The United States Supreme Court's recent decision in Wal-Mart Stores, Inc. v. Dukes[1] has rightly drawn attention from commentators on a host of class action issues ranging from the standards for commonality to limitations on classes seeking back pay awards. One less discussed part of its holding, however, relates to the use of expert testimony at the class certification stage. The Dukes decision settles a split in the circuits over the standards for such testimony and makes it clear that Daubert [2] standards apply when a party introduces expert testimony to obtain class certification.

Prior to Dukes, lower courts were divided over the treatment of expert testimony offered at the class certification stage. A minority did not engage in a Daubert analysis when considering the plaintiffs' expert testimony. These courts commonly cited the concern that weighing the expert's credibility at certification would constitute a premature evaluation of the merits of the underlying case. Most courts, however, took the view that district courts must scrutinize expert testimony as a part of their class certification decision. Some of these courts ended their analysis at Daubert scrutiny, while others required that the district court also conclusively resolve any challenges to the reliability of the information provided by the plaintiffs' expert at the certification stage below. As explained below, Dukes settled this issue in favor of Daubert scrutiny.

Daubert Scrutiny and the Tension with Rule 23

Expert testimony can play an important part in class action employment litigation. Plaintiffs often present expert opinions to show that the contested issues in the case can be decided on the basis of common proofs that apply to all class members. Defendants may counter with expert testimony to show that trial of the claims would instead depend on individual proofs specific to each plaintiff's case. These battle lines are commonly drawn in employment class actions where the plaintiffs offer statistical and other evidence of discrimination in the aggregate, and the defense counters with an expert pointing out flaws in the plaintiffs' expert's methodology. This expert testimony usually bears on the commonality and predominance requirements of Rule 23,[3] but it also likely implicates the merits of the case to a large extent.

Rule 702 of the Federal Rules of Evidence governs the use of expert testimony, permitting its admission if the testimony is based on "sufficient facts or data," uses "reliable principles and methods," and applies those principles and methods "reliably to the facts of the case."[4] In Daubert, a case involving medical experts, the Supreme Court held that under Rule 702, district judges should act as "gatekeepers" who look beyond the surface of expert opinions. Under Daubert, a district court should scrutinize the methodologies and validity of scientific expert testimony, and exclude testimony that is irrelevant or unreliable.[5] The Daubert decision was important for the integrity of the judicial process because it obligated trial courts to ferret out and exclude junk science for consideration by the finder of fact.

Until Dukes, the Supreme Court had not directly addressed whether the Daubert requirements apply to expert testimony presented at a class certification hearing, resulting in a split of authority among the lower courts.

These differing holdings and standards exposed employers to the risk of having classes certified against them based on inadmissible expert testimony in some jurisdictions but not in others. The question of Daubert's application at the class certification stage was clouded by the uncertain relationship between Daubert scrutiny and the court's ability to weigh in on the merits of the case in analyzing the Rule 23 requirements. Initially, in Eisen v. Carlisle & Jacquelin, the Supreme Court suggested that Rule 23 did not grant the court authority to conduct a preliminary inquiry into the merits of the suit. [6] The Court later clarified its position, stating that class certification is proper only "if the trial court is satisfied, after a rigorous analysis, that the prerequisites" of Rule 23 have been fulfilled.[7] These decisions left open the interplay between the appropriate degree of "rigorous analysis" in evaluating competing expert testimony and an undue examination of the underlying merits at the certification stage. In the absence of Supreme Court guidance, the courts wrestled with this tension in applying varied, and in some cases, inadequate, degrees of scrutiny to testimony supporting and opposing class certification.

Giving Daubert the Cold Shoulder

A few circuits declined to engage in a Daubert analysis based on the rationale that this practice would constitute a premature inquiry into the merits of the plaintiffs' claims, stepping on the toes of Eisen. In 2001, the Second Circuit became the leading proponent of this highly deferential approach, under which the district court was only required to find that the basis of the expert's opinion is not so "fatally flawed" as to be inadmissible as a matter of law,[8] in line with its position that "some showing" of meeting the Rule 23 requirements sufficed to certify the class.[9] Five years later, however, the Second Circuit, reflecting the trend among most circuits to engage in more extensive scrutiny, expressly disavowed the use of this modest standard. Instead, it held that district courts may certify a class only after resolving any factual disputes relevant to each Rule 23 requirements, despite any overlap with a merits issue.[10]

