Civil Procedure & Federal Courts Blog

Commentary: Jurisdictionality and Stern v. Marshall

From Professor Scott Dodson (William & Mary) comes the following commentary on this week’s Supreme Court decision in Stern v. Marshall:

Stern v. Marshall is notable for a number of reasons, not all of which are related to the law.  As for the law, I suspect that the opinion will be read mostly for the holding (and the dissent to it) of the scope of Article III’s “judicial power.”  But there’s a unanimous holding of interest to folks (like me) who watch the Court’s growing awareness of the nuances of jurisdictionality.  The labels “jurisdictional” and “nonjurisdictional” are less than they purport to be.  They purport to be dichotomous opposites, describing mutually exclusive sets of effects.  And the Court has largely bought into the dichotomy, characterizing something as jurisdictional and therefore has all the effects of jurisdictionality (as in the maligned opinion Bowles v. Russell), or that something is nonjurisdictional and therefore has none of the effects of jurisdictionality (as in Henderson v. Shinseki).  But, as I have argued elsewhere, that dichotomy is false—nonjurisdictional rules can have jurisdictional effects.  Thus, characterizing a requirement “nonjurisdictional” says very little about its effects, and those effects (waivability, forfeitability, consentability, susceptibility to equitable discretion, etc.) are usually the key issues at stake in the dispute.

In a short section in Stern, the Court appeared to move closer to my position, indicating that perhaps the Court is starting to think more carefully about these nuances.  At issue in Stern was whether Sec. 157(b)(5) of the Bankruptcy Code was jurisdictional such that it could not be forfeited.  The Court concluded that the provision was not jurisdictional (see pages 12-14 of the slip opinion).  I think the Court was correct on this question, though its analysis did not consider certain factors that I think important to the inquiry and that I have spelled out in detail elsewhere.  The Court then made an interesting move.  Ever so briefly, it then considered whether the nonjurisdictional rule was forfeitable (see pages 15-16).  Although I wouldn’t characterize the Court’s analysis here as thorough, I do think the Court was correct to engage in it.  And the Court’s willingness to do so suggests that the Court recognizes that a nonjurisdictional rule could be nonforfeitable.  It’s hard to tell how deeply the Court is thinking about these issues (particularly because the Court ultimately found Sec. 157(b)(5) to be forfeitable and thus to have no jurisdictional effects), but I call it a step in the right direction toward recognizing that the labels “jurisdictional” and “nonjurisdictional” are often unhelpful and misleading.

As an aside, the case did not have occasion to consider the converse issue of how jurisdictional rules can hybridize with nonjurisdictional effects.

--Scott Dodson

SCOTUS Cert Grant of Interest on Article III Standing

This past week was a busy one at the Supreme Court, but we wanted to note that Monday’s orders included a grant of certiorari in First American Financial Corp. v. Edwards (No. 10-708). The Court granted cert. only as to question 2, which involves Article III standing. From the cert. petition’s questions presented (with a little cutting and pasting to incorporate those parts of question 1 that were referenced in question 2)...

Section 8(a) of the Real Estate Settlement Procedures Act of 1974 ("RESPA" or "the Act") provides that "[n]o person shall give and no person shall accept any fee, kickback, or thing of value pursuant to any agreement or understanding ... that business incident to or a part of a real estate settlement service involving a federally related mortgage loan shall be referred to any person." 12 U.S.C. § 2607(a). Section 8(d)(2) of the Act provides that any person "who violate[s]," inter alia, § 8(a) shall be liable "to the person or persons charged for the settlement service involved in the violation in an amount equal to three times the amount of any charge paid for such settlement service." Id. § 2607(d)(2).  

2.  Does [a private purchaser of real estate settlement services] have standing to sue under Article III, § 2 of the United States Constitution, which provides that the federal judicial power is limited to "Cases" and "Controversies" and which this Court has interpreted to require the plaintiff to "have suffered an 'injury in fact,'" Lujan v. Defenders of Wildlife, 504 U.S. 555, 560 (1992), [in the absence of any claim that the alleged violation affected the price, quality, or other characteristics of the settlement services provided]?

SCOTUSblog’s case file is available here, which contains links to the Ninth Circuit’s opinion below and the cert-stage briefs.

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SCOTUS Decision in Stern v. Marshall

Yesterday the Supreme Court issued its decision in Stern v. Marshall (No. 10-179). Our earlier coverage of the case is here and here. Chief Justice Roberts writes the majority opinion, joined by Justices Scalia, Kennedy, Thomas and Alito. Justice Scalia also writes a separate concurring opinion. Justice Breyer writes a dissenting opinion, joined by Justices Ginsburg, Sotomayor, and Kagan. Chief Justice Roberts’ opinion opens in Dickensian fashion:

This “suit has, in course of time, become so complicated, that . . . no two . . . lawyers can talk about it for five minutes, without coming to a total disagreement as to all the premises. Innumerable children have been born into the cause: innumerable young people have married into it;” and, sadly, the original parties “have died out of it.” A “long procession of [judges] has come in and gone out” during that time, and still the suit “drags its weary length before the Court.”

