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Posts Tagged ‘causation’

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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The Supreme Court has issued its opinion in one of the most highly anticipated class action-related cases on the docket this term.  The result in Amgen Inc. v. Connecticut Retirement Plans and Trust Funds, No. 11-1085, slip op. (U.S., Feb. 27, 2013) is not surprising given the content and tone of the questioning at oral argument.  In an 6-3 opinion authored by Justice Ginsberg, the Court held that the plaintiff in a securities fraud case based on a fraud-on-the-market theory of reliance does not have to prove materiality of the fraudulent statement or omission at the class certification stage.  Because materiality is a common question capable of resolution simultaneously for the entire class, the majority reasoned, it does not have to be proven at the class certification stage.  Justices Scalia, Thomas, and Kennedy dissented.

Amgen is an important decision in the securities fraud context because it addresses the lingering question of whether any special prerequisites exist in certifying a securities fraud class action that aren’t required in certifying other types of class actions.  Like the Supreme Court’s earlier decision in Erica P. John Fund v. Halliburton Co., 131 S. Ct. 2179 (2011), Amgen will probably have an impact beyond the securities fraud context.  In the context of class certification decisions more broadly, the opinion will be almost certainly be cited as clarifying the distinction between issues impacting the elements of class certification, which must be resolved at the class certification phase, and merits issues, which can wait until trial to be resolved.

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Phoenix Attorney Shawn Aiken sent me an advance copy of a draft class action bill set to be introduced in the Arizona legislature this week.  The bill sets forth some specific requirements for class certification that are much more exacting than those required under federal Rule 23 and most state class action rules.  Some of the highlights are summarized below.  Click this link for a complete copy of the bill.

  • clear and convincing evidence would be required to justify a grant of class certification
  • orders granting class certification would have to be supported by a detailed written statement of the reasons and evidence justifying the decision
  • in assessing superiority, the court would be required to consider, among other things, “whether it is probable that the amount which may be recovered by individual class members will be large enough in relation to the expense and effort of administering the action to justify maintaining the case as a class action”
  • there would be a rebuttable presumption against class certification in cases involving claims where individual knowledge, causation, and  reliance are required elements
  • certification of a case as a class action would not relieve any class member of the requirement of proving individual injury or damages
  • class notice must include a statement of “the possible financial consequences for the class”
  • the law would expressly provide that the plaintiff would bear the initial cost of distributing notice to the class
  • appeals from orders granting or denying class certification could be taken as a matter of right the same as a final judgment, and trial court proceedings would be automatically stayed pending the appeal

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The Colorado Supreme Court’s highly anticipated rulings in four class actions were announced earlier today.  Here are links to the opinions.  I’ll have more commentary on the four decisions soon:

No. 09SC668 – Jackson v. Unocal Corp. – Judgment Reversed (class certification upheld) – Addresses the burden of proof on class certification.

 

No. 09SC1080 – Garcia v. Medved Chevrolet, Inc. Judgment Affirmed (case to be remanded to trial court to conduct rigorous analysis of class certification) – Addresses the circumstances in which the plaintiff in a fraud class action can establish that reliance, injury, and causation can be tried a class-wide basis.

 

No. 10SC77 – State Farm Mut. Auto. Ins. Co. v. Reyher  – Judgment Reversed (denial of class certification upheld) – Addresses the standards for determining whether individual issues predominate and the extent to which the court may consider the merits of a plaintiff’s claims in ruling on class certification.

 

No. 10SC214 – BP America Prod. Co. v. Patterson – Judgment Affirmed (class certification upheld) – Addresses the circumstances in which the plaintiff can prove fraudulent concealment and ignorance of facts giving rise to a claim on a common, class-wide basis.

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The audio feeds for the arguments in three of the four class-action related cases heard today by the Colorado Supreme Court are now available on the court’s website.  Here are some links:

09SC1080 Garcia v. Medved
10SC214 BP America v. Patterson
10SC77 – State Farm v Reyher

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