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Posts Tagged ‘rigorous analysis’

The United States Supreme Court issued its decision in Comcast Corp. v. Behrend, No. 11-864 today.  In a 5-4 decision, the Court held that the class of cable subscribers had been improperly certified.  Justice Scalia, writing for the majority, reasoned that the expert testimony offered by the plaintiff to show that antitrust damages were capable of class-wide proof addressed alleged damages that did not logically flow from the plaintiff’s theory of class-wide liability.  The majority held that the trial court had erred by refusing to consider questions concerning the expert testimony on damages that might overlap with the “merits,” while the Third Circuit had erred by accepting the plaintiffs’ contention that it had a class-wide theory of damages through expert testimony without actually scrutinizing the factual basis for that contention:

The Court of Appeals simply concluded that respondents “provided a method to measure and quantify damages on a classwide basis,” finding it unnecessary to decide “whether the methodology [was] a just and reasonable inference or speculative.” 655 F. 3d, at 206.  Under that logic, at the class-certification stage any method of measurement is acceptable so long as it can be applied classwide, no matter how arbitrary the measurements may be.  Such a proposition would reduce Rule 23(b)(3)’s predominance requirement to a nullity.

The dissenting Justices would have dismissed the writ of certiorari as having been improvidently granted.  The dissent’s criticism of the majority’s holding has more to do with the procedural posture of the case and the methodology used by the majority in reaching its factual conclusions than with the legal class certification concepts underlying the majority’s reasoning.  In particular, the dissent faulted the majority for having changed the issue on review after the conclusion of briefing and took issue with the majority’s analysis of the factual basis for the expert’s opinions.

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I’m pleased to announce that the BakerHostetler Class Action Defense Team has just released its 2012 Year-end Review of Class Actions, a joint project with the firm’s Employment Class Actions, Antitrust, and Data Privacy practice teams.  See below for a synopsis of the project.  Click the link above to access a copy of the report itself:

We are pleased to share with you the BakerHostetler 2012 Year-end Review of Class Actions, which offers a summary of some of the key developments in class action litigation during the past year. Class action litigation continues to persist in all areas of civil litigation despite the Supreme Court’s 2011 decisions in AT&T Mobility v. Concepcion and in Wal-Mart Stores, Inc. v. Dukes, which were seen by many commentators as marking the beginning of the end of class actions as we know them. But while the Supreme Court’s 2011 decisions have had a significant impact on class action litigation, they have not brought about its demise and are not likely to do so anytime soon. In the last two years, we’ve seen landmark decisions and the addition of important judicial gloss to those decisions. 2013 will be no different as the Supreme Court is set to weigh in on a series of key cases this spring.

We hope you find this Review a useful tool as you move forward into the new year. This comprehensive analysis of last year’s developments in class action procedure and jurisdiction, as well as developments by subject matter will hopefully provide context and insight as you look ahead to 2013’s expected trends in class action law, including the proliferation of privacy class action litigation and class action litigation relating to the LIBOR rate-fixing scandal.

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Ever since the U.S. Supreme Court issued its decisions in Smith v. Bayer and Wal-Mart Stores, Inc. v. Dukes, I have wondered aloud whether we would start to see a significant divergence between the standards applicable to class certification in the state and federal courts.  (See the Parting Thoughts Section of this August 31 SCOTUSBlog Post).  My home state of Colorado has been the first to end this speculation, adopting a decidedly more liberal standard for class certification in its decision yesterday in Jackson v. Unocal Corp. than the standards discussed in Dukes and many other lower federal court decisions. 

The main holding of the Colorado Supreme Court’s decision in Jackson can be summarized with the court’s statement that:

A trial court must conduct a rigorous analysis of the evidence and find to its satisfaction that each C.R.C.P. 23 requirement is established.

