As an attorney, Neil Gorsuch chastised plaintiffs lawyers for bringing “meritless claims” in securities class actions that do little to benefit investors.
His writing on the topic has garnered a good deal of attention since President Donald Trump nominated Gorsuch to the U.S. Supreme Court and encourages those who would like to see Gorsuch pick up where the late Justice Antonin Scalia left off when it comes to class actions.
But do those views—articulated while Gorsuch was in private practice and acting as an attorney for the U.S. Chamber of Commerce—dominate his opinions as a judge on the U.S. Court of Appeals for the Tenth Circuit? Not quite.
According to a careful review of Gorsuch’s decisions, his textualist approach, more than ideology, is the common theme of his opinions on class actions, arbitration and mass torts. And yet, though some of his decisions have favored plaintiffs, Gorsuch’s careful judicial reasoning and parsing of statutory language has more often led him to side with the defense.
Neil Gorsuch on class actions and arbitration:
- Gorsuch’s textualist approach, more than ideology, is the guiding principle in his rulings on class actions.
- Gorsuch’s literal take on the Federal Arbitration Act could swing either way for defendants.
- If confirmed, his first opportunity to shape law is likely to come in a trio of cases before the U.S. Supreme Court involving class action waivers in employment arbitration clauses.
Should he be confirmed, Gorsuch’s originalist philosophy is likely to continue shape his rulings on class actions and arbitration, said Andrew Vollmer, a professor at the University of Virginia’s School of Law .
“He’ll look at the existing law,” Vollmer said. “And I think his concerns with the policies underlying class actions will be less important—although possibly will influence him at the margins.”
GORSUCH ON CLASS ACTIONS
In nominating Gorsuch, President Trump said he was fulfilling a promise to pick someone “who respects our laws and interprets them as written,” not unlike Scalia.
Scalia was a significant voice on class actions during his tenure on the court. In recent years, he authored every 5-4 ruling where he was in the majority, including the landmark cases of Wal-Mart v. Dukes and AT&T v. Concepcion.
It’s less than clear whether Gorsuch will pick up the mantle. In general, Gorsuch hasn’t weighed in on many class actions—or on arbitration agreements in that context, according to a review of his decisions using litigation analytics site Ravel Law. But his adherence to statutory text is evident in the few where he’s written the majority opinion.
In 2016, Gorsuch dissected the wording of the Class Action Fairness Act [CAFA] in a ruling siding with Stamps.com in a class action over its recurring monthly subscription charges.
Gorsuch, writing for a unanimous panel in Hammond v. Stamps.com, vacated an order remanding the case to New Mexico state court, concluding that the amount “in controversy” clearly exceeded $5 million as required by the CAFA.
The lower court’s decision to remand the case because Stamps.com didn’t provide sufficient proof of alleged damages beyond $5 million, he wrote, “rests on a legal error about the meaning of a key statutory term.” The CAFA’s phrase “in controversy” means one “might legally conclude” that damages could exceed that amount, not that it was likely.
“Our job,” he wrote, “is to abide Congress’s policy directions, not replace them with others of our own hand.”
He made similar remarks in a case in which BP America Inc. sought to appeal the remand of a mass action that the Oklahoma attorney general’s office had brought over propane gas prices. In disagreeing with the attorney general’s interpretation of the CAFA, Gorsuch wrote in a 2010 decision that “we are not at liberty to take our editing pencils to what Congress has written.”
One of his only decisions involving class certification dealt with alleged prison overcrowding in an Albuquerque detention center. Gorsuch dismissed the city’s appeal of a district judge’s order withdrawing approval for a settlement in the case after concluding that the Tenth Circuit lacked jurisdiction. In the 2011 decision, Gorsuch insisted that the courts of appeal should never “disregard the bounds of our legal authority” under the statute governing the appeal of final decisions.
“Congress told us to ask only whether a district court’s decision is final and Congress’s direction demands our respect, not our rewriting,” he wrote.
As for securities class actions—the area in which Gorsuch wrote the Chamber’s amicus brief in Dura Pharmaceuticals. v. Broudo—his decisions are few.
Writing for the majority in MHC Mutual Conversion v. Sandler O’Neill & Partners, Gorsuch found no liability against bank officers whose statements regarding mortgage-backed securities in the bank’s portfolio were alleged to have caused investors losses. In a 2014 decision written with characteristic flair, Gorsuch reviewed more than a century of law on the question of when Section 11 of the Securities Act of 1933 imposes liability on issuers who offer false or misleading opinions.
“For centuries legions accepted Newtonian physics without qualification. Last year some of us fervently believed the Broncos would win the Super Bowl. In 2008, no doubt there were those who genuinely thought the market for mortgage backed securities would soon rebound,” he wrote. “Events have disproved each of these opinions, but that hardly means the opinions were anything other than honestly offered—true opinions at the time made.”
