Cruz-Alvarez_FFeatured Expert Contributor – Civil Justice/Class Actions

By Frank Cruz-Alvarez, Shook, Hardy & Bacon L.L.P. (co-authored with Rachel A. Canfield, an associate with the firm)

Over the last thirty years, Associate Justice Antonin Scalia established a powerful presence on the Supreme Court on issues of interest to the business community. WLF’s General Counsel, Mark Chenoweth, deftly addressed this from a broader perspective in a recent interview with Metropolitan Corporate Counsel. In the specific area of class-action litigation, Justice Scalia repeatedly thwarted the plaintiffs’ bar’s efforts to encourage liberal interpretation of Rule of Civil Procedure 23 and broadly applied the preemptive effect of the Federal Arbitration Act (FAA). His death and vacancy have generated much speculation about how the post-Scalia high court will address class actions and other related cases in the terms ahead.

The most notable class-action decision driven by Justice Scalia’s perspective was Wal-Mart Stores, Inc. v. Dukes, a landmark case that decertified one of the most expansive class-actions of all time—some 1.5 million then-current and former female employees. Although a unanimous Court agreed that the class action should not have been certified, the Justice Scalia-led majority took the decision a step further, concluding that because Wal-Mart left specific employment decisions to individual managers, the proposed class lacked commonality as it would be impossible to produce a common answer to the question “why was I disfavored.” Wal-Mart makes it more difficult to obtain class certification on the basis of discrimination against large-scale employers who leave specific employment decisions to individual managers.

Justice Scalia also authored Comcast Corp. v. Behrend, which prohibits certification of a class for lack of predominance if the offered evidence does not show that damages are capable of measurement on a class-wide basis. This decision has yet to see its full potential, as lower courts have interpreted the opinion’s language more liberally than the Behrend majority likely intended.

In the area of arbitration, Justice Scalia authored the majority opinion in AT&T Mobility v. Concepcion, where the Court held the FAA preempts state laws that invalidate class-action arbitration waivers. This decision ensured that private agreements to arbitrate will be enforced by their terms.

Presumably, the Court is now pitted in a 4-4 stalemate as far as class-action and arbitration issues are concerned. With one less vote, yesterday’s majority could quickly become tomorrow’s minority.

This dynamic shift will likely alter the approach practitioners, clients, and courts take with respect to class-action cases. Specific to Supreme Court review, class-action defendants will have to decide whether it is worthwhile to petition the Court for certiorari review and risk an unfavorable outcome. Likewise, it is unclear whether the Court will be as eager to grant such petitions, and if so, how future resolution of such cases will compare with past reasoning.

In the recent weeks since Justice Scalia’s passing, the pattern of the tide has already begun to change. Late last month, Dow Chemical chose to settle an antitrust class-action lawsuit for a cool $835 million instead of pursuing its bid for certiorari. The company argued that the class was improperly certified because a number of class members suffered no injury. Dow candidly announced this decision was made, at least in part, because its petition relied on two opinions authored by Justice Scalia—Wal-Mart and Comcast—and because his absence from the Court meant an “increased likelihood for unfavorable outcomes for business involved in class-action suits.”

The Court more recently denied certiorari in Direct Digital LLC v. Mullins—a case initially thought of as a front runner for review. Direct Digital asked the Court to weigh in on a circuit-court split regarding how courts should determine whether a class is “ascertainable.” The Court’s reason for denying review remains unknown, yet one can deduce Justice Scalia’s absence played a role in the now-divided courts’ denial.

His absence is also likely to impact cases on the October 2015 docket. Argued this past November, Spokeo, Inc. v. Robins, which raises whether standing to sue exists in “no-injury” class actions, and Tyson Foods, Inc. v. Bouaphakeo, which questions whether certification may be based on statistical sampling techniques, are currently pending in the Court. The Court has also moved arguments in another class-action case, Microsoft v. Baker, to its next term beginning in October. The issue in that case is whether a federal court of appeals has jurisdiction to review an order denying class certification after the named plaintiffs voluntarily dismiss their claims with prejudice.

In the event the Court reaches a deadlock in cases like Spokeo or Tyson Foods, Supreme Court tradition indicates the Court will hold reargument after a new justice has been confirmed. Alternatively, the Court could issue an order affirming a decision based on a 4-4 deadlock, which would summarily affirm the federal appellate court decision.

Justice Scalia’s passing and absence from the Court will have a profound impact on the process by which the Court selects and decides future class-action cases. While the current Court sits divided on such issues, confirmation of the next justice, regardless of his or her approach to business litigation issues, will undoubtedly have far reaching implications when it comes to class-action litigation.