Justia U.S. Supreme Court Opinion Summaries

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

An agreement between American Express and merchants who accept American Express cards, requires that all of their disputes be resolved by arbitration and provides that there “shall be no right or authority for any Claims to be arbitrated on a class action basis.” The merchants filed a class action, claiming that American Express violated section 1 of the Sherman Act and seeking treble damages under section 4 of the Clayton Act. The district court dismissed. The Second Circuit reversed, holding that the class action waiver was unenforceable and that arbitration could not proceed because of prohibitive costs. The Circuit upheld its reversal on remand in light of a Supreme Court holding that a party may not be compelled to submit to class arbitration absent an agreement to do so. The Supreme Court reversed. The FAA reflects an overarching principle that arbitration is a matter of contract and does not permit courts to invalidate a contractual waiver of class arbitration on the ground that the plaintiff’s cost of individually arbitrating a federal statutory claim exceeds the potential recovery. Courts must rigorously enforce arbitration agreements even for claims alleging violation of a federal statute, unless the FAA mandate has been overridden by a contrary congressional command. No contrary congressional command requires rejection of this waiver. Federal antitrust laws do not guarantee an affordable procedural path to the vindication of every claim or indicate an intention to preclude waiver of class-action procedures. The fact that it is not worth the expense involved in proving a statutory remedy does not constitute the elimination of the right to pursue that remedy. View "Am. Express Co. v. Italian Colors Rest." on Justia Law

Plaintiff sued under the Fair Labor Standards Act of 1938 (FLSA) on behalf of herself and “other employees similarly situated,” 29 U. S. C. 216(b). She ignored an offer of judgment under Federal Rule of Civil Procedure 68. The district court, finding that no other individuals had joined her suit and that the Rule 68 offer fully satisfied her claim, dismissed for lack of subject-matter jurisdiction. The Third Circuit reversed, reasoning that allowing defendants to “pick off” named plaintiffs before certification with calculated Rule 68 offers would frustrate the goals of collective actions. The Supreme Court reversed. Because plaintiff had no personal interest in representing putative, unnamed claimants, nor any other continuing interest that would preserve her suit from mootness, her suit was appropriately dismissed. The Court assumed, without deciding, that the offer mooted her individual claim. Plaintiff had not yet moved for “conditional certification” when her claim became moot, nor had the court anticipatorily ruled on any such request. The Court noted that a putative class acquires an independent legal status once it is certified under Rule 23, but, under the FLSA, “conditional certification” does not produce a class with an independent legal status, or join additional parties to the action. View "Genesis HealthCare Corp. v. Symczyk" on Justia Law

Comcast and its subsidiaries allegedly “cluster” cable television operations within a region by swapping their systems outside the region for competitor systems inside the region. Plaintiffs filed a class-action antitrust suit, claiming that Comcast’s strategy lessens competition and leads to supra-competitive prices. The district court required them to show that the antitrust impact of the violation could be proved at trial through evidence common to the class and that damages were measurable on a classwide basis through a “common methodology.” The court accepted only one of four proposed theories of antitrust impact: that Comcast’s actions lessened competition from “overbuilders,” i.e., companies that build competing networks in areas where an incumbent cable company already operates. It certified the class, finding that the damages from overbuilder deterrence could be calculated on a classwide basis, even though plaintiffs’ expert acknowledged that his regression model did not isolate damages resulting from any one of the theories. In affirming, the Third Circuit refused to consider Comcast’s argument that the model failed to attribute damages to overbuilder deterrence because doing so would require reaching the merits of claims at the class certification stage. The Supreme Court reversed: the class action was improperly certified under Rule 23(b)(3). The Third Circuit deviated from precedent in refusing to entertain arguments against a damages model that bore on the propriety of class certification. Under the proper standard for evaluating certification, plaintiffs’ model falls far short of establishing that damages can be measured classwide. The figure plaintiffs’ expert used was calculated assuming the validity of all four theories of antitrust impact initially advanced. Because the model cannot bridge the differences between supra-competitive prices in general and supra¬competitive prices attributable to overbuilder deterrence, Rule 23(b)(3) cannot authorize treating subscribers in the Philadelphia cluster as members of a single class. View "Comcast Corp. v. Behrend" on Justia Law

