Opposing Class Certification by Attacking Plaintiffs' Classwide - - PowerPoint PPT Presentation

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Presenting a live 90-minute webinar with interactive Q&A

Opposing Class Certification by Attacking Plaintiffs' Classwide Damages Methods

Examining and Preparing to Challenge Damages Methods such as Surveys, Event Studies and Regression Analysis

Today’s faculty features:

1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific TUESDAY, DECEMBER 20, 2016

Galen D. Bellamy, Partner, Wheeler Trigg O'Donnell, Denver Jeremy M. Creelan, Partner, Jenner & Block, New York Aaron Dolgoff, Vice President, Charles River Associates, Boston

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Predominance: Comcast and the World That Came Before Jeremy Creelan

jcreelan@jenner.com

December 20, 2016

6

Pre-Amchem: Increasing Scrutiny of Certification

• As class actions used increasingly to bring mass tort claims in

1980s, courts increased scrutiny of certification on predominance and other Rule 23 grounds. For example:

– Castano v. Am. Tobacco Co., 84 F.3d 734, 740 (5th Cir. 1996) (tobacco): “The district court erred in its analysis in two distinct ways. First, it failed to consider how variations in state law affect predominance and superiority. Second, its predominance inquiry did not include consideration of how a trial on the merits would be conducted.” – In re Am. Med. Sys., Inc., 75 F.3d 1069, 1085 (6th Cir. 1996) (penile implants): “As this case illustrates, the products are different, each plaintiff has a unique complaint, and each receives different information and assurances from his treating physician. Given the absence of evidence that common issues predominate, certification was improper.” – Boughton v. Cotter Corp., 65 F.3d 823 (10th Cir. 1995) (hazardous emissions from uranium mill)

7

Amchem Prod., Inc. v. Windsor (1997): “Cohesiveness” Test

• Purported class action on behalf of all those exposed to

defendant’s asbestos

• Settlement class – neither party intends to litigate
• District Court certified class based on shared experience of

asbestos exposure & interest in prompt compensation; held that settlement was fair

• 3d Cir. vacated for lack of predominance under Rule

23(b)(3)

8

Amchem Prod., Inc. v. Windsor (1997): “Cohesiveness” Test

• Ginsburg for Majority (6)

– “The Rule 23(b)(3) predominance inquiry tests whether proposed classes are sufficiently cohesive to warrant adjudication by representation.” – Predominance readily met in consumer or securities fraud as well as antitrust cases – Predominance may be met in mass tort cases arising from common cause or disaster – Fact that all members had been exposed to asbestos was insufficient to meet predominance, as different members were exposed to different products for different amounts of time in different ways, and differences in state law compounded those disparities – Settlement class – lower bar?

9

Amchem Progeny: Predominance Requirement Powerful

• Predominance requirement satisfied:

– Smilow v. Sw. Bell Mobile Sys., Inc., 323 F.3d 32, 39–40 (1st Cir. 2003) – Gunnells v. Healthplan Servs., Inc., 348 F.3d 417 (4th Cir. 2003) – In re Visa Check/MasterMoney Antitrust Litig., 280 F.3d 124 (2d Cir. 2001)

• Predominance requirement NOT satisfied:

– Danvers Motor Co. v. Ford Motor Co., 543 F.3d 141, 148 (3d Cir. 2008) – Broussard v. Meineke Disc. Muffler Shops, 155 F.3d 331 (4th Cir. 1998) – Jackson v. Motel 6 Multipurpose, Inc., 130 F.3d 999 (11th Cir. 1997)

10

Amchem Progeny: Predominance Requirement Unclear

• Individualized damages a bar to certification

– Randall v. Rolls-Royce Corp., 637 F.3d 818 (7th Cir. 2011) – Blades v. Monsanto Co., 400 F.3d 562, 570-71 (8th Cir. 2005)

• Individualized damages NOT a bar to certification (majority)

– Yokoyama v. Midland Nat’l Life Ins. Co., 594 F.3d 1087, 1089 (9th

• Cir. 2010)

– In re New Motor Vehicles Canadian Exp. Antitrust Litig., 522 F.3d 6 (1st Cir. 2008) – Allapattah Servs. v. Exxon Corp., 333 F.3d 1248, 1261 (11th Cir. 2003)

