Posted on: 3/30/2012
Jeffrey Holmstrand, Falherty Sensabaugh Bonasso
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In Wal-Mart Stores, Inc. v. Dukes, 564 U.S. ___, 131 S.Ct. 2541, 180 L.Ed.2d 374 (2011), the Court announced several principles of general applicability to class actions and refined its thinking on the scope of Rules 23(a) and (b). Previous articles from DRI and other influential commentators have outlined Dukes holdings. See, e.g., Patrick D. Smith, "Long-Awaited Dukes Decision a Victory for Corporate Defendants," DRI Today (6/21/2011) ; Sean P. Wajert, "Dukes v. Wal-Mart: What It May Mean for Mass Torts," Mass Tort Defense Blog (6/21/2011); Jennifer Quinn-Barabanov, "Has Dukes Killed Medical Monitoring?," For The Defense (DRI November 2011). This survey article will outline some of the major themes from Dukes and discuss how lower courts have interpreted them, particularly in product liability cases.
Wal-Mart v. Dukes: Four of Its Major Themes
Dukes, “one of the most expansive class actions ever,” 131 S.Ct. at 2547, involved a nationwide class of over 1,500,000 current and former female employees of Wal-Mart who alleged discrimination in violation of Title VII. Plaintiffs sought injunctive and declaratory relief, along with class claims for backpay and punitive damages. Id. They asserted that issues of law and fact common to the class existed, as required under Fed.R.Civ.P. 23(a)(2); and that Fed.R.Civ.P. 23(b)(2), which applies where “final injunctive relief or corresponding declaratory relief is appropriate respecting the class as a whole,” provided the proper vehicle for certification. The district court agreed. A divided Ninth Circuit generally affirmed and held the district court could manage the proceedings by trying a handful of individual claims involving random class members and extrapolating the results to the remainder, a “novel project” the Court would call “Trial By Formula.” 131 S.Ct. at 2561. The Supreme Court granted certiorari and reversed.
Rule 23(a) has four requirements: numerosity, commonality, typicality and adequacy of representation. Stating that Rule 23 does not set forth a “mere pleading standard,” the Court held that a party seeking certification “must affirmatively demonstrate his compliance with the Rule—that is, he must be prepared to prove that there are in fact sufficient numerous parties, common questions of law or fact, etc.” 131 S.Ct. at 2551 (emphasis in original). Although rich with holdings and language helpful to the defense practitioner, this article discusses the lower court’s treatment of four of Dukes themes:
1) Proving there are “question of law or fact common to the class” under Rule 23(a)(2) requires more than a showing of potentially or theoretically common questions. Rather, the common questions must “generate common answers apt to drive resolution of the litigation.” 131 S.Ct. at 2551 (citing R. Nagareda, Class Certification in the Age of Aggregate Proof, 84 N. Y. U. L. Rev. 97, 132 (2009).
2) Courts must engage in a “rigorous analysis” of the proof offered in support of certification. The Court stated this can and often will entail overlap with the merits of the case and rejected prior dicta suggesting that merits inquiry is improper at the certification stage. 131 S.Ct. at 2551–52. It also includes whether expert testimony relevant to certification is subject to a Daubert review. Id. at 2554.
3) Rule 23(b)(2) permits certification only where injunctive or declaratory is available on a class-wide basis. In Dukes, the individualized nature of requested relief—backpay—precluded certification under 23(b)(2) and the Court suggested monetary claims may exclusively fall under Rule 23(b)(3). 131 S.Ct. at 2557–60.
4) Policy concerns cannot trump the language of the rules. Accordingly, the Ninth Circuit’s “Trial by Formula” plan was impermissible because, among other things, a defendant is entitled to present individualized defenses to individualized claims. 131 S.Ct. 2560–61.
With these major themes in mind, we can turn to their application in the lower federal courts.
Dukes’ discussion of what constitutes a “common issue” under Rule 23(a)(2) impacts both the analysis under that Rule and the “predominance inquiry” under Rule 23(b)(3). See, In re: OnStar Contract Litigation, 2011 U.S.Dist.Lexis 145846 (E.D.Mich. December 19, 2011) (applying Dukes definition of “common issues” in its Rule 23(b)(3) inquiry to hold that individual issues predominated). Courts have not, however, uniformly applied Dukes’ conception of a “common issue.”
