Dukes v. Wal-Mart: Supreme Court Announces New Class Action Standards That Will Substantially Curtail Employment Discrimination Class Actions, As Well As Consumer, Antitrust, and Other Class Actions

On June 20, in Dukes v. Wal-Mart, the U.S. Supreme Court dealt a huge blow to plaintiffs seeking to certify employment discrimination class actions under Federal Rule of Civil Procedure 23, as well as consumer, antitrust, and other class actions. The heavily publicized case involved a proposed 1.5-million-person class of female Wal-Mart employees seeking to bring disparate impact and pattern or practice claims for discrimination in promotions and compensation. Justice Scalia wrote for the majority. In a 5-4 decision, the Court found that allegations that Wal-Mart had a “common” policy of permitting local managers to use discretion to make employment decisions based upon subjective factors did not satisfy the commonality requirement of Rule 23(a)(2). Significantly, the Court held that the commonality requirement is not met by “generalized questions” that do not meaningfully advance the litigation and is not met where named plaintiffs and members of the purported class have not suffered the “same injury.” In addition, in a unanimous decision, the Court found that claims for “individual monetary damages,” including back pay, could not be certified under Rule 23(b)(2). This decision provides defendants in class actions with a variety of tools to defeat efforts to certify large class actions involving disparately situated plaintiffs.

The Court Must Consider Certain Merits Issues in Deciding Class Certification Motions

The Court reached several conclusions that addressed, and rejected, arguments plaintiffs have made for years in support of certifying broad class actions in all contexts. For example, the Court put the final nail in the coffin of the argument that a district court must accept plaintiffs’ allegations as true and avoid any factual considerations of the “merits” in ruling upon class certification. The Court made it clear that a district judge must engage in a “rigorous analysis” before certifying a class action and must consider the merits of plaintiffs’ claims if they overlap with issues related to certification. The Court also suggested that a district court must scrutinize supposedly expert opinions offered in support of class certification. In making this ruling, the Court suggested that the standard set forth in Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579 (1993) (the Daubert standard) likely applies to expert evidence used in the class certification process.

“Commonality” Element Not Met Where Common Questions Are Not Significant

While acknowledging that even a single common question could be sufficient to establish communality, the Court held that reciting basic common questions, such as whether Title VII was violated, is not enough. A plaintiff must identify common questions that depend upon the same contention and the resolution of that contention must “resolve an issue that is central to the validity of each one of the claims in one stroke.” For example, the Court acknowledged that the case before it presented common questions like “do all of us plaintiffs indeed work for Wal-Mart?” and “do our managers have discretion over pay?” but held that “reciting these questions is not sufficient to obtain class certification.” Rather, it held that “commonality requires the plaintiff to demonstrate that the class members have suffered the same injury.” In discussing this point, the Court made clear that “commonality” does not exist merely because a purported class all allegedly suffered a violation of the same provision of law. This will be a significant benefit to defendants in defeating class actions where many purported class members have suffered no injury at all.

The Court then addressed the “wide gap” between an individual claim of discrimination and the existence of a company policy of discrimination that creates a class of individuals with the same injury as the named plaintiff, which was first acknowledged by the Supreme Court in General Telephone Co. of Southwest v. Falcon, 457 U.S. 147, 157-58 (1982). It noted that such a gap could be bridged, and commonality found, in two ways. First, it cited the case of a uniform biased testing procedure that impacted all test takers in the same way. Second, it could occur when there is “significant proof” that an employer “operated under a general policy of discrimination.” In discussing the second way, the Court made it clear that “the bare existence of delegated discretion” is not sufficient to establish commonality.