Those words were not written about this case, see C. Dickens, Bleak House, in 1 Works of Charles Dickens 4–5 (1891), but they could have been. This is the second time we have had occasion to weigh in on this long-running dispute between Vickie Lynn Marshall and E. Pierce Marshall over the fortune of J. Howard Marshall II, a man believed to have been one of the richest people in Texas. The Marshalls’ litigation has worked its way through state and federal courts in Louisiana, Texas, and California, and two of those courts—a Texas state probate court and the Bankruptcy Court for the Central District of California—have reached contrary decisions on its merits. The Court of Appeals below held that the Texas state decision controlled, after concluding that the Bankruptcy Court lacked the authority to enter final judgment on a counterclaim that Vickie brought against Pierce in her bankruptcy proceeding. To determine whether the Court of Appeals was correct in that regard, we must resolve two issues: (1) whether the Bankruptcy Court had the statutory authority under 28 U. S. C. §157(b) to issue a final judgment on Vickie’s counterclaim; and (2) if so, whether conferring that authority on the Bankruptcy Court is constitutional.

Although the history of this litigation is complicated, its resolution ultimately turns on very basic principles. Article III, §1, of the Constitution commands that “[t]he judicial Power of the United States, shall be vested in one supreme Court, and in such inferior Courts as the Congress may from time to time ordain and establish.” That Article further provides that the judges of those courts shall hold their offices during good behavior, without diminution of salary. Ibid. Those requirements of Article III were not honored here. The Bankruptcy Court in this case exercised the judicial power of the United States by entering final judgment on a common law tort claim, even though the judges of such courts enjoy neither tenure during good behavior nor salary protection. We conclude that, although the Bankruptcy Court had the statutory authority to enter judgment on Vickie’s counterclaim, it lacked the constitutional authority to do so.

The majority’s analysis of the Article III issue is quite lengthy, prompting Justice Scalia to note in his concurrence: “The sheer surfeit of factors that the Court was required to consider in this case should arouse the suspicion that something is seriously amiss with our jurisprudence in this area.” The majority ultimately concludes that “[t]he Bankruptcy Court below lacked the constitutional authority to enter a final judgment on a state law counterclaim that is not resolved in the process of ruling on a creditor’s proof of claim.” [Slip Op. 38.] Particularly important to the majority were the decisions in Northern Pipeline, 458 U. S. 50 (1982), and Granfinanciera, 492 U. S. 33 (1989). From p.21:

It is clear that the Bankruptcy Court in this case exercised the “judicial Power of the United States” in purporting to resolve and enter final judgment on a state common law claim, just as the court did in Northern Pipeline. No “public right” exception excuses the failure to comply with Article III in doing so, any more than in Northern Pipeline. Vickie argues that this case is different because the defendant is a creditor in the bankruptcy. But the debtors’ claims in the cases on which she relies were themselves federal claims under bankruptcy law, which would be completely resolved in the bankruptcy process of allowing or disallowing claims. Here Vickie’s claim is a state law action independent of the federal bankruptcy law and not necessarily resolvable by a ruling on the creditor’s proof of claim in bankruptcy. Northern Pipeline and our subsequent decision in Granfinanciera rejected the application of the “public rights” exception in such cases.

In dissent, Justice Breyer argues that the majority “fails to follow the analysis that this Court more recently has held applicable to the evaluation of claims of a kind before us here, namely, claims that a congressional delegation of adjudicatory authority violates separation-of-powers principles derived from Article III. See Thomas v. Union Carbide Agricultural Products Co., 473 U. S. 568 (1985); Commodity Futures Trading Comm’n v. Schor, 478 U. S. 833 (1986).” [Dissenting Op. 2]. He explains at p.6:

In both [Thomas and Schor], the Court took a more pragmatic approach to the constitutional question. It sought to determine whether, in the particular instance, the challenged delegation of adjudicatory authority posed a genuine and serious threat that one branch of Government sought to aggrandize its own constitutionally delegated authority by encroaching upon a field of authority that the Constitution assigns exclusively to another branch.

All nine Justices agree on the statutory question, however. In examining that issue, the Court weighed in once again on the distinction between jurisdictional and nonjurisdictional requirements. Here, the subject of that inquiry was section 157(b)(5) of the bankruptcy code, which provides: “The district court shall order that personal injury tort and wrongful death claims shall be tried in the district court in which the bankruptcy case is pending, or in the district court in the district in which the claim arose.” As Chief Justice Roberts explained [Slip Op. 12], “Pierce asserts that his defamation claim is a ‘personal injury tort,’ that the Bankruptcy Court therefore had no jurisdiction over that claim, and that the court therefore necessarily lacked jurisdiction over Vickie’s counterclaim as well.” The Court rejected Pierce’s argument. From pp.13-14:

We need not determine what constitutes a “personal injury tort” in this case because we agree with Vickie that §157(b)(5) is not jurisdictional, and that Pierce consented to the Bankruptcy Court’s resolution of his defamation claim. Because “[b]randing a rule as going to a court’s subject-matter jurisdiction alters the normal operation of our adversarial system,” Henderson v. Shinseki, 562 U. S. ___, ___–___ (2011) (slip op., at 4–5), we are not inclined to interpret statutes as creating a jurisdictional bar when they are not framed as such. See generally Arbaugh v. Y & H Corp., 546 U. S. 500, 516 (2006) (“when Congress does not rank a statutory limitation on coverage as jurisdictional, courts should treat the restriction as nonjurisdictional in character”). Section 157(b)(5) does not have the hallmarks of a jurisdictional decree. To begin, the statutory text does not refer to either district court or bankruptcy court “jurisdiction,” instead addressing only where personal injury tort claims “shall be tried.”