The court in an MDL proceeding relied on Dukes in denying certification of a multi-state class action involving infant and children’s drinking vessels. In re: Bisphenol-A (BPA) Polycarbonate Plastic Products Liability Litigation, 276 F.R.D. 336 (W.D.Mo. 2011). Plaintiffs’ class claims turned on the presence of BPA in baby products sold by the defendants and were based on various state law theories flowing from the scientific debate over the safety of BPA. Plaintiffs contended different states could be reasonably grouped together in order to provide for a single governing law within each group. While “imagined or slight variances in state law” would not “thwart certification,” the court concluded there were serious questions about the proposed groupings which “fall harder on Plaintiffs because it is their burden to demonstrate the common issues of law.” 276 F.R.D. at 342. See also, Pilgrim v. Universal Health Card, LLC, 660 F.3d 943. 947–948 (6th Cir. 2011) (affirming district court’s decision to strike class allegations where variances among state consumer-protection laws precluded a finding of class-wide common issues of law).
As to the existence of common issues of fact, the court said these could include the nature of a defendant’s advertising, its knowledge of the state of the science regarding BPA over time, the presence of BPA in some of its products, and the status of the scientific debate over time regarding BPA. 276 F.R.D. at 343–344. Nonetheless, the court found that a number of significant issues, including the most basic question of whether a class member purchased a product manufactured by a defendant, were not “common” because they were “not capable of classwide resolution as required by Dukes. Id. at 344. Other “critically important” individual issues related to damages. For example, the court stated that “whether a defendant’s retention of the benefit (i.e., the purchase price for the goods) is ‘unjust’ requires considering what a particular plaintiff received in exchange for bestowing that benefit … If a person completely used a product without encountering ill-effects or other difficulties and can only declare after the fact that s/he would not have purchased the goods had the truth been known, such a person may not have ‘unjustly’ enriched the seller.” Id. The court added, “[n]othing in Rule 23 dictates that individual issues relating to damages are to be ignored in evaluating Rule 23(b)(3)’s predominance requirement.” Id. at 346.
In Gates v. Rohm & Haas Company, 655 F.3d 255 (3rd Cir. 2011), the Third Circuit addressed a number of issues including commonality and its relationship to Rules 23(b)(2) and 23(b)(3). There, residents who lived near an industrial complex claimed exposure to vinyl chloride from the defendants’ manufacturing operations and asserted claims for medical monitoring and property damage. The lower court denied certification, finding that individualized questions existed with respect to at least three issues: (1) each class members’ exposure; (2) whether each class member was at increased risk; and (3) whether each class member needed monitoring. Id. at 265. Using Dukes’ conception of “common issues,” the appellate court stressed the need for “strong commonality of interests” among members of a Rule 23(b)(2) class, and stated that Dukes “highlighted the importance of cohesiveness in light of the limited protections for absent class members….” 655 F.3d at 264 (quoting Dukes, 131 S.Ct. at 2558). In rejecting a claim the district court had delved into the merits of the class claims, the panel cited the admonition in Dukes that the certification inquiry would often overlap with a merits analysis and stated it was appropriate to consider “whether the proposed common proof would accurately reflect the exposure of individual members of the class to vinyl chloride.” Id. at 265. See also, Bruce v. Harley-Davidson Motor Company, Inc., 2012 U.S.Dist.Lexis 36723 at *18–21(C.D.Cal. January 23, 2012) (plaintiffs could not prove defective nature of vehicles at issue on a class-wide basis); Haynes v. Planet Automall, Inc., 276 F.R.D. 65, 80 (E.D.N.Y. 2011) (denying certification in a Truth in Lending Act claim based on alleged misrepresentations where plaintiff could not provide class-wide proof of a systemic violation of TILA or of materiality and reliance under a state law consumer protection claim); Oakley v. Verizon Communications, 2012 U.S.Dist.Lexis 12975 (S.D.N.Y. February 1, 2012) (denying certification of class seeking relief under a single statute where different class members alleged defendant violated statute in different ways); Tartt v. Wilson County, Tennessee, 2012 U.S.Dist.Lexis 7764 (M.D.Tenn. January 24, 2012) (same).
