United States: The U.S. Supreme Court And Workplace Class Actions

Last Updated: January 23 2017
Article by Gerald L. Maatman Jr.

Seyfarth Synopsis: As profiled in our recent publication of the 13th Annual Workplace Class Action Litigation Report, the U.S. Supreme Court's rulings have a profound impact on employers and the tools they may utilize to defend high-stakes litigation. Rulings by the Supreme Court in 2016 were no exception.

Is The Supreme Court Pro-Worker Or Pro-Employer?

Over the past decade, the U.S. Supreme Court led by Chief Justice John Roberts increasingly has shaped the contours of complex litigation exposures through its rulings on class action and governmental enforcement litigation issues. Many of these decisions have elucidated the requirements for pursuing employment-related class actions. The decision in Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541 (2011), and the decision in Comcast Corp. v. Behrend, 133 S. Ct. 1426 (2013), are the two most significant examples. Those rulings are at the core of class certification issues under Rule 23. To that end, in 2016, federal and state courts cited Wal-Mart in 536 rulings in 2016; they cited Comcast in 216 cases.

Over the past several years, the Supreme Court has accepted more cases for review – and issued more rulings than ever before that have impacted the prosecution and defense of class actions and government enforcement litigation. The past year continued that trend, with several key decisions on complex employment litigation and class action issues, and more cases accepted for review that are posed for rulings in 2017. The key class action decisions this past year in the Tyson Foods and Spokeo cases were arguably more pro-plaintiff and pro-class action than business-oriented or anti-class action.  While the Supreme Court led by Chief Justice John Roberts is often thought to be pro-business, the array of its key rulings impacting class action workplace issues is anything but one-dimensional. Some decisions may be viewed as hostile to the expansive use of Rule 23, while others are hospitable and strengthen the availability of class actions and/or make proof requirements easier for plaintiffs.  Further, the Supreme Court declined several opportunities to impose more restraints on class actions, and by often deciding cases on narrow grounds, it has left many gaps to be filled in by and thereby has fueled disagreements arising amongst lower federal courts. Suffice it to say, the range of rulings form a complex tapestry that precludes an overarching generalization that the Supreme Court is either pro-business or pro-worker on class actions.

Rulings In 2016

In terms of direct decisions by the Supreme Court impacting workplace class actions, this past year was no exception. In 2016, the Supreme Court decided seven cases five employment-related cases and two class action cases that will influence complex employment-related litigation in the coming years.

These rulings included two wage & hour cases, two statutory violation cases (under the Fair Credit Reporting Act ("FCRA") and the Telephone Consumer Protection Act ("TCPA")), two ERISA cases, and one EEOC case.  A rough scorecard of the decisions reflects three distinct plaintiff-side victories, defense-oriented rulings in three cases, and one toss-up.

Tyson Foods, Inc. v. Bouaphakeo, et al., 136 S. Ct. 1036 (2016)Tyson Foods involved review of a ruling where workers pursued class claims under the FLSA and Iowa state law for unpaid work and overtime for time spent putting on and taking off hard hats, work boots, hair nets, aprons, gloves, and earplugs. The employer objected to class certification on a host of grounds, including that the variations in protective gear, the differences in the time to don and doff the gear, and the varying hours worked gave rise to individualized issues precluding class certification.  The workers proved their donning and doffing time and their hours over 40 hours per week based on expert testimony via a time and motion study that calculated average times donning and doffing. At trial the jury awarded $2.89 million to 3,344 class members, which the district court increased to $5.8 million with liquidated damages, and the Eight Circuit affirmed.  In a 6 to 2 decision, the Supreme Court answered the vexing "trial by formula" problem it touched upon in Wal-Mart, and determined that the representative evidence offered via statistics and expert testimony was appropriate in this case, and supported both class certification and the jury verdict for the class. The Supreme Court declined to craft a general rule governing the use of statistical evidence, or so-called representative evidence, in all types of class actions, although in general it elucidated when such evidence would be allowed in a class action and when class members can rely on statistical samples to establish their claims. For these reasons, more so than the other Supreme Court case in 2016, Tyson Foods was the Rule 23 workplace class action decision of the year.  The ruling opens a door that many thought the Supreme Court closed in Wal-Mart and Comcast, and provides plaintiffs' counsel with a new theoretical approach for class certification. Most notably, the dissenters in Tyson Foods claimed that the Supreme Court had turned its back on Comcast by redefining and diluting the predominance standard for class certification under Rule 23(b)(3).

