Justia U.S. Supreme Court Opinion Summaries

Articles Posted in Class Action
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Tyson employees working in the kill, cut, and retrim departments of an Iowa pork processing plant are required them to wear protective gear. The exact composition of the gear depends on the tasks a worker performs on a given day. Tyson compensated some, but not all, employees for donning and doffing, and did not record the time each employee spent on those activities. Employees sued under the Fair Labor Standards Act (FLSA) and an Iowa wage law. They sought certification of their state claims as a class action under FRCP 23 and of their FLSA claims as a “collective action,” 29 U.S.C. 216. The court concluded that common questions, such as whether donning and doffing were compensable, were susceptible to classwide resolution even if not all of the workers wore the same gear. To show that they each worked more than 40 hours a week, inclusive of time spent donning and doffing, the employees primarily relied on a study performed by an industrial relations expert, Dr. Mericle. He conducted videotaped observations analyzing how long various donning and doffing activities took, averaged the time, and produced an estimate of 18 minutes a day for the cut and retrim departments and 21.25 minutes for the kill department. These estimates were added to the timesheets of each employee. The jury awarded about $2.9 million. The Eighth Circuit and Supreme Court affirmed. The most significant question common to the class is whether donning and doffing is compensable under FLSA. Because a representative sample may be the only feasible way to establish liability, it cannot be deemed improper merely because the claim was brought on behalf of a class. Each class member could have relied on the Mericle sample to establish liability had each brought an individual action. View "Tyson Foods, Inc. v. Bouaphakeo" on Justia Law

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The Navy contracted with Campbell to develop a recruiting campaign that included text messages to young adults who had “opted in” to receipt of solicitations on topics that included Navy service. Campbell’s subcontractor generated a list of cellular phone numbers for consenting 18- to 24-year-olds and transmitted the Navy’s message to more than 100,000 recipients, including Gomez, age 40, who claims that he did not "opt in" and was not in the targeted age group. Gomez filed a class action under the Telephone Consumer Protection Act (TCPA), 47 U.S.C. 227(b)(1)(A)(iii), which prohibits “using any automatic dialing system” to send text messages to cellular telephones, absent prior express consent, and seeking treble statutory damages for a willful violation. Before the deadline for a motion for class certification, Campbell proposed to settle Gomez’s individual claim and filed an FRCP 68 offer of judgment, which Gomez did not accept. The district court granted Campbell summary judgment, finding that Campbell acquired the Navy’s sovereign immunity from suit. The Ninth Circuit reversed, holding that Gomez’s case remained live but that Campbell was not entitled to derivative sovereign immunity. The Supreme Court affirmed. An unaccepted offer of judgment does not moot a case. Campbell’s settlement bid and offer of judgment, once rejected, had no continuing efficacy; the parties remained adverse. A federal contractor may be shielded from liability unless it exceeded its authority or authority was not validly conferred; the Navy authorized Campbell to send text messages only to individuals who had “opted in.” View "Campbell-Ewald v. Gomez" on Justia Law

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DIRECTV and its customers entered into service agreements that included a binding arbitration provision with a class-arbitration waiver. It specified that the entire arbitration provision was unenforceable if the “law of your state” made class-arbitration waivers unenforceable. The agreement also declared that the arbitration clause was governed by the Federal Arbitration Act, 9 U.S.C. 2. After California customers entered into the agreement, the Supreme Court held that California’s rule invalidating class-arbitration waivers was preempted by the Federal Act. When California customers sued, the trial court denied DIRECTV’s request to order the matter to arbitration. The California Court of Appeal affirmed, finding the entire arbitration provision unenforceable under the agreement because the parties were free to refer in the contract to California law as it would have been absent federal preemption. The U.S. Supreme Court reversed. The California court’s interpretation does not place arbitration contracts “on equal footing with all other contracts,” as required by the Act. California courts would not interpret contracts other than arbitration contracts the same way. The language the court used to frame the issue focused only on arbitration. View "DIRECTV, Inc. v. Imburgia" on Justia Law