A number of courts have glossed over Dukes’ commonality holding in the course of certifying what appear to be classes with significant individualized issues. See e.g., Donovan v. Philip Morris USA, Inc., 2012 U.S.Dist.Lexis 37974 (D.Mass. March 21, 2012) (holding Dukes changed nothing with respect to whether plaintiffs in a medical monitoring action could prove commonality on a class-wide basis); Powell v. Tosh, 2012 U.S.Dist.Lexis 27912 at *24, 34 (W.D.Ky. March 1, 2012) (court accepted assertion the defendant’s “course of conduct” caused “the same injury,” even while denying certification of a 23(b)(2) class because the injuries claimed varied by plaintiff); Galvan v. KDI Distribution, Inc., 2011 U.S.Dist.Lexis 127602 (C.D.Cal. October 25, 2011) (certifying nationwide class under California consumer fraud law despite the presence of individualized inquiries). Class counsel will no doubt rely on the analysis in these types of cases to support certification.
The Dukes Court directly questioned the lower court’s refusal to apply Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579 (1993), to expert testimony at the certification stage. The appellate courts have since split on the extent to which a district court must conduct a full Daubert review as part of its “rigorous analysis” of a certification motion. The Seventh Circuit recently reaffirmed prior cases holding that a district court must conclusively determine any challenge to an expert’s qualifications or submissions when that expert’s opinion or testimony is “critical to class certification.” Messner v. Northshore Univ. HealthSystem, 2012 U.S. App. LEXIS 731 at *15–16 (7th Cir. Jan. 13, 2012) (citing American Honda Motor Co. v. Allen, 600 F.3d 813, 815-16 (7th Cir. 2010)); see also Sher v. Raytheon Co., 419 Fed.Appx. 887 (11th Cir. 2011) (citing American Honda for proposition the district court erred in failing to conduct a Daubert inquiry prior to certification decision). On the other hand, a panel majority in the Eighth Circuit held that a district court need not conduct a full Daubert review at the certification stage. In re: Zurn Pex Plumbing Product Liability Litig., 644 F.3d 604 (8th Cir. 2011) pet. for cert. filed, No. 11-740 (Dec. 15, 2011). Instead, it held the district should conduct a “tailored Daubert analysis,” but the opinion does not specify what that entails. See also, Behrend v. Comcast Corp., 655 F.3d 182, 204 n. 16 (3rd Cir. 2011) (“We understand the Court’s observation to require a district court to evaluate whether an expert is presenting a model which could evolve to become admissible evidence, and not requiring a district court to determine if a model is perfect at the certification stage.”). Thus, unless directly precluded by circuit precedent, defense counsel should considering pressing for a full Daubert hearing at the district court level.
Many district courts have preferred to avoid conducting a full Daubert inquiry at the certification stage. See e.g., Bruce v. Harley-Davidson Motor Company, Inc., 2012 U.S.Dist.Lexis 36723 (C.D.Cal. January 23, 2012) (excluding expert based on “focused” Daubert inquiry discussed in Zurn); Franklin v. Government Employees Insurance Company, 2011 U.S.Dist.Lexis 125625 (W.D.Wash. October 21, 2011) (refusing to apply Daubert to some certification expert testimony and disregarding other expert testimony because it had no bearing on the elements of the plaintiffs’ claims). On the other hand, a handful have taken the Supreme Court’s statement to heart and considered applying Daubert to expert testimony at the certification stage. In re: Cox Enterprises, Inc. Set-Top Cable Television Box Antitrust Litigation, 2011 U.S.Dist.Lexis 149656 at *59-63 (W.D.Okla. December 28, 2011) (collecting cases and suggesting Daubert would apply); cf., Smith v. Ceva Logistics U.S., Inc., 2011 U.S.Dist.Lexis 82020 (C.D.Cal. July 25, 2011) (declining to decide issue where proposed expert’s testimony met Daubert); Stone v. Advance America, Cash Advance Centers, Inc., 2011 U.S.Dist.Lexis 142464 (S.D.Cal. December 12, 2011) (same); see generally Julie Slater, Comment, "Reaping the Benefits of Class Certification: How and When Should “Significant Proof” Be Required Post-Dukes?," 2011 B.Y.U.L.Rev. 1259, 1273-1276 (2011) (arguing Daubert should apply to expert opinions at the certification stage).