Spokeo, Inc. v. Robins, 136 S. Ct. 1540 (2016) – Widely considered the other key class action ruling of the past Supreme Court term, Spokeo concerned whether people without an injury can still file class actions. The case involved whether a job applicant had the ability to bring a complaint against credit reporting firms under the FCRA, where the plaintiff alleged that a people search engine violated the FCRA when it reported he was wealthy and had a graduate degree; in reality, he was struggling to find work. The district court had dismissed the lawsuit because plaintiff lacked standing, and the Ninth Circuit reversed. In its 6 to 2 ruling, the Supreme Court held that the wrong analysis of standing had been undertaken, and it remanded the case for further findings. In so doing, the Supreme Court articulated that standing requires a showing of a "concrete injury" that is not necessarily synonymous with a tangible injury. Hence, certain types of intangible harms may be sufficient to satisfy standing requirements. The decision reflects that the Supreme Court's class action jurisprudence has taken a more nuanced and measured approach toward constraints on the ability of representative parties to litigate class actions. By opening the door to more expanded standing principles, Spokeo is apt to subject employers to more litigation under statutes like the FCRA.

EEOC v. CRST Van Expedited, Inc., 136 S. Ct. 1642 (2016) – This case concerned the largest fee sanction award approximately $4.7 million ever issued against the EEOC. It arose from a systemic sexual harassment lawsuit that the agency lost for failing to meet pre-suit obligations relative to the claims of 67 female employees for whom the EEOC sued, but whose claims the Commission failed to investigate before filing suit. The dispute over legal fees arose when the employer subsequently secured a fee award for its expenditures in fighting the claims. The Eighth Circuit subsequently upended that award on the basis that the district court improperly ruled that it had to determine on an individual basis whether each of the 67 claims in question were frivolous or groundless (and as the employer's victory on procedural grounds was not a victory on the merits). On further appeal to the Supreme Court, it unanimously held that a favorable outcome on the merits is not a prerequisite for an employer to recover fees against the EEOC. As a result, it remanded the case for an examination of the fee issue and resuscitated the employer's quest to recover millions of dollars from the Commission. In so doing, it gave the EEOC a significant bench-slap over its arguments. While the decision dealt specifically with Title VII's attorneys' fee provision, it is likely that the attorneys' fee provisions in many other statutes will be intercepted in a similar fashion.

Campbell-Ewald Co. v. Gomez, et al., 136 S. Ct. 663 (2016)Campbell-Ewald concerned whether a company can moot and defeat a class action brought under the TCPA by offering a settlement by way of a Rule 68 offer of judgment, and what happens to potential class actions when such proposals are accepted. In this case, defendant made the Rule 68 offer before plaintiff filed a motion for class certification, and it moved to dismiss the lawsuit as moot after plaintiff declined the offer. In a 6 to 3 ruling, the Supreme Court held that under basic contract principles, an unaccepted offer creates no lasting right or obligation, and plaintiff's claims were not rendered moot. In so ruling, the Supreme Court eliminated a potential defense strategy that employers had used to eviscerate class actions with "pick off" offers to the named plaintiff.

Amgen, Inc. v. Harris, et al., 136 S. Ct. 758 (2016) – In this unanimous ruling, the Supreme Court reversed and remanded a breach of fiduciary duty claim under the ERISA on the grounds that ERISA fiduciaries that manage publically-traded employee stock investments in 401(k) plans need not overcome a presumption of prudence. In so ruling, the Supreme Court reaffirmed its ruling in Fifth Third Bank v. Dudenhoeffer, 134 S. Ct. 2459 (2014). The Supreme Court reversed on the basis that the Ninth Circuit imposed too low of a burden on plaintiffs when attempting to show that the ERISA fiduciaries should have done something to halt the decline in stock values.

