Presenting a live 90-minute webinar with interactive Q&A "No Injury" and "Overbroad" Class Actions After Comcast, Glazer and Butler: Implications for Certification Navigating Complex Issues of Overbreadth and Damages in Consumer Product Cases TUESDAY, APRIL 1, 2014 1pm Eastern 12pm Central 11am Mountain 10am Pacific Today s faculty features: Frederick S. Longer, Member, Levin Fishbein Sedran & Berman, Philadelphia Jessica D. Miller, Partner, Skadden Arps Slate Meagher & Flom, Washington, D.C. Geoffrey M. Wyatt, Counsel, Skadden Arps Slate Meagher & Flom, Washington, D.C. The audio portion of the conference may be accessed via the telephone or by using your computer's speakers. Please refer to the instructions emailed to registrants for additional information. If you have any questions, please contact Customer Service at 1-800-926-7926 ext. 10.
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No Injury & Overbroad Class Actions After Comcast, Butler & Glazer: Implications for Certification SPEAKERS: FRED LONGER JESSICA MILLER GEOFFREY WYATT
OVERVIEW Significance of Comcast Corp. v. Behrend Glazer & Butler: what they mean for products cases Standing: is it a viable basis to challenge overbroad classes? 6
SIGNIFICANCE OF COMCAST Comcast Corp v. Behrend, 133 S. Ct. 1426 (2013) Class of two million cable subscribers asserted antitrust claims against Comcast Claimed Comcast increased its share of Philadelphia cable market and engaged in anticompetitive conduct Initially had four theories of antitrust impact Court certified one theory Plaintiffs sought to prove classwide damages using an expert opinion that presumed viability of all four theories Court of appeals affirmed certification Supreme Court held that class had to be decertified because the damages and liability theories did not match 7
COMCAST NO MISMATCHES Supreme Court majority reversed class certification Plaintiffs did not present classwide damages theory that matched certified liability theory Plaintiffs damages model failed to measure damages resulting from the particular antitrust injury on which [the defendants ] liability [was] premised Thus, questions of individual damages calculations [would] inevitably overwhelm questions common to the class, defeating predominance and rendering classwide treatment improper 8
SIGNIFICANCE OF COMCAST Plaintiffs view Certiorari limited to one question: Whether a District Court 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 classwide basis Dissent: what happened to the question on which certiorari was granted? The Court s ruling is good for this day and case only 9
COMCAST NO MISMATCHES First takeaway: classwide liability and damages theories must match Plaintiffs view this conclusion only applies to antitrust cases Harris v. Comscore Inc., 292 F.R.D. 579, 589 n.9 (N.D. Ill. 2013) ( The Supreme Court s holding came from its assumption, uncontested by the parties, that Rule 23(b)(3) requires that damages must be measurable based on a common methodology applicable to the entire class in antitrust cases. That assumption, even assuming it is applicable to privacy class actions in some way, is merely dicta and does not bind this court. ) Defendants view principle is broadly applicable Jacob v. Duane Reade, Inc., 293 F.R.D. 578 (S.D.N.Y. 2013) (noting that courts have grappled with Comcast s interaction with nonantitrust class actions and concluding that the no-mismatch rule applies broadly in cases where plaintiffs attempt to rely on purportedly common damages evidence) 10
COMCAST NO MISMATCHES Case study: In re Skelaxin Metaxalone Antitrust Litig., 2014 U.S. Dist. LEXIS 11467 (E.D. Tenn. Jan. 30, 2014) Putative antitrust class action alleging defendants colluded to delay market entry of generic alternative Plaintiffs sought the difference between the amount they paid and the amount they would have paid for a theorized generic The court denied both the direct and indirect purchasers motions for class certification [I]f Comcast is given its full breadth... the incongruity between End Payors description of class membership and the entities included in its impact and damages model might defeat this proposed class Given Comcast s requirement that the damages model and the theory of liability match, [the expert s damages] model [was] problematic 11
