By now, and most prominently in AT&T Mobility v. Concepcion, the narrative whereby the U.S. Supreme Court interprets the Federal Arbitration Act (FAA) so as to put the continued viability of class actions in doubt is sufficiently familiar that the time is ripe for a counter-narrative. And that is exactly what Stanford Law School Professor Janet Cooper Alexander sets out in a new article, To Skin a Cat: Qui Tam Actions as a State Legislative Response to Concepcion, 46 U. MICH. J.L. REFORM 101 (forthcoming Summer 2013) (available here). Alexander, a former Supreme Court clerk to Justice Thurgood Marshall and currently the Fredrick I. Richman Professor of Law at Stanford, is a recognized expert on civil procedure, federal jurisdiction, and the historical evolution of procedure in state and federal courts, in addition to having compiled a substantial body of work as a practitioner as a partner at Morrison & Forester before becoming an academic.
In the article, Alexander begins with the premise that Concepcion has spelled the demise of “virtually all consumer and employment claims,” and notes that there is no realistic likelihood of federal legislation that would return such class actions to their status quo ante. However, Alexander identifies “an alternative approach that could be taken at the state level,” and describes that alternative approach as entailing “statutory qui tam actions to enforce civil penalties for violations of state consumer protection and employment laws.” Indeed, though not formally under the qui tam rubric, the California Labor Code’s Private Attorneys General Act, known as PAGA, performs exactly as Alexander describes, and has thus far proven immune to Concepcion-based challenged, most notably in Brown v. Ralphs Grocery Co., 197 Cal. App. 4th 489 (2011), cert denied, 132 S. Ct. 1910 (2012).
Alexander contends that “the rationale of Concepcion simply does not apply” to PAGA actions, since they are brought for public rather than private benefit, to ensure compliance with state law. Alexander states her thesis thusly: “Indeed, allowing private parties to contract away the state legislature’s chosen means of enforcing claims belonging to the state would seriously impair the state’s ability to execute core governmental functions. It would be an intrusion into state sovereignty that should give pause to neo-federalists such as the majority in Concepcion.” Alexander at 101.
After noting the practical and legal challenges to legislating around Concepcion, Alexander distinguishes PAGA as an exemplary qui tam-like action, and suggests both amendments to it and free-standing legislation capable of meaningful enforcement of consumer and employment laws (without triggering FAA preemption). Under PAGA, employees bring representative actions that do not require satisfaction of the familiar class action elements (ascertainability, commonality, etc). PAGA actions are also atypical of most private litigation, in that the nominal plaintiff is recovering civil penalties, the majority of which go to the State of California, with the plaintiff taking only a 25 percent “bounty.” See Alexander at 126-132. Thus, it is through PAGA and other qui tam analogues that Alexander proposes to achieve the public benefits associated with class actions, while avoiding the Supreme Court’s current fixation on the “liberal federal policy favoring arbitration.” Suggesting the potentially unlimited breadth of such an undertaking, Alexander writes that “[n]othing would prevent states from creating qui tam actions to enforce any statute containing civil penalties payable to the state.” Alexander at 122.
Thus far, PAGA immunity from FAA preemption has been confirmed, both in California state court (Brown v. Ralphs) as well as in federal court (Urbino v. Orkin Serv’s of California), suggesting the broader utility of the qui tam approach. Additionally, as Alexander notes, while the denial of certiorari in Brown v. Ralphs cannot necessarily be construed as an endorsement by the Supreme Court, it does mean that the case failed to sufficiently motivate at least four Justices to take it on, despite it being the single most important post-Concepcion decision with respect to preserving the ability to effect aggregate enforcement of state laws. See Alexander at 129, n.144.
The Alexander article is notable for its skepticism that the Supreme Court is motivated by anything other than an animus against class actions. For instance, after indicating that the Justices in the Concepcion majority had been prominently aligned with state autonomy, “Concepcion demonstrates that for these Justices, a disdain for consumer class action litigation and individuals’ access to courts outweighs any commitment to federalism and state autonomy.” Alexander at 103.
Glenn Danas of Capstone Law APC, the principal architect of the winning briefing in Brown v. Ralphs, commented on Professor Alexander’s article, stating that it “hits the nail on the head in explaining how qui tam-type actions, like PAGA, provide the states with a mechanism for enforcing their own laws that cannot be emasculated or extinguished by corporations using mandatory arbitration agreements.” Danas added, “we’ve been making nearly identical arguments since Concepcion issued, with multiple appellate courts agreeing, and now the California Supreme Court will hopefully decide that public law enforcement rights such as those embodied by PAGA do not yield to waivers contained in private adhesion contracts.”
Alexander proposes drafting “[a] statute similar to PAGA [to create] a mechanism for private plaintiffs to sue to enforce statutory penalties in a qui tam action.” Alexander at 132. She thus envisions PAGA’s application to only specified California Labor Code provisions being expanded to cover “unfair competition, insurance, environmental protection, and other subjects where contracts of adhesion are common.” Id. Further, Alexander suggests changing PAGA’s confusing and much-litigated language about actions being brought on behalf of so-called “aggrieved employees” and replacing it with a clear and direct statement to the effect that such actions are brought “on behalf of the state.” Alexander at 133. In addition to greater clarity, Alexander contents that such a provision would also “make it more likely that a court would find Concepcion inapplicable.” Id.
Alexander’s thesis is far from an outlier; PAGA-like civil penalty actions have attracted considerable attention from other scholars examining how the Concepcion-created voids might be filled. See, e.g., Spencer, J., Arbitration, Class Waivers, and Statutory Rights, 35 HARV. J.L. & PUB. POL’Y 991 (Summer 2012); Wasserman, R., Legal Process in a Box, or What Class Action Waivers Teach Us about Law-making, 44 LOY. U. CHI. L.J. 391 (Winter 2013).