11

Comcast v. Behrend (2013): “Rigorous Analysis” of Predominance

• Purported class action on behalf of 2M Comcast

subscribers

• Sherman Act claims challenging alleged “clustering”

scheme to eliminate competition in Philadelphia area

• District Ct rejected 3 of Ps’ 4 theories of anti-competitive

impacts; accepted “overbuilder deterrence” theory b/c “capable of measurement on classwide basis” and “capable

• f classwide proof”
• Ps’ expert damages analysis included all 4 impacts; did not

isolate “overbuilder” theory

12

Comcast v. Behrend (2013): “Rigorous Analysis” of Predominance

• Scalia for Majority (5)

– “Rigorous analysis” required at class certification to confirm Ps’ damages case consistent with liability case under FRCP 23(b)(3) – Overlap with merits analysis – Ps’ expert did not tie supra-competitive prices to “overbuilder deterrence” theory  damages incapable of measurement on a classwide basis if based on Ps’ expert analysis

13

Comcast v. Behrend (2013): “Rigorous Analysis” of Predominance

• Ginsberg for Dissent (4)

– Court should dismiss cert. as improvidently granted b/c question presented whether expert evidence admissible at certification – “no new ground” on FRCP 23(b)(3) standards – Class may be certified even if damages not provable in aggregate – Ps’ expert analysis did allow classwide proof of damages because Comcast agreed that Ps’ 3 other theories had no impact on prices

14

Comcast v. Behrend (2013): “Rigorous Analysis” of Predominance

• Key Takeaways

– Part of pantheon of recent SCOTUS cases shifting merits analyses earlier in life of a case – Lingering difficulties for appeals courts trying to review half-formed factual record from certification stage – Strategic Note: Identify mismatch between Ps’ theory and damages model before class cert. consideration

15

Comcast v. Behrend (2013): “Rigorous Analysis” of Predominance

• Questions

– Would courts take Scalia at his word?

• Or limit Comcast to its facts?
• Or limit Comcast to nexus between damages theory and liability theory?

– Comcast addressed combined liability-damages class

certification: impact on liability-only or damages-only classes? – Was Comcast about reliability of damages analysis or case management or Due Process?

370 Seventeenth Street | Suite 4500 | Denver, Colorado 80202-5647 | P 303.244.1800 | F 303.244.1879 | wtotrial.com

THE EVOLVING IMPACT OF COMCAST ON PROPOSED CLASS DAMAGES MODELS

Galen D. Bellamy

bellamy@wtotrial.com

December 20, 2016

Question 1 Raised by Comcast: How “Rigorous” Must the Analysis Be?

Comcast held that courts must consider challenges to damage methodology even if those challenges overlap with the merits.

If a court must consider challenges to class damages evidence, does that include Daubert challenges to damages experts? How developed or far along must the damages methodology be to survive challenge? Any proposed model need not include exact calculations. Is the rigorous analysis of classwide damages limited to ensuring that the plaintiffs’ model is consistent with its liability theory?

17

“Rigorous Analysis” of Damage Evidence = Daubert

The Circuit Courts agree that some form of Daubert analysis is appropriate at the class certification stage. Full Daubert: Third, Fifth, Seventh, and Eleventh Circuits:

In re Blood Reagents Antitrust Litig., 783 F.3d 183 (3d Cir. 2015). Unger v. Amedisys Inc., 401 F.3d 316, 323 n.6 (5th Cir. 2005).

• Am. Honda Motor Co. v. Allen, 600 F.3d 813, 815-16 (7th Cir. 2010).

Sher v. Raytheon Co., 419 F. App’x. 887, 890 (11th Cir. 2011).

Modified Daubert:

In re Zurn Pex Plumbing Prods. Liab. Litig., 644 F.3d 604, 612 (8th

• Cir. 2011) (“focused” Daubert analysis at class certification).

Tait v. BSH Home Appliances Corp., 289 F.R.D. 466, 495 (C.D. Cal. 2012) (“tailored” Daubert analysis at class certification).

18

Question 2 Raised by Comcast: Must Damages be Measureable on A Classwide Basis to Meet Predominance?

