Over the past few years, the Supreme Court has heard several cases involving class action procedure, including China Agritech, Inc. v. Resh; CalPERS v. ANZ Securities, Inc.; and Microsoft Corp. v. Baker. Today, the Supreme Court continued this trend, granting review to decide whether Rule 23(f)’s 14-day deadline to file a petition for permission to appeal an order granting or denying class certification is subject to equitable exceptions. Nutraceutical Corp. v. Lambert, No. 17-1094.
The Supreme Court will decide before the end of this Term whether to hear any or all of four important cases that raise recurring questions of class action law that have sharply divided the lower courts. These cases address questions that we have blogged about before (e.g., here and here): whether a class full of uninjured members may be certified, and whether plaintiffs may rely on experts and statistics to gloss over individualized differences among class members in order to prove their class claims and damages. These questions strike at the heart of what it means to be a “class,” because class actions generally must be litigated using common evidence to show that each class member has been harmed.
There seem to be two prevailing conceptions of class actions. In one view, a class action is a way of determining many similar claims at once by evaluating common evidence that reliably establishes liability (and lays a ground work for efficiently calculating damages) for each class member. That is, the class device produces the same results as individual actions would, but more efficiently. In the other view—one we consider misguided—a “class” of plaintiffs complaining about similar conduct can have their claims determined through statistical sampling even if no common evidence will provide a common answer to common factual or legal questions. Instead, this theory holds, the results of mini-trials can simply be extrapolated to the entire class, even if individual results would vary widely.
Last week, the Ninth Circuit took a step deeper into the second camp in Jimenez v. Allstate Insurance Co. (pdf), delivering a ringing endorsement of statistical sampling as a way to establish liability as well as damages.
Can you have a class action if you can’t figure out who’s in the proposed class? According to many in the plaintiffs’ bar, the answer is “yes.” But as we have discussed in prior blog posts, there is an emerging consensus to the contrary. Most courts agree that plaintiffs in consumer class actions have the burden of proving that members of the putative class can be identified (i.e., that the class is ascertainable). And most of those courts have held that it is not sufficient for plaintiffs to rely upon affidavits by would-be class members who attest that they fall within the class definition.
The Third Circuit adopted both of those principles last fall in Carrera v. Bayer Corp., 727 F.3d 300 (3d Cir. 2013). As we have reported, that court recently denied en banc review over objections by plaintiffs’ lawyers that taking ascertainability seriously would render many class actions unsustainable.
As it turns out, a growing number of other courts are following Carrera’s lead in holding that classes whose membership cannot be determined flunk the ascertainability requirement and therefore cannot be certified.
For example, in Karhu v. Vital Pharmaceuticals, Inc. (pdf) (S.D. Fla. Mar. 3, 2014), the court refused to certify a putative class of purchasers of weight-loss supplements. The court explained that the plaintiffs had failed to show any objective, administratively feasible method of ascertaining the identities of class members. Class members could not be identified from the defendants’ records because the products were sold to retailers, and defendants therefore had no database of end-user consumers. The plaintiffs could not show that the purchasers could be identified from the records of third-party retailers. And, of course, few if any purchasers would have retained receipts from such purchases years after the fact.
The plaintiffs argued that class members could simply submit affidavits confirming that they bought the supplements at issue during the relevant time period. But the court recognized that this process would be extremely unwieldy, and would inevitably devolve into “a series of mini-trials” over the circumstances of particular purchases that would “defeat the purpose of class action treatment.” And the court added—citing Carrera—that simply exempting the affidavits from individualized challenges would lead to fraudulent claims, which “could dilute the recovery of genuine class members.”
