Tuesday, June 21, 2011

A great day for common sense at the Supreme Court

The two major decisions announced yesterday struck a victory for common sense that will also benefit the business climate.

First the Supreme Court reversed the Ninth Circuit's certification of a class consisting of every woman who worked for Wal-Mart. Carrie Severino at NRO explains why allowing the class action to go forward was so problematical.
But betting against the 9th Circuit is almost always a good idea: The Court has overturned 84 percent of the cases it has taken from the 9th Circuit so far this year, and that’s not counting today’s decisions yet. Besides, the arguments against Wal-Mart in this case employed a legal theory so radical, even Justice Ginsburg couldn’t fully swallow it.

This case was a brilliant move by class-action lawyers who, ever in search of bigger classes of plaintiffs and defendants with deeper pockets, set their sights on Wal-Mart, the nation’s largest private employer. They managed to create a class that consists of all women employed in one of Wal-Mart’s four brands of stores over more than a decade: some 1.5 million women. The problem is that there isn’t a massive problem of discrimination at Wal-Mart stores, so the lawyers needed to come up with a theory that didn’t rely on finding actual discrimination in individual cases. Their theory is that Wal-Mart violated the law because — even though it had a clear anti-discrimination policy — its employees may have been given enough discretion that they secretly ignored the policy and disadvantaged women in hiring and promotion because of surrounding cultural assumptions. But to take this case as a class action, the Court couldn’t even look at the individual cases, and would just have to rely on general statistics. And even those statistics don’t show a pattern of discrimination over all stores in the whole country — in 90 percent of stores there was no real difference between male and female salaries.

If a theory like this can fly, then the due process guaranteed by the Fifth Amendment doesn’t mean much.

It’s like finding that 10 percent of McDonalds’ stores across the country ignored company policy and didn’t throw out their expired meat and then — without even having to prove that anyone got sick because of the meat rather than, say, the flu — suing the whole company on behalf of everyone who ordered a Big Mac over a ten-year period. The kicker is that anyone who really did get food poisoning wouldn’t be able to bring their own lawsuit later to get real damages, and would be stuck with whatever their small percentage of the settlement in the larger suit was. Someone hospitalized with salmonella would get the same award as someone who never even felt queasy.

Certifying this class would have been a lose-lose-lose-win situation. The store would lose, the people who have legitimate lawsuits would lose, the integrity of our legal system would lose, and the lawyers would be the only ones who win. But they would win big.

Thankfully, the Court is still well to the right of the Ninth Circuit (a fairly low bar).
If the class action had gone forward, it would have put any large corporation at risk of massive lawsuits despite whatever policies they enunciated. It would have been one more burden on businesses. There are still laws against discrimination and any individual can sue based on his or her circumstances. But marauding lawyers can't try to earn the big bucks by putting together some huge class to leverage settlement money out of businesses worried about defending themselves.

In the second decision, the Court ruled that the EPA is the entity responsible for regulating greenhouse gases not the courts. Since the Supreme Court had ruled earlier that the Clean Air Act gives the EPA the power to regulate greenhouse emissions they now wouldn't allow nuisance suits to try to bring the courts in to rule on climate change charges. What a novel concept! Don't let judges take the place of those given the responsibility by law for instituting public policy. The WSJ clarifies why this is so important.
The Court "remains mindful that it does not have creative power akin to that vested in Congress," Justice Ginsburg observed, in an all-too-rare vindication of legal restraint. "It is altogether fitting that Congress designated an expert agency, here, EPA, as best suited to serve as primary regulator of greenhouse gas emissions. The expert agency is surely better equipped to do the job than individual district judges issuing ad hoc, case-by-case injunctions. Federal judges lack the scientific, economic, and technological resources an agency can utilize in coping with issues of this order."
Just imagine if this theory applied across the board to allow those entities chosen by legislatures or Congress to implement public policy to proceed without threats from nuisance lawsuits to put judges in charge of policy from education to prison regulation to the environment.

Both decisions will have the effect of freeing up businesses from nuisance lawsuits. And that will be a good thing as we try to get the economy back on track. If critics want to complain that the Court's decisions were too friendly to big business, they can take it up with Ruth Bader Ginsburg.