Certain statements from the majority appeared to suggest yes:

“[U]nder the proper standard for evaluating certification, respondents’ model falls far short of establishing that damages are capable of measurement on a classwide basis.” “If the model does not even attempt to [measure damages flowing from reduced overbuilder competition], it cannot possibly establish that damages are susceptible of measurement across the entire class for purposes of Rule 23(b)(3).”

But the dissent said otherwise:

“[T]he decision should not be read to require, as a prerequisite to class certification, that damages attributable to a classwide injury be measureable ‘on a class-wide basis.’”

19

Must Damages be Measureable on a Classwide Basis? (cont’d)

Significant questions practitioners were asking in the immediate wake of Comcast in light of these statements:

Is it Plaintiffs’ burden under Rule 23(b)(3) to come forward with evidence that damages can be calculated on a classwide basis? Must they employ a damages “model” to satisfy that burden (or were the Court’s statements to that effect specific to that antitrust case)? If damages are not measureable on a classwide basis, must certification be denied under 23(b)(3)?

20

Early Circuit Court Decisions Appeared to Suggest that Damages Must be Measureable

• n a Classwide Basis

The D.C. Circuit Court of Appeals, for example, succinctly summed up how many practitioners viewed the state of the law immediately following Comcast: “No damages model, no predominance, no class certification.” In re: Rail Freight Fuel Surcharge Antitrust Litigation, 725 F.3d 244 (D.C. Cir. 2013)

21

Must Damages be Measureable on a Classwide Basis? (cont’d)

After Comcast, the Tenth Circuit reversed certification and remanded to the district court to “consider the extent to which material differences in damages determinations will require individual inquiries.”

Wallace B. Roderick Revocable Living Trust v. XTO Energy, 725 F.3d 1213 (10th Cir. 2013)

Thus, after Comcast, “material” differences in individual damages determinations could tip the predominance scale against certification.

22

Must Damages be Measureable on a Classwide Basis? (cont’d)

Although the early decisions by the DC Circuit and Tenth Circuit suggested that Comcast might have real bite, the consensus that has since emerged is that Comcast:

Does not require that damages be measureable on a classwide basis to satisfy predominance; Does not impose a new requirement that Plaintiffs come forward with a damages “model” as a prerequisite to satisfying Rule 23(b)(3).

23

Must Damages be Measureable on a Classwide Basis? (Cont’d)

It remains the law after Comcast that the need for individual damages calculations alone does not defeat a finding of predominance.

Leyva v. Medline Industries, Inc., 716 F.3d 510 (9th Cir. 2013) In re Whirlpool Corp., 722 F.3d 838 (6th Cir. 2013) Butler v. Sears, 727 F.3d 796 (7th Cir. 2013) In re Deepwater Horizon, 739 F.3d 790 (5th Cir. 2014) In re Nexium Antitrust Litig., 777 F.3d 9 (1st Cir. 2015) Roach v. T.L. Cannon, 778 F.3d 401 (2d Cir. 2015) Neale v. Volvo Cars of N. Am., LLC, 794 F.3d 353 (3d Cir. 2015) Brown v. Electrolux Home Products, 817 F.3d 1225 (11th Cir. 2016)

24

Can the Need for Individual Damage Calculations Ever Defeat Predominance?

Although it is clear that individual damages calculations “alone” cannot defeat predominance, that does not mean such calculations are irrelevant to the predominance inquiry. “Without presenting another methodology, respondents cannot show Rule 23(b)(3) predominance: Questions of individual damage calculations will inevitably overwhelm questions common to the class.”

Comcast, 133 S.Ct. at 1433.

25

Early Circuit Court Decisions Left the Door Open

The decisions issued after Comcast by the Fifth, Sixth and Seventh Circuits all focused on the fact that those cases involved liability classes, so they did not need to decide what impact individual damages calculations might have on predominance. The decisions issued by the First, Second and Ninth Circuits all noted that there was an easy way to calculate individual damages in those cases. Still an open question after these cases about how to evaluate a class seeking certification of both liability and damages theories where damages are not measureable on a classwide basis and individual damages are not readily calculable.

26

Consider The Ninth Circuit

Reaffirmed that, even after Comcast, damage calculations alone cannot defeat class certification.

Leyva v. Medline Industries, Inc., 716 F.3d 510 (9th Cir. 2013).

Further, a proposed class damages model can pass muster even if it is “an approximation . . . uncertain, contingent, or difficult of ascertainment.”

