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Is the Genesis decision a license to bribe?

Is the Genesis decision a license to bribe?

By Paul Bland, Senior Attorney

In a class action, one or more people who believe their legal rights have been violated bring a lawsuit on behalf of a group of people whom they believe have been harmed in the same way. The person or persons who bring the case on behalf of the group are the named class representative(s). If the court agrees that certain standards have been met (such as, the named class representative is well-equipped to adequately represent other people who were allegedly harmed), the court will certify the case as a class action.

But if some corporate defense lawyers can be believed, the basic ethical and constitutional premises of class actions were just turned on their head. They say a new Supreme Court decision empowers corporate defendants in class actions to bribe class representatives to abandon the rest of the potential class members, and makes it nearly impossible for the representatives to refuse to sell out everyone else.

On April 16, the U.S. Supreme Court decided a case called Genesis Healthcare Corp. v. Symczyk, where the defendant made a written offer of judgment to the named class representative for enough money that the defendant claimed this would resolve the representative’s individual claims. The case did not involve the typical type of class action, which is brought under Rule 23 of the Federal Rules of Civil Procedure, but instead a “collective action” under the Fair Labor Standards Act.

There is a big question as to whether the Genesis case would apply at all to Rule 23 class actions due to significant differences between the two types of cases. Corporate advocates are arguing that Genesis should be used to wipe away most Rule 23 class actions as well, but for the purpose of addressing the key ethical and policy issue involved I will just skip over the difference between the cases and assume, for the sake of argument, that Genesis does apply to Rule 23 cases.

In the briefing and arguing before the Supreme Court, the parties disputed whether this offer could moot out the case, meaning the court would have to dismiss the entire class action, even though the other class members got nothing under the offer. (A case is moot when the dispute between the parties has been resolved, and there is nothing left to fight over.)

The gist of the defendant’s argument was that the case was moot because the class representative had supposedly been offered enough to resolve her personal claims, and that because the case had not been certified as a class action it did not matter what happened to the claims of all the other people. Among other arguments, the plaintiffs argued companies cannot “pick off” a named class representative by offering to pay them for their individual claim; the case is only moot if the defendant offers enough money to resolve the claims of all the possible class members. The plaintiffs also pointed out that the class representative hadn’t accepted the offer, which they argued rendered it rejected.

Justice Thomas, writing for the five justices in the majority, said that they did not have to decide if the unaccepted offer to the named class representative mooted the entire case because the plaintiff had supposedly conceded the issue in this case. As Justice Kagan pointed out in her boisterous dissent, it is very unlikely that other plaintiffs will concede this point in future cases.

So what does the case mean for the future?

Some lawyers who defend corporations accused of breaking consumer protection or civil rights laws have declared that the majority opinion in Genesis means that any class action can be wiped away if the defendant just offers the class representative enough money to resolve their individual claim. (I believe that legal position is flatly wrong for a number of reasons I’ll discuss in a future post.)

Suppose for a moment that the corporate defense lawyers are right. Doesn’t that approach undermine one of the basic ethical responsibilities of named class representatives? A basic rule of class actions is that class representatives are supposed to represent the other class members. This means more than that the class representatives are supposed to be competent; they are also supposed to be loyal to the rest of the class members. A key part of that is that class representatives are not supposed to file potential class actions just to make money for themselves; they are supposed to be standing up for everyone in the class.

For many years, courts have recognized that this requirement of adequate representation by a loyal class representative is required by the U.S. Constitution.

How can due process be met if class members are not represented by someone trying hard to protect all of their interests?

The corporate lawyers’ reading of Genesis flips all this on its head. Some major corporate law firms are boasting in print that Genesis legitimizes defendants trying to bribe the class representatives to sell out the class. In their divide-and-conquer world, defense lawyers think if they throw some money at the feet of the class representative that the class representatives’ duties and obligations to the rest of the class fly out the window. Even if a class representative wants to do the right thing — reject an individual pay day just for them and insists on standing up for the whole group — they don’t have the power, and the court must throw out the whole case.

The corporate defense version of Genesis is not only bad law, it is terrible policy. It attacks the ethical and constitutional foundations of what it means for a class representative to be adequate. In corporate think, Genesis is a license to bribe.

I hope courts see through this.