In addition to dipping back to Deming v. Darling, an 1889 opinion penned by Justice Oliver Wendell Holmes when he served on the Massachusetts Supreme Court, Gorsuch invoked a more contemporary decision from the U.S. Court of Appeal for the Third Circuit—In Re Donald J. Trump Casino Securities Litigation.
GORSUCH ON ARBITRATION
An important question now before the Supreme Court is whether class action waivers in employment arbitration contracts, which are governed by the Federal Arbitration Act [FAA], violate an employee’s rights under the National Labor Relations Act.
Gorsuch hasn’t addressed arbitration in the class action context. However, in several opinions Gorsuch has shown support for the FAA and, in one case, he chided the National Labor Relations Board.
Gorsuch wrote in a 2016 dissent to NLRB v. Community Health Services that the NLRB was “exceeding its congressional charter” in awarding impermissible back pay to hospital workers. Gorsuch also has come out strongly against longstanding deference to administrative agencies’ interpretation of the laws that govern them.
Such a stance “is highly relevant” to the class action waiver cases pending before the Supreme Court, said Ron Chapman, a shareholder at Ogletree, Deakins, Nash, Smoak & Stewart in Dallas.
Gorsuch’s literal reading of the FAA also could bode well for employers because there’s “nothing to suggest class action waivers are unlawful” in the actual statute, he said.
“It does appear that some of the sentiments that employers assert in defending class action waivers also appear in Judge Gorsuch’s writings,” Chapman added.
But his textual approach also could be a warning to businesses that have relied on decades of case law expanding the FAA, which was passed in 1925.
“If you take Gorsuch’s philosophy, and his prior arbitration decisions, they are so piercingly textual,” said Imre Szalai, professor at Loyola University New Orleans College of Law.
In Howard v. Ferrellgas Partners, a 2014 consumer case over propane deliveries, Gorsuch cautioned that the act’s “heavy hand in favor of arbitration” should not “be foisted on the parties at all costs.” (Even so, that decision reversed an order denying a motion to compel arbitration.)
In the 2009 case Chelsea Family Pharmacy v. Medco Health Solutions, a Tenth Circuit panel reviewed a dispute between a retail pharmacy and a third-party prescription drug program to determine whether all, part or none of the litigation should be sent to arbitration. The panel found that one set of injuries would be subject to the companies’ arbitration agreement.
Gorsuch agreed but wrote a concurring opinion that rejected what he called “this business of classifying arbitration clauses as ‘broad or ‘narrow’.”
Gorsuch bemoaned that the Tenth Circuit had “imported” a test outlined by the Second Circuit, but found nowhere in the Federal Arbitration Act, into its jurisprudence. And though he conceded the court was bound to abide by it, he wrote “I question its appropriateness and utility.”
“It seems to me that we ought not be in the business of burdening a statute with words Congress has not written or inventing a test the Supreme Court has not endorsed,” he wrote.
GORSUCH ON MASS TORTS
While Gorsuch’s case law in mass torts also is limited, in several cases, he addressed a district judge’s decision involving expert witnesses at trial. And in at least two cases, he waded into the federal pre-emption debate, an area that comes up frequently as a defense in mass torts cases. The Supreme Court has had to address pre-emption in recent cases involving pharmaceuticals and medical devices.
Ruling in Cook v. Rockwell International, a 2015 decision involving property owners near the former Rocky Flats Plant, Gorsuch cited the text of the Price-Anderson Act in concluding that the federal law did not pre-empt nuisance claims under Colorado law.
“Where does any of this language—expressly—pre-empt and preclude all state law tort recoveries for plaintiffs who plead but do not prove nuclear incidents? We just don’t see it,” he wrote.
It’s one case where Gorsuch’s textualism led him to split with business interests. In an amicus brief in support of certiorari, the U.S. Chamber of Commerce wrote “It is hard to overstate the legal and practical importance of this case,” which it complained would “subject the nuclear energy industry, defense contractors, and the federal government to potentially boundless liability.”
But in a product liability case over the “off label” use of Medtronic Inc.’s Infuse Bone Graft, Gorsuch found that the plaintiff’s tort claims under Oklahoma law were pre-empted by the Federal Food, Drug and Cosmetic Act. As in many of his other decisions, he turned to the text of the statute to come to that conclusion, though he noted that some of the “competing instructions” in the Supreme Court’s past opinions on the issue “warrant revisiting and reconciliation.”
“Not everyone may agree with how Congress balanced the competing interests it faced in this sensitive and difficult area,” he wrote in Caplinger v. Medtronic. “But strike a balance Congress had to and did, and it’s not for this court to revise it by beating a new path around pre-emption nowhere authorized in the text of the statue and nowhere recognized in any of the Supreme Court’s many forays into this field.”