Significantly, the Court rejected three arguments routinely made by plaintiffs in arguing for class certification. First, the Court rejected the testimony of plaintiffs’ social science expert, Dr. William Bielby, who claimed that Wal-Mart had a culture that made it susceptible to gender bias, finding it useless to the salient question of whether plaintiffs could prove a general policy of discrimination. In doing so, the Court suggested that the testimony of expert witnesses used in support of class certification is subject to the Daubert standard. Second, the Court rejected the use of aggregate statistical analyses and the mere existence of gender disparities in pay, promotion, or representation as enough to meet the commonality burden in an employment case. Instead, the Court suggested that to show commonality, a plaintiff would at least need to demonstrate store-by-store disparities. Third, the Court found that affidavits from 120 individuals, or 1 out of every 12,500 class members, fell well short of meeting the burden of having “significant proof” that Wal-Mart operates under a general policy of discrimination. While these rejections occurred in the context of this employment discrimination claim, purported class plaintiffs in many other cases frequently attempt to rely on similar evidence to support class certification. For example, antitrust plaintiffs attempt to use aggregate statistical analyses of costs and prices and consumer class action lawyers use surveys, regression analyses, and purported social science analyses to establish the existence of commonality. The Court’s decision in Dukes makes clear that the Court may not merely accept plaintiffs’ efforts to homogenize out individual issues through unreliable expert testimony.

Rule 23(b)(2) Cannot Be Misused to Circumvent Due Process

The Court next ruled, in the unanimous portion of the opinion that will have a substantial impact on class actions generally, that individualized claims for money damages cannot be certified under Rule 23(b)(2) and instead must be certified, if at all, under the more onerous requirements of Rule 23(b)(3). In so ruling, the Court noted that Rule 23(b)(3), unlike Rule 23(b)(2), mandates notice to the class and an opportunity for class members to opt out of the lawsuit, necessary safeguards consistent with preserving the constitutional due process rights of class members whose individual claims for monetary damages would be adjudicated if a class were certified. The Court rejected the “predominance test” established by the Ninth Circuit, which permitted the certification of claims for monetary damages as long as claims for injunctive relief “predominated” over the claims for monetary damages. It cited favorably to the “incidental damages” test first adopted by the Fifth Circuit in Allison v. Citgo Petroleum Corp., 151 F.3d 402, 415 (5th Cir. 1998), which permits certification of claims for monetary relief as long as that relief “flow[s] directly from liability to the class as a whole,” which “should not require additional hearings.” While seeming to express skepticism that monetary damages could ever be incidental to injunctive and declaratory relief, the Court declined to adopt a bright-line rule prohibiting all money damages from ever being certified under Rule 23(b)(2). This ruling has widespread implications because Rule 23(b)(3) requires plaintiffs to prove that common questions predominate over individual ones and that a class action is superior to other available methods for fairly and efficiently adjudicating the controversy. Given the Court’s cynicism regarding the use of discretionary decisionmaking as grounds for the less stringent commonality standard, this burden should be extremely difficult for plaintiffs’ attorneys to meet in employment class actions without significantly altering the types of class actions they bring.

Even in the many jurisdictions that have long been critical of Rule 23(b)(2) certification of claims for monetary damages, plaintiffs’ attorneys have previously had some success in distinguishing back pay from monetary damages and thereby getting claims for huge back pay awards certified under Rule 23(b)(2). The Supreme Court put an end to that practice as well. In a far-reaching ruling that will effectively require plaintiffs who bring class action employment discrimination lawsuits (except those solely for classwide injunctive relief) to meet the standards of Rule 23(b)(3), the Court held that back pay, regardless of whether it is characterized as equitable, cannot be certified under Rule 23(b)(2). Central to this holding was the Court’s rejection of the Ninth Circuit’s proposed sampling-based approach to doling out back pay to the class without ever permitting Wal-Mart to defend the employment decisions it made regarding each individual class member. Rather than approve this approach, which it derisively referred to as “trial by formula,” the Court held that Wal-Mart was “entitled to individualized determinations of each employee’s eligibility for backpay.” This ruling not only precludes certification of the claims for money damages under Rule 23(b)(2), but will also make it difficult for plaintiffs to certify claims for monetary damages under Rule 23(b)(3). In addition, this ruling will limit the use of Rule 23(b)(2) to obtain “restitution damages” or any other type of money damages in all kinds of cases, including consumer class actions, antitrust class actions, and products liability actions.