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SCOTUS Decision in PLIVA v. Mensing: Federal Preemption & Generic Drugs

Today the Supreme Court issued its decision in PLIVA v. Mensing (No. 09-993), which is actually three consolidated cases about federal preemption of state-law tort liability in claims involving generic drugs. Justice Thomas writes the majority opinion, joined by Chief Justice Roberts and Justices Scalia, Kennedy (in part), and Alito. Justice Sotomayor writes a dissenting opinion, joined by Justices Ginsburg, Breyer, and Kagan. Justice Thomas’s majority opinion begins:

These consolidated lawsuits involve state tort-law claims based on certain drug manufacturers’ alleged failure to provide adequate warning labels for generic metoclopramide. The question presented is whether federal drug regulations applicable to generic drug manufacturers directly conflict with, and thus pre-empt, these state-law claims. We hold that they do.

Justice Sotomayor’s dissent begins:

The Court today invokes the doctrine of impossibility pre-emption to hold that federal law immunizes generic drug manufacturers from all state-law failure-to-warn claims because they cannot unilaterally change their labels. I cannot agree. We have traditionally held defendants claiming impossibility to a demanding standard: Until today, the mere possibility of impossibility had not been enough to establish pre-emption.

Although Justice Kennedy provides the fifth vote in support of preemption, he does not join Part III-B-2 of Justice Thomas's opinion. That section of the opinion (which starts on p.15 of the slip op.) argues that “the text of the [Supremacy] Clause—that federal law shall be supreme, ‘any Thing in the Constitution or Laws of any State to the Contrary notwithstanding’—plainly contemplates conflict pre-emption by describing federal law as effectively repealing contrary state law.” Justice Thomas explains:

The phrase “any [state law] to the Contrary notwithstanding” is a non obstante provision. . . . A non obstante provision in a new statute acknowledged that the statute might contradict prior law and instructed courts not to apply the general presumption against implied repeals. The non obstante provision in the Supremacy Clause therefore suggests that federal law should be understood to impliedly repeal conflicting state law. Further, the provision suggests that courts should not strain to find ways to reconcile federal law with seemingly conflicting state law.

For our earlier coverage of the case, see here and here.

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Cassone and Ramello on the Economics of Class Actions

Professors Alberto Cassone and Giovanni Battista Ramello (Universita del Piemonte Orientale) have posted on SSRN a draft of their article, The Simple Economics of Class Action: Private Provision of Club and Public Goods.  Here’s the abstract:

This article uses economic categories to show how the reorganization of civil procedure in the case of class action is not merely aimed at providing a more efficient litigation technology, as hierarchies (and company law) might do for other productive activities, but that it also serves to create a well defined economic organization ultimately aimed at producing a set of goods, first and foremost among which are justice and efficiency.

Class action has the potential to recreate, in the judicial domain, the same effects that individual interests and motivations, governed by the perfect competition paradigm, bring to the market.

Moreover, through economic analysis it is possible to rediscover not only the productive function of this legal machinery, but also that partial compensation of victims and large profits for the class counsel, far from being a side-effect, are actually a necessary condition for reallocation of the costs and risks associated with the legal action.

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Fun Photo "Evidence" in a Summary Judgment Brief

In the ongoing lawsuit between Ross Perot, Jr. and Mark Cuban for mismanagement of the Dallas Mavericks, we have a new addition to fun motions to show our students.  Cuban's lawyers amended their motion for summary judgment to include a large photo of the Mavericks celebrating after winning the NBA title.  

Deadspin covers the story here and here is the summary judgment motion.

RJE

SCOTUS Decision in Turner v. Rogers

This week, the Supreme Court issued its decision in Turner v. Rogers (No. 10-10), which addresses the procedures required for civil contempt proceedings leading to incarceration. Justice Breyer writes the majority opinion, joined by Justices Kennedy, Ginsburg, Sotomayor, and Kagan. Justice Thomas writes a dissenting opinion, joined by Justice Scalia and partially joined by Chief Justice Roberts and Justice Alito. Justice Breyer’s majority opinion begins:

South Carolina’s Family Court enforces its child support orders by threatening with incarceration for civil contempt those who are (1) subject to a child support order, (2) able to comply with that order, but (3) fail to do so. We must decide whether the Fourteenth Amendment’s Due Process Clause requires the State to provide counsel (at a civil contempt hearing) to an indigent person potentially faced with such incarceration. We conclude that where as here the custodial parent (entitled to receive the support) is unrepresented by counsel, the State need not provide counsel to the noncustodial parent (required to provide the support). But we attach an important caveat, namely, that the State must nonetheless have in place alternative procedures that assure a fundamentally fair determination of the critical incarceration-related question, whether the supporting parent is able to comply with the support order.

The Court based its conclusion on “the ‘distinct factors’ that this Court has previously found useful in deciding what specific safeguards the Constitution’s Due Process Clause requires in order to make a civil proceeding fundamentally fair. Mathews v. Eldridge, 424 U. S. 319, 335 (1976) (considering fairness of an administrative proceeding).”

As relevant here those factors include (1) the nature of “the private interest that will be affected,” (2) the comparative “risk” of an “erroneous deprivation” of that interest with and without “additional or substitute procedural safeguards,” and (3) the nature and magnitude of any countervailing interest in not providing “additional or substitute procedural requirement[s].” Ibid. See also Lassiter, 452 U. S., at 27–31 (applying the Mathews framework).

Applying this framework, the Court reasons (some citations omitted):

[W]e find three related considerations that, when taken together, argue strongly against the Due Process Clause requiring the State to provide indigents with counsel in every proceeding of the kind before us.

First, the critical question likely at issue in these cases concerns, as we have said, the defendant’s ability to pay. That question is often closely related to the question of the defendant’s indigence. But when the right procedures are in place, indigence can be a question that in many—but not all—cases is sufficiently straightforward to warrant determination prior to providing a defendant with counsel, even in a criminal case. . . .  