Pulaski & Middleman, LLC v. Google, Inc., 802 F.3d 979, 989 (2015).

27

Consider The Ninth Circuit (cont’d)

So is Comcast toothless? Not so fast . . . Doyle v. Chrysler Group, LLC (9th Cir. 2016) (unpublished):

Reversed certification because plaintiff had not demonstrated that damages could be measured on a classwide basis. Distinguished Leyva and Pulaski because those cases involved “a common methodology for calculating damages”.

28

When Do Individual Damages Calculations Tip the Predominance Scale?

Brown v. Electrolux Home Products, 817 F.3d 1225 (11th Cir. 2016)

Like the Circuit Courts that had reached the issue before it, the Eleventh Circuit recognized that the “black letter rule” in every circuit is that individual damages calculations generally do not defeat a finding of predominance. Noted that the predominance issue is qualitative, and the individual issues raised by damages determinations are often easy issues to resolve when damages calculations are formulaic. Recognized that an “exception” to the blackletter rule when computing individual damages will be complex and fact-specific.

29

Question 3 Raised by Comcast: How Precisely Must the Liability Theory and Damages Model Align?

The primary holding of Comcast was that the class liability and damages theories must align:

“[A] model purporting to serve as evidence of damages in this class action must measure only those damages attributable to that theory.” “Calculations need not be exact . . . but at the class certification stage (as at trial) any model supporting a ‘plaintiff’s damages case must be consistent with its liability case’” Model does not establish that class damages are capable of measurement if the model “identifies damages that are not the result

• f the wrong.”

30

Liability and Damages Must Align

From the defense perspective, this is probably where the most fruitful application of Comcast has been, but the lower courts are not aligned on what this requirement actually means in practice. Compare:

Hughes v. Ester C. Co., NBTY, Inc., 2016 WL 6092487 (E.D.N.Y.

• Sept. 30, 2016).

Goldemberg v. Johnson & Johnson Consumer Companies, Inc., 2016 WL 5817012 (S.D.N.Y. Oct. 4, 2016).

31

Consider the Ninth (again)

Brazil v. Dole Packaged Foods, LLC, (9th Cir. 2016) (unpublished):

Did not cite Comcast. District court decertified class because plaintiffs’ damages expert could not isolate the impact that “all natural” label had on price. Ninth Circuit affirmed because plaintiffs had not shown that the price premium solely attributable to the “all natural” label could be calculated with proof common to the class.

In re ConAgra Foods:

Plaintiffs’ expert asserted that he could use regression analysis to determine damages, but could not isolate damages flowing solely from allegedly false aspect of “100% natural” claim. Court granted amended motion for class certification that relied on revised class damages models (regression + conjoint analyses) to isolate price premium. Currently on appeal. The Ninth Circuit heard oral argument in September on the same day as Brazil.

32

Liability and Cognizable Damages Theory Must Align

Harnish v. Widener University School of Law, 833 F.3d 298 (3d

• Cir. 2016):

Did not cite Comcast. Showed how a flawed damages model can prevent certification. Not only must damages model measure damages attributable solely to Plaintiffs’ theory of liability, but it must measure a legally cognizable theory of damages pursuant to underlying state law.

33

Three Years After Comcast, Consensus has Emerged

• n Three Key Points

First, the “rigorous analysis” of damages evidence includes considering whether class damages experts satisfy FRE 702 and Daubert. Second, although individual damage calculations alone will not defeat predominance, courts are increasingly willing to consider the need for such inquiry as a factor in deciding whether common issues outweigh individual issues. Third, proof of class damages must measure only those damages attributable to Plaintiffs’ theory of liability.

34

Arguments Under Comcast That Have Been Successful In Attacking Plaintiffs’ Class Damages

The proposed methodology has not been sufficiently developed.

District court cannot perform its “rigorous analysis” or evaluate the reliability of the opinion under Daubert.

The proposed damages model does not obviate the need for individual inquiry.

Courts have recognized that the need for such inquiries can defeat predominance.

The proposed methodology does not measure only damages flowing from the alleged injury.

Or the method does not measure damages in a way that is cognizable under the underlying substantive law.

