“The truth isn't a thing of fact, or reason. It's simply what everyone agrees on.”
- The Wizard in Wicked
In the rush to adopt and simplify class action law by searching for any common issue to certify, more and more courts ignore long-held substantive legal concepts and principles.
On the first day of my first class in law school – which is more years ago than I like to think – I was greeted with a single and clear cut notion: the tort (or claim) of negligence had three necessary elements:
- The existence of a duty
- The breach of that duty and
- Damages caused by the breach.
Because these three things are elements of the negligence tort itself and not defenses, a plaintiff had to establish each one in every case to prevail.
As a result of this fundamental, class certification of negligence claims was problematic for years, because inevitably, whether a class member’s damage was caused by the breach of the duty or by something else (or both) was unique to each person.
Since this causation was an element of the claim and could not simply be ignored or tried separately, certification would inevitably fail. See, for example, Lienhart v. Dryvit Systems, Inc. 255 F.3d 138 (4th Cir, 2001), Zinzer v. Accufox Research Institution, 253 F.3d 1180 (9th Cir. 2000):
“If each class member has to litigate numerous and substantial separate issues to establish his or her right to recover individually, a class action is not “superior.” Hicks v. Kaufman and Broad Home Corp., 89 Cal. App. 4th908 (2001) (“...to recover under...[a negligence theory of liability] each class member would have to come forward and proof specific damage to her home and that such damage was caused by cracks in the foundation and not some other agent...Given this need for individualized proof, commonality of facts is lost and the actions splits into more pieces than the allegedly defective foundations.”)
Today, however, the argument that damage and causation questions in negligence cases create sizeable individual issue unique to each class member, is under siege. And, as the new mantra of “one issue” class certification gains more and more traction, the very ability (and indeed right) of defendants to contest causation and damage issues as to every class member is also threatened. The decisions in two unrelated cases over the past month demonstrate just how far we have strayed from the fundamental and traditional concepts.
In In Re Target Corporation Data Security Breach Litigation, Judge Magnuson last month certified the class negligence claims of the financial institutions that claimed to have suffered losses from the well-known Target data breach. And more recently, Judge Copenhaver in federal southern district of West Virginia certified the negligence claims of homeowners, who claimed to have suffered injury by reason of the water contamination of the Kanawha River in Charleston, West Virginia.
In each case and in several others (see our previous posts on October 10, 2015; July 11, 2014; and May 16, 2014), the arguments by the defendants that the individual issues of damages and causation precluded certification were quite literally swept under the rug.
In Target, the plaintiff financial institutions argued Target was negligent when failing to provide sufficient security to prevent hackers from accessing customer data. The Court recognized that the plaintiff had to show a duty, a breach of duty and damages caused by the breach, but then simplistically dismissed Target’s arguments that causation was an individual issue that must be heard with liability. According to Judge Magnuson, Target’s arguments were just about damages, and damages were frequently tried separately from liability for class actions purposes. In other words, the notion that there may be individual causation issues that Target had a right to present in reference to the negligence claims was just ignored.
Using a similarly simplistic approach, the West Virginia court reached the same conclusion in Good, et al. v American Water Works Company, et al:
“While courts have denied certification when individual damage issues are especially complex or burdensome…where the qualitatively overarching issue by far is the liability issue of the defendant's willfulness, and the purported class members were exposed to the same risk of harm every time, such as where a defendant violates a statute in the identical manner on every occasion, individual damages issues are insufficient to defeat class certification under Rule23(b)(3). The same principle would apply here to the alleged liability in negligence.”
Again, the individual nature of the causal element of the tort of negligence was not even referenced.
This oversimplified approach was all the more galling by the Supreme Court’s decision in Dukes v. Wal-Mart, which many thought would provide the governing class certification rules. In Dukes, the Court noted that even though Wal-Mart may have had employment practices that could be considered discriminatory – presenting a common issue – that fact in and of itself was not determining. This because, in order to resolve the dispute raised by the class claims, the individual issue for the dismissal of each employee had to be resolved. Class certification was inappropriate:
“Here respondents wish to sue about literally millions of employment decisions at once. Without some glue holding the alleged reasons for all those decisions together, it will be impossible to say that examination of all the class members’ claims for relief will produce a common answer to the crucial question why was I disfavored.”
Conceptually, the notion that each class member’s negligence claim requires an individual determination of causation is no different.
The Target and Waterworks certifications are problematic for another reason: In neither decision is there a recognition or suggestion as to when and how defendants would be able to present their causation defenses. Any adjudication that would not allow the defendants to fully and fairly litigate their defenses to individual claims would, according to Dukes, run afoul of the Rules Enabling Act ( Rule 23 cannot be used to “abridge, enlarge or modify any substantive right,” 28 U. S. C. §2072(b).) Yet both cases can be read to hold that once there is a common determination of liability (was there a duty that was breached?) the only thing left to resolve was the individual amounts of damages.
This term, the Supreme Court will again look at class actions in Tyson. (See our past blog post “Dow Chemical, Tyson Food, Wal-Mart and Allstate Insurance: Will SCOTUS Clean Up Its Class Action Mess?”)
Perhaps the Court will use this as an opportunity to rein in a lower court judiciary that seems hell bent to ignore Dukes and carve out single issues for certification. And the Rule 23 Subcommittee of the federal Judicial Conference Advisory Committee on Civil Rules has also gotten into the act, proposing that Rule 23 be changed to state that predominance is not a requirement for certification of an “issues class” to resolve particular issues on a class wide basis under section (c)(4).
All this despite – or perhaps because of – the well recognized principle that certification, given the massive costs and risks for defendants, usually means settlement. (Indeed, there are reports that the Target case has already been settled). While encouraging resolution of cases may be a good thing, that’s only if the settlement is based on the merits, not the threat created by generating a monstrous class, which forces defendants to capitulate and pay more than they should, or even face financial ruin.