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The Corporate Campaign Against Class Actions – and Why Public Justice is Working to Preserve Them

The Corporate Campaign Against Class Actions – and Why Public Justice is Working to Preserve Them

By Andrew Fernandez, Summer 2021 Communications Intern

Hidden away from the ‘blockbuster’ cases that drew the most media attention in the October 2020 Supreme Court term, issues concerning economic justice and civil rights in the U.S. were at stake in a case that might have an impact on the future of class actions. In TransUnion v. Ramirez, the petitioner in the case – credit reporting giant TransUnion – argued before the Court that people who it wrongly labeled as terrorists or drug traffickers did not suffer enough “concrete” harm to have standing to be a member of a class under Article III of the Constitution, unless they had proven that TransUnion disclosed this false information to a third party. This argument might sound odd – after all, being publicly labeled as a terrorist intuitively sounds quite concrete – but it’s unfortunately just another in a long list of shaky legal arguments from corporate America aimed at immunizing themselves from the accountability that can come from a class action lawsuit.

For decades, corporate interests have been dead set on dismantling class action suits. Groups like the U.S. Chamber of Commerce have weakened this valuable legal tool by targeting a crucial step in the legal procedure of class litigation: class certification.

If you’re concerned about corporate power and inequality in America, the issue of when a class action can be certified is one you should know more about. Let’s break down just what class certification is, why it’s often a crucial tool for justice, and how it’s currently under threat.

How class actions hold corporations accountable

Class actions are essential to a healthy democracy for several reasons: First, class actions are an important avenue to provide direct relief to large groups of people who have been harmed by illegal behavior by corporations. In many successful class actions, class members can often receive substantial sums of money – sometimes many thousands of dollars – depending upon the nature of the illegal acts.  Class actions provide material restitution that has a real, measurable impact in the lives of everyday people who were wronged by a corporation.

Second, class actions can help overcome financial barriers That otherwise make it impossible for workers, consumers and others to pursue their rights in the legal system. Big corporations have a big advantage when it comes to legal action: money. Often, corporations have endless resources to hire the best attorneys and massive legal teams. Individual claimants, on the other hand, rarely have similar resources on hand. Whether you’re a working-class parent who purchased a faulty appliance, or you were the victim of a widespread financial scam, you may decide not to sue for financial reasons. Years of legal fees for no guaranteed reward might not seem worth it, even though you know you were wronged. When injured consumers or workers cannot band together, financial barriers often not only deny justice to those who deserve it, but it also leaves the wrongdoer unpunished and perhaps more likely to behave recklessly and dangerously in the future, harming countless others.

It is true that plaintiffs lawyers often help individuals by agreeing to handle cases on a contingency basis (not charging any fee up front, and only getting paid if the person recovers money (and then receiving a percentage of the recovery). But in many cases where workers, consumers, investors and others have been hurt by illegal corporate behavior, the damages may not be enough on an individual level to make it economically possible for an attorney to take the case. And in many cases, injured people are often not aware that they were victimized by a scam or that some law was violated.

Class actions can solve these problems. By pooling the claims and raising the potential recovery, the class can afford to pay for a long, drawn-out legal battle without going broke, giving them a fighting chance against corporations with expensive legal teams on retainers.

But that recovery has a double effect – not only does it make it financially possible for an attorney to represent injured people without going broke, but it actually serves as a check on corporate misbehavior because it hits them where it really hurts: their bottom line.

No one knows this better than Public Justice Senior Attorney Karla Gilbride. She has worked on countless public interest cases against corporations, many of which have been class actions. According to Karla, the idea that class actions aren’t good for much other than a check for a sometimes tiny amount in the mail is a misrepresentation. “Class actions don’t just recover money for people,” she says. “They change corporate behavior.”

In Public Justice’s own consumer protection class actions, we’ve had illegal debts wiped away and fixed people’s illegally damaged credit records, which can not only fundamentally change the course of an individual’s life, but can also motivate corporations to obey regulations or consumer and worker protections.

Individual suits might be a drop in the bucket to a huge corporation like TransUnion, but as Karla Gilbride explains,if you have a huge multi-million-dollar exposure…then it really starts to affect the bottom line.” For example, TransUnion had lost individual lawsuits (including one for punitive damages) relating to its false labeling of consumers as terrorists but took no action to remedy this. It was only as the class action began proceeding effectively that TransUnion finally updated and fixed its system to reduce the repeated systemic errors.

