This has been a truly devastating U.S. Supreme Court term for people suing large corporations and the lawyers who represent them. Here’s the unhappy (for plaintiffs) recap: The Court’s decision in AT&T v. Concepcion upholds mandatory arbitration clauses in consumer cases; Janus v. First Derivative Traders gives mutual funds a pass for their subsidiaries’ alleged misstatements to investors; Wal-Mart v. Dukes restricts broad employment discrimination class actions; and Pliva v. Mensing lets generic drug companies off the hook for state law product liability claims. All of these decisions have the effect of cutting off avenues of recovery against big businesses. And all of them—particularly this week’s one-two punch in Dukes and Mensing—have left plaintiffs-side lobbyists staggering.
Their inevitable next step, as folks from the American Association for Justice (AAJ) and the Alliance for Justice told OTC Friday, is to ask Congress to enact legislation that reverses the effects of the Supreme Court’s rulings. In Mensing, the majority opinion even anticipates that development. “We acknowledge the unfortunate hand that federal drug regulation has dealt Mensing, Demahy, and others similarly situated,” wrote Justice Clarence Thomas. “As always, Congress and the FDA retain the authority to change the law and regulations if they so desire.”
Senate Judiciary Committee chairman Patrick Leahy has already scheduled a hearing for next week entitled “Barriers to Justice and Accountability: How the Supreme Court’s Recent Rulings Will Affect Corporate Behavior,” at which the committee is expected to address the Concepcion, Dukes, and Janus fallout. In May, meanwhile, Minnesota Senator Al Franken reintroduced the Arbitration Fairness Act, which had kicked around in the last Congress, specifically to address “three disappointing [Supreme Court] decisions,” including Concepcion.
But looking at the recent history of legislative attempts to undo Supreme Court precedent doesn’t offer a whole lot of hopes for plaintiffs, as even the advocacy groups acknowledge. “Congress tends to be more driven by external events like an oil spill or airplace crash,” said AAJ policy director Susan Steinman. “This is not a situation Congress would fix very quickly.” (Steinman said AAJ is still analyzing what tack to take in mitigating the impact of the Court’s rulings.) Added Brian Sobel, the director of justice programs at the Alliance for Justice: “In this political climate, even if the Senate were to take up issues, would the Republicans in Congress go along? That seems unlikely.” (AFJ nevertheless intends to urge Congress to act, particular in the Mensing case.)
In recent history, according to class action authority John Beisner of Skadden, Arps, Slate, Meagher & Flom, there have been only four instances in which Congress managed to pass laws with the specific intention of reversing the effect of Supreme Court rulings. Two laws in the 1980s and one in the 1990s were designed to restore various civil rights. Most recently, the Lilly Ledbetter Fair Pay Act, the first law President Barack Obama signed when he took office, extended the statute of limitations for pay discrimination suits in a direct response to the Supreme Court’s ruling in the 2007 case Ledbetter v. Goodyear Tire.
“These are relatively rare examples,” Beisner said. “It’s pretty hard to do it….In the end, you’re talking about passing new legislation. That’s a daunting task.” It's particularly difficult, Beisner added, in a case like Dukes, in which the Court's decision is an interpretation of the rules of federal litigation, not of a law previously passed by Congress.
And, indeed, the halls of Congress are littered with the corpses of legislation that tried and failed to roll back Supreme Court rulings. Arlen Specter, the recently-retired Pennsylvania Senator, introduced bills to undo Stoneridge’s restrictions on suits against auditors and law firms that allegedly abetted securities fraud and the heightened pleading standards established by Iqbal and Twombly (in which the Court held that plaintiffs have to provide detailed allegations in their initial complaints). Neither went anywhere, even though House and Senate judiciary committees each held hearings to address whether the Supreme Court’s Iqbal standard has made it harder for plaintiffs to survive defense motions to dismiss.
For almost a year, the securities class action bar has been laboring in the wake of the Supreme Court’s ruling in Morrison v. National Australia Bank, trying to get Congress to reinstate a private right of action for U.S. investors in foreign-traded securities. Last summer’s Dodd-Frank Act addressed Morrison but fell far short of the hopes of the plaintiffs bar: The law called upon the Securities and Exchange Commission to conduct a study of Morrison’s impact. It also assigned a study on Stoneridge’s impact to the General Accounting Office.
As Lisa Rickard of the Institute for Legal Reform (an arm of the U.S. Chamber of Commerce) notes, a government study is a long way from a new law. And Rickard assured OTC Friday that her group plans to stand squarely in the way of any attempts to undo the Court’s latest rulings. “Trial lawyers and consumer groups tend to say the sky is falling and run to Congress,” she said. “You can count on the fact that we will vociferously protect the rule of law as laid down by the Supreme Court.”
(Reporting by Alison Frankel)