defeating class certification by attacking plaintiffs...
TRANSCRIPT
Defeating Class Certification by Attacking
Plaintiffs' Classwide Damages Models
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THURSDAY, AUGUST 8, 2019
Presenting a live 90-minute webinar with interactive Q&A
Cedric D. Logan, Partner, Wheeler Trigg O'Donnell, Denver
Eric L. Robertson, Attorney, Wheeler Trigg O'Donnell, Denver
Dawn B. Williams, Partner, Drinker Biddle & Reath, Washington, D.C.
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Comcast v. Behrend: Where we’ve been and where we’re going
Dawn B. Williams
Drinker Biddle & Reath
(202) 230-5226
August 8, 2019
Comcast Recap
6 |
▪ “Rigorous analysis” of predominance
▪ Theory of damages must be tied to liability theory
▪ Damages “capable of measurement on a classwide basis” ???
Post-Comcast: Second Circuit
7 |
▪ What types of cases in the Second Circuit?
▪ Stock-drop / securities fraud
▪ Consumer fraud, often including statutory claims
▪ Antitrust
▪ Employment
Post-Comcast: Second Circuit
8 |
▪ Trio of Seminal Second Circuit Opinions
▪ Sykes v. Mel S. Harris & Assoc., 780 F.3d 70 (2d Cir. Feb. 10, 2015).
▪ Roach v. T.L. Cannon Corp., 778 F.3d 401 (2d Cir. Feb. 10, 2015).
▪ Waggoner v. Barclays PLC, 875 F.3d 79 (2d Cir. Nov. 6, 2017).
Post-Comcast: Second Circuit
9 |
▪ That damages may have to be ascertained on an individual basis is a factor in the
predominance analysis, but will not in and of itself defeat certification
▪ Calculations need not be exact at class certification stage
▪ Daubert-like inquiry
Post-Comcast: District Courts in the Second Circuit
10 |
▪ Purported classwide financial suitability analysis rejected (Fernandez v. UBS AG)
▪ Invasion of privacy insufficient as classwide damages model (Jensen v. Cablevision)
▪ Increased utility costs (due to misreps or antitrust activity) rejected as a theory
(Famular, Jensen)
Post-Comcast: Ninth Circuit
11 |
▪ What types of cases in the Ninth Circuit?
▪ Consumer fraud / false labeling, often including statutory claims
▪ Employment
▪ Antitrust
Post-Comcast: Ninth Circuit
12 |
▪ Nguyen v. Nissan N. Am., 2019 WL 3368918 (9th Cir. July 26, 2019).
▪ Zakaria v. Gerber Prods., Co., 755 F. App’x 623 (9th Cir. Nov. 14, 2018).
▪ Lambert v. Nutraceutical Corp., 870 F.3d 1170 (9th Cir. Sept. 15, 2017), rev’d on other
grounds, 139 S. Ct. 710 (Feb. 26, 2019).
▪ Just Film, Inc. v. Buono, 847 F.3d 1108 (9th Cir. Feb. 7, 2017).
▪ Doyle v. Chrysler Grp., 663 F. App’x 576 (9th Cir. Oct. 24, 2016).
▪ Vaquero v. Ashley Furniture Indus., Inc., 824 F.3d 1150 (9th Cir. June 8, 2016).
▪ Pulaski & Middleman, LLC v. Google, Inc., 802 F.3d 979 (9th Cir. Sept. 21, 2015).
Post-Comcast: Ninth Circuit
13 |
▪ Individualized damage calculations alone cannot defeat class certification
▪ Plaintiff must allege that the class suffered damages traceable to the same injurious
course of conduct underlying plaintiff’s legal theory
▪ Daubert-lite: the court must evaluate admissibility under Daubert, but “admissibility
must not be dispositive” (Sali v. Corono Regional Med. Cntr.)
Post-Comcast: District Courts in the Ninth Circuit
14 |
▪ Whether “manifestation” of defect is significant depends on liability theory (compare
Nguyen v. Nissan to Davidson v. Apple)
▪ Plaintiffs must set forth some kind of “workable model” at certification / decertification
(Hamilton v. Wal-Mart)
▪ Even flawed models, if tied to liability theory, may be accepted at certification (Grace
v. Apple)
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COMCAST ACROSS THE
COURTS OF APPEAL
Cedric D. Logan
August 8, 2019
Comcast cited 1st Cir. only twice, lowest in nation.