Jackson, Slip Op. at 18.  At first glance, this statement may not seem out of step with the “rigorous analysis” standard commonly recognized by the federal courts.  However, the majority’s intentional use of the phrase “to its satisfaction” rather than “by a preponderance of the evidence” makes the Colorado standard a potentially far less exacting hurdle.  A large portion of Justice Martinez’s majority opinion is dedicated to explaining why the court chose to make the class certification decision a matter of pure judicial discretion by the trial court rather than a matter of evidentiary proof.  The majority opinion makes reference no less than four times to the state’s “policy of favoring the maintenance of class actions” and juxtaposes this policy against a federal policy that the majority characterizes as “limiting class actions.” 

Also key to the majority’s analysis was the language of Colorado’s rule 23 allowing the court to make a “conditional” class certification order, language that has recently been removed from the federal rule.  Because certification can be tentatively granted and later revoked by the trial court in Colorado, the court reasoned, the applicable evidentiary standard should be more flexible and less definitive than the “preponderance” of the evidence standard applied in most federal courts, where (the Jackson court reasoned) the rule requires a single class certification decision.

The majority addressed two other issues that are closely related to the standard of review.  The first was whether a trial court may resolve factual disputes that overlap with the merits of the case.  On that issue, the majority reached the relatively uncontroversial conclusion that a court may consider disputes about facts that overlap with the merits, but “only to the extent necessary to satisfy itself that the requirements of C.R.C.P. 23 have been met.”  Slip op. at 27.   

The second issue was whether the trial court should resolve expert witness disputes in reaching its determination on class certification.  On this issue, the court’s holding was nuanced.  Although it recognized that the trial court must evaluate the competing experts’ opinions in order to determine whether the evidence at trial can be presented in a way to resolve the class claims through a common set of facts, the majority held that a trial court should not rule on the admissibility of the plaintiffs’ expert’s testimony at the class certification phase.  The majority again recognized that this holding was contrary to the holdings of several federal court decisions, but it reasoned that a different standard was justified under the Colorado rule because a trial court had the power to reconsider a preliminary certification order following a pretrial Shreck (the Colorado equivalent of Daubert, not to be confused with Shrek, the surly but loveable ogre) hearing on the admissibility of a plaintiffs’ expert’s testimony.  See id. at 31-32.

A strongly-worded dissent from Justice Eid, who was joined by Justice Rice, criticized the decision by stating, in summary, that:

the majority’s standardless approach makes class certification in Colorado essentially unreviewable by appellate courts and raises serious procedural due process concerns.

Slip Op. at 1 (Eid, J., dissenting).  Justice Eid’s dissent contains a wealth ammunition for academics, commentators, and the courts of other jurisdictions to question the majority’s reasoning.  But alas, for litigants in Colorado, it does not have the force of law.  So, rather than discuss it in depth, I simply commend it to your reading.

There are a host of questions that arise out of Jackson that will likely be the subject of future litigation in the Colorado courts, and I’ll address a few of them now.  However, I’ll apply the Colorado Supreme Court’s class certification standard to the following remarks by saying that they are preliminary and tentative and subject to later reconsideration as the record develops.

Does the Jackson decision mean that trial courts in Colorado should take a “certify first, ask questions later” approach to the certification question?  

This is a position that any party seeking class certification will likely take in the wake of Jackson.  However, a review of all four companion cases decided by the Colorado Supreme Court on Monday makes clear that this is not a permissible approach.  Jackson vests wide discretion in the trial court to grant or deny certification depending on whether the class certification elements are met to the court’s satisfaction, but it also requires the trial court to consider evidence presented by both sides in analyzing whether class treatment is appropriate.  These conclusions are reflected by the results in State Farm Mutual Automobile Insurance Co. v. Reyher, in which the court applied its new standard and held that a trial court had acted within its discretion in denying class certification after a rigorous analysis, and Garcia v. Medved Chevrolet, Inc., in which it determined that the trial court had erred by granting class certification without taking into consideration the evidence presented by the defendant showing that individual questions would predominate.

Is the “rigorous analysis” standard meaningless in light of the trial court’s vast discretion under Jackson?