What Comes Next?

In general, it will be more difficult for plaintiffs to obtain class certification in all cases. District courts will now be required to scrutinize closely all alleged common questions of law and fact to determine if the proposed class action can generate common answers to those questions that are apt to drive the resolution of the litigation. In particular, variations in whether class members suffered injury will be ripe for attack given the express language of the Court’s opinion. It will not be sufficient for plaintiffs to allege a “general policy” without proving the existence of such a policy and its impact on each class member. In addition, defendants are now more likely to have challenges to expert testimony at the class certification stage heard under the Daubert standard, which will have the effect of further requiring an actual showing of commonality by plaintiffs rather than mere assertions of commonality by lawyers or their experts. Even where some level of commonality is shown, in damages cases plaintiffs will also need to meet the predominance and other standards of Rule 23(b)(3), and they will not be able to circumvent due process through the use of formulaic damages awards that do not permit defendants to address the individual variations in the claims of each class member.

We also expect this decision to be tremendously helpful to retailers and other businesses that delegate authority to the local level in all types of class actions. The Court held that decisions relevant to the case were “decentralized” and made in local Wal-Mart stores, which it found to be the “opposite” of a common practice that would justify a class action. Retail and other similar companies frequently operate in this manner with respect to employment and many other decisions. These companies will be able to argue that nationwide class actions are inappropriate where the relevant decisions are made at the local level.

Class action employment discrimination lawyers will likely respond to this decision by modifying the types of cases they bring and how they characterize the common questions asserted in those cases. We expect plaintiffs’ attorneys to file smaller class actions focused on specific job groups and/or locations, perhaps with multiple subclasses. Joe Sellers, one of the lawyers for the plaintiffs in Dukes, has already been quoted as saying the decision will result in “more class actions at the store or regional level.” See “Wal-Mart Case Is a Blow for Big Cases and Their Lawyers,” http://www.nytimes.com/2011/06/21/business/21class.html?_r=1&smid=tw-nytimes&seid=auto. These smaller class cases may be brought under state laws in state courts to avoid some of the impact of this decision on certification. In addition, plaintiffs may focus on more tailored challenges targeting specific aspects of employers’ personnel policies that apply to a broad range of employees. It is also likely that employers will face more multiplaintiff cases that attempt to consolidate various individual discrimination claims, including pattern or practice claims. Mr. Sellers has stated that the plaintiffs’ lawyers in Dukes have prepared “thousands” of individual charges of gender discrimination that they plan to file with the Equal Employment Opportunity Commission (EEOC)See “Wal-Mart Women Vow to Press Bias Fight in Courts, Agency,” http://www.businessweek.com/news/2011-06-21/wal-mart-women-vow-to-press-bias-fight-in-courts-agency.html. In short, we expect to see plaintiffs’ attorneys testing various avenues to obtain the most expansive classes possible under the new standards.

We also expect to see an increase in Equal Pay Act claims. While the standard for certification in those cases is demanding, plaintiffs’ counsel may view it as a favorable alternative to proceeding under Rule 23 in light of this decision. Moreover, while class action counsel are not likely to entirely abandon theories premised upon subjectivity and stereotyping, we expect more class actions focused on objective personnel policies, such as employment tests, that apply generally to a large group of employees. The EEOC has been aggressively investigating such cases for several years as part of its focus on screening procedures and claims of systemic discrimination.

Finally, as has already started, we expect calls for government action. The EEOC has stated that it is reviewing the Dukes decision and determining whether it warrants any changes in its strategies for enforcement of Title VII. The Commission, which is not bound by Rule 23, could respond by more aggressively filing representative actions, potentially in partnership with intervening private class counsel. In addition, civil rights groups have already started calling for congressional action, including a renewed push for passage of the Paycheck Fairness Act. While the current Congress is unlikely to move forward with such legislation, as we saw with the Lilly Ledbetter Fair Pay Act, future political changes to the makeup of Congress could result in legislation designed to eat away at some of the employer-friendly aspects of the Dukes decision.

