The United States Supreme Court is expected to issue no fewer than five opinions between now and the end of June that will further change and clarify the rules governing federal class actions in the United States.  For nearly fifteen years after its seminal decision in Amchem Products, Inc. v. Windsor, 521 U.S. 591 (1997), the Supreme Court was largely silent on significant class certification issues.  In the past several years, however, that has changed dramatically.  In 2011, the Supreme Court issued Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541 (2011), which provided significant direction to lower courts on how to evaluate class-certification motions.  Dukes followed several recent arbitration cases also presenting class action issues, including the enforceability of arbitration provisions and class-arbitration waivers in consumer contracts.  AT&T Mobility LLC v. Concepcion, 131 S. Ct. 1740 (2011); Stolt-Nielsen S.A. v. AnimalFeeds Int’l Corp., 130 S. Ct. 1758 (2010).   Now, this Term, the Supreme Court has granted certiorari in five cases, all of which could significantly impact how and when class actions can be certified in United States courts. 

Comcast v. Behrend, No. 11-864, presents the issue whether a district court may grant class certification without first resolving whether the plaintiffs have introduced admissible evidence, including expert testimony, to show that they have a method of proving damages that is common for all plaintiffs.  Petitioner Comcast argues that expert testimony presented at the class-certification stage must be subject to the standard of Daubert v. Merrell Dow Pharmaceuticals, 509 U.S. 579 (1993), which requires a full inquiry into the reliability and admissibility of that expert evidence.  The respondents – plaintiffs below – maintain that Comcast waived its Daubert argument by failing to make it in the lower courts and thus the Court should dismiss the writ of certiorari.  Multiple amicus briefs filed in support of Comcast on the merits have stressed the need for strict review of expert testimony to help prevent unmeritorious claims from being certified, which places pressure on defendants to settle.  Amicus briefs have also been filed in support of plaintiffs, stressing that a strict standard will render meritorious cases not viable.  The case was argued in late 2012; at oral argument the Justices concentrated on the merits, which may suggest that they (or enough of them) are untroubled by the respondents’ threshold argument for dismissal of the writ.  If the Court declines the respondents’ invitation to dismiss the writ and reaches the substantive issue, the Court’s ruling in this case is expected to clarify just how closely district court judges must weigh expert testimony before certifying a class.

In The Standard Fire Insurance Co. v. Knowles, No. 11-1450, the Court has been asked to decide whether a plaintiff can defeat a defendant’s right of removal under the Class Action Fairness Act ("CAFA") by stipulating that he will seek less than the $5 million CAFA threshold for removal on behalf of the putative class.  Petitioner Standard Fire Insurance Company asserts that the answer is no, arguing that a class plaintiff in Knowles’ position does not have the authority to bind absent putative class members to the damages stipulation, and that removal was proper because the actual amount in controversy exceeds $5 million.  Respondent Knowles argues that a plaintiff, as “master of his complaint,” can stipulate damages as he sees fit and such a stipulation is controlling on the amount-in-controversy issue.  At oral argument, several Justices voiced concerns that if Knowles’ argument carried the day, class counsel could evade CAFA’s application, and thus federal jurisdiction, by filing piecemeal stipulations artificially dividing class actions; other Justices suggested, however, that the text of CAFA may permit this type of strategy on the part of a class plaintiff.  The Court is expected to decide before the end of June whether a stipulation of the type Knowles filed can bind absent class members, and thereby prevent a defendant from removing the action to federal court under CAFA.  If allowed to stand (and if not swiftly corrected by Congress), the decision may result in a large CAFA loophole that will allow plaintiffs’ lawyers willing to limit their asserted damages to easily avoid removal to federal court.

