Class Actions

• Publication year: 2018
• Author: By Jessica Riggin & Dylan Cowart

Class Actions

By Jessica Riggin & Dylan Cowart

"Reports of My Death Are Greatly Exaggerated" -Mark Twain

On May 21, 2018, the Supreme Court of the United States issued its landmark decision in Epic Systems Corp. v. Lewis,¹ holding that an employer-imposed arbitration agreement prohibiting employees "from pursuing work-related claims on a collective basis" does not violate the protections guaranteed by the National Labor Relations Act² (NLRA) allowing employees to engage in concerted activity. The Supreme Court's decision resolved a circuit split over the issue of class action waivers, a provision often found in mandatory arbitration agreements requiring individualized proceedings. The Seventh and Ninth Circuits³ both previously held that engaging in class, collective, or representative proceedings was "concerted activity," a substantive right protected by the NLRA.⁴ Those courts found that class action waivers were unlawful pursuant to Section 7 of the NLRA and thus illegal because they qualified for the "savings" clause contained in the Federal Arbitration Act (FAA), which provides that arbitration agreements are only enforceable "save upon such grounds as exist at law or in equity for the revocation of any contract."⁵ The Seventh and Ninth Circuits reasoned that because the arbitration agreements at issue waived a substantive federal right, the FAA's savings clause precluded enforcement of that class action waiver.

The Supreme Court's Epic Systems decision, however, rejected this logic, siding with the Fifth, Second, and Eighth Circuits.⁶ These earlier circuit court decisions held, among other things, that "the use of class action procedures is not a substantive right" and that "[r]equiring a class mechanism is an actual impediment to arbitration and violates the FAA"—finding that the FAA's savings clause did not provide a basis for invalidating class action waivers.⁷ Similarly, the Epic Systems decision held that there is no conflict between the FAA and NLRA because the NLRA does not provide a right to a class or collective action in the first instance: "The NLRA secures to employees rights to organize unions and bargain collectively but it says nothing about how judges and arbitrators must try legal disputes that leave the workplace and enter the courtroom or arbitral forum."⁸ In so holding, Epic Systems permits the enforcement of mandatory arbitration agreements under the FAA that require employees to sue individually, as opposed to collectively.

In light of this decision and its predecessor cases,⁹ many of which have limited the ability of employees and consumers to pursue their claims on a class and collective basis, plaintiff-side class action practitioners have increasingly turned to other creative avenues to seek relief for their clients whose claims are too small to make individual actions practicable. So this consideration of "class action" case law will not be limited to class actions under procedural rules,¹⁰ but also the case law surrounding (1) arbitrations, which—post-Epic Systems—have more frequently sought relief on behalf of some or many ("mass actions") and (2) Private Attorneys General Act (PAGA) actions, in which representative plaintiffs can pursue Labor Code violations on behalf of other aggrieved employees without being compelled into arbitration on their representative claims. While it is too soon to analyze the impact of Epic Systems on each of these procedural mechanisms, it seems likely that class actions, arbitrations, and PAGA actions will continue to have a significant future role to play in vindicating the rights of employees and consumers.

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Class Actions

After the decision in Epic Systems—as has been the case after other Supreme Court decisions unfriendly to class action practice—many predicted the demise of the class action vehicle. Yet, not only are many arbitration agreements deemed unenforceable, there are also a multitude of reasons that employers and other defendants may choose not to impose arbitration agreements, including increased costs¹¹ and lack of appellate rights.¹² As a result, class actions remain viable; class action case law continues to develop; and class action practitioners must remain familiar with developments in relevant state and federal case law. Some of these recent developments are outlined below.

To begin, Noel v. Thrifty Payless Inc.¹³ sets the stage for the potential evolution of the ascertainability standard. There, the plaintiff purchased an inflatable swimming pool from a Rite Aid store and, after returning home, realized the pool he bought was much smaller than the one pictured on the box. He felt cheated and filed a class action against Rite Aid for deceptive advertising, alleging violations of California consumer protection laws. The trial court refused to certify the class, holding that it was not ascertainable because the plaintiff had not presented evidence to show how other class members would be identified.¹⁴ The Court of Appeal affirmed, but the California Supreme Court has accepted review of the decision.¹⁵ While the Court of Appeal relied upon a decision urging reference to "official records," the appellants argue that it "confuse[d] ascertainability with identifiability" and "ascertainability merely requires a class definition to be sufficiently clear and objective to allow class members to self-identify as members of the class for purposes of obtaining an ultimate recovery."¹⁶

Meanwhile, a U.S. Supreme Court case, China Agritech, Inc. v. Resh,¹⁷ provided important clarification on the longstanding "American Pipe tolling" rule: that once a class action is filed, the statute of limitations is paused and only begins to run again upon the denial of class certification. The China Agritech decision holds that this rule applies only to individual claims and not successive class actions. What does this mean as a practical matter? If a plaintiff files, for example, a nationwide class action lawsuit and class certification is denied, that plaintiff (or other members of the proposed class) will not be permitted to file class actions on behalf of smaller proposed classes if the class certification decision is delivered after the statute of limitations (a likely result given the typical time frame of class litigation). This may have the unintended effect of incentivizing plaintiffs counsel to preemptively file multiple class actions that are (potentially) unnecessary, as they no longer have the luxury of waiting for a final decision on class certification.

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