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Posts Tagged ‘expert’

The October 2015 United States Supreme Court Term is already well underway, and there are several cases on the docket that could have a significant impact on class action practice.  Here is a summary of the three cases this term that I think could have the biggest impact on class action practice going forward:

Campbell-Ewald Co. v. Gomez, No. 14-857

The Campbell-Ewald case addresses the tactic known as “picking-off” named plaintiffs in class actions, and deals with the question whether an offer of judgment that would provide a named plaintiff complete relief is sufficient to moot the plaintiffs’ claim, even if it is not accepted.  The case follows the Court’s 2013 decision in Genesis Healthcare v. Symczyk, where the majority opinion assumed, without deciding, that an offer of judgment had mooted the named plaintiffs’ claim in an FLSA collective action, based on a finding that the issue had been waived below.

Oral argument in Campbell-Ewald was held in October.  Justices Alito, Scalia, and Chief Justice Roberts all displayed open hostility to the plaintiffs’ position that she should be allowed to litigate the case even after the defendant had offered everything she hoped to achieve for herself in the case.  Despite these views, however, it remains to be seen whether a majority of the court will ultimately hold that any unaccepted offer of settlement is sufficient to actually moot the plaintiffs’ claim under Article III, or whether the decision will fall short of reaching that sweeping question.  Some of the questions posed by likely swing voter, Justice Kennedy, suggest that he agrees with his conservative colleagues that a litigant who has been offered full relief should not be permitted to proceed with the case, but other questions reflected a reluctance to treat an unaccepted offer the same as a judgment.  This suggests that the Court’s ultimate decision could turn on a more technical procedural analysis rather than the broader and more abstract question of whether a controversy can ever exist following an offer of full relief, but of course the questions posed during oral argument do not always signal the Court’s ultimate analysis.

When the Supreme Court originally granted cert in Campbell-Ewald, there appeared to be a split in the circuits on this question, but since then, the circuits have become aligned with the view that an unaccepted offer in a proposed class action does not moot the named plaintiffs’ claims.  A contrary ruling by the Supreme Court would revive a powerful tool that defendants could wield to effectively preempt many types of consumer class actions, especially those seeking statutory damages for small individual amounts.

Spokeo, Inc. v. Robins, No. 13-1339

Spokeo has been hailed as a case with the potential to end “no-injury” class actions.  Ostensibly at issue is whether Congress has the power to enact legislation that gives a private plaintiff the right to seek statutory damages despite the lack of any concrete injury.  A decision could therefore potentially have a significant impact on class actions brought under a variety of federal statutes that provide a private right of action to recover statutory damages upon proof of a violation, one that goes beyond the Fair Credit Reporting Act, the statute at issue in Spokeo.

However, during today’s oral argument, much of the questioning focused on whether the named plaintiff had, in fact, suffered an injury by alleging that false information had been published on his credit report, and the extent to which Congress actually intended to limit the private right of action under the Fair Credit Reporting Act to persons who could show an actual injury.  It seems likely that the outcome of the case will turn on the majority’s view of those two factors.

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

Tyson Foods offers the Court an opportunity to further elaborate on the concept of “trial by formula”, discussed in Justice Scalia’s 2011 opinion in Wal-Mart Stores, Inc. v. Dukes, as well as the standards governing expert testimony at the class certification phase, which the Court touched upon but did not  ultimately address directly in both Wal-Mart and again in the 2013 decision in Comcast Corp. v. Behrend.  It also raises the question whether it is ever proper to certify a damages class that includes individual plaintiffs that undisputedly lack any injury or damages.

Specifically, the Court granted certiorari on the following two questions:

I. Whether differences among individual class members may be ignored and a class action certified under Federal Rule of Civil Procedure 23(b)(3), or a collective action certified under the Fair Labor Standards Act, where liability and damages will be determined with statistical techniques that presume all class members are identical to the average observed in a sample; and

II. Whether a class action may be certified or maintained under Rule 23(b)(3), or a collective action certified or maintained under the Fair Labor Standards Act, when the class contains hundreds of members who were not injured and have no legal right to any damages.

Oral argument in Tyson Foods is set for next Monday, November 10.

