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Key Takeaways

U.S. Supreme Court takes up new breed of class actions.

Web companies, pork processor press business-friendly court.

Photo by Andrew Harrer/Bloomberg

Businesses See Chance to Derail Lawsuits as High Court Returns

U.S. Supreme Court takes up new breed of class actions.

Web companies, pork processor press business-friendly court.

By Greg Stohr, Bloomberg News

For companies, the U.S. Supreme Court term that opens Monday is all about stopping lawsuits before they start.

A court with a pro-business reputation will get ample opportunities to reinforce that image over the next nine months. Chief Justice John Roberts and his colleagues will hear a set of cases that could thwart some types of class-action litigation by limiting the power of federal courts to hear suits. Consumer advocates say the cases threaten centuries-old rights of access to the courts.

Business lawyers are attacking what they describe as a new breed of litigation, suits that seek to turn technical violations of federal laws into multimillion-dollar cases against Internet companies like Google Inc. and Facebook Inc.

Plaintiffs’ lawyers now have “the ability to argue for classes of millions of people, which you just didn’t have before there were web-based businesses,” said Andrew Pincus, a Washington lawyer at Mayer Brown who will argue a case on behalf of the data broker Spokeo in November. “They look for new opportunities, and I think this is a new opportunity.”

Business advocates have become used to winning when they ask the nation’s highest court to curb lawsuits. As is typically the case, the U.S. Chamber of Commerce won more often than not during the term that ended in June, although the business lobby suffered a surprise loss in a far-reaching housing discrimination case.

Over the past decade, the trade group has won almost 70 percent of the cases in which it has filed a brief, according to the Constitutional Accountability Center, a progressive think tank and law firm that is often at odds with the Chamber.

“It’s a demonstration of just how pro-business the Supreme Court is that the lower courts aren’t willing to go as far as the court is,” said Elizabeth Wydra, the Constitutional Accountability Center’s chief counsel. “If I were the Chamber of Commerce, I’d feel pretty good about bringing a case up to the Roberts court.”

Extension of Pattern

The new term shapes up as an extension of the pattern. In each of the top cases, the court is reviewing a lower court ruling that favored someone who sued a company. That’s a good sign for business, because the high court reverses about 70 percent of the rulings it reviews.

“Each of the cases this term arises because the plaintiffs’ bar has refused to accept the well-established limits on the class-action device,” Kate Todd, chief counsel for the Chamber of Commerce’s litigation arm, said in an e-mailed statement.

The business cases are part of a term that also features clashes over affirmative action, union fees and redistricting. Later on, the court may add fights on abortion and religious objections to contraceptive coverage.

The latest cases take aim at procedural rules that can turn out to be crucial. Spokeo’s appeal, set for argument Nov. 2, seeks to bar Congress from authorizing lawsuits by consumers who haven’t suffered any concrete harm.

Spokeo, which uses public information to compile personal dossiers that it publishes online, is seeking to stop a lawsuit by a man who says the company misrepresented his education, wealth and marital status. The would-be class action accuses Spokeo of violating the U.S. Fair Credit Reporting Act, which authorizes damages of at least $100 for each victim.

Concrete Harm

Spokeo says the man, Thomas Robins, didn’t suffer any concrete harm, making him ineligible to sue in federal court. The company says the inaccuracies may even have bolstered Robins’s image by suggesting he was wealthier and better educated than he really was.

The dispute has implications for a list of similar federal statutes, including laws governing copyrights, real-estate settlements, employee benefits, disabilities and housing discrimination. Among the companies that are backing Spokeo — and seeking to fend off lawsuits — are Google, Facebook, EBay Inc. and Twitter Inc.

“It could have a pretty dramatic impact on the ability of legislatures, including the national legislature, to create redressable statutory rights,” said Marty Lederman, a Georgetown University law professor who follows the court’s docket.

Full Payment

A case before the justices Oct. 14 will determine whether a defendant in a class-action suit can end the case by offering full payment to the lead plaintiff.

The dispute involves Campbell-Ewald Co., a marketing firm facing what it says are hundreds of millions of dollars in damages for sending automated text messages. Campbell-Ewald, a unit of the Interpublic Group of Cos., sent the texts as a part of a contract to help the U.S. Navy with recruiting.

Jose Gomez says he received multiple messages in violation of the U.S. Telephone Consumer Protection Act, which authorizes damages of up to $1,500 per text. Gomez sued, aiming to represent as many as 100,000 people who received the messages.

Campbell-Ewald sought to settle the case by offering to pay Gomez $1,503 for each message he received. Although Gomez declined, the company says the case should be thrown out because he has been offered everything to which he might be entitled.

‘Cottage Industry’

“These cases reflect a growing cottage industry of lawsuits based on technical violations of regulatory statutes that do not correspond to any substantial harm,” said Todd, the Chamber of Commerce lawyer.

A third dispute centers on a more traditional class-action suit. Tyson Foods Inc. is seeking to overturn a $5.8 million award it was ordered to pay for underpaying workers at an Iowa pork-processing plant for time spent putting on protective gear and walking to work stations. The company says the case shouldn’t have been certified as a class action.

Tyson argues that it didn’t get a fair chance to mount individualized defenses to claims by more than 3,000 workers.

Tyson says the plaintiffs’ lawyers turned the case into a “trial by formula” by using statistical evidence that presumed everyone in the group was identical to a fictional average employee.

The workers say they used statistical evidence only because Tyson didn’t comply with a federal requirement to keep records of the hours worked by each employee. They say a 1946 Supreme Court decision permits “reasonable classwide approximations” in those circumstances.

Tyson also argues that, by any measure, hundreds of workers were fully compensated. Lawyers for the employees say a class action can go forward even if not all members of the group were injured.

The case gives the court a chance to reinforce a 5-4 decision in 2011 that said Wal-Mart Stores Inc. couldn’t be sued for gender discrimination by potentially a million female workers.

“This term brings us back to the classic Roberts court cases,” Wydra said. “You have the interests of big business pitted against the interests of hard-working Americans.”

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