35

Comcast and the Application of Damages Methods at Class Certification December 20, 2017 Aaron Dolgoff Vice President adolgoff@crai.com

200 Clarendon Street Boston, Massachusetts 02116-5092 617-425-3000

Topics covered

Using examples from securities, antitrust and labor/employment class actions:

• Briefly introduce a few damages methods Plaintiffs might use at Class

Certification phase

• Discuss various Plaintiffs and Defendant arguments supporting or rebutting

these methods

• Provide some lessons from case outcomes

37

Securities Litigation

Damages Approaches

• In securities class actions every class member will necessarily have

individualized damages calculations based on the size and timing of their respective trades

– Individual calculations do not preclude a common approach (i.e., individual calculations are not necessarily a barrier to class certification)

• Two generic approaches to damages in securities suits:

(1) Stock price inflation: Actual purchase price – “But-for” purchase price

Economic models are used to estimate the “but-for” price

(2) Rescission of out-of-pocket losses: Actual purchase price – Actual sale price

[perhaps offset for unrelated losses] 38

Securities Litigation

Comcast Decisions – Summary

• Some damage methods are easier to establish classwide application

– Claims securities “worthless”/ rescission claims (Cromeans v. Morgan Keenan, Dodona v. Goldman Sachs) – Statutory formulas (§11 of 1933 Securities Act) (NJ Carpenters Health v Residential Capital) – Burden remains on plaintiff to offer evidence of damages methodology (e.g., Kosmos Energy Ltd. Securities Litigation in which the court found plaintiffs offered no evidence in support of predominance requirement for a §11 claim)

• Damage claims requiring estimation of stock price inflation (i.e., 10(b)-5) generally

require an economic method and expert opinion

– Event study method has become most commonly applied method to determine stock price inflation – Applying an event study to a damages formula is insufficient: plaintiffs need to show how their damages methodology tracks their theory of liability (e.g., BP Securities Litigation 1 – class denied)

39

Securities Litigation

Event Study Method

1. Identify events

– Disclosure vs misstatement – Cannot directly test impact of an omission

2. Define length of event windows

– Tradeoff: isolating window to the identified event vs statistical confidence

3. Calculate excess return using an appropriate economic model

– Control for market, industry and/or other exogenous factors (i.e., factors unrelated to the event being tested)

4. Test statistical significance

40

Securities Litigation

Issues in Measuring Value Impact of an Event

• Confoundment (i.e., the isolation problem)

– Defining the event window – Isolating individual effects (example: controlling for earnings announcements) – Impact on statistical significance

• How does the event information relate to plaintiffs’ theory of harm?

– Undisclosed risk vs. Realization of risk

• Is the information really “news”?

– Public disclosure – Dissemination mechanisms (e.g., analyst reports)

• Statistical confidence / reliability of model

41

Securities Litigation

Does the Event Related to Theory of Harm? BP Securities Litigation II Example

42

“Pre Explosion” or “Process Safety” Subclass “Post Explosion” or “Spill Severity” Subclass

Securities Litigation

BP Securities Litigation II– Post-Explosion Subclass

• Plaintiffs’ damage method

– Damage theory: defendants withheld information about the severity of the oil spill – Event study method applied to a set of disclosure dates – Constant $ of inflation between disclosures

• Defendant arguments

– It is improper to carry-back stock price declines to the first alleged spill severity misstatement because there is no evidence defendants had the same information at that earlier time – Improper overlap of corrective disclosure events between Pre-Explosion and Post-Explosion subclasses

• Subclass certified

– Defendants arguments concern loss causation – challenging the “fit” between alleged corrective events and alleged fraudulent statements. – Failure to prove loss causation is not an impediment to class certification – “Plaintiffs’ task … is to present a legally viable, internally consistent and truly classwide approach … Whether Plaintiffs have properly executed under the approach is a question for a different day.”

43

Securities Litigation

BP Securities Litigation II– Pre-Explosion Subclass

• Plaintiffs’ damage method

– Damage theory: Consequential damages theory

• “Materialization-of-risk” - misstatements deprived investors the opportunity to divest prior to realization of risk

– Event study to measure price impact of realization of risk across 8 corrective events (reduced by amount known to the market, i.e., risks voluntarily assumed by investors) – Apportion across alleged misrepresentation dates (linear step-up over time)

• Defendant arguments

– Corrective events were not related to the process safety misstatements – Arbitrary allocation (back-casting) method; can produce irrational results – Failure to measure value of an undisclosed risk, as distinct from value impact from realization of that risk.