Second, sometimes, as here, the person opposing the defendant at the hearing is not the government represented by counsel but the custodial parent unrepresented by counsel. The custodial parent, perhaps a woman with custody of one or more children, may be relatively poor, unemployed, and unable to afford counsel. Yet she may have encouraged the court to enforce its order through contempt. She may be able to provide the court with significant information. A requirement that the State provide counsel to the noncustodial parent in these cases could create an asymmetry of representation that would alter significantly the nature of the proceeding. Doing so could mean a degree of formality or delay that would unduly slow payment to those immediately in need. And, perhaps more important for present purposes, doing so could make the proceedings less fair overall, increasing the risk of a decision that would erroneously deprive a family of the support it is entitled to receive.

Third, as the Solicitor General points out, there is available a set of “substitute procedural safeguards,” Mathews, 424 U. S., at 335, which, if employed together, can significantly reduce the risk of an erroneous deprivation of liberty. They can do so, moreover, without incurring some of the drawbacks inherent in recognizing an automatic right to counsel. Those safeguards include (1) notice to the defendant that his “ability to pay” is a critical issue in the contempt proceeding; (2) the use of a form (or the equivalent) to elicit relevant financial information; (3) an opportunity at the hearing for the defendant to respond to statements and questions about his financial status, (e.g., those triggered by his responses on the form); and (4) an express finding by the court that the defendant has the ability to pay.

The Court concludes:

The record indicates that Turner received neither counsel nor the benefit of alternative procedures like those we have described. He did not receive clear notice that his ability to pay would constitute the critical question in his civil contempt proceeding. No one provided him with a form (or the equivalent) designed to elicit information about his financial circumstances. The court did not find that Turner was able to pay his arrearage, but instead left the relevant “finding” section of the contempt order blank. The court nonetheless found Turner in contempt and ordered him incarcerated. Under these circumstances Turner’s incarceration violated the Due Process Clause.

Justice Thomas’s dissenting opinion begins:

The Due Process Clause of the Fourteenth Amendment does not provide a right to appointed counsel for indigent defendants facing incarceration in civil contempt proceedings. Therefore, I would affirm. Although the Court agrees that appointed counsel was not required in this case, it nevertheless vacates the judgment of the South Carolina Supreme Court on a different ground, which the parties have never raised. Solely at the invitation of the United States as amicus curiae, the majority decides that Turner’s contempt proceeding violated due process because it did not include “alternative procedural safeguards.” Consistent with this Court’s longstanding practice, I would not reach that question.

Among the most notable aspects of Justice Thomas’s dissent are two sections that are joined by Justice Scalia but not by the other dissenters (Chief Justice Roberts and Justice Alito). From Part I-A of the dissent:

Under an original understanding of the Constitution, there is no basis for concluding that the guarantee of due process secures a right to appointed counsel in civil contempt proceedings. It certainly does not do so to the extent that the Due Process Clause requires “‘that our Government must proceed according to the “law of the land”—that is, according to written constitutional and statutory provisions.’” Hamdi v. Rumsfeld, 542 U. S. 507, 589 (2004) (Thomas, J., dissenting) (quoting In re Winship, 397 U. S. 358, 382 (1970) (Black, J., dissenting)). . . . Although the Sixth Amendment secures a right to “the Assistance of Counsel,” it does not apply here because civil contempt proceedings are not “criminal prosecutions.” U. S. Const., Amdt. 6. Moreover, as originally understood, the Sixth Amendment guaranteed only the “right to employ counsel, or touse volunteered services of counsel”; it did not require the court to appoint counsel in any circumstance.

Part III of Justice Thomas’s dissent challenges the majority’s use of “the Mathews v. Eldridge balancing test,” arguing that it “does not account for the interests of the child and custodial parent, who is usually the child’s mother.” He concludes (citations omitted):  

Although I think that the majority’s analytical framework does not account for the interests that children and mothers have in effective and flexible methods to secure payment, I do not pass on the wisdom of the majority’s preferred procedures. Nor do I address the wisdom of the State’s decision to use certain methods of enforcement. Whether “deadbeat dads” should be threatened with incarceration is a policy judgment for state and federal lawmakers, as is the entire question of government involvement in the area of child support. This and other repercussions of the shift away from the nuclear family are ultimately the business of the policymaking branches.

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NY Times Discussion on Wal-Mart v. Dukes

Yesterday’s New York Times contains a discussion entitled A Death Blow to Class Action?, with contributions by: 

• Suzette Malveaux
• Matthew Bodie
• Ralph Richard Banks
• John Elwood
• Tanya Hernandez
• Richard Primus
• Melissa Hart

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Johnson on Securities Class Actions in State Court

Professor Jennifer Johnson (Lewis & Clark) has posted on SSRN a draft of her article, Securities Class Actions in State Court, which is forthcoming in the University of Cincinnati Law Review.  Here’s the abstract:

Over the past two decades, Congress has gradually usurped the power of state regulators to enforce state securities laws and the power of state courts to adjudicate securities disputes. This Paper evaluates the impact of Congressional preemption and preclusion upon state court securities class actions. Utilizing a proprietary database, the Paper presents and analyzes a comprehensive dataset of 1500 class actions filed in state courts from 1996-2010. The Paper first examines the permissible space for state securities class actions in light of Congressional preclusion and preemption embodied in the 1998 Securities Litigation Uniform Standards Act (SLUSA) and Class Action Fairness Act of 2005 (CAFA). The Paper then presents the state class action filing data detailing the numbers, classifications, and jurisdictions of state class action cases that now occupy the state forums. First, as expected, the data indicates that there are few traditional stock-drop securities class actions litigated in state court today. Second, in spite of the debate over the impact of SLUSA and CAFA on 1933 Act claims, very few plaintiffs attempt to litigate these matters in state court. Finally, the number of state court class actions involving merger and acquisition (M&A) transactions is skyrocketing and now surpasses such claims filed in federal court. Moreover, various class counsel file their M & A complaints in multiple jurisdictions. The increasingly large number of multi-forum M&A class action suits burden the defendants and their counsel, the judiciary and even plaintiffs’ lawyers themselves. The paper concludes that absent effective state co-ordination, further Congressional preemption is possible, if not likely.

