Comcast v. Behrend: Has it Made an Impact?
When the United States Supreme Court accepted review of Comcast v. Behrend, many legal observers believed that it would resolve a circuit split over whether expert reports submitted for purposes of class certification must satisfy the Daubert v. Merrell Dow admissibility standards. While Comcast ultimately did not address this issue, it did confirm that courts should scrutinize expert reports prior to certification. Comcast emphasized the necessity of a close relationship between the proposed method of establishing damages and the theory of liability. This aspect of Comcast has received the most attention from lower courts and many have applied this case in a variety of situations.
Perhaps most notably, the D.C.
Circuit rejected class certification in an antitrust class action where the plaintiffs’ damages model resulted in some “false positives” of injury where none existed. In In re Rail Freight Fuel Surcharge Antitrust Litigation-MDL No. 1869, the court emphasized that pursuant to Comcast, the plaintiffs needed their proposed damages model to establish common evidence of classwide injury, and without that model class certification was futile. In other words, “[n]o damages model, no predominance, no class certification.”
Similarly, in Forrand v. Federal Express Corp., the Central District of California rejected the plaintiff’s proposed method of proving class-wide damages in a putative employment class action that would involve comparing the times that employees clocked in and clocked out with the time for which they were paid. The court held that such a method was inconsistent with both the law and the facts, because the time during which employees were clocked in did not necessarily equate to the time in which they worked. In support of this determination, the court noted that pursuant to Comcast, “a plaintiff must bring forth a measurement method that can be applied classwide and ties the plaintiff’s legal theory to the impact of the defendant’s allegedly illegal conduct.”
Comcast has also been cited by courts for denying class certification where plaintiffs have failed to produce any model for determining damages on a class-wide basis. In Roach v. Cannon Corp., a plaintiff in a putative employment class action contended that it was not necessary to offer “a damages model susceptible of measurement across the entire class” as “this issue is separate from the question of liability.” The Northern District of New York found that this argument was at odds with the Comcast holding, which clearly required production of such a model. The Second Circuit recently agreed to hear an appeal of this decision.
Plaintiffs have attempted to circumvent Comcast by seeking certification of a liability-only class, reserving issues of damages for later. Indeed, some courts, on their own initiative, certified liability-only classes to avoid potential class certification obstacles regarding damages. These courts applied reasoning similar to that set forth by the Eastern District of Michigan in Miri v. Dillon, concluding that such an approach “will provide significant economies of time, effort and expense for the litigants and the Court in light of the predominance of common questions of fact and law regarding liability.” While some defendants argued that such an approach is improper in light of Comcast, several district courts have rejected this argument, typically on the grounds that Comcast did not address this issue.
In In re Whirlpool Corp. Front-Loading Washer Product Liability Litigation, the Sixth Circuit held that Comcast did not apply where the plaintiffs sought liability-only certification. The Whirlpool decision is particularly significant, as it followed an order by the Supreme Court vacating the Sixth Circuit’s previous class certification decision and directing reconsideration in light of Comcast. In concluding that Comcast did not require the court to depart from its initial decision affirming class certification, the Sixth Circuit observed that “[w]here determinations on liability and damages have been bifurcated,” the Comcast holding has “limited application.”
The Seventh Circuit reached the same result in a parallel class action. As in Whirlpool, Butler v. Sears, Roebuck and Co. was vacated and remanded for reconsideration in light of Comcast. As with the Sixth Circuit, the Seventh Circuit held that Comcast was distinguishable because the plaintiffs only sought class certification with regard to liability issues. The court observed that if “issues of liability are genuinely common issues, and the damages of individual class members can be readily determined,” the “fact that damages are not identical among all class members should not preclude class certification.” According to the court, any other result would “drive a stake through the heart of the class action device.”
It remains to be seen whether the Supreme Court will accept review of Whirlpool, Butler, or another case addressing the continued utility of liability-only classes. Until the Supreme Court rejects or limits the use of such classes, plaintiffs may increasingly turn toward liability-only classes in an effort to mitigate the impact of Comcast.
