The arguments for and against class certification often follow a preordained road map, in which both plaintiffs and defendants focus on whether the requirements of Federal Rule of Civil Procedure 23 or its state-law equivalents have been satisfied. Defendants can and must make these arguments—and often can win on those grounds—but sometimes they overlook an additional source of attacks on class certification: the U.S. Constitution. These constitutional arguments can be critical in a number of respects. When it comes to state court class actions—especially when a business is stuck in a “judicial hellhole”—constitutional arguments are the only route for obtaining U.S. Supreme Court review; otherwise there would be no federal-law issue in the case. And the Constitution offers independent and potentially significant protections to defendants targeted by inappropriate class actions, whether in state or federal court. In this series of articles, we will provide readers with an overview of key constitutional limitations on class actions and our insights on how defendants can identify opportunities to invoke them to defeat class certification.
- State-law variations, due process, and federalism. Plaintiffs’ lawyers often seek to bring nationwide or multi-state class actions under the law of a single state. Defendants should consider arguing that such class actions violate due process. The Supreme Court has recognized that due process forbids states from applying their laws to the claims of non-residents when that state lacks a significant enough connection to the claims asserted by putative class members. And principles of federalism counsel against permitting one state to, in effect, apply its policy preferences nationwide by having that state’s law regulate transactions or occurrences involving class members across the country.
- Due process right to raise individualized defenses. It seems self-evident that in an individual civil case, due process requires allowing a defendant to raise any and all defenses in response to a plaintiff’s claim. But plaintiffs have had remarkable success convincing courts that these rules don’t apply in the class action context. In a number of cases, courts have essentially redefined causes of action to bypass traditional elements of that action that would be individualized, for example, whether a plaintiff relied on an alleged misrepresentation. Defendants should be prepared to argue that such machinations violate their due process right to present every available defense. This due process argument has a statutory counterpart in federal court—recently recognized by the Supreme Court—in the Rules Enabling Act, which prohibits the use of the Federal Rules of Civil Procedure, including Rule 23, to “abridge, enlarge or modify any substantive right.”
- Lack of standing. For cases in federal court, Article III of the Constitution requires that plaintiffs have “standing”—meaning that they have been actually injured in a concrete, particularized way; that the challenged conduct of the defendant caused that injury; and that the injury likely can be redressed by a favorable decision. This requirement exists because the federal courts have the power only to decide concrete, actual cases and controversies, not abstract or hypothetical questions. In the class action context, courts are divided over whether the named plaintiff alone must possess standing or whether all class members, including unnamed members of the putative class, also must have standing if the case is to proceed on a class-wide basis. The issue is ripe for Supreme Court review, so defendants around the country should consider challenging class certification on this ground (or preserving such challenges).
- Due process and aggregating statutory damages. For certain causes of action, Congress and state legislatures have authorized by statute the recovery of a specified amount of damages (often measured in the hundreds or thousands of dollars), rather than requiring the plaintiff to prove actual damages, which for some types of claims may be impossible. Such statutory damages (often accompanied by a right to attorneys’ fees) are designed to incentivize individual plaintiffs and their lawyers to pursue such claims. But the availability of these statutory damages in combination with the class-action device may create a risk of staggeringly large awards, often for merely technical violations of a statute. When facing the potential for such large, aggregated damages, defendants should consider arguing that such damages violate due process because they are so disproportionate to any actual injury of the class—and indeed, in some circumstances, could annihilate the defendants by forcing them into bankruptcy or out of business.
We hope that this series of articles will help inside counsel become familiar with these constitutional objections to class certification so that they can consider deploying them in the cases that they manage.