A large class action lawsuit is most corporations’ worst nightmare. Even in a case where the damages sought by each member of the class are miniscule and the merits are questionable, the stakes are high. The cost to defend a class action suit can be astronomical, and many statutes allow the lawyers for prevailing class plaintiffs to recover their attorneys’ fees from the defendant.
However, the landscape for class action litigation is rapidly evolving in some surprising ways. Many of the recent changes are favorable to defendants, simultaneously limiting the size of potential classes and allowing companies to contractually reduce their exposure to class litigation. Several forces are driving this evolution, but the most powerful one by far is the Supreme Court, which has been steering a steady course towards limiting the rights of class action litigants. Savvy companies can take advantage of the recent changes to greatly reduce their risk for potential class actions.
Duke-ing It Out
In Wal-Mart v. Dukes, lawyers representing female employees of Wal-Mart famously sought to certify the largest-ever class action—a proposed class of approximately 1.5 million people who claimed that systemic discrimination against women limited their pay and promotion opportunities at the discount retailer. After more than a decade of litigation, the Supreme Court determined in 2011 that the Dukes class could not be certified because there would be no way to establish on a classwide basis whether each member of the class was a victim of discrimination or whether there were legitimate reasons for her particular employment situation.
Both plaintiffs and defendants have an interest in being able to reach binding settlements of class action suits. For defendants, settlement can ensure broad protection from future suits by members of the class on whose behalf the case is being settled. For plaintiffs, settlement ensures compensation to the class members without the uncertainty of litigating their claims before a jury.