In re Nexium Antitrust Litig., 297 F.R.D. 168 (D. Mass. 2013)
“Now, into the wild . . .”
In re Nexium Antitrust Litig., 777 F.3d 9 (1st Cir. 2015) (affirming)
De minimus potentially uninjured class members does not defeat cert.
In re Asacol Antitrust Litig., 907 F.3d 42, 57 (1st Cir. 2018)
Suppression of generic drugs
Reversed class cert.
Individual inquiries to determine uninjured class members
Not de minimus
16
1st Circuit
MA, ME, NH, RI
In re Dial Complete Mktg. & Sales Practices Litig., 320 F.R.D. 326,
(D.N.H. 2017)
Levecque v. Argo Mktg. Grp., Inc., 2015 WL 3672647 (D. Me.
June 12, 2015)
Baker v. Equity Residential Mgmt., L.L.C., 2019 WL 2719963 (D.
Mass. July 1, 2019)
In re Loestrin 24 Fe Antitrust Litig., 2019 WL 3214257 (D.R.I. July
2, 2019)
17
1st Circuit
MA, ME, NH, RI
Neale v. Volvo Cars of N. Am., LLC, 794 F.3d 353 (3d Cir. 2015)
Vacated cert., but minimized Comcast in the process
“Specific to the antitrust claim at issue”
Quotes dissent: “individual damages calculations do not preclude
class certification under Rule 23(b)(3) is well nigh universal”
In re Modafinil Antitrust Litig., 837 F.3d 238, 260 (3d Cir. 2016), as
amended (Sept. 29, 2016)
Model that calculates savings to the class had generic drugs been
introduced earlier
Individual conspiracies contributed to overall market conditions
18
3d Circuit
PA, NJ, DE
But Don’t Forget . . .Harrnish v. Widener University School of Law,
833 F.3d 298 (3d Cir. 2016):
Not only must damages model measure damages attributable solely
to Plaintiffs’ theory of liability, but it must measure a legally cognizable
theory of damages pursuant to underlying state law.
A flawed damages model can prevent certification, even without
Comcast.
Did not cite Comcast.
Carrera v. Bayer Corp., 727 F.3d 300 (3d Cir. 2013)
19
3d Circuit
PA, NJ, DE
Only cited five times, mostly in passing
Nucor Corp. v. Brown, 760 F.3d 341 (4th Cir. 2014)
Brown v. Nucor Corp., 785 F.3d 895 (4th Cir. 2015)
Krakauer v. Dish Network, L.L.C., 925 F.3d 643 (4th Cir. 2019)
Am. Sales Co., LLC v. Pfizer, Inc., 2017 WL 3669604 (E.D. Va.
July 28, 2017)
Adair v. EQT Prod. Co., 320 F.R.D. 379, 416–17 (W.D. Va. 2017)
20
4th Circuit
MD, WV, VA, NC, SC
Also only cited five times, but the discussions are substantive
In re Deepwater Horizon, 739 F.3d 790 (5th Cir. 2014)
“nothing in Comcast mandates a formula for classwide measurement
of damages in all cases”
Comcast has “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”
Slade v. Progressive Sec. Ins. Co., 856 F.3d 408
Ludlow v. BP, P.L.C., 800 F.3d 674, 683–89 (5th Cir. 2015)
(5th Cir. 2017)
21
5th Circuit
TX, LA, MS
In re Whirlpool Corp., 722 F.3d 838 (6th Cir. 2013)
Remanded by SCOTUS after Comcast
Liability only class
“recognition that individual damages calculations do not preclude
class certification under Rule 23(b)(3) is well nigh universal.”
Rikos v. Procter & Gamble Co., 799 F.3d 497 (6th Cir. 2015)
Full refund model OK’d for allegation that product is valueless
22
6th Circuit
MI, OH, KY, TN
Ohio Pub. Employees Ret. Sys. v. Fed. Home Loan Mortg. Corp.,
2018 WL 3861840 (N.D. Ohio Aug. 14, 2018)
Damages expert struck under Daubert
“model that is vague, indefinite, and unspecific, or simply asserts . . .
