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Earlier today, the Supreme Court denied certiorari in two highly anticipated appeals of decisions by the Sixth and Seventh Circuit Courts of Appeals to grant class certification over breach of warranty claims involving allegedly defective washing machines.  The denial of cert in Butler v. Sears, Roebuck & Co., Nos. 11-8029, 12-8030 (7th Cir., Aug. 22, 2013) (Posner, J.) and In re Front‐Loading Washer Products Liability Litigation, No. 10-4188 (6th Cir. July 18, 2013) was a surprise to many commentators who had seen the moldy washer cases as providing the perfect opportunity for the Court to continue its trend clarifying the boundaries of class certification in cases like Wal-Mart Stores, Inc. v. Dukes,  Amgen Inc. v. Connecticut Retirement Plans and Trust Funds, and Comcast Corp. v. Behrend.  The denial of cert means that the Court will not be addressing the question of whether it is appropriate for a federal court to order class certification of discrete, common issues in a case without analyzing whether those issues predominate more generally over the individualized questions, like injury or damages.  That question will be left to the lower courts for the time being.

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2013 was a memorable year for class actions.  I’ve assembled my top 10 most significant developments below.  There were almost enough U.S. Supreme Court decisions to fill up the entire list, but my number 1 development was still a pair of lower court decisions that may also become the story of the year in 2014.

10. Kiobel v. Royal Dutch Petroleum Co., 133 S.Ct. 1659 (2013) – Not a class action decision per se, but likely to have significant repercussions on the development of international class action law.  Extraterritorial effect of the Alien Tort Statute is significantly limited.

9. Clapper v. Amnesty Intern. USA, 133 S. Ct. 1138 (2013) – Another non-class action decision already having a significant impact on the question of standing in data privacy class actions.

8. Oxford Health Plans LLC v. Sutter, 133 S. Ct. 2064 (2013) – Class Arbitration is not completely dead, but there’s a blueprint for how to kill it.

7. American Express Co. v. Italian Colors Restaurant, 133 S. Ct. 2304 (2013)- Arbitration continues to reign supreme, even under the “federal law of arbitrability”

6. Genesis Healthcare Corp. v. Symczyk, 133 S. Ct. 1523 (2013) – Can class actions be defeated simply by picking off the representatives one at a time?  That’s for the circuits to decide.

5. Amgen Inc. v. Connecticut Retirement Plans and Trust Funds, 133 S.Ct. 1184 (2013) – Supreme Court holds that materiality is a common question and that proof of materiality is not a prerequisite to class certification, but raises questions about the continued viability of the Basic fraud on the market presumption in securities cases.

4. Certiorari granted in Halliburton v. Erica P. John Fund, No 13-317 – That didn’t take long.  On the heels of , Supreme Court agrees to revisit the Basic fraud on the market presumption.

3. Comcast Corp. v. Behrend, 133 S.Ct. 1426 (2013) – Limited holding = damages theory has to match theory of liability.  Expansive holding = no class certification unless the question of damages is susceptible to common, classwide proof.  Which holding will be embraced by the lower courts?

2. Standard Fire Ins. Co. v Knowles, 133 S. Ct. 1345 (2013) – First ever CAFA decision limits representative plaintiffs’ ability to bind class prior to class certification.  Can’t avoid federal jurisdiction by stipulating to no more than $4,999,999.99 in damages on behalf of a putative class.

1. Moldy Washing Machine Decisions – Limited Comcast holding prevails so far.  Two lower courts reaffirm class certification orders after remand in light of Comcast.  Issue certification is alive and well, for the moment, but stay tuned to see if the Court takes up these cases in 2014.

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Today, Whirlpool and Sears filed petitions for a writ of certiorari with the U.S. Supreme Court asking seeking review of decisions by the Sixth and Seventh Circuits upholding certification orders in class actions alleging that design defects create a tendency for mold to develop in front-loading washing machines manufactured by the defendants.  The two lower court decisions, which were discussed in this August 23, 2013 CAB Post, are Butler v. Sears, Roebuck & Co., Nos. 11-8029, 12-8030 (7th Cir., Aug. 22, 2013) (Posner, J.) and In re Whirlpool Corp. Front‐Loading Washer Products Liability Litigation, No. 10-4188 (6th Cir. July 18, 2013).  Earlier decisions in both cases had previously been vacated and remanded for reconsideration in light of the Court’s decision in Comcast Corp. v. Behrend, and both the Sixth and Seventh Circuits reached the same conclusion on remand: that class certification was proper even though most potential class members were not actually affected by mold in their washing machines.

