August 29, 2011 | White Paper on Legal Issues
The 2011-2012 Term of the Supreme Court was most unusual in addressing numerous civil justice and tort related issues. In keeping with the Heritage Foundation’s Scholars & Scribes event format of seven minutes, I will very briefly analyze the top seven cases. Apart from being brief, my approach utilizes almost citation-free, layperson common sense terms. Each case could be deserving of in-depth academic law review treatment, but brevity and hopefully clarity will be the guideposts here. The seven cases include: Wal-Mart Stores, Inc. v. Dukes: Limits on mass class actions: the world or part of it is not a “class.” Goodyear Luxembourg Tires S.A. v. Brown and McIntyre Machinery Limited v. Nicastro: Constitutional limits on pursuing foreign product manufacturers: Can they now access United States markets and not pay the tort tax? American Electric Power Co., Inc v. Connecticut: Courts are not a good place to decide greenhouse gas environmental policy: Why is this true? AT&T Mobility LLC v. Concepcion: Mandatory arbitration and class actions do not mix under the Federal Arbitration Act. Pliva, Inc. v. Mensing: The preemption puzzle: Why are manufacturers of generic drugs protected while manufacturers of name brand drugs are not protected? CSX Trans., Inc. v. McBride: Throwing out “proximate” cause when workers sue railroads: Has the FELA become a worker compensation system with tort damages?
Wal-Mart Stores, Inc. v. Dukes: Rational Limits on Mass Class Action
The Supreme Court this Term made clear something that should be obvious: Mixing millions of people with only the most general aspects of their cases in common should not be treated as a class for the purposes of Federal Rule of Civil Procedure Rule 23 class actions. This common sense observation, however, is not obvious to everyone. In that regard, both a Federal District Court and the Ninth Circuit Court of Appeals approved the certification of a class action filed against Wal-Mart by approximately 1.5 million past or present female employees. The women alleged Wal-Mart engaged in Title VII discrimination by denying them equal pay and/or promotions in violations of Title VII of the Civil Rights Act.
Interestingly enough, the plaintiffs did not allege Wal-Mart had any express corporate policies against the advancement of women. Instead, they claimed that local managers’ discretion over pay was at the core of disparate treatment.
As previously indicated, the lower federal courts gave the green light to the class action. The Supreme Court’s 5-4 majority did not concur with the lower courts. Basically, Justice Scalia said in layman’s terms, there was no “glue” to hold the class together.
Why was this true? The plaintiffs relied upon statistical evidence about pay and promotion disparities between men and women and anecdotal reports, but were told by the Supreme Court that this evidence was not sufficient to “glue” the class action together.
If the Supreme Court had allowed the case to stand, this “class action” would have provided “nuclear missile” weaponry for the plaintiffs’ bar to obtain settlement regardless of the merits of individual cases. Through legerdemain, class actions could be certified even though, as a factual matter, there was a lack of actual proof that all the claims in the “class” had questions of law and fact in common. When huge class actions are “certified,” some corporations take a lesson from General Custer’s huge loss at the Battle of Little Bighorn: settlement and surrender is often the only option.
The Supreme Court demanded not simply common questions, but common answers for a class to be formed. In Wal-Mart, such proof was simply not in existence.
It should be noted that female plaintiffs may be able to bring smaller class actions in particular jurisdictions where decisions about pay and promotion law are under local Wal-Mart systems. Nevertheless, I would not be surprised if the organized (American Association for Justice, AAJ) plaintiffs’ bar seeks to attempt to overrule Wal-Mart in Congress, either in all or part, much the way they did with the Supreme Court’s Ledbetter statute of limitation decision a few years ago. This time, however, they may not be successful since the courthouse doors are not necessarily closed. Plaintiffs simply cannot enter court doors through a super bowl of mass class action litigation.
Goodyear Luxembourg Tires S.A. v. Brown and McIntyre Machinery Limited v. Nicastro: Constitutional Limits on Suing Foreign Manufacturers: Can They Access the United States Markets and Not Pay the “Tort Tax?”
For years, there has been great speculation as to whether foreign manufacturers, who do not target United States markets, yet have their products end up in the United States and cause damage or injury, may be subjected to jurisdiction by state courts.
Two Supreme Court decisions give some comfort to such foreign manufacturers.
