Dow Chemical, Tyson Foods, Wal-Mart and Allstate Insurance: Will SCOTUS Clean Up its Class Action Mess?
Will the Supreme Court reiterate its findings in Dukes and Comcast in 4 cases pending before it?
In an unusual turn of events, four class action cases are before the Supreme Court on writs of certiorari that all raise the same question: did the Supreme Court mean what it said in Wal-Mart Stores Inc. v. Dukes, 131 S. Ct. 2541 (2011) and Comcast Corporation v. Behrend, 133 S.Ct. 1426 (2013) or not. Both Dukes and Comcast raised the bar for establishing certification but lower courts have systematically ignored both.
The Supreme Court set itself up for this treatment by early on refusing to hear lower court decisions in which Dukes and Comcast had not been followed. We have written on the mischief this refusal would cause on more than one occasion. See:
Our predictions came true.
Some background: in both Dukes and Comcast the Supreme Court contemplated a rigorous analysis of certification issues. In Dukes the Supreme Court recognized that a class action is the exception to the usual rule that litigation is conducted by and on behalf of individual litigants; a plaintiff “must affirmatively demonstrate his compliance with Rule 23” to justify certification. A plaintiff must prove there are in fact common issues, typicality of claims or defenses and predominance, not just pled these elements.
And a court faced with certification must conduct a rigorous analysis to determine if the plaintiffs have established that they can actually meet the prerequisites of Rule 23. Finally, the Court suggested that a statistical sampling method of establishing damages and causation that deprives a defendant of its opportunity to contest each individual situation would preclude certification.
In Comcast, the Supreme reiterated these requirements and added that class certification was not appropriate without careful consideration and analysis of whether individual issues--specifically damage questions--would overwhelm the common issues. The damages model offered by plaintiff must attribute the wrongful conduct of the defendant to the damage suffered and the damages must be ascertainable.
Based on these concepts, the Supreme Court reversed the certification of an antitrust class because the plaintiff’s damage theory was broader than the theory of liability. According to the Court, the damage theory would result in “individual damage calculations [that would] overwhelm questions common to the class.” Dukes and Comcast thus seemed to place substantial limitation on class certifications.
But as we reported, it hasn’t worked out that way. Starting with the refusal of the Supreme Court to grant certiorari of the decisions of the Sixth and Seventh Circuits inthe “washing machine cases” (In re Whirlpool Corp. Front-Loading Washer Products Liab. Litig., 722 F.3d 838 (6th Cir. 2013), cert denied, 134 S.Ct. 1277 (U.S. 2014) (“Whirlpool”); Butler v. Sears, 702 F.3d 359 (7th Cir. 2012), cert. granted, judgment vacated, 133 S.Ct. 2768 (U.S. 2013)andjudgment reinstated, 727 F.3d 796 (7th Cir.2013)cert. denied, 134 S.Ct. 1277 (U.S. 2014) (“Sears”)) the rigorous examination and other certification requirements contemplated by Dukes and Comcast have been eroded.
The 6th Circuit, for example, found Comcast had no application where plaintiff proposed a class wide liability trial with individual trials for damages. Predominance could be established where “liability issues relating to injury must be susceptible to proof on a class wide basis” and that predominance was in reality nothing more than a test of efficiency.
The 7th Circuit in both Sears and subsequent cases explained that Dukes“has nothing to do with commonality of damages,” and distinguished conduct common to members of the class under Rule 23(a) (2) from a defect common to all instances of a consumer product under 23(b) (3). It also distinguished Comcast, “when exercising its discretion the court must apply the correct legal standards. The district court denied plaintiffs’ motion to certify under a mistaken belief that ‘commonality of damages’ is legally indispensable. With that error corrected, the district court can proceed using the proper standards.”
Both Circuits found Comcast had no application where plaintiff proposed a class wide liability trial and individual damage trials. The Courts held that predominance was satisfied since the liability issues relating to injury were susceptible to proof on a class wide basis and that predominance was in reality nothing more than a test of efficiency. As we stated in previous posts, this gave credence to the lower courts’ certification theories and opened the door for trial courts to expand-- not contract-- the availability of class certification irrespective of Dukes and Comcast--which is exactly what has occurred.
The cases now before the court involve a who’s who of corporation America: Dow Chemical, Tyson Foods, Wal-Mart and Allstate Insurance. In all four cases, these defendants were victims of certifications where the classes included plaintiffs with no injuries or different damages and where statistical sampling was used to supply average damages.