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Wal-Mart v. Dukes Coverage

Tons of coverage of yesterday’s Supreme Court decision in Wal-Mart Stores, Inc. v. Dukes. Here’s a sample:

• ABA Journal (Debra Cassens Weiss)
• Above the Law (David Lat)
• Concurring Opinions (Josh Blackman)
• Concurring Opinions (Sergio Campos)
• How Appealing (Howard Bashman)
• National Law Journal (Tony Mauro)
• New York Times (Adam Liptak)
• NPR (Nina Totenberg)
• Point of Law (James Copland)
• PrawfsBlawg (Matt Bodie)
• San Francisco Chronicle (Bob Egelko)
• SCOTUSblog (Lyle Denniston)
• USA Today (Joan Biskupic)
• The Volokh Conspiracy (Jonathan Adler)
• Wall Street Journal (Jess Bravin and Ann Zimmerman)
• Washington Post (Robert Barnes)

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Wal-Mart v. Dukes Recap: Rule 23(a)'s Commonality Requirement

As covered earlier here, the Supreme Court decided Wal-Mart Stores, Inc. v. Dukes today. The opinions cover two distinct issues: (1) whether the class action satisfied Rule 23(a)(2)’s requirement that “there are questions of law or fact common to the class”; and (2) whether the class members’ claims for backpay were properly certified under Rule 23(b)(2). This post recaps the decision on the first issue, on which the Court splits 5-4. Justice Scalia, joined by Chief Justice Roberts and Justices Kennedy, Thomas, and Alito, concludes in Part II of the opinion that the plaintiffs “have not established the existence of any common question.” [Slip Op. 19]. Justice Ginsburg writes a dissenting opinion on this issue, joined by Justices Breyer, Sotomayor, and Kagan. There’s a lot going on with respect to the commonality issue in both opinions, so these excerpts (by definition) won’t be able to cover everything.

From Justice Scalia’s majority opinion [Slip Op. 8-10]:

The crux of this case is commonality—the rule requiring a plaintiff to show that “there are questions of law or fact common to the class.” Rule 23(a)(2). That language is easy to misread, since “[a]ny competently crafted class complaint literally raises common ‘questions.’” Nagareda, Class Certification in the Age of Aggregate Proof, 84 N. Y. U. L. Rev. 97, 131–132 (2009). For example: Do all of us plaintiffs indeed work for Wal-Mart? Do our managers have discretion over pay? Is that an unlawful employment practice? What remedies should we get? Reciting these questions is not sufficient to obtain class certification. Commonality requires the plaintiff to demonstrate that the class members “have suffered the same injury,” Falcon, supra, at 157. This does not mean merely that they have all suffered a violation of the same provision of law. Title VII, for example, can be violated in many ways—by intentional discrimination, or by hiring and promotion criteria that result in disparate impact, and by the use of these practices on the part of many different superiors in a single company. Quite obviously, the mere claim by employees of the same company that they have suffered a Title VII injury, or even a disparate impact Title VII injury, gives no cause to believe that all their claims can productively be litigated at once. Their claims must depend upon a common contention—for example, the assertion of discriminatory bias on the part of the same supervisor. That common contention, moreover, must be of such a nature that it is capable of classwide resolution—which means that determination of its truth or falsity will resolve an issue that is central to the validity of each one of the claims in one stroke. “What matters to class certification . . . is not the raising of common ‘questions’—even in droves—but, rather the capacity of a classwide proceeding to generate common answers apt to drive the resolution of the litigation. Dissimilarities within the proposed class are what have the potential to impede the generation of common answers.” Nagareda, supra, at 132.

Justice Scalia then turns to what one might call the burden of proof on a party seeking class certification [Slip Op. 10-12]:

A party seeking class certification must affirmatively demonstrate his compliance with the Rule—that is, he must be prepared to prove that there are in fact sufficiently numerous parties, common questions of law or fact, etc. We recognized in Falcon that “sometimes it may be necessary for the court to probe behind the pleadings before coming to rest on the certification question,” 457 U. S., at 160, and that certification is proper only if “the trial court is satisfied, after a rigorous analysis, that the prerequisites of Rule 23(a) have been satisfied,” id., at 161; see id., at 160 (“[A]ctual, not presumed, conformance with Rule 23(a) remains . . . indispensable”). Frequently that “rigorous analysis” will entail some overlap with the merits of the plaintiff’s underlying claim. That cannot be helped. . . .

In this case, proof of commonality necessarily overlaps with respondents’ merits contention that Wal-Mart engages in a pattern or practice of discrimination. That is so because, in resolving an individual’s Title VII claim, the crux of the inquiry is “the reason for a particular employment decision,” Cooper v. Federal Reserve Bank of Richmond, 467 U. S. 867, 876 (1984). Here respondents wish to sue about literally millions of employment decisions at once. Without some glue holding the alleged reasons for all those decisions together, it will be impossible to say that examination of all the class members’ claims for relief will produce a common answer to the crucial question why was I disfavored.