Issue Certification Under Rule 23(c)(4) in a Post-Wal-Mart World
The Supreme Court’s decisions in WalMart v. Dukes and Comcast v. Behrend
have made certification of Rule 23(b)(3) classes increasingly difficult for plaintiffs in federal court. It comes as no surprise that enterprising plaintiffs’ attorneys have sought alternative ways to certify classes, including through the use of Rule 23(c)(4), which allows for “issue certification.” The few circuit courts that have dealt with this subsection are split as to whether they can certify a class by certain issues in a case even where other issues may not satisfy the stringent predominance requirement of Rule 23(b)(3). Until the Supreme Court clarifies when issue certification is proper, defendants can expect an uptick in the number of proposed Rule 23(c)(4) class actions.
Rule 23(c)(4) states: “When appropriate, an action may be brought or maintained as a class action with respect to particular issues.” This offers plaintiffs the option of bringing a class action on issues of liability, and allowing individual adjudication of damages after certification. Therefore, courts can be faced with the question of whether plaintiffs are using issue certification to manipulate their way around the stringent requirements of Rule 23(b)(3), or if this mechanism will help the trial court effectively manage the proposed class litigation.
The circuit courts that have dealt with the possibility of issue certification under Rule 23(c)(4) have approached the topic in a variety of ways.
In the 1996 decision Castano v. American Tobacco Co., the Fifth Circuit reviewed the lower court’s grant of issue certification under Rule 23(c)(4) to certain aspects of the plaintiffs’ proposed class. Specifically, the district court granted certification as to the issues of “core liability” and punitive damages, while finding that other issues, including proximate cause, reliance and affirmative defenses, did not satisfy the predominance requirement of Rule 23(b)(3). On appeal, however, the appellate court rejected outright what it called the trial court’s “manufactur[ing of] predominance through the nimble use of subsection (c)(4) by divvying up various issues of liability and damages until certification was proper.”
The Fifth Circuit court went on to hold that the “proper interpretation of the interaction between subdivisions (b)(3) and (c)(4) is that a cause of action, as a whole, must satisfy the predominance requirement of (b)(3) and that (c)(4) is a housekeeping rule that allows courts to sever the common issues for a class trial.” Based on this language, the Fifth Circuit appears rigidly against the prospect of the use of issue certification as a way of overcoming opposition to class certification. The court warned that through the use of issue certification, a plaintiff could “sever issues until the remaining common issue predominates over the remaining individual issues [and thus] eviscerate the predominance requirement of rule 23(b)(3).”
Conversely, the Fourth Circuit found that the Fifth Circuit’s approach in Castano would render the language of Rule 23(c)(4) null and void, and preclude the use of issue certification, which is plainly provided for in Rule 23. In In re Nassau County Strip Search Cases, the Second Circuit similarly disagreed with the Fifth Circuit’s approach, citing Advisory Committee notes and commentator analysis in support of its holding that it was proper to certify liability issues even where the question of damages could not satisfy predominance. Numerous other courts within the Second, Seventh and Ninth Circuits have found issue certification proper, particularly where the case can be cleanly divided into separate liability and damages phases. Notably, this pattern has continued after Wal-Mart and Comcast.
The prospect of “automatic certification” of classes around the country — through what the Fifth Circuit calls the “nimble use” of issue certification — is obviously troubling for potential class action defendants. Given the Supreme Court’s recent laser-like focus on class action jurisprudence, if plaintiffs’ attorneys begin to use Rule 23(c)(4) to increase their success rate of certification in federal court, it is likely that one of these cases will eventually be granted certiorari. Indeed, the controlling majority on the Supreme Court court is well aware of the pressure defendants face post-certification given the possibility of large trial verdicts and exorbitant legal fees. In the meantime, defendants in class action litigation should remain aware of the case law (or lack thereof) in their controlling jurisdiction on the question of issue class certification under Rule 23(c)(4).
Recent cases of note
Eighth Circuit Applies “Legal Impossibility” Standard to
Measure CAFA’s Amount in Controversy Requirement
In Raskas v. Johnson & Johnson, 719 F.3d 884 (8th Cir. 2013), the Eighth Circuit recently reversed a district court’s remand to state court of three nearly identical putative class action suits against separate drug companies. The suits allege that the defendants violated the Missouri Merchandising Practices Act and conspired to deceive consumers into throwing away medications after their expiration dates, knowing the medications were safe and effective beyond those dates. The drug companies removed to the U.S. District Court for the Eastern District of Missouri, but the district court held it did not have subject-matter jurisdiction over the case because the drug companies had not met the $5 million controversy requirement amount under the Class Action Fairness Act (CAFA). The drug companies appealed, arguing the total sales of their respective medications in Missouri during CAFA’s five-year statute of limitations period did, in fact, exceed $5 million. The Eighth Circuit agreed, holding it was not “legally impossible” for the plaintiffs to recover at least $5 million, therefore joining the Seventh Circuit in applying the most defendant-friendly standard for evaluating CAFA’s amount in controversy threshold.