• Subclass not certified

– Selection of improper corrective events not relevant: loss causation need not be proven at class certification – “Plaintiffs damage model [back-casting] need not be perfect. It need not be ‘correct.’ … [the] damages methodology contains its flaws, but is not wholly arbitrary.” – Fatal flaw denying certification: consequential damages theory cannot be applied uniformly

• Lumps together those who would have bought at heightened risk with those who would not
• Presumes investor reliance on factors other than price (i.e., risk), a theory inconsistent with fraud-on-the-market theory

44

Securities Litigation

Alternatives to Event Study Method

• Indicators from factual record

– Contemporaneous analyst reports – Plaintiff or other investor valuation analyses

• Direct valuation of alleged misstatement / omission

– E.g., discounted cash flow method to value an earnings misstatement regarding earnings

• Regression or other benchmarking techniques

– Statistically isolating effects of similar information disclosures in cross-sectional studies – Issues

• Comparability
• Controls for case-specific factors

45

Antitrust Damages Approach

• Antitrust damages may be measured by a model of overcharges, where actual

prices paid are compared to but-for prices

• Multiple regression is used to separate the impact of the alleged misconduct

from other supply and demand factors affecting price:

46

Antitrust

Steps in Using Regression Models

47

Antitrust

Potential Certification Issues in Use of Regression Models

48

Antitrust

In re Rail Freight Fuel Surcharge Antitrust Litigation

• Plaintiffs alleged 4 rail freight carriers conspired to increase freight prices through fuel surcharges
• Plaintiffs’ expert controlled for various factors believed to affect prices of all rail shipments and found a

significant change in the relationship between fuel prices and freight rates at the start of the class period

• Appellate court decision focused on one of Defendant’s rebuttal arguments: “false positives”

– Defendants found plaintiff’s model estimated damages for customers with rates set by contracts signed before the alleged misconduct.

49 Plaintiff Reply to Defendant Arguments Court Pre-class shippers are not part of class; relevant issue is whether the class paid higher rates Although false positives don’t disprove the model… Plaintiffs misapprehend their burden… It is not enough to submit a questionable model whose unsubstantiated claims cannot be refuted through a priori analysis… we have no way of knowing the

• vercharges the damages model calculates for class members is any

more accurate than the obviously false estimates it produces for legacy shippers. The conspiracy may have predated the class period, thus tainting even legacy contracts Plaintiffs failed to present any evidence of this possibility, a claim that is also at odds with the district court’s factual findings.

Antitrust

In re High-Tech Employee Antitrust Litigation (1 of 2)

50

Plaintiff model Defendant Critique Court Finding Conduct Regression

• Show impact of anti-

solicitation agreements and quantify damage by each proposed class

• Controls for benchmark

period of two years before and after the class period.

• Plaintiffs should have produced

disaggregated models which would show dramatically different results for each Defendant.

• If benchmark period is restricted

to just after the class period the model shows over-compensation rather than under-compensation.

• Failure to control for value of

equity compensation.

• Failed to control for the fact that

compensation within firms is correlated, thus requiring the use

• f “clustered standard errors.”
• Defendant expert does not appear to have created a

truly disaggregated model… moreover, his use of so many variables may “minimize artificially” the effects

• f the anti-solicitation agreements. Aggregation may

also be appropriate given limited sample size.

• Defendants fail to explain why it makes sense to limit

the benchmark period (e.g., by showing that the pre- conduct period is not comparable to the post-conduct period).

• Defendant’s control for equity compensation (S&P

500) does not reflect variations in Defendants’ stock prices or compensation.

• The fact that when standard errors are clustered the

results are not significant at the 95% level does not render the regression inadmissible / unreliable.

Court not persuaded that the Conduct Regression by itself provides plausible method of showing detrimental effects were experienced by all or nearly all class members… Nevertheless, the Court is persuaded that the regression provides reasonable method of … showing impact generally, and providing a measure of class-wide damages.

