The Supreme Court's recent terms have been marked by a steady stream of decisions that commentators have predicted will reshape employment-related class action litigation. This past term was no exception, with most commentators focusing their attention on the Court's decision in Comcast Corp. v. Behrend, 133 S. Ct. 1426 (2013).
Among other things, the Comcast decision—echoing parts of the Court's earlier landmark decision in Wal-Mart Stores, Inc. v. Dukes, 131 S.Ct. 2541 (2011)—reaffirmed that, before granting class certification, lower courts must first conduct a "rigorous analysis" that will "frequently entail overlap with the merits" of the case to ensure that all of the requirements of the class action rule, Rule 23, are satisfied. Taking the analysis one step further, Comcast also held that courts may not certify a class seeking monetary damages unless all of the damages sought resulted from a common mechanism—an employment policy is a good example—that harmed all of the class members. Specifically, the Court cautioned that class certification is not proper when "damage calculations will inevitably overwhelm questions common to the class."
Even though Comcast involved antitrust claims, observers instantly hailed this holding as "incredibly important" and a "profoundly significant and positive development" for companies facing class action lawsuits of all types.
Six months have passed since the Court decided Comcast. Has the case lived up to the predictions? As with much in law, the answer is not cut and dry, but Comcast's impact on class action litigation cannot be denied. Indeed, Comcast has already been cited in nearly 100 lower court opinions, including in many employment class actions. That is a lot of citations, even for a major Supreme Court opinion. To put it in perspective, the Supreme Court's most talked about recent case, United States v. Windsor, which invalidated the Defense of Marriage Act, has been cited in less than 20 lower court opinions.
What really matters, though, is not how often courts cite Comcast, but how they have interpreted it. On that score, much of the interpretation has focused on two aspects of the decision, both of which are of interest to employers facing class action lawsuits.
The first is Comcast's admonishment that lower courts need to consider all arguments that bear on the propriety of class certification, even if those arguments overlap with the merits of the case. Traditionally, many courts, including the lower court in Comcast, took the view that because the decision of whether class certification is appropriate is made based on a different legal standard than the decision on the underlying merits of the case, courts should not consider merits issues when deciding class certification. But as one district court has noted, Comcast "leav[es] no doubt" that approach is no longer good law. Parra v. Bashas', Inc., No. CIV-02-0591-PHX-RCB, 2013 WL 2407204, at *4 (D. Ariz. May 31, 2013).
Importantly, this does not mean that employers can defeat class certification simply by showing that plaintiffs are likely to lose on the merits. Rather, it means that courts should look at how plaintiffs will prove the merits of their underlying case and decide whether they can do so through common evidence. For example, if the law in an employment discrimination case requires the plaintiffs to prove that the reason for a particular employment decision was discriminatory, courts can consider whether the plaintiffs can prove that claim using common evidence like an employment policy (in which case class certification may be appropriate) or whether they can only prove their claims through individualized evidence like a particular supervisor's discriminatory animus (in which case class certification is likely inappropriate). This is still an important development for employers because it raises the bar for obtaining class certification by requiring plaintiffs to prove that their claims can be resolved by common evidence.
The second focus of lower court's interpretation of Comcast has been on what the Supreme Court had to say about damages. The Supreme Court cautioned that courts must consider whether "questions of individual damage calculations will inevitably overwhelm questions common to the class." 133 S.Ct. at 1433. This is of great importance to employers because damages in employment-related class actions inevitably vary among class members based on things like total salary, length of employment and work schedules. And if computing damages based on those variables becomes too complicated, Comcast instructs that class certification is not appropriate.
Courts immediately seized upon this holding in wage and hour cases. One of the first was Roach v. T.L. Cannon Corp., 3:10-CV-0591 TJM/DEP, 2013 WL 1316452 (N.D.N.Y. Mar. 29, 2013), a class action case involving claims that an employer had not calculated and paid its employees' wages in accordance with New York law. Beyond a boilerplate assertion that the class members had not been paid properly, the plaintiffs offered no way of showing how damages could be calculated on a class-wide basis. The court found that evidence suggesting that the plaintiffs were only sometimes not paid in accordance with the law demonstrated that damages "are in fact highly individualized," which render class certification improper under Comcast.
Likewise, in Smith v. Family Video Movie Club, Inc., No. 11 CV 1773, 2013 WL 1628176 (N.D. Ill. Apr. 15, 2013), the court, relying on Comcast, denied class certification of an Illinois state law claim asserting that employees had not been paid for off-the-clock work. The court found that determining how much unpaid work each class member performed—which was necessary to compute damages—would be an individualized task that would overwhelm common questions because the evidence demonstrated that the amount of off-the-clock worked "varie[d] greatly from store to store and from store manager to store manager."
Even so, some courts have cautioned that individualized damages will not preclude class certification under Comcast if the damages can be calculated in an easy way. For example, in Leyva v. Medline Industries, 716 F.3d 510 (9th Cir 2013), the Ninth Circuit held that Comcast did not preclude class certification of a state law wage and hour claim, despite the fact that each class member's damages were different, because evidence suggested that the employer could "efficiently" calculate damages using information in a computer database. The court reasoned that "if the putative class members prove [the defendant's] liability, damages will be calculated based on the wages each employee lost due to [defendant's] unlawful practices" and that "damages could feasibly be calculated once the common liability questions are adjudicated."
Leyva arguably rejects the broadest reading of Comcast—that the need to calculate each class member's damages itself precludes class certification. This interpretation was echoed in a recent opinion by Judge Posner, who wrote that "[i]t would drive a stake through the heart of the class action device, in cases in which damages were sought rather than an injunction or a declaratory judgment, to require that every member of the class have identical damages." Butler v. Sears, Roebuck & Co., 11-8029, 2013 WL 4478200 (7th Cir. Aug. 22, 2013).
So where does this leave us? Based on Comcast's treatment in the lower courts so far, there are three big takeaways:
- First, there is no longer any doubt that courts can look at the type of evidence the parties will present on the underlying merits of the case when deciding class certification.
- Second, when plaintiffs assert class claims for money damages—like unpaid overtime or other back pay—their damages must flow from some common injury, such as the application of a particular employment policy.
- Third, the fact that each class member may have experienced different damages does not necessarily preclude class certification, provided that damages can still be calculated efficiently, such as by using wage information in a computer database.
Of these three, look for the third to be the focus of the most debate in the coming months. Parties, particularly in employment cases, are likely to vigorously dispute how easily damages can be calculated. How courts resolve those disputes in light of Comcast's guidance that "individual damage calculations" cannot overwhelm issues common to the class will undoubtedly shape how employers defend themselves against class actions for many years to come.