Left-leaning lawprofs like Erwin Chemerinsky and Arthur Miller regularly flog the idea that decisions they disagree with — such as Twombly and Iqbal on pleading, AT&T v. Concepcion and AmEx v. Italian Colors on arbitration, and Vance v. Ball State and Ledbetter v. Goodyear Tire on workplace liability — show the Supreme Court to be biased in favor of business defendants. Richard Epstein rebuts.
Much commentary regards last week’s decision on American Express v. Italian Colors Restaurant (see earlier) as a virtual sentence of doom for class actions, which will henceforth be barred by contract in favor of individualized arbitration. From the plaintiff’s side, Paul Bland of Trial Lawyers for Public Justice calls the decision “catastrophic for the antitrust laws… an unmitigated disaster” while from the defense side, Michael Fox expects employers to use the ruling to turn back one of the current litigation trends most menacing to them, class actions over wage-hour infractions under the Fair Labor Standards Act (FLSA) (“a large number of employers who have not implemented arbitration plans will be re-thinking the decision”). Others expect a backlash against the decision; for example, the new Consumer Financial Protection Bureau may ban or greatly restrict arbitration waivers in consumer contexts (cf. Daniel Fisher‘s report) or Congress might legislate with the same intent, presumably after future Democratic Party gains in the House. More: Fed Soc Blog.
There are, however, also reasons to doubt that the decision spells utter rout for the class action bar. To begin with, these lawyers have proven resourceful in finding ways around earlier restrictions, as in the case of securities litigation reform and the Class Action Fairness Act. At Class Action Blawg, Paul Karlsgodt comments: “Concepcion hasn’t [ended class actions], so I doubt Amex III will either.”
Moreover, earlier Supreme Court decisions generally make clear that the arbitration option cannot displace substantive legal entitlements. Many, even most relevant federal statutory causes of action are barbed with incentive provisions intended to ease the assertion of meritorious claims, including attorneys’-fee entitlements, treble damages and statutory damages. The particular situation in Italian Colors, in which unrecoverable expert witness costs were expected to exceed even treble damages for the claimant, is not really typical. Our colleagues at Point of Law, especially Ted Frank, have been active in pointing out some of these considerations. [Manhattan Institute paper, plus reaction from Carter Wood and more from Michael Greve; discussion between Ted and Cardozo lawprof Myriam Gilles; more blog posts here and here]
In footnote 4, the majority credits AmEx’s concession that “other forms of cost sharing . . . could provide effective vindication.” As Professor [Myriam] Gilles noted, AmEx expressly conceded this point in footnote 8 of its reply brief on the merits. In essence, Justice Kagan’s dissent refuses to credit AmEx’s concession — thus disagreeing with the majority about the facts of this specific case.
As Cook points out, pattern and coordinated litigation filed on behalf of numerous small claimants against financial institutions, but not using the class action device, has been quite successful in fields ranging from the Fair Debt Collection Practices Act to FACTA to the ATM notice cases. Indeed, defendants will sometimes regret the lack of a class action mechanism since it may be more difficult to obtain closure and settlement of a body of liability without it.
Commentators have counted out the class action bar before now. It’s always been a mistake.
Today’s Supreme Court decision in American Express Co. v. Italian Colors Restaurant is a victory for freedom of contract, a boost for arbitration as an alternative to litigation, and a step forward in the Court’s ongoing recognition that the class action is just one legal vehicle among many, not some priority express train to be favored over other traffic. The restaurant had agreed with American Express to settle disputes by way of arbitration, and to waive any rights to have future disputes handled through class actions. When a potential antitrust claim arose, it nonetheless sought to slip out of its contractual agreement and invalidate the waiver. Split along familiar ideological lines with Justice Sotomayor not participating, the court ruled 5-3 that the Second Circuit erred in striking down the waiver as inconsistent with the Federal Arbitration Act. While the Court has previously held that arbitration agreements must be construed to provide “effective vindication” of statutory claims, the class action format — which did not even exist for these purposes until decades after the Sherman Act’s passage — was not so crucial to the restaurant’s legal rights as to be unwaivable.
