Investors sued HCA Holdings, Inc., alleging that HCA’s registration statement and prospectus contained misrepresentations when HCA made its initial public offering in 2011.  The district court certified a class of investors, and HCA filed a petition for interlocutory appeal with the Sixth Circuit pursuant to Fed. R. Civ. P. 23(f).  On February 26, 2015, the Sixth Circuit denied HCA’s petition.  In re Hca Holdings, No. 14-0511, 2015 U.S. App. LEXIS 3015 (6th Cir. Feb. 26, 2015).

In denying HCA’s petition, the Sixth Circuit held that HCA had not presented any novel or complex issue for review (amongst the other Fed. R. Civ. P. 23(f) factors).  Notably, however, the Sixth Circuit also addressed one of HCA’s grounds for appeal: “to clarify who retains the burden of proving predominance when individualized issues arise from an affirmative defense, rather than the elements of a plaintiff's claim.”

The Sixth Circuit noted that under its prior precedent, the plaintiff retains the burden to prove that common issues predominate over individualized inquiries by showing that such issues may be resolved through “generalized proof and applicable to the class as a whole.”  Yet, the Sixth Circuit noted that the “fact that a defense may arise and may affect different class members differently does not compel a finding that individual issues predominate over common ones.”  (Emphasis added.)  In this respect, the Sixth Circuit affirmed the district court’s decision, holding:

Here, the district court applied our precedent that an affirmative defense, standing alone, does not compel a finding that common liability issues do not predominate. It then considered the evidence presented by the parties regarding investor knowledge and concluded that the Defendants failed to present sufficient evidence that its affirmative defense of investor knowledge defeated predominance on the common liability issues. The district court acknowledged that the Defendants established that there was some information publicly available that, if known by investors, would preclude relief on the Plaintiffs' claims. But the district court found that the Defendants failed to show that any investor actually had knowledge of this information. The district court noted the Plaintiffs’ evidence that certain sophisticated investors did not have knowledge of the information and found that the Defendants’ speculation that other investors could have known this information could not, standing alone, defeat predominance. Thus, viewed in its totality, the Plaintiffs met their burden of showing that investor knowledge did not defeat predominance of the common liability issues.

(Emphasis added.)

Thus, while the Sixth Circuit did not squarely resolve HCA’s issue for appeal, the Sixth Circuit appeared to side with courts that have held that, while a plaintiff retains the burden of proof to show how class-wide issues (including any affirmative defenses) may be resolved through common proof, a defendant cannot defeat class certification by merely speculating about a potential defense.  Essentially, therefore, at the class certification stage, a defendant must present some evidence as to the viability of a defense and show how the plaintiff’s proposed methodology for class-wide proof fails to account for such individualized issues.