Consumer Law & Policy Blog

Will the Supreme Court Take Up Due Process Limits on Consumer Fraud Class Actions?

by Deepak Gupta

We'll probably learn the answer tomorrow morning, at 10:00 am, when the Court issues its order list from the March 18 conference.  I think there's a good chance that the Court will decide to grant Philip Morris USA v. Jackson, a major tobacco case, known in the Louisiana courts below as Scott v. Philip Morris. (The electronic docket is here.) 

This is a big one. The tobacco companies' petition -- signed by a formidable trio of Alan Untereiner, Paul Clement and Miguel Estrada -- presents the question whether the Due Process Clause "prevents states from employing the class-action device to eliminate fundamental substantive and procedural protections that would otherwise apply to the adjudication of class members' individual claims."  Specifically, the case is about whether litigating a class action despite individual reliance issues can violate due process. Reliance is a hotly contested issue in consumer fraud class actions, though it's not usually framed in constitutional terms.

There's good reason to think that the Justices will be interested in this petition. Apart from the Court's intense interest in all things class action this term (see, e.g., Wal-Mart v. Dukes, AT&T v. Concepcion, Smith v. Bayer), there's the fact that Justice Scalia, back in September, issued a must-read in-chambers opinion granting Philip Morris's request for a stay. Not only did his opinion predict that it was "reasonably probable" that four Justices would vote to grant cert, he also told the petitioners' lawyers which issue to argue in their petition:

Letter to the Times on Consumer Class Actions

The Times recently published my letter to the editor.

Class-Action Lawsuits

To the Editor:

Re "The Arbitration War" (editorial, Nov. 27):

The legal issues before the Supreme Court in AT&T v. Concepcion may seem complex, but what's really at stake is the ability of people to band together and challenge fraud, discrimination and other wrongful practices.

AT&T wants the court to allow corporations to ban class actions through their contracts with consumers and employees. As your editorial correctly explains, AT&T is asking the court to second-guess state contract law, which protects the state's residents from such overreaching.

Although not without abuses, class actions have become an essential tool for resolving the common legal grievances of large groups of people. Brown v. Board of Education was a class action. The fate of class actions should be decided by our elected representatives, not by private legislation tucked into the fine print of take-it-or-leave-it contracts.

Deepak Gupta

Washington, Nov. 29, 2010

The writer, a lawyer with the advocacy group Public Citizen, recently argued on behalf of the consumers before the Supreme Court in AT&T v. Concepcion.

Supreme Court Grants Cert in Major Class-Action Case, Rewrites Question

by Deepak Gupta

This morning, the Supreme Court granted certiorari in a closely watched class-action case from the Ninth Circuit, Wal-Mart v. Dukes.  Although Dukes is an employment case, involving allegations of gender discrimination -- it's been called the largest class action in history -- the case is likely to have major implications for consumer class actions as well.

Dukes has already been the subject of a lot of press attention. In fact, I can't remember the last time a dispute between private parties garnered as much press at the cert stage, before the Court had even considered it.  The chatter increased even more when the Court emerged from a recent conference without granting or denying the petition. As some observers had predicted, the Court took the additional time to tinker with the two questions presented in Wal-Mart's petition:

I. Whether claims for monetary relief can be certified under Federal Rule of Civil Procedure 23(b)(2)--which by its terms is limited to injunctive or corresponding declaratory relief--and, if so, under what circumstances.

II. Whether the certification order conforms to the requirements of Title VII, the Due Process Clause, the Seventh Amendment, the Rules Enabling Act, and Federal Rule of Civil Procedure 23.

The second question, to which most of Wal-Mart's petition was devoted, reflected an unusual kitchen-sink approach by Wal-Mart's lawyers. The Court did not grant certiorari on that unmanageably broad question. Instead, the Justices agreed to hear the first question and posed a second question of their own: "Whether the class certification ordered under Rule 23(b)(2) was consistent with Rule 23(a)."

This morning's grant, together with Concepcion and Shady Grove, may reflect a growing interest among the Justices in class actions--a subject with which the Court has previously had relatively little involvement.  Lyle Denniston has more at SCOTUSblog, here.

