Kelly Sloan, The Business Times
Several recent U.S. Supreme Court rulings have implications for businesses in limiting class-action and harassment lawsuits.
The pro-business rulings contrast with legislation enacted earlier this year in Colorado, including a law that makes it easier to sue even the small firms.
“In this case, we can see a sharp difference between the Supreme Court of the United States and the liberal progressive state of Colorado,” said State Sen. Steve King, R-Grand Junction. “The Supreme Court, in this particular instance, relied on common sense and business sense, whereas Colorado relied on litigation and trial lawyers to create an open season on business.”
In a case before the Supreme Court involving Comcast, several Philadelphia- area customers of the cable television company claiming to represent 2 million customers in 16 counties, sued the company for over-charging and the use of anticompetitive tactics — allegations Comcast denied. The Court found in favor of Comcast, ruling the plaintiffs couldn’t level a class-action lawsuit because they lacked a sufficiently acceptable method for determining damages in a victory.
In another case, the high court ruled 5-4 that class-action lawsuits can’t be brought against a company if the parties had previously agreed by contract to resolve disputes through individual arbitration.
The Italian Colors Restaurant in Oakland, Calif., attempted to pool with other merchants in a lawsuit against American Express over credit card fees, arguing it would be too expensive to sue on their own. The court ruled the merchants were required to bring their claims individually as stipulated in a contract with American Express. The fact individual lawsuits could prove expensive neither voided the contract nor eliminated their right to sue.
In another business-related case, the Supreme Court ruled that an harassment lawsuit against a company must target a supervisor — defined by the court as a person with authority to hire or fire, rather than simply a co-worker.
In still another case, the court ruled a Colorado woman must pay legal costs after losing her harassment suit against debt collection firm General Revenue Corporation.
Tony Gagliardi, state director of the National Federation of Independent Business in Colorado, said he welcomed the Supreme Court decisions, but has observed a far different trend in Colorado.
He cited as the most troubling example the enactment of House Bill 1136. The measure makes it easier to sue even the smallest employers for discrimination under state law for an expanded classes of economic damages as well as for non-economic damages. These non-economic damages include emotional pain, inconvenience, mental anguish and loss of enjoyment of life. Federal law only allows such damages to be assigned to businesses employing more than 15 people.
In addition to the financial risks the law poses to small businesses, the legislation allows discrimination cases to be brought under state law, where most are currently handled in federal court.
“I don’t see anything the Supreme Court did effecting 1136,” Gagliardi said. “HB 1136 will remain the worst bill for small business in 15 years.”
King agreed: “Even at the Capitol, with its marble floors, you could feel the ground shake from trial lawyers jumping up and down with joy at the prospect of an increase in their market share. Even the federal government has not allowed these smallest of businesses to be sued like this.”
Given that defending a lawsuit costs on average $50,000 and could run up to $150,000, the stakes are high, King said. “This law allows one disgruntled ex-employee to destroy a business.”
Gagliardi said he’s encouraged by the direction of the Supreme Court even as he’s discouraged by the direction of the State Legislature. “Small businesses face lawsuits each and every day they open their doors,” he said, adding that any favorable ruling can help lessen that burden.