The 11th Circuit earlier this month vacated the district court's premature certification of a class of property owners allegedly harmed by releases from a nearby industrial facility. Sher v. Raytheon Corp., No. 09-15798 (11th Cir. 3/9/11).

Plaintiffs alleged that Raytheon, through improper disposal and/or storage of hazardous waste at its St. Petersburg, Florida facility, was responsible for the release of toxic waste into the groundwater of surrounding neighborhoods.

To demonstrate the predominance of common issues under Rule 23(b)(3), plaintiffs’ offered a groundwater expert, Dr. Philip Bedient, who identified the impacted area as a toxic underground plume stretching approximately one mile long and 1.7 miles wide from the Raytheon facility. The need to show on an individual basis the impact of the pollution on each property is a major reason these kinds of property damage class claims are not certified. To try to show here that damages for alleged property injury to 1000 class members could be appropriately resolved in a single class action, plaintiffs presented the affidavit of their damages expert, Dr. John A. Kilpatrick, who stated that he could develop a hedonic multiple regression model to determine diminution-in-value damages without resorting to an individualized consideration of each of the various properties.

Defendants, in turn, challenged Dr. Bedient’s methodology for defining the impacted area, or really the putative class, as “inconsistent with applicable professional standards.” Dr. Bedient’s area of impact apparently encompassed many properties on which no contamination had been detected at all. Raytheon also introduced its damages expert, Dr. Thomas O. Jackson. Dr. Jackson’s report stated that the Plaintiffs’ expert’s “proposed method of analysis of property value diminution using mass appraisal/regression modeling would be unacceptable for this purpose, and would not eliminate the need to evaluate each property in the proposed class area on an individual basis.”

So, notwithstanding the general rule that the court should not delve too deeply into the merits at the class certification stage, the court was confronted with dueling experts, and, more importantly, a serious challenge to the methodology of plaintiffs' experts.

As a threshold matter, the district court punted-- finding that it was not necessary at this stage of the litigation to declare a "proverbial winner in the parties’ war of the battling experts" or choose between the dueling statistics and chemical concentrations. This type of determination would require the court to weigh the evidence presented and engage in a Daubert-style critique of the proffered experts qualifications, which would be "inappropriate" at this stage of the litigation. More specifically, an inquiry into the admissibility of plaintiffs’ proposed expert testimony as set forth in Daubert would be inappropriate, "because such an analysis delves too far into the merits of Plaintiffs’ case."

On appeal of the certification order, the court of appeals found the Seventh Circuit’s opinion in American Honda Motor Co., Inc., 600 F.3d 813 (7th Cir. 2010), to be persuasive. We posted on that before. The issue before the Seventh Circuit in American Honda was whether or not the district court should have conclusively ruled on the admissibility (versus the weight of, as also in this case) of expert opinion prior to certifying the class. In American Honda, the Seventh Circuit found that “when an expert’s report or testimony is critical to class certification, as it is here . . . , a district court must conclusively rule on any challenge to the expert’s qualifications or submissions prior to ruling on a class certification motion.” Id. at 815-16. The American Honda court found that, if the situation warrants, the district court must perform a full Daubert analysis before certifying the class. Id. at 816. “A district court is the gatekeeper. It must determine the reliability of the expert’s experience and training as well as the methodology used." Id. “The [district] court must also resolve any challenge to the reliability of information provided by an expert if that information is relevant to establishing any of the Rule 23 requirements for class certification.” Id.

Accordingly, here, in its Rule 23 analysis, the district court erred as a matter of law by not sufficiently evaluating and weighing conflicting expert testimony on class certification. It was error for the district court to decline to declare a proverbial, yet tentative winner of the Daubert issue. Plaintiffs are required to prove, at the class certification stage, more than just a prima facie case, i.e., more than just a “pretty good case.” A district court must make the necessary factual and legal inquiries and decide all relevant contested issues prior to certification. Thus, the court erred in granting class certification prematurely. Tough questions must be faced and squarely decided, said the court, not side-stepped in an overly cautious attempt to avoid the merits.