Post-Argument Coverage of AT&T v. Concepcion

by Deepak Gupta

Because I don't have a crystal ball, I'll leave to others the task of making predictions based on yesterday's oral arguments before the U.S. Supreme Court in AT&T v. Concepcion.  (By the way, here's some of the latest scholarship on such prediction-making.)

If you want to play along at home, you can come up with your own prognostication based on the transcript, one of the excellent summaries by Professors Lawrence Cunningham or Jean Sternlight, or some of the press coverage:

• "Overall," according to SCOTUSblog, "post-argument predictions about the case’s outcome tilt toward a victory by respondents Vincent and Liza Concepcion, but not everyone was willing to make predictions based on the argument." 

• "Recent Supreme Court decisions have generally favored the enforcement of arbitration agreements and have been wary of aspects of class-action litigations. But it was hardly clear at Tuesday’s arguments that those two trends would continue in the latest case." Adam Liptak, Supreme Court Weighs Class-Action Suits, New York Times

• "A victory for consumers and class action litigators seemed possible on Tuesday as the Supreme Court heard arguments in a high-stakes dispute over clauses that block class actions as a way of resolving contract disputes." Tony Mauro, Class actions on the ropes? Not likely, National Law Journal

• "My sense tells me that the anti-consumer, anti-class action bias will win this one. Not so much on the merits, but because of the politics." Steve Berk, AT&T v. Concepcion: Almost live from the Supreme Court,The Corporate Observer

• "[I]t doesn't look as though there are too many votes at the high court to do away with the right of consumers to band together to sue the great American manufacturers of fine print." Dahlia Lithwick, Can You Hear Them Now? The Supreme Court reads the fine print on your cell phone contract, Slate

• "Based on what was said during the argument, I predict a 8-1 or 7-2 vote for the consumers and California, with Alito dissenting and Roberts a toss up. Thomas, who never speaks at oral argument, will vote for the consumers and state on federalism grounds, as he always does in FAA cases." Lawrence Cunningham, Argument in Class Waiver Case Favors Consumers, States, Concurring Opinions

• "The Supreme Court seemed disinclined to let companies use legal fine print to block class actions, with several justices suggesting they might defer to state courts that ruled in favor of consumers." Jess Bravin, Justices Question Contracts That Block Class Actions, Wall Street Journal

• "AT&T's odds are mixed: ... Justices Clarence Thomas and Antonin Scalia are sympathetic to these cases due to their states' rights ideology. But no one will be surprised if AT&T and its big business backers prevail." Stephanie Mencimer, Consumer Protection's Citizens United, Mother Jones

• "In sum, I think Respondents have to be pleased with how the argument went.  A significant number of Justices seemed to recognize that some arbitration provisions are unconscionable, and that second-guessing lower courts’ unconscionability rulings can raise some difficult federalism and administrative issues." Jean Sternlight, ADR Prof Blog

• "While Chief Justice John Roberts and Justice Samuel Alito appeared this morning to join Mr. Pincus in trying to come up with support for preemption in this case, it appears that they may come up a few votes short (with the usual caveat that it is always a risky business to predict how the Court will rule based on oral argument)." Elizabeth Wydra, ACSblog.

For you ultrawonks out there, here's even more coverage:

• David Savage, Supreme Court weighs whether consumers' small suits can be combined, Los Angeles Times
• Robert Barnes, Justices hear case on class-action arbitration, Washington Post
• Jeremy Hobson, Is banning class action lawsuits unconstitutional?, NPR Marketplace (interviewing David Lazarus of the L.A. TImes)
• Ashby Jones, Class-Action Lawyers Breathing Easier After High Court Argument, Wall Street Journal
• Bill Mears, High court to decide dispute over taxes on 'free cell phone,' CNN
• Mark Sherman, Court hears dispute over 'free' phone, Associated Press
• Joan Biskupic, Supreme Court hears sales tax case on 'free' phone, USA Today
• Jon Hood, The End of Class Actions?, Consumer Affairs
• Greg Stohr, Consumer Arbitration case divides U.S. Supreme Court, Businessweek
• Lawyers USA, Supreme Court hears AT&T class action waiver dispute, Daily Record
• Brendan Fischer, Supreme Court Considers Corporate Right to Mandatory Arbitration, Center for Media and Democracy
• David Heath, High Court Ponders If Companies Can Force Consumers to Sign Away Right to Class-Action Suits, Center for Public Integrity
• Erika Morphy, A lot hinges on SC's ruling in $30 cellphone sales case, E-Commerce Times
• Scott Lemieux, Consumer Protection at the Supreme Court, The American Prospect
• Nan Aron, Will the Supreme Court Grant Big Business a License to Steal
• Ian Milhiser, The Supreme Court's One Thousandth Cut Against Consumers, Center for American Progress

