Seyfarth Synopsis: The first key trend from our 15th Annual Workplace Class Action Litigation Report involves rulings by the U.S. Supreme Court. Over the past few years, the Supreme Court has issued a number of rulings that impacted the prosecution and defense of class actions in significant ways. Today, we provide readers with an outline of the most important workplace rulings issued by the Supreme Court in 2018, as well as which upcoming decisions employers should watch for in 2019. Read the full breakdown below!
Over the past decade, the U.S. Supreme Court – led by Chief Justice John Roberts – increasingly has shaped the contours of complex litigation exposures through its rulings on class action and governmental enforcement litigation issues. Many of these decisions have elucidated the requirements for pursuing employment-related class actions under Rule 23 of the Federal Rules of Civil Procedure.
The 2011 decision in Wal-Mart Stores, Inc. v. Dukes and the 2013 decision in Comcast Corp. v. Behrend are the two most significant examples. Those rulings are at the core of class certification issues under Rule 23.
This year saw another signal ruling in Epic Systems Corp. v. Lewis, which marks a gateway device to block prosecution of class actions in the judicial system and forces adjudication of claims on an individual, bi-lateral basis in arbitration.
To that end, federal and state courts cited Wal-Mart in 608 rulings in 2018; they cited Comcast in 235 cases in 2018; and despite its issuance in May of 2018, they cited Epic Systems in 119 decisions by year’s end.
The past year also saw a change in the composition of the Supreme Court in April of 2018, with Justice Neil Gorsuch assuming the seat of Antonin Scalia after his passing in 2016, and Justice Brett Kavanaugh taking the seat of Anthony Kennedy in October 2018, after Kennedy’s retirement and a bruising Senate confirmation battle.
Given the age of some of the other sitting Justices, President Trump may have the opportunity to fill additional seats on the Supreme Court in 2019 and beyond, and thereby influence a shift in the ideology of the Supreme Court toward a more conservative and strict constructionist jurisprudence. In turn, this is apt to change legal precedents that shape and define the playing field for workplace class action litigation.
Rulings In 2018
In terms of decisions by the Supreme Court impacting workplace class actions, this past year was no exception. In 2018, the Supreme Court decided seven cases – four employment-related cases and three class action cases – that will influence complex employment-related litigation in the coming years.
The employment-related rulings included two wage & hour collective actions and two union cases, and in class actions that involved securities and human rights. A rough scorecard of the decisions reflects one distinct plaintiff/worker-side victory, and defense-oriented rulings in six cases.
Epic Systems Corp. v. Lewis, 138 S. Ct. 1612 (2018) – Decided on May 21, 2018, this employment case involved the interpretation of mandatory workplace arbitration agreements between employers and employees and whether class action waivers within such agreements – which require workers to arbitrate any claims on an individual, bi-lateral basis (and waive the ability to bring or participate in a class action or collective action) – violate employees’ rights under the National Labor Relations Act to engage in “concerted activities” in pursuit. In a 5 to 4 ruling, the Supreme Court held that class action waivers in arbitration agreements are valid. The decision is likely to have far-reaching implications for litigation of class actions and collective actions.
Cyan, Inc., et al. v. Beaver County Employees Retirement Fund, 138 S. Ct. 1061 (2018) – Decided on March 20, 2018, this class action case posed the issue of whether federal law bars state courts from hearing certain securities class actions. The case turned on interpretation of the Private Securities Litigation Reform Act of 1995 (“SLUSA”) – which imposes tougher standards on securities class actions brought in federal courts – and whether it mandated that state courts can no longer hear class actions based on the Securities Act of 1933. In a 9 to 0 decision, the Supreme Court held that SLUSA did not strip state courts of jurisdiction over class actions alleging violations of securities laws and that defendants cannot remove such lawsuits from federal court to state court. In this regard, it did not spell the end of what many have viewed as a “cottage industry” of state court-based class action filings in states such as California where class action lawyers target public companies with securities claims over drops in stock process.
Encino Motors, LLC v. Navarro, et al., 138 S. Ct. 1134 (2018) – Decided on April 2, 2018, in this wage & hour case the Supreme Court examined whether service advisors at car dealerships are exempt under 29 U.S.C. § 213(b)(10)(A) from the overtime pay provisions of the Fair Labor Standards Act (“FLSA”). The Supreme Court held 5 to 4 that service advisors are exempt under the FLSA. The ruling is apt to have far-reaching implications on the legal tests for interpretation of statutory exemptions under the FLSA, as the broader reading of the exemption potentially could reduce the number of workers allowed to assert wage & hour claims against their employers.
CNH Industrial N.V. v. Reese, et al., 138 S. Ct. 761 (2018) – Decided on February 20, 2018, in this employment case the Supreme Court held in a per curium opinion that collective bargaining agreements are to be interpreted according to ordinary principles of contract law, including the rule that a contract is not ambiguous unless it is subject to more than one reasonable interpretation. The case involved a collective bargaining agreement, which provided health care benefits under a group benefit plan to certain employees who retired under the pension plan. The agreement expired by its terms in May 2004. At that time, a class of CNH retirees and surviving spouses filed a lawsuit seeking a declaration that their health care benefits vested for life. In reversing lower court rulings that determined that the collective bargaining agreement was ambiguous and they therefore could rely on extrinsic evidence in interpreting the contract to favor the claims of the union members, the Supreme Court held that the “only reasonable interpretation of the 1998 agreement was that the health care benefits expired when the collective bargaining agreement expired in 2004.
