Trial-Quality Expert Testimony...for Class Certification?
May 5, 2015
Federal courts at all levels have dramatically overcomplicated class-action litigation in recent years. However, even with the debate over whether “individualized damages” defeat class certification, one idea is clear: If a litigator relies on an expert to establish any factor for class certification, that litigator must be ready for the equivalent of a trial at the class-certification stage.
The turmoil surrounding this issue began, at least in theory, in 2013 after the United States Supreme Court decided a case that has been the source of an enormous body of controversy, Comcast, Inc. v. Behrend, 569 U.S. – (2013). In that case, the Court denied class certification in an antitrust case under Rule 23(b)(3) of the Federal Rules of Civil Procedure on the basis that the plaintiffs’ ostensibly “individualized damages” negated the predominance element necessary to certify a class. Ultimately, the Court concluded that because the class, which alleged common antitrust violations, could not prove that damages were common to class members, certification was unwarranted.
Historically, the existence of “individualized damages” has been considered merely one of several factors in determining class certification. However, it seems from the Comcast majority’s opinion that the existence of individualized damages is a controlling factor. As a result, since the decision in Comcast, commentators and courts nationwide have debated the opinion’s significance. Is the decision limited to antitrust class actions? Is it applicable to all class actions? Is the solution to bifurcate liability and damages under Rule 23(c)(4)? Are individualized damages controlling, or they just one factor? Are class actions going to hell in a handbasket?
Commentary on this issue has varied immensely, as has lower courts’ treatment of the issue. Some cases read the Comcast decision literally—individualized damages are a death knell for class certification. Arguably, this stance negates class-action status in a host of cases, including (for example) in nearly every wage-and-hour class action. Except in cases in which statutory damages apply, individualized damages are inherent in many types of cases, including antitrust.
Other cases read the Comcast decision as being limited to antitrust although that reading is flawed, too, because so many antitrust class actions will have individualized damages. Consider any case in which class members hail from different geographical areas. Still other cases have divided class liability issues from class damages issues, as allowed in Rule 23(c)(4).
However, these interpretations seem to cancel each other out. If individualized damages negate class action, virtually no cases would be appropriate for class status, regardless of class size or common theory of liability (absent statutory damages). However, if courts are permitted simply to bifurcate all cases with common theories of liability and hear individualized damages in separate proceedings, then almost all cases would be appropriate for a class action. Neither of these conclusions is tenable in a practical context.
Perhaps the “correct” reading (or the most palatable reading) of the Comcast decision relates back to an early Supreme Court antitrust decision in Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477 (1977). In that case, the Court required three elements for an antitrust action: an antitrust violation, damages, and an “antitrust injury.” In this context, you can see how the concepts of “damages” and “injury” could muddy the Court’s decision in Comcast.
Traditionally, courts have treated the “antitrust injury” concept as one of policy or legislative intent. In addition to proving an antitrust violation and damages, the plaintiffs must prove an injury that antitrust laws are aimed to prevent. So, for example, there would be no liability in a case in which the defendant actually violated antitrust laws and caused damages if the defendant’s action promoted competition in the marketplace.
With this reading of the Comcast decision, individualized damages do not doom class status. Likewise, cases with individualized damages are not relegated to bifurcation under Rule 23(c)(4). Rather, there is a significant difference in antitrust cases that does not exist in other areas—antitrust suits must demonstrate an illegal act, damages, andthe intended injury.
Notwithstanding what might be the “correct” reading of the Court’s holding in Comcast, courts may apply (and have applied) the broadest interpretation of Comcast possible—class denial in any case with individualized damages. This might equate to nearly all cases.
Many courts, including the United States Court of Appeals for the District of Columbia (which might be considered the feeding ground for Supreme Court cases and justice appointments) as well as New York and Illinois federal district courts, have determined that any suggestion of individualized damages in a class action of any nature will defeat class certification. Circuit courts reviewing these issues have also skirted the class issue, often relying on the existence of statutory damages.
The practical impact of these issues is this: Litigators in all class actions, if those cases rely on expert testimony, should be prepared for full battle at the class-certification stage. One concept that the Comcast decision made clear was the integral role that experts will play, whether in cases in which experts establish liability or (worse) cases in which experts establish damages (or antitrust injury). The determining factor in the lower stages of the Comcast decision revolved around experts. The expert in that case established, ostensibly, faulty models of antitrust injury. Because the district court dismissed three of the four theories of antitrust injury, the expert’s opinion on damages was fatally flawed.
Perhaps the most important takeaway from the Comcast decision, and cases subsequent (such as the Third Circuit’s recent decision in In re: Blood Reagents Litigation, No. 12-4067 (3d Cir. Apr. 8, 2015)), is the nature of expert testimony. In the Comcast case, the plaintiffs argued that the ability to prove that expert testimony would produce evidence that “could evolve” into proof of class-action appropriateness was sufficient to survive the preliminary proceedings to establish class certification. In other words, the actual proof would be left to trial.
However, in Comcast, the Court’s original concern was the satisfaction of the Daubert standard at the class-certification stage. Subsequently, from the Blood Reagents case and otherwise, it is certain that the examination of expert evidence to establish elements necessary to class certification must be “rigorous.”
The practical impact, then, is that litigators must put far more emphasis (and much earlier emphasis) on expert testimony. Regardless of the type of lawsuit, because there is so much debate about how far the Comcast decision extends, litigators should plan for a “rigorous” examination of experts in the class-certification stage, which is probably far earlier than in days past. Gone are the days when you might retain an expert early on but only genuinely worry about the expert’s qualifications, methodologies, and trial prowess immediately prior to the actual trial. Instead, you must be thinking about the perfect expert with the best qualifications from Day One. Class certifications often come early in litigation, and this recent “rigorous” requirement for expert examination is tantamount to a mini-trial.
How have you seen lower courts treating the Comcast decision in your own cases? What have your experiences been with expert issues in class certifications since these cases have been decided? Do you have other thoughts about “individualized damages” in class actions or the class-certification process? We’d love to hear your thoughts.
The content of this article is intended to provide general information and as a guide to the subject matter only. Please contact an Advise & Consult, Inc. expert for advice on your specific circumstances.