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"No Injury" and "Overbroad" Consumer Class Actions: Strategies to Pursue

• r Defend Class Certification

Navigating Complex Issues of Overbreadth and Damages in Consumer Product Cases

Today’s faculty features:

1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific WEDNESDAY, OCTOBER 7, 2015

Frederick S. Longer, Member, Levin Fishbein Sedran & Berman, Philadelphia Jessica D. Miller, Partner, Skadden Arps Slate Meagher & Flom, Washington, D.C. Geoffrey M. Wyatt, Counsel, Skadden Arps Slate Meagher & Flom, Washington, D.C.

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“No Injury” and “Overbroad” Consumer Class Actions: Strategies to Pursue or Defend Class Certification

SPEAKERS: FRED LONGER flonger@lfsblaw.com JESSICA MILLER jessica.miller@skadden.com GEOFFREY WYATT geoffrey.wyatt@skadden.com

OVERVIEW – “No-Injury” Class Actions – “Overbroad” Class Actions – Supreme Court has granted review in two cases – Spokeo v. Robins and Tyson Foods,

• Inc. v. Bouaphakeo – that will present the
• pportunity for the Court to address each issue

– Issues Classes

6

NO-INJURY CLASS ACTIONS

• Background

– The past few years have seen various federal courts embrace overbroad, no-injury class actions – Defendants have long argued that such class actions are illegitimate because the plaintiffs are seeking damages for a risk that has not materialized and may never materialize – For many years, courts agreed that no-injury class actions are not viable – Many cases were resolved at the motion-to-dismiss stage because they were brought by plaintiffs who had experienced no problem with the product, and thus could not state a claim

7

NO-INJURY CLASS ACTIONS

• Background

– Many “no-injury” cases were resolved at the motion-to-dismiss stage

• Lee v. General Motors Corp., 950 F. Supp. 170 (S.D. Miss. 1996) (uninjured

plaintiffs sued General Motors, alleging that the detachable fiberglass roofs on certain vehicles did not meet GM’s safety inspection standards; court dismissed the claims, explaining that the vehicles in question operated without any problems or difficulties for multiple years, making it impossible for plaintiffs to establish that they had been injured by the alleged defect)

• Yost v. General Motors Corp., 651 F. Supp. 656 (D.N.J. 1986) (plaintiff alleged that
• il and water and/or coolant tended to mix in the crankcase in certain of defendant’s

engines and that defendant failed to disclose the defect; case was dismissed, and the court noted that “[t]he basic problem in this case [was] that plaintiff Yost ha[d] not alleged that he ha[d] suffered any damages. . . . All he [was] able to allege [was] that the potential leak [was] ‘likely’ to cause damage and ‘may’ create potential safety hazards”)

• Yu v. IBM, 732 N.E.2d 1173 (Ill. App. Ct. 2000) (plaintiff sued over computer

system he claimed was not Y2k compliant, even though he had taken advantage of a free fix that rendered the computer not defective; court dismissed the case because plaintiff had suffered no injury)

8

NO-INJURY CLASS ACTIONS

• Background

– Recently, courts have entertained an array of cases that in prior years might have been rejected as improper “no injury” class actions

9

NO-INJURY CLASS ACTIONS

• Examples of recent “no injury” class actions

– Lilly v. Jamba Juice Co., No. 13-cv-02998-JST, 2014 WL 4652283 (N.D. Cal. Sept. 18, 2014) – Plaintiffs sought to certify a class of California purchasers of Jamba Juice Smoothie Kit products that were allegedly mislabeled as “All Natural” – The plaintiffs did not allege that they experienced any problems with the juice – The named plaintiffs sometimes consumed other products that contain the same allegedly unnatural ingredients – When one of the named plaintiffs was asked during a deposition if she thought she was harmed from purchasing and consuming the smoothie kit, she answered “no” – The court nonetheless certified the class for purposes of determining liability

10

NO-INJURY CLASS ACTIONS

• Examples of recent “no injury” class actions

– McCrary v. Elations Co., LLC, 2014 WL 1779243, at *14 (C.D. Cal. Jan. 13, 2014) – Certified a class of purchasers of joint health supplements, despite defendant’s argument that some members of the class were happy with the supplement – “Defendant’s concern that some putative class members were happy with Elations and thus were uninjured is

• unpersuasive. The requirement of concrete injury is

satisfied when the Plaintiffs and class members ... suffer an economic loss caused by the defendant, namely the purchase of defendant’s product containing misrepresentations.”