Similarly, a federal court recently decertified a California class action—in part on ascertainability grounds— in In re Pom Wonderful LLC Marketing and Sales Practices Litigation (pdf) (C.D. Cal. Mar. 25, 2014). The plaintiffs alleged that Pom Wonderful had misled a class of California customers with purportedly false or misleading statements in advertising about the “various health benefits” of “certain Pom juice products.” But the court held that class members could not be identified, and therefore that no “ascertainable class exists.” In reaching that conclusion, the court provided some useful guidance on how ascertainability works:
- “Class actions, and consumer class actions in particular, each fall on a continuum of ascertainability dependent upon the facts of the particular case or product.”
- “While no single factor is dispositive, relevant considerations include the price of the product, the range of potential or intended uses of a product, and the availability of purchase records.”
- “In situations where purported class members purchase an inexpensive product for a variety of reasons, and are unlikely to retain receipts or other transaction records, class actions may present such daunting administrative challenges that class treatment is not feasible.”
Applying these principles, the court readily concluded that the proposed class in Pom Wonderful “falls well towards the unascertainable end of the spectrum.” That was so for multiple reasons, including that (i) “millions of consumers paid only a few dollars per bottle”; (ii) “[f]ew, if any consumers, are likely to have retained receipts”; (iii) “[n]o bottle, label, or package included any of the alleged misrepresentations” (as they were all contained in advertising); and (iv) “consumer motivations” for purchasing Pom juice “likely vary greatly, and could include a wide array of sentiments such as ‘I was thirsty,’ ‘I wanted to try something new,’ ‘I like the color,’ ‘It mixes well with other beverages,’ or even, ‘I like the taste,’ or, as Plaintiffs contend, ‘It prevents prostate cancer.’” As a result, “there is no way to reliably determine who purchased [the challenged] products or when they did so.”
(The decision also contains an extensive discussion of why the plaintiffs’ proposed damages models failed to satisfy the predominance requirement under Comcast Corp. v. Behrend.)
Carrera, Karhu, and Pom Wonderful should be helpful for defendants who oppose class certification when the proposed class consists of purchasers of consumer products for which there are no customer lists. In these cases, plaintiffs often have no real plan for satisfying the ascertainability requirement other than by inviting a show of hands—via barebones affidavits—from the (relatively few) individuals who might want a small payout from a potential class fund.
In response, defendants routinely (and appropriately) argue that affidavits are not good enough, because due process entitles them to challenge an individual’s claim that he or she purchased a given product, such as by cross examination at a trial. Recognizing that the right to individualized cross-examination would render a trial unmanageable—making class certification inappropriate—plaintiffs sometimes argue that fraudulent claims can be winnowed out through the use of a claims administrator.
That approach strikes us as improper. To be sure, in class action settlements, the parties often agree that a claims administrator may make judgments to determine whether a claimant truly is a class member who qualifies for benefits and to assess whether any submitted claims are fraudulent. But that agreement reflects one of the compromises of settling a case, in which defendants trade away the right to cross-examine each putative class member in exchange for certainty, finality, and—most significantly—a substantial discount on the potential liability claimed by the plaintiff and his or her counsel.
By contrast, in a litigated case, defendants’ due process rights cannot be so easily jettisoned. In the absence of party agreement, how can it be that the administrative determinations of an outside third party serve as an adequate substitute for a defendant’s right to cross-examine its accusers and for judicial resolution of factual disputes? (We leave to one side whether assessments by claims administrators would be accurate, but commend to our readers an article by Alison Frankel discussing an interesting amicus brief on the subject that was filed in Carrera.)
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In short, when it comes to ascertainability, the list of questions goes on and on. Defendants targeted by consumer class actions where customer lists are not readily available may wish to insist upon answers.
At its conference on January 10, the Supreme Court can get serious about fixing consumer class actions. The Justices should take up that challenge, because it will consider two certiorari petitions that seek review of class certifications—involving alleged “moldy odors” in high-tech front loading washing machines—that are prime examples of what has gone wrong with the lower federal courts’ application of Rule 23. We’re somewhat biased: along with our partner Steve Shapiro and our co-counsel at Wheeler Trigg, we represent the petitioners in Whirlpool Corporation v. Glazer, No. 13-431, and Sears, Roebuck & Co. v. Butler, No. 13-430; copies of our cert petitions are available here, and our reply is available here (pdf).
