In Hirsch v. CSX Transp., Inc., ___ F.3d ___, 2011 WL 3926369 (Sept. 8, 2011), the Sixth Circuit joined other federal circuits in requiring putative class plaintiffs to plead the elements of causation and damages or face dismissal of their class allegations. The decision is welcome news to class defendants because the Court upheld dismissal on summary judgment—before class certification—thus affirming that district courts may dismiss class claims before a certification hearing. It also offers a valuable tutorial on the strategic opportunities surrounding Daubert hearings.
A Three Day Fire
Jonathan Hirsch brought this lawsuit during the evacuation of his home town, which was caused by the derailment of a CSX train. Here’s what happened.
On October 10, 2007, a CSX train derailed near Painesville, Ohio and caused a serious fire that burned for almost three days. Hirsch, 2011 WL 3926369 at *1. The fire prompted the evacuation of approximately 1300 residents and, according to Plaintiffs, sent 2800 tons of burning material into the atmosphere. Plaintiffs claimed that the “fire produced toxic chemicals even from non-toxic cargo,” and allegedly caused elevated levels of dioxin in Painesville. Id. Filed just one day after the derailment—and “presumably while the fire was still burning”—Plaintiffs asserted claims of negligence, nuisance, strict liability, trespass, and medical monitoring under Ohio law. Id.
Following discovery—presumably on the merits of the claims—CSX moved for summary judgment. Id. Because CSX had previously stipulated that it breached a duty when the train derailed, the only issue remaining was whether “CSX’s breach proximately caused injury” to Plaintiffs. Id.
Here’s where the case gets interesting. Plaintiffs hired four experts to establish a factual basis for their injury:
- A chemical engineer who tested the community for dioxin;
- A chemist who “speculated as to the amount of the cargo burned”;
- A physicist who “plotted the dispersion and concentration of the chemicals from the fire on a map” showing who in the “community were exposed to what levels of dioxin”; and
- A physician who used the map to determine who in the community was likely to have been exposed to levels of dioxin that exceeded EPA standards.
Despite the extensive record of expert testimony, CSX did not ask the district court for a hearing pursuant to Daubert v. Merrill Dow Pharm., U.S. 509 U.S. 579, (1993), nor did it file a motion to exclude their testimony. Id. at *2. Instead, CSX elected to bypass a pre-trial challenge to the admissibility of the experts’ testimony and filed a motion for summary judgment. Id.
One Half of One in a Million of a Chance
The Sixth Circuit began its analysis noting that the absence of a Daubert challenge by Defendants presented the case in a “rather unusual posture.” Id. at *2. Indeed, it is usually the defendants who request a Daubert ruling to determine the admissibility of the plaintiffs’ experts—but here it was Plaintiffs who insisted that they were entitled to one. Id.
The Court disagreed, and distinguished “the admissibility of evidence from its sufficiency.” Id. (emphasis in original). Even if an expert’s opinion is admissible under Daubert standards, the district court retains the discretion—indeed the obligation—to decide whether the evidence “amounts to more than a mere scintilla.” Id.
And why didn’t these four experts offer more than a mere scintilla of evidence on the issue of injury? Because they testified that, at most, the class suffered no more than an insignificant risk of injury, rather than an injury in fact.
Describing Plaintiffs’ claim as “conceptually unique,” the Court noted that Plaintiffs themselves conceded that they had not yet suffered any compensable injury. “Rather, their alleged injuries consist solely of the increased risk of . . . certain diseases . . .” Id. at *3. It was thus up to the experts to establish that a reasonable physician would order medical monitoring for them.
One expert offered the conclusory statement—with little explanation—that a reasonable physician would order such monitoring. But “an expert’s bare opinion on the ultimate issue” is not enough to carry the day. Id. at *3.
Another expert—relying on the suspect methodology of the other experts—testified that Plaintiffs might have been exposed to enoughdioxin to place them “somewhere around 50% of a one in a million additional risk of developing cancer.” Id. at *4. Describing the risk as “proverbially small,” the Court noted that the average American stands a greater chance of drowning in a bathtub in any given year (1/840,000) than the risk of contracting cancer advanced by Plaintiffs’ experts. Id. (citing Harvard Center For Risk Analysis). According to the Court, the expert’s testimony amounted to no more than “a mere scintilla” of evidence. Id. at *5.
Several lessons emerge from this case. First, CSX offers an alternative perspective on the need for—and the opportunities created by the absence of—a Daubert hearing in class proceedings. In an appropriate case, defendants should consider whether the Daubert hearing—and the pre-hearing briefing—will only educate the plaintiffs and create a forum to rehabilitate a weak expert record. CSX’s decision to forego the Daubert hearing meant that the experts were locked into indefensible positions.
Second, the Court’s distinction between the admissibility and sufficiency of expert testimony suggests a multi-tiered strategy for the prosecution of a Daubert hearing. A court’s ruling that an expert’s testimony is admissible does not mean that it is sufficient to create a genuine issue of material fact. CSX illustrates how an expert’s testimony might be one, but not the other.
Third, and most important, CSX stands for the crucial proposition that class allegations—and proof—must satisfy the basic elements of causation and damages. Indeed, the “no-injury” class action has appeared in many forms in recent years. Some commentators trace the no-injury class to products liability claims. But the theory has evolved and has been advanced in cases alleging fraud, RICO, violations of consumer statutes, breach of warranty, and the like. See, e.g., In re Toshiba America, 2009 WL 2940081, Case No. 08-939, MDL No. 1956, D. N.J. (Sept. 11, 2009); In re Schering-Plough Corp. Intron/Temodar Consumer Class Action, 2009 WL 2043604, Case No. 2:06-CV-5774 D.N.J. (July 10, 2009). Cases in which the plaintiffs allege “risks” of harm that have not yet manifested, defects without physical harm, economic loss based on diminished value, or purchases that would not have been made but for statements or omissions, are all candidates for a no-injury class.
Equally important, no-injury classes may—and should—be challenged by motions at the outset of the litigation. And, while many such classes are challenged for failure to state a claim under Federal Rule 12(b)(6), defendants should consider a more dynamic basis for dismissal: Lack of standing under Federal Rule 12(b)(1).
Unlike Federal Rule 12(b)(6)—where the plaintiffs’ allegations are accepted as true—Federal Rule 12(b)(1) shifts the burden to the plaintiffs to demonstrate the existence of subject matter jurisdiction. No presumption of truthfulness attaches to the plaintiffs’ allegations, and the existence of disputed facts will not preclude a trial court from evaluating the merits of the jurisdictional claims. See, e.g., In re Schering-Plough Corp. Intron/Temodar Consumer Class Action, 2009 WL 2043604 at *6.
In addition, where there are allegations of fraud or violations of certain consumer statutes, Federal Rule 9(b) will also impose a more rigorous pleading standard and, hence, shift the burden to the plaintiffs to establish causation and damages. See, e.g., In re Toshiba America, 2009 WL 2940081 at *13.
Like the mythical shape shifter, the no-injury class continues to assume many forms. The CSX case provides authority to challenge these cases at the earliest stage of the proceedings.