July 2011

The Supreme Court’s decision this term relieving an investment firm of liability for fraud has received some attention on ACSblog and within the legal community.

But among the public at large, Janus Capital Group, Inc. v. First Derivative Traders is likely the blockbuster ruling “everyone missed,” writes College of Saint Rose political science professor Scott Lemieux in The American Prospect.

The decision, in which a five-justice majority held that Janus Capital Group was not  legally responsible for false statements made in the literature of a mutual fund it managed, is “as stark an example as one can imagine of the Court’s pro-corporate bias” and reveals “the extent to which conservatives are happy to give the financial interests that destroyed the economy free rein,” Lemieux writes.

One possible reason why the decision didn’t get more attention is that Justice Clarence Thomas’s “tortured” explanation of why Janus Capital executives didn’t “make” the false statements in a legal sense is so difficult to comprehend.

“If you don’t understand this reasoning, the fault lies with the Supreme Court, not you,” Lemieux writes. “As one securities litigator told me, the Court’s newly minted definition of what it means to ‘make’ a statement is ‘literally unheard of in the history of law.’ … By Thomas’s logic, since Press Secretary Jay Carney works at the pleasure of the president, the press is wrong to say that he is ‘making’ statements at a press conference. This argument is so silly as to be self-refuting.”

He continues:

All hope is not lost for class action plaintiffs in the aftermath of the Supreme Court’s ruling in Wal-Mart v. Dukes, posits a Reuters article focusing on several federal court decisions issued in the three weeks since the Wal-Mart Decision.  Nevertheless, the classes in those cases, which relate mostly to wage-and-hour claims, are nowhere near as large as the class in Wal-Mart, and the lawsuits do not address systematic discrimination.

In New York, a federal judge ruled that about 600 employees of SimplexGrinnell, a unit of Tyco International Ltd, can proceed with a class action suit alleging that they were underpaid. In Florida, California, and Ohio, federal judges have upheld class certification in cases relating to overtime pay and other wage-and-hour claims.

Allan King, an employment lawyer at Littler Mendelson, explained, "A lot of the judges are reading the Dukes case narrowly. If they were to read it more broadly, plaintiffs would have to make a much stronger case much earlier in the litigation." Plaintiffs applying for class certification in Fair Labor Standards Act cases have also been successful, as they are not subject to the strict standards required in discrimination cases, like Wal-Mart, brought under Title VII of the Civil Rights Act of 1964. 

The Reuters article also notes:

To be sure, the plaintiff classes so far kept intact or certified are small compared with the Wal-Mart group, and their lawsuits do not involve the same type of sex bias allegations. The Wal-Mart case is expected to have more of an impact in other nationwide discrimination class actions, including pending cases against Costco Wholesale Corp, Toshiba Corp, Goldman Sachs Group Inc, Cigna Corp and Bayer.

In a recent article in the Harvard Law and Policy Review, the official journal of ACS, Catholic University Law Professor Suzette Malveaux stressed the importance of class action remedies for victims of discrimination, noting that “for many employees and others, a class action is their only meaningful access to the courts.”