The first case, Goodyear Luxembourg Tires S.A., was a fairly easy one to hold that procedural due process did not permit the North Carolina courts to take jurisdiction. Justice Ginsberg delivered a unanimous opinion for the Court. The question in Goodyear was whether foreign subsidiaries of a United States parent corporation would be amenable to suit in a state court on claims unrelated to any activity of the subsidiary in the foreign state. In the actual case, a bus accident outside of Paris, unfortunately, took the lives of two thirteen year old North Carolina boys. The product liability allegation was that the accident was caused by a defective product manufactured in Turkey by a Goodyear subsidiary. Thus, in a nutshell, the case had occurred with a foreign subsidiary product in a foreign country. The North Carolina Supreme Court thought it adequate to obtain jurisdiction because the “stream of commerce” had allowed an occasional foreign manufactured tire to enter the State of North Carolina. That reasoning was insufficient for the United States Supreme Court to allow North Carolina’s Supreme Court to take jurisdiction over the Goodyear foreign subsidiary. The United States Supreme Court’s test was whether the defendant had “purposely availed” itself of conducting activities within the forum. It had not; there was no continuing and systematic business plan to sell the products in North Carolina. Allowing the North Carolina Supreme Court to take jurisdiction in this situation would violate procedural due process.
The second case, McIntyre v. Nicastro, was much closer. In McIntyre the foreign manufacturer marketed products through a distributor in the United States, but did not target the State of New Jersey, the place where the plaintiff severed four fingers on his right hand in a workplace injury. Since only four of McIntyre’s machines ended up in New Jersey, the state was not “targeted” by the manufacturer. Nevertheless, McIntyre had hired a distributor, and told the distributor to “sell as many products as possible.” A plurality opinion held that the defendant never purposefully availed itself of the privilege of conducting business in New Jersey. The plurality needed Justices Breyer and Alito to prevail in their decision, but the Justices limited their view to the facts of the case. There was strong dissent by Justices Ginsberg, Sotomayor and Kagan who each thought that the defendant’s visits to U.S. trade shows (outside of New Jersey) and its contracting with a U.S. distributor were sufficient predicates to allow the New Jersey Supreme Court to take jurisdiction over the case.
I believe that the organized plaintiffs’ bar, the AAJ, will also turn to Congress with respect to these decisions. Despite the fact that the plaintiffs’ bar cannot use Congress to override the Constitution, AAJ lobbyists may create imaginative ways to subject foreign manufacturers to jurisdiction in the U.S. In the last Congress, the plaintiffs’ bar pushed the Foreign Manufacturers Legal Accountability Act, which required that foreign manufacturers, as a condition of market access, identify a registered agent to accept service of process on their behalf. This action would constitute an acceptance of jurisdiction in U.S. courts. As it true with many other bills in Congress, this legislation grew tentacles in different shapes over time; ultimately most of the business community opposed it and it died a quick death.
Whether the idea of some companies paying the tort tax, namely, American companies and foreign companies who clearly conduct business in the U.S. while some remote foreign manufacturers do not, will be enough to glue the business community together to actually work with the plaintiffs’ bar on this legislation, is something that only time will tell. If past is prologue, AAJ will reach too far and the legislation will not become law. The Foreign Manufacturers Legal Accountability Act has been introduced in the 112th Congress as H.R. 4678 and S. 1606.
American Electric Power Co., Inc v. Connecticut: Courts Are Not A Good Place to Decide Greenhouse Gas Environmental Policy: Why is this true?
A much watched case, because it could create a fundamental public policy shift of public policy power from Congress and the Executive Branch to the courts, was AEP v. Connecticut. In AEP, eight state attorneys general sued several large electric companies under the ambiguous amoeba-like tort of “nuisance.” Using this tort as their basis for a claim, the state attorneys general sought an injunction to compel the electric companies to reduce greenhouse gases by three percent a year for ten years. A panel on the Second Circuit Court of Appeals, which at the time included Justice Sotomayor, agreed with the attorneys general. The United States Supreme Court reversed on a somewhat technical ground called “displacement.” Justice Ginsberg, speaking for a unanimous Supreme Court, held that the Environmental Protection Agency’s (EPA) jurisdiction over greenhouse gases “displaced” the courts from deciding greenhouse gas “climate change” issues in cases brought by state attorneys general. If the EPA failed to act properly, the remedy for the attorney generals was not to bring a separate tort suit, but to sue the EPA for its failure to act.
As they sometimes often do, some learned defense attorneys have construed this decision very narrowly. They argue that challenging questions remain as to whether private causes of action brought under state law can endure and whether private causes of action brought under “federal common law” of nuisance can endure. An example is the Native Village of Kivalina v. ExxonMobil Corp., decision in the Ninth Circuit where residents of Kivalina, Alaska sued fifteen energy companies claiming that greenhouse gases under a “Rube Goldberg” chain of events caused their town to be flooded.