that there are unspecified ‘tools’ available to measure damages, the
model amounts to no damages model at all”
Chapman v. Tristar Prod., Inc., 2017 WL 2643596 (N.D. Ohio
June 20, 2017)
Would not decertify based on potential problems with damages
model, but did persuade the court to bifurcate
23
6th Circuit
MI, OH, KY, TN
Butler v. Sears, 727 F.3d 796 (7th Cir. 2013)
Remanded by SCOTUS after Comcast
Liability only class
Kleen Prod. LLC v. Int'l Paper Co., 831 F.3d 919 (7th Cir. 2016)
Parko v. Shell Oil Co., 739 F.3d 1083, 1086–87 (7th Cir. 2014)
Rule 23 not mere pleading requirement
Not sufficient for “plaintiffs [to] intend to rely on common evidence and
a single methodology to prove both injury and damages”
“The judge should have investigated the realism of the plaintiffs' injury
and damage model”
24
7th Circuit
WI, IL, IN
Ebert v. Gen. Mills, Inc., 823 F.3d 472 (8th Cir. 2016)
Tyson Foods v. Bouaphakeo, 136 S. Ct. 1036 (2016).
Donning and doffing case under the Fair Labor Standards Act.
Plaintiff introduced expert testimony with representative evidence
Held: “Representative evidence that is statistically inadequate or
based on implausible assumptions could not lead to a fair or accurate
estimate[.] Petitioner, however, did not raise a challenge to
respondents’ experts’ methodology under Daubert.”
Concurrence: What about the completely uninjured class members?
This may be the next Comcast, as there appears to be a circuit split
25
8th Circuit
MN, ND, SD, NE, IA, MO, AR
Wallace B. Roderick Revocable Living Trust v. XTO Energy, 725
F.3d 1213 (10th Cir. 2013)
The Tenth Circuit reversed certification and remanded to the district
court to “consider the extent to which material differences in damages
determinations will require individual inquiries.”
Naylor Farms, Inc. v. Chaparral Energy, LLC, 923 F.3d 779 (10th
Cir. 2019)
Models not always necessary
Question is do individual damages overwhelm common questions
Friedman v. Dollar Thrifty Auto. Grp., Inc., 304 F.R.D. 601 (D.
Colo. 2015)
Alleged deceptive conduct about “add-on products” presented
individualized inquiry about liability and damages
26
10th Circuit
WY, UT, CO, KS, NM, OK
Brown v. Electrolux Home Products, 817 F.3d 1225 (11th Cir.
2016)
Noted that the predominance issue is qualitative, and the individual
issues raised by damages determinations are often easy issues to
resolve when damages calculations are formulaic.
Recognized that an “exception” to the blackletter rule when
computing individual damages will be complex and fact-specific.
Remand to consider whether common issues of liability and damages
together predominate over individual issues.
27
11th Circuit
AL, GA, FL
In re: Rail Freight Fuel Surcharge Antitrust Litigation, 725 F.3d
244 (D.C. Cir. 2013)
“No damages model, no predominance, no class certification.”
In re McCormick & Co., Inc., Pepper Prod. Mktg. & Sales
Practices Litig., 2019 WL 3021245, at *1 (D.D.C. July 10, 2019)
MDL re slack fill pepper products
Court rejected challenges to classwide model, but acknowledged that
“it may well be a challenge to figure out how to identify class
members and to allocate damages among them”
28
DC Circuit
Early Circuit Court Decisions
In re: Rail Freight Fuel Surcharge Antitrust Litigation, 725 F.3d
244 (D.C. Cir. 2013)
“No damages model, no predominance, no class certification.”
Wallace B. Roderick Revocable Living Trust v. XTO Energy, 725 F.3d
1213 (10th Cir. 2013)
The Tenth Circuit reversed certification and remanded to the district
court to “consider the extent to which material differences in damages
determinations will require individual inquiries.”
29
Must Damages be Measureable on a
Classwide Basis?
The need for individual damages calculations alone does not
defeat a finding of predominance:
Leyva v. Medline Industries, Inc., 716 F.3d 510 (9th Cir. 2013)
In re Whirlpool Corp., 722 F.3d 838 (6th Cir. 2013)
Butler v. Sears, 727 F.3d 796 (7th Cir. 2013)
In re Deepwater Horizon, 739 F.3d 790 (5th Cir. 2014)
In re Nexium Antitrust Litig., 777 F.3d 9 (1st Cir. 2015)
Roach v. T.L. Cannon, 778 F.3d 401 (2d Cir. 2015)
Neale v. Volvo Cars of N. Am., LLC, 794 F.3d 353 (3d Cir. 2015)
Brown v. Electrolux Home Products, 817 F.3d 1225 (11th Cir. 2016)
30
But the Door is Still Open
First, Fourth, Eighth, Tenth, Eleventh, and DC still developing
Fifth, Sixth and Seventh Circuits: those cases involved liability
only classes.