Encino Motorcars, LLC v. Navarro, et al., 136 S. Ct. 2117 (2016) – This case involved interpretation of an exemption for service advisors at automobile dealerships who sued for unpaid overtime under the FLSA. The district court had dismissed the claim on the basis of an exemption for salesmen, partsmen, and mechanics under the FLSA, but the Ninth Circuit reversed on the basis of an interpretative regulation of the DOL in 2011 (that reversed the DOL's position on the exemption without explanation). In a 6 to 2 ruling, the Supreme Court reversed the Ninth Circuit's decision, holding that reliance on the DOL's interpretative regulation lacked the force of law because it was arbitrary and capricious. The Supreme Court criticized the DOL's position and instructed the Ninth Circuit to reinterpret the FLSA exemption without giving any deference to the DOL's 2011 regulation.

Gobeille, et al. v. Liberty Mutual Insurance Co., 136 S. Ct. 936 (2016) – In this case, the Supreme Court held in a 6 to 2 ruling that a Vermont state law – that required the disclosure of payments relating to healthcare claims and information about healthcare services – was preempted by the ERISA to the extent the Vermont law applied to ERISA-governed plans. In so ruling, the Supreme Court articulated the contours of how the ERISA preempts state law attempts to regulate healthcare benefit issues.

The decisions in Spokeo, Campbell-Ewalt, and Tyson Foods are sure to shape and influence class action litigation in a profound manner relative to preemptive defense strategies and "pick-off" attempts, standing concepts, and statistical evidence for class certification and proof of class claims for damages. To the extent that extrinsic restrictions on class actions – i.e., limits on the ability of representative plaintiffs to litigate class actions, such as Article III standing concepts and the mootness doctrine – are relaxed or lessened (as in Spokeo and Campbell-Ewalt), class actions are easier to maintain and litigate. Further, Tyson Foods is certainly a setback for employers and reflects an approach to class certification that seems at odds with Wal-Mart and Comcast. To that end, one indication of their impact is the fact that after the Supreme Court's rulings in these cases, lower federal and state courts cited Spokeo in 365 decisions, cited Campbell-Ewald in 185 decisions, and cited Tyson Foods in 104 decisions during the remainder of 2016.

Amgen, Navarro, Gobeille, and CRST Van Expedited are also apt to shape the future of workplace  litigation in the contexts of ERISA fiduciary duty claims, deference to DOL regulations in wage & hour litigation, ERISA preemption, and claims for breaches of statutory duty against the EEOC. While arguably defense-oriented rulings, they are not as significant for employers as Spokeo, Campbell-Ewalt, and Tyson Foods are for plaintiffs.

Rulings Expected In 2017

Equally important for the coming year, the Supreme Court accepted five additional cases for review in 2016 that are likely to be decided in 2017 that also will impact and shape class action litigation and government enforcement lawsuits faced by employers. Those cases include four employment lawsuits and one class action case. The Supreme Court undertook oral arguments on two of these cases in 2016; the other three will have oral arguments in 2017. The corporate defendants in each case have sought rulings seeking to limit the use of class actions or control government enforcement lawsuits.

NLRB v. SW General, No. 15-1251 – In this case, which was argued on November 7, 2016, the Supreme Court will determine whether an unfair labor practice charge was unauthorized due to the NLRB's acting general counsel serving in violation of a federal statute in terms of NLRB procedure. The Supreme Court is apt to decide the scope of Presidential authority with executive agencies, the contours of federal labor law, and a blueprint for how future Administrations can exercise power over labor policies.