11

NO-INJURY CLASS ACTIONS

• Examples of recent “no injury” class actions

– Zeisel v. Diamond Foods, Inc., No. C 10-01192 JSW, 2011 U.S. Dist. LEXIS 60608 (N.D. Cal. June 7, 2011) – Plaintiff brought a putative class action on behalf of walnut purchasers who alleged that certain walnut products were deceptively marketed as being good for the heart – The case was certified even though the named plaintiff continued to purchase the walnuts after filing suit and testified that he would continue to purchase the walnuts, belying any claim of actual injury

12

NO-INJURY CLASS ACTIONS

• Examples of recent “no injury” class actions

– Rikos v. Procter & Gamble Co., --- F.3d ----, 2015 WL 4978712, at *5 (6th Cir. Aug. 20, 2015) – Affirmed certification of multistate class of purchasers of a particular brand of probiotics – Defendant argued that some class members were clearly not injured because they kept buying the probiotics – Court disagreed: “[A]lthough P & G argues that some class members were not injured because they kept buying Align—a sign that Align works, says P & G—that is not the right way to think about ‘injury’ in the false- advertising context. The false-advertising laws at issue punish companies that sell products using advertising that misleads the reasonable consumer.”

13

NO-INJURY CLASS ACTIONS

• Examples of recent “no injury” class actions

– Remijas v. Neiman Marcus Group, LLC, 794 F.3d 688, 693 (7th Cir. 2015) – 350,000 Neiman Credit Card holders had their accounts pilfered but only 9,200 cards were known to have been used fraudulently – 7th Circuit reversed dismissal for lack of standing – Held: customers should not have to wait until hackers commit identity theft or credit-card fraud in order to give the class standing, because there is an “objectively reasonable likelihood” that “such an injury will occur.”

• Citing Clapper v. Amnesty Int’l USA, 133 S.Ct. 1138, 1147

(2013)

14

NO-INJURY CLASS ACTIONS

• Examples of recent “no injury” class actions

– Mabary v. Home Town Bank, N.A., 771 F.3d 820 (5th

• Cir. 2014)
• Plaintiff brought suit against a bank, alleging that it failed

to post a placard about transaction fees in violation of the federal Electronic Funds Transfer Act

• Defendant argued that plaintiff was aware of the fee and

thus had no injury

• Court disagreed, holding that the violation of the statute

was itself an injury

15

NO-INJURY CLASS ACTIONS

• Spokeo v. Robins, No. 13-1339

– One type of “no injury” case that has been certified in recent years relates to alleged statutory violations that have not harmed the proposed class members – The Supreme Court has granted certiorari and will address this issue in Spokeo v. Robins – Spokeo arises from a claim under the Fair Credit Reporting Act – Spokeo operates a “people search engine” that aggregates publicly available information about people, including, in some instances, information relating to a person’s “wealth” – Plaintiff argues that Spokeo’s disclosure of wealth information made it a “consumer reporting agency” that issues “consumer reports” in violation of the FCRA

16

NO-INJURY CLASS ACTIONS

• Spokeo

– The district court dismissed the suit against Spokeo on Article III grounds – Court concluded that the plaintiff had failed to identify any actual or imminent concrete injury – The Ninth Circuit reversed, finding that the FCRA’s provision for statutory damages in cases involving willful violations of the statute meant that the plaintiff was injured solely by Spokeo’s alleged violation of the statute – Spokeo sought certiorari, arguing that the courts of appeals were split on the question at issue:

• Does violation of a statute by itself suffice to establish constitutional

standing, or must the plaintiff also show that he or she was injured in some tangible sense?

