The U.S. Supreme Court’s new term starts Monday and a question looms: Will the high court further limit access to justice? Four cases now pending ask the court to immunize corporations even more.
Will the Supreme Court Further Limit Access to Justice?
The U.S. Supreme Court’s new term starts Monday and a question looms: Will the high court further limit access to justice?
Millions of consumers and employees cannot hold corporations that cheated or injured them accountable because the court recently changed the law and held that federal pre-emption, arbitration clauses and class action bans eliminated their rights to a day in court and a jury trial. Four cases now pending ask the court to immunize corporations even more.
‘New Prime v. Oliveira’
New Prime v. Oliveira, to be argued Wednesday, is a class action against a national trucking company for cheating its drivers. Prime first charges drivers to work as “apprentices,” then has them work as “driver trainees” for less than minimum wage, and only forgives their debts if they work over a year. Some end up paying the company or working for free. (Disclosure: Public Justice represents Dominic Oliveira.)
Prime claims the suit is barred because the Federal Arbitration Act requires enforcement of the mandatory arbitration clause in its workers’ agreement that bans class actions. Section 1 of the FAA, however, says the statute does not apply to “contracts of employment” of transportation workers.
Prime contends that doesn’t matter because its agreement says Oliveira and co-workers are “independent contractors.” But the U.S. Court of Appeals for the First Circuit rejected that argument, finding that, when the FAA became law in 1925, “contracts of employment” meant “agreements to do work.”
Prime asks the Supreme Court to hold that (1) whether Section 1 exempts these workers’ claims from the FAA should be decided by an arbitrator, not a court, and (2) it doesn’t. Oliveira says (1) courts must determine whether the FAA applies before relying on it to compel arbitration and (2) the FAA, by its terms, does not apply to transportation workers’ agreements to perform work.
‘Henry Schein v. Archer and White Sales’
Henry Schein v. Archer and White Sales seeks injunctive relief and damages against a wholesale distributor and manufacturers of dental equipment and supplies for violating the antitrust laws and terminating a family-owned distributor. The defendants moved to compel arbitration based on an arbitration clause in one company’s distribution agreement. The clause delegates decisions on whether claims have to be arbitrated to the arbitrator, but also says it does not apply to “actions seeking injunctive relief.” Because this case seeks injunctive relief, the Fifth Circuit denied the motion to compel arbitration as “wholly groundless.”
The defendants insist the FAA requires courts to enforce delegation clauses and the parties’ intent even if they believe motions to compel arbitration are wholly groundless. Archer and White says that makes no sense—and it never intended any such thing.
‘Lamps Plus v. Varela’
Lamps Plus v. Varela is a class action against Lamps Plus for giving a criminal access to income and tax withholding statements of approximately 1,300 employees. Citing its employment agreement, the company moved to compel arbitration and asked the court to find it barred class actions in arbitration. The district court granted the motion to compel, but held Frank Varela could pursue a class action in arbitration because Lamps’ agreement is ambiguous on that issue and California contract law (which the agreement adopts) requires ambiguous contracts to be interpreted against the drafter. The Ninth Circuit affirmed.
Lamps says its agreement is not ambiguous and California law interpreting ambiguous agreements was misapplied. It urges the court to create new federal substantive law precluding class actions in arbitration unless agreements “clearly and unmistakably” authorize them. Varela says this last argument was never made below and the lower courts properly interpreted the agreement. He also says the district court’s order was not appealable: the FAA expressly prohibits appeals of orders granting motions to compel arbitration and, while the district court dismissed the case without prejudice at Lamp’s request, orders dismissing cases (even with prejudice) cannot be appealed by the party that sought them.
‘Frank v. Gaos’
Frank v. Gaos is a challenge to the proposed settlement of a class action alleging Google violated the Stored Communications Act and California law by sharing 129 million users’ search terms with third parties. The settlement includes injunctive relief and requires Google to pay $8.5 million. Since the money cannot practically be distributed to the class members, the settlement gives cy pres (“as near as possible”) awards—utilized in class actions in such circumstances for decades—to six nonprofits for internet privacy and other work to indirectly benefit the class members. The Ninth Circuit approved the settlement.
The petitioners raise numerous points, but primarily argue the cy pres awards are improper because class action settlements must deliver money to class members. They say the funds should be distributed to random class members by lottery or the inevitably-small number of class members who respond to a claims process. Otherwise, they contend, the class cannot be certified; the class members will do better by litigating individually.
The settling parties maintain the cy pres awards are entirely appropriate. They note that giving windfalls to small numbers of class members through a lottery or claims process would be improper and would not serve most class members well. They say that, in reality, if the class is not certified, the class members will not litigate individually—and Google will pay nothing.
Each of these cases is different. All of them, however, ask the court to overrule federal appeals courts, construct new barriers to holding corporate wrongdoers accountable, and further limit access to justice. We will see if it does.
Arthur H. Bryant is chairman of Public Justice, a national public interest law firm that fights for corporate accountability, the poor and the powerless and access to justice for all.