Consumer Law

Will the Supreme Court Take Up Due Process Limits on Consumer Fraud Class Actions?

By Deepak Gupta

by Deepak Gupta

We'll probably learn the answer tomorrow morning, at 10:00 am, when the Court issues its order list from the March 18 conference.  I think there's a good chance that the Court will decide to grant Philip Morris USA v. Jackson, a major tobacco case, known in the Louisiana courts below as Scott v. Philip Morris. (The electronic docket is here.) 

This is a big one. The tobacco companies' petition -- signed by a formidable trio of Alan Untereiner, Paul Clement and Miguel Estrada -- presents the question whether the Due Process Clause "prevents states from employing the class-action device to eliminate fundamental substantive and procedural protections that would otherwise apply to the adjudication of class members' individual claims."  Specifically, the case is about whether litigating a class action despite individual reliance issues can violate due process. Reliance is a hotly contested issue in consumer fraud class actions, though it's not usually framed in constitutional terms.

There's good reason to think that the Justices will be interested in this petition. Apart from the Court's intense interest in all things class action this term (see, e.g., Wal-Mart v. Dukes, AT&T v. Concepcion, Smith v. Bayer), there's the fact that Justice Scalia, back in September, issued a must-read in-chambers opinion granting Philip Morris's request for a stay. Not only did his opinion predict that it was "reasonably probable" that four Justices would vote to grant cert, he also told the petitioners' lawyers which issue to argue in their petition:

Applicants complain of many violations of due process, including (among others) denial of the opportunity to cross-examine the named representatives of the class, factually unsupported estimations of the number of class members entitled to relief, and constant revision of the legal basis for the plaintiffs? claim during the course of litigation. Even though the judgment that is the alleged consequence of these claimed errors is massive?more than $250 million?I would not be inclined to believe that this Court would grant certiorari to consider these fact-bound contentions that may have no effect on other cases.

But one asserted error in particular (and perhaps some of the others as well) implicates constitutional constraints on the allowable alteration of normal process in class actions. This is a fraud case, and in Louisiana the tort of fraud normally requires proof that the plaintiff detrimentally relied on the defendant?s misrepresentations. Accordingly, the Court of Appeal indicated that members of the plaintiff class who wish to seek individual damages, rather than just access to smoking-cessation measures, would have to establish their own reliance on the alleged distortions. But the Court of Appeal held that this element need not be proved insofar as the class seeks payment into a fund that will benefit individual plaintiffs, since the defendants are guilty of a?distort[ion of] the entire body of public knowledge? on which the ?class as a whole? has relied. Thus, the court eliminated any need for plaintiffs to prove, and denied any opportunity for applicants to contest, that any particular plaintiff who benefits from the judgment (much less all of them) believed applicants? distortions and continued to smoke as a result. Applicants allege that this violates their due-process right to ?an opportunity to present every available defense.?

Full post as published by CL&P Blog on March 20, 2011 (boomark / email).