17

NO-INJURY CLASS ACTIONS

• Defendants’ perspective

– The Court’s ruling will have broad implications for class action practice – A rule under which mere violation of a statute – or the mere breach of any duty – automatically establishes injury would improperly lower the bar to class treatment – Requiring a plaintiff to show concrete injury to maintain

• r participate in a class action would go a long way

toward reining in bloated settlements and potential liability based on technical violations of law that produce little or no actual harm

18

NO-INJURY CLASS ACTIONS

• Plaintiffs’ Perspective

– “Failure of proof” on the merits is not an obstacle to class certification. See Amgen

• Inc. v. Connecticut Retirement Plans and Trust Funds, 133 S.Ct. 1184, 1197 (U.S.

2013) (“Such a contention [regarding failure of proof] is properly addressed at trial

• r in a ruling on a summary-judgment motion. The allegation should not be

resolved in deciding whether to certify a proposed class.”); Suchanek v. Sturm Foods, Inc., 764 F.3d 750, 757, 758 (7th Cir. Aug. 22, 2014) (“If the court thought that no class can be certified until proof exists that every member has been harmed, it was wrong.” *** “If very few members of the class were harmed, that is an argument not for refusing to certify the class but for certifying it and then entering a judgment that would largely exonerate [the defendants].”). – The Third Circuit is equally emphatic on this point. In Sullivan v. DB Investments, Inc., 667 F.3d 273, 305 (3d Cir. 2011)(en banc), this Court rejected the defendants’ arguments that the plaintiffs had to prove that each class member had a “viable claim or some colorable legal claim” as being “misdirected.” See also Hassine v. Jeffes, 846 F.2d 169, 178 (3d Cir. 1988)(“The ability of a named plaintiff to succeed

• n his or her individual claims has never been a prerequisite to certification of the

class.”); Byrd v. Aaron’s Inc., 784 F.3d 154, 168-69 (3d Cir. 2015) (overbreadth is not a component of ascertainability).

19

OVERBROAD CLASS ACTIONS

• Two main types of cases

– Cases in which not all members of the proposed class were injured – Cases in which plaintiffs’ damages theory does not match the class

20

OVERBROAD CLASS ACTIONS

• Origins of “overbroad” class actions

– With failure of no-injury class actions, more cases were filed in which the named plaintiffs’ products actually manifested the alleged defect at issue in the litigation – Dismissal of such cases was less likely – But at first most courts recognized that even if the named plaintiffs may have suffered some injury, the overwhelming majority of class members had not – According to these courts, certification of these claims was not appropriate, for a variety of reasons – These decisions are best summed up in the Seventh Circuit’s pronouncement in the Ford Explorer/Firestone tire litigation in 2002 that “[n]o injury, no tort, is an ingredient of every state’s law”

• In re Bridgestone/Firestone, Inc., Tires Prods. Liab. Litig., 288 F.3d

1012, 1017 (7th Cir. 2002)

21

OVERBROAD CLASS ACTIONS

• Examples of classes rejected as overbroad
• Burton v. Chrysler Group LLC, No. 8:10-00209-MGL, 2012

U.S. Dist. LEXIS 186720 (D.S.C. Dec. 21, 2012) (rejecting proposed class of “[a]ll persons and entities who purchased a new 2007-2009 Dodge Ram 2500 or 3500 truck in the United States” because not all owners experienced the alleged problem with their vehicles)

• Kachi v. Natrol, Inc., No. 13cv0412 JM(MDD), 2014 U.S. Dist.

LEXIS 90987 (S.D. Cal. June 19, 2014) (rejecting proposed nationwide and California classes of purchasers of fitness supplements because inefficacy claims did not apply to entire class)

• Feinstein v. Firestone Tire & Rubber Co., 535 F. Supp. 595

(S.D.N.Y. 1982) (rejecting proposed class of purchasers of allegedly defective tires because not all purchasers experienced problems with their tires)

22

OVERBROAD CLASS ACTIONS

• Recent trends

– Over the last several years, a number of courts have departed from the decisions rejecting no-injury class actions – These courts are certifying such cases, even where it is clear that many class members have never encountered any problem with the subject product – and likely never will

