United States: Supreme Court To Decide Whether To Hear Four High-Stakes Cases Asking When A Suit May Be Litigated As A Class Action

The Supreme Court will decide before the end of this Term whether to hear any or all of four important cases that raise recurring questions of class action law that have sharply divided the lower courts. These cases address questions that we have blogged about before (e.g., here and here): whether a class full of uninjured members may be certified, and whether plaintiffs may rely on experts and statistics to gloss over individualized differences among class members in order to prove their class claims and damages. These questions strike at the heart of what it means to be a "class," because class actions generally must be litigated using common evidence to show that each class member has been harmed.

The Supreme Court's seminal decisions in Wal-Mart Stores, Inc. v. Dukes (2011) and Comcast Corp. v. Behrend (2013) seemed to resolve these legal issues. Dukes decertified a nationwide class of employees raising gender discrimination claims and held that plaintiffs seeking to represent a class must "demonstrate that the class members 'have suffered the same injury'" by proving their claims that must be "capable of classwide resolution ... in one stroke." The Dukes Court also disapproved of "trials by formula," in which liability is determined for a "sample set" of class members and then "applied to the entire remaining class." And in Comcast, the Court overturned a class certification order in an antitrust case because plaintiffs' statistical model fell "far short of establishing that damages are capable of measurement on a classwide basis."

Some lower courts have read Dukes  and Comcast to shut the door to class actions in which plaintiffs cannot establish classwide liability with common evidence, but others continue to allow plaintiffs to represent classes full of uninjured members. In 2013, defendants asked the Supreme Court to review Sixth and Seventh Circuits decisions that allowed a handful of plaintiffs who alleged that their washing machines produced musty odors to represent buyers of scores of different washing machines, even though only a small portion of buyers ever complained about odors, most purchasers were satisfied with their machines, and use and care habits varied across the classes and affected the conditions of users' machines. After an initial GVR the Court ultimately declined to hear those cases, and these important legal issues have now percolated in the lower courts for two more years, leading to the certification of many dubious classes.

Four cert petitions now ask the Court to pick up where it left off in Dukes and Comcast and further flesh out the limits of when a case may be litigated as a class action. In a massive antitrust case, Dow Chemical is seeking review of a Tenth Circuit decision (pdf) that affirmed a $1.1 billion judgment to a class of purchasers of polyurethane chemicals. Plaintiffs alleged that Dow conspired with other polyurethane manufactures to issue coordinated price announcements—not actual price increases—but the evidence at trial showed that individual purchasers robustly negotiated prices with individual suppliers, that many purchasers switched to lower-cost suppliers of the chemicals, and that other purchasers simply refused to pay announced price increases. The Tenth Circuit swept those individualized issues under the rug by presuming that price announcements actually increased prices to all purchasers, a presumption that the Supreme Court has called "unreasonable" in a controlling antitrust decision.

Cert petitions in three employment cases are also knocking at the Court's door. Wal-Mart seeks review of a Pennsylvania Supreme Court decision (pdf) that affirmed a $150 million judgment to a class of 187,000 current and former Wal-Mart employees alleging that Wal-Mart did not fully compensate them for rest breaks and off-the-clock work. The plaintiffs of course did not call 187,000 employees to testify at trial. They called a handful of plaintiffs and otherwise used statistical extrapolation of some employee time cards to prove injury to the class, depriving Wal-Mart of its right to challenge each individual class member's claim that he or she was not fully compensated.

Tyson Foods has asked the Court to review an Eighth Circuit decision (pdf) that affirmed a $6 million judgment to a class of workers alleging that Tyson did not fully pay them for time spent donning and doffing protective equipment. The evidence showed that protective equipment and walking times varied across the class, but the Eighth Circuit allowed plaintiffs to paper over those differences by modeling the time that it took the "average" employee to dress and walk to and from his work station—though most class members looked nothing like this hypothetical employee. Plaintiffs' controversial use of statistics fractured the Eighth Circuit. The panel split 2-1 in its decision, and the Eighth Circuit narrowly denied rehearing en banc by a 6-5 vote.

Finally, Allstate Insurance has asked the Court to review a blogged about previously. There, the Ninth Circuit allowed one claims adjuster to represent a class of all California claims adjusters alleging that Allstate has an unofficial policy of pressuring adjusters to work uncompensated hours. The lower courts' apparent trial plan is to allow the plaintiff class to prove three issues that would not resolve liability for even one class member and then to push all individualized defenses and damages issues to nebulous, to-be-determined individual hearings that the district court will describe more fully at some later date.

Predicting which cases the Supreme Court will hear is always difficult, but chances seem good that the Court will grant certiorari in one or more of these cases. The Dow, Wal-Mart, and Tyson petitions are unusual in that these cases all were tried, reached final judgments, and have fully developed records. Because class certification puts tremendous pressure on defendants to settle, very few class actions are litigated to final judgment. The cert petitions the Court sees in class actions typically challenge interlocutory rulings upholding class-certification orders; plaintiffs oppose those petitions by arguing that any harm is speculative and any errors can be corrected by the district courts as the case proceeds. The plaintiffs in Dow, Wal-Mart, and Tyson cannot not offer those arguments. The full trial records allow the Court to see exactly the effects that class certification has on the defendants' ability to mount a defense at trial; no speculation is required.

Given the staggering judgments in Dow and the most recent Wal-Mart case, there will be even more pressure on defendants to settle future cases after orders granting class certification. If the Court doesn't step in soon to clarify to the lower courts that it meant what it said in its decisions in Dukes and Comcast, defendants will be even more likely to throw in the towel rather than risk another nine- or ten-figure jury verdict. The cert petitions in these cases present the Court with an extraordinary opportunity to review class-certification orders in cases with fully developed trial records, one that may not come around again given the behavior of many lower courts now.

Numerous friend-of-the-court briefs have asked the Supreme Court to hear these cases, signaling their importance. The Chamber of Commerce, Business Roundtable, National Association of Manufacturers, Product Liability Advisory Council, prominent economists, and many other concerned organizations have highlighted the broad impact that these cases have on class-action litigation and discuss the significant toll that class actions take on our economy. And John Engler, the former governor of Michigan and now president of Business Roundtable, urged the Supreme Court to review these cases because of their importance to American business in a recent op ed in the Washington Times.

These four petitions show that, despite the Supreme Court's decisions in Dukes and Comcast, courts continue to certify large classes that are so disparate that a defendant cannot conceivably offer a full defense within the class-trial format, which prevents close individual inquiry into each class member's circumstances. We would not be surprised if the Court decides to hear some or all of these cases and then issues decisions that will have lasting impact on class-action law.

Tags: antitrust, Bouaphakeo v. Tyson Foods Inc., Braun v. Wal-Mart Stores, Class Certification, Comcast Corp. v. Behrend, Eighth Circuit, employment, In re Urethane Antitrust Litig., Inc., Jimenez v. Allstate Ins. Co., Ninth Circuit, Pennsylvania Supreme Court, product liability, Sears Roebuck & Co. v. Butler, Seventh Circuit, Sixth Circuit, Supreme Court, Tenth Circuit, Trial by Formula, wage and hour, Wal-Mart Stores Inc v. Dukes, Whirlpool Corp. v. Glazer

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