Supreme Court Provides More Guidance on Class Certification Requirements

Over the past few years, the Supreme Court has issued several decisions addressing certification of class actions. In Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 277, 131 S. Ct. 2541 (2011), the Court denied certification to a class of female employees alleging gender discrimination because the plaintiffs had failed to identify any company-wide discriminatory policies and the alleged discrimination resulted from a series of discretionary decisions made by local and regional managers. Earlier this year in Amgen Inc. v. Connecticut Retirement Plans and Trust Funds, 568 U.S. __, 133 S. Ct. 1184 (2013), the Court noted that “Rule 23(b)(3) requires a showing that questions common to the class predominate, not that those questions will be answered, on the merits, in favor of the class” (emphasis in original).

Most recently, in Comcast v. Behrend, 569 U.S. __, 133 S. Ct. 1426 (2013), decided March 27, the Court again discussed certification requirements. Comcast involved antitrust claims on behalf of a putative class of cable subscribers. The plaintiffs alleged four theories of liability but the District Court accepted only one, and certified based on that theory. The Third Circuit affirmed.

The Supreme Court reversed in a 5-4 decision written by Justice Scalia. The majority found that Federal Rule of Civil Procedure 23(b)(3)’s requirement that common issues predominate had not been satisfied because the plaintiffs’ economic expert’s analysis was not based on the theory of liability the District Court had credited. The Supreme Court concluded this mismatch meant there was no evidence damages could be calculated based on common evidence. The Court acknowledged that, although the calculation of damages “need not be exact” at the certification stage, the model supporting damages must be “consistent with [the plaintiff’s liability case].” Comcast, 133 S. Ct. at 1433. Given that the expert report in Comcast was found to be inconsistent with the only viable liability theory, the Court concluded that questions of individual damage calculations would “inevitably overwhelm questions common to the class.”

The dissent, co-written by Justices Ginsburg and Breyer, objected both procedurally and on the merits. As to procedure, the dissent noted that the majority failed to address the question as to which certiorari had been granted – namely, whether the plaintiffs’ expert reports constituted admissible evidence. Instead, the Court addressed whether the plaintiffs had satisfied Rule 23(b)(3)’s predominance requirement. On the merits, the dissent believed the damages model of plaintiffs’ expert did suffice to supply classwide evidence of injury.

It remains to be seen what impact Comcast will have on class certification generally. The dissent commented that the decision “breaks no new ground on the standard for certifying a class action,” and was “good for this day and case only.” Some district courts have seen it that way as well, while several others have relied on Comcast to deny certification based on lack of evidence to prove classwide injury and/or damages.

Like Wal-Mart before it, Comcast reflects a trend begun in the lower courts to give increased scrutiny to the evidentiary showing in support of certification, rather than permit mere speculation or promises of proof at trial to suffice. This trend creates a premium for both plaintiffs and defendants to develop an adequate evidentiary record before the certification stage, and to delve into the merits during that motion practice to the extent relevant to Rule 23’s criteria.