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Posts Tagged ‘statistical evidence’

Next week, I’ll be presenting in webinars addressing two trendy topics in class actions.

Next Tuesday, January 23, at 1:00 PM EST, Brian Troyer of Thompson Hine in Cleveland and I will be reprising a Stafford Publications webinar titled Statistics in Class Certification and at Trial: Leveraging and Attacking Statistical Evidence.  For more information and to register, please visit this link to the Strafford Publications website.

The next day, Wednesday January 24, at 1:00 PM EST, my partners Melissa Seibert, Melinda McLellan and I will be presenting a BakerHostetler client Webinar titled Emerging Biometric Data Privacy Risks.  Among other things, that webinar will address trends in consumer and employment class actions involving unauthorized use or disclosure of biometric information.  For more information and to register, please visit this link to the BakerHostetler website.

 

 

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The Supreme Court issued its decision today in Tyson Foods, Inc. v. Bouaphakeo, No. 14-1146, a case that many commentators predicted would provide an opportunity for the Court to limit or bar the use of statistical evidence as a substitute for common proof in class actions.  The majority opinion, authored by Justice Kennedy, rejected the invitation to create a “broad rule” limiting the use of statistical evidence, however.  Instead, the Court offered practical guidance on the situations in which statistical evidence may or may not be appropriate.  The relevant portion of the opinion is short and succinct, so I have quoted it in its entirety below:

[P]etitioner and various of its amici maintain that the Court should announce a broad rule against the use in class actions of what the parties call representative evidence. A categorical exclusion of that sort, however, would make little sense. A representative or statistical sample, like all evidence, is a means to establish or defend against liability. Its permissibility turns not on the form a proceeding takes—be it a class or individual action—but on the degree to which the evidence is reliable in proving or disproving the elements of the relevant cause of action. See Fed. Rules Evid. 401, 403, and 702.

It follows that the Court would reach too far were it to establish general rules governing the use of statistical evidence, or so-called representative evidence, in all class-action cases. Evidence of this type is used in various substantive realms of the law. Brief for Complex Litigation Law Professors as Amici Curiae 5–9; Brief for Economists et al. as Amici Curiae 8–10. Whether and when statistical evidence can be used to establish classwide liability will depend on the purpose for which the evidence is being introduced and on “the elements of the underlying cause of action,” Erica P. John Fund, Inc. v. Halliburton Co., 563 U. S. 804, 809 (2011).

In many cases, a representative sample is “the only practicable means to collect and present relevant data” establishing a defendant’s liability. Manual of Complex Litigation §11.493, p. 102 (4th ed. 2004). In a case where representative evidence is relevant in proving a plaintiff’s individual claim, that evidence cannot be deemed improper merely because the claim is brought on behalf of a class. To so hold would ignore the Rules Enabling Act’s pellucid instruction that use of the class device cannot “abridge . . . any substantive right.” 28 U.S.C. § 2072(b).

Those who were hoping for a rule barring statistical evidence as a proxy for common evidence in class actions will no doubt be disappointed, but Justice Kennedy’s opinion does go much further than it had to in beginning to develop standards that will govern resolution of the issue in future cases.  To summarize:

  1. There is no general rule barring the use of statistics to prove class-wide liability in a class action.
  2. The extent to which statistical evidence is allowable in a class action depends on whether the evidence is reliable in proving or disproving the elements of a relevant cause of action.
  3. Statistical evidence is admissible in a class action if it would be admissible in an individual action to prove or disprove elements of a plaintiffs’ claim.
  4. Whether statistical evidence can be used to establish class-wide liability depends on the purpose for which the evidence is being introduced and on “the elements of the underlying cause of action.”

As a final side-note, the decision in Tyson Foods does not appear to have been impacted at all by the recent death of Justice Scalia.  Only two of the eight remaining Justices, Justices Thomas and Alito, dissented.