Chances of successful claims and settlements against corporations like TransUnion, with over $2.7 billion in annual revenue, become much slimmer when each individual must bring claims on a case-by-case basis. Class actions are a way to harness strength in numbers in the court, an advantage that’s sorely needed when standing up to powerful corporations with seemingly endless financial resources.

How class actions address systemic injustice

Class actions go beyond just challenging corporate power – they are one of the few ways to truly address systemic injustice. In fact, some of the most important civil rights cases brought in this country were class actions. Brown v. Board of Education is just one example of the many cases crucial to the fight for racial justice that were brought as a class action.

Systemic issues are often the result of a company-wide culture or a history of illegal behavior, both of which require a collective solution. By addressing wrongdoing on a system-wide basis, class actions offer one of the few avenues for systemic reform in this country. While many European nations have substantial administrative states, which regulate corporate conduct at the governmental level, the U.S. overwhelmingly relies upon private enforcement of the laws protecting workers and consumers, including laws combating corporations’ monopolistic behavior. If our legal system only addressed systemic issues when they are atomized into individual claims of discrimination or exploitation, too often it will miss the bigger picture. By looking at wrongdoing in this narrow, individualistic manner, the legal system often misses glaring injustice occurring at a larger scale.

Class actions also excel in showing how widespread or impactful systemic harm can be on a group of people. As Karla puts it, class actions “provide a vehicle for putting front and center the scope of the problem and how many people are affected by it.” Widespread systemic corruption, discrimination, or misconduct can sometimes impact the lives of millions of people, and class actions provide a legal avenue to show that stark reality.

What is class certification?

Because class actions are so effective at holding corporations accountable and addressing systemic injustice, corporate interests have had class actions in their sights for years. Recently, corporate interests have focused on making it harder and harder for a case to be certified as appropriate for class action treatment. It’s a tactic that aims to stop a class action in its tracks.

At the start of any class action suit, the plaintiff must prove to the court that the proposed class is legally legitimate. The burden of proof is on the plaintiff to meet a slate of standards as dictated by Federal Rule 23. Some of these standards include “numerosity” (whether or not the class is so large that individual suits are an inferior approach), and “commonality” (whether each class member raises a common legal or factual question). Then it’s up to the court to decide if the class meets those standards. Class certification is the first major hurdle that any class action claim must overcome and is often where class action suits live or die.

We often fight against unreasonable limitations on class certification. In 2019, for example, Public Justice served as co-counsel in Cherry v. Dometic Corp., an 11th Circuit appeal of a decision denying certification of a consumer class action on “ascertainability” grounds. The class was comprised of hundreds of thousands of consumers who alleged that the refrigerators they purchased corroded soon after installation, resulting in cracked boiler tubes, ruining the fridge, and even releasing flammable carcinogenic gases. Despite these claims, the Southern District Court of Florida ruled that the class didn’t meet its definition of an ascertainable class, finding that the plaintiffs had not proven that they could identify the people impacted by the purported wrongdoing. The district court’s ruling was a serious deviation from legal precedent (most courts find that a class is ascertainable if it is objectively defined, so one can determine who’s in it without some subjective individualized inquiry). If it was allowed to stand, the ruling would have raised the standard for ascertainabililty to such a degree that many small value class actions would have become nearly impossible, if the defendant was careful to avoid keeping good records.

Thanks to the hard work of Public Justice’s attorneys and our co-counsel, the 11th Circuit ultimately ruled in favor of the plaintiff and reversed the lower court’s denial of class certification. In this case, we successfully prevented the courts from applying a narrower and more restrictive interpretation of Rule 23.

While the outcome in Cherry v. Dometic was a favorable one, it still underscores just how catastrophic it can be if courts accept corporate invitations to create unreasonable new barriers to class certification. Under the district court’s approach, nearly all of the people harmed by a seriously defective product would not have a chance at a meaningful or effective legal remedy. In a country whose legal system determines outcomes based on financial resources far too often, the class action suit is an essential tool to overcome the financial barriers faced by the less powerful and less wealthy seeking to obtain justice. Without a fair definition of what constitutes a class, we’ll lose the class action as a legal tool.

The war against class actions

While Cherry was a great win, in the last decade, we’ve seen a number of decisions that have made it harder to certify a class.