• Wolin v. Jaguar Land Rover North America, LLC, 617 F.3d 1168 (9th
• Cir. 2010) (alleged vehicle defect resulting in premature tire wear)
• Tait v. BSH Home Appliances Corp., 289 F.R.D. 466 (C.D. Cal. 2012),
• cert. denied, 134 S. Ct. 1273 (2014) (alleged washing machine defect

resulting in mold growth/accumulation)

• In re Zurn Pex Plumbing Products Liability Litigation, 644 F.3d 604

(8th Cir. 2011) (allegedly defective brass plumbing fittings)

23

• Most attention in recent years was on the

washing machine cases, Glazer and Butler

– Whirlpool Corp. v. Glazer, 678 F.3d 409 (6th

• Cir. 2012)
• Affirmed class certification of consumers alleging

mold in washing machines

• Most class members – 97 percent – never

complained about any problem with their washers

• “Even if some class members have not been injured

by the challenged practice, a class may nevertheless be appropriate”

• Supreme Court vacated and remanded in light of

Comcast

OVERBROAD CLASS ACTIONS

24

• Glazer and Butler

– Butler v. Sears, Roebuck & Co., 702 F.3d 359 (7th

• Cir. 2012)
• Another front-load washing machine class action
• “Predominance is a question of efficiency”
• According to Judge Posner, if Sears thinks the machines

are not defective, it can win on classwide basis

• In tension with Thorogood (not cited in Butler), where

Judge Posner rejected a dryer class action because:

– Consumers may have purchased dryers for reasons unrelated to propensity to cause or prevent rust stains – The risks of “costly error” inherent in allowing one jury to decide liability as to all were too great – It appeared that the rust problem did not affect most class members

• Also vacated and remanded in light of Comcast

OVERBROAD CLASS ACTIONS

25

• Glazer and Butler

– Sixth Circuit stuck to its prior ruling on remand – Claimed Glazer was “different” from Comcast

• Comcast concerned individualized damages issues
• Glazer only certified liability for class treatment

– The defendant argued that injuries were also varied

• Analogous to Comcast because class members without mold
• r odor problems were not injured
• Thus, class device could expand potential recovery beyond

any valid liability theory

– Sixth Circuit sought to avoid injury problem based on “premium price” theory – Supreme Court denied certiorari

OVERBROAD CLASS ACTIONS

26

• Glazer and Butler

– Seventh Circuit followed the same course

• Comcast does not affect the prior ruling because

the case could proceed as an issues class: “[t]here is a single, central, common issue of liability: whether the Sears washing machine was defective,” that could be resolved on a classwide basis

• All other, noncommon issues, including both injury

and damages, could be resolved separately in individual trials

– See Butler v. Sears Roebuck & Co., 2013 WL 4478200 (7th Cir. Aug. 22, 2013)

• Supreme Court denied certiorari

OVERBROAD CLASS ACTIONS

27

• Cases limiting Glazer and Butler

– Felix v. Ganley Chevrolet, Inc., No. 2015-Ohio-3430, 2015 WL 5039233 (Aug. 27, 2015) (Ohio Supreme Court vacated a trial court's

• rder certifying a class of consumers who signed an automobile

purchase agreement containing an allegedly unconscionable arbitration clause in a consumer protection class action, finding that, to satisfy predominance, the plaintiffs must demonstrate that all class members suffered actual damages as a result of the challenged conduct) – Pagliaroni v. Mastic Home Exteriors, Inc., No. 12-10164 (D. Mass.

• Sept. 22, 2015) (rejecting proposed class of purchasers of decking

products because “some consumers received Oasis decks that are alleged to be unfit for ordinary use, whereas others have had no performance problems with their decks. In light of this record, whether a particular Oasis deck fails ordinary expectations for use is not a common question susceptible to classwide proof or determination.”)

