Is this the death of class actions based on state law?
Class Action Woes
As though it isn’t hard enough to wrangle together all the people harmed by a widespread practice into one multi-district litigation, the Supreme Court just made it harder to file and win class action lawsuits.
The case that landed in front of the Court, Bristol-Myers Squibb v. Superior Court of California, started over the blood-thinner Plavix, made by pharmaceutical giant Bristol-Myers Squibb (BMS). Nearly 700 plaintiffs claim to have been harmed by the drug, so they joined together and filed a lawsuit in California, where 86 of them lived and where BMS had carried out extensive business, making around $1 billion off of Plavix in California.
But on Monday, June 19, 2017, the U.S. Supreme Court determined that the 592 plaintiffs who didn’t live in California could not join the lawsuit in that state. Justice Alito, writing for the majority, said that those plaintiffs could either sue on BMS’s home turf (New York, where they’re headquartered, or Delaware, where they’re incorporated), or they could bring separate suits in each state where they live.
Some analysts saw this coming. Just last May, the Court limited patent infringement lawsuits to the corporation’s home state in TC Heartland v. Kraft Foods. Eight days later they determined in BNSF Railway v. Tyrrell that the Fourteenth Amendment protects corporations from a lawsuit in a state where they are not ‘at home,’ if the harm in question happened elsewhere.
The practice under attack here by the Supreme Court has been decried by corporations as ‘court shopping.’ It sparks the fear that greedy lawyers are tilting the scales of justice by filing their class action suits in jurisdictions that will be most friendly to them. But Justice Sotomayor, in her lone dissent, expresses some dire concerns over the resulting legal landscape for ordinary people who have been hurt by corporate misconduct. “I fear the consequences of the Court’s decision today will be substantial,” she writes. If the choices are to do separate state lawsuits or to file in the corporation’s home court,attorneys will find it “difficult to aggregate the claims of plaintiffs across the country whose claims may be worth little alone.”
“A core concern in this Court’s personal jurisdiction cases is fairness. And there is nothing unfair about subjecting a massive corporation to suit in a State for a nationwide course of conduct that injures both forum residents and nonresidents alike.”
She notes that another way the court’s majority decision will result in “piecemeal litigation and the bifurcation of claims” is that the ruling makes it “impossible to bring a nationwide mass action in state court against defendants who are ‘at home’ in different States.” In the Bristol-Myers Squibb case, another defendant named in the lawsuit was McKesson Corporation, headquartered in California and responsible for a full quarter of BMS’s worldwide revenue. The lawsuit states that the two collaborated to hurt consumers, but regardless of their connection, will they now have to be sued in two separate lawsuits in separate jurisdictions?
Another question left dangling by this Court’s decision is how a class action lawsuit could be brought against corporations which are not headquartered in any state. Are we now required to bring 50 different lawsuits, one per state, against such defendants? How would such a requirement lead to greater justice, if it eviscerates plaintiffs’ ability to minimize costs, share discovery, and maximize recoveries on claims that may be too small on their own to justify bringing suit?
The elephant in the room here is that we live in a world where corporations are likely to headquarter themselves in jurisdictions that are lenient toward their misconduct, even as they affect the health and well-being of people all over the country. If all nationwide class actions must take place on in their home jurisdiction, the ruling allows corporations to themselves essentially ‘forum shop.’
Taking an even wider view, this is also likely to strengthen the process under which states reduce regulatory law and become more lax against corporate misconduct, making the argument more clear that any strict state law stopping corporations from exploiting or harming others would direct result in tax loss, as businesses flee to more lax jurisdictions.
Sotomayor writes, with some doom in her tone: “the majority appears to concede that this is not, at bottom, a case about fairness but instead a case about power.” She asks:
What interests are served by preventing the consolidation of claims and limiting the forums in which they can be consolidated? The effect of the Court’s opinion today is to eliminate nationwide mass actions in any State other than those in which a defendant is “‘essentially at home.’ [. . .]. Such a rule hands one more tool to corporate defendants determined to prevent the aggregation of individual claims, and forces injured plaintiffs to bear the burden of bringing suit in what will often be far flung jurisdictions.
[. . .] The effect of today’s opinion will be to curtail— and in some cases eliminate—plaintiffs’ ability to hold corporations fully accountable for their nationwide conduct.
As sharp as Justice Sotomayor’s reasoning is here, eight Justices sided against her nonetheless.
If that news isn’t depressing enough on its own, class actions are facing an attack from another quarter: the legislative branch. The terribly named Fairness in Class Action Litigation Act was passed by the U.S. House in March. Consumer advocates worry it could severely limit who can join together in a class to those who received nearly identical injuries, and would also put personal information, like the names of victims, into the public realm, where they could be further victimized by scam artists.
The bill was not passed without opposition. Rep. Jamie Raskin from Maryland opined:
“I oppose this misguided legislations because it sends another huge valentine and wet kiss to large corporate polluters and tortfeasors, but gives the finger to millions of American citizens who suffer injuries from these defendants.”
It’s uncertain what will happen with this bill, but we’ll continue watching the shifting landscape of class action lawsuits, and search for creative ways plaintiff-side attorneys can still stand up to huge corporations.