Northwest Business Litigation

Wal-Mart asks Supreme Court to review employment class action

Wal-Mart today filed a petition for certiorari in the U.S. Supreme Court, asking the Court to review certification of a huge employment class action lawsuit.  Plaintiffs in Dukes v. Wal-Mart allege that Wal-Mart discriminates against women in pay and promotions, and they seek to represent a class of some 1.5 million current and former employees.  Wal-Mart contends the class -- the largest ever in an employment case -- includes too many members, and presents too many individual issues, to be adjudicated in a single action.  So far the federal District Court in California and the Ninth Circuit Court of Appeals have disagreed.  See SCOTUS Blog's coverage of the petition for certiorari here, and our earlier coverage of the case here.

Oregon Court of Appeals affirms decertification of class action

Last week the Oregon Court of Appeals affirmed a lower court's decision to decertify a class action against US Bank.  In Belknap v. US Bank, the plaintiffs claimed that defendant employer failed to timely pay a portion of their wages.  In 2004, the trial court certified a plaintiffs' class estimated to include up to 1,900 former employees.  But after two years of discovery and motion practice, the court decertified the class and the case proceeded with just the two named plaintiffs -- only one of whom ultimately won his wage claim at trial.  On appeal, the Court of Appeals concluded that the trial court properly discontinued the class when it became evident that individual fact issues pertinent to each class member's claims would overwhelm any common issues, and plaintiff had no viable plan for trying the claims in an efficient manner.

U.S. Supreme Court: FAA does not mandate class arbitration

Today the U.S. Supreme Court held that the Federal Arbitration Act (FAA) does not require class arbitration unless the parties' arbitration agreement expressly provides for class arbitration. 

In Stolt-Nielsen, S.A. v. AnimalFeeds Int'l Inc., AnimalFeeds claimed that Stolt-Nielsen violated the antitrust laws by charging supracompetitive prices.  The parties' agreement provided for arbitration of all disputes arising from the contract.  AnimalFeeds initiated an arbitration claim on behalf of a class of purchasers, and Stolt-Nielsen disputed that class arbitration was available under the contract.  While the arbitration clause was silent on the issue of class arbitration, the arbitration panel determined that it was appropriate to proceed with a class arbitration, and the Second Circuit agreed.

The Supreme Court reversed, holding that, because the parties did not expressly agree to arbitration of claims by a class of claimants, class arbitration was not available.  According to Justice Alito, writing for the majority, despite the FAA's policy favoring arbitration of disputes, "a party may not be compelled under the FAA to submit to class arbitration unless there is a contractual basis for concluding that the parties agreed to do so."

Ninth Circuit approves massive employment discrimination class action against Wal-Mart

An en banc panel of the Ninth Circuit Court of Appeals today authorized a huge class-action lawsuit to proceed against Wal-Mart.  At issue in Dukes v. Wal-Mart are claims that the company has a policy of discriminating against women in pay and promotions.  The plaintiff class is estimated to number 1.5 million current and former employees.

The en banc panel split 6-5 in favor of certifying the class.  Judge Michael Daly Hawkins, writing for the majority, states "the district court acted within its broad discretion in concluding that it would be better to handle some parts of this case as a class action instead of clogging the federal courts with innumerable individual suits litigating the same issues repeatedly."  Pointing to the unwieldy size of the class and lack of evidence of a company-wide policy of discrimination, the dissent by Judge Sandra Ikuta states "No court has ever certified a class like this one, until now.  And with good reason."

See our coverage of the 2007 opinion by a three-judge Ninth Circuit panel approving the class here, and the 2009 order for rehearing en banc here. 

U.S. Supreme Court to choose test for a corporation's "principal place of business"

Among the grounds for subject matter jurisdiction in federal court is diversity jurisdiction, which is available when the plaintiff and defendant are citizens of different states.  A corporation's citizenship is defined as its "principal place of business," and if a corporate defendant's principal place of business is in the state where plaintiff is a citizen, federal court may be unavailable as a forum.  A case currently pending before the U.S. Supreme Court will resolve which of several tests is appropriate for determining a corporation's principal place of business.

On November 10, 2009 the Supreme Court heard oral argument in the case of Hertz Corp. v. Friend.   In that case, the Ninth Circuit had applied the "place of operations" test, rather than the "nerve center," "center of activity," or "totality of the circumstances" tests favored in other circuits.  The court's ruling will be of vital importance to corporations looking to avoid being sued in state courts, which can be more plaintiff-friendly than federal courts.

Ninth Circuit approves preemptive motion to deny class certification

In a case of first impression, the Ninth Circuit ruled earlier this month in Vinole v. Countrywide Home Loans, Inc., CV-07-00127-DMS, that a defendant may file a preemptive motion to deny class certification before plaintiffs file a motion to certify a class.  While it is standard practice for the putative class representative to bring the issue of class certification before the court, nothing in FRCP 23 requires the defendant to wait for such a motion before asking the court to deny certification. 

