In the year and a half since the United States Supreme Court’s decision in Wal-Mart Stores, Inc. v. Dukes, litigants, courts and even the Supreme Court itself have continued to analyze the legal standard for certification of Rule 23 class actions.  The Supreme Court heard oral argument yesterday in Comcast Corp. v. Behrend, a case that could have important implications for wage and hour class actions, and perhaps collective actions as well.

The named plaintiffs in Behrend alleged that antitrust violations by Comcast caused damages to about two million cable subscribers in Greater Philadelphia by raising the price of their cable service.  The trial court judge certified a class of the two million subscribers, based in part on the judge’s finding of “predominance” -- a finding that questions of law or fact that affected all of the would-be class members “predominated” over questions affecting only individual customers.  Comcast argued that it was improper to certify the class because the named plaintiffs’ only evidence of the damages subscribers allegedly suffered was an expert witness report that Comcast contended was fundamentally methodologically flawed.  According to Comcast, the trial judge mistakenly thought he was required to accept the expert report at face value at the certification stage of the case and defer evaluation of the methodology until post-certification.

The Supreme Court agreed to consider the case but reformulated the issue presented by Comcast to the question whether a federal trial court may certify a class action without resolving whether the plaintiff has introduced admissible evidence, including expert testimony, to show that the case is susceptible to awarding damages on a class-wide basis.  Surprisingly, yesterday’s oral argument focused more on issues peripheral to that question and on procedural defects claimed by the plaintiffs than on the question presented for Supreme Court review.   In fact, at one point, it seemed that several of the Justices were considering dismissing the case because of Comcast’s alleged waiver of a key argument in the courts below.  Nonetheless, the oral argument offered at least two possible insights into the Court’s thinking that may be important for the future of wage and hour class and even collective actions.

First, both Comcast and the cable subscribers started their arguments from key premises in Dukes:  that a party seeking class certification cannot merely allege, but must be able to prove, the certification requirements; and that the trial court should conduct a “rigorous analysis” of a plaintiff’s proof regarding certification requirements.  The majority opinion in Dukes suggested that the trial court’s rigorous analysis should include assessment whether evidence offered by a plaintiff’s expert witness was sufficiently reliable to be considered admissible.  At the oral argument in Comcast, the two sides agreed that a trial judge has an obligation to make some assessment at the certification stage whether expert evidence is sufficiently reliable to support certification.  Even the lawyer for the plaintiff cable subscribers conceded this point.  If the Court’s opinion in Comcast reflects this conclusion, employees would find it harder to rely on shaky expert evidence to support certification of wage and hour class actions.

Second, there also seemed to be broad agreement at oral argument that both damages issues and liability issues (not merely liability issues) should be considered in determining whether common issues of law or fact predominate in a potential class action.  Indeed, merely by asking whether a trial court should always require admissible evidence that damages could be awarded on a class-wide basis, the Supreme Court seems to imply that the individualized nature of damages may defeat class certification.  Both sides accepted this proposition, as well, agreeing that plaintiffs had to establish that damages could be proven on a class-wide basis before a class could be certified.  In fact, at one point in the argument, Justice Kagan quipped that she was “still in search of a legal question that anybody disagrees about here.”

If the Supreme Court adopts this predominance standard for class actions that seek monetary damages as the primary relief, such as wage and hour claims, it will be far more difficult for plaintiffs to obtain class certification.  In many wage and hour class actions, claimed damages are highly individualized.  Plaintiffs have argued and a number of courts have ruled that the individual nature of damages does not defeat class certification where common questions of law or fact predominate in determining whether the employer is liable.  A ruling by the Supreme Court in Comcast that plaintiffs must be able to demonstrate that they will be able to measure damages on a class-wide basis for class certification would refute those arguments and require district courts to deny class certification in wage and hour cases that require individualized proof of damages. 

Further, if damages as well as liability issues count in deciding whether common questions predominate under Rule 23, the same rationale should apply in collective actions under the Fair Labor Standards Act in deciding whether a group of employees are “similarly situated” for purposes of conditional certification and decertification.  If a group of employees have been affected by a challenged wage and hour policy or practice in ways that would lead to individualized damages, then courts should find those employees not “similarly situated” and should deny collective certification.

It remains to be seen whether Comcast produces an important follow-on opinion to Dukes or a quiet dismissal on technical grounds.  But employers facing wage and hour claims should find the oral argument encouraging as a measure of how the common ground regarding class certification standards has shifted in the 16 months since Dukes.  We expect a decision this winter and will, of course, keep our readers informed as developments occur.