In my view, however, the core of the AEP decision goes beyond its technical grounds and needs to be understood that way by the lower state and federal courts, the Executive Branch, Congress and the public.
In a perceptive observance, Justice Ginsberg speaking for the unanimous Court observed that:
Judges may not commission scientific studies or convene groups of experts for advice, or issue rules under notice-and-comment procedures inviting input by any interested person, or seek the counsel of regulators in the States where the defendants are located. Rather, judges are confined by a record comprising the evidence the parties present.
In plain English, the balancing of environmental needs against adverse impacts on the economy as the result of overregulation is not the province of the courts. “Regulation through litigation” should have no place with respect to greenhouse gases. Those are matters for Congress and the Executive Branch to decide. One final key point about this case; while some have said that the Supreme Court has judicially noticed that climate change “caused by” greenhouse gas is an actual fact, the Court in Footnote 2 said, “The Court, we caution, endorses no particular view of the complicated issues related to carbon-dioxide emissions and climate change.”
AT&T Mobile LLC v. Concepcion: Mandatory Arbitration Through the Federal Arbitration Act and Class Actions Do Not Mix
AT&T v. Concepcion put at war the meaning and purpose of the Federal Arbitration Act versus the Supreme Court of California’s view that mandatory arbitration provisions’ prohibitions against class action proceedings were unconscionable. The facts of this case were simple. Concepcion had entered into a contract with AT&T for the sale and servicing of cellular telephones. The contract provided for arbitration of all disputes between the two parties. The contract further required that the parties bring such claims in their individual capacity, not as members of a class action.
The Ninth Circuit invalidated this provision, following California law, and deemed the class action restriction unconscionable.
A 5-4 majority of the United States Supreme Court reversed the Ninth Circuit. The majority looked to Section Two of the Federal Arbitration Act and found that it reflected a “liberal federal policy favoring arbitration.” The Supreme Court reasoned that arbitration agreements could not be invalidated unless such restrictions were generally applicable to “contract defenses, not those solely directed at arbitration.” Beneath the skin of this case is a political war. The AAJ, the organized plaintiffs’ bar and consumer activist groups despise mandatory arbitration. The plaintiffs’ bar propaganda movie, Hot Coffee, devotes twenty-five percent of its content to vilifying mandatory arbitration agreements. The movie focuses on an emotionally charged situation involving an alleged rape that allegedly took place in a workplace setting in Iraq. The segment focus is on the “victim” of the alleged rape, Jamie Leigh Jones, who signed a mandatory arbitration employment dispute contract. Senator Al Franken utilized Ms. Jones’ case as part of his political goal to eliminate or substantially weaken all mandatory arbitration agreements.
The Concepcion decision may be used as fuel to ignite AAJ’s quest to abolish mandatory arbitration contracts, but the politics to support such a change in American law may simply not be there. When the flames on the issue were less newsworthy, Democratic majorities in the House and Senate could not get a bill akin to Senator Franklin’s “Arbitration Fairness Act,” out of either the House or Senate committees. Time will tell whether the Concepcion decision will permit plaintiffs’ lawyer politics to overrule in whole or part current federal policy on arbitration and the AT&T v. Concepcion ruling. Right now, it seems doubtful.
Pliva, Inc. v. Mensing: The Preemption Puzzle: Why are Manufacturers of Generic Drugs Protected by Preemption and Not Manufacturers of Brand Name Drugs?
One of the most interesting civil justice and tort law related decisions of this Supreme Court’s Term was Pliva, Inc. v. Mensing. The majority of the Court held that manufacturers of generic drugs, who follow FDA rules with respect to their warnings, are shielded from state tort law in failure to warn product liability cases. The majority found that “impossibility” was brought about preemption because manufacturers of generic drugs could not, on their own, change or enhance their warnings. If the generic manufacturers wish to change a warning they must ask the FDA for permission for such a change. It was impossible to comply both with FDA rules and a jury’s tort law based finding that additional warnings were required.
