Supreme Court To Decide Whether Daubert Applies At Class Certification Stage

Contributed by Isabella C. Lacayo

Within the next few months, the Supreme Court is expected to issue its decision Behrend v. Comcast – a decision that, like the decision in Wal-Mart Stores v. Dukes, could impact all putative class actions.  The 2011 Dukes decision arose from an employment dispute, but has had a broad impact on class actions because the Supreme Court held that courts must apply a rigorous analysis of all the prerequisites for class certification prior to certifying a class, even if the rigorous analysis entails some overlap with the merits of the underlying claims.  Now, under Dukes, plaintiffs must prove compliance with the FRCP 23 criteria by a preponderance of the evidence.

As we have commented here before, the Supreme Court in Dukes also questioned the Ninth Circuit’s conclusion that a Daubert hearing to determine the admissibility of the testimony was not appropriate at the class certification stage.  So while the Supreme Court hinted that Daubert may very well apply at the class certification stage, the issue was not decided in Dukes.   That issue, though, is now squarely before the Court in the Behrend case, an antitrust case where plaintiffs are a class of cable television subscribers that allege Comcast engaged in monopolistic activity.

In order to be certified as a class by the district court, the Behrend putative class submitted a damages model prepared by an economic expert witness to show that it suffered damages on a class-wide basis.  Comcast objected to the model, arguing that it was inadmissible under FRE 702 and Daubert, and thus could not be used as a basis for certification.  Plaintiffs argued that because Daubert is intended to protect juries from being swayed by dubious scientific testimony, it should not apply as stringently during the class certification stage, where the judge is the decision maker.  The district court sided with plaintiffs and certified the class, finding that it need not make final rulings on admissibility before certification.  The Third Circuit affirmed the district court.  655 F.3d 182 (3d Cir. 2011).

Comcast appealed to the Supreme Court and, in the summer of 2012, the Supreme Court announced that it would review the Third Circuit’s decision, specifically “whether a district court may certify a class action without resolving whether the plaintiff class has introduced admissible evidence, including expert testimony, to show that the case is susceptible to awarding damages on a class-wide basis.”  Oral arguments were heard in November 2012.

The Third Circuit’s decision in Behrend added to the conflict among the Circuits on the issue of whether Daubert applies with respect to class certification.  The Seventh Circuit had taken the approach espoused by Comcast when it held that when an expert’s report or testimony is “critical to class certification” a district court “must perform a full Daubert analysis before certifying the class [ ].”  American Honda Motor Co. v. Allen, 600 F.3d 813, 815-16 (7th Cir. 2010).  And the Fifth Circuit has recognized that, “[i]n many cases, it makes sense to consider the admissibility” of expert testimony at the Rule 23 certification stage, because “[i]n order to consider Plaintiffs’ motion for class certification with the appropriate amount of scrutiny, the Court must first determine whether Plaintiffs’ expert testimony supporting class certification is reliable.” Unger v. Amedisys Inc., 401 F.3d 316, 323 n.6 (5th Cir. 2005).  The Eighth Circuit, though, appears to have chosen a middle ground when it affirmed a district court’s “tailored” Daubert analysis – an examination of the expert testimony with the requirements of FRCP 23 in mind.  In re Zurn Pex Plumbing Products Liability Litigation, 644 F.3d 604, 612 (8th Cir. 2011).  The Eighth Circuit concluded that a full Daubert analysis would have been “impractical” because the parties had engaged in bifurcated discovery, resulting in a limited evidentiary record at the class certification stage that would have “prevented . . . [a] full and conclusive Daubert inquiry.”  Id. at 612-13.  The Eighth Circuit noted that it was “not convinced that the [Seventh Circuit’s] approach [in] American Honda would be the most workable in complex litigation or that it would serve case management better” than a more limited analysis. Id. at 612.

Not surprisingly, multiple amicus briefs were filed in support of Comcast before the Supreme Court (they can be found here), urging the Court to require admissibility determinations under Daubert at the class certification stage.  Many of the amici cite the significant settlement pressure on defendants caused by class certification as a justification for requiring admissibility under Daubert for class certifications.  Judge Posner recently noted in an unrelated decision that, in the class action context, defendants face “monstrous judgment[s]” and thus “threats of ruin” which “force most defendants in class action suits to settle if a class is certified.”  For this reason alone, Behrend v. Comcast could be a game-changer, significantly altering the landscape for all defendants facing putative class actions.