Defendants Authorized to Remove Class Actions to Federal Court After Expiration of Thirty-Day Periods for Removal
In a novel decision, the Ninth Circuit rejected the principle that the two 30-day removal periods set forth in 28 U.S.C. §§ 1446(b)(1) & (b)(3) are the only windows during which defendants can remove a case to federal court. In Roth v. CHA Hollywood Med. Ctr., L.P., 2013 WL 3214941 (9th. June 27, 2013), after the plaintiffs filed their complaint in California state court, the defendants removed to the U.S. District Court for the Central District of California. Arguing that the defendants’ time to remove expired, the plaintiffs moved to remand the case, and the district court granted the plaintiffs’ motion. The Ninth Circuit reversed, holding that a defendant who has not lost the right to remove because of a failure to timely file a notice of removal under § 1446(b)(1) or (b)(3) may remove to federal court at the time it discovers, based on its own investigation, that a case is removable.
Plaintiffs’ Willful Skirting of Federal Jurisdiction Under CAFA Endorsed
For the first time, the Eleventh Circuit, in Scimone v. Carnival Corp., 720 F.3d 876 (11th Cir. 2013), allowed plaintiffs to skirt federal jurisdiction by drafting complaints specifically designed to avoid the reach of CAFA’s mass action provision. The plaintiffs initially filed one lawsuit in Florida state court against Carnival Corp., seeking a combined $1.4 billion in damages on behalf of more than 100 class members over the sinking of the Costa Concordia. Before the defendant could remove the case pursuant to CAFA, the plaintiffs voluntarily dismissed the complaint and subsequently filed separate complaints, each naming fewer than 100 plaintiffs.
Carnival subsequently removed the two cases to the U.S. District Court for the Southern District of Florida, claiming the court had subject-matter jurisdiction under CAFA’s mass action provision. The district court disagreed, ruling that neither suit satisfied the statute’s 100-plaintiff requirement. The Eleventh Circuit affirmed, finding that plaintiffs are free to structure their complaints to avoid federal jurisdiction as long as they are willing to undergo the inconvenience of two separate trials.
Individual Questions in Policyholders’ PIP Bad Faith Claim Predominate Over Common Questions
In Halvorson v. Auto-Owners Ins. Co., 718 F.3d 773 (8th Cir. 2013), the Eighth Circuit reversed the U.S. District Court for the District of North Dakota’s decision to certify a class of auto policyholders who sued their insurer, Auto-Owners Insurance Company and its subsidiary, Owners Corporation, for breach of contract and bad faith. The lawsuit alleges that the defendants instituted a personal injury protection (PIP) bill review system that “nickel and dimed” providers by paying amounts below the limits of policy coverage. The district court certified a portion of the class that included policyholders residing in North Dakota. On appeal, the Eight Circuit held that a class action would not be the superior method of adjudicating the action because individual issues, particularly whether a provider’s charge was “usual and customary,” would predominate over the common question of whether the defendants’ bill review system was reasonable.
Three-Year Delay in Raising CAFA “Home State” Exception Reasonable
In Gold v. New York Life Ins. Co., 12-2344- CV, 2013 WL 5226183 (2d Cir. Sept. 18, 2013), the Second Circuit recently affirmed the Southern District of New York’s order throwing out a putative class action against New York Life Insurance Co. (New York Life). The plaintiffs alleged that New York Life violated labor laws by improperly denying certain employees overtime and deducting wages from their paychecks. The district court denied federal jurisdiction under CAFA’s “home state” exception, holding that the claims and parties were too localized in New York. Although New York Life did not raise this exception for nearly three years, the Second Circuit found the delay acceptable because the application of the exception was complicated by the district court’s bifurcated discovery schedule, where class discovery could not proceed until the close of individual discovery