We posted some of the pre-argument coverage here -- most notably these columns by David Lazarus in the LA Times and Prof. Brian Fitzpatrick (Vanderbilt Law) in the SF Chronicle.  An archive, including all of the briefs, is available here.

Pre-argument commentary on AT&T Mobility v. Concepcion

by Deepak Gupta

Here's a roundup of some of the latest commentary on the the Concepcion case, which I'll be arguing tomorrow before the U.S. Supreme Court: 

• Brian Fitzpatrick, Supreme Court case could end class-action suits, San Francisco Chronicle
  

• David Lazarus, Consumers' right to file class actions is in danger, Los Angeles Times

• Amanda Becker, Supreme Court case involving class actions could affect waitresses' suit against Hooters, The Washington Post
  

• Matthew Hathaway, Plenty at Stake in Class Action Case Before Supreme Court, St. Louis Post-Dispatch
  

• Alliance for Justice, AT&T v. Concepcion: Will the Supreme Court Give AT&T A License to Steal?
  

• Ed Mierzwinski, Next Up For the Supreme Court That Brought You Unlimited Corporate Campaign Cash: Do Consumers Have the Right to Band Together To Fight Corporate Crime?, Huffington Post

• Stephen C. Webster, AT&T pushes Supreme Court to demolish right to join class action lawsuits, The Raw Story

• David Horton, AT&T v. Concepcion, PrawfsBlawg

• American Constitution Society, 'The Stakes are High' in AT&T V. Concepcion, ACSblog

ACS Briefing on Concepcion

Here's the video of the American Constitution Society's panel discussion on AT&T v. Concepcion held on Tuesday at the National Press Club. If you want to hear some fireworks, skip forward to the presentation by Paul Bland (scroll down on the right). For more restrained academic commentary, listen to the presentations by Nina Pillard (providing an overview of the case) and Steve Ware (flagging what he takes to be AT&T's two key arguments, both having to do with the contours of state contract law).

Some Commentary on Concepcion

Here's a roundup of some recent commentary on AT&T v. Concepcion.  You can find more commentary, briefs, and other information on the case at this page.

• Bonnie Robin-Vergeer, at the Making Justice Real blog, discusses an amicus brief filed on behalf of a big coalition of legal aid and national consumer groups. She says that [t]he case has the potential to be a blockbuster for consumer rights. . . . . [I]f the Court accepts AT&T’s position, businesses could effectively strip consumers of their right to pursue small claims in any forum because, for small individual claims, classwide proceedings often offer the only effective means for consumers to obtain redress and to force businesses to halt illegal practices." 

• At its Text & History blog, the Constitutional Accountability Center discusses its amicus brief, focusing on federalism. “Concepcion will test whether the Court’s federalism principles are trumped by its favoritism toward corporate America,” says Doug Kendall. “Concepcion should be an easy case,” Kendall said, “because state courts are vital in protecting the rights of American consumers, and the Federal Arbitration Act specifically preserves a critical role for state law."

• In a masthead editorial in Sunday's paper, The New York Times mentioned the case as part of a broader discussion of the Roberts Court and the battle over preemption. A win for the respondents in Concepcion, the Times opines, "would be good for consumers."

• Ian Millhiser at the Center for American Progress observes that "Class-action lawsuits enable many people with small dollar losses to join together in a single suit, and they make sure that corporate America cannot continuously break the law a few dollars at a time. Yet Concepcion could allow corporations to force consumers to sign both a forced arbitration agreement and a no-class-action agreement—a step that would further erode ordinary Americans’ power to hold big-moneyed interests accountable for lawbreaking."

• At the ADR Prof Blog, Richard Reuben of Missouri Law, an expert on arbitration law, observes that "if the 9th Circuit is reversed, one may reasonably question what is left of Section 2’s savings clause. After all, all Discover Bank did was apply general unconscionability law to the class arbitration context ... If that’s preempted, then how would any application of general contract law to arbitration be able to withstand preemption?"