A dissent by Justice Kagan — both longer and more spirited than Justice Scalia’s majority opinion — seeks to extend the Court’s earlier rulings that arbitration clauses cannot thwart “effective vindication” of statutory rights by such devices as requiring overly high fees for entry into arbitration. Interestingly, the dissent outdoes the majority in claiming to favor the true spirit of arbitration as an alternative to litigation; in that respect, at least, it departs from the tone of much commentary from the Legal Left which treats arbitration as an evil corporate plot to deprive the world of the benefits of zealous litigation. It also proposes two paths of argument that the majority declines to pursue: 1) that skepticism toward contractual waivers might be especially appropriate in antitrust contexts because the alleged monopolist under scrutiny may use its putative market power to put across unfair contract terms; 2) that confidentiality clauses in Amex’s contract (not addressed by the majority) might fail the “effective vindication” test by preventing Amex customers from joining forces to collaborate on expert reports to use on their behalf in individualized assertion of their disputes.
For years, organized trial lawyers have been publicly campaigning against arbitration — which keeps money out of their pockets by diverting disputes from knock-down litigation — claiming that it is unfair and one-sided. But many studies support the view that disputants’ overall satisfaction in arbitration compares very favorably to that in litigation, in part because it is a speedier and less acrimonious process. And consumers and small businesses by millions sign away their class action rights not because they are all hoodwinked or coerced, but because at some level they have rational grounds to recognize that those class-action rights are very unlikely to pay off for them in durable future benefits (as opposed to benefits for participants in the litigation industry). Congress will be asked to overturn Supreme Court decisions like Amex v. Italian Colors and the earlier, relatedAT&T Mobility v. Concepcion. It should resist. (expanded from an earlier post at Cato at Liberty; and welcome SCOTUSblog readers.)
The retention campaign for liberal Florida Supreme Court Justices Fred Lewis, Barbara Pariente, and Peggy Quince is “outspending the opposition 20-to-1,” fueled by large donations from plaintiff’s injury law firms that practice before the court, such as the law firms of Wayne Hogan, Tom Edwards, and Fred Levin, Searcy Denney Scarola Barnhart & Shipley, Grossman Roth, and Pajcic & Pajcic — not to mention defense lawyers. [Orlando Sentinel]
P.S. And from which side do you think the left-leaning Justice at Stake detects a threat to judicial independence? Right. You guessed it.See alsoABA Journal [proposals to cut state bar out of judicial nomination process classed among "legislative attacks" on independent judiciary. Meanwhile, no quantity of vitriolic and demagogic attacks on jurists over such decisions as Citizens United or Concepcion ever seem to get classed as menacing judicial independence].
SCOTUSblog, the eminent Supreme-Court-watching site, has been running a symposium on the future of class actions after such decisions as Wal-Mart v. Dukes, AT&T Mobility v. Concepcion, and Smith v. Bayer. Contributors include many names familiar from our columns, including Ted Frank, Andrew Trask, Russell Jackson, and Paul Karlsgodt.
And a reminder to those of you who can make it to the Washington, D.C. area next Thursday: Cato’s annual Constitution Day will feature three outstanding panels reviewing the work of the high court in the past term, including a panel moderated by me and featuring Roger Pilon (Cato) on pre-emption, Andrew Trask (McGuire Woods) on Wal-Mart, and Jonathan Adler (Case Western, Volokh Conspiracy) on climate change litigation. You can register here.
“Lawyer Sues for Humiliation and Lost Business Due to Misspelled Yellowbook Ad” [ABA Journal, South Dakota]
Argument today in important Supreme Court case, AT&T Mobility v. Concepcion: will courts respect freedom of contract in consumer arbitration context, or yield Litigation Lobby the monopoly it seeks over dispute resolution? [Ted at PoL]
HUD “defers to Constitutional considerations” and dismisses complaint against woman who’d posted note at church seeking Christian roommate [Fox News, earlier; Oct. 28 statement from Michigan Department of Civil Rights]
Judge denies class action status in Pelman obesity suit against McDonald’s [Bloomberg, earlier]
“Campers mauled by bear at Lake Louise lose lawsuit against Parks Canada” [Calgary Herald]
The Center for Class Action Fairness filed an amicus brief yesterday on behalf of consumers in the Supreme Court case of AT&T Mobility v. Concepcion; Public Citizen brought a suit successfully striking an arbitration provision in a cell-phone contract as “unconscionable” because it did not provide for bringing class actions—even though consumers as a whole would be better off with the generous arbitration provision than with opportunity for the class action. Of course, then trial lawyers lose out. More at Point of Law; and Public Citizen’s page on the case has other briefs and links to (generally pro-trial-lawyer) blog commentary.
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