Law in Plain English: M&G Polymers USA, LLC v. Tackett

This is one in a series of posts designed to describe court decisions in plain English. For more detail and background on the legal issues, see the link to the case below. For similar posts, click here.

SCOTUSblog: M&G Polymers USA, LLC v. Tackett

Argument: Nov 10 2014 (Aud.)

Background: Retirees and dependents of retirees from an M&G plant brought a class action lawsuit against M&G after the company announced that retirees would be required to make contributions to their health care costs. The retirees and their union sought an injunction ordering M&G to reinstate the retirees to the current versions of the benefits plans they were enrolled in to receive health care for life without contributions. The labor agreements were originally negotiated between the union as a whole and the employer, and provided for retiree health care benefits (among other things). Individual (local) plants would either adopt the master agreement as a whole or adopt the master agreement with certain exceptions or differences. Some local agreements included "side" letters or "cap" letters that capped the company's contribution toward the cost of retiree health care benefits, although these letters were not reproduced in booklets distributed to retirees and (allegedly) not ratified as part of the agreement between the employer and the local plant. The district court found that, in the absence of extrinsic evidence to the contrary, the master agreements indicated an intent to vest lifetime contribution-free health care benefits, even if the agreement itself was silent as to the duration of retiree health care benefits. The district court also concluded. then, that the cap letters did not apply to the master agreement because those benefits could not be bargained away without retiree permission. The Sixth Circuit affirmed.

Issue: The question before the Court is whether, when construing collective bargaining agreements in Labor Management Relations Act (LMRA) cases, courts should presume that silence concerning the duration of retiree health-care benefits means the parties intended those benefits to vest (and therefore continue indefinitely), as the Sixth Circuit holds; or should require a clear statement that health-care benefits are intended to survive the termination of the collective bargaining agreement, as the Third Circuit holds; or should require at least some language in the agreement that can reasonably support an interpretation that health-care benefits should continue indefinitely, as the Second and Seventh Circuits hold.

Holding: In a unanimous decision, the Supreme Court ruled that the Sixth Circuit’s decision rested on principles that are incompatible with ordinary principles of contract law. ERISA governs pension and welfare benefits plans, including those established by collective-bargaining agreements. ERISA establishes minimum funding and vesting standards for pension plans, but exempts welfare benefits plans—which provide the types of benefits at issue here—from those rules. The Court interprets collective-bargaining agreements, including those establishing ERISA plans, according to ordinary principles of contract law, at least when those principles are not inconsistent with federal labor policy. As a result, the Court vacated the judgment of the Sixth Circuit and remanded it for the appeals court to apply ordinary principles of contract law in the first instance.

Law in Plain English: Dart Cherokee Basin Operating Company, LLC v. Owens

This is one in a series of posts designed to describe court decisions in plain English. For more detail and background on the legal issues, see the link to the case below. For similar posts, click here.

SCOTUSblog: Dart Cherokee Basin Operating Company, LLC v. Owens

Argument: Oct 7 2014 (Aud.)

Background: Brandon Owens filed a class action lawsuit in Kansas state court alleging that he and others were underpaid royalties from Dart Cherokee Basin Operating Company or Cherokee Basin Pipeline on oil and gas wells. The defendants sought to remove the case to federal court, pursuant to the Class Action Fairness Act (CAFA). Federal law requires only that defendants must file "a short and plain statement of the grounds for removal." Although Owens sought royalties of at least $8.2 million (in excess of CAFA's requirement of $5 million, the district court denied the motion to remove because the defendant's notice of removal failed to provide evidentiary support, "such as an economic analysis . . . or settlement estimates" for the $8 million figure. The defendants requested permission to appeal to the Tenth Circuit, but a divided panel denied permission. Petitioners then sought en banc review of the panel's decision, but the panel voted 4-4 (an evenly divided vote denies the petition).

Issue: The question before the Court is whether a defendant seeking removal to federal court is required to include evidence supporting federal jurisdiction in the notice of removal, or whether it is enough to allege the required “short and plain statement of the grounds for removal.”