OVERBROAD CLASS ACTIONS

28

• Cases following Glazer and Butler
• In re IKO Roofing Shingle Products Liability Litigation, 757 F.3d 599

(7th Cir. 2014) (reversing denial of certification of class of purchasers

• f organic asphalt roofing shingles who alleged defendant falsely told

customers that the shingles met industry standards; Seventh Circuit ruled that it did not matter that certain class members’ roofing shingles did not manifest the alleged defect)

• Suchanek v. Sturm Foods, Inc., No. 13-3843, 2014 U.S. App. LEXIS

16259 (7th Cir. Aug. 22, 2014) (reversing denial of certification of class of purchasers of coffee pod products who alleged that defendant falsely claimed the pods contained premium coffee; Seventh Circuit ruled the lower court’s concern regarding “overbreadth” was misguided in light of the record evidence, including affidavits from the named plaintiffs, demonstrating that all of the plaintiffs received low-quality instant coffee instead of the premium coffee they were promised)

OVERBROAD CLASS ACTIONS

29

OVERBROAD CLASS ACTIONS

• Overbreadth as an issue of “standing”

– Neale v. Volvo Cars of North America, LLC, --- F.3d -

• -, 2015 WL 4466919, at *2, *5 (3d Cir. July 22,

2015)

• Absent class member standing not required in Third

Circuit: “Volvo argues on appeal that: (1) putative members

• f the class have not suffered an injury and therefore lack

Article III standing * * * We now squarely hold that unnamed, putative class members need not establish Article III standing”

• But acknowledges that courts of appeals are confused and

divided on the question, with the Second, Eighth, Ninth, an D.C. Circuits all potentially requiring absent class member standing

30

OVERBROAD CLASS ACTIONS

• Tyson Foods v. Bouaphakeo, No. 14-1146

– The Supreme Court could address some or all of these issues in Tyson Foods – The plaintiffs claim that they were not sufficiently compensated for time spent donning and doffing work-related attire and equipment – They sought to represent co-workers in both a collective action under the federal Fair Labor Standards Act and as a class under an Iowa state wage law

31

OVERBROAD CLASS ACTIONS

• Tyson Foods

– The district court allowed both claims to proceed on an aggregate basis – Tyson argued that the evidence established that injury (if any) varied widely within the class – The district court ruled that the opinions of plaintiffs’ experts — who determined an “average” injury allegedly sustained by each class member based on a sampling of alleged uncompensated overtime worked by certain class members — sufficed to remove individualized issues from the case – The Eighth Circuit affirmed but was strongly divided over the injury issue – In its cert. petition, Tyson argued that plaintiffs’ approach of proving classwide injury on the basis of an “average” of alleged overtime hours by a small sample of the entire class violated the Court’s prohibition on “Trial By Formula” in Wal-Mart Stores v. Dukes – The petition also invokes the case law on standing

32

OVERBROAD CLASS ACTIONS

• Defendants’ perspective

– The Court should take the opportunity to limit the ability to bring overbroad class actions – One problem with overbroad class actions is that, because they are overbroad, they result in settlements in which very few class members participate – In Eubank v. Pella Corp., 753 F.3d 718 (7th Cir. 2014), for example, the plaintiffs asserted various claims arising out of allegedly defective windows that caused leaking – The Seventh Circuit recognized that many members of the class experienced no problems with their windows, but nonetheless ruled that certification was proper – The parties then entered into a settlement that the Seventh Circuit recently vacated as being “inequitable – even scandalous” – 225,000 notices had been sent to class members, but less than 1,300 claims had been filed before the district court approved the settlement – Those claims sought less than $1.5 million, “a long way from the $90 million that the district judge thought the class members likely to receive were the suit to be litigated” – One obvious reason for the low claims rate was that the certified class included large numbers

• f consumers who were satisfied with the product at issue and therefore had zero motivation

to obtain compensation

33

OVERBROAD CLASS ACTIONS

• Defendants’ perspective

– Another problem with certification of overbroad classes is the assumption that it is even possible to determine who is an injured class member and who is not – In the Nexium litigation, for example, the plaintiffs alleged that AstraZeneca improperly paid three generic manufacturers to delay entry into the market of generic equivalents to Nexium, the manufacturer’s heartburn drug – Defendants argued that the class was overbroad because it failed to account for “brand loyalists” – in essence, patients who refuse to take generic drugs and therefore could not have been injured – The district court rejected this argument, certifying a class, and the First Circuit affirmed – In its ruling, the Court of Appeals acknowledged that “a proper mechanism for exclusion of brand-loyalist consumers has not yet been proposed,” but believed that absent class members could “establish injury through testimony by the consumer that, given the choice, he or she would have purchased the generic” and that such testimony could be provided “in the form of an affidavit or declaration” – In a strongly worded dissent, Judge William Kayatta expressed concern that the district court and the majority had improperly “kicked the can down the road” by assuming that it would be possible later in the litigation to determine who was injured and who was not – Judge Kayatta also noted that class member affidavits would not be a proper way to establish injury because the defendant would have no feasible means of refuting them.