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The London InterBank Offered Rate (LIBOR) is a reference point in determining interest rates for financial instruments in the U.S. and globally. The Judicial Panel on Multidistrict Litigation (JPML) established a multidistrict litigation for cases alleging that banks understated their borrowing costs, depressing LIBOR and enabling the banks to pay lower interest rates on financial instruments sold to investors. Over 60 actions were consolidated, including the Gelboim class action, which raised a single claim that banks, acting in concert, had violated federal antitrust law. The district court dismissed all antitrust claims and granted certifications under Rule 54(b), which authorizes parties with multiple-claim complaints to immediately appeal dismissal of discrete claims. The Second Circuit dismissed the Gelboim appeal because the order appealed from did not dispose of all of the claims in the consolidated action. A unanimous Supreme Court reversed. The order dismissing their case in its entirety removed Gelboim from the consolidated proceeding, triggering their right to appeal under 28 U.S.C. 1291, which gives the courts of appeals jurisdiction over appeals from “all final decisions of the district courts.” Because cases consolidated for MDL pretrial proceedings ordinarily retain their separate identities, an order disposing of one of the discrete cases in its entirety qualifies under section 1291 as an appealable final decision. The JPML’s authority to transfer civil actions for consolidated pretrial proceedings, 28 U.S.C. 1407, refers to individual “actions,” not to a monolithic multidistrict “action” and indicates Congress’ anticipation that, during pretrial proceedings, final decisions might be rendered in one or more of the consolidated actions. The Gelboim plaintiffs are no longer participants in the consolidated proceedings. View "Gelboim v. Bank of Am. Corp." on Justia Law

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A defendant seeking to remove a case from state to federal court must file a notice of removal “containing a short and plain statement of the grounds for removal,” 28 U. S. C. 1446(a). Owens filed a putative class action in Kansas state court, seeking compensation for underpaid oil and gas lease royalties. Dart removed the case, invoking the Class Action Fairness Act (CAFA), which gives federal courts jurisdiction over class actions if the amount in controversy exceeds $5 million, 28 U. S. C. 1332(d)(2). Dart’s notice of removal alleged underpayments of more than $8.2 million. Following a motion to remand, Dart submitted a detailed declaration supporting an amount in controversy higher than $11 million. The district court granted Owens’ remand motion, reading Tenth Circuit precedent to require proof of the amount in controversy in the notice itself. The Tenth Circuit denied review. The Supreme Court vacated. Notice of removal need include only a plausible allegation that the amount in controversy exceeds the jurisdictional threshold; it need not contain evidentiary submissions. By borrowing Federal Rule of Civil Procedure 8(a)’s “short and plain statement” standard, Congress intended that courts apply the same liberal rules to removal allegations as to other pleadings. The amount-in-controversy allegation of a plaintiff is accepted if made in good faith. No anti-removal presumption attends cases invoking CAFA. View "Dart Cherokee Basin Operating Co., LLC v. Owens" on Justia Law

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Investors can recover damages in a private securities fraud action only with proof that they relied on misrepresentation in deciding to buy or sell stock. The Supreme Court held, in "Basic," that the requirement could be met by invoking a presumption that the price of stock traded in an efficient market reflects all public, material information, including material misrepresentations; a defendant can rebut the presumption by showing that the alleged misrepresentation did not actually affect the stock price. EPJ filed a putative class action, alleging misrepresentations designed to inflate Halliburton’s stock price, in violation of the Securities Exchange Act of 1934 and SEC Rule 10b–5. The Supreme Court vacated denial of class certification, concluding that securities fraud plaintiffs need not prove causal connection between the alleged misrepresentations and their economic losses at the class certification stage. On remand, Halliburton argued that certification was nonetheless inappropriate because it had shown that alleged misrepresentations had not affected stock price. Without that presumption, investors would have to prove reliance on an individual basis, so that individual issues would predominate over common ones and class certification was inappropriate under FRCP 23(b)(3). The district court certified the class. The Fifth Circuit affirmed. The Supreme Court vacated and remanded, while declining to reject the Basic presumption.The Court rejected arguments that “a robust view of market efficiency” is no longer tenable in light of evidence that material, public information often is not quickly incorporated into stock prices and that investors do not invest in reliance on the integrity of market price. Congress could alter Basic’s presumption, given recent decisions construing Rule 10b–5 claims, but has not done so, although it has responded to other concerns. The Basic doctrine includes two presumptions: if a plaintiff shows that the misrepresentation was public and material and that the stock traded in a generally efficient market, there is a presumption that the misrepresentation affected price. If the plaintiff also shows that he purchased stock at market price during the relevant period, there is a presumption that he purchased in reliance on the misrepresentation. Requiring plaintiffs to prove price impact directly would take away the first presumption. Defendants, however, must have an opportunity to rebut the presumption of reliance before class certification with evidence of lack of price impact. That a misrepresentation has price impact is Basic’s fundamental premise and has everything to do with predominance. If reliance is to be shown by that presumption, the publicity and market efficiency prerequisites must be proved before certification. Because indirect evidence of price impact will be before the court at the class certification stage in any event, there is no reason to artificially limit the inquiry at that stage by excluding direct evidence of price impact. View "Halliburton Co. v. Erica P. John Fund, Inc." on Justia Law