The issues presented for review in Sears, Roebuck & Co. v. Butler are as follows:

1. Whether the predominance requirement of Rule 23(b)(3) is satisfied by the purported “efficiency” of a class trial on one abstract issue, without considering the host of individual issues that would need to be tried to resolve liability and damages and without determining whether the aggregate of common issues predominates over the aggregate of individual issues.

2. Whether a product liability class may be certified where it is undisputed that most members did not experience the alleged defect or harm.

In Whirlpool Corp. v. Glazer the cert petition requests review of the following issues:

1. Whether the Rule 23(b)(3) predominance requirement can be satisfied when the court has not found that the aggregate of common liability issues predominates over the aggregate of individualized issues at trial and when neither injury nor damages can be proven on a classwide basis.

2. Whether a class may be certified when most members have never experienced the alleged defect and both fact of injury and damages would have to be litigated on a member-by-member basis.

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One of the key questions in the aftermath of the Supreme Court’s recent decision in Comcast Corp. v. Behrend is the extent to which damages must be susceptible to classwide calculation in order to justify class certification.  In particular, the question is as follows: When the Comcast Court held that class certification was improper because the plaintiff had failed to demonstrate that “damages are capable of measurement on a classwide basis,” did it mean that Rule 23(b)(3) certification is never proper if damages cannot be determined on a classwide basis?  If the answer to this question is yes, then consumer class actions are in trouble because it’s a rare case where classwide determination of damages is possible.  But if the answer to this question is no, then as the Comcast dissent suggested, “the opinion breaks no new ground on the standard for certifying a class action under Federal Rule of Civil Procedure 23(b)(3).”

Yesterday, in the second of two moldy washing machine class actions that had been vacated and remanded for further consideration in light of Comcast, the Seventh Circuit Court of Appeals joined the Sixth Circuit in answering “no” to this question.  In Butler v. Sears, Roebuck & Co., Nos. 11-8029, 12-8030 (7th Cir., Aug. 22, 2013) (Posner, J.), the court reaffirmed its earlier decision that if common issues predominate over individualized issues in resolving the question of liability, then a class can be certified even if the question damages would require individual determinations. As usual, Judge Posner’s decision is colorful and an interesting read, even for those who disagree with the outcome.  The Sixth Circuit’s decision, which was issued last month, is In re Whirlpool Corp. Front‐Loading Washer Products Liability Litigation, No. 10-4188 (6th Cir. July 18, 2013).

In evaluating the potential broader impact of the Sixth and Seventh Circuit’s decisions, it is important to maintain a clear distinction between the question of damages and the related questions of injury and causation of damages.  Courts have long accepted that individualized damages questions do not prevent class certification, and the moldy washer decisions themselves break little new ground other than to interpret Comcast as not having altered that longstanding principle.  However, saying that individualized questions of damages can be left for a later proceeding is very different than saying that there is a good reason to certify a class when the elements necessary to prove liability itself (which typically include both the existence of injury and causation) cannot all be resolved on a classwide basis.  Individualized questions of whether a given class member has suffered any compensable injury at all or whether the allegedly wrongful conduct caused any alleged injury should still defeat predominance, and neither Sears nor Whirlpool should be read to suggest differently.  In those cases, because the plaintiffs had advanced what these courts concluded was a viable theory of common injury, the only individualized questions related to the amount of, and not the existence of, damages. See In re Whirlpool Corp., slip op. at 22 (“Because all Duet owners were injured at the point of sale upon paying a premium price for the Duets as designed, even those owners who have not experienced a mold problem are properly included within the certified class.)

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My sincere apologies to the loyal ClassActionBlawg reader for the scarcity of new content lately. I’m on the road this week, but thought I should at least drop a note about two interesting class-action-related developments in the U.S. Supreme Court over the past week:

1) the Court granted cert in  State of Mississippi v. AU Optronics Corp., to address the issue whether parens patriae actions filed by state attorneys general seeking restitution on behalf of state citizens are “mass” actions, permitting removal under the Class Action Fairness Act (CAFA).  For more on the case, see Deborah Renner’s post on the BakerHostetler Class Action Lawsuit Defense Blog.  If it were up to me, I’d go further and say that parens patriae cases are actually “class” actions under CAFA, but apparently the Court has its own idea about the scope of the issue.