What Should Employers Do Now?

The Dukes decision is a great win for employers who no longer face the prospect of defending overbroad class claims indiscriminately attacking the individualized decisionmaking of local managers based upon ill-defined, allegedly discretionary policies. However, now is not the time for employers to become complacent. As noted above, we expect more targeted class claims as class action plaintiffs’ attorneys test the boundaries of this decision. While this next wave of cases will almost certainly focus on smaller classes than that at issue in Dukes and the other large class actions of recent years, it will still create significant risks to organizations who are sued, in terms of litigation costs, potential exposure, and public relations. Fortunately, Dukes ups the ante for plaintiffs’ attorneys as well, as they now face a much greater battle when filing class actions, and we expect that they will be more diligent in researching and selecting cases than they have been in the past. For this reason, as well as to most efficiently manage their businesses, employers should continue to develop employment practices and policies that reflect best practices, monitor those practices and policies to ensure compliance with EEO policies, and analyze the impact of such practices and policies for equity and consistency with diversity policies and goals.

United States Supreme Court Strikes Down Largest Employment Discrimination Class Action in History

On June 20, 2011, the United States Supreme Court granted employers some long-awaited relief by substantially raising the bar for plaintiffs (and their lawyers) seeking to certify large employment discrimination class actions. In Wal-Mart v. Dukes (No. 10-277), the Court reversed the Ninth Circuit Court of Appealsen banc decision upholding the certification of a class action filed on behalf of approximately 1.5 million hourly and salaried female employees alleging sex discrimination in pay and promotions. The potential damages were estimated to be more than a billion dollars.

As we have detailed in prior newsletters and bulletins, because of potentially large damage awards and fee-shifting provisions, employment class actions have been a boon for the Plaintiff’s bar while exposing employers to significant liability and litigation costs.  Although the Dukes decision will not put an end to class actions, it, at the very least, temporarily halts the large nationwide employment discrimination class actions. In its ruling, the Supreme Court significantly increased the plaintiffs’ burden of proof at the class certification phase and mandates that district courts look more carefully at whether class certification is appropriate, including a critical assessment of plaintiffs’ proof of class-wide discrimination.

The Supreme Court’s Decision in Dukes

Following an increasing trend, the Dukes plaintiffs alleged that Wal-Mart discriminated against its female employees by delegating subjective decision making authority with respect to pay and promotion decisions to its local store managers and by building a corporate culture that fostered sex bias in these managerial decisions. Both the district court and the Ninth Circuit held that plaintiffs demonstrated that their class claims were appropriate for certification by relying on:

(i) statistical evidence purportedly demonstrating disparities in the pay and promotions of males and females; (ii) anecdotal reports of discrimination by 120 female employees; and (iii) the “expert” testimony of a sociologist who concluded that Wal-Mart’s culture was susceptible to gender discrimination.

Plaintiffs Did Not Satisfy Their “Commonality” Burden under Rule 23(a)

In a strongly worded opinion, Justice Scalia, writing for the 5–4 majority, disagreed that the Dukes plaintiffs’ evidence was sufficient to support class certification because it did not meet plaintiffs’ burden of satisfying Rule 23 of the Federal Rules of Civil Procedure requirements for certification. As recast by Justice Scalia, to meet these requirements, plaintiffs must provide “significant proof” that their class claims involve a common issue the resolution of which is “central to the validity of each one of the [class members’] claims in one stroke”; for example, discriminatory bias on the part of the same manager or the use of a discriminatory test.

The majority’s decision removes any doubt that a trial court must conduct a “rigorous analysis” to ensure that plaintiffs have satisfied the Rule 23 elements, including a searching review of evidence that goes to the merits of the case. Exploration of the merits was appropriate in Dukes, the majority found, because it necessarily overlapped with the plaintiffs’ class-wide allegations that Wal-Mart engaged in a pattern and practice of discrimination.

