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Class Action Among Top Concerns at SCOTUS This Term

1 December 2015

The Supreme Court is continuing to address questions related to class actions, with a trio of pending cases being watched carefully by many businesses.

“This term the Court is considering three major class action cases—Campbell-Ewald v. Gomez, Spokeo v. Robins, andTyson Foods v. Bouaphakeo—making it one of the most important terms for businesses—and the class action bar—in years,” Gregory Garre, a former solicitor general who now chairs Latham & Watkins’ Supreme Court and Appellate practice group, told InsideCounsel.

“That's a significant number of cases to take on,” adds Andrew Pincus, an attorney at Mayer Brown—where he represents Spokeo in its current case.

Thomas Hungar, who was deputy solicitor general and is now co-chair of Gibson Dunn's Appellate and Constitutional Law practice group, recalls that the Supreme Court has been doing a lot in the class action area in recent years. Decisions such as Wal-Mart Stores v. Dukes andComcast v. Behrend tried to reign in some lower court decisions regarding criteria in Rule 23 of the Federal Rules of Civil Procedure on class certification, he said.

“Lower courts, in many cases, don't seem to be getting the message,” Hungar told InsideCounsel.

The Tyson Foods case deals—in part—with standards for certifying uninjured class members. It also considers the use of statistical analysis and averages by plaintiffs.

Hungar explains that using an average means the defendant cannot offer individualized defenses.

Dealing broadly with overtime pay and the Fair Labor Standards Act, the Tyson Foods case is perhaps the most significant of the three depending on how the justices rule, Hungar says.

The second case, Campbell-Ewald, deals with a defendant making a settlement offer to a named plaintiff (where they get everything). Does that then moot the case for class certification? Hungar says that can be a “cost-effective” way to make the “plaintiffs whole”—and provide them with a “reasonable settlement”—without having the costs related to a class certification fight.

The Spokeo case broadly deals with the Fair Credit Reporting Act and if someone can have standing to sue even if they did not suffer “concrete” damages.

Depending on the specifics of the Supreme Court's ruling, Spokeo could make it more difficult to bring class actions.

Looking at the larger picture, given their cost and impact, alleged abuses of class actions are a concern to businesses. “Nowadays… many class actions are not being prosecuted to seek justice, but rather to essentially shakedown a defendant—hurting businesses and damaging the American economy,” claims the U.S. Chamber of Commerce's Institute of Legal Reform.

In fact, 4.5 percent of class actions were considered “high-risk” or “bet the company” three years ago, but that amount is now at 16.4 percent, reports a study from Carlton Fields Jorden Burt.

On the other hand, consumer advocacy groups are trying to strengthen the rights of consumers in class actions. “Among other things, class actions allow consumers to hold corporations liable for widespread wrongdoing that could not successfully be challenged in individual litigation,” Leah Nicholls, a staff attorney at Public Justice, argues in a recent blog post.

Given the diversity of opinion, there could be some changes made to Rule 23 in 2018. In September, several interested parties attended a mini-conference coordinated by the Rule 23 Subcommittee of the Judicial Conference Advisory Committee on Civil Rules—with topics including such areas as settlements and certifications.

Meanwhile, class actions are not the only area of concern to business regarding what is pending at the Supreme Court.

“The Supreme Court has been paying a lot of attention to patent law in recent years,” Hungar said.

Beyond current cases, when reviewing some recent patent decisions, it appears individual Supreme Court justices sometimes questioned approaches used by the U.S. Court of Appeals for the Federal Circuit. Judges at the Federal Circuit have at times adopted rules that are “patent-specific,” Hungar confirms. They are different from those found in other contexts, he explains.

On one level, Hungar says that is “part of the normal back and forth between the Supreme Court and the lower courts.” But the relationship between the Supreme Court and the Federal Circuit is different in that it was marked by a lengthy period of where the Supreme Court did not review many patent cases and basically let the Federal Circuit develop patent law on its own.

More recently, the Supreme Court has seen some things “it thought didn't make a lot of sense,” Hungar said.

Looking ahead, business-related issues will continue to be addressed by the Supreme Court.

“We’ll continue to see arbitration, class action and patent cases,” Hungar predicts. There could be some attention paid to issues related to overly aggressive interpretation of criminal law as it relates to white collar crime, Hungar adds.

“The Court has signaled that it is willing to reconsider the deference owed to certain agency determinations,” Garre said. “That would be an issue of enormous importance to businesses in litigating against government enforcement agencies.”

There is also the more fundamental question of when the history of the current Supreme Court is written—how it will be viewed as far as business concerns?

“The current Court is widely regarded as being relatively friendly to business. But the record is more mixed when you dig down to individual cases,” Garre said.

As far as comparisons of this current Supreme Court to the Court when William Rehnquist was chief justice (Garre was one of his clerks), Garre says, “Perhaps the biggest change since the Rehnquist Court is the number of patent cases the Court has agreed to hear in the past few years and its increasing scrutiny of the Federal Circuit.”

Pincus adds that a number of the justices on the current Supreme Court are “very focused on” the “real world consequences” of their decisions, and seek a “sensible rule” that can be applied in the “real world.” He adds the Supreme Court “takes on each case as it comes.”

On a practical level, he advises attorneys to follow what issues/cases are coming before the Supreme Court and watch for what may be discussed. It could impact current cases in a company's litigation portfolio. Sometimes, attorneys may want to wait until a relevant Supreme Court ruling is released, because it could benefit them in their own cases, Pincus explains. That way they can be sure they are “making the right argument,” Pincus said.

Overall, when it comes to the basic question of whether to appeal a case to the Supreme Court, Garre urges general counsel to proceed with caution.

“Be careful what you ask for,” Garre said. “While there is often a natural tendency to want to press forward with a case, it is important to consider whether the case really is a good vehicle to present to the Court and the possible outcomes if the Court were to grant review. Sometimes, the best course may be to keep your powder dry.”

Reprinted with permission from the December 1, 2015 edition of InsideCounsel © 2015 ALM Properties, Inc. All rights reserved. Further duplication without permission is prohibited.

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