In Vinole, the plaintiffs filed a class action complaint alleging that defendant misclassified a group of employees as “exempt,” and, consequently, did not pay all overtime and related wages owed to them.  Before the pretrial motion deadline and discovery cutoff, and before plaintiffs filed a motion for class certification, defendant filed a motion to deny class certification on the ground that individual issues predominated over common issues.  See FRCP 23(b)(3).

Plaintiffs claimed that it was improper to file a preemptive motion to deny class certification at that stage in the litigation.  The district court rejected the contention and denied class certification. 

Plaintiffs then appealed to the Ninth Circuit, claiming the district court abused its discretion in considering the motion.  The appellate court examined Rule 23(c)(1)(A) concerning the timing of a class certification determination, and found that nothing there gives plaintiffs the privilege to move for class certification before the defendant moves to deny certification.  The court also distinguished cases in which a motion to deny class certification was found to be premature because plaintiffs lacked sufficient time to complete discovery.  Here the plaintiffs had conducted discovery for 10 months and advised the district court that no more discovery would occur before their filing of a motion for class certification. 

The Ninth Circuit ruled that a defendant’s preemptive motion to deny class certification may be filed before the discovery and pretrial motion deadlines absent a showing of procedural prejudice to the plaintiffs. 

The court also affirmed the district court’s denial of class certification on the grounds that individual issues concerning the time individual plaintiffs spend in or out of the office and how each plaintiff performed his or her job predominated over common issues.

Ninth Circuit orders rehearing of biggest-ever class action certification

The Ninth Circuit last week ordered en banc rehearing of the landmark class certification in Dukes v. Wal-Mart.  The order comes two years after a three-judge panel approved the largest class in history, consisting of 1.5 million current and former female employees of Wal-Mart.  The lead plaintiffs claim that Wal-Mart has discriminated against women in making promotions.  A 15-judge panel will now decide whether the district court properly certified the class.  See our earlier coverage of the case here.

Oregon Supreme Court denies smoker class action for "medical monitoring"

In a unanimous opinion with one concurrence, the Oregon Supreme Court yesterday upheld the dismissal of a large class action of smokers who sought injunctive relief for "medical monitoring, smoking cessation and education."  Plaintiffs are some 400,000 smokers who have no present symptoms, but sought to have a group of tobacco companies fund a program to cover the cost of CT scans and other diagnostic tests to identify future harm from smoking.  Even though they lack of any present injury, plaintiffs contended they could maintain an action for such relief based on the defendant tobacco companies' negligence.   The Court disagreed, holding that a common law negligence claim requires a present physical injury:  "The complaint does not allege that plaintiff has suffered any present physical harm as a result of defendants' conduct. The complaint alleges only that plaintiff has suffered a 'significantly increased risk of developing lung cancer' in the future."  The Court continued:

"Oregon law has long recognized that the fact that a defendant's negligence poses a threat of future physical harm is not sufficient, standing alone, to constitute an actionable injury. As this court has explained, 'the threat of future harm, by itself, is insufficient as an allegation of damage in the context of a negligence claim.' Zehr, 318 Or at 656; see also Bollam v. Fireman's Fund Ins. Co., 302 Or 343, 347, 730 P2d 542 (1986) (holding that "'[t]he threat of future harm, not yet realized, is not enough'") (quoting W. Page Keeton, Prosser & Keeton on Torts 165 (5th ed 1984)). As Prosser explains,

Since the action for negligence developed chiefly out of the old form of action on the case, it retained the rule of that action, that proof of damage was an essential part of the plaintiff's case. Nominal damages, to vindicate a technical right, cannot be recovered in a negligence action, where no actual loss has occurred. The threat of future harm, not yet realized, is not enough. Negligent conduct in itself is not such an interference with the interests of the world at large that there is any right to complain of it, or to be free from it, except in the case of some individual whose interests have suffered.

Keeton, Prosser & Keeton on Torts at 165 (footnotes omitted). Accordingly, a plaintiff's cause of action does not accrue, and the statute of limitations on that cause of action does not begin to run, until the plaintiff has suffered an "'actual loss.'" Bollam, 302 Or at 347 (quoting Prosser and Keeton on Torts at 165)."

You can find the full opinion here.

Class action by blind users of Target Corp's website is allowed to proceed

In a potential blow to companies doing business on the Internet, a federal judge in California certified a class action on behalf of blind users of the discount retailer Target Corp's website.  The lawsuit alleges that Target's site is inaccessible to the blind, in violation of anti-discrimination laws.  A copy of yesterday's Order can be found here.

Defective notice blocks securities class action settlement

The Ninth Circuit today tossed out a $35 million securities class action settlement involving Veritas Software Corporation over a defective notice to class members.  In Petrone v. Malone, the court addressed a novel issue under the Private Securities Litigation Reform Act:  how must the notice of settlement describe the damages each member of the class will receive? 
Under the PSLRA, the notice must state the amount of settlement funds to be distributed on a per-share basis.  The notice at issue in Petrone calculated the per-share recovery with the unstated assumption that only 43% of the class members would file a claim for damages.  By failing to calculate the recovery based on all of the shares held by the class, the notice overstated the potential per-share recovery and violated the PSLRA. 

See our other coverage of securities fraud and the PSLRA here and here.