Quoting Falcon, 457 U.S. at 159 n.15, Justice Scalia indicates that given the facts of this case, the plaintiffs were required to provide “‘significant proof’ that Wal-Mart ‘operated under a general policy of discrimination’”; he concludes: “That is entirely absent here.” [Slip Op. 12-13]. Justice Scalia explains [Slip Op. 14-15]: 

The only corporate policy that the plaintiffs’ evidence convincingly establishes is Wal-Mart’s “policy” of allowing discretion by local supervisors over employment matters. . . .  To be sure, we have recognized that, “in appropriate cases,” giving discretion to lower-level supervisors can be the basis of Title VII liability under a disparate-impact theory—since “an employer’s undisciplined system of subjective decisionmaking [can have] precisely the same effects as a system pervaded by impermissible intentional discrimination.” But the recognition that this type of Title VII claim “can” exist does not lead to the conclusion that every employee in a company using a system of discretion has such a claim in common.

Justice Ginsburg’s opinion concurring in part and dissenting in part disagrees with the majority’s commonality holding. She writes [at pp.2-3]:

[Rule 23(a)(2)] “does not require that all questions of law or fact raised in the litigation be common,” 1 H. Newberg & A. Conte, Newberg on Class Actions §3.10, pp. 3–48 to 3–49 (3d ed. 1992); indeed,“[e]ven a single question of law or fact common to the members of the class will satisfy the commonality requirement,” Nagareda, The Preexistence Principle and the Structure of the Class Action, 103 Colum. L. Rev. 149, 176, n. 110 (2003). See Advisory Committee’s 1937 Notes on Fed. Rule Civ. Proc. 23, 28 U. S. C. App., p. 138 (citing with approval cases in which “there was only a question of law or fact common to” the class members).

A “question” is ordinarily understood to be “[a] subject or point open to controversy.” American Heritage Dictionary 1483 (3d ed. 1992). See also Black’s Law Dictionary 1366 (9th ed. 2009) (defining “question of fact” as “[a]disputed issue to be resolved . . . [at] trial” and “question of law” as “[a]n issue to be decided by the judge”). Thus, a “question” “common to the class” must be a dispute, either of fact or of law, the resolution of which will advance the determination of the class members’ claims.

The District Court, recognizing that “one significant issue common to the class may be sufficient to warrant certification,” 222 F. R. D. 137, 145 (ND Cal. 2004), found that the plaintiffs easily met that test. Absent an error of law or an abuse of discretion, an appellate tribunal has no warrant to upset the District Court’s finding of commonality.

Justice Ginsburg explains [at p.6]:

The District Court’s identification of a common question, whether Wal-Mart’s pay and promotions policies gave rise to unlawful discrimination, was hardly infirm. The practice of delegating to supervisors large discretion to make personnel decisions, uncontrolled by formal standards, has long been known to have the potential to produce disparate effects. Managers, like all humankind, may be prey to biases of which they are unaware. The risk of discrimination is heightened when those managers are predominantly of one sex, and are steeped in a corporate culture that perpetuates gender stereotypes.

Responding to the majority opinion, Justice Ginsburg writes [at 8-10]:

The Court gives no credence to the key dispute common to the class: whether Wal-Mart’s discretionary pay and promotion policies are discriminatory. See ante, at 9 (“Reciting” questions like “Is [giving managers discretion overpay] an unlawful employment practice?” “is not sufficient to obtain class certification.”). “What matters,” the Court asserts, “is not the raising of common ‘questions,’” but whether there are “[d]issimilarities within the proposed class” that “have the potential to impede the generation of common answers.” Ante, at 9–10 (quoting Nagareda, Class Certification in the Age of Aggregate Proof, 84 N. Y. U. L. Rev. 97, 132 (2009); some internal quotation marks omitted).

The Court blends Rule 23(a)(2)’s threshold criterion with the more demanding criteria of Rule 23(b)(3), and thereby elevates the (a)(2) inquiry so that it is no longer “easily satisfied,” 5 J. Moore et al., Moore’s Federal Practice §23.23[2], p. 23–72 (3d ed. 2011). . . . The Court’s emphasis on differences between class members mimics the Rule 23(b)(3) inquiry into whether common questions “predominate” over individual issues. And by asking whether the individual differences “impede” common adjudication, ante, at 10 (internal quotation marks omitted), the Court duplicates 23(b)(3)’s question whether “a class action is superior” to other modes of adjudication. Indeed, Professor Nagareda, whose “dissimilarities” inquiry the Court endorses, developed his position in the context of Rule 23(b)(3). See 84 N. Y. U. L. Rev., at 131 (Rule 23(b)(3) requires “some decisive degree of similarity across the proposed class” because it “speaks of common ‘questions’ that ‘predominate’ over individual ones”). “The Rule 23(b)(3) predominance inquiry” is meant to “tes[t] whether proposed classes are sufficiently cohesive to warrant adjudication by representation.” Amchem Products, Inc. v. Windsor, 521 U. S. 591, 623 (1997). If courts must conduct a “dissimilarities” analysis at the Rule 23(a)(2) stage, no mission remains for Rule 23(b)(3).

Justice Ginsburg concludes [at 11]:

Wal-Mart’s delegation of discretion over pay and promotions is a policy uniform throughout all stores. The very nature of discretion is that people will exercise it in various ways. A system of delegated discretion, Watson held, is a practice actionable under Title VII when it produces discriminatory outcomes. 487 U. S., at 990–991; see supra, at 7–8. A finding that Wal-Mart’s pay and promotions practices in fact violate the law would be the first step in the usual order of proof for plaintiffs seeking individual remedies for company-wide discrimination. Teamsters v. United States, 431 U. S. 324, 359 (1977); see Albemarle Paper Co. v. Moody, 422 U. S. 405, 415–423 (1975). That each individual employee’s unique circumstances will ultimately determine whether she is entitled to backpay or damages, §2000e–5(g)(2)(A) (barring backpay if a plaintiff “was refused . . . advancement . . . for any reason other than discrimination”), should not factor into the Rule 23(a)(2) determination.

