Individualized Proof of Damages Can Block Class Certification Under Rule 23(b)(3)

The United States Supreme Court in Comcast v. Behrend continued its trend of disfavoring class certification of cases involving individualized proof of damages.  Previously, in its landmark Dukes v. Wal-Mart decision, the Court ruled that “individualized monetary claims” cannot be certified under Federal Rule of Civil Procedure 23(b)(2), which is designed primarily for injunctive and declaratory relief.  Instead, such claims must meet Rule 23(b)(2)’s heightened requirements that issues common to the class predominate over individual issues and that a class action is the superior method for adjudication.  The Court’s ruling in Comcast makes it clear that individualized monetary claims also present obstacles to class certification under Rule 23(b)(3).

The plaintiffs in Comcast, an anti-trust class action, proposed four theories of anti-trust impact, with the lower court accepting one.  The plaintiffs’ expert testified as to damages for the entire class, without isolating damages resulting from any one theory of anti-trust impact.  The lower court found that the plaintiffs were not required to tie each theory to an exact calculation of damages at the class-certification stage under Rule 23(b)(3).  The Supreme Court disagreed, holding that, while damage figures do not need to be exact at the certification stage, the plaintiffs failed to prove that their damages model was capable of measurement on a class-wide basis.  The Court emphasized that, under Rule 23(b)(3), “individual damage calculations will inevitably overwhelm questions common to the class.”

It should be noted that, in this 5-4 ruling, the Court did not craft a bright-line rule that a district court never can certify classes if damages cannot be proven on a class-wide basis.  Still, the decision provides employers with another way to challenge class certification.

Arbitration Agreements Can Preclude Title VII Class Actions

The United States Court of Appeals for the Second Circuit has ruled that companies can use arbitration agreements to preclude Title VII class actions.

In Lisa Parisi v. Goldman Sachs & Co., an employee filed suit against her employer, Goldman Sachs, accusing it of engaging in a practice or pattern of discrimination against female employees.  Goldman Sachs sought to compel arbitration pursuant to a signed agreement that included a broad arbitration clause covering Title VII claims and a class arbitration waiver.  The plaintiff argued that she had a substantive right under Title VII to pursue a pattern-or-practice claim, which is only available to class plaintiffs.  The lower court agreed with the plaintiff, providing the plaintiffs’ class bar with one of their first rulings to sidestep AT&T Mobility LLC v. Concepcion, the Supreme Court decision which generally upheld class arbitration waivers.

On appeal, the Second Circuit agreed with Goldman Sachs and refused to recognize an exception to AT&T Mobility, holding that arbitration agreements can also preclude Title VII class actions.   In response to the plaintiff’s arguments, the court reasoned that no right to bring a substantive pattern-or-practice claim exists because “pattern or practice” is a method of proof and not an independent cause of action.