Holding: In a 5-4 decision, the Supreme Court ruled that as specified in §1446(a), a defendant’s notice of removal need include only a plausible allegation that the amount in controversy exceeds the jurisdictional threshold; the notice need not contain evidentiary submissions. The District Court erred in remanding this case for want of an evidentiary submission in the notice of removal, and the Tenth Circuit abused its discretion in denying review of that decision.

Law in Plain English: Halliburton Co. v. Erica P. John Fund, Inc.

This is one in a series of posts designed to describe court decisions in plain English. For more detail and background on the legal issues, see the link to the case below. For similar posts, click here.

SCOTUSblog: Halliburton Co. v. Erica P. John Fund, Inc.

Argument: Mar 5 2013

Discussion: The Erica P. John Fund, Inc. ("the Fund") represent a putative class of shareholders who allege that they suffered material losses as a result of fraudulent misrepresentations by Halliburton (see here for this case's first trip to the Supreme Court back in 2011). The Fund's claims are based upon the "fraud-on-the-market" theory, which suggests that that an efficient, well-organized market will reflect all of the information that there is about a given security. Under this theory, investors can be presumed to have relied upon the distortions made by Halliburton's allegedly fraudulent misrepresentations without specific proof that they had done so. The Court adopted this theory in Basic Inc. v. Levinson, although that decision was made in 1988; three of the justices (including Justices Kennedy and Scalia) recused themselves at the time, and three justices in last term's Amgen case said they the Court should perhaps review Basic's premise. Halliburton attempted to show evidence that its allegedly fraudulent mispresentations caused no market price impact, but the District Court ruled that Halliburton was not entitled to do so. The Fifth Circuit affirmed.

Issue: The questions before the Court are (1) whether this Court should overrule or substantially modify the holding of Basic Inc. v. Levinson, to the extent that it recognizes a presumption of classwide reliance derived from the fraud-on-the-market theory; and (2) whether, in a case where the plaintiff invokes the presumption of reliance to seek class certification, the defendant may rebut the presumption and prevent class certification by introducing evidence that the alleged misrepresentations did not distort the market price of its stock.

Holding: In a 9-0 decision, the Supreme Court ruled that Halliburton has not shown a special justification for overruling Basic’s presumption of reliance. For the same reasons the Court declines to overrule Basic’s presumption of reliance, it also declines to modify the prerequisites for invoking the presumption by requiring plaintiffs to prove “price impact” directly at the class certification stage. The Court agrees with Halliburton, however, that defendants must be afforded an opportunity to rebut the presumption of reliance before class certification with evidence of a lack of price impact.

Law in Plain English: Chadbourne & Parke LLP v. Troice

This is one in a series of posts designed to describe court decisions in plain English. For more detail and background on the legal issues, see the link to the case below. For similar posts, click here.

Allen Stanford. Photo from Wikipedia.

SCOTUSblog: Chadbourne & Parke LLP v. Troice; Willis of Colorado Inc. v. Troice; Proskauer Rose LLP v. Troice

Argument: Oct 7 2013 (Aud.)

Discussion: In 2012, Allen Stanford was convicted of cheating investors out of more than $7 billion over 20 years in one of the largest Ponzi schemes in U.S. history. Three cases sough to use state class-actions to attempt to recover damages for losses resulting from the Stanford Ponzi scheme. On the other hand, a preclusion provision of the Securities Litigation Uniform Standards Act ("SLUSA") provides that "[n]o covered class action based upon the statutory or common law of any State or subdivision thereof may be maintained in any State or Federal court by any private party alleging a misrepresentation or omission of a material fact in connection with the purchase or sale of a covered security" (emphasis added). The district court dismissed the claims, finding that they were precluded by the SLUSA provision. The Fifth Circuit then reversed, holding that that the purchase or sale of securities (or representations about the purchase or sale of securities) was only tangentially related to the fraudulent scheme, and thus the preclusion provision did not apply.

Issue: The questions before the Court were (1) whether the Securities Litigation Uniform Standards Act (SLUSA) precludes a state-law class action alleging a scheme of fraud that involves misrepresentations about transactions in SLUSA-covered securities; and (2) whether SLUSA precludes class actions asserting that defendants aided and abetted SLUSA-covered securities fraud when the defendants themselves did not make misrepresentations about the purchase or sale of SLUSA-covered securities.