In Amgen Inc. v. Connecticut Retirement Plans and Trust Funds, No.11-1085, the Court is expected to decide whether plaintiffs in a securities fraud case must establish materiality before a class can be certified on the fraud-on-the-market theory.  The Court first endorsed the fraud-on-the-market theory in Basic v. Levinson, 485 U.S. 224 (1988).  Since that decision, securities-fraud plaintiffs have been bringing more actions based on such a theory, which in turn inexorably led to the question of what such plaintiffs need to prove, and when, to certify a “fraud-on-the-market” class.  Petitioner Amgen argues that if there is no materiality demonstrated at the class-certification stage, there is similarly no basis for presuming that the representation affected the stock price and caused investors to rely on it.  Respondent Connecticut Retirement argues that materiality is a merits issue, not a prerequisite to class certification.  Proof of materiality can be postponed, the respondent argues, because Rule 23 is concerned only with determining whether a class is cohesive enough that its questions can be resolved with common proof, as materiality can be.  At oral argument, several Justices observed that a finding of immateriality at the certification stage would foreclose future trials on the merits.  Those exchanges at argument have led some Court-watchers to predict that the Supreme Court will rule in favor of Connecticut Retirement.  A decision in favor of Amgen, in contrast, would permit courts to dismiss putative securities class actions earlier, reducing the enormous settlement pressure such actions place on defendants.

In Oxford Health Plans LLC v. Sutter, No. 12-135, the Court is expected to expound on its 2010 opinion in Stolt-Nielsen v. AnimalFeeds International Corp., in which it held that a party may not be compelled to submit to class arbitration where the parties had stipulated that they reached “no agreement” on whether a dispute could proceed as a class arbitration.  The issue in Oxford is whether an arbitrator may compel class arbitration based on broad contract language that precludes litigation and requires arbitration of any dispute, but is silent on whether disputes may proceed as class arbitration.  The Third Circuit Court of Appeals concluded that the arbitrator did not exceed his powers in determining that the contractual provision allowed for class arbitration, distinguishing Stolt-Nielsen on the ground that the parties had stipulated there that they had reached “no agreement” on the class arbitration issue.  Petitioner Oxford argues that arbitration is a creature of contract and that it did not consent to class arbitration merely by agreeing to a broad arbitration clause.  The respondents—plaintiffs below—assert that it was well within the arbitrator’s authority to interpret the agreement as including class arbitration, and that the lower courts correctly upheld the interpretation under the deferential review standard for arbitrator decisions.  The Supreme Court’s decision in this action is expected to resolve whether there has to be an explicit agreement allowing for class arbitration for any such arbitration to proceed.  As class arbitration increases the risk of large judgments, while strictly limiting judicial review, this decision could have significant implications for companies that have arbitration provisions that are silent on the issue of class arbitration.

In American Express Co. v. Italian Colors Restaurant, No. 12-133, the Court is expected to clarify the breadth of its 2011 decision in Concepcion, which held that the Federal Arbitration Act ("FAA") pre-empts state law prohibiting class waivers in arbitration agreements.  The issue in Italian Colors is whether a class-action waiver in an arbitration agreement may be found unenforceable if the waiver effectively renders impossible individual claims seeking to vindicate federal statutory rights.  Petitioner American Express’ cardmember agreements prohibit class arbitrations.  American Express argues that the Court categorically ruled in Concepcion that the enforceability of an arbitration agreement cannot turn on whether it permits class-wide arbitration.  American Express further asserts that no federal statutory rights are impaired by the cardmember agreements because the Sherman Act, under which plaintiffs claim relief, does not require that plaintiffs be permitted to proceed as a class.  Respondent Italian Colors argues that allowing the class-arbitration waiver to stand would permit the FAA effectively to override the Sherman Act’s private right of action because the small size of plaintiffs’ claims and the high cost of attorney fees and antitrust studies make individual arbitrations not feasible.  The Second Circuit ruled in favor of the plaintiff, Italian Colors, concluding that enforcing the class-wide arbitration ban would preclude plaintiffs from obtaining Sherman Act relief.  But there was a twist:  under Stolt-Nielsen, the Court of Appeals could not compel the parties to arbitrate on a class-wide basis because American Express had not consented to it in its cardmember agreement. As a result, the Second Circuit simply remanded to the district court with instructions to deny American Express’ motion to compel arbitration.  The Supreme Court granted American Express’ petition for review seeking clarification of the scope and consequences of Concepcion.  If the Supreme Court affirms the Second Circuit’s ruling, future plaintiffs would have a path to evade class-arbitration waivers and pursue class actions in federal court if they can show that the waiver would effectively foreclose private rights of action in federal statutes.


All five of these 2012 Term cases bear close monitoring.  The Supreme Court’s rulings are likely to have a significant impact on the potential exposure of large, multinational companies doing business in the United States and the ability of the plaintiffs to pursue class actions in the United States.  As each of these important cases is decided, we will be publishing alerts to keep our clients up-to-date on the latest developments in United States class-action law.