Courts have also considered the “rigorous analysis” standard in other contexts. For example, a number of courts have held that a motion to strike class allegations is a proper mechanism to review whether certification is warranted. See e.g., Pilgrim v. Universal Health Card, LLC, 660 F.3d 943. 949 (6th Cir. 2011); Vinole v. Countrywide Home Loans, Inc., 571 F.3d 935, 941–44 (9th Cir. 2009); Sanders v. Apple, Inc., 672 F. Supp. 2d 978, 990–91 (N.D. Cal. 2009)). Post-Dukes, courts have applied the “rigorous analysis” standard in addressing motions to strike. See e.g., Rikos v. The Procter & Gamble Company, 2012 U.S.Dist.Lexis 25104 (S.D.Ohio February 28, 2012) (plaintiffs could not pursue statutory claims under California law on behalf of non-California residents and state-by-state analysis of breach of warranty claims precluded certification under Rule 23(b)(3) because individual questions of law would predominate). Other courts have cited the standard in conducting certification reviews. In Rader v. Teva Parenteral Medicines, Inc., 276 F.R.D 524 (D.Nev. 2011), the district court rigorously analyzed plaintiffs' proposed proof and denied certification on a variety of grounds including a determination that proof of causation was not possible on a class-wide basis and that proposed class claims for emotional distress were too individualized to warrant class treatment. See also, Creative Montessori Learning Centers v. Ashford Gear LLC, 662 F.3d 913 (7th Cir. 2011) (reversing district court’s decision to grant certification in a proceeding under the Telephone Consumer Protection Act where district court failed to conduct a “rigorous analysis” and remanding for a proper consideration of the relevant requirements of Rule 23); Brandner v. Abbott Laboratories, Inc., 2012 U.S.Dist.Lexis 7017 (E.D.La. January 23, 2012) (applying “rigorous analysis” to the predominance and superiority requirements of Rule 23(b)(3) and holding that issues such as whether an individual purchased the product and whether the product caused a particular plaintiffs’ condition would be “subject to individualized, not collective proof”); cf., Price v. Martin, 2011 La.Lexis 2889 (La. December 6, 2011) (citing Dukes in support of its decision to order decertification of a class of person who owned property near a wood treatment facility).
Scope of Rule 23(b)(2)
The Third Circuit’s decision in Gates presented an early post-Dukes look at medical monitoring class actions. Plaintiffs proposed a Rule 23(b)(2) class for medical monitoring damages and a Rule 23(b)(3) “liability-only” class for property damages. 655 F.3d at 258. The court acknowledged that “class members’ regimes of medical screening and the corresponding cost will vary individual by individual.” Pointing out that Dukes had not conclusively determined whether monetary relief was ever available under Rule 23(b)(2), and questioning “whether the kind of medical monitoring sought here can be certified under Rule 23(b)(2),” 655 F.3d at 263, the Gates court nonetheless declined to reach the issue because it found other grounds for denying certification under Rule 23(b)(2). But see, Donovan v. Philip Morris USA, Inc., 2012 U.S.Dist.Lexis 37974 (D.Mass. March 21, 2012) (purporting to distinguish Gates and rejecting argument that a medical monitoring claim could not be certified under Rule 23(b)(2)).
