Reading the Tyson tea leaves: This case won’t be vehicle for big class action changes

November 11, 2015

Remember how excited the business lobby was in 2014 when the U.S. Supreme Court took a case that might have knocked out the foundation of most securities fraud class actions? The justices granted certiorari in Halliburton v. Erica P. John Fund to reconsider the presumption that, under fraud-on-the-market theory, investors relied on corporate misrepresentations. But in the end, the court left the presumption more or less intact, disappointing Halliburton amici who had hoped for fundamental change in the law governing securities class actions.

I think class action opponents are going to be just as disappointed with the outcome in Tyson Foods v. Bouaphakeo, based on oral arguments Tuesday at the Supreme Court.

Tyson wants the justices to overturn a $6 million wage-and-hour judgment for workers at a meat processing plant in Iowa who claimed they weren’t adequately paid for the time they spent getting into and out of protective gear. The company’s petition for Supreme Court review presented two questions: whether the class was improperly certified because the case relied on statistical averages that purported ignored differences between class members; and, more broadly, whether a class action may be certified when the class includes plaintiffs who have not been injured and are not entitled to damages. (More than 100 of the workers in the case worked less than 40 hours a week and, according to Tyson, should not receive overtime pay.)

That second question, in particular, has potentially gigantic consequences. If plaintiffs’ lawyers have to show at the class certification stage that every class member has been injured, a lot fewer class actions will be certified. That’s why so many pro-business groups filed briefs urging the Supreme Court to use the Tyson case to squelch class actions with squishy membership.

Tyson’s own argument on certifying classes that contain uninjured class members has shifted a bit during merits briefing in the case, as I’ve reported. The company’s last brief called for plaintiffs to offer a “rigorous culling” mechanism in order to be certified as a class but seemed to back away from the absolutist view that classes cannot be certified if some members may not have been injured.

Neither position found much traction with the four liberal justices or Justice Anthony Kennedy at arguments Tuesday morning. I have to repeat the usual caveat that oral arguments don’t necessarily presage the Supreme Court’s ultimate decision, but Justice Kennedy, in particular, said repeatedly that the context of this case – which was simultaneously a class action under Rule 23 of the Federal Rules of Civil Procedure and a collective action under the Fair Labor Standards Act – changes the class certification calculus because the Supreme Court’s 1946 decision in Anderson v. Mt. Clemens Pottery lowered the standard of proof in FLSA cases against employers that, like Tyson, kept inadequate records.

If the Tyson case were only a class action, Kennedy said in questions to both workers’ counsel David Frederick of Kellogg Huber Hansen Todd Evans & Figel, and workers’ amicus Elizabeth Prelogar of the solicitor general’s office, certification of a class of workers who wore different sorts of protective gear would be a close call. Using statistical evidence might even be a “barrier” to class certification, Kennedy said – were it not for the leeway plaintiffs are allowed under the Mt. Clemens precedent. “The point is we start with Mt. Clemens,” he said. “That’s the substantive law for FLSA.”

So even if the Supreme Court is worried about certification of classes containing uninjured class members, as Justices Samuel Alito and Antonin Scalia suggested they are, the Tyson case appears to be a bad vehicle to solve the problem.

Justices Elena Kagan and Sonia Sotomayor also suggested that Tyson, and not the class action mechanism, is to blame if workers who didn’t actually work overtime share in the class recovery. Tyson argued against separate trials for liability and damages and asked the jury to deliver a single lump-sum verdict for the entire class. The company could have instead asked for a separate proceeding to handle what Justice Kagan called the “highly ministerial” issue of which workers are entitled to a share. “It takes care of the entire problem” of uninjured class members, she said. (Tyson counsel Carter Phillips of Sidley Austin said the workers actually withdrew their proposal to bifurcate the trial so the ultimate decision was not Tyson’s.)

Justice Stephen Breyer, meanwhile, showed pretty clearly what he thinks of the broad argument that classes cannot be certified if they contain uninjured members. “Of course you can put in your class people whom, it will turn out, are not hurt,” he said. “That’s the most common thing in the world.”

The justice offered a hypothetical of a price-fixing case in which plaintiffs posited a year-long conspiracy but at trial could only prove the conspiracy lasted a half-year. “We put (plaintiffs from the second half-year) in the class to begin with because we thought we could prove injury,” he said. “As it turns out, we can’t. Now, I’ve never heard that you had to be able to know exactly how you’re going to win your case when you form the class action because you don’t know quite what the proof will be. I mean, isn’t that how class actions work?” (Phillips said trial judges have a continuing obligation to oversee class membership.)

I mentioned Halliburton at the beginning of this story for a reason. Justice Kagan drew an analogy between the Tyson and Halliburton cases during oral arguments. Just as the justices reiterated in Halliburton that investors don’t have to make an individualized show of proof, she said, “the same thing, it seems to me, is true here because of the Mt. Clemens inquiry.”

And that’s why I’m pretty sure the eventual decision in Tyson is going to be as underwhelming for class action opponents as Halliburton was.

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