Antitrust

In re High-Tech Employee Antitrust Litigation (2 of 2)

51

Plaintiff model Defendant Critique Court Finding Common Factors Analysis

• Statistical model to assess

firm wide compensation structures and the formulaic way in which total compensation varied over time” (evidence of “rigid wage structure”)

• Almost all of the model’s “fit” is

explained by employer and job title

• Cannot establish that compensation
• f different employees with different

job titles are correlated over time.

• The analysis shows where an employee works

and what an employee does plays a large role in determining salary. Plaintiff expert fails to explain how one can infer from that that Defendant’s salary structures were so rigid that compensation for employees with different titles would necessarily move together Compensation Movement Charts

• Track compensation for top

10 positions at Google and Apple over time (to show co-movement)

• Plaintiff examined only a small

fraction of the class and focused on Technical Class employees

• In light of Plaintiffs failure to provide a broader

sampling, the Court is not persuaded that the [charts] are particularly probative of whether salaries for all or nearly all Class members moved together

“the Court has concerns about the capacity of Plaintiffs’ evidence and proposed methodology to prove impact to the All Employee Class or the Technical Class. The Court is most concerned about whether the evidence will be able to show that Defendants maintained such rigid compensation structures that a suppression of wages to some employees would have affected all or nearly all Class members. The Court is also concerned that Plaintiffs’ proposed classes may be defined so broadly as to include large numbers of people who were not necessarily harmed by Defendants’ allegedly unlawful conduct.”

Labor and Employment

Minor League Baseball (Senne, et al. v. Kansa City Royals, et al.)

• Plaintiffs alleged FLSA and state wage and hour law violations (minimum wage and
• vertime of minor league players)
• The court conditionally certified FLSA class with more than 2,000 players opting-in to

the class.

– Plaintiffs motion for state law class certification – Defendants motion to decertify FLSA class

• In support of class certification Plaintiffs submitted expert declarations for survey and

damages experts

– Survey expert designed survey to obtain estimates of player hours worked at various activities / times of year (e.g., spring training, championship season, winter); pilot survey implemented using opt-ins to FLSA class. – Damages expert demonstrated use of pilot survey data combined with other data (e.g., game schedule, travel times between cities) to calculate damages – Defendants filed motion to exclude Survey expert declaration and testimony (damages expert relies on survey results, so exclusion of survey would effectively preclude damages analysis) 52

Labor and Employment

Example from Minor League Baseball (Senne, et al. v. Kansa City Royals, et al.)

53

Defendants’ Expert Rebuttal criticism Court opinion

Pilot survey sample bias (respondents were all class opt-ins) No reason to believe a survey conducted at a later stage will suffer from this defect Potential bias from non-response (about 1/3 response rate) Defendants have raised the possibility of non-response bias, but not demonstrated any actual bias Bias from ambiguity in questions combined with predetermined category ranges that might influence responses The use of closed-ended questions is an accepted practice in conduct surveys

• f this nature.

Complicated survey questions invited “best guess” answers “Troubled” by format of the question flagged… while on its own this problem is not sufficient to render the survey unreliable, when combined with assumptions about players’ memories, the reliability is questionable. Self-interest bias The methodology used in conducting the pilot is fundamentally flawed and plaintiffs have not shown they can overcome these problems when they conduct the more comprehensive survey. All minor league players have a vested interest, regardless of whether they opted in to the FLSA class. Plaintiffs have not pointed to any specific records that can be used to validate survey results. Self-interest bias is compounded by the ability of players to remember mundane events to come up with reliable answers.

* The above does not address Plaintiffs’ subsequent attempts for reconsideration based on additional expert declarations.

Summary Implications

• Important to empirically test assumptions about reliability of damages model across

sub-classes or compared to those outside the class

– Not enough to show potential flaws in plaintiffs’ expert opinions – need demonstrate those flaws are real and have measurable impact

• At Class Certification stage courts are not looking for perfection from plaintiffs’

experts

– Damages calculations need not be correct – An appropriate model incorrectly applied may still be sufficient for class certification – Remediable errors in Plaintiffs’ methods are less likely to prevent class certification

• Expert opinions must address fundamental issues:

– Do plaintiffs provide an approach to estimate a common impact across plaintiffs or sub-classes? – Is the damage model consistent with plaintiffs’ liability theory? – Is the damage model confounded by alternative liability theories? – Are there reliable data (measurable, sufficient data, unbiased) to implement the damages method? 54