Holding: In a 7-2 decision, the Supreme Court ruled that SLUSA does not preclude the plaintiff's state-law class actions, because SLUSA only applies when the plaintiffs allege a misrepresentation or omission of a material fact in connection with the purchase or sale of a covered security. Since the plaintiffs did not allege such in this case, the Court affirmed the lower court's decision.

Law in Plain English: Sandifer v. United States Steel Corporation

This is one in a series of posts designed to describe court decisions in plain English. For more detail and background on the legal issues, see the link to the case below. For similar posts, click here.

SCOTUSblog: Sandifer v. United States Steel Corporation

Argument: Nov 4 2013 (Aud.)

Background: The Fair Labor Standards Act (FLSA), 29 U.S.C. § 203(o), excludes, from the time during which an employee is entitled to be compensated at the minimum hourly wage "any time spent in changing clothes...at the beginning or end of each workday which was excluded from measured working time...by the express terms of or by custom or practice under a bona fide collective-bargaining agreement applicable to the particular employee." A group of workers at U.S. Steel filed a collection action lawsuit against the company for failing to compensate them for the time they spent putting on and taking off their work clothes in a locker room at the plant. The clothes consist of flame-retardant pants and jacket, work gloves, metatarsal boots (work boots containing steel or other strong material to protect the toes and instep), a hard hat, safety glasses, ear plugs, and a "snood" (a hood that covers the top of the head, the chin, and the neck). The District Court ruled that the FLSA does not require that the clothes-changing time in this case be compensated, and the Seventh Circuit agreed.

Issue: The question before the Court is what constitutes “changing clothes” within the meaning of Section 203(o) of the FLSA?

Holding: In a unanimous decision (except for Justice Sotomayor, who did not join in footnote 7), the Supreme Court ruled that most of the items identified by the workers were indeed clothes, and as a result, the time that petitioners spend donning and doffing their protective gear is not compensable by the operation of federal law. Consequently, the FLSA does not require that the clothes-changing time in this case be compensated and the Seventh Circuit's decision was affirmed.

Gary Works, U. S. Steel’s largest manufacturing plant, is situated on the south shore of Lake Michigan.

Mississippi ex rel. Hood v. AU Optronics Corp.: Previously articulated principles of statutory interpretation or ideological bias?

Professor Gifford

My torts professor, Don Gifford, wrote a law review article which can be summed up as follows: 

Mississippi ex rel. Hood v. AU Optronics Corp. will test the principles of both its conservative and liberal wings. A textualist interpretation, usually favored by Justice Scalia and his conservative colleagues, would not allow such removal — a decidedly anti-business result. At the same time, a purposive approach to interpreting the statutory provision, promoted by Justice Breyer, possibly would allow such removal. For each group of Justices, the conflict is clear: Will they follow their previously articulated principles of statutory interpretation or their ideological bias?

And what result? In a unanimous decision, the Supreme Court ruled that because Mississippi is the only named plaintiff, this suit does not constitute a mass action under CAFA. As a result, the case could be removed to federal court. Perhaps to the surprise of Professor Gifford (I reached out to him for a response, and he said he was surprised!), Scalia went along with the rest of the Court in reaching what Professor Gifford called "a decidedly anti-business result."

Law in Plain English: Mississippi ex. rel. Hood v. AU Optronics Corp.

This is one in a series of posts designed to describe court decisions in plain English. For more detail and background on the legal issues, see the link to the case below. For similar posts, click here.

SCOTUSblog: Mississippi ex. rel. Hood v. AU Optronics Corp.

Argument: Nov 6 2013 (Aud.)

Did you know? Mississippi state law specifically prohibits class action lawsuits.  Miss.Code Ann. § 75-24-15(4).

Discussion: Mississippi filed a parens patriae lawsuit against manufacturers and distributors of liquid crystal display ("LCD") panels. These parties had the case removed to federal court because the claim was either a "class action" or "mass action" under the Class Action Fairness Act (CAFA). Mississippi then moved to remand the case to state court, and the District Court granted the motion. The Fifth Circuit ruled that Mississippi was not the sole party of interest--the State (as a purchaser of LCD products) and individual citizens who purchased the products within Mississippi possessed rights sought to be enforced." As a result, the lawsuit qualified as a "mass action" under CAFA and reversed the District Court's order.

