On Thursday, August 22, 2013, the class actions brought by consumers alleging defective Sears washing machines survived another review by the Seventh Circuit after the U.S. Supreme Court remanded the class certification decision in light of Comcast v. Behrend, 133 S. Ct. 1426 (2013).

Factual Background

The lawsuit arises from alleged mold-causing defects in several models of washing machines. On November 13, 2012, the Seventh Circuit reversed the district court’s denial of class certification and sought to “clarify the concept of predominance in class action litigation.”  Butler v. Sears, Roebuck, and Co.,  Nos. 11-8029, 12-8030 (7th Cir. 2012).   In its opinion, the Seventh Circuit found that the fact that multiple washer models were at issue did not complicate the situation sufficiently to defeat the predominance requirement of Federal Rule of Civil Procedure 23(b)(3) “[P]redominance is a question of efficiency . . . . A class is the more efficient procedure for determining liability and damages in a case such as this involving a defect that may have imposed costs on tens of thousands of consumers, yet not a cost to any one of them large enough to justify the expense of an individual suit.”  Slip. Op. at 4. Accordingly, the Seventh Circuit found that the predominance requirement was satisfied and the class should be certified.

The U.S. Supreme Court granted Sears’ petition for certiorari.  On June 3, 2013, the Court vacated the Seventh Circuit’s decision and remanded the case for further consideration in light of Comcast.  

Comcast Opinion

Comcast involved an antitrust class action in which plaintiffs’ alleged that Comcast obtained a monopoly on cable services in certain regions via transactions with competitors to swap regional markets and thereby cluster their operations within a particular region.  A class of Comcast subscribers was certified based on one of four proposed antitrust impact theories, even though the damages model presented did not isolate any one antitrust impact theory from the others.  Affirming class certification, the Court of Appeals found that “an attack on the merits of the methodology had no place in the class certification inquiry” and, therefore, the damages model was sufficient for class certification purposes.

The Supreme Court, however, reversed the certification decision.  The Court rejected the Court of Appeals’ approach because, under that logic, “any method of measurement is acceptable so long as it can be applied classwide, no matter how arbitrary the measurements may be.”  Accordingly, the Court held that the model for damages must be able to measure damages specific to liability, even if that determination required the court to delve into the merits.  Because the damages model was not specific to the one remaining antitrust impact theory, class certification was not appropriate.

Seventh Circuit’s Consideration of Comcast

The Seventh Circuit reconsidered its class certification decision in light of Comcast but ultimately determined that the Comcast decision was of no moment.  See Butler v. Sears, Nos. 11-8029, 12-8030 (7th Cir. 2013).  The Seventh Circuit interpreted Comcast to hold that “a damages suit cannot be certified to proceed as a class action unless the damages sought are the result of the class-wide injury that the suit alleges.”  Slip Op. at  5.  Distinguishing Comcast, the Seventh Circuit found that there was no possibility that the damages could be attributed to an act of the defendants that was not challenged on a class-wide basis, i.e. the alleged defect in the washer.  The Seventh Circuit went on to point out that, unlike in Comcast, the class actions at issue were limited to liability determinations and damages issues may be resolved separately under Rule 23(c)(4) of the Federal Rules of Civil Procedure.

Accordingly, the Seventh Circuit declined to interpret Comcast so broadly as to require that all class members sustain the same damages, stating that such an interpretation, “would drive a stake through the heart of the class action device.” Id. at 9.    Thus, where issues of liability can be resolved through common proof, individual damages can be determined through other means.

Additionally, the Seventh Circuit addressed the predominance issues raised, referring to it as a “qualitative assessment” as opposed to “bean counting.”  Id. at 11.  In other words, even where there are several individualized issues, one issue central to the validity of the claim in a class action can justify class treatment.  Importantly, the Seventh Circuit found a central issue of liability, i.e., whether the washing machines were defective, sufficient to satisfy the predominance requirement and uphold the class certification.

Implications

The Seventh Circuit’s opinion strengthens the already well-established class certification principle that individualized damages determinations will not preclude class certification where liability can be determined on a class-wide basis.  Interestingly, the Court seems to suggest using Rule 23(c)(4) as the vehicle through which to avoid any predominance issues with individual questions of damages.  We will continue to track cases dealing with this issue and post updates on any new developments.