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The Class Actions, Mass Torts and Derivative Suits Subcommittee of the Colorado Bar Association, now ably chaired by my BakerHostetler partner, Casie Collignon, held its first CLE luncheon of the year this past Friday.  The program, United States Supreme Court vs. Class Actions in 2013, featured excellent commentary about the Supreme Court’s 2013 class action decisions by The Honorable Marcia Krieger, Chief Judge, U.S. District Court for the District of Colorado, Seth Katz of Burg Simpson, and John Fitzpatrick of Wheeler Trigg O’Donnell.  Here are just a few of the many insightful observations made by each of the speakers:

Judge Krieger opened by observing that none of the cases this term have been a surprise from the standpoint of what a trial court judge would have expected given existing law.  Amgen was predictable because the question of materiality in a securities fraud case is unquestionably a common issue, so it is not surprising that it is a question for trial, not a prerequisite for class certification.  Standard Fire can be viewed as a straightforward application of agency law: a plaintiff cannot bind a class of people that he or she doesn’t yet represent.  Comcast exemplifies the importance of examining the plaintiffs’ theory of liability and the relationship to the theory of loss.  Damages are not the same as loss.  The theory by which the plaintiff establishes loss determines the measure of damages.

When asked to identify any trends that she has been seeing in class actions recently, Judge Krieger identified issue certification as a key trend.  She has been seeing more situations where the factual issues may be individualized but there are common legal issues that can be resolved classwide.  She noted that she has been inclined to grant partial certification limited to the common legal issue(s) in that situation.

From the plaintiffs’ perspective, Katz agreed that the outcome of Standard Fire was not surprising, and he went as far as to say that the outcome was correct, noting that plaintiffs’ attorneys shouldn’t be afraid of the federal courts.  Although the holding of Amgen was favorable to plaintiffs, Katz noted an issue that should be of great concern to plaintiffs, and that is the commentary from the conservative wing of the court suggesting that they might be willing to revisit the fraud-on-the-market presumption adopted in Basic Inc. v. Levinson.  Katz sees the potential of a 4-4 split on that issue, with Chief Justice Roberts being the deciding vote.  He predicts market studies being commissioned by both sides over the coming years to demonstrate or disprove the continued efficiency of the markets.

Comcast, Katz noted, caused a collective sigh of relief in the plaintiffs’ bar because it does not go as far as many would have feared by requiring Daubert hearings at the class certification phase.  He noted that one positive impact for plaintiffs arising from the “death of Eisen” (the rejection in decisions like Wal-Mart and Comcast of the idea that merits questions were off-limits at the class certification phase) is that it gives plaintiffs’ counsel an opportunity to obtain merits discovery much earlier in a case than was allowed previously.  On the other hand, Katz expressed fear about the possibility that the Court is trying to raise the bar for plaintiffs with a subtle change in the language about what common proof is necessary on the issue of damages.  Where earlier decisions required that damages be “susceptible to classwide proof,” the Comcast majority phrased the standard as requiring the plaintiff to “prove classwide damages.”  Katz predicts that defendants will argue that this means damages must be uniform, as opposed to simply being susceptible to formulaic calculation.  He noted, however, that the few lower courts that have interpreted Comcast so far have rejected a broad application of the decision.

Fitzpatrick combined philosophical commentary about the evolution of class actions with some practical tips for defense lawyers.  Standard Fire, he argued, is proof that judicial hellholes still exist.  He pointed to Amgen as an example of the dangers of accepting conventional wisdom, pointing out that the outcome in that case might well have been different if the defendants had stipulated to the existence of an efficient market.

Comcast, Fitzpatrick said, provides an opportunity for defendants to prevail at the class certification stage by discrediting a plaintiffs’ expert.  Focus not just on the opinions themselves, he suggested, but also on 1) the existence of bias; 2) the expert’s credentials, and 3) flaws in the methodology.  Scour the country for transcripts about the plaintiffs’ experts.  Look at misstatements and exaggerations in the expert’s CV.  Make sure you find and read all of their prior statements in books, media, and transcripts.  Just as important, Fitzpatrick reminded defense practitioners, is the make sure to prepare your own experts for class certification.

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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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I’m embarrassingly late in posting a link to a terrific article from Steptoe & Johnson Partner Jennifer Quinn-Barabanov entitled Has Dukes Killed Medical Monitoring?  The article, published in the November 2011 Issue of DRI’s For the Defense Magazine, explores the potential impact of the Supreme Court’s decision Dukes in defending against class certification of product liability claims that seek as a remedy medical monitoring of class members who were exposed to an allegedly harmful product.

I highly recommend Quinn-Barabanov’s article for those of you who may have missed it when it came out in November.  The article is a must-read for anyone facing (or prosecuting) a medical monitoring class action.

It also makes at least two key contributions that are independent of the medical monitoring context.  First, it offers an analysis of the potential application of various aspects of the Wal-mart Stores Inc. v. Dukes decision outside of the employment discrimination context, including the arguably heightened commonality analysis and the admissibility of expert testimony in support of class certification.  Second, it is a good primer on the possible distinctions between truly injunctive relief, which still may be the basis for a Rule 23(b)(2) class action, and merely equitable relief incidental to a claim for monetary relief, which the Dukes Court held cannot support class certification under Rule 23(b)(2).

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