Despite the Second Circuit's renunciation of minimal expert scrutiny standards, a handful of courts continued to find that Daubert did not apply at the certification stage. The most prominent example was found in the Ninth Circuit's own decision in Dukes v. Wal-Mart Stores, Inc.[11] The primary focus of the Daubert discussion in Dukes related to the testimony of William Bielby, a sociologist.[12] Bielby is the leading courtroom proponent of "unconscious bias," his theory that "gender stereotypes are especially likely to influence personnel decisions when they are based on subjective factors, because substantial decision maker discretion tends to allow people to seek out and retain stereotyping-confirming information and ignore or minimize information that defies stereotypes."[13] In short, Bielby opines that corporations giving discretion in promotion decisions will inevitably slight women.

Using his theory, Bielby testified that he employed "social framework analysis," and had examined Wal-Mart's policies and practices, including its strong corporate culture and the subjective discretion permitted in promotion decisions. Based on that review, he claimed that it was "vulnerable" to bias or gender stereotyping.[14] The plaintiffs argued that this "vulnerability" sufficed to satisfy their required showing of common discrimination under Rule 23 even though Bielby failed to identify any specific discriminatory policy at Wal-Mart. [15]

The trial court admitted Bielby's testimony and granted certification, and the panel of the Ninth Circuit affirmed. These courts relied heavily on the overruled Second Circuit precedent, holding that the district court need not apply full Daubert scrutiny at the certification stage, but instead, some form of Daubert-lite scrutiny.[16] In its revised opinion, while carefully avoiding the overruled Second Circuit language, the Ninth Circuit reasoned that Bielby's opinion would have passed muster even if Daubert were applied because Wal-Mart had merely challenged the persuasiveness of his conclusions, not his methodologies.[17] The court expressed reluctance to judge the ultimate merits of the case,[18] and the later Ninth Circuit en banc panel stated that it was "not convinced...that Daubert has exactly the same application at the class certification stage."[19] Thus, the Ninth Circuit applied at best a watered-down Daubert analysis.

The Ninth Circuit was not alone. At least one court in the Sixth Circuit followed the view that a Daubert inquiry is inappropriate at the certification stage.[20] The Tenth Circuit also appeared to apply a lesser showing at the certification stage, expressing a reluctance to test the merits of the plaintiff's claims in ruling on Rule 23 certification.[21]

The courts disregarding the Daubert admissibility standard improperly transformed Rule 23 into a mere pleading rule, circumventing its filtering function, and unjustifiably exposing defendants to potentially illegitimate pressure to settle meritless class action claims. While class actions can serve a useful role, they also create "insurmountable pressure" on the defendant to settle.[22]

Daubert Scrutiny and Beyond

More sensible courts rejected the notion that Eisen forbids a Daubert analysis at the class certification stage. In In re IPO, the Second Circuit rejected its past "fatally flawed" approach of not employing Daubert standards. Although pieces of the opinion indicate a desire that district courts dig deeper to resolve underlying factual disputes at the certification stage,[23] it simultaneously expressed reluctance to authorize factual findings due to fears of creating a "mini-trial." [24] The Eighth Circuit also employed this approach.[25]

The majority of Circuits put further teeth into the Daubert reliability and relevance standards, requiring in addition that the district court actually resolve challenges to the reliability of the information provided by plaintiffs' experts at the time of certification. The Seventh Circuit was the leading proponent of this position, holding that, after a full Daubert analysis scrutinizing the expert's experience, training and methodology used, "a district court must conclusively rule on any challenge to the expert's qualifications or submissions prior to ruling on a class certification motion." [26] The First,[27] Fifth[28] and Eleventh[29] Circuits followed the same arguably enhanced Daubert analysis. The Fourth Circuit did not expressly square itself with these circuits, but it seemed likely to eventually follow suit, as it relied heavily on the Seventh Circuit in acknowledging the necessary overlap with a merits inquiry in analyzing the Rule 23 requirements at the certification stage.[30]

The Third Circuit, in In re Hydrogen Peroxide Antitrust Litigation,[31] articulated the required scrutiny of the certification requirements as a heightened burden of proof for establishing each of the Rule 23 elements. In confronting conflicting expert testimony, the court rejected the argument that Eisen confined Rule 23 to a mere pleading rule where weighing expert testimony also implicated the merits of the case.[32] Instead, it concluded that: "[f]actual determinations necessary to make Rule 23 findings must be made by a preponderance of the evidence. In other words, to certify a class, the district court must find that the evidence more likely than not establishes each fact necessary to meet the requirements of Rule 23."[33] Under this approach, the district court may only find commonality "after considering all relevant evidence."[34]

The Decision in Dukes

The Supreme Court's decision in Dukes, of course, addressed a wide variety of important topics in the class action realm. Among its most important holdings, the court reiterated and tightened the standards for commonality and typicality under Rule 23(a). The court also held that classes pursuant to Rule 23(b)(2) were inappropriate when the plaintiffs sought back pay.