But we and our clients are by no means alone in thinking that these cases present excellent vehicles for the Justices to bring more rigor and fairness to the application of Rule 23(a) and (b)(3). A bevy of amici has filed briefs in support of certiorari, explaining to the Court why the technology industry, appliance and other manufacturers, retailers, and U.S. businesses in general need the Court to intervene. Commentators too have seen in these cases the chance for the Supreme Court to clean up the class action mess. See, for example:
- this op-ed in the Wall Street Journal by Governor John Engler, President of the Business Roundtable (subscription required);
- this editorial in the Washington Examiner;
- this article in the New York Law Journal by Michael Hoenig (subscription required); and
- this piece by Desmond Hogan and Erica Songer in InsideCounsel.
In Whirlpool, plaintiffs allege that Whirlpool front-loading washing machines have a design defect that makes it possible for the machines to produce moldy odors. In Sears, the plaintiffs allege that Kenmore-brand washers made by Whirlpool have the same design defect and that some also have a manufacturing defect that on occasion may produce a false error code. In both cases, the alleged odor and error-code issues have manifested for only a tiny portion of purchasers—less than five percent according to Whirlpool and Sears service records and independent surveys by Consumer Reports. Yet the Sixth Circuit in Whirlpool approved certification of a class of all Ohio residents who bought 21 differently designed washing machine models. And the Seventh Circuit did the same in Sears for a class of buyers of 27 different models in six different States, the relevant laws of which vary. Over the course of the class period not only did the design of the machines change, but so did the instructions given to consumers to protect against any moldy odors. Individual owners used their machines differently, cared for them differently, and operated them in varied conditions.
As we explain in our briefs, both courts of appeals ignored a raft of individualized issues that make it impossible for plaintiffs to satisfy the class-certification requirement that common issues predominate over individual ones. Only class-member-specific inquiries could determine the crucial questions of whether any particular buyer experienced the alleged issues with moldy odors or error codes at all, whether the alleged defect or other factors caused any such issues, whether the buyer followed care and use instructions, whether problems manifested during the warranty period, whether the buyer requested and received adequate warranty service, and whether any damages resulted from any alleged defect (among other questions). And the fact that the certified classes are filled with uninjured buyers fatally undermines constitutional standing to litigate the class claims and threatens to unfairly dilute the rights of the few class members who may actually have injuries.
The harms caused by the decisions of the Sixth and Seventh Circuits are not limited to the violence those decisions have done to Rule 23’s requirements. Indeed, the adverse social and economic consequences of certification of these sorts of cases cannot be overstated. The introduction of front-loading washers reflected years of innovation to improve water- and electrical-efficiency in response to regulatory mandates. Independent testing shows that front-loading washers perform very well both on those measures and on cleaning capability. Yet every manufacturer of front-loading washers is now the subject of class actions across the Nation.
Massive class action litigation of this sort is immensely costly. Those costs end up being absorbed by consumers. Class suits over products that for the vast majority of owners perform as advertised undermine the generous warranty programs that manufacturers and retailers offer to quickly address problems actually experienced by individual customers. And they deter innovation. Any manufacturer must think twice before creating an innovative product when the reward is an onslaught of class litigation. What technologically advanced new product does not have glitches or sporadic issues? That is what warranty programs are designed for—to keep customers happy and coming back despite the likelihood of teething troubles in advanced, innovative products that make all our lives better.
