In this series of articles, we have explored the often ignored—but often significant—protections that the U.S. Constitution provides to defendants targeted by inappropriate class actions. Although some lower courts disagree as to the scope and availability of these protections, a number of constitutional provisions—Article III, the Due Process Clauses of the Fifth and Fourteenth Amendments and the federalism principles underlying the Full Faith and Credit and Commerce Clauses—may provide four key safeguards for defendants in class actions. First, it frequently will be improper for plaintiffs to urge applying the law of one state to the claims of all putative class members in a nationwide class action, thereby displacing the laws of other states. Second, defendants cannot be deprived of the right to raise defenses to the claims of individual class members. Third, all plaintiffs in federal court (including absent class members) must have standing to sue. And fourth, plaintiffs cannot demand statutory damages on a class-wide basis that threatens the defendant with liability grossly disproportionate to any actual injury.
But it is not enough for businesses and their lawyers to be aware of these constitutional arguments in the abstract. They also must know how to spot these issues in the first place to make sure that they can raise such arguments when it is appropriate to do so. To help in that endeavor, we offer a few “issue-spotting” tips:
- Defendants should consider challenging class certification on due process or federalism grounds whenever the proposed class seeks to impose one state’s substantive law nationwide or the proposed nationwide class would include class members without any connection to the forum state.
- Due process (as well as the Rules Enabling Act) may provide a basis for objecting to class certification whenever plaintiffs’ proposed class-wide trial plan would bypass consideration of defendants’ individualized defenses as to causation, reliance, injury or the like, such as when plaintiffs are suing under state laws that purport to relieve plaintiffs in class actions—but not individual actions—of the obligation to establish elements of the claim. Relatedly, if plaintiffs fail to offer a trial plan, that may be a hint that they cannot come up with a plan that satisfies constitutional requirements.
- A putative class that necessarily includes members who would not legally have a claim if bringing an individual action may be ripe for a challenge under Article III’s standing requirement (as well as an overbreadth challenge under Federal Rule of Civil Procedure 23). In particular, defendants should be on the lookout for class members who suffered no discernable injury, such as product-liability or false-advertising cases on behalf of “all purchasers,” many of whom may not have experienced the alleged defect or been exposed to the alleged falsehood.
- Defendants should consider challenging class certification any time that the class seeks to aggregate statutory damages not only on the grounds that the risk of overdeterrence precludes a class action from being superior to individual actions, as required by Rule 23(b)(3), but also on the grounds that threatening to impose disproportionate—potentially even ruinous—liability would violate due process.
Of course, whether any particular defendant should raise a constitutional challenge to class certification can be determined only on a case-by-case basis. But (admittedly with the benefit of 20/20 hindsight) we have certainly seen cases where defendants apparently have overlooked such arguments—something that may be especially regrettable when defendants are litigating in state court, where a failure to assert federal constitutional challenges may mean that defendants have abandoned their only avenue to seek Supreme Court review. Losing that right is especially unappealing given that, in recent years, the Supreme Court has demonstrated increased interest in the law governing class actions. Defendants should put themselves in a position to benefit from potentially helpful Supreme Court decisions by ensuring that they raise potential constitutional defects in response to the class actions they face.