How Will The Post-Scalia Supreme Court Deal With Class Actions?

By Carolyn Shapiro, ISCOTUS Co-Director. Originally posted on the ACSBlog

As the Supreme Court’s new Term begins, one of the key questions is how the Court will be affected by Justice Scalia’s absence. As interesting as the question of how the Court itself responds, however, is the question of how litigants behave – and what we can learn from that behavior. One datapoint came shortly after Justice Scalia’s death in February 2016, in a major antitrust case involving Dow Chemical. In this case, known in the lower courts as In re Urethane Antitrust Litigation, a class of purchasers of certain polyurethane chemical products sued Dow Chemical for price fixing. The plaintiffs prevailed at trial and obtained a $1.1 billion jury verdict. On appeal in the 10th Circuit, Dow Chemical argued, among other things, that the case was inappropriate for class adjudication and that the plaintiffs’ method of calculating damages was improper. The 10th Circuit upheld the jury verdict and Dow filed a petition for certiorari (Dow Chemical Co. v. Industrial Polymers, Inc., No. 14-1091) in March 2015.

Although Dow Chemical was an antitrust case, the issues it presented echo class-action-related issues in a wage-and-hour case that the Court heard last term, Tyson Foods, Inc. v. Bouaphakeo. In both cases, the defendant challenged the use of averages or representative proof of damages and argued that differences between the damages different class members may be entitled to rendered class (or collective) actions inappropriate. In Tyson Foods, for example, the defendant claimed that it was improper for the court to certify a class or collective action where the plaintiffs calculated damages by extrapolating from the time it took for certain employees to perform the tasks (donning and doffing protective and sanitary gear) for which they had not been paid overtime. In Dow Chemical, the class relied on a damages expert who looked at prices paid by some class members and extrapolated to classwide damages and Dow Chemical argued that differences between damages actually suffered by individual class members rendered class certification improper. Indeed, the Court took no action on the cert petition in Dow Chemical while Tyson Foods was pending, a sign that it considered the issues in the cases related and that the outcome of one might affect the other.

The Court in recent years has been hostile to class action lawsuits, whether reading Rule 23 narrowly, as in Wal-Mart v. Dukes (2011) and Comcast v. Behrend (2012) or reading the Federal Arbitration Act expansively to preclude class adjudication, as in AT&T Mobility v. Concepcion (2011) and American Express Co. v. Italian Colors Restaurant (2013). All four of those cases had majority opinions authored by Justice Scalia and all four of them were decided with only five justices in the majority. (Italian Colors had only three justices in dissent. Justice Sotomayor was recused. The other three cases were 5-4 decisions.) Clearly then, Justice Scalia’s death could have a significant impact on future decisions related to the viability of class actions.

The Court heard argument in Tyson Foods in November 2015, several months before Justice Scalia’s death. Even then, some courtwatchers thought that there were not five votes to support the employer’s claim, but some suggested that the Court might limit its holding to the application of a particular 1946 precedent to wage-and-hour cases. Dow Chemicalat least one such courtwatcher suggested, would allow the Court to more cleanly reach Rule 23 certification issues.

Then Justice Scalia died. Even before that, there had apparently been some settlement discussion in Dow Chemical, but that discussion had not come to fruition. But only two weeks after Justice Scalia’s death – and before Tyson Foods was decided (6-2 in favor of the plaintiffs and with an emphasis on the 1946 precedent) – Dow Chemical settled for $835 million. Cases settle all the time, of course, but the astonishing part about this settlement was that Dow Chemical announced that they settled because of Justice Scalia’s death. Specifically, according to a Bloomberg report, the company explained: “Growing political uncertainties due to recent events with the Supreme Court and increased likelihood for unfavorable outcomes for business involved in class-action suits have changed Dow’s risk assessment of the situation.”

I agree with that assessment, although unlike Dow Chemical, I think it is a good thing. Class action lawsuits are crucial to the ability of consumers, employees and other groups of people with relatively small individual claims, to recover. The quartet of majority opinions drafted by Scalia and mentioned above have done real harm and a ruling in favor of Dow Chemical here would have made it that much more difficult to obtain class certification in cases – of which there are many – where class members may be entitled to different amounts of damages. Without Justice Scalia, a 4-4 affirmance seems the best result Dow Chemical could hope for. (I would argue that the logic of Tyson Foods suggests that a 5-3 or 6-2 victory for the plaintiffs might have been possible, but no one had the benefit of the decision in Tyson Foods at the time of settlement.)

Obviously, the long term trajectory of the Court’s jurisprudence in this and many other areas depends on the results of the election. In the short term, however, we may know soon whether Dow Chemical bet right. Later this Term, the Court is slated to hear argument in Microsoft Corp. v. Baker, a case involving the ability of plaintiffs to appeal the denial of class certification by dismissing their individual claims with prejudice. Allowing an appeal under those circumstances might keep alive class actions in situations where pursuing the individual claims and appealing the class certification denial after final judgment is financially impossible. Oral argument in Microsoft and of course the decision itself, may provide a clue as to whether the Court’s hostility to class actions will survive Justice Scalia’s death.

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