Issue: The question before the Court is whether a state’s parens patriae action is removable as a “mass action” under CAFA when the state is the sole plaintiff, the claims arise under state law, and the state attorney general possesses statutory and common-law authority to assert all claims in the complaint.

Holding: In a unanimous decision, the Supreme Court ruled that because Mississippi is the only named plaintiff, this suit does not constitute a mass action under CAFA. As a result, the case cannot be removed to federal court.

Law in Plain English: American Express Co. v. Italian Colors Restaurant

This is one in a series of posts designed to describe court decisions in plain English. For more detail and background on the legal issues, see the link to the case below. For similar posts, click here.

American Express Co. v. Italian Colors Restaurant

Italian Colors Restaurant and other merchants (in a class action) alleged that as a condition of accepting American Express (AmEx) charge cards, they were forced to accept AmEx credit cards and debit cards at higher rates than competitors' credit cards and debit cards. Pursuant to a prior agreement which included a class action waiver, AmEx sought arbitration. The District Court found in favor of AmEx. The Second Circuit reversed, finding that the class action waiver was unenforceable because if the provision were enforced it would strip the plaintiffs of rights accorded them by statute. The question before the Court was whether the Federal Arbitration Act (FAA) permits courts, invoking the “federal substantive law of arbitrability,” to invalidate arbitration agreements on the ground that they do not permit class arbitration of a federal-law claim. In a 5-3 decision (Justice Sotomayor recused, because she participated in the decision at the Second Circuit), the Supreme Court ruled that the FAA does not permit courts to invalidate a contractual waiver of class arbitration on the grounds that the plaintiff’s cost of individually arbitrating a federal statutory claim exceeds the potential recovery. As a result, the merchants' class action is precluded by the arbitration agreement. The practical impact of this decision is that courts must enforce arbitration agreements for claims, even for claims alleging a violation of a federal statute, unless the FAA’s mandate has been overridden by a contrary congressional command.

Law in Plain English: Maracich v. Spears

This is one in a series of posts designed to describe court decisions in plain English. For more detail and background on the legal issues, see the link to the case below. For similar posts, click here.

Maracich v. Spears

Several lawyers filed a class action lawsuit on behalf several car purchasers against hundreds of state car dealerships, alleging that the dealers had charged unlawful fees in violation of a state consumer protection statute.  The lawyers obtained the names and contact information of thousands of other state residents who had also paid the challenged fee from the South Carolina Department of Motor Vehicles. The lawyers wrote to the consumers, offering to talk to them about joining the class action. One of the lawyers for the car dealers found some consumers and sued the original lawyers, alleging that the solicitations violated the Driver’s Privacy Protection Act. The DPPA has a "litigation exception" which allows use of personal data “in connection with any civil...proceeding in any Federal, State, or local court...including...investigation in anticipation of litigation;” and a "solicitation" exception which allows use of the information “[f]or bulk distribution for surveys, marketing or solicitations...if the State has obtained the express consent of the person to whom such personal information pertains.” The Fourth Circuit agreed with the original lawyers that their use of the DPPA data fell within the litigation exception and dismissed the lawsuit. The question before the Court was whether the litigation exception applied to the original lawyers when they obtained, disclosed, or used personal information solely to find clients to represent in their class action (the solicitation exception didn't apply, because both sides conceded that the lawyers didn't have the consent of their parties). In a 5-4 decision, the Supreme Court ruled that an attorney’s solicitation of clients is not a permissible purpose covered by the (b)(4) litigation exception. As a result, the class action lawsuit fails. The practical impact of this decision is that courts will have to limit the scope of the litigation exception to exclude client solicitation.

