Class actions in the United States – recent developments

22 August 2016
If​ News 5/2016 Liability. The US legal system and levels of awarded damages are and have for a long time been fascinating subjects for people all around the world. For the general public the system is often viewed in the light of numerous movies and TV dramas and when compared to a Nordic trial, people sometimes get disappointed when they crosscheck our court systems. Corporations who risk being targets for these kinds of dramatic scenarios may not be that fascinated by the US way of resolving disputes and awarding damages.

​The US system has several components that differ from what we are used to in our part of the world. These include the jury system, punitive damages and contingency fees to attorneys to name a few. Another topic, which has often been associated with US lawsuits is the use of class actions. Class actions are cases where several parties who have suffered more or less the same kind of loss or injury under the same circumstances form a group (a ‘class’) on the plaintiff side and file a claim against a defendant that most commonly is a corporation.

The benefit from this is that the plaintiff side can use common resources and thus become a stronger party than if they had separate claims against the defendant. Class actions are very attractive to attorneys who seek to be awarded 30-40% of awarded damages on contingency fees if successful. There are numerous examples of attorneys actively seeking and forming class actions.

First the court must accept a class

The main premise for filing a class actions claim that the court will accept is whether the parties on the plaintiff side can actually be considered a class – they need to have enough in common for the case to be applied to them all. This is such an important component of the class action system that the Supreme Court of the United States has on several occasions had to come to a verdict on this single question alone.

In 2011 the Supreme Court (Wall-Mart Stores v. Dukes) had to decide whether a large group of women (former and current employees) could form a class in a case of gender discrimination pertaining to pay and promotion against the employer Wall-Mart Stores. The Supreme Court came to the conclusion that there was too much variability in the individual circumstances; it was not possible to handle the case as a class action.

Another similar verdict came in Comcast Corp. v. Behrend in 2013 where the Supreme Court had to decide whether a group of consumers who claimed that Comcast had obtained a monopoly on cable market could constitute a class. The court found that because the plaintiff’s method of measuring and quantifying the damages was not just and reasonable enough the court could not accept the group of plaintiffs as a class.

Especially the Wall-Mart Stores v. Dukes has been criticized for being too pro-business and for making it very difficult to certify class actions. It should be noted that this was a 5-4 verdict, other cases about certifying class actions have also been far from unanimous. One of the judges who consistently ruled against certifying class actions was Justice Antonin Scalia, who died in February 2016. Speculations have since been going on whether this has an impact on future rulings. With only nine judges in the Supreme Court every single vote counts, especially when unanimity cannot be reached.

Are class actions on the rise?

In a recent verdict from March 2016 the Supreme Court came to what is considered to be a far more pro-consumer conclusion concerning class actions and the question whether to certify a number of plaintiffs as a class. In Tyson Foods v. Bouaphakeo more than 3,000 employees of a Tyson Foods food processing plant claimed that their employer had not allowed them to use work time nor allowed any overtime pay for putting on and off necessary protective equipment before and after their shifts.

Instead of measuring each individual employee’s donning and doffing time the plaintiffs’ attorneys used statistical experts to estimate how much unpaid time had been spent on this.

Tyson Foods pointed at former verdicts and argued that this method could not be considered proper since it could not establish the same loss and in the same way for each employee. The court however disagreed with Tyson Foods and instead ruled that it is acceptable to use this kind of statistical estimates in multi-party cases. It is often the only way to collect and present relevant data – otherwise it would be very difficult for plaintiffs.

It is now considered to be much more likely to see similar calculations based on statistical data for establishing the loss or damage to individuals in a group and therefore allowing such cases as class actions. It will be very interesting to follow the development to see whether the Supreme Court now has taken steps in a more consumer-friendly direction. If that is the case it might have an impact for all corporations present on the US market.

The impact of the presidential elections

As in the Tyson Foods case and other recent cases the Supreme Court now only consists of eight judges because of the death of Justice Scalia. President Obama has nominated Merrick Garland to fill the vacancy. According to experts it is not known which position he will take in the future regarding certifying class actions if appointed.

Since also the Senate needs to approve it is likely that an appointment will not be made until after a new president is elected in November. Who Hilary Clinton or Donald Trump will endorse is not yet known, however Donald Trump has released a list of eleven potential candidates. It is therefore too early to speculate what position the next Supreme Court judge may have on questions related to class actions, but it can have an important impact on future rulings and it may make the presidential election campaign even more interesting to follow!

Håkan Larsson​