COMCAST NO MISMATCHES Case study: Cannon v. BP Prods. N. Am., 2013 U.S. Dist. LEXIS 142934 (S.D. Tex. Sept. 30, 2013) Class action related to defendant s chemical releases and emissions Certification denied plaintiffs could not prove classwide causation or damages Expert s overarching theory of damages could not support plaintiffs certification bid it was disconnected from Plaintiffs causes of action of negligence, trespass, and nuisance which [were] limited to a particular time period beginning in late 2008 One problem: expert advanced a real estate trend analysis that was based on the wrong class area 12
COMCAST SCRUTINY OF EXPERTS Second takeaway: Defendants view: courts must rigorously analyze expert evidence at class certification stage It appears certiorari originally granted to resolve the applicability of Daubert at class certification But no Daubert issue was preserved Instead, the Court addressed the merits of the damages evidence under the rigorous analysis requirement It rejected the notion that expert damages evidence need not be scrutinized on the merits; [u]nder that logic,... any method of measurement is acceptable so long as it can be applied classwide, no matter how arbitrary the measurements may be, which would reduce Rule 23(b)(3) s predominance requirement to a nullity 13
COMCAST SCRUTINY OF EXPERTS Second takeaway: Plaintiffs view: Merits questions may be considered to the extent but only to the extent that they are relevant to determining whether the Rule 23 prerequisites for class certification are satisfied Amgen v. Connecticut Retirement Plans & Trust, 133 S. Ct. 1184, 1195 (2013) 14
COMCAST SCRUTINY OF EXPERTS Case study: In re Rail Freight Fuel Surcharge Antitrust Litig., 725 F.3d 244 (D.C. Cir. 2013) It is now indisputably the role of the district court to scrutinize the evidence before granting certification, even when doing so requires inquiry into the merits of the claim It is now clear [ ] that Rule 23 not only authorizes a hard look at the soundness of statistical models that purport to show predominance the rule commands it If the damages model cannot withstand this scrutiny then, that is not just a merits issue No damages model, no predominance, no class certification 15
COMCAST SCRUTINY OF EXPERTS Case study: In re Urethane Antitrust Litig., 2013 WL 2097346 (D. Kan. May 15, 2013) Defendant s motion to decertify class action where the same expert as in Comcast had testified to antitrust impact was rejected There is no basis to strike Dr. McClave s testimony or to conclude that his methodology could not provide a causal link between plaintiffs theory of liability and the class-wide impact 16
COMCAST SCRUTINY OF EXPERTS How does this scrutiny relate to Daubert?: Cannon v. BP Prods. N. Am., 2013 U.S. Dist. LEXIS 142934 (S.D. Tex. Sept. 30, 2013) [A] district court s rigorous analysis may necessitate the evaluation of expert testimony. Although courts are not to insist upon a battle of the experts at the certification stage..., [i]n many cases, it makes sense to consider the admissibility of the testimony of an expert proferred to establish one of the Rule 23 elements in the context of a motion to strike prior to considering class certification. The court scrutinized plaintiff s expert s damages opinion [I]n one sense scrutiny of expert testimony being used to show that a case is susceptible to class treatment seems less controversial than the normal application of Daubert, because it does not intrude on the jury s role given that class certification is an issue for the court The expert s overarching theory of damages was disconnected from Plaintiffs causes of action of negligence, trespass, and nuisance which [were] limited to a particular time period beginning in late 2008 17
COMCAST SCRUTINY OF EXPERTS Is it another basis to challenge beyond Daubert? It seems so: In Rail Freight Fuel Surcharge Antitrust Litigation, the D.C. Circuit did not even mention Daubert; instead, it focused on the merits of the damages model See also, e.g., Vaccarino v. Midland Nat l Life Ins. Co., 2014 U.S. Dist. LEXIS 18601 (C.D. Cal. Feb. 3, 2014) (treating the Comcast inquiry as distinct from a Daubert challenge because it goes to the merits of the evidence) Or not: See In re Skelaxin Metaxalone Antitrust Litig., 2014 U.S. Dist. LEXIS 11467 (E.D. Tenn. Jan. 30, 2014) 18