• In re Nexium Antitrust Litig., Nos. 14-1521 & 14-1522, 2015 WL 265548 (1st Cir. Jan. 21, 2015)

34

• Plaintiffs’ perspective

– As demonstrated by the prior discussion, injury-in-fact is confused with damages. – Because class actions must be defined objectively, most courts will not permit a class definition to include the phrase, “and were damaged thereby.” Therefore, most class actions will include persons that have not yet had a problem manifest. That does not mean that class members are not exposed to the injury or lack standing, e.g., a purchaser of a defective product that has yet to manifest the defect. It simply means, apart from their purchase damages, they are not yet traumatized by the

• defect. See, e.g., Remijas, supra; McCrary, supra.

OVERBROAD CLASS ACTIONS

35

DAMAGES

• Supreme Court majority reversed class

certification in Comcast Corp v. Behrend, 133

• S. Ct. 1426 (2013)

– Plaintiffs did not present classwide damages theory that matched certified liability theory – Plaintiffs’ damages model “failed to measure damages resulting from the particular antitrust injury on which [the defendants’] liability [was] premised” – Thus, “questions of individual damages calculations [would] inevitably overwhelm questions common to the class,” defeating predominance and rendering classwide treatment improper

36

DAMAGES

• First takeaway: under Comcast, classwide liability and

damages theories must match

– Plaintiffs’ view – this conclusion only applies to antitrust cases

• Harris v. Comscore Inc., 292 F.R.D. 579, 589 n.9 (N.D. Ill. 2013)

(“The Supreme Court’s holding came from its assumption, uncontested by the parties, that Rule 23(b)(3) requires that damages must be measurable based on a common methodology applicable to the entire class in antitrust cases. That assumption, even assuming it is applicable to privacy class actions in some way, is merely dicta and does not bind this court.”)

– Defendants’ view – principle is broadly applicable

• Jacob v. Duane Reade, Inc., 293 F.R.D. 578 (S.D.N.Y. 2013) (noting

that courts have “grappled” with Comcast’s “interaction with non- antitrust class actions” and concluding that the no-mismatch rule applies broadly in cases where plaintiffs attempt to rely on purportedly common damages evidence)

37

DAMAGES

• Case study: In re Skelaxin Metaxalone Antitrust Litig.,

2014 U.S. Dist. LEXIS 11467 (E.D. Tenn. Jan. 30, 2014)

– Putative antitrust class action alleging defendants colluded to delay market entry of generic alternative – Plaintiffs sought the difference between the amount they paid and the amount they would have paid for a theorized generic – The court denied both the direct and indirect purchasers’ motions for class certification

• “[I]f Comcast is given its full breadth . . . the incongruity between End

Payors’ description of class membership and the entities included in its impact and damages model might defeat this proposed class”

• “Given Comcast’s requirement that the damages model and the theory
• f liability match, [the expert’s damages] model [was] problematic”

38

DAMAGES

• Case study: Cannon v. BP Prods. N. Am., 2013 U.S.
• Dist. LEXIS 142934 (S.D. Tex. Sept. 30, 2013)

– Class action related to defendant’s chemical releases and emissions – Certification denied – plaintiffs could not prove classwide causation or damages – Expert’s “overarching theory of damages” could not support plaintiffs’ certification bid – it was “disconnected from Plaintiffs’ causes of action of negligence, trespass, and nuisance which [were] limited to a particular time period beginning in late 2008”

• One problem: expert advanced a real estate trend

analysis that was based on the “wrong class area”