The Supreme Court's extreme deference to arbitration

In today's decision in Oxford Health Plans LLC v. Sutter, the Supreme Court defined the standard by which an award of arbitration must be challenged (all citations omitted):

“It is not enough . . . to show that the [arbitrator] committed an error—or even a serious error.” Because the parties “bargained for the arbitrator’s construction of their agreement,” an arbitral decision “even arguably construing or applying the contract” must stand, regardless of a court’s view of its (de)merits. Only if “the arbitrator act[s] outside the scope of his contractually delegated authority”—issuing an award that “simply reflect[s] [his] own notions of [economic] justice” rather than “draw[ing] its essence from the contract”—may a court overturn his determination. So the sole question for us is whether the arbitrator (even arguably) interpreted the parties’ contract, not whether he got its meaning right or wrong.

That's some extreme deference right there.

Law in Plain English: Oxford Health Plans LLC v. Sutter

This is one in a series of posts designed to describe court decisions in plain English. For more detail and background on the legal issues, see the link to the case below. For similar posts, click here.

Oxford Health Plans LLC v. Sutter

Dr. Sutter and Oxford Health Plans are parties to a Primary Care Physician Agreement. According to the agreement, disputes are to be handled by arbitration. Several years into the agreement, Sutter accused Oxfort of improperly denying, underpaying, and delaying reimbursement of physicians' claims for the provision of medical services. He filed a class action suit, but the New Jersey Superior Court granted Oxford's motion to compel arbitration. The arbitrator found that the agreement permitted class arbitration. The District Court and the Third Circuit agreed. The question before the Court was whether the arbitrator acts within his powers under the Federal Arbitration Act  or exceeds those powers by determining that parties affirmatively agreed to authorize class arbitration based solely on their use of broad contractual language precluding litigation and requiring arbitration of any dispute arising under their contract. In a unanimous decision, the Supreme Court ruled that the arbitrator’s decision survived the limited judicial review allowed by the FAA; and that he did not exceed his powers. As a result, Sutter's class action suit will not go forward and he must submit to arbitration. The practical impact of this decision is that the Supreme Court continues to give a wide amount of deference to arbitration and arbitrator's decisions.

Law in Plain English: Genesis HealthCare Corp. v. Symczyk

This is one in a series of posts designed to describe court decisions in plain English. For more detail and background on the legal issues, see the link to the case below. For similar posts, click here.

Genesis HealthCare Corp. v. Symczyk

Symczyk was an employee of a nursing home owned by Genesis HealthCare. Their policy was to deduct 30 minutes of pay for a lunch break, but Symczyk and others often worked through their breaks. Symczyk brought a "collective action" (similar to, but not, a class action) lawsuit under the Fair Labor Standards Act (FLSA), alleging that she and others were entitled to be paid for the time they worked through her lunch breaks. Genesis offered to pay $7,500 for unpaid wages (which was everything that Symczyk had asked for), but she did not respond. The question before the Court was whether the case became moot, and beyond the judicial power of Article III, when the lone plaintiff received an offer from the defendants to satisfy all of the plaintiff's claims. In a 5-4 decision, the Supreme Court ruled that once Genesis has offered to pay everything she had asked for, she no longer had any personal interest in representing putative, unnamed claimants, nor any other continuing interest that would preserve her suit from mootness. As a result, her suit was appropriately dismissed by the Third Circuit. The practical impact of this decision on a larger scale is that when a defendant offers everything the plaintiff asks for, there may not be anything left for the courts to decide (although the Court didn't technically rule on this issue).

Law in Plain English: Comcast v. Behrend

This is one in a series of posts designed to describe court decisions in plain English. For more detail and background on the legal issues, see the link to the case below. For similar posts, click here.

Comcast v. Behrend

Several Comcast subscribers filed a class action lawsuit against Comcast alleging that Comcast violated the Sherman Anti-trust Act by "clustering." The suit alleged that Comcast made illegal swap agreements to concentrate, or "cluster," operations in particular regions. For example, Comcast bought Adelphia's Philadelphia operations (to increase their share of subscribers from 24% to nearly 70% in the region) and in return sold their operations in Palm Beach, Florida and Los Angeles, California, to Adelphia to allow Adelphia to cluster their operations in those regions. The question before the Court was whether the District Court should have certified the class action without resolving whether the subscribers has introduced admissible evidence, including expert testimony, to show that their case was susceptible to awarding damages on a class-wide basis. In a 5-4 decision, the Supreme Court ruled that the District Court improperly certified the class. To meet the requirements for a class action, the subscribers must show that “the questions of law or fact common to class members predominate over any questions affecting only individual members." In other words, the plaintiff's damages model needed to show damages on a classwide basis. To do so, the court may need to inquire into the substance ("merits") of the plaintiff's claims, and how their alleged damages were actually related to their alleged injury. In this case, the District Court failed to do this. As a result, the class would not be certified. The practical impact of this decision is that it makes it more difficult to certify class actions in certain circumstances because the plaintiffs will have to introduce sufficient evidence to link their theory of damages to their claimed injury.

