Sunday, April 3, 2011
With the Supreme Court hearing oral arguments in Wal-Mart Stores, Inc. v. Dukes last Tuesday, there's a good bit of focus from around the web on the individualized hearings aspect of Randall v. Rolls-Royce Corp., a Seventh Circuit opinion decided on March 30, 2011. In Randall, Judge Posner affirmed the denial of class certification for a Title VII and Equal Pay class action because plaintiffs' were inadequately represented and because backpay would require individualized hearings.
What was most interesting to me about the case, however, was its tie-in to Smith v. Bayer Corp., which is still pending before the Supreme Court. Recall that Smith v. Bayer Corp. presents the question of whether to afford preclusive effect to a federal court's decision not to certify a class.
In Smith v. Bayer, I found two things troubling about the Eighth Circuit's opinion below (In re Baycol Products Liability Litigation). First, the appellate court suggested that plaintiffs should've intervened in the first suit to preserve their right to appeal, but, because the class was never certified, no notice was ever sent out to the class members. How should the plaintiffs have known to intervene without any formal notice that the lawsuit was pending?
Second, although the class was never certified, the appellate court nevertheless claimed that the plaintiffs were adequately represented. This is odd. Parties can be bound to a decision when they were parties to the previous suit, in privity with those parties, or were adequately represented. Putative class members are generally not considered parties to a suit until the class has been certified; here, the plaintiffs in the second suit were not the named plaintiffs in the first suit.
Similarly, it's hard to see how the parties in the second suit were adequately represented in the first suit. Can a court really conclude that a putative class was adequately represented when it chooses not to certify the class and it's the certification decision that operates to legitimize the actions of the class representatives and class counsel to act on behalf of the class? This also raises personal jurisdiction questions. Following the rationale from the Supreme Court's opinion on personal jurisdiction in Phillips Petroleum v. Shutts, it's hard to see how the second plaintiffs would be bound by the federal court's decision not to certify the class. In Shutts, the court likened the failure to opt out of a (b)(3) class to consent to jurisdiction. Courts have long held that plaintiffs consent to personal jurisdiction by submitting their claims to the court. So, by failing to opt out, the plaintiffs effectively "consented." But in the Baycol litigation, there was no certification, thus no chance to opt-out, thus no consent. From that, it would seem that there was no personal jurisdiction (one of the questions certified in Smith v. Bayer). Likewise, this seems to put us quite close to the doctrine of virtual representation that the Supreme Court struck down in Taylor v. Sturgell.
The logical question that follows shows just how slippery the Eighth Circuit's reasoning was in In re Baycol and it's also the tie-in to the Seventh Circuit's opinion in Rolls-Royce: What is the preclusive effect of a decision not to certify the class when class counsel is incompetent? Can a court really say that the class was adequately represented after it explicitly finds that adequacy isn't met?
The Seventh Circuit in Rolls-Royce took great pains to explain how plaintiffs' counsel dropped the ball, picked poor class representatives, and did not diligently pursue the case. Should this effort and the resulting decision not to certify the class really preclude subsequent attorneys from trying to certify a similar class? Granted, the district court in Rolls-Royce also granted summary judgment to the defendants, so these circumstances are a bit different, but it doesn't take much imagination to see the harm that could result from the Eighth Circuit's reasoning.