COMCAST DAMAGES AT CLASS CERT Third takeaway: damages will play a bigger role at class certification Plaintiffs who attempt to proffer classwide damages evidence will face a higher hurdle Defendants will likely rely increasingly on damages-based arguments in opposition to certification, even outside the mismatch context 19
COMCAST DAMAGES AT CLASS CERT Higher hurdle for plaintiffs: Before Behrend, the case law was far more accommodating to class certification under Rule 23(b)(3) In re Rail Freight Fuel Surcharge Antitrust Litig., 725 F.3d 244 (D.C. Cir. 2013) The Court agrees with Defendants that Comcast signals a significant shift in the scrutiny required for class certification. Prior to Comcast, the Court may have been satisfied that Plaintiffs invocation of the event study methodology alone showed the predominance of common issues.... Following Comcast, circuit and district courts have rigorously examined proposed damages methodologies in putative class action cases for disconnects between damages and liability.... Plaintiffs cannot avoid this hard look by refusing to provide the specifics of their proposed methodology. In re BP P.L.C. Secs. Litig., 2013 U.S. Dist. LEXIS 173303, at *73-75 (S.D. Tex. Dec. 6, 2013) 20
COMCAST DAMAGES AT CLASS CERT Defendants will raise damages more often, but not always successfully: In re Nexium Esomeprazole Antitrust Litig., 296 F.R.D. 47 (D. Mass. 2013) Putative class action alleging federal antitrust violations Defendants argued damages could not be proven on a classwide basis under Comcast Defendants challenged the methodology of one of plaintiffs experts, who did not account for actual brand prices, but-for generic prices, purchases by brand loyalists, and generic and other-drug conversion rates Defendants argued that [t]hese variations... [were] ignored by the use of averages calculations... and without individualized inquiries, will result in the unlawful recovery of damages by uninjured direct purchasers Court was not persuaded 21
COMCAST DAMAGES AT CLASS CERT In re Nexium Esomeprazole Antitrust Litig., 296 F.R.D. 47 (D. Mass. 2013) Court acknowledged that variation in actual price paid among the direct purchasers may preclude some class members from recovery if it is shown that various rebates, discounts, or buying practices did not result in net positive damages However, such variation did not defeat class certification because the plaintiffs advance[d] a single, class-wide theory of harm: Defendants unlawful conduct delayed the entry of lower-priced generic Nexium The court found that this clearly differentiat[ed] th[e] case from the facts in Comcast, which rejected a damages model because it failed solely to incorporate the court s accepted theory of liability 22
COMCAST: LIMITED BY GLAZER & BUTLER? Do Glazer and Butler limit application of Comcast with regard to overbroad classes? Whirlpool Corp. v. Glazer, 678 F.3d 409 (6th Cir. 2012) Affirmed class certification of consumers alleging mold in washing machines Most class members 97 percent never complained about any problem with their washers Even if some class members have not been injured by the challenged practice, a class may nevertheless be appropriate Supreme Court vacated and remanded in light of Comcast 23
COMCAST: LIMITED BY GLAZER & BUTLER? Do Glazer and Butler limit application of Comcast with regard to overbroad classes? Butler v. Sears, Roebuck & Co., 702 F.3d 359 (7th Cir. 2012) Another front-load washing machine class action Predominance is a question of efficiency According to Judge Posner, if Sears thinks the machines are not defective, it can win on classwide basis In tension with Thorogood (not cited in Butler), where Judge Posner rejected a dryer class action because: Consumers may have purchased dryers for reasons unrelated to propensity to cause or prevent rust stains The risks of costly error inherent in allowing one jury to decide liability as to all were too great It appeared that the rust problem did not affect most class members Also vacated and remanded in light of Comcast 24