2) The Court vacated Judge Richard Posner’s decision in Butler v. Sears Roebuck & Co. and remanded for reconsideration in light of its recent decision in Comcast Corp. v. Behrend.  This follows the Court’s earlier decision to vacate the Sixth Circuit’s decision in In re Whirlpool Corp. Front-Loading Washer Products Liability Litigation for the same reason.  Given the many questions left unanswered by the Comcast decision, it will be interesting to see what the Sixth and Seventh Circuits do with the moldy washer cases on remand.

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Work commitments have prevented me from commenting in detail on some key developments in class actions over the past week or so, but please be sure to check out my Twitter feed for some links.  The key developments include: 1) the Supreme Court granting certiorari in Amex III to decide whether federal law can apply to hold a class arbitration waiver unconscionable; and 2) Judge Posner’s decision favorable to class certification of warranty claims in case involving allegedly moldy washing machines.

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This is the first in what will be six posts summarizing my notes of the six presentations at the ABA’s 16th Annual Class Actions Institute held last Thursday in Chicago.  The National Institute sets the gold standard for class action conferences, and this year was no exception.  Program Chair Daniel Karon and the rest of the organizing committee did an excellent job selecting six of the most timely and relevant topics facing class action practitioners today.  As always, the list of panelists was a veritable who’s who in the class action field.  If you ever have the opportunity to attend this annual conference, I highly recommend it.

As has become the custom at the National Institute, Columbia Law Professor John C. Coffee, Jr. kicked off this year’s program with a comprehensive and insightful summary of the year’s key developments in class action law.  This year’s presentation saw what has been a hit solo act turn into an even better duet, as Professor Coffee shared the stage with Connecticut Law Professor Alexandra Lahav.  The session was titled “Holy Cow!  This Year the Courts Said What?!” A Brief History of this Year’s Developments in Class Action Jurisprudence.  Attendees were also treated to a comprehensive, 179-page summary of the year in class actions by Professors Coffee and Lahav entitled The New Class Action Landscape: Trends and Developments in Class Certification and Related Topics.

The first part of Professor Coffee’s presentation covered each of the class action-related cases on the U.S. Supreme Court’s docket this term.  Here is a list of those cases with some of Professor Coffee’s insights:

  • Connecticut Retirement Plans & Trust Funds v. Amgen, Inc., 660 F.3d 1170 (9th Cir. 2011) – Amgen raises the question whether the plaintiff must establish the materiality of an alleged false statement at the class certification stage of a securities fraud class action.  Professor Coffee believes that this case is a close call, but whichever way it comes out, it does not threaten to end securities class action litigation as we know it.
  • Behrend v. Comcast Corporation, 655 F.3d 182 (3d Cir. 2011) – In Behrend, the Court could decide whether a trial court must perform a full Daubert analysis of expert testimony offered in support of or in opposition to class certification.  The case raises the question, at least in the antitrust context, whether the plaintiff must present a  formal damages model or whether the mere possibility of common proof is enough.
  • Symczyk v. Genesis Healthcare Corp., 656 F.3d 189 (3d Cir. 2011) – This is a wage and hour case under the FLSA, which has a different procedure than Rule 23.  FLSA claims are more accurately characterized as collective actions, rather than class action.  The issue is whether a settlement offer for the full amount of the named plaintiff’s FLSA claim can moot the claim and prevent the case from proceeding on a collective basis, a concept also known as “picking off.”   One of the arguments that has been raised is that the writ of certiorari should be dismissed as improvident granted, so it is unclear whether the Court will actually enter a substantive ruling.
  • Knowles v. The Standard Fire Insurance Company, 2011 U.S. Dist. LEXIS 130077 (W.D. Ark. December 2, 2011) – This case raises the question whether a plaintiff can plead around CAFA removal jurisdiction by stipulating to less than $5 million in damages on behalf of the putative class.  Professor Coffee felt confident in making the prediction that the defendant will win.  He points to dicta in the Court’s recent decision in Smith v. Bayer Corporation calling into question whether a plaintiff can do anything to bind the members of a putative class before it is certified.

Professor Coffee then went on to highlight some of the big developments in the lower courts from over the past year, which include:

The proper burden of proof to be applied at class certification.  The circuits are split on this issue, with some applying a preponderance of the evidence standard and others simply requiring a rigorous analysis with no particular evidentiary standard.

