June 18, 2018

A recent U.S. Supreme Court ruling about when securities fraud class actions can be filed could ripple into employment law, practitioners told Bloomberg Law.

“This decision, I regret to say, has taken a step toward making many civil rights unenforceable,” Joe Sellers with Cohen Milstein Sellers & Toll PLLC in Washington told Bloomberg Law. Sellers represents workers in employment lawsuits.

“The underlying rights are only as effective as the mechanisms that are available to permit their enforcement,” Sellers said. “If the mechanisms that exist to permit the enforcement of those rights have constraints on them, then those rights are abrogated.”

One of those mechanisms is a class action, which lets one person sue on behalf of others in a similar position who may have experienced the alleged wrongdoing. If a court certifies a class, all individuals who meet the definition of a class member are automatically included. But members can opt out if they want to pursue their own lawsuit, don’t like the terms of a settlement, or simply don’t want to be part of the class.

The case, China Agritech Inc. v. Resh, involved corporate shareholders who wanted class action status for their lawsuit that alleged the fertilizer manufacturer committed securities fraud. Their case followed earlier fraud lawsuits in which the court denied class action certification.

The justices unanimously held that a later-filed class action can’t “piggyback” on one that was filed earlier in order to be considered timely. Justice Sonia Sotomayor , in a concurring opinion, said she may have ruled differently if the case involved another area of law because of the unusual rules that apply in securities litigation.

Solo Lawsuits Aren’t Always Feasible, Lawyers Say

Sellers represents women who allege sex discrimination against Walmart. They filed regional class actions after the high court in 2011 ruled that a nationwide class action was too broad to satisfy a requirement that a class action include claims common to class members.

Sellers filed an amicus brief in the China Agritech case that said cutting off the window for a follow-on class action could end up blocking a subsequent case from being filed. As a result of the decision, “the follow-on regional classes which we’d been pursuing probably will no longer be available to us,” Sellers said.

Putative members of the class wouldn’t run into the statute of limitations problem if they filed individual lawsuits, Sellers said in his brief.

“But if your case has any complexity it’s not economical to bring it individually,” he told Bloomberg Law. “If you require people to bring it only as an individual rather than collectively, then you may have effectively precluded them from bringing the claim at all.”

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