Monday, September 27, 2010

SCOTUS Stays $250M+ Class Action Judgment

On Friday, Justice Scalia (Circuit Justice for the Fifth Circuit) issued an order staying a quarter-of-a-billion-dollar judgment entered in Louisiana state court against several tobacco companies. The case is Philip Morris USA Inc. v. Scott (No. 10A273, docket available here), and the lower court opinion is at 36 So. 3d 1046. The defendants sought the stay to give them time to file a cert. petition, which will challenge the judgment on federal due process grounds. In granting the stay, Justice Scalia concludes: “I think it reasonably probable that four Justices will vote to grant certiorari, and significantly possible that the judgment below will be reversed.”

More from Scalia’s Opinion in Chambers

Applicants complain of many violations of due process, including (among others) denial of the opportunity to cross-examine the named representatives of the class, factually unsupported estimations of the number of class members entitled to relief, and constant revision of the legal basis for the plaintiffs’ claim during the course of litigation. Even though the judgment that is the alleged consequence of these claimed errors is massive—more than $250 million—I would not be inclined to believe that this Court would grant certiorari to consider these fact-bound contentions that may have no effect on other cases.

But one asserted error in particular (and perhaps some of the others as well) implicates constitutional constraints on the allowable alteration of normal process in class actions. This is a fraud case, and in Louisiana the tort of fraud normally requires proof that the plaintiff detrimentally relied on the defendant’s misrepresentations. 949 So. 2d, at 1277. Accordingly, the Court of Appeal indicated that members of the plaintiff class who wish to seek individual damages, rather than just access to smoking cessation measures, would have to establish their own reliance on the alleged distortions. Ibid. But the Court of Appeal held that this element need not be proved insofar as the class seeks payment into a fund that will benefit individual plaintiffs, since the defendants are guilty of a “distort[ion of] the entire body of public knowledge” on which the “class as a whole” has relied. Id., at 1277–1278. Thus, the court eliminated any need for plaintiffs to prove, and denied any opportunity for applicants to contest, that any particular plaintiff who benefits from the judgment (much less all of them) believed applicants’ distortions and continued to smoke as a result.

Applicants allege that this violates their due-process right to “an opportunity to present every available defense.” Lindsey v. Normet, 405 U. S. 56, 66 (1972) (internal quotation marks omitted) (quoting American Surety Co. v. Baldwin, 287 U. S. 156, 168 (1932)). . . . The apparent consequence of the Court of Appeal’s holding is that individual plaintiffs who could not recover had they sued separately can recover only because their claims were aggregated with others’ through the procedural device of the class action.
 
The extent to which class treatment may constitutionally reduce the normal requirements of due process is an important question. National concern over abuse of the class-action device induced Congress to permit removal of most major class actions to federal court, see 28 U. S. C. §1332(d), where they will be subject to the significant limitations of the Federal Rules. Federal removal jurisdiction has not been accorded, however, over many class actions in which more than two-thirds of the plaintiff class are citizens of the forum State. See §1332(d)(4). Because the class here was drawn to include only residents of Louisiana, this suit typifies the sort of major class action that often will not be removable, and in which the constraints of the Due Process Clause will be the only federal protection. There is no conflict between federal courts of appeals or between state supreme courts on the principal issue I have described; but the former seems impossible, since by definition only state class actions are at issue; and the latter seems implausible, unless one posits the unlikely case where the novel approach to class-action liability is a legislative rather than judicial creation, or the creation of a lower state court disapproved by the state supreme court on federal constitutional grounds. This constitutional issue ought not to be permanently beyond our review.

For additional coverage, see Lyle Denniston’s post on SCOTUSblog.

--A

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