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Class Actions Are Dead. Long Live Class Actions.
Practical Law Legal Update 7-557-8865 (Approx. 5 pages)
Class Actions Are Dead. Long Live Class Actions.
by Practical Law Litigation
| Published on 25 Feb 2014 • USA (National/Federal) |
Although recent US Supreme Court decisions have emphasized the rigorous analysis associated with certifying a class action, several circuit court rulings demonstrate that class actions nonetheless are alive and well. Both plaintiffs' and defense counsel engaging in class action lawsuits must understand the evolving legal landscape to effectively litigate at the class certification stage.
Despite being hailed as the "death knell" of class actions, recent Supreme Court rulings on class action certification have not led to the demise of the class action device. To the contrary, class actions are alive and well; they continue to be certified by the lower courts and embraced in increasingly inventive ways by plaintiffs' counsel. As the jurisprudence on class certification continues to develop, counsel on both sides of the caption must understand the evolving legal landscape to effectively litigate at the class certification stage.
Recent Supreme Court Certification Rulings
Two recent Supreme Court decisions addressed, among other things, the high threshold plaintiffs must meet to be entitled to class certification (Comcast Corp. v. Behrend, 133 S. Ct 1426 (2013); Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541 (2011)). In these rulings, the Court found that:
- Federal Rule of Civil Procedure (FRCP) 23 sets out more than a "mere pleading standard."
- The party seeking class certification must be prepared to affirmatively prove that the FRCP 23 statutory prerequisites are met.
- Certification is only appropriate if the court is satisfied, after a "rigourous analysis," that the prerequisites of the rule have been met.
- The required rigorous analysis frequently overlaps with the merits of the plaintiff's underlying claim.
- These standards apply to FRCP 23(a) as well as FRCP 23(b).
In particular, in Dukes, the Supreme Court discussed the FRCP 23(a)(2) requirement that a class action is appropriate only where there are questions of law or fact common to the class. The Court ruled that commonality was not met because the plaintiffs could not sufficiently identify a common contention capable of classwide resolution. For more on Dukes' holding regarding commonality, see Practice Note, Class Actions: Certification: US Supreme Court Defines Common Questions in Wal-Mart v. Dukes.
In Comcast, the Court focused on FRCP 23(b)(3)'s requirement that questions of law or fact common to the class predominate over questions affecting individual members. The Court found that this requirement was not met because the plaintiffs did not present a classwide theory of damages that matched the accepted theory of liability. As a result, "[q]uestions of individual damage calculations will inevitably overwhelm questions common to the class." For more on Comcast's holding, see Legal Update, Supreme Court Rules for Comcast in Class Action Antitrust Case.
Circuit Courts Still Upholding Certification
The US Supreme Court's recent emphasis on the rigor associated with establishing class certification led some members of the legal community to predict that the death of class actions was near. So far this has not been the case. Indeed, several circuit courts have distinguished and limited Dukes and Comcast, with the US Courts of Appeals for the Sixth and Seventh Circuits even expressly declining to alter prior rulings granting certification, for example:
- In re Deepwater Horizon. The US Court of Appeals for the Fifth Circuit affirmed the district court's order certifying the class action and approving a settlement under FRCP 23. The court ruled that under Dukes, commonality may "be satisfied by an instance of the defendant's injurious conduct, even when the resulting injurious effects-the damages-are diverse." In addition, the court found that Comcast had no impact "on cases such as the present one, in which predominance was based not on common issues of damages but on the numerous common issues of liability." (739 F.3d 790, 810-11, 815 (5th Cir. 2014).)
- Butler v. Sears, Roebuck and Co. The Supreme Court remanded back to the Seventh Circuit a case the circuit court had certified to determine whether Comcast "cut the ground out from under" the certification decision. The Seventh Circuit did not alter its prior holding because "the district court in our case, unlike Comcast, neither was asked to decide nor did decide whether to determine damages on a class-wide basis." The court found that there was a single, central and common issue of liability and other noncommon issues such as damages could be resolved individually. The court also noted that "[i]t would drive a stake through the heart of the class action device, in cases in which damages were sought . . . to require that every member of the class have identical damages." (727 F.3d 796, 798, 800-801 (7th Cir. 2013).)
- In re Whirlpool Corp. Front-Loading Washer Products Liability Litigation. After the Sixth Circuit affirmed the grant of certification in this case, the Supreme Court vacated the judgment and directed the circuit court to reconsider in light of Comcast. On remand, the Sixth Circuit declined to alter its prior conclusion that the class was properly certified. The Sixth Circuit noted that this case was different from Comcast because "[h]ere the district court certified only a liability class and reserved all issues concerning damages for individual determination; in Comcast Corp. the court certified a class to determine both liability and damages. Where determinations on liability and damages have been bifurcated . . . the decision in Comcast . . . has limited application." (722 F.3d 838, 860 (6th Cir. 2012).)
- Leyva v. Medline Industries Inc. The US Court of Appeals for the Ninth Circuit reversed the lower court's decision to deny class certification. The court noted that plaintiffs must be able to show that damages stem from the defendant's actions that created the legal liability. However, in this case "unlike in Comcast, if putative class members prove Medline's liability, damages will be calculated based on the wages each employee lost due to Medline's unlawful practices." (716 F.3d 510, 514 (9th Cir. 2013).)
Notably, on February 24, 2014, the Supreme Court declined to revisit the decisions in Butler v. Sears, Roebuck and Co. and In re Whirlpool Corp. Front-Loading Washer Products Liability Litigation by denying petitions for certiorari that had been filed in those cases ( (Feb. 24, 2014); (Feb. 24, 2014)).
Class Actions Live On
Class actions are unlikely to fade. Indeed, there has been a surge in the number of certification-related decisions coming out of the lower courts as counsel argue the implications of the recent Supreme Court class certification rulings. By the end of 2013, Dukes had been cited more than 1,300 times in lower federal and state court rulings and Comcast, a case that was only nine months old, had been cited nearly 170 times. Moreover, the Supreme Court recently elected not to review the limited interpretations given to Dukes and Comcast by the Sixth and Seventh Circuits. This may be seen by some as an implicit endorsement of viewing those cases through a narrow lens.
Both plaintiffs' and defense counsel engaging in class action litigation must be well-informed of evolving class certification jurisprudence, particularly given the significant repercussions of a certification decision (see Practice Note, Class Actions: Certification: Significance of Certification). Practical Law has several tools and resources available to guide counsel involved in class actions. These resources may be found in the Class Action Toolkit, and include: