The current Supreme Court term promises a number of decisions of interest to the business community. The court has yet to issue most of this term’s opinions, and so we preview here the cases that raise the most significant issues.
Walmart class action
In perhaps the most notable addition to its docket, the Supreme Court will review a decision certifying the largest plaintiff class in history: 1.5 million women alleging gender bias by Wal-Mart in pay and promotions. (Wal-Mart v. Dukes, No. 10-244). The decision is noteworthy not only because both the class and the potential monetary liability are large, but because the appeals court allowed the class action to proceed under the federal rule governing class actions seeking injunctive relief, even though the plaintiffs are also seeking billions of dollars in monetary relief. The Ninth Circuit rejected the “incidental damages” test that other courts have adopted to prevent such a result. Under that test, an injunctive class action that also seeks damages can be certified only if the monetary relief would be automatic, or computable by objective standards without additional hearings, if liability for injunctive relief were found.
If the Supreme Court agrees with the Ninth Circuit, the decision could dramatically increase the exposure of businesses in the United States to large class actions based on a broad variety of legal claims, under a legal rule with fewer procedural protections than are provided by the rule that generally applies to large class actions seeking money damages. Argument is scheduled for March 29, 2011, with a decision likely in June 2011.
Federal Arbitration Act
As we noted in our last report, the interplay between arbitration and class-action litigation has been an important recent issue on the court’s docket. In November, the court heard argument as to whether the Federal Arbitration Act (“FAA”) preempts a state law rule that conditions the enforceability of arbitration provisions on the availability of certain procedural mechanisms such as classwide arbitration. (AT&T Mobility, LLC v. Concepcion, No. 09-893). The Ninth Circuit held that California law as to “unconscionability” prohibited a wireless provider from relying on a provision in its service agreement that disputes must be resolved in individual arbitrations. At oral argument, the justices struggled with weighing the right of states to determine which contracts are “unconscionable” against the strong federal endorsement of arbitration manifested in the FAA. Thus, while the court last year protected companies from class-wide arbitrations imposed on them without their consent, the ability of companies to protect themselves contractually from judicial class actions is in doubt.
Greenhouse gas emissions caps
The court also agreed in December to decide whether states and private parties can bring litigation seeking judicially created caps on greenhouse gas emissions. (American Electric Power Co. v. Connecticut, No. 10-174). The court will consider whether such parties have legal standing to seek emissions caps on utilities in an effort to address global warming, and whether such an action can be implied under federal common law and is the proper province of the courts. The court will review a ruling by the Second Circuit that allowed eight states, a city and three nonprofit land trusts to seek to hold utilities liable for creating a “public nuisance” in the form of climate change. Similar suits are pending against automobile manufacturers, chemical producers and oil-and-gas producers. A decision in favor of the plaintiffs could be of particular significance in encouraging plaintiffs to seek judicial regulation in areas that the more conservative new Congress, or an EPA cautious about regulating absent express statutory authority, may choose not to regulate. The argument will likely be set for the April session, and the decision would then issue towards the end of June.
State courts and “stream of commerce” theory
The court heard two cases in January determining whether U.S. state courts have jurisdiction over non-U.S. companies that simply place products in the “stream of commerce” if it is reasonably foreseeable that they will wind up in the state, for example, by selling them to an appointed exclusive distributor that resells them in the state. (J. McIntyre Machinery v. Nicastro, No. 09-1343; Goodyear Luxembourg Tires, S.A. v. Brown, No. 10-76). The Supreme Court has never squarely decided whether the “stream of commerce” theory can support personal jurisdiction, though a prior decision suggests that the plaintiff must identify additional conduct showing that the defendant purposefully directed its activities at the forum state. Non-U.S. companies have a significant interest in this question because product-liability suits can be much more expensive in the United States than overseas.
Health care law challenges
Finally, while it is widely expected that constitutional challenges to the 2010 federal health care legislation will ultimately make their way to the Supreme Court, that will likely be in the October 2011 – June 2012 term. The court will likely want the challenges to percolate through the courts of appeals rather than to step in to hear them sooner, and appellate decisions on the issue will not begin to issue until late spring or summer.
Richard Thornburgh was U.S. Attorney General from 1988 to 1991. He and co-authors David Fine and John Longstreth are lawyers at K&L Gates LLP.