U.S. Supreme Court Limits Class Action Lawsuits

Most of us have received a notice in the mail telling us that we are a member of a class action lawsuit.  Many of us wonder what it is and what it means.  A class action lawsuit is a claim in which a large group of people collectively bring a lawsuit.  The thought behind this action is it gives an individual the right to institute a law suit against the largest of corporations.  One of the requirements of instituting a class action lawsuit is that there must be commonality of issues.

The U.S. Supreme Court decided two landmark cases this term that severely restrict the successful institution of class action lawsuits.

In AT&T v. Concepcion, the Concepcions entered into a cellular telephone contract with AT&T that provided for the arbitration of all disputes but did not permit class-wide arbitration.  After the Concepcions were charged sales tax on the retail value of the phones, which were to be “free” under their contract, they sued AT&T in Federal Court in California.  Their suit was consolidated into a class action case alleging false advertising and fraud by charging sales tax on “free” phones.  The court relied on a California Supreme Court case, which found the arbitration provision unconscionable.   The Appellate Court agreed and thereafter, the U.S. Supreme Court agreed to hear the appeal.

The Supreme Court ruled, in a 5-4 vote, that the federal arbitration law overrides state consumer protection laws.  Justice Scalia wrote for the majority stating that the California law stands as an obstacle to the accomplishment of the purposes and objectives of the Federal Arbitration Act which bars States from discriminating against arbitration.

The effect of this decision holds that consumers will likely be bound by an arbitration clause in a contract even when a state law permits a class action lawsuit arising from the transaction.

The second class action decision, which dealt another blow to class action claimants, was the case of Wal-Mart Stores, Inc. v. Dukes, et al.  This case involved the largest employee class action lawsuit in U.S. history.  In this case, the Plaintiff was trying to include as many as 1.5 million female employees in a sexual discrimination case.  The claim was that local managers exercised their discretion over pay and promotions disproportionately in favor of men, which resulted in the filing of this lawsuit.

The lower court certified the class action and the Ninth Circuit affirmed the lower court’s decision that the Plaintiffs met the requirement that the class had common questions of law or fact.  In other words, the lower Courts held that the Plaintiffs’ claims had a common contention of such a nature that it was capable of a class-wide resolution, which meant that a single judicial determination would resolve an issue that is central to the validity of all of the claims.

The U.S. Supreme Court, in another 5-4 vote, ruled that the case could not proceed in its current form as a class action case because, as Justice Scalia wrote for the majority, without some glue holding the alleged reasons for all those decisions together, it will be impossible to say that examination of all class members’ claims will produce a common answer to the crucial discrimination question.  In other words, the Court held that the class members did not possess the required commonality.

Justice Ginsburg, writing for the minority, stated that the Court’s holding “disqualifies the class at the starting gate” as it puts too much of a burden on Plaintiffs to show how their claims are sufficiently similar to obtain class action status. Additionally she stated, "the dissimilarities approach leads the Court to train its attention on what distinguishes indiviual class members, rather than on what unites them."

These two historic decisions make class action litigation a much more difficult undertaking and severely limit the rights of consumers and individuals in seeking redress from large corporations.

Richard P. Hastings is a Connecticut personal injury lawyer at Hastings, Cohan & Walsh, LLP, with offices throughout the state.  A graduate of Fordham Law School, he has been named a Connecticut Super Lawyer and is the author of the books: "The Crash Course on Child Injury Claims"; "The Crash Course on Personal Injury Claims in Connecticut" and "The Crash Course on Motorcycle Accidents."  He can be reached at 1(888)CTLAW-00 or by visiting www.hcwlaw.com.