In Dukes, the majority found plaintiffs’ evidence fell far short of the required “significant proof.” The Court did not reverse a prior decision that delegation of subjective decision making to individual managers could constitute a common discriminatory practice, but the majority found plaintiffs’ evidence lacking where Wal-Mart had a “general policy of non-discrimination” and where thousands of managers were making literally millions of pay and promotion decisions in some 3,400 stores. Specifically, the Court rejected plaintiffs’ sociological expert’s conclusion that Wal-Mart’s corporate culture made it more susceptible to gender bias in managerial decision making because the expert could not even opine, let alone show, that gender bias infected .5 percent or 95 percent of managerial decisions. The Court concluded that this was “the opposite of uniform policy that could provide commonality needed for a class action.”

The majority also found plaintiffs’ statistical and anecdotal evidence to be equally unpersuasive. Plaintiffs’ statistical expert conducted a region-by-region analysis and found that female representation in management positions was substantially less than in lower hourly positions and that females earned less than men. The Court discounted this proof, stating that any disparity at the regional level could not by itself establish that there were pay or promotion disparities at the individual stores, and even less so across all class members, which the majority stated was necessary to support plaintiffs’ theory of commonality. Furthermore, even if the statistics supported disparity at all the individual stores, the analysis did not consider potential assertions by Wal-Mart’s managers that women are not as readily available in certain store areas or the differences in the criteria used by the individual stores to make the decisions. The Court further found that the plaintiffs’ anecdotal evidence comprised of 120 affidavits representing the reporting experiences of only 1 out of every 12,500 class members and only 235 of Wal-Mart’s 3,400 stores could not show the whole company operated under a general policy of discrimination.

Plaintiffs Could Not Pursue Individualized Monetary Claims under Rule 23(b)(2)

The Court also unanimously resolved a split in the Courts of Appeal and held that the claims for backpay should not have been certified as a class action under Rule 23(b)(2) because such backpay damages were not “incidental” to the injunctive or declaratory relief sought. The Court concluded that certification under Rule 23(b)(2) is inappropriate when “each member would be entitled to an individualized award of monetary damages.”

Instead, the Court held that the monetary claims involving individualized proof must proceed under Rule 23(b)(3), which permits class certification only upon a showing that common questions of law and fact predominate over questions affecting individuals and after providing notice of the class action to potential class members and an opportunity to opt out. The Court reasoned that these procedural safeguards were necessary to protect class members’ individual interests in monetary relief.

The Court also rejected the position adopted by the Ninth Circuit that a statistical sample of class members could be used to determine the damages for the whole class without individualized proceedings. The Court reasoned that this sampling method was inconsistent with the procedures established by the Supreme Court for determining the scope or lack of individual damages in Title VII claims. The majority further suggested, without deciding, that this approach might also violate an employer’s right to individualized determinations of each class member’s eligibility for backpay.

Implications of the Court’s Decision in Dukes

The most immediate effect of the Dukes decision is that district courts will need to reconsider the appropriateness of employment discrimination class actions on their docket that were certified under Rule 23(b)(2). In the longer run, Dukes may not have sounded the death knell for all large discrimination class actions but it has made it very difficult for plaintiffs to mount class actions that seek to cover multiple types of claims, e.g., pay and promotions, and many different job classes, facilities and/or managers. As a consequence, future class actions are more likely to focus on more discrete claims of discrimination covering fewer locales and limited to common decision makers and covering a more homogenous class. In particular, Dukes is likely to curtail the bringing of class actions under the “delegation of subjective decision making” theory. Although the Court did not articulate clear evidentiary standards for establishing “commonality,” the Court emphasized the need to demonstrate a common allegedly operative discriminatory practice and injury across all putative class members. It is difficult to see how plaintiffs will mount class actions based on “subjective decision making” given the Court’s emphasis that “demonstrating the invalidity of one manager’s use of discretion will do nothing to demonstrate the invalidity of another’s.”