Of course, the Supreme Court has tried before to bring more rigor to Rule 23 analysis—but many lower federal courts have ignored the message. Take the Sears case, in which the Seventh Circuit thumbed its nose at a litany of Supreme Court precedents. After the Supreme Court GVR’d the Seventh Circuit’s initial certification decision in light of Comcast Corp. v. Behrend, Judge Posner seemed perplexed about why his ruling had been vacated. Despite the GVR, he concluded that there was “no possibility” that the holding in Comcast could apply. And although the Supreme Court in Wal-Mart Stores, Inc. v. Dukes ruled that “common answers,” not “common questions,” are the key to satisfying the Rule 23(a) commonalty requirement, Judge Posner wrote that asking for “common answers” would place too “heavy” a burden on plaintiffs to justify certification. And why the stretch to certify? Because, in his view, individual claims would be too “meager” to make “suing worthwhile.” But that “ends-justifies-the-means” rationale for class actions runs counter to the Supreme Court’s repeated teachings that substantive law cannot be modified to pave the way for employing the class device.
What explains this flouting of precedent? The Seventh Circuit’s realpolitik approach recognizes that once cases are certified they tend to “quickly settl[e]” without any adjudication of the merits and using some mechanical “schedule of damages”—a result the Seventh Circuit deemed “efficient” (never mind that the Supreme Court repeatedly has identified blackmail settlements as a problem, not a solution). Indeed, the Court has again and again admonished that “[t]he class action is ‘an exception to the usual rule that litigation is conducted by and on behalf of the individual named parties only’”—as the Court said in both Dukes and Comcast. For that reason, Court said just last Term in American Express Co. v. Italian Colors Restaurant that Rule 23’s stringent requirements should “in practice exclude most claims” from class treatment; but federal trial and appeals courts still treat those requirements as authorizing class certification of “most claims.” So long as that departure from precedent continues, class actions will effectively impose a tax on every American, with the only beneficiaries being the plaintiffs’ bar, as a recent empirical study our colleagues conducted documents. Granting certiorari and reversing certification in the washer cases would go a long way indeed to putting the class action device back on track.
While the U.S. Supreme Court and federal courts of appeals have in recent years demanded rigorous scrutiny before authorizing certification of class actions, the Supreme Court of Canada has charted a different course. In a trio of recent decisions in antitrust class actions, Canada’s high court rejected key U.S. precedents on the scope and nature of class actions, forcing companies to defend against the same types of allegations under distinctly different legal regimes on each side of the border.
The three cases decided by the Canadian court, which all involved allegations of price-fixing, are:
- Pro-Sys Consultants Ltd. v. Microsoft Corporation (pdf), relating to Microsoft operating systems;
- Infineon Technologies AG v. Option Consommateurs (pdf), involving DRAM computer chips; and
- Sun-Rype Products Ltd. v. ADM (pdf), concerning high-fructose corn syrup.
In each case, plaintiffs had filed a class action in Canada on the heels of a similar class action filed in the United States. The Supreme Court of Canada addressed four issues that have been critical to antitrust class actions on both sides of the border, and deviated in several places from the path charted by the U.S. Supreme Court.
Indirect Purchasers May Sue Under Canada’s Antitrust Law
In Pro-Sys, the Supreme Court of Canada ruled that a defendant is generally precluded from asserting a passing-on defense in an antitrust class proceeding (i.e., the Court largely adopted the U.S. Supreme Court’s ruling in Hanover Shoe). But Canada’s court rejected the U.S. Supreme Court’s Illinois Brick rule that bars indirect-purchaser suits under federal antitrust law, and held instead that an indirect purchaser may assert a cause of action under Canada’s Competition Act. In concluding that an indirect-purchaser class action may be certified in the common-law provinces in Canada—i.e., those other than Quebec—the Court echoed Justice Brennan’s dissent in Illinois Brick, concluding that “the same policies of insuring the continued effectiveness of the [antitrust] action and preventing wrongdoers from retaining the spoils of their misdeeds favor allowing indirect purchasers to prove that overcharges were passed on to them.”
The Pro-Sys Court acknowledged the potential risk of double recovery when parallel claims are brought by direct and indirect purchasers, either as part of the same action or in multiple jurisdictions. But the Court noted that “legislation restricts individual recovery for damages for violations to just two years,” making it impractical for potential Canadian indirect plaintiffs to sit on their claims until resolution of an earlier direct purchaser suit. Where multiple suits are brought, a defendant may present evidence of the potential for overlapping recovery to the trial judge, who may modify any damage award accordingly.
