Wednesday, October 14, 2009

Interesting U.S. Supreme Court Dictum

It's only in a statement concurring in a denial of certiorari, but three justices of the Supreme Court - including Justice Kennedy (the prime swing justice on the Court), who wrote it, and new Justice Sotomayor, expressed some interesting thoughts on Due Process the other day. See DTD Enterprises, Inc. v. Wells, ___ S. Ct. ____, 2009 WL 3255157, at *1 (U.S. Oct 13, 2009). Hat tip to Volokh Conspiracy.

These three justices state:
To the extent that New Jersey law allows a trial court to impose the onerous costs of class notification on a defendant simply because of the relative wealth of the defendant and without any consideration of the underlying merits of the suit, a serious due process question is raised.
Query, if there are "serious" due process implications to the imposition of the cost of class notification "without any consideration of the underlying merits," how about imposition of the much larger costs of discovery? Might the same Due Process concerns underlie the Court's more stringent reading of Fed. R. Civ. P. 8 in Twombly/Iqbal?

And again:
[T]here is considerable force to the argument that a hearing in which the trial court does not consider the underlying merits of the class-action suit is not consistent with due process because it is not sufficient, or appropriate, to protect the property interest at stake.
What a difference a few years make! It wasn't that long ago that a lot of courts held, under a misreading of Eisen v. Carlisle & Jacquelin, 417 U.S. 156, 177 (1974), that "merits" consideration in the context of class action litigation was a no-no. See In re Initial Public Offering Securities Litigation, 471 F.3d 24 , 33-39 (2d Cir. 2006) (discussing demise of this misreading at length). Now it looks like there's some support on the Court for the opposite proposition - that preliminary merits review might be constitutionally required.

After all, many courts have observed that class certification has a huge coercive effect on settlement. Merits consideration may well be equally (if not more) constitutionally required to protect a defendant's property interests in that situation, given the greater sums at stake.

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