In the closing days of its term, the Supreme Court announced that it had granted certiorari in Comcast Corporation v. Behrend, setting up what is certain to be a major battle over expert testimony and class certification hearings.
Behrend arises from what appears to be the largest certified class in history – more than two million former and current subscribers to Comcast’s cable services in the Philadelphia metropolitan area. According to the complaint, Comcast violated Sections 1 and 2 of the Sherman Act by pursuing a strategy of anticompetitive clustering – deliberately buying up cable systems in geographic areas where Comcast already has a significant foothold while selling or trading away cable systems where the carrier’s holdings were less concentrated. According to the plaintiffs, Comcast’s clustering deterred entry by “overbuilders” – companies who deliberately enter a market where another cable provider is already established.
Comcast’s cert petition in Behrend set the case up as a straightforward application of the Court’s landmark 2011 decision in Wal-Mart Stores, Inc. v. Dukes, where the Court announced that class certification is proper only if the trial court is satisfied, “after a rigorous analysis,” that the requirements for class certification have been proven – even if plaintiffs will be required to prove the same propositions again in order to prevail on the merits at trial. Dukes was handed down against a background of earlier lower court holdings applying a lesser standard, often certifying classes based only on a determination that class representatives would likely be able to establish the prerequisites for class certification later, at trial. These cases took their cue from the Supreme Court’s apparent bar in Eisen v. Carlisle & Jacquelin against inquiring into the merits at the class certification stage. But the Dukes court dispatched Eisen in a footnote, dismissing the relevant language as “purest dictum.” Comcast asked for summary reversal in Behrend, arguing that the Third Circuit had ignored Dukes and resurrected Eisen, disregarding Comcast's various merits arguments on a variety of Rule 23 issues.
The Court seems to have been deadlocked about what to do with Behrend for several weeks, relisting the case from conference to conference no less than seven times. Ultimately, the justices reached a compromise, granting cert on a single question: whether a district court could certify a class without deciding whether the plaintiffs had introduced admissible evidence, including expert testimony, to show that awarding damages on a class-wide basis is practical. In other words, when an expert’s testimony is crucial to the plaintiffs’ Rule 23 arguments – which it will generally be in antitrust, if not in most class actions – must the parties and the court have a full-blown Daubert proceeding before a class can be certified?
"We are really expecting this to be the big one," Ankur Kapoor of Constantine Cannon told the Philadelphia Inquirer after cert was granted. "The legal journals will be writing about it for years." Lawyers at Mayer Brown LLP agreed, writing that the issue is of "extraordinary importance to businesses defending themselves against class actions of all stripes." Seyfarth Shaw's Workplace Class Action blog agreed, writing that the opinion in Behrend "could have wide-ranging impact on class actions, including those in the workplace arena." Cozen O'Connor's Class Action Defense Review, on the other hand, predicted that Behrend would not have the profound impact of Dukes and the Court's other class action landmark of 2011, AT&T Mobility v. Concepcion.
There's no question a Circuit split has developed in the years immediately before and after Dukes on the question of how to handle expert testimony. As the petitioners in Behrend pointed out, the Seventh Circuit has held at least twice that district courts must make a definitive ruling on the Daubert inquiry at the class certification stage if the plaintiff's compliance with Rule 23 depends on the admissibility of the expert's testimony -- most recently in Messner v. Northshore University Healthsystem, and earlier in American Honda Motor Co. v. Allen. The Ninth Circuit endorsed a full-blown Daubert analysis in Ellis v. Costco Wholesale Corp. The Eleventh Circuit agreed in Sher v. Raytheon Co., following Allen in an unpublished opinion.
But on the other hand, there is the Eighth Circuit's opinion in In re Zurn Pex Plumbing Products Liability Litigation, filed only two weeks after Dukes. The Eighth Circuit failed to take up the Supreme Court's heavy hint in Dukes that Daubert was fully applicable to class certification hearings, affirming a district court's "tailored" determination that expert testimony was sufficiently reliable "in light of the existing state of the evidence" to justify certifying a class. After all, the Eighth Circuit pointed out, class certification was "inherently tentative," and a full Daubert inquiry could not be justified at such an early stage.
Given the Supreme Court's dicta
and the apparent compromise at the cert stage, it seems likely that the Court will reject the Eighth Circuit's approach in Zurn Pex,
as it should. Class certification is a crucial stage in class action litigation, particularly in antitrust cases. Designing an econometric model which reliably predicts damages on a classwide basis is an enormous challenge and, as the cert petition in Behrend
observes, "most cases will be on the fast track to settlement shortly after class certification." Although plaintiffs may press for more discovery pre-certification if courts are required to conduct full-blown Daubert
inquiries before certification, this seems like a reasonable price to pay in order to defeat meritless class actions early. Although some have worried that courts which approve expert testimony at the certification hearing will decline to reconsider at the close of discovery, this seems unlikely, given the discovery and factual development likely to occur in the interim. All in all, Behrend
is likely to be an important battle at the Supreme Court, and a worthy sequel to the Court's opinion in Dukes.