The Class Action Fairness Act of 2005 (CAFA) gives federal district courts original jurisdiction over class actions if the matter in controversy exceeds $5 million, 28 U.S.C. 1332(d)(2),(5), and provides that to determine whether a matter exceeds that amount the “claims of the individual class members must be aggregated.” When Knowles filed a proposed class action in Arkansas state court against Standard Fire Insurance, he stipulated that he and the class would seek less than $5 million in damages. Following removal, the district court remanded to state court, concluding that the amount in controversy fell below the CAFA threshold in light of Knowles’ stipulation, although the amount would have fallen above the threshold absent the stipulation. The Eighth Circuit declined to hear an appeal. The Supreme Court vacated and remanded. Knowles’ stipulation does not defeat federal jurisdiction under CAFA. The stipulation does not speak for those Knowles purports to represent; a plaintiff who files a proposed class action cannot legally bind members of the proposed class before the class is certified. CAFA does not forbid a federal court to consider the possibility that a nonbinding, amount-limiting, stipulation may not survive the class certification process. The Court noted CAFA’s objective: ensuring “Federal court consideration of interstate cases of national importance.” View "Standard Fire Ins. Co. v. Knowles" on Justia Law

To recover damages in a private securities-fraud action under section 10(b) of the Securities Exchange Act of 1934 and Securities and Exchange Commission Rule 10b–5, a plaintiff must prove reliance on a material misrepresentation or omission made by the defendant. The Supreme Court has endorsed a “fraud-on-the-market” theory, which permits plaintiffs to invoke a rebuttable presumption of reliance on public, material misrepresentations regarding securities traded in an efficient market. The theory facilitates the certification of securities-fraud class actions by permitting reliance to be proved on a class-wide basis. Connecticut Retirement sought FRCP 23(b)(3) certification of a securities-fraud class action against a biotechnology company (Amgen). The district court certified the class. The Ninth Circuit affirmed, rejecting an argument that Connecticut Retirement was required to prove materiality before class certification under Rule23(b)(3)’s requirement that “questions of law or fact common to class members predominate over any questions affecting only individual members.” The Supreme Court affirmed. Proof of materiality is not a prerequisite to certification of a securities-fraud class action. Materiality is judged by an objective standard and can be proved through evidence common to the class. Failure of proof of materiality would not result in individual questions predominating, but would end the case. A requirement that putative class representatives establish that they executed trades “between the time the misrepresentations were made and the time the truth was r¬vealed” relates primarily to typicality and adequacy of representation, not to the predominance inquiry. The Court rejected Amgen’s argument that, because of pressure to settle, materiality may never be addressed by a court if it is not evaluated at the class-certification stage. The potential immateriality of Amgen’s alleged misrepresentations and omissions was no barrier to finding that common questions predominate. View "Amgen Inc. v. CT Ret. Plans & Trust Funds" on Justia Law

Respondents, current or former employees of petitioner Wal-Mart, sought judgment against the company for injunctive and declaratory relief, punitive damages, and backpay, on behalf of themselves and a nationwide class of some 1.5 million female employees because of Wal-Mart's alleged discrimination against women in violation of Title VII of the Civil Rights Act of 1964, 42 U.S.C. 2000e-1 et seq. At issue was whether the certification of the plaintiff class was consistent with Federal Rules of Civil Procedure 23(a) and (b)(2). The Court held that certification of the plaintiff class was not consistent with Rule 23(a) where proof of commonality necessarily overlapped with respondents' merits contention that Wal-mart engaged in a pattern or practice of discrimination and without some glue holding together the alleged reasons for the employment decisions, it would be impossible to say that examination of all the class members' claims would produce a common answer to the crucial discrimination question. The Court concluded that in a company Wal-Mart's size and geographical scope, it was unlikely that all managers would exercise their discretion in a common way without some common direction and respondents' attempt to show such direction by means of statistical and anecdotal evidence fell well short. The Court also held that respondents' backpay claims were improperly certified under Rule 23(b)(2) where claims for monetary relief could not be certified under the rule. Accordingly, the judgment of the Court of Appeals was reversed. View "Wal-Mart Stores, Inc. v. Dukes, et al." on Justia Law