In Infineon, the Supreme Court of Canada held that similar principles apply under Quebec’s civil-law regime. Accordingly, indirect-purchaser class actions also may be filed in that province.
Canada Does Not Require Rigorous Analysis Of Class Certification Requirements Prior To Certifying A Class
In Pro-Sys, the Supreme Court of Canada addressed the “rigorous” approach to class certification that the U.S. Supreme Court has reiterated is necessary under Federal Rule of Civil Procedure 23—most recently in Wal-Mart Stores, Inc. v. Dukes and Comcast Corp. v. Behrend. The Canadian court rejected the U.S. approach.
To the contrary, the court held that a plaintiff seeking class certification in Canada’s common-law provinces does not need to prove with evidence at the class-certification stage that the class-certification requirements are met, nor does the court need to resolve “conflicting facts and evidence at the certification stage.” Rather, in Canada a would-be class representative need only adduce a “credible” or “plausible” methodology to prove the issues of loss and liability on a class-wide basis.
More specifically, in an antitrust class action, “the methodology must offer a realistic prospect of establishing loss on a class-wide basis so that, if the overcharge is eventually established at the trial of the common issues, there is a means by which to demonstrate that it is common to the class.” The methodology must be “grounded in the facts” and “there must be some evidence of the availability of the data.”
But the Canadian court did not give a completely free pass to plaintiffs at the class-certification stage. Instead, the court suggested, certification remains “a meaningful screening device” (including the requirement that an expert’s methodology offer a “realistic prospect” of establishing class-wide loss).
In Infineon, the Supreme Court of Canada held that the standard for class certification in Quebec is even lower because the evidentiary burden is “less demanding” under the Civil Code. In a total departure from U.S. precedent, a Quebecois plaintiff must present merely an “arguable case that an injury was suffered”—and need not do so by presenting expert testimony. In fact, “presentation of expert evidence is not the norm at the [class-action] authorization stage in Quebec.” (Defense lawyers in Quebec tell us that class-action trials are far more common than they are here; this comparatively loose approach to class certification may explain why.)
Canadian Courts May Exercise Jurisdiction Over Companies Alleged To Be Part Of Foreign-Based Conspiracies.
Another significant aspect of the Canadian high court’s decision in Infineon was the conclusion that Quebec courts could exercise jurisdiction over companies accused of entering into price-fixing arrangements outside of Canada, so long as there is some indication of injury or “economic damage” to a consumer in Quebec.
Similarly, in Sun-Rype, the Court ruled that if plaintiffs adequately allege that defendants conduct business in Canada, make sales in Canada, and conspire to fix prices on products sold in Canada, Canadian courts could adjudicate the claims regardless of where the challenged conduct had taken place. As the Court put it: “The respondents have not demonstrated that it is plain and obvious that Canadian courts have no jurisdiction over the alleged anti-competitive acts committed in this case.”
Some Good News On Ascertainability In Canada?
The Supreme Court of Canada did refuse to approve certification of a class action in one of the three cases. In rejecting class treatment for the indirect-purchaser class action in Sun-Rype, the court focused on the plaintiffs’ failure to establish “some basis in fact” that an identifiable class existed. In particular, the plaintiffs in Sun-Rype did not offer any evidence to show that two or more persons could prove that they purchased a product actually containing high-fructose corn syrup during the class period.
This holding parallels a recent trend in U.S. courts of taking Rule 23’s ascertainability requirement seriously—with the most prominent examples being the Third Circuit’s recent decisions in Hayes and Carrera—decisions we have previously discussed in some detail. That said, it does not appear that the inquiry is as stringent in Canada as it is in Hayes and Carrera; although those U.S. decisions rejected the use of self-identification alone as a means of demonstrating the existence of an identifiable class in those cases, the Canadian Sun-Rype decision may leave that door open.
