THE SUPREME COURT'S "NON-TRANSSUBSTANTIVE" CLASS ACTION.

Author:Glover, J. Maria
Position:Special Issue on Class Actions
 
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  1. THE ROBERTS COURT'S COMPETING CLASS ACTION CASES 1628 II. THE COURT'S "NON-TRANSSUBSTANTIVE" CLASS ACTION DECISIONS 1636 A. The Court's "Non-Transsubstantive" Rule 23 Jurisprudence 1637 1. Substantive Lawmaking 1637 2. Composite Judgments: Substantive Policy and Procedural 1644 Consequence B. The Court's "Non-Transsubstantive" Class Arbitration 1650 Jurisprudence III. IMPLICATIONS OF THE COURT'S "NON-TRANSSUBSTANTIVE" CLASS ACTION JURISPRUDENCE FOR JUDICIAL LAWMAKING POWER AND THE JUDICIAL ROLE 1654 A. Implications for Judicial Lawmaking Power 1654 B. Transparency, the Judicial Role, and Judicial Legitimacy 1662 IV. CONCLUSION 1667 This year marks the fiftieth anniversary of the adoption of Federal Rule of Civil Procedure Rule 23, and with it, the advent of the modern class action. As the fiftieth anniversary approached, many scholars, including myself, said that class actions were dead, dying, or headed for a zombie state. (1) Many of the Supreme Court's recent class action cases all but confirmed that view. (2) In just the last six years, the Supreme Court ratcheted up the requirements for class certification under Rule 23 in Wal-Mart Stores v. Dukes and Comcast v. Behrend, increasing the cost and difficulty of obtaining certification. And, in a series of cases, the Court permitted the use of class action prohibitions in arbitration contracts, thus eliminating a swath of class actions and, often, the underlying claims themselves. The Court's language in these cases also tracked stock arguments against the class action, (3) leaving the distinct impression that the Roberts Court was on a mission to diminish or destroy the class action procedure.

    But a funny thing happened on the way to the funeral: just as the obituaries for the class action were being written, the Supreme Court issued a series of decisions that breathed new life into it. In Halliburton Co. v. Erica P. John Fund, Inc. (Halliburton II) (4) and Amgen Inc. v. Connecticut Retirement Plans & Trust Funds, (5) the Court reaffirmed the fraud-on-the-market theory, a critical tool in securities class actions. (6) In Tyson Foods v. Bouaphakeo, (7) the Court vindicated the use of statistical proof to satisfy Rule 23 requirements, distancing itself from strong suggestions in prior cases that individualized proof requirements would doom class certification. (8) And the language in these cases tracked stock arguments in favor of class actions. (9)

    To paraphrase Mark Twain, the rumors of the class action's death now seem greatly exaggerated. But the Court's class action decisions raise a new and perhaps more vexing question. If the Court is not fully intent on destroying the class action, what drives its seemingly disparate decisions? Do they reflect an anti--class action agenda losing steam, as Professor Coffee has suggested? (10) Was the unbridled anti--class action agenda an illusion to begin with? Or is there a deeper explanation for these decisions? Part I of this Article demonstrates that the Court's "pro--class action" decisions cannot be easily reconciled with their "anti--class action" counterparts through traditional means--neither through straightforward applications of Rule 23, nor precedent, nor particular case facts. But Part II posits that the Court's seemingly disparate class action cases can still be rationalized. To do so, however, one must look past the procedural veneer and consider the underlying substantive rules and remedial regimes at stake. Indeed, a key question presented in each case--notwithstanding what appears in the petitions for writs of certiorari--is whether the Court will embrace an interpretation of a substantive rule that has the effect of facilitating the availability of the class action. The Court's ultimate answer reflects a composite judgment about the substantive rule at issue and its implications for the availability of the class action device. Accordingly, to the extent one insists that procedural rules are, or ought to be, transsubstantive--that, "in form and manner of application, [they do] not vary from one substantive context to the next" (11)--the Court's class action jurisprudence might actually be deemed "non-transsubstantive."

    This Article's thesis has numerous implications--for separation of powers, judicial lawmaking power, federalism, the role of precedent, notions of transsubstantive procedure, procedural theory, and the nature and legitimacy of the judicial role, among others. The limitations of the Article format permit consideration in Part III of just two: First, the implications for the nature and scope of the federal courts' procedural and substantive lawmaking powers under the Rules Enabling Act [hereinafter Enabling Act]. (12) And second, related implications for the nature and legitimacy of the judicial role in "procedural" opinions.

