THE FUTURE OF CLASS ACTIONS
By: Caroline Bressman, Volume 101 Staff Member
Far from being the exception to individual adversarial suits in modern U.S. litigation, an early prototype of class action litigation was common in medieval England. During a period shaped by strong group cultures, judges largely did not question group litigation. The early U.S. legal system adopted some of these ideas about English group litigation, and in 1937, the Federal Rules of Civil Procedure (FRCP) Advisory Committee drafted Rule 23 for class actions.
Legal scholars believe that during the Roberts Court era, the U.S. Supreme Court is averse to class actions. In its recent interpretations of Rule 23 class certification and class action waivers under the Federal Arbitration Act (FAA), the Supreme Court has largely limited collective relief. The late Justice Scalia propelled much of the pro-arbitration agreement movement, such that his replacement (presumably Judge Neil Gorsuch) will likely further this trajectory.
I. CLASS CERTIFICATION UNDER FRCP 23
A federal court must certify a purported class under FRCP 23. Under FRCP 23(a), a purported class must fulfill each of four prerequisites, which the Supreme Court describes as “sufficiently numerous parties, common questions of law or fact, typicality of claims or defenses, and adequacy of representation.” Next, the purported class must fulfill one of the following requirements under Rule 23(b): (1) separate adjudications will create a risk of decisions that are inconsistent with or dispositive of other class members’ claims, (2) declaratory or injunctive relief is appropriate to the class as a whole based on the opposing party’s actions, or (3) questions of law or fact common to class members predominate individual members’ actions.
Several recent Supreme Court decisions employed a narrow interpretation of Rule 23 and thereby barred purported classes’ cases. In 2011, the Supreme Court faced one of the largest purported classes in history with Wal-Mart Stores, Inc. v. Dukes. The Court denied certification because the plaintiffs lacked commonality under Rule 23(a)(2). Similarly, in Comcast Corp. v. Behrand, the Court applied a narrow interpretation of Rule 23 in denying a purported class of former and current Comcast subscribers alleging various antitrust violations. The Court adopted language from Dukes in characterizing Rule 23 determinations as a “rigorous analysis” that will frequently overlap with the claim’s merits.” Here, the purported class failed under a Rule 23(b)(3) analysis, because the class’s damages model fell short of “establishing that damages are capable of measurement on a classwide basis.” Thus, the Court viewed the individuals within these purported classes as being too dissimilar to be eligible under Rule 23.
The trajectory of narrow Rule 23 interpretation shifted slightly in Tyson Foods, Inc. v. Bouaphakeo. Here, the class used statistical sampling to fill evidentiary gaps due to defendant’s failure in keeping adequate records. The Court reasoned that because each employee worked in the same facility, completed similar work, and was compensated under the same policy, representative evidence was reasonable for class certification. The Court narrowed its holding by not creating a categorical rule about statistical evidence in class action claims. Despite this qualification, the decision provides a small opening for purported classes to fulfill Rule 23(b)(3)’s predominance inquiry.
II. CLASS ADJUDICATION UNDER THE FEDERAL ARBITRATION ACT
The FAA is another mechanism by which courts may restrain class actions, but only if agreements between the plaintiff class and defendant contain class action waivers. Enacted in 1925, the FAA obligates parties with arbitration agreements to resolve any future claims outside of court, with the purpose of quashing historical judicial hostility toward such agreements. Section 2 provides the basis for enforcing arbitration agreements, and it states that written arbitration agreements “shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.” The Act thereby demands arbitration when permissible under contract principles.
The Supreme Court has recently limited class actions through its broad interpretation of the FAA. In the landmark case AT&T Mobility LLC v. Concepcion, the Supreme Court struck down a California law requiring the availability of classwide arbitration. The Court reasoned that state law rules cannot obstruct the FAA’s objectives, which are to “ensur[e] that private arbitration agreements are enforced according to their terms.” Once again, in DIRECTV, Inc. v. Imburgia, the Supreme Court enforced an arbitration agreement with DIRECTV customers, despite a provision that renders the class arbitration waiver unenforceable if the signing customer’s state demands so. Just as in Concepcion, the relevant state law was the California law deeming waivers of class arbitration unenforceable. A final significant case that strengthened the FAA against class action waivers is American Express Co. v. Italian Colors Restaurant. Here, the Court held that a waiver of class arbitration is enforceable under the FAA when the cost of individual arbitration exceeds the potential recovery.
