During the 2010–2011 term, the U.S. Supreme Court issued several noteworthy decisions highlighting the changing face of dispute resolution. For good reason, the two most talked-about decisions are Wal-Mart Stores Inc. v. Dukes, 131 S. Ct. 2541 (2011) and AT&T Mobility LLC v. Concepcion, 131 S. Ct. 1740 (2011). Depending on who one might ask, these decisions are either a draconian assault on the rights of plaintiffs to litigate against powerful corporations, or a backlash against unmanageable and frivolous class actions (Dukes) and the all-but-inevitable result of a system that respects the rights of businesses and individuals to freely enter into contracts (Concepcion).
In Dukes, the Court denied certification to a purported class of approximately 1.5 million of Wal-Mart’s former and current female employees. The plaintiffs’ lawsuit — the largest discrimination case in U.S. history — did not attack a specific Wal-Mart policy, but instead alleged that the decisions of independent managers at 3,400 stores had a disparate impact on female employees. In denying class certification, the Court held that the plaintiffs were missing the “glue,” otherwise referred to as “commonality,” necessary to support a class under Federal Rule of Civil Procedure 23.
While Dukes makes it more difficult for large classes to obtain certification, Concepcion may allow corporations to eliminate class actions altogether. The Concepcion plaintiffs filed a federal class action challenging the enforceability of an arbitration provision in their cell-phone contracts with AT&T Mobility that waived their rights to pursue class arbitration. The plaintiffs argued that their class action should be allowed to proceed based on a California law barring class waivers as unconscionable. The Court disagreed, concluding that the California law at issue conflicted with the purposes of the Federal Arbitration Act. In so doing, the Court expressly rejected the plaintiffs’ policy-based argument that plaintiffs will abandon small-dollar claims if such claims cannot be pursued on a class basis.
Aside from the immediate impact of Dukes and Concepcion, the import of these decisions for dispute resolution remains largely untested in the lower courts. At a minimum, these cases represent new hurdles for consumers and employees pursuing class actions, whether in federal court or arbitration proceedings. Both decisions will certainly galvanize more companies to use class-action waivers. While Dukes is not necessarily the death-knell of class actions, suffice it to say that the Supreme Court has drawn a line in the sand and expects lower courts to reasonably limit the size and geographic scope of classes. Certainly, Dukes is now the class-action precedent that will guide certification decisions and briefing. Although some wiggle room may exist, the important lesson to take away from Concepcion is more cut and dry: class-arbitration waivers are enforceable.
Damon Thayer is an associate at Jenner & Block LLP in the Complex Commercial Litigation Department in Los Angeles, California. http://www.jenner.com/people/bio.asp?id=2440.
Kathleen Jones was a 2011 summer associate at Jenner & Block LLP in Los Angeles, California and attends the University of Southern California School of Law.