Perhaps the most notable example is the Supreme Court’s 2011 decision in Wal-Mart v. Dukes. This landmark case began when Betty Dukes learned she was paid less than her male counterparts and she and five other coworkers filed a class action suit against Wal-Mart. The class consisted of female Wal-Mart employees employed after December 26, 1998, numbering around 1.5 million women. Dukes alleged that nationwide company policies were to blame for the pay gap, backing it up with hard statistics revealing that women who are working in the company’s stores “are paid less than men in every region” and “that the salary gap widens over time even for men and women hired into the same jobs at the same time.” The class was certified by a district court, and the 9th Circuit upheld the certification three times before the Supreme Court reached out and took the case.

Unfortunately, the Court did not agree. In the Court’s decision, the late Antonin Scalia wrote that the Wal-Mart women “have little in common but their sex and this lawsuit.” For Justice Scalia and the rest of the majority, overwhelming statistical proof of widespread discrimination did not create enough “commonality” among the Wal-Mart women.

Not only does this illustrate how far opponents of class actions are willing to stretch logic in order to undermine class certification, but it shows who will suffer most if class actions are seriously compromised. The result will be that millions of marginalized people like Betty Dukes will be denied the possibility of justice. As a result of the Dukes decision, it is far easier for corporations to systematically pay their female employees less than their male employees.

And it’s not just the courts where class actions have come under threat – Congress has introduced dangerous legislation in recent years, such as H.R. 985 in 2017, or the so-called, “Fairness in Class Action Litigation Act.” This bill, strongly supported by the Chamber of Commerce, would have gutted class actions, primarily by severely limiting what constitutes a class. Fortunately, thanks to the collective work of a broad coalition (of which we at Public Justice were an energetic part), the bill was stalled in the Senate Committee. However, this bill, and others like it, shows that there are powerful interests that are bent on taking away this already limited avenue for recourse in America.

Special interest groups like the Chamber of Commerce and the Federalist Society claim that overly broad parameters to meet class certification open up the possibility for abuse. They claim that class actions place a “regulatory burden” on companies and have “no basis in this country’s legal tradition.”  But lying behind these arguments is the fact that these pro-corporate advocates are funded by large corporate interests who simply want to avoid paying the class action settlements and damage awards that they must pay under the law. Corporations would rather they be able to misbehave without consequence. That’s why they’re in this fight.

Why is Public Justice committed to class action preservation?

We believe the fight to preserve class actions is a fight between profit and justice. While billionaire-funded organizations like the Chamber and the Federalist Society may give value-based reasons to justify their goal of undermining the class-action suit, ultimately it is clear that what they are most concerned about is the bottom line of large corporations. Class actions have invoked the ire of corporate interests because they are effective at holding corporations accountable.

We at Public Justice believe that systemic harm can often only be addressed through systemic and aggregate action. Millions of Americans suffer each day as a result of systemic harm like discrimination or worker exploitation, and those that oppose class actions aren’t interested in addressing these issues because they benefit from such structural inequality. So instead of confronting and addressing these issues, opponents of class action lawsuits choose to deflect blame to individual misconduct.

Cases like Wal-Mart v. Dukes expose this reality. Class action opponents refused to see Betty Dukes’s mistreatment as a part of a larger system of discrimination. The statistics demonstrating a company-wide bias against their female employees were out of bounds for legal consideration, in their view, because they were not the fault of a single individual, but rather the fault of many people over many years (including people who were often likely acting on implicit or unconscious biases).

What is Public Justice doing to protect class actions?

The existential nature of this fight is what motivates us here at Public Justice every day to fight for class action preservation. When HR 985 passed the House, we joined our allies to spring into action and conduct the largest grassroots campaign in our organization’s history.  On top of that, our Class Action Preservation Project is consistently involved in litigation to protect the ability of future generations of people who are harmed to use class actions. The project has seen some huge successes, like Cherry v. Dometic and many others like Noel v. Thrifty, Braun v. Wal-Mart, and Cottrell v. Alcon Labs. And of course, we’ve been involved in numerous cases as counsel for classes in cases advocating on behalf of consumers, marginalized groups, and many other groups seeking justice.

How can I help?

The fight to protect class actions needs a grassroots movement behind it if we are going to successfully stand up to the corporate interests working to dismantle them. If you want to learn more about our fight to preserve class action litigation, check out our website and follow us on social media. And if you’re looking to contribute financially, consider donating to our Class Action Preservation Project.

Image via Shutterstock.