Wal-Mart v. Dukes: The Court Gets One Right
In today’s decision in Wal-Mart v. Dukes, the Supreme Court unanimously found that the Ninth Circuit had jumped the gun in certifying what would have been one of the largest class actions in history, a job-bias action against the giant retailer on behalf of female employees. A five-justice majority led by Justice Scalia found that the plaintiffs had clearly not met the requirements needed to have the case certified for class treatment; four dissenters led by Justice Ginsburg would have sent the case back for more consideration.
While some press commentary simplistically treated this case as a “Which Side Are You On” parable of workplace sexism, both the majority and the dissent spend much time grappling with more lawyerly issues specific to class actions as a procedural format, such as the exact role of “common questions,” whose implications will inevitably be felt in litigation far removed from the employment discrimination context. To sweep hundreds of thousands of workers (or consumers or investors) into a class as plaintiffs even if they personally have suffered no harm whatsoever — to use sexism at Arizona stores to generate back pay awards in Vermont, and statistical disparities to prove bias without allowing defendants to introduce evidence that a given worker’s treatment was fair — bends the class action mechanism beyond its proper capacity. Also to the point, it is unfair.
Because both class action law and employment discrimination law are in the end creatures of federal statute, the elected branches will have the last word. Advocates of expansive employment litigation can be expected to introduce legislation in Congress to overturn key elements of today’s decision, a strategy that has worked well for them in the past on issues like back pay, “disparate-impact” law and the scope of coverage of the Americans with Disabilities Act (ADA). While we will soon be hearing a drumbeat to that effect, Congress should resist it, because the majority’s opinion today is to be preferred as a matter of policy, fairness, and liberty.
In particular — to take just one of the policy issues in employment law brought to center stage by today’s case — plaintiffs seek to establish that Wal-Mart’s policy of decentralized manager discretion over pay and promotions is itself an unlawful practice because (they argue) it allows too wide a scope for (unconscious or otherwise) bias on the part of store managers, notwithstanding the company’s adoption of overall policies banning sex bias. The majority led by Scalia marveled that Wal-Mart’s corporate non-policy — that is, its decision not to micromanage its local executives on personnel choices — would wind up being legally interpreted as amounting to an affirmative centralized decision to discriminate. But it’s not — and we should be glad lawyers at every big company aren’t yet insisting that every local HR decision be sent to a distant headquarters for fear of liability.
Supreme Court Rules That Arbitration Provisions Should Be Enforced
A few readers have now asked me about the “libertarian” reaction to yesterday’s Supreme Court ruling that allows companies to use boilerplate contract provisions that require consumers to arbitrate any disputes individually rather than coming together as a class action for arbitration purposes (let alone being able to bring claims into court). That is, where an individual claim isn’t worth that much money (about $30 in yesterday’s case of AT&T Mobility v. Concepcion), no lawyer will take the case and so only by having a class file collectively, the argument goes, will justice be served.
The ruling broke down 5-4 on “conventional” lines, with an opinion by Justice Scalia, joined by the Chief Justice and Justices Kennedy, Thomas, and Alito, holding that the Federal Arbitration Act trumped (“preempted” by operation of the Constitution’s Supremacy Clause) California law that was more favorable to the plaintiffs. Justice Thomas also filed a concurrence, noting that “state public policy against arbitration” is not enough to revoke a contract with an arbitration agreement. Justice Breyer dissented, joined by Justices Ginsberg, Sotomayor, and Kagan, arguing that certain class action waivers are unenforceable.
Here’s some more background (edited from a useful summary I received in a Heritage Foundation email): A cellular telephone contract between the parties provided for arbitration of all disputes, but did not permit classwide arbitration. After the Concepcions were charged sales tax on the retail value of phones provided for free under their service contact, they sued AT&T, and their suit was consolidated with a class action alleging false advertising and fraud. The district court denied AT&T’s motion to compel arbitration. The Ninth Circuit affirmed, reasoning that the Federal Arbitration Act, which makes arbitration agreements valid and enforceable except on such grounds as exist to revoke any contract, did not require arbitration because the prohibition on classwide proceedings was “unconscionable” under California law. The Supreme Court reversed, stating that arbitration agreements must be placed on equal footing with other contracts and California’s rule was preempted by the FAA and its strong federal policy favoring informal arbitration.
I’ll leave it to my colleagues Walter Olson, our expert on civil litigation, and Roger Pilon, who has written and spoken extensively on preemption, to comment on the particulars of the opinion if they wish. What I will say generally is that (1) we at Cato take the enforceability of contracts quite seriously, but (2) preemption is a very technical area of law that has to be examined on a case-by-case, statutory-provision-by-statutory-provision basis. See, for example, this Cato Supreme Court Review article from a few years ago, and also the relevant section of last year’s “Looking Ahead” essay that presciently previewed the Concepcion case (kudos to Erik Jaffe!). Finally, Roger will be writing an article piece on this term’s preemption cases for the next Review — but you’ll have to wait till Constitution Day in September for that!
Google Book Search, Class Actions and the Separation of Powers
In response to yesterday’s post making the case against the Google Book Search Deal, I had spirited conversation with Google policy analyst Derek Slater, who helped me understand Google’s perspective on the case and some of the issues I discussed.
He raised a reasonable objection to my claim that “the settlement would give Google carte blanche to use these orphan works without making a serious effort to contact their owners.” He points out that the settlement stipulates that the Book Rights Registry will make an effort to locate orphan works holders and hold funds in escrow for five years to be paid to any orphan work holders who surface. Describing this as “carte blanche” was probably too strong. I think my basic point—that Google won’t be required to conduct the kind of “diligent search” for rightsholders before using a work—is still valid, but I could have made this point more carefully.
He also quibbled with my contention that the settlement would confer permanent competitive advantages on Google. I think I’m on firmer ground here; although the settlement does extend to Google’s competitors some of the advantages Google itself enjoys, the fact remains that Google would receive broad immunity from copyright lawsuits that would not be extended to Google’s competitors.
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