III. WHAT RECENT SUPREME COURT DECISIONS MEAN FOR THE FUTURE OF CLASS ACTIONS
One possible explanation for these decisions’ outcomes is that they mirror the ideology of the Justices. While the late Justice Scalia served on the bench, several of the recent key cases were 5–4 decisions. Indeed, some scholars theorize that Justice Scalia abandoned his conservative principles to maintain the five-Justice conservative bloc in FAA cases. Regardless of this theory’s verity, Justice Scalia authored a large percentage of recent FAA cases. However, in Justice Scalia’s absence, the Court decided Tyson Foods 6–2. Given that most of these decisions are tight, a ninth Justice can greatly impact upcoming class action decisions.
The possibility of Judge Neil Gorsuch being confirmed as the ninth Justice may help preserve the trajectory that Justice Scalia established in his class action opinions. A few of Judge Gorsuch’s recent 10th Circuit dissents concern deference to the NLRB and the enforcement of arbitration agreements, which can significantly impact purported classes of employees and consumers. For example, Judge Gorsuch argued against deference to the National Labor Relations Board (NLRB) in his dissent of NLRB v. Community Health Services, Inc. In another dissent, Judge Gorsuch argued for upholding the validity of six arbitration clauses, despite their procedural details differing, in Ragab v. Howard. These pro-employer dissents could suggest similar results for class action waiver cases.
However, one opinion that Judge Gorsuch authored stands in relief to these dissents. In Shook v. Board of County Commissioners, he affirmed the denial of class certification for present and future inmates with mental health conditions at El Paso County Jail. The district court denied certification because of the purported class’s failure to satisfy Rule 23(a)(2), (a)(3), or (b)(2). Despite the outcome, Judge Gorsuch repeatedly stated that though the district court did not abuse its discretion in denying class certification, that his court would reach another conclusion if initially presented with the case. In particular, Judge Gorsuch implied that the district court, sua sponte, could have created subclasses to satisfy Rule 23(b)(2) requirements. Of course, this case is not determinative of Judge Gorsuch’s class action viewpoints, but it suggests that he may not rule on purely anti-class action lines.
By the time this Post is published, the Supreme Court will have heard arguments for Microsoft Corp. v. Baker, which reviews an order denying class certification after the named plaintiffs voluntarily dismiss their claims with prejudice. Additionally, the Court has granted certiorari for three cases that involve the legality of class action waivers in arbitration agreements: NLRB v. Murphy Oil USA, Inc., Epic Systems Corp. v. Lewis, and Ernst & Young, LLP v. Morris. Given the recent trend in restraining class action success, the Supreme Court is limiting vital opportunities for collective relief for employees, consumers, and shareholders. Is American individualism growing more in the 21st century? Do judges strive to see differences rather than commonalities in individuals’ circumstances? Given the tight split on class action decisions, a new Justice, such as Judge Gorsuch, could greatly influence the crucial upcoming 2017 Term decisions.