  2. THE ROBERTS COURT'S COMPETING CLASS ACTION CASES

    A side-by-side analysis of the Roberts Court's "anti-class action" and "pro--class action" cases reveals stark tensions between them and leaves the impression that the Court is lost at sea in its class action jurisprudence. Start with the Court's anti--class action decision in Dukes. Authored by Justice Scalia, Dukes made class certification under Rule 23 more difficult across the entire substantive landscape. First, in holding that a proposed class of female Wal-Mart employees failed to satisfy the commonality requirement of Rule 23(a)(2), the Court issued a new, heightened commonality standard. (13) A putative class must now demonstrate the existence of a common question that "is capable of classwide resolution--which means that the determination of its truth or falsity will resolve an issue that is central to the validity of each one of the claims in one stroke." (14) In evaluating whether plaintiffs have satisfied that Rule 23 standard, courts must now perform a "rigorous evaluation" of whether certification requirements are met, including an evaluation of any overlapping merits questions. (15)

    Second, the Court rejected plaintiffs' proposed use of statistical sampling to estimate damages and resolve defendant's affirmative defenses to plaintiffs' claims of discrimination. (16) Invoking the Enabling Act, the Court stated that "Trial by Formula" would impermissibly "abridge" defendant's substantive right to "litigate its statutory defenses to individual claims." (17) Whether this holding was meant to entirely reject statistical sampling as a means of satisfying Rule 23 in general was unclear. (18) But the overall signal was strong: statistical evidence, particularly in aggregate proceedings, was suspect. (19)

    The Court's holdings in Dukes are in considerable tension with two contemporaneous, "pro--class action" cases, Amgen and Halliburton II. Both cases involved securities fraud claims arising under section 10b of the Securities Exchange Act of 1934 (20) and SEC Rule 10b-5. (21) To make out a prima facie case for securities fraud under Rule 10b-5, plaintiffs must establish that they relied upon defendants' alleged misrepresentations. (22) However, in 1988, the Supreme Court held in Basic v. Levinson that investors are presumed to have relied on the defendant's misrepresentation when they purchased stock because of additional presumptions regarding the integrity of the market price itself. (23) That "fraud-on-the-market" presumption is critical to class certification--without it, individual issues of reliance would predominate under Rule 23(b)(3). (24) Both Amgen and Halliburton II involved questions regarding what plaintiffs needed to prove, at the class certification stage, to invoke the Basic presumption.

    In Amgen, defendants argued that investors needed to prove the materiality of Amgen's statements at the certification stage to invoke the Basic presumption and survive the Rule 23(b)(3) predominance inquiry. (25) Somewhat surprisingly, (26) the majority opinion, notably joined by Chief Justice Roberts, (27) rejected defendants' predominance argument. The majority reasoned that, because the common question of materiality is both a prerequisite for invoking the Basic presumption and a stand-alone element of securities fraud, the threat of individual issues predominating over common ones was functionally Active. (28)

    That holding, and its reasoning, is in tension with both the certification holdings and the reasoning of Dukes. While the 10b-5 element of materiality is a common question, it is also an antecedent question to whether the separate 10b-5 element of reliance can be established through common proof. (29) Materiality is, therefore, a common question about whether there is a common question. This state of affairs seems impermissible under Dukes. Plaintiffs in Dukes argued that they could answer the question of whether Wal-Mart had a particular sort of discriminatory policy--whereby regional managers were conduits for the discriminatory culture at the national level--through common proof. (30) But that approach would not reveal whether the question apt to drive the resolution of the litigation--"why was I disfavored"--could be established through common proof. (31) Amgen tracks this set-up. Investors argued that materiality was a question they could answer through common proof. (32) Whether plaintiffs can answer that question through common proof, however, does not tell us whether individualized questions of reliance can be answered through common proof.

    Moreover, as Justice Thomas admonished in his Amgen dissent, both Rule 23(h)(3) and Basic insist that certification requirements be met at the time of certification , (33) If plaintiffs fail to prove materiality at the merits stage, the case ends there--but that means that the case should never have been certified to begin with. This is no mere formalistic point: certification itself imposes settlement pressure before the merits stage. Empirically, it is the merits stage, not the certification stage, that tends to be functionally...

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