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The Securities Litigation Uniform Standards Act of 1998, 15 U.S.C. 78bb(f)(1), forbids large securities class actions “based upon the statutory or common law of any State” in which plaintiffs allege “a misrepresentation or omission of a material fact in connection with the purchase or sale of a covered security,” and defines “covered security” to include only securities traded on a national exchange. Plaintiffs filed civil class actions under state law, contending that defendants helped Stanford and his companies perpetrate a Ponzi scheme by falsely representing that uncovered securities (certificates of deposit in Stanford Bank) were backed by covered securities. The district court dismissed, reasoning that, for purposes of the Act, the Bank’s misrepresentation that its holdings in covered securities made investments in its uncovered securities more secure provided the requisite “connection” between the state-law actions and transactions in covered securities. The Fifth Circuit reversed. The Supreme Court affirmed, holding that the Act does not preclude the state-law class action. The Court noted the Act’s basic focus on transactions in covered, not uncovered, securities, and that use of the phrase “material fact in connection with the purchase or sale” suggests a connection that matters. A connection matters where the misrepresentation makes a significant difference to someone’s decision to purchase or to sell a covered security, not an uncovered one; the “someone” making that decision must be a party other than the fraudster. The Act and the underlying Securities Exchange Act of 1934 and the Securities Act of 1933, are intended to protect investor confidence in the securities markets, not to protect persons whose connection with the statutorily defined securities is more remote than buying or selling. A broader interpretation of “connection” would interfere with state efforts to provide remedies for ordinary state-law frauds. This interpretation does not curtail the Securities and Exchange Commission’s enforcement powers under 15 U S.C. 78c(a)(10). The SEC brought successful actions against Stanford and his associates, based on the Bank’s fraudulent sales of certificates of deposit. View "Chadbourne & Parke LLP v. Troice" on Justia Law

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The Class Action Fairness Act of 2005 (CAFA) lowers diversity jurisdiction requirements in class actions and in mass actions, i.e., civil actions “in which monetary relief claims of 100 or more persons are proposed to be tried jointly on the ground that the plaintiffs’ claims involve common questions of law or fact,” 28 U.S.C. 1332(d)(11)(B)(i). Mississippi sued LCD manufacturers in state court, alleging violations of state law and seeking restitution for LCD purchases made by itself and its citizens. Following removal, the district court held that the suit qualified as a mass action, but remanded to state court on the ground that it fell within CAFA’s “general public” exception, section 1332(d)(11)(B)(ii)(III). The Fifth Circuit reversed. The Supreme Court reversed. Because Mississippi is the only named plaintiff, the suit does not constitute a mass action under CAFA. The phrase “100 or more persons” does not encompass unnamed persons who are real parties in interest to claims brought by named plaintiffs. The Court stated that it is difficult to imagine how the “claims of 100 or more” unnamed individuals could be “proposed to be tried jointly on the ground that the...claims” of some completely different group of named plaintiffs “involve common questions of law or fact.” Had Congress wanted CAFA to authorize removal of representative actions brought by states as sole plaintiffs, it would have done so through the class action provision, not the mass action provision. View "Mississippi ex rel. Hood v. AU Optronics Corp." on Justia Law