Only two years ago in Wyeth v. Levine, the Supreme Court found that there was no preemption with respect to tort law duty to warn with a brand name drug, even though the FDA had specifically approved the warnings involved in the case and there was no indication that the manufacturer had committed any fraud. But, unlike the situation with respect to generic drug manufacturers, manufacturers of brand name drugs can change their warnings on their own; they do not need FDA approval to do so. They can seek “forgiveness” from the FDA instead of permission. If the FDA considers the change and decides the warning is improper, or unnecessary, then the brand name drug company has to pull back on the warning. But, failure of the brand name drug company to act on its own may result in product liability exposure unless there is “clear evidence” that the FDA would not approve the additional warning.
The dissent in Pliva observed the generic drug manufacturer could have at least tried and asked the FDA to make a change, and the failure of the generic drug manufacturer to take that step was enough to forestall preemption of a tort claim. Curiously, the one thing that both the majority and the dissent agree on is that the current pattern of preemption rulings in the medical device and drug area does not make a lot of “sense.” The total medical liability picture is this. Medical device companies benefit from express preemption, generic drug manufacturers benefit from implied preemption, but brand name drug manufacturers stand exposed to tort liability, with juries “second guessing” the FDA’s judgment about what are proper warnings. Plaintiffs’ lawyers may argue that there is something wrong with this picture and there may be judicial and political fallout from the Pliva decision.
Even before Pliva, plaintiffs’ lawyers have tried to make brand name drug manufacturers liable for injuries allegedly caused by generic drug company’s products. In the Conte case a mid-level California appellate court held a brand name drug manufacturer, Wyeth Pharmaceutical, subject to liability for failure to warn, even though it did not make the drug in question. It was made by a generic manufacturer. Although rejected by about eight other courts, the California court embraced so-called “misrepresentation theory” where the words in the Physician’s Desk Reference, written by the brand name company, were deemed a sufficient basis for plaintiffs to sue the brand name manufacturer. While lawyers can always develop imaginative theories to reach “deep pocket” defendants, it defies logic and fairness to hold a brand name manufacturer liable for harms caused by a competitor’s product.
Will the Pliva and Levine decisions with no preemption for brand name drug companies and preemption for generic drug companies be a springboard for more Conte-like decisions? From what plaintiffs’ lawyers have indicated so far, the answer is yes. But, wise courts should say no. Solid amicus briefs and other learned means should be utilized to prevent such an inappropriate expansion of tort law.
According to the opinion in Pliva, about seventy percent of drugs sold in the United States are generics. Should people who take generic drugs be made aware of the fact that if something goes awry and they want to bring a failure to warn claim, they could do so against the brand name drug manufacturer but not the generic drug manufacturer? At this time it is uncertain whether state or federal law will promote such disclosure. One consequence of Pliva that does seem likely is that plaintiffs’ lawyers will, once again, try to convince Congress to annul preemption for all drug manufacturers. They will proceed under the false premise that the FDA is too weak a guardian to protect public safety. They will argue that actual tort law exposure is needed to protect the public from “hazards” caused by pharmaceuticals.
The plaintiffs’ lawyers apparently believe the myth: that tort law is needed for safety, and that the FDA cannot protect the public. That myth surfaced in the majority opinion in Levine for brand name drugs, but disappeared from the majority opinion in Pliva. The myth ended up as one of the basis for the dissent. This is where it belongs. Preemption on the issue of duty to warn makes sense for all drugs, branded or generic. If the FDA is not doing a good job of approving warnings, improve the FDA. Do not leave decisions of this type to the “random roulette” of state trial court decisions.
CSX Trans., Inc. v. McBride: Throwing Out “Proximate Case” when Workers Sue Their Employer Railroads: Has the FELA Become a Worker Compensation System with Tort Damages?
Not many people outside of the railroad industry are familiar with the Federal Employers’ Liability Act (FELA). The name of the act is somewhat confusing as it does not involve federal employers. The FELA, which applies to interstate railroad employees and those who work on ships in maritime (called the Jones Act), shows how an injured employee can sue his employer, the railroad, under tort law.
Some people believe that the “sins of our fathers” fall on later generations. Perhaps this is true of the FELA. Owners of railroads at the turn of the century did not want to embrace worker compensation. Instead, they decided to live with a very relaxed rule of tort law, namely the FELA. Under the FELA, a railroad employee can successfully sue his employer if the employee proves that his injury was caused by his employer’s negligence (even a small amount of negligence will do). Under the FELA statute, the plaintiff is not barred by a contributory negligence or assumption of risk defense. Instead, an award is reduced to the extent a jury finds the plaintiff at fault. Damages that are potentially available are full tort damages: complete economic losses, uncapped pain and suffering damages, and when appropriate, punitive damages.