In Powell, a class action brought by present and former residents of an area surrounding a hog farm, the Court relied in part on Dukes to reject certification of a 23(b)(2) class: “Any damage calculation would necessarily involve individualized determinations, as the Plaintiffs’ own expert has stated that the frequency and intensity varies by direction. Additionally, the amount of each class member’s damages would be dependent on intangible, subjective differences of each class member’s circumstances as the alleged odor has affected each potential plaintiff differently.” Powell 2012 U.S. Dist. LEXIS 27912 at *34 (footnote omitted). See also In re Ford Motor Co. E-350 Van Products Liability Litigation, 2012 U.S.Dist.Lexis 13877 (D.N.J. February 6, 2012) 23(b)(2) certification improper where “equitable” relief included a uniform payment to each class member to cover the cost to repair allegedly defective vehicle); Fosmire v. Progressive Max Insurance Company, 2011 U.S.Dist.Lexis 117366 (W.D.Wash. October 11, 2011) (refusing to certify class under 23(b)(2) where it had already refused to certify a damages class under Rule 23(b)(3)).
Policy Concerns Cannot Trump the Language of the Rule
Dukes rejected the Ninth Circuit’s novel “Trial by Formula” because the defendant had the right to present all available defenses to individual claims. That reasoning came to the fore in a recent district court decision from Michigan, In re: OnStar Contract Litigation, 2011 U.S.Dist.Lexis 145846 (E.D.Mich. December 19, 2011). Claiming that OnStar Corporation had made misrepresentations in the sale and marketing of its service, plaintiffs sought certification of a nationwide class under Michigan’s Consumer Protection Act (MCPA). In support, plaintiffs cited Dix v. American Bankers Life Assur. Co. of Florida, 429 Mich. 410, 415 N.W.2d 206 (1987) for the proposition they could prove reliance on a class-wide basis under on a “reasonable consumer” standard. Id. at *75. In rejecting application Dix, the district court first agreed with OnStar that the “reasonable consumer” standard did not apply when consumers received different disclosures at different times from different sources which varied over the class period. Id. at * 77–8. More importantly, it held Dukes itself precluded application of Dix, at least in federal court: " Moreover, there is no dispute that an individual asserting a claim under subsection (s) of the MCPA for a defendant's failure to “reveal a material fact, the omission of which tends to mislead or deceive the consumer, and which fact could not reasonably be known by the consumer” must establish reliance. If, in certifying a class action under Fed. R. Civ. P. 23, this Court were to apply a “reasonable person” standard to determine reliance on a class-wide basis, that would prevent Defendant OnStar from asserting a statutory defense that it would be able to assert in an individual action. To do so would go against the Supreme Court's recent decision in Wal-Mart Stores, Inc. …." Id. at *79.
The Third Circuit in Gates v. Rohm and Haas made a similar observation in rejecting the plaintiffs’ proposed common proof in support of their claim for medical monitoring: “Attempts to meet the burden of proof using modeling and assumptions that do not reflect the individual characteristics of class members have been met with skepticism.” 665 F.3d at 266. Elaborating on that point, it stated: "Plaintiffs cannot substitute evidence of exposure of actual class members with evidence of hypothetical, composite persons in order to gain class certification. The evidence here is not “common” because it is not shared by all (possibly even most) individuals in the class. Averages or community-wide estimations would not be probative of any individual's claim because any one class member may have an exposure level well above or below the average." Id. (internal citations and quotations omitted). OnStar and Gates suggest that regardless of whether state procedures might permit some sort of “reasonable consumer” or “reasonable purchaser” standard to supplant individualized proof in state court proceedings, a federal court considering whether class-wide adjudication is appropriate may not deprive the defendant of its ability to present all available defenses. Cf., Philip Morris, USA v. Williams, 549 U.S. 346, 353 (2007) (Due Process Clause prohibits a State from punishing an individual without first providing that individual with “an opportunity to present every available defense.”)
The full nature of Dukes' impact will not be known for some time. When defending a class action, especially in federal court, counsel will need to continue to mine the majority opinion and advance the arguments Dukes offers. Most class actions are won or lost at the certification stage. By moving at least some of the heavy lifting on the merits to that arena, Dukes provides the opportunity to defeat certification in ways prior cases may have precluded.
Jeffrey A. Holmstrand
Flaherty Sensabaugh Bonasso