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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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In keeping with the time-honored tradition of end-of-the-year top 10 lists, I’ve assembled my annual list of the top 10 most significant class action developments below.  Whether these are actually the top 10 most significant decisions over the past year may be subject to reasonable debate, so please feel free to add your own favorites in the comments section.

1. Certiorari denied in “moldy washer” cases – In my view, the single biggest development impacting class action practice over the past year was the Court’s decision not to take on the question of “issue certification” presented in the Sears and Whirlpool “moldy washer” cases.  This non-decision opens the door for significant litigation over whether isolated issues should be certified for class treatment even where significant individual litigation would be necessary following resolution of the class wide issues.

2. Judge Posner’s class action settlement decisions – Judge Posner wins the award for the jurist having the single biggest impact on class action practice in 2014.  In addition to the Supreme Court declining to take on review of his decision in one of the “moldy washer” cases, Butler v. Sears, Roebuck & Co., Judge Posner authored two significant (and harshly worded) decisions discussing the standards for evaluating the fairness of class action settlements, including Eubank v. Pella Corp., Nos. 13-2091, -2133, 2136, -2162, 2202 (7th Cir., June 2, 2014), and Redman v. RadioShack Corp., case number 14‐1470, 14‐1471 and 14‐1658 (7th Cir., Sept. 19, 2014).  These decisions are emblematic of a more general trend in the courts of subjecting class action settlements, especially coupon settlements, to ever-greater scrutiny.

3. Basic framework remains largely unchanged after Halliburton II – One of only three Supreme Court decisions of significance on class action issues this past year, the Court largely maintained the status quo in declining to overrule the framework for evaluating “fraud on the market” theory of reliance in securities class actions.

4. Whirlpool trial ends with victory for the defendant – Not long after the Supreme Court declined review, the first of the “issue” class cases went to trial against Whirlpool.  The trial ended in a defense verdict, although as I wrote in October, I’m not sure that’s necessarily a good thing for defendants in the long-term.

5. Court clarifies removal pleading standards in Dart Cherokee Basin Operating Co. v. Owens – In one of the Roberts Court’s most helpful class-action-related decisions, at least from a practical standpoint, the majority removed barriers to corporate defendants’ ability to remove cases under the Class Action Fairness Act (CAFA), clarifying that jurisdictional facts need only be pled, not supported by evidence, in the notice of removal.

6. California Supreme Court issues significant decision on the use of statistical evidence to support class certification – An individual state court decision has to be pretty significant to make my annual top 10 list, but I think Duran v. U.S. Bank National Association fits the bill.  The decision is one of the most comprehensive to date in addressing the potential pitfalls of reliance on statistics as a proxy for common, class wide proof.

7. Supreme Court holds in AU Optronics that consumer actions brought by state attorneys general are not “mass actions” subject to the Class Action Fairness Act – It’s probably a misnomer to call AU Optronics a “class action” case, since the issue presented was whether actions brought by state AGs on behalf of consumers were “mass actions.”  But because the case involved interpretation of CAFA, it makes this year’s list.

8. International class and collective action litigation continues to expand – Class, collective, and multi-party actions continue to expand outside of the United States and Canada.  Examples included France joining the list of Civil Law jurisdictions in Europe to enact a “class action” law, and a group action in Austria, joined by more than 25,000 litigants, challenging Facebook privacy policies.

9. Data breach class actions proliferate – High profile data breaches and hacking incidents made news, and resulted in class actions, in 2014.  From a rash of payment card breaches impacting customers of large retailers like Target and Home Depot to the more recent Sony hacking incident, data breach class action litigation shows no signs of slowing down any time soon.

10. Supreme Court grants, then dismisses, certiorari in Public Employees’ Retirement System of Mississippi, v. IndyMac MBS, avoiding a high court ruling on the question of whether statute of repose can be tolled for absent class members under the American Pipe tolling doctrine.  In what has become a trend of the past year, this is yet another missed opportunity for the Supreme Court to address a class action issues of significance.