Dow Chemical, for example, seeks review of a 10th Circuit opinion that affirmed a $1.1 billion judgment to a class of purchasers of polyurethane chemicals. Plaintiffs alleged that Dow conspired to issue coordinated announcements of price increases. However, the evidence showed that individual purchasers robustly negotiated prices with individual suppliers, that many purchasers switched to lower-cost suppliers of the chemicals, and that other purchasers simply refused to pay announced price increases. All created substantial individual issues. The 10th Circuit swept these issues aside by merely presuming that price announcements actually increased prices to all purchasers directly contradicting precedent and the notion in Dukes and Comcast that actual evidence support certification instead of presumptions.
Wal-Mart seeks review of a Pennsylvania Supreme Court decision that affirmed a $150 million judgment in favor of a class of Wal-Mart employees who alleged that Wal-Mart did not fully compensate them for rest breaks and off-the-clock work. In apparent direct contradiction of Dukes, the plaintiffs successfully used statistical extrapolation of some employee time cards to prove the injury to the class. By doing so, the lower court deprived Wal-Mart of its right recognized in Dukes for Wal-Mart to be able to challenge each individual class member's claim.
Tyson Foods has asked the Court to review an 8th Circuit decision that affirmed a $6 million judgment to a class of workers alleging that Tyson did not fully pay them for time spent putting on and taking off protective equipment. Here the evidence showed that protective equipment and times varied across the class; the 8th Circuit allowed plaintiffs to model the time it took the "average" employee to dress and walk to and from his work station ignoring there was no evidence offered to show most or even any class members fit this model. Again, in direct contradiction to Dukes.
Finally, Allstate has asked the Court to review a 9th Circuit decision that allowed one person to represent a class of Allstate adjusters alleging that Allstate had an unofficial policy of pressuring them to work uncompensated hours. The district court approved a trial plan that would allow the plaintiff class to prove three key liability points (that arguably did not even resolve liability for any class member) and then to push all individualized defenses and damages issues to undefined individual hearings that would be set up and fleshed out later. The plan followed the model endorsed in Whirlpool and Sears—and rejected by the Supreme Court in Comcast.
So what will the Supreme Court do? Will it accept cert. and review these decisions? On the one hand, the cases discussed above seem inconsistent with the both spirit and letter of Dukes and Comcast. The cases would provide the opportunity for the Supreme Court to reiterate its holdings and bring the lower courts in line. Indeed, many have commented that a less than rigorous analysis of class certification questions places defendants at a tremendous disadvantage since the costs and risks of proceeding with a class case are enormous. This is the perfect opportunity to reign in the lower courts and the acceptance of any of these cases would pretty clearly signal the Court’s concern with what has happened.
On the other hand, one would have thought the Court would have put its foot down in the washing machine cases had it been that concerned. And the fact that since Dukes and Comcast, Whirlpool successively tried its class case and 3 out of 4 of the pending cases before the Supreme Court went to trial, suggests at least on the surface and to the ill-informed that the “pressure to settle and impossibility of trial” is not as great of a problem as some would say. And the Court may conclude it’s said all it needed to say for the time being and let the lower courts sort it out. In terms of future precedent, this be tantamount to taking the cases and sustaining certification. Either way, its high stakes which is why so many amicus briefs have been filed.
If I had to guess, I would bet the Court will not hear the cases. The Court had the perfect opportunity to address renegade Circuits in the washing machine cases knowing that many would question how consistent the lower court ruling were with Dukes and Comcast. Will the court be persuaded by the increased mischief since then? Probably not …but I’ve been wrong before and frankly hope I am now.
Comment by the author, June 10, 2015: It only goes to show you…..As I predicted in my post yesterday, forecasting what SCOTUS will do is always dicey. And I guessed wrong when I thought the Court would not hear any of the four cases raising significant class action questions under Dukes and Comcast. The Court has in fact agreed to hear the Tyson case next term. As discussed in my post, Tyson asserts that because the evidence showed individual liability and damages questions, and because claims were based on statistical modeling and sampling, the 8th Circuit ruling was inconsistent with Dukes and Comcast. So the question now is whether SCOTUS will use this case to reign in lower courts or to limit its own holdings in Dukes and Comcast. Given my track record, I ain’t predicting!
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Stephen E. Embry is a member of the Firm's class action, privacy and mass tort groups. He frequently defends participants in consumer class actions and mass tort litigation. Stephen is a national litigator and advisor who is experienced in developing solutions to complex litigation and corporate problems.