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In other Supreme Court News... Am. Elec. Power v. CT

It might get lost in the Wal-Mart shuffle, but don't ignore another federal courts case from today, American Electric Power v. Connecticut.  As usual, SCOTUSblog has good links to the opinion, lower court opinions, and commentary.

"Holding: The Clean Air Act and Environmental Protection Agency actions displace federal common law public nuisance claims brought by several states, the city of New York, and three private land trusts against four private power companies and the federal Tennessee Valley Authority over global warming and carbon dioxide emissions."

RJE

Wal-Mart v. Dukes Recap: Scope of Rule 23(b)(2)

As covered earlier here, the Supreme Court decided Wal-Mart Stores, Inc. v. Dukes today. The opinions cover two distinct issues: (1) whether the class action satisfied Rule 23(a)(2)’s requirement that “there are questions of law or fact common to the class”; and (2) whether the class members’ claims for backpay were properly certified under Rule 23(b)(2).

This post recaps the decision on the 23(b)(2) issue, on which Justice Scalia writes for a unanimous Court (Part III of the opinion) and concludes: “[Plaintiffs’] claims for backpay were improperly certified under Federal Rule of Civil Procedure 23(b)(2). Our opinion in Ticor Title Ins. Co. v. Brown, 511 U. S. 117, 121 (1994) (per curiam) expressed serious doubt about whether claims for monetary relief may be certified under that provision. We now hold that they may not, at least where (as here) the monetary relief is not incidental to the injunctive or declaratory relief.” [Slip Op. 20]

Rule 23(b)(2) allows class treatment when “the party opposing the class has acted or refused to act on grounds that apply generally to the class, so that final injunctive relief or corresponding declaratory relief is appropriate respecting the class as a whole.” One possible reading of this provision is that it applies only to requests for such injunctive or declaratory relief and does not authorize the class certification of monetary claims at all. We need not reach that broader question in this case, because we think that, at a minimum, claims for individualized relief (like the backpay at issue here) do not satisfy the Rule. [Slip Op. 20]

The opinion continues [Slip Op. 21-22 (footnotes omitted)]:

Permitting the combination of individualized and classwide relief in a (b)(2) class is also inconsistent with the structure of Rule 23(b). Classes certified under (b)(1) and (b)(2) share the most traditional justifications for class treatment—that individual adjudications would beimpossible or unworkable, as in a (b)(1) class, or that the relief sought must perforce affect the entire class at once, as in a (b)(2) class. For that reason these are also mandatory classes: The Rule provides no opportunity for (b)(1) or (b)(2) class members to opt out, and does not even oblige the District Court to afford them notice of the action. Rule 23(b)(3), by contrast, is an “adventuresome innovation” of the 1966 amendments, Amchem, 521 U. S., at 614 (internal quotation marks omitted), framed for situations “in which ‘class-action treatment is not as clearly called for’,” id., at 615 (quoting Advisory Committee’s Notes, 28 U. S. C. App., p. 697 (1994 ed.)). It allows class certification in a much wider set of circumstances but with greater procedural protections. Its only prerequisites are that “the questions of law or fact common to class members predominate over any questions affecting only individual members, and that a class action is superior to other available methods for fairly and efficiently adjudicating the controversy.” Rule 23(b)(3). And unlike (b)(1) and (b)(2) classes, the (b)(3) class is not mandatory; class members are entitled to receive “the best notice that is practicable under the circumstances” and to withdraw from the class at their option. See Rule 23(c)(2)(B).

Given that structure, we think it clear that individualized monetary claims belong in Rule 23(b)(3). The procedural protections attending the (b)(3) class— predominance, superiority, mandatory notice, and the right to opt out—are missing from (b)(2) not because the Rule considers them unnecessary, but because it considers them unnecessary to a (b)(2) class.

The opinion then confronts the language in Rule 23’s advisory committee notes stating “that Rule 23(b)(2) ‘does not extend to cases in which the appropriate final relief relates exclusively or predominantly to money damages.’ 39 F. R. D., at 102 (emphasis added).” [Slip Op. 23]. The plaintiffs argued that this language indicated that, in some cases, Rule 23(b)(2) was appropriate for monetary claims. The Court’s response [Slip Op. 23-24]:

Of course it is the Rule itself, not the Advisory Committee’s description of it, that governs. And a mere negative inference does not in our view suffice to establish a disposition that has no basis in the Rule’s text, and that does obvious violence to the Rule’s structural features. The mere “predominance” of a proper (b)(2) injunctive claim does nothing to justify elimination of Rule 23(b)(3)’s procedural protections: It neither establishes the superiority of class adjudication over individual adjudication nor cures the notice and opt-out problems. We fail to see why the Rule should be read to nullify these protections whenever a plaintiff class, at its option, combines its monetary claims with a request—even a “predominating request”—for an injunction.