 Justice Eid’s dissent argues that the majority’s decision renders the “rigorous analysis” requirement a purely procedural requirement.  In other words, as long as the trial court goes through all the motions, the court still has relatively unfettered discretion to grant or deny certification.  This may be true as an analytical matter, but as a practical matter, performing the “rigorous analysis” requires the trial judge to think critically about how the trial is actually going to be conducted.  It also prevents the trial judge from glossing over what may turn out to be insurmountable practical problems in fairly adjudicating the case through common, class-wide evidence.  Thus, even if a “rigorous analysis” is a purely procedural requirement, that does not mean that it will have no impact on the outcome of class certification motions.

Has the Colorado Supreme Court resurrected the pre-Dukes misinterpretation of Eisen as prohibiting any analysis of the merits of the case?

That the answer to this question is no may not be completely clear from the majority’s opinion in Jackson itself, but it becomes clear when Jackson is read in combination with Justice Martinez’s companion opinion in Reyher.  While, curiously, the majority opinion in Jackson makes no reference to Dukes, the opinion in Reyher cites Dukes approvingly in holding that a trial court cannot simply accept the plaintiff’s allegations as true.  The line that can’t be crossed is that the trial court cannot prejudge the merits, a conclusion that is consistent with the Supreme Court’s recent ruling in Erica P. John Fund, Inc. v. Halliburton Co.

Is class certification now effectively unreviewable in the Colorado appellate courts?

The widely disparate outcomes in the three companion cases decided along with Jackson reflect that appellate review will still have a function after Jackson.  An appellate court may clearly find 1) that the trial court conducted a rigorous analysis of the evidence and acted within its discretion in either granting (Jackson, Patterson) or denying (Reyher) class certification; or 2) that the trial court failed to conduct a rigorous analysis of the evidence and therefore the case must be remanded (Garcia).   What is less clear is whether there ever going to be circumstances in which an appellate court could find that a trial court performed a rigorous analysis but abused its discretion in deciding the outcome of the class certification motion, and whether, if so, the appellate court could dictate the result of the class certification motion rather than remanding that decision to the trial court.

What are the practical implications of Jackson?

There many potential practical implications of the Jackson decision.  First, the standard in Colorado is clearly less stringent than the federal court standard.  This raises the prospect that plaintiffs will view Colorado as a favorable forum for class action litigation, and it will almost certainly raise the stakes in battles over forum selection and federal jurisdiction.  Moreover, given the trial court judge’s broad discretion over the class certification, the particular leanings and predispositions of the trial court judge become pivotal in the likely success or failure of a class action.

Second, the court’s emphasis on the tentative nature of class certification decisions under Colorado Rule 23 means that even once they are certified, class actions in Colorado are likely to be subjected to repeated efforts at decertification as the case progresses.

Third, the emphasis on the “rigorous analysis” standard increases the likelihood that, despite the lack of a clear standard for resolving the issue, class certification will necessitate a mini-trial involving the presentation of live witnesses and a fully-developed record, likely increasing the cost of discovery and the class certification process itself.

On the other hand, none of these potential impacts would be a drastic change from the way that class actions are already being litigated in the Colorado Courts.  Parties already fight over removal and forum selection, courts already conduct evidentiary hearings on class certification motions, and defendants already make repeated efforts at decertifying a class.  Thus, the legacy of  Jackson may ultimately be merely to validate the existing customs and practices for litigating  class actions in Colorado.

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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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Along with leading Colorado Employment attorney Todd J. McNamara, I’ll be presenting at a breakfast seminar at the CBA-CLE next Tuesday with the (hopefully) self-explanatory title: Wal-Mart v. Dukes: Reshaping Class Certification.   The particulars follow below.  Hope to see you there!