- See Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338, 348 (2011) (quoting Califano v. Yamasaki, 442 U.S. 682, 700–701 (1979)). ↑
- See generally Stephen C. Yeazell, From Medieval Group Litigation to the Modern Class Action (1987) (tracing the history of group litigation in medieval England to the modern class action in Anglo-American law). ↑
- Id. at 4–5. ↑
- Id. at 8. ↑
- Fed. R. Civ. P. 23 advisory committee’s note to 1937 amendment. ↑
- See Brian T. Fitzpatrick, The End of Class Actions?, 57 Ariz. L. Rev. 161, 199 (2015) (expressing pessimism over the future of class actions in light of Supreme Court decisions permitting class action waivers in arbitration clauses); Robert H. Klonoff, The Decline of Class Actions, 90 Wash. U. L. Rev. 729, 731 (2013) (“The class action device, once considered a “revolutionary” vehicle for achieving mass justice, has fallen into disfavor.”); cf. Stephanie Greene & Christine Neylon O’Brien, The NLRB v. the Courts: Showdown over the Right to Collective Action in Workplace Disputes, 52 Am. Bus. L.J. 75, 82 (2015) (describing how the Supreme Court has strengthened class action waivers); Robert H. Klonoff, Class Actions in the Year 2026: A Prognosis, 65 Emory L.J. 1569, 1571 (2016) (predicting that securities class actions will flourish but that consumer, employment, and personal injury class actions will continue declining). ↑
- See David S. Schwartz, Justice Scalia’s Jiggery-Pokery in Federal Arbitration Law, 101 Minn. L. Rev. Headnotes 75, 79 (2016). ↑
- Comcast Corp. v. Behrand, 133 S. Ct. 1426, 1432 (internal quotations omitted). ↑
- See Fed. R. Civ. P. 23(b). ↑
- 564 U.S. 338 (2011). The purported class included approximately 1.5 million female employees alleging Title VII sex discrimination. Id. at 343. ↑
- Id. at 349. Judge Scalia wrote for the majority, “Without some glue holding the alleged reasons . . . together, it will be impossible to say that examination of all the class members’ claims for relief will produce a common answer to the crucial question why was I disfavored.” Id. at 352. ↑
- 133 S. Ct. 1426, 1429–31 (2013). ↑
- Id. at 1432. ↑
- Id. at 1432–33. ↑
- Cf. John C. Coffee, Jr., The Supreme Court “Saves” the Class Action: Complex Litigation After Scalia, CLS Blue Sky Blog (Apr. 4, 2016), http://clsbluesky.law.columbia.edu/2016/04/04/the-supreme-court-saves-the-class-action-complex-litigation-after-scalia (suggesting that the Tyson Foods decision may foreshadow the end of the “Scalia Revolution,” which sought to overthrow class actions). ↑
- Tyson Foods, Inc. v. Bouaphakeo, 136 S. Ct. 1036, 1047 (2016). ↑
- Id. at 1048. ↑
- Id. at 1049. ↑
- See 9 U.S.C. §§ 1–14 (2015). ↑
- Fitzpatrick, supra note 6, at 163–64. ↑
- 9 U.S.C. § 2 (2015). ↑
- 563 U.S. 333, 338 (2011). ↑
- Id. at 344 (internal citations omitted). ↑
- 136 S. Ct. 463, 478 (2015). ↑
- Id. at 467. ↑
- 133 S. Ct. 2304 (2013). ↑
- Id. at 2309. ↑
- See Comcast Corp. v. Behrend, 133 S. Ct. 1426 (2013); AT&T Mobility LLC v. Concepcion, 563 U.S. 333 (2011); Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338 (2011). Note that Justice Sotomayor did not take part in American Express Co. v. Italian Colors Restaurant, a 5–3 decision. ↑
- Schwartz, supra note 7, at 93. ↑
- See id. at 78. ↑
- 812 F.3d 768 (10th Cir. 2016) (Gorsuch, J., dissenting). This case concerned variations of NLRB backpay rules, and because he viewed a recent variation as “treating cases that seem to differ mostly in degree as different in kind,” the NLRB had overstepped its statutory bounds. Id. at 781. ↑
- 841 F.3d 1134, 1139 (10th Cir. 2016) (Gorsuch, J., dissenting). Using Concepcion for support, Judge Gorsuch reasoned that the parties had a sufficient meeting of the minds to uphold these arbitration agreements. Id. ↑
- Thomas J. Barton, Trump’s Supreme Court Nominee Will Likely Be Key Vote in Class Action Waiver Dispute, Drinker Biddle (Feb. 21, 2017), http://www.drinkerbiddle.com/insights/publications/2017/02/trumps-supreme-court-nominee. ↑
- 543 F.3d 597 (10th Cir. 2008). Allegations include inadequate jail conditions for mental health care under the Eighth Amendment. Id. at 600. ↑
- Id. at 602. ↑
- See id. at 600, 603–604, 610. ↑
- Id. at 607. ↑
- For an initial analysis predicting a hostile ruling against class actions, see Ronald Mann, Argument Analysis: Justices Dubious About Free Review of Decisions Denying Class Certification, SCOTUSBlog (Mar. 21, 2017), http://www.scotusblog.com/2017/03/argument-analysis-justices-dubious-free-review-decisions-denying-class-certification. ↑
- Adam Liptak, Justices Will Hear Challenges to Mandatory Employee Arbitration, N.Y. Times (Jan. 13, 2017), https://www.nytimes.com/2017/01/13/us/politics/scotus-mandatory-employee-arbitration.html. ↑