Law in Plain English: The Standard Fire Insurance Co. v. Knowles

This is one in a series of posts designed to describe court decisions in plain English. For more detail and background on the legal issues, see the link to the case below. For similar posts, click here.

The Standard Fire Insurance Co. v. Knowles

Knowles filed a proposed class action lawsuit in an Arkansas state court and agreed (in legal terms, this is called a stipulation) that he (and the class) would seek less than $5 million in damages. This amount is important because the Class Action Fairness Act of 2005 (CAFA) gives federal courts jurisdiction over class actions where the amount exceeds $5 million. Knowles wanted to keep the case in state court because some state courts, particularly in Arkansas, are more favorable for class actions than federal courts. CAFA was passed to address this problem, and Knowles was trying to find a way around CAFA. The Standard Fire Insurance Co. removed the case to federal court, but the federal district court remanded it back to Arkansas state court because of the amount in controversy. Standard Fire appealed to the Eighth Circuit, who refused to hear the case. The question before the Court was whether Knowles's stipulation was actually binding on other members of the proposed class. In a unanimous opinion, the Supreme Court ruled that this was not the case; Knowles's stipulation could not bind members of a proposed class action before the class was certified. The practical impact of this decision is that class action plaintiffs won't be able to avoid federal jurisdiction by stipulating amounts in controversy less than the amount specified in CAFA before the class is certified. This ruling gives additional teeth to CAFA in allowing defendants to remove class actions to federal courts.

2011 predictions update

Everyone makes predictions for the upcoming year, but how many people go back and actually score themselves?

1. The Supreme Court will reverse the Ninth Circuit in Wal-Mart v. Dukes.
TRUE

2. Judge Roger Vinson of the U.S. District Court for the Northern District of Florida will find the health care reform law to be unconstitutional.
TRUE

3. The FCC will approve new net neutrality rules (that will probably happen in the next week or so), but the federal courts will find that this oversteps their authority (again).
PARTIALLY TRUE (case is still pending)

4. At least one politician (state legislator or above) will resign when a video of their misconduct goes viral.
Thankfully, we didn't get video of Weiner's weiner, but he did resign. PARTIALLY TRUE

5. North Korea's Kim Jong-il will die and his son, Kim Jong-un, will take over.
TRUE and TRUE

6. At least one Philadelphia sports team will make it to the Super Bowl, NHL Finals, or World Series.
FALSE (unfortunately)

7. Patriots' QB Tom Brady will win the NFL MVP and Eagles' QB Michael Vick will finish second.
TRUE (Note: Brady was unanimous; there was no second place)

8. Baltimore (BWI) will record less than 30 inches of snowfall this winter (please)
TRUE (I think the official number was 18-19 inches)

9. I will get accepted to law school (please) and actually go this time!
FALSE (long story)

10. Stuxnet's creator(s) will be revealed (total guess).
FALSE

And one more for the road that I am most certain of:

DEFCON19 will be canceled.
Always TRUE

Top ten update

With the news this morning that Wal-Mart succeeded at the Supreme Court in having the Dukes class action suit dismissed, it's time to update the top ten predictions for 2011. Here's a look back at the predictions with updates:


1. The Supreme Court will reverse the Ninth Circuit in Wal-Mart v. Dukes. YES

2. Judge Roger Vinson of the U.S. District Court for the Northern District of Florida will find the health care reform law to be unconstitutional. YES

3. The FCC will approve new net neutrality rules (that will probably happen in the next week or so), but the federal courts will find that this oversteps their authority (again). YES and NO