Treatment of expert testimony.  The federal district courts continue to resist resolving a battle of the experts at the class certification stage, but dicta from the Supreme Court in Dukes, as well as holdings by several of the circuits, are putting increasing pressure on the federal courts to perform a Daubert analysis (and the Court could resolve this issue for good in Behrend).

Class Arbitration Waivers.  Some lower courts, especially the Second Circuit, continue to carve out exceptions to the Supreme Court’s ruling favoring arbitration agreements in Concepcion.   One key issue is whether a class arbitration waiver may still be held unconscionable as a matter of federal law.  Professor Coffee quipped that the Second Circuit will only change if the Supreme Court “stuffs it down their throat.”  While unconscionability under state law is no longer a viable argument against enforcing an arbitration clause, clauses with fee-shifting provisions continue to be susceptible to attack.

Settlement Only and Limited Fund Classes.  There is a lower court trend in permitting certification in settlement classes in cases that could not be certified as class actions in contested cases, notwithstanding the Supreme Court’s opinion in Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 617 (1997).  The primary justification tends to be that any individualized issues of fact in the case went to manageability, which is no longer an issue in the settlement context.   In cases where courts have found that individualized issues impact both predominance and manageability, settlement classes have continued to be rejected.

Partial Certification.   The question of issue certification has been one of the hottest trends in the federal courts in the wake of Dukes.  Professor Coffee pointed out that the resolution of whether courts allow partial certification tends to be determined whether the fact of certification creates an extortionate threat to settle the case.

Class Action Settlements.  If you read just one class certification decision this year, Professor Coffee recommends Judge Rosenthal’s memorandum opinion in In re: Heartland Payment Systems, Inc. Customer Data Security Breach Litigation, MDL No. 09-2046 (S.D. Tex. March 20, 2012), which has a well-organized, step-by-step analysis of the approval of a class action settlement.

Professor Lahav focused her remarks on what has been happening in the lower courts in response to the three key aspects of the Court’s decision in Dukes: 1) the “new commonality” requirement; 2) the rejection of the use of Rule 23(b)(2) to recover individualized money damages; and 3) the rejection of “trial by formula,” of the use of statistical sampling to solve individualized damages problems.

The “new commonality”.  Among Professor Lahav’s key observations was that in the Title VII context, there must be a policy, but if there is an identifiable policy, the courts will allow discretionary elements of that policy to be attacked.  This trend is best exemplified by Judge Posner’s decision in McReynolds v. Merrill Lynch, Pierce, Fenner & Smith, Inc.  As many commentators predicted, Plaintiffs have had better success after Dukes by narrowing the geographic scope of discrimination claims.  This has also been true in the consumer context.  In the civil rights context, allegations of systemic constitutional violations have had success when the courts have focused on the systemic nature of the practice, but not when courts have focused on the effects of a systemic practice on the prospective class members.  In general, there has been an increasing reliance on issues classes to overcome individualized issues that might destroy commonality or predominance.

Rule 23(b)(2) and monetary damages.  The majority opinion in Dukes raised the question whether there can ever be a class with monetary damages.  None of the circuit courts have provided further guidance on when damages might be sufficiently “incidental” to still allow relief.  One area that has seen mixed results since Dukes is the area of medical monitoring class actions, where the remedy sought is medical monitoring of the possible health effects of a toxic exposure but the cost of monitoring can vary from person to person.  Professor Lahav pointed to the Third Circuit’s decision in Gates v. Rohm & Haas Co., No. 10-2108 (3d Cir., Aug. 25, 2011), as potentially supporting arguments on both sides.  Hybrid class actions, where classes are certified based on both Rule 23(b)(2) and 23(b)(3), are becoming increasingly common, especially in the Title VII context.  One unanswered question is whether damages claims are precluded if a Rule 23(b)(2) class is certified but not successful.

Statistical evidence and “trial by formula.”   Statistical evidence is still accepted in contexts where it has been accepted traditionally, e.g. civil rights, disparate impact, and antitrust cases.  It is not allowed in cases where the defendant can raise individualized defenses.  One proposed solution is, again, issues classes, but this creates a class action funding problem – How do lawyers get paid?

Professor Lahav also revisited statistical trends in class actions, focusing primarily on data compiled by the Federal Judicial Center in 2008 which analyzed the impact of the Class Action Fairness Act (“CAFA”).  She made the key point that statistical data on class action trends has been severely lacking since the FJC study, making updated empirical analysis of class action trends difficult.

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