COMCAST: LIMITED BY GLAZER & BUTLER? Do Glazer and Butler limit application of Comcast with regard to overbroad classes? Sixth Circuit stuck to its prior ruling on remand Claimed Glazer was different from Comcast Comcast concerned individualized damages issues Glazer only certified liability for class treatment The defendant argued that injuries were also varied Analogous to Comcast because class members without mold or odor problems were not injured Thus, class device could expand potential recovery beyond any valid liability theory Sixth Circuit sought to avoid injury problem based on premium price theory Supreme Court denied certiorari 25
COMCAST: LIMITED BY GLAZER & BUTLER? Do Glazer and Butler limit application of Comcast with regard to overbroad classes? Seventh Circuit followed the same course Comcast does not affect the prior ruling because the case could proceed as an issues class: [t]here is a single, central, common issue of liability: whether the Sears washing machine was defective, that could be resolved on a classwide basis All other, noncommon issues, including both injury and damages, could be resolved separately in individual trials See Butler v. Sears Roebuck & Co., 2013 WL 4478200 (7th Cir. Aug. 22, 2013) Supreme Court denied certiorari 26
IMPACT OF GLAZER & BUTLER Cases limiting Glazer and Butler Ginsburg v. Comcast Cable Communs. Mgmt. LLC, 2013 U.S. Dist. LEXIS 139873, at *5-6 (W.D. Wash. Sept. 24, 2013) (distinguishing Butler because the plaintiffs inability to prove liability on a classwide basis [was] inextricably intertwined with their inability to prove damages ) In re Principal U.S. Prop. Account Erisa Litig., 2013 U.S. Dist. LEXIS 185665, at *107-09 (S.D. Iowa Sept. 30, 2013) (distinguishing Glazer because the damages inquiry was so tied to the liability question that individualized analyses permeate[d] th[e] case ) 27
IMPACT OF GLAZER & BUTLER Cases following Glazer and Butler Phillips v. Asset Acceptance, LLC, 736 F.3d 1076, 1083 (7th Cir. 2013) (following Butler and reversing class certification after holding that even though actual damages were bound to vary across class members, a class action limited to determining liability on a class-wide basis, with separate hearings to determine if liability is established the damages of individual class members, or homogeneous groups of class members, is permitted by Rule 23(c)(4) ) (quoting Butler) Jacob v. Duane Reade, Inc., 293 F.R.D. 578, 588-89 (S.D.N.Y. 2013) (following Glazer and maintaining class certification as to liability, but decertifying as to damages in light of the need for individualized proof) 28
MORE ISSUES CLASSES? What do Comcast, Butler and Glazer mean for issues classes? The lead dissent in Comcast suggested that individualized damages issues can be addressed through issues classes 133 S. Ct. 1426, 1437 & n.* (2013) The majority did not respond, leaving open the possibility that it intended to require proof of classwide damages in all cases 29
MORE ISSUES CLASSES? Courts have gone different ways since Comcast Some have either applied or assumed a requirement of classwide damages and have certified where the plaintiffs provide common evidence of damages and denied certification where they do not Some courts have employ[ed] Rule 23(c)(4) and maintain[ed] class certification as to liability only, leaving damages for a separate, individualized determination Jacob v. Duane Reade Holdings, 293 F.R.D. 578 (S.D.N.Y. 2013) (summarizing these approaches) 30
MORE ISSUES CLASSES? In re Motor Fuel Temperature Sales Practices Litig., 292 F.R.D. 652 (D. Kan. 2013) Certified issues class on alleged non-disclosure of information regarding gasoline Determining each class members damages, if any, may require individualized determinations, but [t]he possibility that individual issues may predominate the issue of damages... does not defeat class certification by making [the liability] aspect of the case unmanageable Johnson v. Nextel Communs., Inc. 293 F.R.D. 660 (S.D.N.Y. 2013) Certified issues class on employment-discrimination claims Comcast does not apply to certification of liability-only classes and therefore is not relevant to the court s analysis under Rule 23(c)(4) 31