Amicus Briefs in AT&T v. Concepcion

by Deepak Gupta

The amicus briefs supporting our side in AT&T v. Concepcion are due today.  As they come in, we'll post them here and add them to the case webpage.  (As most readers of this blog are probably aware, the case concerns the enforceability of class-action bans in consumer and employment agreements.)

American Antitrust Institute

American Association for Justice

Constitutional Accountability Center

Lawyers' Commiteee for Civil Rights Under Law, Employee Rights Advocacy Institute for Law & Policy, National Employment Law Project, National Employment Lawyers Association, National Partnership for Women & Families, and National Women's Law Center

Legal Aid Society of D.C., AARP, Center for Responsible Lending, Center for Science in the Public Interest, Consumer Action, Consumer Federation of America, National Association of Consumer Advocates, National Consumer Law Center, National Consumers League, National Legal Aid and Defender Association, Public Good, U.S. Public Interest Research Group

Mary Grace Coneff, et al. (Named Plaintiffs in Related Case)

NAACP Legal Defense & Education Fund, Inc.

National Academy of Arbitrators

National Workrights Institute

Professors of Arbitration

Professors of Civil Procedure and Complex Litigation

Professors of Contract Law

Professors of Federal Jurisdiction

States of Illinois, Maryland, Minnesota, Montana, New Mexico, Tennessee, Vermont, and the District of Columbia

New Jersey Supreme Court Allows Mass-Marketing Fraud Class Action

Yesterday, the New Jersey Supreme Court handed down a unanimous 50-page opinion reversing the denial of certification in a mass marketing consumer fraud case.

 

The case involves a dietary supplement known as Relacore -- a pill marketed as causing stress and weight reduction.  According to its advertisting, Relacore attacks the "stress-to-belly-fat cycle."  The complaint alleges that there's no basis to believe the pill delivers any of its claimed benefits.  The trial court and intermediate appellate court both held that class certification was inappropriate because the mass marketing for Relacore took a variety of forms -- sometimes it was advertised as a weight-loss product and sometimes as a stress-reduction product -- and because there was no way of knowing which consumer relied on which claims, individual issues would necessarily predominate.

 

Public Citizen wrote an amicus brief, joined by other consumer groups.  We argued that the lower courts' decision would mean that companies that commit fraud in multiple ways would be better off than companies that make only one false claim.  We argued that pills like Relacore are what economists call "credence goods" -- you don't know anything about them until someone tells you something about them.  Nobody grabs pills off the shelf randomly, so people must have decided to buy the pills in reliance on advertising. 

 

The opinion quotes at length from our argument about "credence goods" and makes that concept central to its predominance analysis. It also relies heavily on our argument that making multiple false claims shouldn't put deceptive advertisers in a better position that those that make a single false claim:

Class-Action Bans in the Supreme Court: Respondents' Brief in AT&T v. Concepcion

by Deepak Gupta

Today we filed our merits brief for the respondents in the U.S. Supreme Court in AT&T v. Concepcion.  The question in Concepcion is whether companies can use the fine print of take-it-or-leave-it contracts to strip consumers and employees of the opportunity to bring or participate in a class action.  Companies accomplish this by embedding class-action bans in mandatory arbtiration clauses, thereby precluding classwide proceedings in any forum (court or arbitration).  Thus, the case isn't really about arbitration at all; it's about whether stronger parties can use contracts of adhesion to exempt themselves from accountability for systemic wrongdoing.

In our brief, we argue that the Federal Arbitration Act does not trump state-law rulings holding that class-action bans, where they would have the effect of exculpating the defendant from liability, are unconscionable and unenforceable.  The amicus briefs on our side are due next Wednesday, October 6.

In related news, those of you in the Washington area may be interested in attending an event hosted by the American Constitution Society on October 19 at noon, at the National Press Club, at which participants will discuss the case.  I won't be speaking, nor will my opposing counsel.  But you'll get to hear what I expect will be some spirited debate between Paul Bland, Nina Pillard, Alan Kaplinsky, and Steve Ware. Lunch will be served. 

You can read more about the Concepcion case, including all of the briefs filed so far, here.