Janus, et al. v. AFSCME, 138 S. Ct. 2448 (2018) – Decided on June 27, 2018, in this employment case the Supreme Court considered whether Abood v. Detroit Board of Education, 431 U.S. 209 (1977), should be overruled and public-sector “agency shop” arrangements invalidated under the First Amendment so as to prevent public-sector unions from collecting mandatory fees from non-members. In ruling 5 to 4, the Supreme Court held that the application of a mandatory public sector union fee requirement is a violation of the First Amendment, thereby overruling Abood. This ruling had an immediate impact on millions of workers in 22 states that do not have right-to-work laws. Since many workers are apt to cease paying union dues with the abolishment of the fair share fee payments requirement, the decision will have a significant impact on the ability of public-sector unions to conduct their business.
China Agritech, Inc. v. Resh, et al., 138 S. Ct. 1800 (2018) – Decided on June 11, 2018, in this class action case the Supreme Court examined whether the tolling rule for class actions established in American Pipe & Construction Co. v. Utah, 414 U.S. 538 (1974), tolled the statute of limitations to permit a previously absent class member to bring a subsequent class action outside the applicable limitations period. American Pipe had held that the filing of a class action tolls the running of the statute of limitations for all putative members of the class who make timely motions to intervene after the lawsuit is deemed inappropriate for class action status. The Supreme Court interpreted American Pipe more narrowly, and held that it does not permit the maintenance of a follow-on class action past the expiration of the statute of limitations. In essence, the ruling limits the tolling rule in American Pipe to apply only to subsequent individual claims.
Jesner, et al. v. Arab Bank, PLC, 138 S. Ct. 1386 (2018) – Decided on April 24, 2018, this class action posed the issue of whether foreign-based corporations can be sued in U.S. courts for alleged violations of the Alien Tort Statute. The Supreme Court decided 5 to 4 that Plaintiffs may not do so. The end result will be to bring a halt to class actions brought to hold foreign-based corporations responsible in U.S. courts for alleged human rights violations committed overseas.
The decisions in Epic Systems, Beaver County, Navarro, Reese, Janus, China Agritech, and Jesner are sure to shape and influence workplace class action litigation in a profound manner.
These cases will impact rules on American Pipe tolling and application of statute of limitations in class actions; the ability of foreign-based claimants to prosecute class actions based on overseas labor and human rights abuses; the obligations of corporations to fund lifetime retiree benefits under collective bargaining agreements; the scope of exemptions in wage & hour litigation; union fee litigation and membership rights; securities fraud class action litigation in state courts; and defenses to workplace class actions based on class waivers in mandatory arbitration agreements.
In addition, Epic Systems may turn out to be one of the most important workplace class action decisions over the last several decades in terms of its ultimate impact on litigation dynamics.
Rulings Expected In 2019
Equally important for the coming year, the Supreme Court accepted five additional cases for review in 2018 – that will be decided in 2019 – that also will impact and shape class action litigation and government enforcement lawsuits faced by employers.
Those cases include two employment lawsuits and three class action cases.
The Supreme Court undertook oral arguments on four of these cases in 2018; the other case underwent oral argument in early 2019.
Frank, et al. v. Gaos, No. 17-961 – Argued on October 31, 2018, this case concerns whether and in what circumstances a cy pres award in a class action – that supplies no direct relief to class members – nonetheless comports with the Rule 23 requirement that a settlement binding class members must be fair, reasonable, and adequate. The ultimate ruling by the Supreme Court likely will determine the legality of cy pres awards, and if approved, create guidelines for the appropriateness of cy pres awards in class action settlements.
Home Depot U.S.A. v. Jackson, et al., No. 17-1471 – Argued on January 15, 2019, this case involves the Class Action Fairness Act and the circumstances under which Defendants may remove a class action to federal court where Defendants file a counter-claim. The ultimate decision likely will determine if the Supreme Court’s earlier ruling in Shamrock Oil & Gas Co. v. Sheets, 313 U.S. 100 (1941) – that a Plaintiff may not remove a counter-claim against it – extends to third-party Defendants bringing counter-claims.
Lamps Plus, Inc. v. Varela, et al., No. 17-988 – Argued on October 29, 2018, this case poses the issue of whether the Federal Arbitration Act (“FAA”) forecloses a broad interpretation of an arbitration agreement that allows prosecution of a class arbitration based solely on general language commonly used in arbitration agreements. Given the ruling in Epic Systems in 2018, the upcoming decision in this case will be of critical significance to employers involved in arbitration of workplace disputes.
New Prime Inc. v. Oliveria, et al., No. 17-340 – Argued on October 29, 2018, this case presents the issue of whether a court or an arbitrator must determine the applicability of § 1 of the FAA – which applies only to “contracts of employment” – to independent contractor agreements. The future decision in this case will be important to employers seeking to use class action waivers in workplace arbitration agreements used with independent contractors.
Mount Lemon Fire District v. Guido, No. 17-587 – Argued on October 1, 2018, this case raises the issue of whether the Age Discrimination in Employment Act (“ADEA”) applies to state and local governmental entities. A future decision will determine the coverage of the ADEA relative to the public sector employees.
The Supreme Court is expected to issue decisions in these five cases by the end of the 2018/2019 term in June of 2019.
Rulings in these cases will have significance for employers in complying with employment discrimination laws, structuring arbitration proceedings, and defending class action litigation.
Implications For Employers
Each decision outlined above may have significant implications for employers and for the defense of high-stakes class action litigation. As always, we will closely monitor all Supreme Court case developments and report them to our readers. Stay tuned!