While the full impact of these rulings will become apparent only over time—and future litigation—some implications already are clear. As an initial matter, plaintiffs’ lawyers are likely to be emboldened by these rulings. Indirect-purchaser suits are now expressly permitted in Canada. It will be easier to certify class actions in Canada than the U.S. now that the Canadian high court has expressly rejected the type of “rigorous analysis” mandated by the U.S. Supreme Court in Dukes and Comcast. And foreign defendants with no presence in Canada may be required to defend competition class actions in Quebec, and possibly other provinces, that are filed by plaintiffs alleging that they suffered losses in those jurisdictions that were caused by a price-fixing scheme entered into entirely outside Canada.
More generally, these decisions may lead Canada’s class-action system to see more litigation progress further along towards trial as fights that previously took place at the class-certification stage now get pushed down the road to summary judgment or trial. When it comes to class actions—like the Winter Olympics—our neighbor to the north is one to watch.
Today, Mayer Brown filed a pair of certiorari petitions that challenge efforts by two federal appellate courts to narrow the Supreme Court’s recent class-action decisions in Comcast Corp. v. Behrend and Wal-Mart Stores, Inc. v. Dukes to tickets good for a single ride only. The Supreme Court previously remanded both cases for reconsideration after Comcast, but both courts of appeals reinstated their decisions. The certiorari petitions explain why those decisions are wrong: both putative class actions are beset by individual liability and damages questions and are filled with uninjured class members.
In one case, Sears, Roebuck and Co. v. Butler (pdf), Sears challenges a Seventh Circuit decision allowing class actions to proceed based upon an allegation that Kenmore-brand front-loading clothes washers have a design defect that causes musty odors and a manufacturing defect that produces false error codes. In an opinion by Judge Posner, the Seventh Circuit ruled that the supposed efficiency of a class trial on the supposedly common “defect” issue justified class certification, even though only a small minority of class members experienced musty odors or false error codes, the suit raises numerous individual questions, claims are brought under the laws of six different states, and the supposedly common question would not yield common answers.
In the other case, Whirlpool Corporation v. Glazer (pdf), Whirlpool challenges a Sixth Circuit decision allowing a class action on behalf of Ohio residents based on allegations that Whirlpool front-loading clothes washers have a design defect that can cause moldy odors and that Whirlpool did not adequately warn buyers about the defect. The Sixth Circuit swept aside the many individual liability questions—including whether a class member was among the small percentage who experienced any moldy odors—by using a “premium price theory” never recognized by Ohio law that assumes that every purchaser paid a uniform overcharge regardless of the purchaser’s actual experience with the washer. One point is especially worthy of note: Even though the Supreme Court had vacated and remanded the original Sixth Circuit decision in light of Comcast, the Sixth Circuit’s opinion on remand focused far more heavily on a different Supreme Court precedent, Amgen Inc. v. Connecticut Retirement Plans and Trust Funds, from the securities class action context.
These cases are of obvious importance to the growing number of suits seeking to litigate supposed product defects on behalf of all purchasers when the alleged defects have only manifested in a relative handful of products owned by a small fraction of putative class members. More broadly, the cases present the Supreme Court with an opportunity to clarify the confusion wrought by the Sixth and Seventh Circuit’s decisions over how to properly apply Comcast, Wal-Mart, and the Court’s other class-action decisions.
Class-action lawyers on both sides of the “v.” have been debating the impact of the Supreme Court’s decision earlier this year in Comcast Corp. v. Behrend. Last week, the D.C. Circuit delivered its answer in In re Rail Freight Fuel Surcharge Antitrust Litigation, the most significant opinion thus far to address Comcast. As the D.C. Circuit put it in a unanimous opinion by Judge Brown, “[b]efore [Comcast v.] Behrend, the case law was far more accommodating to class certification under Rule 23(b)(3).” But Comcast places that case law in doubt: When class certification rests on expert economic testimony—which is increasingly the case—“[i]t is now clear . . . that Rule 23 not only authorizes a hard look at the soundness of statistical models that purport to show predominance—the rule commands it” (emphasis added). That powerful holding makes the Rail Freight decision especially important for defendants opposing class certification.