When:

July 12, 2011 8:30 AM – 9:30 AM

Where:

CLECI Large Classroom
1900 Grant Street, Suite 300
Denver CO 80203
(303) 860-0608

Credits:

General credits: 1.00

Prices

CBA Member $59.00
CBA Labor & Employment Section Member $29.00
CBA Litigation Section Member $29.00
Non Member $69.00
 
July 2011
 
Wal-Mart v. Dukes: Reshaping Class CertificationLIVE IN DENVER
 
 
Program Description:
 
When it issued its decision in Wal-Mart Stores, Inc. v. Dukes, the Supreme Court did much more than simply end one of the largest class action suits in American history. It also set a host of new ground rules for federal courts to evaluate class certification, both in employment discrimination cases and in other types of class actions. This program will discuss the significant potential impacts of this landmark decision on a host of issues, including 1) evaluation of merits issues at the class certification stage; 2) the potentially broadened scope of the commonality element of FRCP 23(a); 3) the standards for evaluating expert testimony at the class certification stage; 4) the threshold standard needed to establish “common proof” of an employment or other business practice; 5) the use of statistical evidence in support of class certification; and 6) the standards for adjudicating claims for monetary relief under FRCP 23(b)(2). The program will examine what the Court had to say about these and other topics, and it will also explore the questions that remain unanswered following the decision.
 
Presented by Paul G. Karlsgodt, Esq. and Todd J. McNamara, Esq.
 
Agenda:
8:00 am – 8:30 am Registration
8:30 am – 9:30 am Program (Continental Breakfast Provided)
 
 
Faculty:
 
Paul G. Karlsgodt, Esq.
Baker Hostetler
 
Paul Karlsgodt is a litigation partner whose practice emphasizes class action defense and other complex commercial litigation. Mr. Karlsgodt has represented insurance companies and other FORTUNE 500 companies in numerous nationwide and statewide consumer class action lawsuits and related litigation. He has represented clients in class action lawsuits involving sales and marketing practices, insurance coverage, claims adjustment practices, corporate securities, retailer/dealer disputes, employment and taxation.
 
Mr. Karlsgodt is editor and primary contributor to the legal blog, http://www.ClassActionBlawg.com, which covers a variety of class action-related issues, including decisions, trends, best practices, news and reform, both in the U.S. and throughout the world. He also founded and served as the first Chair of the Class Actions, Derivative Suits and Mass Torts Subsection of the Litigation Section of the Colorado Bar Association. He remains an active member of the Subsection.
 
 
Todd J. McNamara, Esq.
McNamara Roseman & Kazmierski LLP
 
 
Todd McNamara opened his own firm in 1995 and limits his practice exclusively to employment law matters. Mr. McNamara was lead private class counsel in Wilkerson, et al., v. Martin-Marietta, the largest age discrimination claim brought within the State of Colorado, which settled for a reported $7.6 million. Mr. McNamara secured the first race discrimination verdict in the United States against a real estate franchise for failure to award a sales agency to an African-American in Tyler v. ReMax. Most recently, Mr. McNamara, together with class cocounsel, settled a $3.85 million disability discrimination case against the United States Postal Services.
 
Todd has previously served as co-chair of the Colorado Bar Association Labor Law Committee, and is a member of the National Employment Lawyers Association. He serves as an arbitrator and mediator for the American Arbitration Association Employment Panel. He is co-editor of FederalEmployment Jury Instructions and has just recently completed a seventh supplement to that publication, which is used throughout the United States by both lawyers and judges. He is a co-chapter editor with the Practitioners Guide to Colorado Employment Law and has published a number of other articles on employment law issues in both Trial Talk and The Colorado Lawyer. Todd is a Fellow of The College of Labor and Employment Lawyers, one of approximately only 20 in Colorado.

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Many commentators correctly that the decision in Wal-Mart Stores, Inc. v. Dukes would be favorable to business interests.  However, unlike the Court’s earlier decision in AT&T Mobility v. Concepcion, the decision does not necessarily threaten to sound a death knell for class actions or even a particular category of class actions.  Instead, the decision merely clarifies the standards on which future class actions are to be evaluated in the federal courts, but it does so in a way that is likely to impact class actions in many areas of the law outside of the employment law context.  Here are some of the key issues on which the opinion will undoubtedly be cited in the future, and some thoughts on the potential impact of the decision on each issue.