39

DAMAGES

• Second takeaway: Rigorous scrutiny of experts at

class certification

– It appears certiorari originally granted to resolve the applicability of Daubert at class certification

• But no Daubert issue was preserved

– Instead, the Court addressed the merits of the damages evidence under the “rigorous analysis” requirement – It rejected the notion that expert damages evidence need not be scrutinized on the merits; “[u]nder that logic, . . . any method of measurement is acceptable so long as it can be applied classwide, no matter how arbitrary the measurements may be,” which would “reduce Rule 23(b)(3)’s predominance requirement to a nullity”

40

DAMAGES

• Second takeaway: Rigorous scrutiny of experts

at class certification

– How rigorous?

• Plaintiffs’ perspective: “Merits questions may be

considered to the extent – but only to the extent – that they are relevant to determining whether the Rule 23 prerequisites for class certification are satisfied”

– Amgen v. Connecticut Retirement Plans & Trust, 133 S. Ct. 1184, 1195 (2013)

• Defendants’ perspective: Because damages is clearly

relevant to predominance after Comcast, close scrutiny of damages experts will be routine

41

DAMAGES

• How does this scrutiny relate to Daubert?:

– Cannon v. BP Prods. N. Am., 2013 U.S. Dist. LEXIS 142934 (S.D. Tex. Sept. 30, 2013)

• “[A] district court’s rigorous analysis may necessitate the evaluation of

expert testimony. Although courts are not to insist upon a battle of the experts at the certification stage ..., [i]n many cases, it makes sense to consider the admissibility of the testimony of an expert proferred to establish

• ne of the Rule 23 elements in the context of a motion to strike prior to

considering class certification.”

• The court scrutinized plaintiff’s expert’s damages opinion
• “[I]n one sense scrutiny of expert testimony being used to show that a case is

susceptible to class treatment seems less controversial than the normal application of Daubert, because it does not intrude on the jury’s role given that class certification is an issue for the court”

• The expert’s “overarching theory of damages” was “disconnected from

Plaintiffs’ causes of action of negligence, trespass, and nuisance which [were] limited to a particular time period beginning in late 2008”

42

DAMAGES

– Courts of appeals have taken a variety of approaches

• Daubert applies: In re Blood Reagents Antitrust Litigation, 783 F.3d

183 (3d Cir. 2015) (Third Circuit vacated and remanded district court’s certification of a class of individuals and entities who had purchased blood products, finding that “a plaintiff cannot rely on challenged expert testimony, when critical to class certification, to demonstrate conformity with Rule 23 unless the plaintiff also demonstrates, and the trial court finds, that the expert testimony satisfies the standard set out in Daubert”)

• Merits of expert’s theory should be scrutinized: In re Rail Freight Fuel

Surcharge Antitrust Litig., 725 F.3d 244 (D.C. Cir. 2013) (“It is now indisputably the role of the district court to scrutinize the evidence before granting certification, even when doing so ‘requires inquiry into the merits of the claim’”)

• Precision not required as long as damages and liability theories match:

In re VHS of Michigan, Inc., No. 14-0107, 2015 WL 424486 (6th Cir.

• Feb. 3, 2015) (denying permission to appeal certification order; agreeing

with district court that damages and liability theories matched; rejecting defendant’s argument that the damages theory was improper because it provided only an “approximate” classwide damages figure)

43

DAMAGES

• Case study: In re Urethane Antitrust Litig., 2013

WL 2097346 (D. Kan. May 15, 2013), aff’d, 768 F.3d 1245 (10th Cir. 2014)

– Defendant’s motion to decertify class action where the same expert as in Comcast had testified to antitrust impact was rejected

• “There is no basis to strike Dr. McClave’s testimony or to

conclude that his methodology could not provide a causal link between plaintiffs’ theory of liability and the class-wide impact”

– A petition for Supreme Court review in this case was pending as of end of last Term – Among other things, the petition argued that the damages model was flawed because it included damages for purchasers who did not sustain damages as a result of the alleged price-fixing scheme because they negotiated away price increases

44

DAMAGES

• Beyond mismatches?