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The California Supreme Court issued its long-awaited decision in Duran v. U.S. Bank National Association yesterday, addressing the use of statistical sampling as a way of evaluating aggregate liability and damages in a class action. Although Duran is a wage and hour case, its analysis is pertinent to the use of statistical evidence in a variety of other class action contexts.

In the opening line of his majority opinion, Justice Corrigan referred to Duran “an exceedingly rare beast” because it was a wage and hour class action that had proceeded all the way through trial to verdict.  In the trial court, the plaintiff had presented testimony from statistician Richard Drogin, who had also notably served as an expert for the plaintiffs in Walmart Stores Inc. v. Dukes.  Drogin proposed a random sampling analysis that purported to estimate the percentage of the defendant’s employees that had been misclassified for purposes of entitlement to overtime pay.  The trial court did not rely on Drogin’s analysis but instead came up with its own sampling approach, which involved pulling the names of 20 class members, hearing testimony from these witnesses along with the named plaintiffs, and then extrapolating the court’s factual findings across the entire class in order to determine the defendant’s liability.

The supreme court affirmed a decision by the Court of Appeal holding that this sampling approach violated due process and was a manifest abuse of discretion.  Generally, there were two independent reasons for the supreme court’s conclusion: 1) the use of random sampling deprived the defendant of the opportunity to present individualized evidence supporting its defenses to the claims; and 2) the sampling method adopted by the court was inherently flawed and unreliable.

Without categorically rejecting the use of statistics as a tool in managing class action litigation, the supreme court identified numerous conceptual limitations on its use.  First, “[s]tatistical methods cannot entirely substitute for common proof . . . .  There must be some glue that binds class members together apart from statistical evidence.”  So, while statistics may serve as circumstantial evidence to support a common issue–such as the existence of centralized policy or practice, they may not be used as a substitute for establishing commonality or for avoiding individualized determination of individual issues–such as by generalizing effects of a given policy or practice on large groups of claimants where the effects vary in actuality.

Second, a trial court cannot utilize statistical evidence in a way that prevents the individual adjudication of individual defenses.  Although courts are encouraged to develop innovative procedures in managing individual issues, a court cannot ignore individual issues altogether or prevent them from being decided on an individual basis.

Third, if statistical evidence is to be used as part of a litigation plan for managing complex class action, the methods to be employed should be presented, evaluated, and scrutinized at the class certification stage.  The court should not simply assume that statistical methods will permit class treatment and certify the class based on this hypothetical possibility.

Fourth, the court must ensure that the statistical method to be employed has to be reliable, based on statistically valid data, and not prone to a high margin of error.  In other words, junk science or ad hoc, rough justice are not enough.

The Duran opinion is worthy of careful study for anyone considering the use of statistics in class certification proceedings, both in the wage and hour context and in class actions more generally.  It also provides a colorful illustration of the due process and manageability problems posed by the “trial by formula” approach to class actions that the United States Supreme Court criticized in Dukes.

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I’m very excited to be speaking at a Strafford Publications CLE webinar tomorrow entitled: Statistics in Class Action Litigation: Admissibility, Expert Witnesses and Impact of Comcast v. Behrend.   The program is scheduled for June 18, 2013 at  1:00pm-2:30pm EDT.  This is the third iteration of this presentation, which has been updated to offer insights in light of the Supreme Court’s Comcast decision earlier this term.  Brian Troyer of Thompson Hine in Cleveland and Justin Hopson and Rick Preston from Hitachi Consulting in Denver will be co-presenting.  Below is a synopsis of the program.  Click here for more information and to register:

Class certification standards have become more rigorous, and the skillful use of statistical evidence is an important part of class actions. Effectively employing or challenging statistics can make a difference in winning or losing a class certification motion.