When the Comcast Corp. v. Behrend decision came down, my colleagues summarized the Supreme Court’s ruling. Since then, I’ve put together an analysis of the decision and its potential implications. Lexis has now published the piece as a part of its ongoing Emerging Issues Analysis series. It is available here: 2013 Emerging Issues 6992 ($). Enjoy.
An important and recurring issue in class actions is whether a district court must consider particular merits issues when deciding whether to certify a class under Federal Rule of Civil Procedure 23. Today, in Comcast Corp. v. Behrend (pdf), No. 11-864, the Supreme Court reversed the certification of an antitrust class action because the district court failed to conduct a “rigorous analysis” of whether the testimony of the plaintiffs’ damages expert satisfies Rule 23(b)(3)’s requirement that “questions of law or fact common to class members predominate” over individualized questions. The lower courts had concluded that they were unable to scrutinize the expert’s damages model because that would involve examining the merits of the underlying antitrust claims.
The plaintiffs in Behrend had sought to certify a class action involving federal antitrust claims against Comcast. Rule 23(b)(3), which governs class actions for money damages, requires a plaintiff to show that common questions of law or fact predominate over individualized questions. Accordingly, the plaintiffs were required to show that the “antitrust impact” of the alleged violation could be proved at trial through evidence common to the class and that the damages could be measured on a classwide basis through a “common methodology.” Although the plaintiffs presented four theories of antitrust impact, the district court accepted only one. And although the plaintiffs’ damages expert conceded that his economic model for damages did not measure damages flowing from that single theory of antitrust impact, the district court nonetheless certified the class. The Third Circuit affirmed, declining to consider Comcast’s objection to the expert’s model because doing so would require delving into the merits of the underlying claims.
The Supreme Court reversed by a 5-4 vote, holding that the plaintiffs had failed to satisfy Rule 23(b)(3)’s predominance requirement. Writing for the majority, Justice Scalia explained that the Third Circuit erred in refusing to take a “close look” at the methodology underlying the proposed classwide-damages model. As the Court explained, courts must consider challenges to class certification even if those challenges would also be pertinent to the merits. The majority noted that district courts considering whether a plaintiff has satisfied Rule 23(b)(3) must conduct a “rigorous analysis” that will frequently “overlap with the merits of the plaintiff’s underlying claim,” because determining whether common questions predominate over individualized ones “generally involves considerations that are enmeshed in the factual and legal issues comprising the plaintiff’s cause of action.” The majority then explained that because the plaintiffs’ damages model in this case failed to measure only those damages that would be attributable to the sole theory of classwide antitrust liability, the plaintiffs had failed to prove that damages could be measured on a classwide basis. Because “[q]uestions of individual damage calculations will inevitably overwhelm questions common to the class,” the majority held that class certification was improper.
Justices Ginsburg and Breyer, joined by Justices Sotomayor and Kagan, dissented. They first explained that they believed that review had been improvidently granted because the Court had granted certiorari to consider a question—whether Daubert objections to expert testimony must be resolved at the class-certification stage—that in their view had not been preserved for review. The dissenting justices next expressed their view that the reach of the Court’s holding is limited because the plaintiffs had failed to argue that predominance would be satisfied even if damages could not be shown on a classwide basis. Finally, the dissenting justices explained their view that, as a matter of substantive antitrust law, the plaintiffs’ damages methodology was sufficient to support class certification.
The Behrend decision is important for any business that may be the target of class actions. Among other things, Behrend confirms that district courts must scrutinize plaintiffs’ evidentiary showing that common questions will predominate over individualized ones—including questions relating to damages—even if any challenges to that showing overlap with the merits of the underlying claims.