As we blogged earlier this week ( here), the death of U.S. Supreme Court Justice Antonin Scalia on February 13 has sent shockwaves throughout the halls of power in Washington, D.C. The balance within the U.S. Supreme Court between those Justices considered ideologically "conservative" and those considered "liberal" is up for grabs in the middle of the term of a Supreme Court considering employment-related class actions and other major cases that will directly impact how American employers will operate for years if not decades to come.
The Scalia Legacy
Appointed by President Ronald Reagan in 1986, Justice Scalia distinguished himself as a "conservative" jurist by promoting an interpretive philosophy of looking to the original intent behind relevant provisions of the U.S. Constitution, or "originalism." Scalia also employed a textualist approach to his legal analyses, according to laws their plain meaning and refusing the pleas of what he sometimes deemed to be "social engineering" in order to render expansive, activist decisions. Justice Scalia often led a slim majority of the Supreme Court who insisted on adherence of Constitutional principles and the narrow construction of laws.
It was little wonder then that Justice Scalia served as the intellect behind and author of numerous landmark opinions that curbed the excesses of the plaintiffs' class action bar. Among the most influential opinions he authored is Wal-Mart v. Dukes, 131 S.Ct. 2541 (2011), here, which we followed closely for our readers and reported here, here, here, here, here, here, here, and here.
In Wal-Mart, plaintiffs sought to represent a class of 1.5 million female employees employed at one or more of the company's 3,400 stores across the country, in a sweeping class action for sex discrimination in pay. Plaintiffs contended that Wal-Mart's corporate culture embodied sexual stereotypes that, when coupled with corporate policies that give local managers unfettered discretion in making personnel decisions, resulted in gender stereotyping and unlawful discrimination against a nationwide class of women in their compensation. The plaintiffs sought and obtained class certification at the district court level based on a combination of anecdotal evidence and the statistical analysis of their retained expert. The Ninth Circuit affirmed.
Justice Scalia's opinion on behalf of a 5 – 4 majority of the Supreme Court scrutinized plaintiffs' showing under Rule 23. He reasoned that: "Rule 23 does not set forth a mere pleading standard. A party seeking class certification must affirmatively demonstrate his compliance with the Rule – that is, he must be prepared to prove that there are in fact sufficiently numerous parties, common questions of law or fact., etc." Id. at 2551. The Supreme Court determined that plaintiffs had failed to establish common issues sufficient to warrant class treatment. Specifically, the Supreme Court found that corporate policies affording local supervisors discretion in pay decisions did not establish the commonality necessary to maintain a class action. The Supreme Court also rejected plaintiffs' statistical analysis and expert testimony as failing to establish necessary linkage between alleged pay disparities and their proposition that Wal-Mart operated under a general policy of discrimination. The Supreme Court also found that individualized back pay claims predominated over class claims for "injunctive relief," and plaintiffs could not utilize the class action model to conduct a "Trial by Formula" by which back pay damages would be based on a statistical sample from a number of class members. Id. at 2546. Wal-Mart derailed the emerging practice in the plaintiffs' bar of bringing massive nationwide class actions for gender discrimination in pay based on scant evidence of individual claims bolstered by statistical sampling.
Also of significance to employers were the opinions penned by Justice Scalia for the 5 – 4 majorities of the Supreme Court in ATT Mobility LLC v Concepcion, 131 S.Ct. 1740 (2011), here, and American Express Co. v. Italian Colors Restaurant, et al., 133 S.Ct. 2304 (2013), here. In ATT Mobility, the Supreme Court ruled that that the Federal Arbitration Act, enacted by Congress to encourage the use of arbitration, preempts state laws prohibiting contracts from disallowing class-wide arbitration. We reported our analysis of ATT Mobility to our readers here. In the subsequent but largely viewed as companion AmEx case, the Supreme Court held 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 any potential recovery. We reported our analysis of American Express to our readers here.
Although neither ATT Mobility nor AmEx involve employment arbitration agreements, these opinions propelled employers' reliance on the FAA as grounds for courts to enforce employment arbitration agreements, including those with express class waivers. Justice Scalia's reasoning in ATT Mobility became an immediate roadblock to the efforts of such regulatory bodies as the National Labor Relations Board to strike down employment arbitration agreements with express class action waivers on the grounds that they violate an employee's right to collective action. D.R. Horton, Inc. v. N.L.R.B., 737 F. 3d 344, 361 (5th Cir. 2013), here, ("Neither the NLRA's statutory text nor its legislative history contains a congressional command against application of the FAA.")
