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Supreme Court again takes hard look at class actions

After a series of rulings that left some litigators questioning the future of class action litigation, the U.S. Supreme Court will wade into the issue once again next term with a decision that could clarify class certification standards, but also could severely limit the ability of plaintiffs to get class-wide claims past the pleading stage.

A ruling against the plaintiffs in Comcast v. Behrend would make “class actions much more difficult to bring, much more expensive to bring, and would require many, many more experts to certify,” said Philip J. Gordon of the Gordon Law Group in Boston, an employment law firm representing employees. “It would mean that millions of citizens will never get their day in court and never get the relief for the wrongs that are happening to them on a daily basis.”

But members of the defense bar welcomed the court’s grant of certiorari in the case, saying it gives justices the opportunity to state directly what they have already hinted at in past cases: that evidence proffered by plaintiffs and their experts at the class certification stage must meet a standard similar or equal to that required at the merits stage.

“I think it’s an incredibly important question,” said John B. Lewis, a partner in the Cleveland office of Baker & Hostetler where he defends complex employment, civil rights and regulatory class actions. “I think that this is an opportunity for the Supreme Court to articulate a standard and continue to articulate a better understanding of what the law is.”

The case stems from an antitrust suit filed on behalf of cable subscribers alleging that the company violated the Sherman Act by engaging in schemes to eliminate competition in the Philadelphia market.

Comcast argued that class certification was improper because the plaintiffs’ expert did not provide a workable model to prove damages on a class-wide basis.

The 3rd U.S. Circuit Court of Appeals disagreed.

“At the class certification stage we do not require that Plaintiffs tie each theory of antitrust impact to an exact calculation of damages, but instead that they assure us that if they can prove antitrust impact, the resulting damages are capable of measurement and will not require labyrinthine individual calculations,” the court’s majority held. “We are satisfied that Plaintiffs’ damages model meets this burden.”

The Supreme Court granted certiorari to decide the question of whether courts “may certify a class action without resolving whether the plaintiff class has introduced admissible evidence, including expert testimony, to show that the case is susceptible to awarding damages on a class-wide basis.”

 Deciding when ‘Daubert’ applies

In taking up the case, the court has a chance to decide what lawyers and lower courts have been struggling with for some time: whether the standard for admitting expert testimony established in the 1993 case Daubert v. Merrell Dow Pharmaceuticals, Inc. (509 U.S. 579) applies at the class certification stage.

That case held that expert evidence can be admitted at trial only if the expert testifies on technical, scientific or other specialized knowledge that has a valid scientific connection to the case and that will assist the trier of fact.

Courts have split on the issue of whether a full-fledged Daubert analysis is required at the class certification stage, with some falling on either side and others holding that some modified version of the standard — sometimes called “Daubert-light” — applies instead.

But in last year’s Supreme Court ruling in Wal-Mart v. Dukes, Justice Antonin G. Scalia made a statement in dicta that changed the tide: “The District Court concluded that Daubert did not apply to expert testimony at the certification stage of class-action proceedings. We doubt that is so.”

Since then, “most lower courts have followed that dicta,” said Sean P. Wajert, a partner in the Philadelphia office of Shook, Hardy & Bacon and author of the Mass Tort Defense blog.

But as in most cases, the devil is in the details, and lawyers are waiting to see whether the evidence proffered will have to withstand a full Daubert inquiry, or some modified version of it.

The court’s answer — if it chooses to give one — “will have implications for discovery, timing, costs and obviously strategy,” Wajert said.

Equally as important is the issue the court chose to focus on in its question presented: whether class members, at the outset, must show that damages can be awarded on a class-wide basis.

Wajert said the issue is crucial to eliminate situations in which plaintiffs successfully prove liability, only to later find that there is no way to calculate a way to award damages to all class members.

“If you have a large class, you may have discovery on the issue, you may have factual disputes, you may have a mini-trial just on the issue of damages,” Wajert said. “Theoretically, [plaintiffs] can win and not have any provable damages.”

‘One more nail in the coffin’?

Plaintiffs’ attorneys said the grant of certiorari in the case, on the heels of the court’s rulings in Dukes and in AT&T Mobility v. Concepcion, evidences some justices’ animosity toward class action litigation.

“There is something of a movement afoot at the Supreme Court level to make class certification more difficult,” Gordon said.

A ruling toughening the standard of proof at the certification stage could prove devastating to plaintiffs who are seeking to hold companies responsible for wrongdoing, but whose individual damages are less than the cost of bringing a single lawsuit, Gordon said.

“We will have to tell clients that unless they can put up $1 million for a $50,000 or $100,000 case, we can’t do it,” Gordon said. “There will be no relief, and there will be no corrective action taken against corporate wrongdoing. … It’s just one more nail in the coffin [of] class actions.”

While Wajert said a ruling against the class members “will give some plaintiffs pause about bringing class actions,” it won’t be the end of class actions altogether.

“I think it will have a tremendous impact on cases that would have been disposed of early anyway,” Wajert said.

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