Court rules for ‘little guys’ over corporations in two business cases

By Tony Mauro

In a pair of business cases decided Tuesday, the U.S. Supreme Court by lopsided majorities ruled in favor of an employee in a wage-and-hours dispute, and in favor of plaintiffs in a securities class action. Corporations lost both cases. 

The rulings, like several in recent months, gave anecdotal ammunition to those who insist the Roberts Court does not deserve its reputation as a reflexively “pro-business” Court. 

In Kasten v. Saint-Gobain Performance Plastics Corp., the Court decided that the Fair Labor Standards Act protects from retaliation employees who complain about violations — even when the complaint is oral, not written, and voiced to the employer, not a government agency. And in Matrixx Initiatives v. Siracusano, the justices were unanimous in rejecting drug maker Matrixx’s claim that class action plaintiffs had made insufficient pleadings to go forward with their suit. The class asserts Matrixx defrauded investors by issuing misleading information about the possible side effects of Zicam, the cold remedy. 

Within the past month, the Court has issued several similar opinions favoring the “little guy” over corporations in disputes over seat belt safety, workplace discrimination against members of the military, and corporate privacy interests. 

The liberal Constitutional Accountability Center, a leading critic of the Court’s pro-business tilt, felt compelled last month to “give credit where credit is due” to Justice Clarence Thomas for a concurring opinion that sided with consumers in allowing state tort suits against automakers.

In the Kasten case, the Court continued its recent trend of favoring employees in retaliation cases. Justice Stephen Breyer, writing for the majority, went back to the language of the Fair Labor Standards Act and its context when it was passed in 1938 to protect “particularly illiterate, less educated, or overworked workers.” Given that background, Breyer reasoned that the law, which bars the firing of anyone who has “filed any complaint” about wage-and-hours violations, was meant to cover oral as well as written complaints. Justice Antonin Scalia, joined by Justice Clarence Thomas, dissented, arguing that the law only protects those who filed complaints with a court or government agency. 

The Matrixx decision was perhaps more surprising, given that the Court has been tightening up pleading standards in recent years to discourage meritless suits against corporations. Its rulings in Bell Atlantic v. Twombly and Ashcroft v. Iqbal have fueled much of the criticism that the Roberts Court is unfairly shielding corporations from litigation. 

But Tuesday’s decision, authored by Justice Sonia Sotomayor, may represent a step back from the higher pleading standards embraced in Twombly and Iqbal. Sotomayor wrote that the plaintiffs in the Zicam class action had “adequately pleaded materiality” to the point that their claim should not have been dismissed at the pleading stage. The class claimed that, through press releases and other statements, the company misled investors in the wake of publicity about cases in which users of the zinc-based Zicam had lost their sense of smell. 

Matrixx asserted that the incidents of loss of smell were insufficient to make a “statistically significant correlation” to Zicam. But the unanimous Court found that statistical significance or insignificance is “not dispositive of every case.” The mere existence of so-called “adverse event” reports is not in itself enough to make out a case of securities fraud, Sotomayor wrote, but it can be a factor in the “total mix” of things that would influence a reasonable investor to sell or buy stock. As a result, the class had presented enough evidence to get past the pleading stage, though Sotomayor concluded, “whether respondents can ultimately prove their allegations and establish scienter is an altogether different question.” 

The Matrixx ruling was also notable for unanimously upholding a ruling by the U.S. Court of Appeals for the 9th Circuit — a relative rarity. 

So why is the pro-business Court ruling against business so often these days? “Perhaps it’s because the Roberts Court is not quite as pro-business as critics make it out to be,” said Richard Samp, chief counsel of the Washington Legal Foundation, which frequently advocates for the business side in Supreme Court cases. Samp estimates that, so far this term, the Court has ruled against business more often than in favor — though the Court has so far issued fewer than half of the decisions it will produce this term. 

In Kasten and other recent retaliation cases, Samp said, the Court has tended to side with employees mainly because the statutes involved are written explicitly to protect workers from punishment. “They’re not pro-business or pro-employee,” Samp said of the justices. “They’re trying to interpret the statute in front of them.” 

Darren Robbins of Robbins Geller Rudman & Dowd, the lead plaintiffs’ firm in the Zicam class action, applauded the ruling in Matrixx. “I’m not so cynical to think that, notwithstanding certain conservative leanings on the Court, they won’t look at the facts of the case.” Whatever hostility justices may have had about class actions has “started to fade away” in light of the financial meltdown and its impact on retirees and pension funds, Robbins said. “I can’t believe that when justices Alito and Scalia and Roberts look at themselves in the mirror, they are saying, ‘I am a pro-business justice.’ ” 

Doug Kendall of the Constitutional Accountability Center, which has criticized the Court for its rulings that favor Chamber of Commerce positions, said Tuesday, “I’d love to claim that CAC issued a report and the conservatives on the Supreme Court suddenly stopped ruling so much for the Chamber, but that’s not the way the world works. We think it’s great the Court has been able to reach unanimous decisions in a number of these early cases, but the real test will come later in the term when it takes on issues that have divided the Roberts Court.”