The Dukes decision also, as a practical matter, will require district courts to probe more deeply into the merits at the class certification stage, and the Supreme Court endorsed the consideration of Daubert motions to exclude expert testimony before class certification to assess such testimony’s adequacy. Moreover, although Dukes is restricted to class certification requirements, its emphasis on proving that the alleged discriminatory practice applied to and may have injured all class members may also lead to higher standards of proof in establishing class-wide discrimination on the merits.

Dukes also will lessen the incentive of plaintiffs’ attorneys to bring class actions by making it more difficult to seek monetary damages for large, diffuse classes.

How plaintiffs’ attorneys will respond is open to speculation. The attorneys representing Dukes profess their intent to bring individual and more discreet, localized class actions. This may become an overall trend. Employers should keep in mind that the Dukes decision has no immediate impact on the ability of the EEOC to bring company-wide pattern and practice suits because the EEOC generally is not required to satisfy the “commonality” principles espoused by the Supreme Court. Nevertheless, the Dukes decision, which comes on the heels of the Court’s May 2011 pro-employer decision in AT&T Mobility v. Concepcion et ux. seemingly validating the use of mandatory arbitration agreements to bar employees’ ability to litigate claims on a class basis, is a welcome change for employers.

Employers May Face Vicarious Liability For Dangerous Acts Of Independent Contractors

Generally, businesses that hire independent contractors are absolved from any liability for the wrongful acts of those independent contractors unless the work is “inherently dangerous activity.” The concept is that businesses cannot contract away the responsibility for dangerous activities. This concept was recently addressed in Stout v. Johnson, 159 Wn. App. 344 (2011), where a criminal sued a bail bond company for injuries that he sustained when the bail bond company’s independent contractor – i.e., the bounty hunter – apprehended him after he failed to appear in court for a scheduled hearing.

In Stout, the plaintiff-criminal had posted a $50,000 bail bond for felony drug charges. He missed his court appearance, so the bail bond company retained a bounty hunter to apprehend him. When he tried to escape by car, the bounty hunter blocked his pathway, causing him to drive off the road and collide with a tree, sustaining injuries which resulted in the amputation of his leg. The criminal sued the bail bond company, claiming that it was liable for the acts of the bounty hunter since bounty hunting is inherently dangerous. The bail bond company defended claiming that, because the bounty hunter was an independent contractor and not its employee, it was not responsible for his actions. The trial court agreed and dismissed the plaintiff-criminal’s claims against it.

On appeal, the criminal argued that the “inherently dangerous activity” doctrine makes businesses responsible for the actions of their independent contractors. The Stout court started its analysis with the general rule that respondeat superior does impose liability on an employer for the torts of an employee who is acting on the employer’s behalf. Thus, if the bounty hunter had been the bail bond company’s employee the bail bond company could have been liable. However, a business that hires an independent contract is not generally vicariously liable for the actions of that contractor. The Stout court did recognize that an exception exists when an employer of an independent contractor attempts to delegate its duty of care to an independent contract and escape liability in inherently dangerous situations. The Stout court accepted, for purposes of argument, that bounty hunting was an inherently dangerous activity, yet it still held in favor of the employer.

The Stout court explained that, when a person takes part in an activity with knowledge that there is unavoidable risk of injury, he or she is not protected by the “inherently dangerous activity” exception to the independent contractor rule. In other words, the criminal assumed the risk by running and was not an innocent third party who had been injured by an independent contractor engaged in an inherently dangerous activity. When the plaintiff drove his car down the gravel road in an attempt to avoid the apprehension, he was aware that the bounty hunter could ram his car and force it off the road. He knew there was a risk of at least some peril when he absconded.

The takeaways from Stout are that, while employers are legally responsible for the acts of their employees, generally they are not liable for the acts of their independent contractors. That is often a reason why businesses retain independent contractors to perform certain functions, and in most cases, there is a cost savings to the business. However, in certain situations, the Stoutcourt emphasized that businesses will be liable for the acts of their independent contractors when it is an “inherently dangerous activity.” Nonetheless, the Stout court emphasized that, when the person who is injured by the inherently dangerous activity has caused and/or brought the harm from the dangerous activity on himself or herself, he or she will not be able to recover damages from the employer for injury resulting from the dangerous activity.