4. At least one politician (state legislator or above) will resign when a video of their misconduct goes viral.  YES and NO (Chris Lee and Anthony Weiner have both resigned, but over pictures and not video)

5. North Korea's Kim Jong-il will die and his son, Kim Jong-un, will take over. NO

6. At least one Philadelphia sports team will make it to the Super Bowl, NHL Finals, or World Series. NO (only the Phillies are left)

7. Patriots' QB Tom Brady will win the NFL MVP and Eagles' QB Michael Vick will finish second. YES (Brady was unanimous)

8. Baltimore (BWI) will record less than 30 inches of snowfall this winter (please) YES (14.4 inches)

9. I will get accepted to law school (please) and actually go this time! NO (wait-listed, blah!)

10. Stuxnet's creator(s) will be revealed (total guess). NO


And of course, the bonus prediction: DEFCON19 will be canceled. YES :-)

Los Angeles Times is wrong about the Wal-Mart class-action lawsuit

The Los Angeles Times editorializes about the Wal-Mart class-action lawsuit today, and to no surprise, they've read the issue entirely wrong:

There is currently no limit on the size of a class, nor should there be...In other words, Wal-Mart's size shouldn't immunize it to a lawsuit that otherwise meets legal standards.

But this case isn't simply about the size of the class.  Experts acknowledge that a class this large could conceivably go forward if Wal-Mart had a nationwide policy that equally affected all of the women in the class.  But as Ted Frank wrote in the Washington Examiner:

...the theory of the Dukes lawsuit is exactly the opposite: the plaintiffs claimed that Wal-Mart's central office did not exercise enough authority over each of its 3,400 stores; each of the individual managers' discretionary employment or promotion decisions--whether made by male or female managers--was, on average, discriminatory; and thus Wal-Mart was responsible for a policy that "fosters or facilitates" discrimination.

...

One can quickly see why this does not work as a class action. In the words of Professor Richard Epstein, the procedural tail is wagging the substantive dog.

The discrimination laws permit Wal-Mart to defend itself by demonstrating that the challenged job decision was made for a reason other than gender. For example, looking at Betty Dukes, the named plaintiff, alone, we learn that she had a female manager and that she was repeatedly disciplined for returning late from lunch breaks.

Yet if a court ties together claims that are not alike, it will have trouble trying the case as a single class action--unless it pretends that the parts that are not alike are not part of the lawsuit. Wal-Mart is stripped of its defense because the individualized defense would be inconvenient to trying the case as a class action.

But that is precisely backwards. If there are too many individualized issues to permit a defendant to defend itself adequately in a class action, that means the correct ruling is not to have a class action.

Emphasis is mine.  The case isn't about the size of the class, per se.  The size of the case is only relevant because it brings together claims that are not alike, and therefore prevents Wal-Mart from defending itself from disparate, individualized claims.

Class action lawsuits and common sense

Let's say I purchase a product which turns out to be defective and causes some sort of injury to me.  I can file a lawsuit against the manufacturer to recover damages.  Now presume that 10,000 people also purchased the same product and were similarly injured.  The courts would be overwhelmed with 10,000 lawsuits that alleged the same general facts about how the product was defective.  The answer is the class action lawsuit, which brings together many claims into one.  This improves the efficiency of the court because there is no need to repeat the same general facts over and over and over again.

A problem with a class action lawsuit when the circumstances surrounding the injury are different in each case.  This is precisely the problem with Dukes v. Wal-Mart, which will be heard by the Supreme Court this term.  This case is the largest class-action lawsuit ever, and involves alleged discrimination against women in promotion decisions at Wal-Mart.  The legal issue is not about whether the discrimination occurred, but whether or not it should be a class-action case in the first place.  The Ninth Circuit (en banc) affirmed the class certification of the District Court (6-5) in a decision that is almost certain to be overturned.

At the Supreme Court level, the decision will be about the intricateness of Rule 23 of the Federal Rules of Civil Procedure (the rule concerning Class Actions).  From a common-sense perspective, class action lawsuits make sense when they provide efficiency to the courts, but not at the expense of the rights of the parties involved.

For a similar perspective, see the article Manhattan Moment: Courts shouldn't ignore due process to create class actions in the Washington Examiner.