Much has been already said about the Supreme Court’s landmark decision in Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541 (2011). From its clarification of commonality to its implicit recognition of a plaintiff’s burden of proof at the certification stage, counsel, commentators and courts all acknowledge that Wal-Mart significantly altered the class action landscape.
The true legacy of Wal-Mart, however, is only now being written by the lower courts whose task it is to apply the decision and to determine how, if at all, prior precedent can be harmonized. The challenge is significant because the case forces a reevaluation of concepts that rarely received the type of critical analysis that is now required.
Perhaps Wal-Mart’s most significant - and most challenging - contribution to class action analysis is its treatment of commonality. According to the Court, plaintiffs must do more than simply identify a common question. They must now show that the common question or questions can “generate common answers apt to drive the resolution of the litigation.” Wal-Mart, 131 S. Ct. at 2551 (quoting R. Nagareda, Class Certification in the Age of Aggregate Proof, 84 N.Y.U.L.Rev. 97, 131-132 (2009)).
The “common question must be of such a nature that it is capable of classwide resolution - which means that determination of its truth or falsity will resolve an issue that is central to the validity of each one of the claims in one stroke.” Id. “Commonality requires the plaintiff to demonstrate that the class members ‘have suffered the same injury,’” not “merely that they have all suffered a violation of the same provision of law.” Id. In other words, the answers must tell us who has been injured and how - on a class-wide basis.
While the “common answer” formulation is a useful diagnostic tool to decide whether there is a class to certify, its application is challenging. Indeed, the Wal-Mart court recognized that the “language is easy to misread, since ‘[a]ny competently crafted class complaint literally raises common questions.’”
Now, parties and courts have to do more than recite a common legal issue. They must ask whether the substantive claim is capable of yielding a uniform harm. Formulaic recitals of abstract principles simply won’t do. The recent decision in Powell v. Tosh, 2011 WL 4862401 (W.D. Ky. Oct. 13, 2011)—which was briefed before, but decided after Wal-Mart - illustrates the challenges that courts now face in applying the new commonality standard.
The Powell court certified a multi-level class of residents who asserted nuisance claims based on allegedly noxious odors coming from large swine barns that collected hog waste, and from the fields where it was applied by neighboring farmers. The court acknowledged that the plaintiffs alleged a variety of injuries, but nonetheless found sufficient commonality to certify a class under Federal Rule 23(b)(3). Following Wal-Mart, is it possible to certify a Rule 23(b)(3) class where there the injury claims are highly individualized? The Powell court thought so. Here’s what happened.
Jimmy Tosh and a variety of affiliated entities own up to 500,000 swine that are raised from juveniles to market-ready adults.1 Powell, 2011 WL 4862401 at *1. As part of the operation, swine waste is accumulated in a “deep pit” under the swine barns, and is later applied to crops by farmers who have contractual relationships with the Tosh entities. Id. at *1.
The neighbors complained about the smell. Some said the smell was “intolerable,” some claimed emotional injuries, while still others claimed physical injuries. Some said that their property value declined, others said that their water was contaminated, and others complained that hog waste was spilled on or near their property. Id. Recognizing the disparate nature of the alleged injuries, the court noted that it was “unclear what value, if any, should be attached to the Plaintiffs’ claims. . . .” Id. at *6.
Despite the fact that the Tosh entities were operating pursuant to and in compliance with the permits issued by the relevant Kentucky authorities - which Plaintiffs knew, having failed to appeal their unsuccessful administrative challenge - Plaintiffs brought a civil action asserting claims for temporary and permanent nuisance, trespass, negligence and negligence per se, product liability, battery, civil conspiracy, and punitive damages, among others. They also sought to certify a class pursuant to Rule 23(b)(2) and (3). Id. at *12.
Following class and expert discovery, Plaintiffs sought to certify a class of residents who lived within a 1.25 mile radius of two of the Tosh barns, as well as residents in four other counties, though no analysis was ever done with respect to the latter group.
Having first rejected certification of a Rule 23(b)(2) class - Plaintiffs' money damages were more than "incidental" - the court certified a class under Rule 23(b)(3) based on the above claims. The certified class was narrowed considerably to include only those within 1.25 miles of two of the Tosh barns - no evidence had been presented as to any of the other counties. The class also excluded “opt ins” since they lived outside the 1.25 mile radius and their claims would “result in individualized damage testimony” - and, presumably, were not ascertainable from the class definition. Id.. at *11-12. And the class excluded claims for diminished property value, contaminated water, and spills—they did “have common questions.” Id. at *12.
Despite the narrowing of the class, the damage claims were still too individualized to be decided on a class-wide basis. Indeed, the court denied Rule 23(b)(2) certification because the damages would “necessarily involve individualized determinations” because “the frequency and intensity [of the odor] varies by [wind] direction.” Id. at *9; see also id. at *6. In addition, individual “damages would be dependent on intangible, subjective differences of each class member’s circumstances as the alleged odor has affected each potential class member differently.” Id. Hence the court’s dilemma: “[W]hether the individualized damage claims defeat the Rule 23(b)(3) class.” Id. at *10.
So how could the court, consistent with Wal-Mart - which it cited - certify a class that was incapable of class-wide proof of the same injury?
For starters, it relied on prior authority from the Sixth Circuit for the proposition that "'no matter how individualized the issue of damages may be, these issues may be reserved for individual treatment with the question of liability tried as a class action.'" Id. at *10 (citing Sterling v. Velsicol Chem. Corp., 855 F.2d 1188 (6th Cir. 1988)). The court reasoned that “[a]llowing the liability portion to proceed as a class action will help avoid ‘duplication of judicial effort’ and prevent ‘separate actions from reaching inconsistent results with similar, if not identical facts.’” Id.