Senate Hearing on DREAM Act Emphasizes Need for Relief

Today, the U.S. Senate held its first ever hearing on the Development, Relief, and Education for Alien Minors (DREAM) Act. Witnesses such as Department of Homeland Security Secretary Janet Napolitano, Secretary of Education Arne Duncan and Dr. Clifford Stanley, Under Secretary of Defense for Personnel and Readiness, testified to an overflowing Senate hearing room. The hearing renewed hope that despite a failure on the part of the Senate to pass the DREAM Act last year, Congress may yet be willing to help these deserving young adults fulfill their potential and contribute to the U.S.

Only the most cynical politician could claim that the DREAM Act is being used as a political tool after hearing the testimony of Ola Kaso, an unauthorized immigrant from Albania. Ola was brought to the U.S. at a young age by her mother, who was trying to find a better life for her and her family. Ola struggled to integrate into U.S. society at first, but by the end of high school, she had a 4.4 GPA and was a varsity athlete in both tennis and cross country. She became treasurer of both the Senior Class Student Council as well as her school’s chapter of the National Honor Society. She received numerous scholarship offers and was accepted by several universities including the University of Michigan. Yet, despite all of her achievements, Ola was ordered to be deported to Albania (despite not being fluent in Albanian) the March before her high school graduation. Luckily, Ola’s community rallied around her and was able to get DHS to grant her deferred action for one year while she continued her education. However, many DREAM Act students are not so lucky.

The DREAM Act not only accomplishes humanitarian goals like keeping deserving and innocent young students from being punished, but also allows bright young adults to contribute to the U.S. economy. A 2010 study by the UCLA North American Integration and Development Center estimated that the total earnings of DREAM Act beneficiaries over the course of their working lives would be between $1.4 trillion and $3.6 trillion. More earnings over the course of their working lives means another way that the U.S. can seek to reduce its deficits. In fact, the Congressional Budget Office (CBO) estimated that the House version of the DREAM Act (H.R. 6497), as introduced on December 7, 2010, “would reduce deficits by about $2.2 billion over the 2011-2020 period.”

After being pressed by Senator Chuck Grassley (R-IA), DHS Secretary Napolitano made clear that in the absence of the DREAM Act, there would be no categorical “amnesty” for DREAM Act eligible students. But on June 17, the Obama administration took a small step that may benefit some DREAM Act students. In a memo from Immigration and Customs Enforcement (ICE), Director John Morton outlined 19 factors (ranging from age and when someone came to the country to community ties) that ICE officials should weigh when deciding whether to prosecute an immigration case. While there is no categorical pronouncement that all DREAM act students shall receive deferred action, the Obama Administration is at least signaling that these types of cases merit an individualized assessment.

Small steps like this memo and the continued push on the part of Sen. Richard Durbin (D-IL) for the DREAM Act give hope that Congress will soon realize the obvious fiscal and humanitarian benefits of keeping these bright young adults in the United States.

Photo by Antonio Villaraigosa

J. McIntyre Machinery v. Nicastro: Declarifying Asahi

Remember when George H.W. Bush was the 41st President of the United States? Back when the Warsaw Pact dissolved and the U.S.S.R. became the Commonwealth of Independent States? Back when Pan Am ceased flying?

Well, I do.

(No snarky questions professing ignorance about the Warsaw Pact, if you please.)

I was in my first year at Baylor Law School and trying to master the complexities of Civil Procedure, including the mysteries of International Shoe and “minimum contacts.”

And just about the time I thought I had it, Professor Trail smiled that mischievous smile of his and came straight at us with something about a “Stream of Commerce” and Asahi Metal Inustry v. Superior Court. As best I can recall, we were either supposed to elucidate what the law of personal jurisdiction actually was in the wake of Asahi, or else predict who would prevail in a cage match between Justice Sandra Day O’Connor and Justice William Brennan.