Amid these rulings, however, two aspects of the opinion suggest strongly that Daubert standards should apply at the certification level. First, the court found that it was appropriate for the trial court to consider the merits when determining certification issues, and that in fact such review could be a necessity.[35] This finding is central to the expert testimony issue because those courts refusing to apply Daubert standards did so because of their belief that it was inappropriate for the court to examine the merits at the certification stage. Since, as the Court in Dukes found, such an inquiry is appropriate, Dukes removes the analytical underpinnings that led the minority of courts to conclude that Daubert did not apply in the class action content.

Although Wal-Mart had identified the Ninth Circuit's refusal to apply Daubert as grounds for review in its petition for certiorari, the Supreme Court's decision does not explicitly overrule the Ninth Circuit's apparent endorsement at a lesser standard. With respect to the expert testimony offered by the plaintiffs (primarily Bielby's testimony that individuals with subjective decision-making authority may tend to discriminate), the Court found that the conclusions were so weak and flawed as to have no bearing on the issue of certification at all.[36] Thus, the Court assumed that even if the testimony were admitted, it would not justify certification.

During that discussion, the Court indicated that Daubert standards in all likelihood would apply. Specifically, the court stated that:

The District Court concluded that Daubert did not apply to expert testimony at the certification stage of class action proceedings. 222 F.R.D., at 191. We doubt that is so . . . .[37]

Thus, although the Supreme Court did not explicitly overrule Dukes with respect to the application of Daubert, the opinion leaves little doubt that a refusal to apply those standards would constitute error. Between its finding that a court not only can but should engage in a merits analysis, and its curt dismissal of the district court's refusal to assess the validity of expert testimony, Dukes reflects that Daubert standards should apply at class certification stage.

Post-Dukes Decisions

In the three months since Dukes was decided, two Circuit Courts of Appeal have been called upon to decide whether Daubert standards will apply in the certification context. Most recently, in Ellis v. Costco,[38] the Ninth Circuit reviewed the district court's decision to certify a class that was similar to that in Dukes, one in which the plaintiffs challenged promotional decisions at the Costco retail chain. Unlike Dukes, however, the district court had performed a Daubert analysis. The Ninth Circuit, citing the language quoted above, found that the district court had "correctly" applied Daubert, but had improperly ended its analysis with a determination of whether the evidence was simply admissible. The court of appeals found that this constituted error because, after concluding that the evidence was admissible, the trial court should have then gone on to subject the expert's findings to the rigorous analysis Dukes required.

One court of appeals has rendered a decision that is difficult to square with Dukes. In In re Zurn Pex Plumbing Products Liability Litigation,[39] a case decided two weeks after Dukes, the Eighth Circuit reviewed the certification of a class in a products liability case in which the district court had applied a less stringent Daubert analysis. Two members of the three judge panel found that decision appropriate because it construed Daubert as being focused on potential jury confusion and saw no risk of such confusion at the certification stage. The majority did not meaningfully discuss Dukes. The dissent, by contrast, agreed with the defendant that a Daubert analysis is appropriate at the certification stage. It cited and would have followed the statements in Dukes, and would have required a full Daubert hearing before certification. The Zurn Pex case seems at odds with the pronouncement in Dukes, but it remains to be seen whether any other courts will follow it.

Conclusion

Prior to the United States Supreme Court's decision in Dukes, there was a split of authority as to whether Daubert standards should apply to expert testimony at the class certification phase. The decisions that did not apply Daubert exposed defendants to the risk and great expense of class action litigation even when there was no competent testimony that they had engaged in any wrongdoing, let alone on a class-wide basis. The decisions of the majority of courts, now buttressed by the Dukes decision, reflects a more common sense approach that courts should resolve expert testimony issues at the time of certification. Practitioners should continue to follow developments in this area.