1) Standard of review  – The majority’s decision clarifies a long-standing misconception about the ability of a federal court to consider questions relating to the merits of a case in the class certification phase.  For more than 30 years, plaintiffs’ counsel and many courts have cited the Court’s opinion in Eisen v. Carlisle & Jacquelin, 417 U.S. 156 (1974) as prohibiting any examination of the plaintiffs’ claims on the merits at the class certification phase.  Consistent with the majority trend in the lower federal courts, the Supreme Court’s decision in Wal-Mart Stores, Inc. confirms that a court should consider and resolve any issues of fact that are necessary to determine whether one or more elements of Rule 23 are satisfied, regardless of whether those issues may overlap or be identical to one or more issues to be decided in ruling on the merits of the plaintiff’s claims.

2) Evaluation of Expert Testimony – The majority decision makes clear that it is appropriate for a federal court to conduct a Daubert analysis to consider the reliability and helpfulness of expert witness opinions at the class certification phase.  It is no longer sufficient for a plaintiff to present expert testimony and then argue that the Court may find that testimony reliable at some later point in the proceedings.  Again, in keeping with te trend among the federal circuit courts, the Court’s analysis in Wal-mart Stores, Inc. makes clear that the reliability and relevance of expert testimony proposed as “common proof” should be evaluated before granting class certification.

3) Use of Statistical Evidence in Support of Class Certification – The majority’s decision leaves open the possibility that statistical evidence might be used in establishing the existence of common proof in certain cases, but it sets a high standard for when proffered statistical evidence can be considered as adequate proof of the existence of “common issue.”  Significantly, Part III of Justice Scalia’s opinion, which was joined by all 9 justices, disapproves of the “Trial by Formula” approach to class actions, in which a sample of claims is tried on the merits, and the results of that sample are then applied proportionally to the claims of the entire class.

4) Certification of Claims Seeking Monetary Relief Under FRCP 23(b)(2) – This is perhaps the most uncontroversial aspect of the opinion in that part of the unanimous holding of the Court.  The Court’s holding is also straightforward, at least conceptually: claims for monetary relief may not be certified under FRCP 23(b)(2) unless they are merely incidental to injunctive or declaratory relief being requested on behalf of the class as a whole.  However, the devil may be in the details, as future courts (especially outside the employment law context) will be left with the task of defining what monetary relief is “incidental” to injunctive or declaratory relief and what is not.

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Matt Masich of Law Week Colorado has a good article out today previewing oral arguments scheduled for tomorrow in four class-action related cases.  The outcome of these cases could have a dramatic effect on class action practice in the state. 

The issues to be considered include the proper standard for reviewing class certification, the burden of proof on class certificeation, the level of scrutiny to be given to expert testimony at the class certification stage, the extent to which a plaintiff must prove that all class members suffered injury to justify class treatment, and whether reliance and causation can be presumed in putative class actions seeking damages for fraud.

Here is the schedule of the oral arguments to be held tomorrow, March 1, 2011, in the four cases, along with the issues presented in each case:

9:00 a.m., State Farm v. Reyher, No. 10SC77 (see the Court of Appeals’ Opinion)

Whether the court of appeals erred in reversing the trial court’s denial of class certification under C.R.C.P. 23.

10:00 a.m., Garcia v. Medved Chevrolet, No. 09SC1080 (see the Court of Appeals’ opinion)

Whether the court of appeals erred in reversing the trial court’s certification of a class.

1:30 p.m., BP America v. Patterson, No. 10SC214 (See the Court of Appeals’ opinion)

Whether the court of appeals erred in affirming the trial court’s certification of a class.

2:30 p.m., Jackson v. Unocal Corp., No. 09SC668 (See the Court of Appeals’ opinion)

1) Whether the court of appeals erred by creating a “preponderance of the evidence” burden of proof in the certification of a class pursuant to C.R.C.P. 23.

2) Whether the court of appeals erred by requiring the trial court to assess the credibility of expert testimony at the class certification stage.

3) Whether the court of appeals’ construction of C.R.C.P. 23 improperly invaded the trial court’s case management discretion.

The oral argument in each case is scheduled for one hour.

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