The result was predictable confusion–confusion that reached down the ages.

Until today. Professors and law nerds everywhere had the vapors because the Supreme Court of the United States had a chance to clear it all up in J. McIntyre Machinery Ltd. v. Nicastro. After the break, a few words on how end-of-term alphabet soup begat “Son of Asahi.”

Justice Kennedy set out the Asahi problem. Does jurisdiction depend more upon the Defendant taking specific action toward the forum state, or foreseeability enough:

In Asahi, an opinion by Justice Brennan for four Justices . . . contended, “jurisdiction premised on the placement of a product into the stream of commerce [without more] is consistent with the Due Process Clause,” for “[a]s long as a participant in this process is aware that the final product is being marketed in the forum State, the possibility of a lawsuit there cannot come as a surprise.” . . .  .

The standard set forth in Justice Brennan’s concurrence was rejected in an opinion written by Justice O’Connor; but the relevant part of that opinion, too, commanded the assent of only four Justices, not a majority of the Court. That opinion stated: “The ‘substantial connection’ between the defendant and the forum State necessary for a finding of minimum contacts must come about by an action of the defendant purposefully directed toward the forum State. The placement of a product into the stream of commerce, without more, is not an act of the defendant purposefully directed toward the forum State.”

Nicastro gave the Court a chance to pick. But alas, five cats could not be herded into a single corral.

Broadly speaking, the question presented in Nicastro was whether a foreign manufacturer could be hauled into the state where its machine injured someone. The manufacturer had a distributor for U.S. sales, making such sales foreseeable, but had not itself targeted the state where the injury occurred.

But here is where the advocacy begins.

According to Justice Kennedy, writing for the plurality, the question was whether a “British manufacturer of scrap metal machines was subject to jurisdiction in New Jersey, even though at no time had it advertised in, sent goods to, or in any relevant sense targeted the State.”

Justice Ginsberg stated it a bit differently:

A foreign industrialist seeks to develop a market in the United States for machines it manufactures. It hopes to derive substantial revenue from sales it makes to United States purchasers. Where in the United States buyers reside does not matter to this manufacturer. Its goal is simply to sell as much as it can, wherever it can. It excludes no region or State from the market it wishes to reach. But, all things considered, it prefers to avoid products liability litigation in the United States. To that end, it engages a U. S. distributor to ship its machines state-side. Has it succeeded in escaping personal jurisdiction in a State where one of its products is sold and causes injury or even death to a local user?

She also might have mentioned that the “three-ton metal shearing machine severed four fingers on Robert Nicastro’s right hand.”


So, how did the Brennan/O’Connor cage match get decided?

It didn’t. Now it’s just the Kennedy/Ginsburg cage match:

  • Justice Kennedy (with Roberts, Scalia, and Thomas) would hold that Justice Brennan’s concurrence was “inconsistent with the premises of lawful judicial power,” because “it is the defendant’s actions, not his expectations, that empower a State’s courts to subject him to judgment.” Targeting the United States is not the same thing as doing business in New Jersey.
  • Justice Ginsberg (with Kagan and Sotomayor) would hold that the manufacturer’s intent to target the U.S. market was enough to subject it to jurisdiction in New Jersey, even if it’s independent distributor was responsible for the New Jersey sale.
  • Justice Breyer and Justice Alito decided that both groups had cooties and would only concur in the judgment. They thought it “unwise to announce a rule of broad applicability without full consideration of the modern-day consequences,” which they thought were absent from the case.

Justice Kennedy recognized that before today’s opinion, “[t]he rules and standards for determining when a State does or does not have jurisdiction over an absent party [were] unclear because of decades-old questions left open in Asahi Metal Industry Co. v. Superior Court of Cal., Solano Cty., 480 U. S. 102 (1987).”

They still are.

For want of a fifth vote, we are about 14,000 words the richer after today’s three opinions, but none the wiser.

Is it possible to read three Supreme Court opinions on personal jurisdiction and know less than when you started?