Microsoft v. Baker, et al., No. 15-457 – Although not an employment case, this case may well impact the ability of employers to defend class action litigation. It involves a consumer fraud class action where the district court denied class certification, which was reversed on appeal by the Ninth Circuit. The Supreme Court will determine the impact and implications in a class action when the named plaintiffs voluntarily dismiss their claims with prejudice while others in the class wish to proceed with the class litigation. This case is expected to be set for oral argument in 2017.

Czyzewski, et al, v. Jevic Holding, No. 15-649 –  Argued on December 7, 2016, this case involves the Worker Adjustment and Retraining Notification ("WARN") Act and the interplay between worker rights under that statute and bankruptcy proceedings after a company allegedly violates the WARN Act. The Supreme Court likely will determine whether priority in distributing assets in bankruptcy may proceed in a manner that allegedly violates the priority scheme in the Bankruptcy Code. The case also may decide rules for priority in reorganizations and liquidations that impact employers and workers in economically challenged industries and organizations.

EEOC v. McLane Co., Inc., No. 15-1248 – In this case, the Supreme Court will examine whether a district court's decision to quash or enforce a subpoena in an EEOC administrative enforcement proceeding should be reviewed de novo, or reviewed deferentially. The process of responding to or challenging an EEOC subpoena may become considerably more expensive if the Supreme Court sides with the Commission's position, especially as the EEOC been exceedingly aggressive in pursuing systemic administrative investigations through liberal use of subpoenas for all sorts of employer data. This case is expected to be set for oral argument in 2017.

Advocate Health Care Network v. Stapleton, et al., No. 16-74 – In this case (a consolidation of three separate appeals), the Supreme Court will examine whether church-affiliated hospitals are exempt from the ERISA. The hospitals assert that their retirement plans are excluded from the ERISA's coverage and that they should not face class actions over alleged breaches of fiduciary obligations and minimum funding requirements. This case is expected to be set for oral argument in 2017.

The Supreme Court is expected to issue decisions in these five cases in 2017.

Each decision may have significant implications for employers and for the defense of high-stakes workplace litigation.

The Key Decision Expected In 2017

On January 13, 2017, 3 cases were accepted for review that pose what may be the most important issue for employers presently before the Supreme Court on the legality of class action waivers in arbitration agreements. Those cases – NLRB v. Murphy Oil USA, Inc. (No. 16-307), Epic Systems Corp. v. Lewis (No. 16-285), and Ernst & Young, LLP v. Morris (No. 16-300) – will examine whether a class action waiver illegally interferes with the right of employees under the National Labor Relations Act to engage in concerted activity for their mutual aid or protection if the waiver precludes them from pursuing class or collective actions in any judicial forum.

Hanging in the balance is a litigation management tool that many employers have utilized with success to combat and minimize their exposure to class actions and collective actions.

Filling The Scalia Vacancy On The U.S. Supreme Court

Days out from the Presidential inauguration, the Supreme Court remains shorthanded after the death of Justice Antonin Scalia in February of 2016. The potential exists for 4-to-4 deadlocks on key issues. Given the timing of President Trump's nomination for Justice Scalia's successor, the Supreme Court is apt to be short one member until the late spring or potentially even longer given the politics and logistics of the confirmation process.

In terms of the impact of the successor to Justice Scalia, it is reasonable to assume that he or she will be conservative and cut more in the mold of the types of judges that President Trump described in his campaign in terms of the significance of the judicial process in general and the Supreme Court in particular. While the current ideological alignments on the Supreme Court are fragile, a "conservative" replacement of Justice Scalia would almost certainly preserve the current moderate-conservative approach to class action questions. That being said, Justice Scalia had an outsized influence on class action issues during his tenure on the Supreme Court. As illustrated by his opinions in Wal-Mart Stores, Inc. v. Dukes and Comcast Corp. v. Behrend, Justice Scalia advocated putting the spotlight on class action litigation, and the consistent thread of his opinions were to make class actions more difficult to certify and more challenging  to win. In sum, skeptics of class actions lost their strongest judicial ally, and his passing likely will weaken the intellectual championing of counter-points to a future rebound of class action jurisprudence at the Supreme Court.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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Gerald L. Maatman Jr.
 
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