MORE ISSUES CLASSES? Defendants Perspective Issues classes pose serious threats for defendants but they are also risky for plaintiffs Issues classes are not fair to defendants Have sometimes been used to relieve plaintiffs from burden of proving injury and causation Issues verdicts can put tremendous pressure on defendant Issues classes are in tension with Seventh Amendment» [T]he risk that a second jury would have to reconsider the liability issues decided by the first jury is too substantial to certify [an] issues class In re ConAgra Peanut Butter Prods. Liab. Litig., 251 F.R.D. 689, 698-99 (N.D. Ga. 2008) 32
MORE ISSUES CLASSES? Plaintiffs Perspective Butler v. Sears Roebuck & Co., 727 F.3d 796 (7th Cir. 2013) Endorses Rule 23(c)(4) issues-oriented class actions Individual damages are not an impediment to class certification If the issues of liability are genuinely common issues, and the damages of individual class members can be readily determined in individual hearings, and settlement negotiations, or by creation of subclasses, the fact that damages are not identical across all class members should not preclude class certification 33
MORE ISSUES CLASSES? Plaintiffs Perspective In re: Whirlpool, 722 F. 3d 838 (6th Cir. 2013) Inquiry into the merits of the plaintiffs claims at the class certification stage is limited District Court may not turn the class certification proceedings into a dress rehearsal for trial on the merits The remedy for class members who purchased Duets at a premium price but have not experienced a mold problem can be resolved through the individual determination of damages Endorses Rule 23(c)(4) liability-oriented issues classes Limits Comcast to existing jurisprudence 34
MORE ISSUES CLASSES? Plaintiffs Perspective Harris v. Comscore Inc., 292 F.R.D. 579, 589 n.9 (N.D. Ill. 2013) The Supreme Court recently reversed a grant of class certification where [q]uestions of individual damage calculations will inevitably overwhelm questions common to the class The Supreme Court s holding came from its assumption, uncontested by the parties, that Rule 23(b)(3) requires that damages must be measurable based on a common methodology applicable to the entire class in antitrust cases That assumption, even assuming it is applicable to privacy class actions in some way, is merely dicta and does not bind this court» Quoting and citing Ginsburg and Breyer, JJ., dissenting in Comcast ( [T]he decision should not be read to require, as a prerequisite to certification, that damages attributable to a classwide injury be measurable on a class-wide basis ) 35
STANDING A VIABLE CHALLENGE? Can defendants use lack of standing to challenge overbroad classes? Defendants perspective: In re Deepwater Horizon, 732 F.3d 326 (5th Cir. 2013), suggests perhaps so: BP entered class settlement in 2012 agreeing to make payments to cover economic losses arising from the Deepwater Horizon oil spill BP complained that the settlement administrator s methods for evaluating claims allowed uninjured class members to recover Fifth Circuit ordered District Judge Barbier to evaluate legitimacy of claims and cease payments for claims that did not meet stricter standards At least in the Fifth Circuit, classes cannot encompass members who are uninjured and therefore lack legitimate claims not even settlement classes Unless a claimant can colorably assert a loss, it lacks standing 36
STANDING A VIABLE CHALLENGE? Can defendants use lack of standing to challenge overbroad classes? Plaintiffs perspective: Subsequent Fifth Circuit decisions vacated the injunction entered in 2013, concluded that class members had standing, and reserved the definition of the proper test for class member standing for another day In re Deepwater Horizon, 739 F.3d 790 (5th Cir. 2014) (affirming district court decision finding standing) In re Deepwater Horizon, 2014 WL 841313 (5th Cir. Mar. 3, 2014) (vacating injunction entered in 2013 decision) 37
Frederick Longer Levin Fishbein Sedran & Berman flonger@lfsblaw.com Jessica Miller Skadden Arps Slate Meagher & Flom jessica.miller@skadden.com Geoffrey Wyatt Skadden Arps Slate Meagher & Flom geoffrey.wyatt@skadden.com 38