Posted in: Class Action
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Investors can recover damages in a private securities fraud action only with proof that they relied on misrepresentation in deciding to buy or sell stock. The Supreme Court held, in "Basic," that the requirement could be met by invoking a presumption that the price of stock traded in an efficient market reflects all public, material information, including material misrepresentations; a defendant can rebut the presumption by showing that the alleged misrepresentation did not actually affect the stock price. EPJ filed a putative class action, alleging misrepresentations designed to inflate Halliburton’s stock price, in violation of the Securities Exchange Act of 1934 and SEC Rule 10b–5. The Supreme Court vacated denial of class certification, concluding that securities fraud plaintiffs need not prove causal connection between the alleged misrepresentations and their economic losses at the class certification stage. On remand, Halliburton argued that certification was nonetheless inappropriate because it had shown that alleged misrepresentations had not affected stock price. Without that presumption, investors would have to prove reliance on an individual basis, so that individual issues would predominate over common ones and class certification was inappropriate under FRCP 23(b)(3). The district court certified the class. The Fifth Circuit affirmed. The Supreme Court vacated and remanded, while declining to reject the Basic presumption.The Court rejected arguments that “a robust view of market efficiency” is no longer tenable in light of evidence that material, public information often is not quickly incorporated into stock prices and that investors do not invest in reliance on the integrity of market price. Congress could alter Basic’s presumption, given recent decisions construing Rule 10b–5 claims, but has not done so, although it has responded to other concerns. The Basic doctrine includes two presumptions: if a plaintiff shows that the misrepresentation was public and material and that the stock traded in a generally efficient market, there is a presumption that the misrepresentation affected price. If the plaintiff also shows that he purchased stock at market price during the relevant period, there is a presumption that he purchased in reliance on the misrepresentation. Requiring plaintiffs to prove price impact directly would take away the first presumption. Defendants, however, must have an opportunity to rebut the presumption of reliance before class certification with evidence of lack of price impact. That a misrepresentation has price impact is Basic’s fundamental premise and has everything to do with predominance. If reliance is to be shown by that presumption, the publicity and market efficiency prerequisites must be proved before certification. Because indirect evidence of price impact will be before the court at the class certification stage in any event, there is no reason to artificially limit the inquiry at that stage by excluding direct evidence of price impact. View "Halliburton Co. v. Erica P. John Fund, Inc." on Justia Law

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The Securities Litigation Uniform Standards Act of 1998, 15 U.S.C. 78bb(f)(1), forbids large securities class actions “based upon the statutory or common law of any State” in which plaintiffs allege “a misrepresentation or omission of a material fact in connection with the purchase or sale of a covered security,” and defines “covered security” to include only securities traded on a national exchange. Plaintiffs filed civil class actions under state law, contending that defendants helped Stanford and his companies perpetrate a Ponzi scheme by falsely representing that uncovered securities (certificates of deposit in Stanford Bank) were backed by covered securities. The district court dismissed, reasoning that, for purposes of the Act, the Bank’s misrepresentation that its holdings in covered securities made investments in its uncovered securities more secure provided the requisite “connection” between the state-law actions and transactions in covered securities. The Fifth Circuit reversed. The Supreme Court affirmed, holding that the Act does not preclude the state-law class action. The Court noted the Act’s basic focus on transactions in covered, not uncovered, securities, and that use of the phrase “material fact in connection with the purchase or sale” suggests a connection that matters. A connection matters where the misrepresentation makes a significant difference to someone’s decision to purchase or to sell a covered security, not an uncovered one; the “someone” making that decision must be a party other than the fraudster. The Act and the underlying Securities Exchange Act of 1934 and the Securities Act of 1933, are intended to protect investor confidence in the securities markets, not to protect persons whose connection with the statutorily defined securities is more remote than buying or selling. A broader interpretation of “connection” would interfere with state efforts to provide remedies for ordinary state-law frauds. This interpretation does not curtail the Securities and Exchange Commission’s enforcement powers under 15 U S.C. 78c(a)(10). The SEC brought successful actions against Stanford and his associates, based on the Bank’s fraudulent sales of certificates of deposit. View "Chadbourne & Parke LLP v. Troice" on Justia Law