The last time the Supreme Court had a major FELA case was back in 1957. The case was Rogers v. Missouri Pacific, ARCO, 352 U.S. 500 (1957). In Rogers, the Court held that all the plaintiff worker had to show was a “scintilla” of negligence to win his or her case. In this Term in McBride, the Supreme Court had to decide whether the plaintiff had to also show that the defendant’s negligence, however slight, was a “proximate cause” of his or her injuries. The facts were not unusual. The plaintiff, Robert McBride, worked as a locomotive engineer for CSX. McBride seriously injured his hand while using an independent brake. But, this is where the case gets interesting. The issue was whether CSX was entitled to an instruction that the plaintiff had to prove the defendant’s negligence, however slight, was the “proximate cause” of his injury. As every lawyer who reads these words knows, “proximate cause” is a challenging topic for law students. It can be confusing to non-lawyers as well. First year law school tort’s case books, including my own, spend over one hundred pages on proximate cause. This is why. Proximate cause is one of four basic elements of tort law. The other three include standards of liability, “but for” causation, and damages. Eliminating proximate cause, in the view of some, makes a defendant responsible for things that are extraordinarily remote from a defendant’s act of negligence. Both the McBride majority and minority opinions (another 5-4 split) acknowledge that fact. Nevertheless, the majority, including conservative Justice Thomas and four far more liberal Justices, decided proximate cause should go – one need not prove it to win. Chief Justice Roberts’s dissent, which appeared as if it were written by a very wise law professor, presented hypothetical’s of highly remote claims that will now be in play now that an FELA plaintiff does not have to prove proximate cause.
As a practical matter, plaintiffs will only have to show “but for” causation. Basically, if the defendant had not been negligent, he or she would not have been injured. Other causes, bad equipment, reckless acts of drivers wrongfully crossing the tracks, may be swept aside with the disappearance of the proximate cause requirement. Allowing remote acts of negligence to support a lawsuit may have a significant liability expanding effect on FELA physical injury cases such as McBride. But, it is more likely that the toxic tort cases will be the area where elimination of “proximate cause” rings the cash register the loudest for the FELA plaintiffs’ bar.
The other six decisions mentioned in this brief essay may help defendants. But, there will be clear cash generated by this FELA case for members of the plaintiffs’ bar. Unlike the other cases discussed in this essay, we can be assured that the plaintiffs’ bar will not go to Congress to try to alter the McBride case. The railroad industry may, however, reconsider (they have done so before) whether they want to work to repeal the FELA and replace it with a worker compensation system. In the past, the railroad unions demanded such an exorbitant price for giving up FELA, that no agreement was ever reached. Only the future will tell the politics of this one.
There may have been more civil justice and tort related cases decided this Term than any other in the history of the Supreme Court. An important thread that stitches almost all of the cases together – class actions, mandatory arbitration, environmental tort law, and preemptive actions – is that each of them, in some way, could be modified by Congress. Even the topic in the two decisions that have a constitutional basis, namely, those focusing on when a foreign manufacturer may be sued under the due process clause of the Constitution, could be addressed by Congress. For instance, Congress might be asked by plaintiffs’ lawyers to provide a greater ability for plaintiffs to sue foreign manufacturers in federal courts than in state courts.
On the other hand, there is no pro-plaintiff or pro-defendant theme that holds all of the cases together. It was once said that the Supreme Court is “Supreme” not because of its brilliance, but because it is “final.” Regardless of whether that observation is accurate, with most civil justice issues considered by the Court, the “real” final arbitrator is Congress, and the people who elect them. Those who love “proximate cause,” go to the polls soon!
- Victor Schwartz is Chairman of the law firm Shook, Hardy, & Bacon L.L.P.’s Washington, D.C.-based Public Policy Group. On July 7, 2011, Victor Schwartz and other legal scholars and Supreme Court reporters addressed an audience at The Heritage Foundation on the Supreme Court’s 2010-2011 Term.
 Senator Al Franken sponsored legislation that prohibits government contractors from using mandatory arbitration agreements in cases of rape. As a result, Ms. Jones’ case against her employer was heard in a court of law. The jury, however, found that Ms. Jones’ was not raped. There was also significant evidence presented during the case to suggest she fabricated key parts of her story. See, Stephanie Mercimer, Why Jamie Leigh Jones Lost Her KBR Rape Case, Mother Jones, July 7, 2011, at http://motherjones.com/politics/2011/07/kbr-could-win-jamie-leigh-jones-rape-trial.