Abogado Aly: The Value of Class Actions Just Fell. Again.

Thursday, June 11, 2015

The Value of Class Actions Just Fell. Again.

Originally published by Barry Barnett.

Another Term, another chance to gut class actions

If you’ve watched the Supreme Court over the last several years, you may have marveled at how earnestly some of the justices have worked to render Rule 23 a dead letter. Behold:

You have to arbitrate class claims individually. AT&T Mobility, LLC v. Concepcion, 531 U.S. 321 (2011).

You can’t use statistical methods we don’t find compelling to prove class claims. Dukes v. Wal-Mart Stores, Inc., 131 S. Ct. 2541 (2011).

No, really, you have to arbitrate class claims individually, no matter what. American Express Co. v. Italian Colors Restaurant, 133 S. Ct. 2304 (2013).

Hey, didn’t you hear what I said about not using statistical methods to prove class claims? Comcast Corp. v. Behrend, 133 S. Ct. 1426 (2013).

The Court split 5-4 in all four cases, with the same five justices in the majority (Chief Justice Roberts and Justices Alito, Kennedy, Scalia, and Thomas) and the same four justices (Justices Breyer, Ginsburg, Kagan, and Sotomayor) dissenting every time.

We exaggerate only a little

In Halliburton Co. v. Erica P. John Fund, Inc., 134 S. Ct. 2398 (2014), the Court did uphold a crucial principle in securities fraud class actions — that class plaintiffs may take advantage of a presumption that the securities buyers relied on the defendants’ failure to disclose material information. And in Erica P. John Funds, Inc. v. Halliburton, 131 S. Ct. 2179 (2011), the Court did rule that class plaintiffs need not show “loss causation” in order to establish grounds for class certification of a securities fraud case.

But both rulings related to securities law violations, which hurt rich people more than poor ones, and in the 2014 decision the Court also ruled that defendants must have the chance to show at the class certification stage that the nondisclosure didn’t inflate the price of the securities.

Other kinds of class cases

Class actions involving consumer fraud (Concepcion), antitrust law violations (Behrend and Italian Colors), and short-changing workers through discriminatory practices (Dukes) didn’t fare nearly so well. In each case, the little person stood against the behemoth corporation — and got a shellacking.

Last week, the Court took another class action case that aims to benefit the regular Joe and Josephine. In Tyson Foods, Inc. v. Bouaphakeo, No. 14-1146 (U.S.), the Court will address — big shout out to our friends at SCOTUSblog — these questions:

(1) Whether differences among individual class members may be ignored and a class action certified under Federal Rule of Civil Procedure 23(b)(3), or a collective action certified under the Fair Labor Standards Act, where liability and damages will be determined with statistical techniques that presume all class members are identical to the average observed in a sample; and (2) whether a class action may be certified or maintained under Rule 23(b)(3), or a collective action certified or maintained under the Fair Labor Standards Act, when the class contains hundreds of members who were not injured and have no legal right to any damages.

The problem, as the petitioner Tyson Foods sees it, arises from the fact that class plaintiffs used averages to show how much time Tyson didn’t pay, in the aggregate, for class members’ donning and doffing gear they needed to wear to work at Tyson’s pork processing plant in Storm City, Iowa. Using averages, Tyson insists, means that “hundreds” of the 3,344 class members did not suffer any compensable damages.

What will happen

Employment discrimination, consumer fraud, and antitrust claims almost always pit weak economic actors against far more powerful ones. Tyson Foods has the same David v. Goliath orientation. Blawgletter — who will sign off with our last post on June 15 — expects that what happened to the plaintiffs in Concepcion, Dukes, Italian Colors, and Behrend will also occur to those in Tyson Foods.

Although the Court will not state the rule this way, the Court will come close to saying that class plaintiffs must present a near-perfect statistical model if they wish to use statistics to support a finding that questions common to class members predominate over individual ones. Justices Scalia and Thomas Some justices seem to think that forcing a defendant to pay an amount equal to the total harm it caused the class should never happen if any class member did not suffer recoverable damages.

Perfection becomes the enemy of the good, in their view. Or, more likely, the enemy of what they may see as a bad thing — defendants having to pay for 100 percent of the harm they caused.

Get ready for The Contingency

My new law blog will go live on Tuesday, June 16, 2015. Please stand by for info on how to find The Contingency, how to subscribes, and and other fun facts.