But the problem with the proposed class runs much deeper than individualized damages. They complained about different injuries. Even with the narrowed class, some complained about physical injury, some about emotional jury, and some just didn’t like the smell. By failing to distinguish between injury and damage, the court used bifurcation to effectively eliminate the commonality requirement.
Wal-Mart calls into question the continuing viability of Sterling, and the concept that bifurcation will permit liability to be tried separately in the absence of class-wide injury claims. Indeed, the express holding of Wal-Mart - that “class members [must] ‘have suffered the same injury’" - appears to foreclose this result.
Moreover, it is not clear how “judicial duplication of effort” is avoided where a court must still engage in separate jury trials with respect to damages for each and every class member. This is especially true where damages “would be dependent on intangible, subjective differences of each class member’s circumstances as the alleged odor has affected each potential class member differently,” as is the case here. Id. at *9. Indeed, many courts have ruled that the presence of individualized damage claims—apart from individualized injuries—defeat the “superiority” requirement of Rule 23(b)(3), which alone provides the basis to deny class certification. See, e.g., Pipefitters Local 636 Ins. Fund v. Blue Cross Blue Shield of Michigan, __ F.3d __, 2011 WL 3524325 (6th Cir. Aug. 12, 2011) (reh’g and reh’g en banc denied Sept. 20, 2011); Pastor v. State Farm Mut. Auto. Ins. Co., 487 F.3d 1042 (7th Cir. 2007).
The court appeared to recognize as much, since it hopes to avoid the jury trials that its order expressly contemplated. The court will “encourage the parties to engage in informed settlement negotiations” following the liability phase of the trial, reasoning that “necessity will cause the parties to find an amenable procedure.” Id. at *10. But “streamlined” trials, “amenable procedures,” and “necessity” only highlight the lack of common questions relating to class-wide injury - they are not surrogates for predominating commonality.
The Common Questions
But there is another reason why the court certified the class. Plaintiffs identified - and the court accepted - the common questions as whether:
“the actions of the defendants (1) create a temporary nuisance; (2) create a permanent nuisance; (3) constitute a trespass on another's property; (4) constitute a breach of duty owed another, to the injury of another; (5) constitute negligence per se" etc.
Id. at *6.
But these questions ask only whether Plaintiffs “have suffered a violation of the same provision of law,” not whether “the class members ‘have suffered the same injury.’” Wal-Mart, 131 S. Ct. at 2551. Indeed, whether Defendants “create[d] a temporary nuisance” doesn’t answer the question who was injured and how. Nor does the question whether Defendants’ actions “constitute negligence per se” “generate common answers apt to drive the resolution of the litigation.” Id. By articulating the common questions in terms of the “provision of law” rather than whether Plaintiffs “suffered the same injury,” it was more difficult to apply the Wal-Mart diagnostic to determine whether there is really a class to certify.
Had the common questions been framed to provide answers as to whether the class suffered the same injury, the court likely would have reached a different result. Here’s why.
Determining the proper questions starts with a substantive analysis of the underlying claims. For example, under Kentucky law a nuisance “arises from the unreasonable, unwarrantable, or unlawful use by a person of his own property and produces such material annoyance, inconvenience, discomfort, or hurt that the law will presume a consequent damage.” City of Somerset v. Sears, 233 S.W.2d 530, 532 (Ky. 1950). Likewise, a trespass occurs when there is “an intrusion (or encroachment) which is an unreasonable interference with a property owner’s possessory use of his/her property.” Smith v. Carbide & Chems. Corp., 226 S.W.3d 52, 57 (Ky. 2007).
Here, common questions that will yield answers to whether “the class members ‘have suffered the same injury’” might include:
- What is the nature of the annoyance, discomfort, or hurt, if any, that has been suffered by the class representative?
- What is the nature, if any, of the intrusion alleged to have been suffered by the class representative?
- What is the nature and scope of the interference with the possessory use of the class representative’s property?
- What is the burden of proof that the class representative must meet to establish the damage elements of each claim?
- What is the nature of the evidence that will be offered to prove the damage element of each claim?
- What defenses will the defendants assert in response to the each claim?
The answers to these questions are more likely to address the concern advanced by the Wal-Mart court: Who was injured and how?
It is inevitable that there will be varying - and inconsistent - applications of the Wal-Mart rules as litigants and courts adjust to the new era in class jurisprudence. For those who defend class actions, cases will be won or lost based on how the court defines the common questions. It is crucial to frame common questions that will yield answers regarding common injuries. This is especially true where certification is sought under Rule 23(b)(3), since these classes tend to raise more individualized questions than its Rule 23(b) counterparts.
Perhaps the real lesson - and challenge - from Powell is this: Despite Wal-Mart’s emphasis on class-wide injury as the sine qua non of class-wide adjudication, it will take time for courts to become comfortable applying that rule.
This is especially true where bifurcation is used to solve the problem of individualized injuries. Defendants need to aggressively challenge the continuing validity of bifurcation of damage claims, based on different injuries, in light of Wal-Mart. Bifurcation is often a tacit acknowledgment that there is no class-wide injury and, consequently, is inconsistent with the Wal-Mart mandate under Rule 23. It is also inconsistent with the efficiencies that Rule 23 is meant to achieve, and disserves the interests of individual class members since each will be required to participate in discovery, appear in court, and try their damage claims separately.