Statistical evidence is introduced through expert witness testimony, and Daubert challenges may be an effective strategy. This raises the issue of the scope of the court’s inquiry into the merits at the class certification stage.

The 2011 Wal-Mart v. Dukes Supreme Court ruling underscored the prominent role of statistical evidence in assessing the merits at the certification stage. The Court’s recent Comcast v. Behrend ruling reinforces Dukes regarding merits assessments at class certification, thus impacting the continued role of statistical evidence.

Listen as our experienced panel examines statistical evidence in certification proceedings, the impact of Comcast v. Behrend and related case law, and best practices for using statistics and cross-examining witnesses.

Outline

  1. Role of statistical evidence in support of class certification
  2. Expert testimony and Daubert analysis at class certification stage
  3. Impact of Comcast v. Berhrend and Wal-Mart v. Dukes
  4. Science of statistics and cross-examining the statistics witness

Benefits

The panel will review these and other key questions:

  • What is the impact of Comcast and Dukes upon the use of statistical analysis at class certification?
  • What strategies can counsel use to effectively cross-examine statistics witnesses?
  • What types of statistics can be introduced and what are the proper ways to utilize statistics?

Following the speaker presentations, you’ll have an opportunity to get answers to your specific questions during the interactive Q&A.

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This is the last of six posts summarizing my notes of the six presentations at the ABA’s 16th Annual Class Actions Institute held in October in Chicago.  For more on this excellent conference, see my October 31, November 5, November 6November 18, and December 3 CAB posts.

This year’s Institute was capped off by a presentation and demonstration entitled: “Preparing Early and Often,” State-of-the-Art Strategies for Managing Class Action Experts.  Andrew J. McGuiness moderated the panel, which consisted of expert economists Dr. Janet S. Netz and Dr. James Langenfeld, attorneys Mary Jane Fait and Laurie A. Novion, and U.S. District Court Judge Gerald E. Rosen.  The panel’s insightful tips were highlighted by vignettes in the form of mock examinations of the two experts. 

Daubert analysis of proposed expert testimony is required at the class certification, a question on which the Supreme Court may shed some light when it rules on Comcast v. Behrend later this term.  At the moment, circuits that require a Daubert analysis include the Fourth, Seventh, Ninth, and Eleventh Circuits.  The Sixth and Eighth Circuits have both adopted a Daubert-lite standard, while the Fifth Circuit has taken a “Daubert Maybe ” or “Daubert I don’t know” approach to the question.

The vignettes illustrated some of the key potential lines of attack on a plaintiff’s or a defendant’s expert’s opinions presented in support of or in opposition to class certification.  They include (but are not limited to): 1) whether the expert relied on a reliable dataset; 2) whether there is a formulaic basis for calculating damages; 3) whether there are any inconsistencies between the defendant’s own transactional data and outside data, such as market research data; 4) whether any individual variation in the data can be explained in a systemic way; and 5) whether a regression analysis or other analytical model is a valid way of evaluating the data or its causal connection to the defendant’s alleged misconduct.

Both the vignettes and the panelists’ observations served to reinforce how important it is for the lawyer to present an expert’s testimony in a way so that the judge understands the evidence.

One key practice tip offered by the panel was to consider using a consulting expert before turning to a testifying expert.  This way, different models or modes of analysis can be tested without fear of tainting the conclusions of the testifying expert or unnecessarily exposing the testifying expert to impeachment or cross-examination. 

However, that does not mean that it is not necessary to make full disclosure to the testifying expert about the material facts and legal issues in the case.  A common frustration that experts have with lawyers is they oftentimes fail to provide a fair and clear picture of the facts or applicable law, leading the expert to an opinion that is at odds with the facts or irrelevant to the issues in the case.  At minimum, this can put the expert in an awkward position and undermine the attorney’s client’s chances for success.  At worst, it can both lead to an adverse decision and cause undeserved and lasting damage to the expert’s professional reputation.

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