First, Second and Ninth Circuits all noted that there was an easy
way to calculate individual damages in those cases.
Still an open question after these cases about how to evaluate a
putative class where damages are not measureable on a
classwide basis and individual damages are not readily calculable.
31
The Next Frontier
Will SCOTUS revisit Comcast to reiterate/restate core holding?
Apparent circuit split over existence of completely uninjured class
members
Tyson Foods concurrence
1st Cir.: In re Nexium Antitrust Litig.: de minimus uninjured class
members OK, but more than that defeats cert.
Models to prove classwide injury as an element of liability
Harnish
32
Three Key Points
First, the “rigorous analysis” of damages evidence includes
considering whether class damages experts satisfy FRE 702 and
Daubert.
Second, although individual damage calculations alone will not
defeat predominance in most circuits, courts are generally willing
to consider the need for such inquiry as a factor in deciding
whether common issues outweigh individual issues.
Third, proof of class damages must measure only those damages
attributable to Plaintiffs’ theory of liability.
33
Arguments Under Comcast That
Have Been Successful
1. Insufficiently developed model.
District court cannot perform its “rigorous analysis” without substance.
2. Model fails to eliminate the need for individual inquiry.
Courts have recognized that the need for such inquiries can defeat
predominance.
3. Model fails to measure damages flowing from the alleged injury.
Or the method does not measure damages in a way that is
cognizable under the underlying substantive law.
34
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DAMAGES MODELS IN CONSUMER
CLASS ACTIONS
Eric Robertson
August 8, 2019
36
The Damages Element
Breach of Warranty
UCC: difference between “value of the goods accepted and
the value they would have had if they had been as warranted.”
UCC § 2-714(2)
“Value” = “fair market value”
Chatlos Systems, Inc. v. Nat’l Cash Register Corp., 635 F.2d 1081, 1088
(3d Cir. 1980)
In re Fluidmaster, Inc., Water Connector Components Prod. Liab. Litig.,
2017 WL 1196990, at *57 (N.D. Ill. Mar. 31, 2017)
37
The Damages Element
Consumer Protection
UCL, CLRA: difference between “market price actually paid by
consumers and the true market price that reflects the impact of
the unlawful, unfair, or fraudulent business practices.”
In re NJOY, Inc. Consumer Class Action Litig., 120 F. Supp. 3d 1050,
1122 (C.D. Cal. 2015)
38
The Damages Element
“[F]air market value is the “price that a seller is
willing to accept and a buyer is willing to pay
on the open market and in an arm's-length
transaction; the point at which supply and
demand intersect.”Saavedra v. Eli Lilly & Co., 2014 WL 7338930, at *4 (C.D. Cal. Dec. 18, 2014)
39
The Damages Element
Damages are “[t]he difference between what
the plaintiff paid and the value of what the
plaintiff received,” which “requires evidence of
the actual value of what the plaintiff received.”In re POM Wonderful LLC Mktg. & Sales Practices Litig., 2014 WL 1225184,
at *3 (C.D. Cal. Mar. 25, 2014).
40
Market Price
Quantity
Price
Demand
Curve
Supply
Curve
41
Price Premium
Actual
Price
“True”
Price
42
Three Models
Conjoint Analysis
Contingent Valuation
Hedonic Regression
43
Conjoint Analysis
Survey respondents make choices between different combinations
of product attributes.
Statistical methods used to estimate the separate value for each
product attribute.
Attribute can be computed as a percentage of the purchase
price—it was “worth” X% of the purchase price.
In re NJOY, Inc. Consumer Class Action Litig., 120 F. Supp. 3d 1050,
1073 (C.D. Cal. 2015)
44
Conjoint Analysis
“Conjoint analysis is a statistical technique
capable of using survey data to determine how
consumers value a product’s individual
attributes—often called the market’s
willingness to pay.”Saavedra v. Eli Lilly & Co., 2014 WL 7338930, at *4 (C.D. Cal. Dec.