Finally, the opinion written by Justice Scalia for a 5 – 4 majority of the Supreme Court in Comcast Corp. v. Behrend, 133 S. Ct. 1426 (2013), here, not unlike Wal-Mart, also has played a major role in increasing scrutiny of high volume individual damages claims brought for certification under Rule 23. After the plaintiffs obtained class certification in this antitrust class action based in part on the evidence of an expert who used a model of damages, the Third Circuit refused to address Comcast's challenges to the viability of the expert's methodology, holding that "attacks on the merits of the methodology" have "no place in the class certification inquiry." Behrend v. Comcast Corp., 655 F.3d 182, 207 (3d Cir. 2011). As we previously discussed in our analysis of the Supreme Court's opinion here, Justice Scalia's majority opinion rejected the Third Circuit's approach, finding that it "ran afoul of our precedents requiring precisely [the] inquiry [into the merits]" at class certification that the Supreme Court has "repeatedly . . . emphasized[.]" Comcast Corp., 133 at 1432-33. The Supreme Court went on to find that the regression model presented by plaintiffs' expert did not constitute evidence that damages were susceptible to measurement across the entire class. This expert evidence failed to establish that questions of law or fact common to the class predominate over individual questions, an element necessary under Rule 23(b)(3) to proceed as a class action.
During his tenure on the Supreme Court, Justice Scalia's leadership as an originalist and textualist jurist strengthened Rule 23 as a gatekeeper to class action litigation, and compelled recognition of the FAA both as preemptive of contrary state laws and as support for an employer's enforcement of arbitration agreements according to their contractual terms. In Justice Scalia's passing, the fate of several important employment cases that may have resolved favorably for employers, now is far less certain.
Major Employment Class Actions In The Balance
The trajectory of three highly-watched and consequential appeals of major employment class actions now pending before the Supreme Court may change radically in the absence of Justice Scalia's leadership:
- CRST Van Expedited, Inc. v. EEOC, No. 14-1375 — We blogged about this landmark case here. Following the Eighth Circuit's reversal of the largest fee sanction award ever levied against the EEOC – nearly $4.7 million – the Supreme Court granted certiorari and is set to hear oral argument in March in this EEOC enforcement litigation on behalf of a class of similarly situated women that was not commenced by the EEOC as a pattern-or-practice lawsuit. At issue is whether attorneys' fees are appropriate in instances where the EEOC failed to satisfy its pre-suit investigation duties under Title VII, but the employer was not victorious "on the merits." Had Justice Scalia led a majority and written the opinion, employers likely could have expected another opinion holding the EEOC accountable for failing to comply with the 1972 congressional amendment of Title VII that both authorized the EEOC to commence litigation in its own name, while constraining the EEOC's power to engage in interminable litigation by imposing on it the jurisdictional requirements of investigation, determination, and conciliation. Now, in the event this case yields a 4 – 4 vote, the decision of the Eighth Circuit will stand and courts across the country may allow the EEOC avoid accountability for improvidently hailing employers into court, so long as the EEOC does not lose "on the merits."
- Spokeo, Inc. v. Robins, No. 13-1339 — In a putative class action under the Fair Credit Reporting Act that will undoubtedly shake-up the class action landscape, the Supreme Court was presented with the following question: "Does a plaintiff who suffers no concrete harm, but who instead alleges only a statutory violation, have standing to bring a claim on behalf of himself or a class of individuals?" During the oral argument heard in November, which we blogged about here, Justice Scalia tellingly asked the most number of questions. Applying originalist and textualist principles, Justice Scalia likely would have kicked the Ninth Circuit opinion to the curb, requiring litigants to allege actual injury in order to have standing to sue under Article III of the Constitution. Without Justice Scalia's influence in a majority, the outcome of this case is much more unpredictable. A 4 – 4 split could maintain the status quo and encourage the plaintiffs' bar to commence class actions with plaintiffs who have not suffered injury.
- Tyson Foods, Inc. v. Bouaphakeo, No. 14-1146 — As we discussed here, at issue in this case is whether plaintiffs may certify a class under Rule 23(b)(3) or a collective action under the Fair Labor Standards Act upon proof of "Trial By Formula" — that is, the statistical technique that presumes all class members suffered damages identical to the composite or "average plaintiff" or "average class member." Wal-Mart suggests that the predominance of individualized inquiries that would prohibit class certification under Rule 23(b)(3) also prohibits averaging and aggregation. Tyson Foods also presents the issue of whether a class may be certified under Rule 23(b)(3) or a collective certified under the FLSA when the class contains hundreds of members who were not injured and have no right to damages. While Justice Scalia's originalist and textualist thinking likely would prohibit the Tyson Foods class action from proceeding, whether his vote would have carried a majority of justices in this instance, however, is not certain. Oral argument was held in this case in November of 2015.
We will continue to monitor and report on developments in these and other pending cases of importance to our readers.
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