The Court’s moderate-conservative consensus on class actions has proven unwilling to reshape arbitration doctrines that would come at the steep cost of fundamentally transforming arbitration.
Safeguarding intrinsic restrictions on classes
The Court has proven equally rigorous in enforcing the intrinsic restrictions on class actions. Rule 23 classes contain several familiar requirements, including that potential litigants must be numerous, that they must share a predominant question of fact or law, and so on. One well-publicized instance of the Court’s caution came in reversing certification of the “largest class action in history” in Wal-Mart v. Dukes.
The Dukes plaintiffs – more than a million strong – advanced in essence a group claim that Wal-Mart systematically discriminated against women. But the Court refused to read Rule 23’s requirement that plaintiffs share a common question so broadly. Instead of accepting the putative class’s generalization of its common question as whether, roughly, “Wal-Mart discriminates against women,” it examined the class’s underlying theory, which rested on many individualized employment decisions rather than a single corporate policy.
This rigorous approach to determining whether class members share a common question necessarily bounds how large a class can become, and thus reduces the leverage a class can have against a defendant. The Court explained that the rigor it demonstrated in Dukes is not special to Rule 23’s commonality requirement, but instead applies to each of the class action’s intrinsic restrictions. Thus an approach that can fashion a workable class with common factual questions for a claim’s liability – but can only show damages on a more general level – fails these intrinsic restrictions, as the Court explained in Comcast, Inc. v. Behrend.
The Court’s consensus on class actions is both broad and fragile. It commands a bare majority of the Court – with the dissenting Justices sharing none of its primary assumptions. The dissenters tended to view the class action as a right unto itself; to value the weight of foregone claims over the costs attendant to meritless class actions; and to believe the class action deserving of some indulgence from doctrines applied to bilateral litigation. A new conservative Justice would likely apply the principles embraced by the majority, perhaps extending them incrementally.
But a new liberal Justice would almost surely upset the underlying assumptions of the Roberts Court’s treatment of class actions, and in turn revisit the doctrinal developments of the last decade or so – almost certainly imposing the dissenters’ view. We could expect this alternate approach to permit larger, more loosely defined classes and lead to more judicially created exceptions when necessary to preserve class actions.
One potential test on the horizon is a percolating circuit split regarding “ascertainability” – the obligation of a class to locate and define its members in some objective, predictable manner. This split is likely a fair proxy for the ongoing vitality of the Roberts Court consensus. A Justice committed to that consensus would likely conclude that a class must be able to ascertain its membership before certification; a Justice not committed to that consensus likely would reject that requirement, or impose it after certification. The settlement pressures arising from a certified class draw the real-world implications into focus, because if a class need not ascertain its membership until after certification, it likely need not do so at all.
In sum, a new conservative Justice would do not very much to class actions in the federal courts, as litigants already operate under a moderately conservative consensus. But that consensus is fragile. A liberal Justice would surely change the Court’s approach. Whether that change is desirable is an exercise for the reader, the class-action bar, and consumers – who ultimately pay the costs of class actions – to decide.
[Disclosure: Goldstein & Russell, P.C., whose attorneys work for or contribute to this blog in various capacities, was among the counsel to the respondents in Comcast v. Behrend. The authors of this post, however, are not affiliated with the firm.]