The Court does not, however, decide that all forms of monetary claims are forbidden in Rule 23(b)(2) class actions [Slip Op. 26]:

In Allison v. Citgo Petroleum Corp., 151 F. 3d 402, 415 (CA5 1998), the Fifth Circuit held that a (b)(2) class would permit the certification of monetary relief that is “incidental to requested injunctive or declaratory relief,” which it defined as “damages that flow directly from liability to the class as a whole on the claims forming the basis of the injunctive or declaratory relief.” In that court’s view, such “incidental damage should not require additional hearings to resolve the disparate merits of each individual’s case; it should neither introduce new substantial legal or factual issues, nor entail complex individualized determinations.” Ibid. We need not decide in this case whether there are any forms of “incidental” monetary relief that are consistent with the interpretation of Rule 23(b)(2) we have announced and that comply with the Due Process Clause. Respondents do not argue that they can satisfy this standard, and in any event they cannot. 

The opinion concludes with some observations  [Slip Op. 26-27] about the portion of the Ninth Circuit opinion addressing potential ways to adjudicate the backpay claims:

Contrary to the Ninth Circuit’s view, Wal-Mart is entitled to individualized determinations of each employee’s eligibility for backpay. . . .  We have established a procedure for trying pattern-or-practice cases that gives effect to these statutory requirements. When the plaintiff seeks individual relief such as reinstatement or backpay after establishing a pattern or practice of discrimination, “a district court must usually conduct additional proceedings . . . to determine the scope of individual relief.” Teamsters, 431 U. S., at 361. At this phase, the burden of proof will shift to the company, but it will have the right to raise any individual affirmative defenses it may have, and to “demonstrate that the individual applicant was denied an employment opportunity for lawful reasons.” Id., at 362.

The Court of Appeals believed that it was possible to replace such proceedings with Trial by Formula. A sample set of the class members would be selected, as to whom liability for sex discrimination and the backpay owing as a result would be determined in depositions supervised by a master. The percentage of claims determined to be valid would then be applied to the entire remaining class, and the number of (presumptively) valid claims thus derived would be multiplied by the average backpay award in the sample set to arrive at the entire class recovery—without further individualized proceedings. 603 F. 3d, at 625–627. We disapprove that novel project. Because the Rules Enabling Act forbids interpreting Rule 23 to “abridge, enlarge or modify any substantive right,” 28 U. S. C.§2072(b); see Ortiz, 527 U. S., at 845, a class cannot be certified on the premise that Wal-Mart will not be entitled to litigate its statutory defenses to individual claims. And because the necessity of that litigation will prevent backpay from being “incidental” to the classwide injunction, respondents’ class could not be certified even assuming, arguendo, that “incidental” monetary relief can be awarded to a 23(b)(2) class.

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SCOTUS Decision in Wal-Mart v. Dukes

The Supreme Court issued its decision today in Wal-Mart Stores, Inc. v. Dukes (No. 10-277), reversing the Ninth Circuit's certification of the class action. Justice Scalia writes the Opinion of the Court, which is joined in its entirety by Chief Justice Roberts and Justices Kennedy, Thomas, and Alito. Justice Ginsburg writes an opinion concurring in part and dissenting in part, which is joined by Justices Breyer, Sotomayor, and Kagan. Those four Justices join the majority opinion only with respect to Parts I and III.

The opinions break down as follows:

Part II of Justice Scalia’s majority opinion concludes that the class action does not satisfy the “commonality” requirement of Rule 23(a). See FRCP 23(a)(2) (requiring that “there are questions of law or fact common to the class”). Justice Ginsburg's opinion disagrees with the majority on this issue. (Recap here.)

Part III of Justice Scalia’s opinion, which is joined by all nine Justices, concludes that the class members’ claims for backpay were not properly certified under Rule 23(b)(2), which allows class treatment “when the party opposing the class has acted or refused to act on grounds that apply generally to the class, so that final injunctive relief or corresponding declaratory relief is appropriate respecting the class as a whole.” (Recap here.)

For our earlier coverage of the case, see here, here, and here.

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Noyes on Twombly/Iqbal and Judicial Experience

Professor Henry Noyes (Chapman University) has posted on SSRN a draft of his article, The Rise of the Common Law of Federal Pleading: Iqbal, Twombly and the Application of Judicial Experience, which is forthcoming in the Villanova Law Review.  Here’s the abstract:

With its decisions in Twombly and Iqbal, the Supreme Court established a new federal pleading standard: a complaint must state a plausible claim for relief. Many commentators have written about the meaning of plausibility. None has focused on the Court’s statement that “[d]etermining whether a complaint states a plausible claim for relief...will be a context-specific task that requires the reviewing court to draw on its judicial experience and common sense.” In this article, I make and support several claims about the meaning and application of judicial experience. First, in order to understand and define the plausibility standard, one must understand the meaning and application of judicial experience. The requirement that district courts apply judicial experience to resolve a motion to dismiss is a new part of the federal pleading regime, just like the new plausibility standard. Second, the application of judicial experience – as intended by the Supreme Court – requires district courts to consider information and evidence beyond that alleged in the complaint when resolving a motion to dismiss. Third, and contrary to conventional wisdom, the Supreme Court does not intend the application of judicial experience to involve a subjective analysis of the plausibility of a claim. Instead, the Supreme Court intends district courts to consider a larger, objective body of experience – beyond the subjective experience of any particular district court – with similar factual scenarios. Fourth, the Supreme Court anticipates that the application of judicial experience will require district courts to develop a common law of pleading standards that will vary with the type of claim, the type of claimant, the type of defendant and the alleged factual scenario. The Court has expressly denied that plausibility “require[s] heightened fact pleading of specifics,” but what plausibility means is informed by judicial experience. Sometimes plausibility requires more convincing facts (not more specific facts). Finally, I argue that this new pleading regime that requires the application of judicial experience at the pleading stage – even where it is based on objective information – is inappropriate and inconsistent with the adversarial nature of litigation.

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