In this case, a Federal District Court enjoined a state court from considering a plaintiff's request to approve a class action. The District Court did so because it had earlier denied a motion to certify a class in a related case, brought by a different plaintiff against the same defendant alleging similar claims. The federal court thought its injunction appropriate to prevent relitigation of the issue it had decided. The Court held to the contrary and found that, in issuing the order to a state court, the federal court exceeded its authority under the "relitigation exception" of the Anti-Injunction Act ("Act"), 28 U.S.C. 2283, where the statutory provision permitted a federal court to enjoin a state proceeding only in rare cases, when necessary to "protect or effectuate [the federal court's] judgments." The Court held that the standard was not met in this case for two reasons. First, the issue presented in the state court was not identical to the one decided in the federal tribunal. Second, the plaintiff in the state court did not have the requisite connection to federal suit to be bound by the District Court's judgment. View "Smith v. Bayer Corp." on Justia Law

Respondent, First Derivative Traders, representing a class of stockholders in petitioner Janus Capital Group, Inc. ("JCG"), filed a private action under the Securities and Exchange Commission ("SEC") Rule 10b-5, alleging that JCG and its wholly owned subsidiary, petitioner Janus Capital Management LLC ("JCM"), made false statements in mutual funds prospectuses filed by Janus Investment Fund, for which JCM was the investment adviser and administrator, and that those statements affected the price of JCG's stock. Although JCG created Janus Investment Fund, it was a separate legal entity owned entirely by mutual fund investors. At issue was whether JCM, a mutual fund investment adviser, could be held liable in a private action under Rule 10b-5 for false statements included in its client mutual funds' prospectuses. The Court held that, because the false statements included in the prospectuses were made by Janus Investment Fund, not by JCM, JCM and JCG could not be held liable in a private action under Rule 10b-5. The Court found that, although JCM could have been significantly involved in preparing the prospectuses, it did not itself "make" the statements at issue for Rule 10b-5 purposes where its assistance in crafting what was said was subject to Janus Investment Fund's ultimate control. Accordingly, respondent had not stated a claim against JCM under Rule 10b-5 and the judgment of the Fourth Circuit was reversed. View "Janus Capital Group, Inc. v. First Derivative Traders" on Justia Law

Petitioner, the lead plaintiff in a putative securities fraud class action, filed suit against respondent alleging violations under section 10(b) of the Securities and Exchange Act of 1934, 15 U.S.C. 78a et seq., and Securities and Exchange Commission Rule 10b-5, and sought to have its proposed class certified pursuant to Federal Rule of Civil Procedure 23. The Court of Appeals affirmed the District Court's conclusion that the "loss causation" element of class certification was not satisfied and denied class certification. At issue was whether securities fraud plaintiffs must also prove loss causation in order to obtain class certification. The Court held that securities fraud plaintiffs need not prove loss causation in order to obtain class certification and that the Court of Appeals' rule contravened Basic Inc. v. Levinson's fundamental premise that an investor presumptively relied on a misrepresentation so long as it was reflected in the market price at the time of his transaction. The Court also distinguished that, where loss causation was a familiar and distinct concept in securities law, it was not price impact. Accordingly, the Court vacated the judgment and remanded for further proceedings. View "Erica P. John Fund, Inc. v. Halliburton Co., et al." on Justia Law