18, 2014)
In re NJOY, Inc. Consumer Class Action Litig., 120 F. Supp. 3d 1050,
1073 (C.D. Cal. 2015)
45
Willingness to Pay
Quantity
Price
Demand
Curve
46
Willingness to Pay
Saavedra, 2014 WL 7338930, at *4-5:
“Plaintiffs’ theory of injury is distinct from the typical benefit-of-
the bargain claim because it focuses only on the demand side
of the equation, rather than on the intersection of supply and
demand.”
“By looking only to consumer demand while ignoring supply,
[the] method of computing damages converts the lost-
expectation theory from an objective evaluation of relative fair
market values to a seemingly subjective inquiry of what an
average consumer wants.”
47
Willingness to Pay
In re NJOY, Inc., 120 F. Supp. 3d at 1119:
The model looks only “to the demand side of the market
equation,” converting what is properly “an objective evaluation
of relative fair market values [in]to a seemingly subjective
inquiry of what an average consumer wants.”
48
Supply Side
Conjoint analysis appropriate when:
(1) Prices used in surveys reflect actual market price
(2) Quantities used reflect actual quantities sold
In re Dial Complete Mktg. & Sales Practices Litig., 320 F.R.D. 326, 336–
37 (D.N.H. 2017)
Hadley v. Kellogg Sales Co., 324 F. Supp. 3d 1084, 1105 (N.D. Cal.
2018)
Hisley v. Ocean Spray Cranberries, Inc., 2019 WL 3006465, at*3-4 (S.D.
Cal. July 10, 2019)
49
Other Issues
Davidson v. Apple, 2018 WL 2325426, at *22 (N.D. Cal. May 8,
2018):
Proposed damages model failed to measure “how much
consumers overpaid for iPhones assuming a roughly 5.6
percent or less chance that consumers would experience the
touchscreen defect.”
Compare to what expert actually measured: “how much
consumers overpaid for a touchscreen defect that is certain to
manifest in all iPhones.”
50
Other Issues
Davidson v. Apple, 2019 WL 2548460, at *13-16 (N.D. Cal. June
20, 2019):
Second proposed model also fails Comcast because survey
(i) failed to measure how purchasers would value a
defect that could be remedied for free within the one-
year warranty period, and
(ii) used incorrect manifestation rates, resulting in
survey respondents thinking the manifestation rate
was 8 times higher than it actually was.
51
Contingent Valuation
Environmental litigation
Quantifies value of non-market goods
Cannon v. BP N. Am., Inc., 2013 WL 5514284, at *12 (S.D. Tex.
Sept. 30, 2013) (contingent valuation “attempts to value things that do
not typically have a market price, such as the presence of absence of
environmental contamination”)
52
Non-Market Goods
Miller v. Fuhu, Inc., 2015 WL 7776794, at *21 (C.D. Cal. Dec. 1,
2015)
Expert said model was appropriate because the subject of his survey
was a “nonmarket good” in the sense that the alleged defect had
never been disclosed in connection with any real-world sales
In re Scotts EZ Seed Litigation, 304 F.R.D. 397, 413 (S.D.N.Y.
2015)
53
Hedonic Regression
Data-based, not survey based
Measures implicit values of product attributes
Expert observes market prices for products with different
combinations of attributes
Uses a statistical tool to measure the implicit value of each
attribute in that market
If attributes are missing or cannot be disentangled, their value
cannot be measured
54
Omitted Variables
Werdebaugh, 2014 WL 7148923, at *12 (N.D. Cal. Dec. 15, 2014)
Brazil, 2014 WL 5794873, at *11-12 (N.D. Cal. Nov. 6, 2014)
In re Live Concert Antitrust Litig., 863 F. Supp. 2d 966, 974 (D.C.
Cal. 2012)
55
Multicollinearity
Werdebaugh, 2014 WL 7148923, at *11 (N.D. Cal. Dec. 15, 2014):
Perfect collinearity problem here renders the damages model
insufficient
Model measures the “combined effect ” of Blue Diamond's
brand value and Blue Diamond's use of “evaporated cane
juice” and/or “All Natural” on the prices of the challenged
products
Compare Brazil, 2014 WL 5794873, at *9-10
56
Using Two ModelsIn re ConAgra Foods, Inc., 90 F. Supp. 3d 919, 1025 (C.D. Cal.
2015 (Morrow, J.):
Proposed hedonic regression alone did not satisfy Comcast
Hedonic regression and conjoint analysis in combination
meet Comcast