– Some decisions suggest that courts are paying more attention to individualized issues posed by damages, even where mismatches

• r flaws in expert evidence are not alleged:
• Bussey v. Macon Cnty. Greyhound Park, Inc., 562 F. App’x 782, 791 (11th
• Cir. 2014) (holding in light of Comcast that district court abused its

discretion in certifying class of electronic bingo players where damages were individualized)

45

ISSUES CLASSES

• What do these developments mean for

issues classes?

– The lead dissent in Comcast suggested that individualized damages issues can be addressed through issues classes

• 133 S. Ct. 1426, 1437 & n.* (2013)

– The majority did not respond, leaving open the possibility that it intended to require proof of classwide damages in all cases

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ISSUES CLASSES

• Courts have gone different ways since Comcast

– Some have either applied or assumed a requirement of classwide damages and have certified where the plaintiffs provide common evidence of damages and denied certification where they do not – Some courts have “employ[ed] Rule 23(c)(4) and maintain[ed] class certification as to liability only, leaving damages for a separate, individualized determination”

• Jacob v. Duane Reade Holdings, 293 F.R.D. 578 (S.D.N.Y. 2013)

(summarizing these approaches)

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ISSUES CLASSES

• Some courts have relied on issues classes to avoid

difficulties with damages:

– In re Motor Fuel Temperature Sales Practices Litig., 292 F.R.D. 652 (D. Kan. 2013)

• Certified issues class on alleged non-disclosure of information regarding

gasoline

• “Determining each class members’ damages, if any, may require

individualized determinations, but ‘[t]he possibility that individual issues may predominate the issue of damages . . . does not defeat class certification by making [the liability] aspect of the case unmanageable’”

– Johnson v. Nextel Communs., Inc. 293 F.R.D. 660 (S.D.N.Y. 2013)

• Certified issues class on employment-discrimination claims
• “Comcast does not apply to certification of liability-only classes and

therefore is not relevant” to the court’s analysis under Rule 23(c)(4)

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ISSUES CLASSES

• Some courts have rejected issues classes as a solution because

they would simply postpone intractably individualized issues and thus would not be “appropriate”:

– Rahman v. Mott’s LLP, No. 13-cv-03482-SI, 2014 WL 6815779, at *9 (N.D. Cal. Dec. 3, 2014)

• “[A] district court is not bound to certify a liability class merely because

it is permissible to do so under Rule 23(b)(3). The language of Rule 23(c)(4) speaks of certifying as to particular issues ‘when appropriate,’ meaning that ‘[c]ourts should use Rule 23(c)(4) only where resolution of the particular common issues would materially advance the disposition

• f the litigation as a whole.’”

– Citing Jacob v. Duane Reade, Inc., 293 F.R.D. 578, 589 (S.D.N.Y. 2013) (internal citations omitted).

• “Should Rahman prevail on the issue of liability, certifying a second

class on the issue of damages would in essence amount to prosecuting two trials when one would have done just as well. Alternatively, allowing myriad individual damages claims to go forward hardly seems like a reasonable or efficient alternative, particularly in a case such as this where the average class member is likely to have suffered less than a hundred dollars in damages.”

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ISSUES CLASSES

• Defendants’ Perspective

– Issues classes pose serious threats for defendants but they are also risky for plaintiffs

• Issues classes are not fair to defendants

– Have sometimes been used to relieve plaintiffs from burden of proving injury and causation – “Issues” verdicts can put tremendous pressure on defendant – Issues classes are in tension with Seventh Amendment » “[T]he risk that a second jury would have to reconsider the liability issues decided by the first jury is too substantial to certify [an] issues class”

• In re ConAgra Peanut Butter Prods. Liab. Litig.,

251 F.R.D. 689, 698-99 (N.D. Ga. 2008)

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ISSUES CLASSES

• Plaintiffs’ Perspective

– Issues Classes serve a limited purpose – they will advance discreet aspects of either fact or law in a particular case. – It’s like Potter Stewart’s definition of pornography – whether a particular issue progresses the litigation to the goal of res judicata is a question best decided by counsel and the court. They are the ones most knowledgeable with the particular circumstances presenting them at the

• time. They will know it when they see it.

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