Hunton Employment & Labor Perspectives

On March 27, 2013, the U.S. Supreme Court held that evidence of class-wide injury must survive a “rigorous analysis” before a putative class can be certified.  Comcast Corp. v. Behrend, No. 11–864, 2013 WL 1222646, at *5 (U.S. March 27, 2013). While the Comcast case involved subscribers to Comcast’s cable television service who filed a class action lawsuit alleging anti-trust violations and monopolization, the decision is significant for employers facing class actions.

In Comcast, the plaintiffs sought class certification under Federal Rule of Civil Procedure 23(b)(3), which permits certification if “the court finds that questions of law or fact common to class members predominate over any questions affecting only individual members.”  The district court held that in order to satisfy Rule 23(b)(3), plaintiffs must show that individual injury resulting from the alleged antitrust violation was “capable of proof at trial through evidence that [was] common to the class rather than individual to its members” and that damages could be measured on “class-wide basis” by a “common methodology.”  Behrend v. Comcast Corp., 264 F.R.D. 150, 154 (E.D. Pa. 2010), aff’d, 655 F.3d 182 (3d Cir. 2011), rev’d, 2013 WL 1222646 (U.S. March 27, 2013).  While the plaintiffs put forth four different theories alleging antitrust violations, the district court accepted only one as capable of showing injury on a class-wide basis.  To establish damages, the plaintiffs relied solely on the testimony of one expert, whose damages model did not isolate damages based on which of the four theories caused them.  The district court certified the class and Comcast appealed, citing the limitations of the plaintiffs’ damages model.  Behrend, 264 F.R.D. at 190-91, aff’d, 655 F.3d 182 (3d Cir. 2011), rev’d, 2013 WL 1222646 (U.S. March 27, 2013).  The court of appeals affirmed, holding that any inquiry into the methodology of the damages model was an inquiry into the merits, and thus, prohibited at the class certification stage.  Behrend, 655 F.3d at 206-07, rev’d, 2013 WL 1222646 (U.S. March 27, 2013).

Building on its recent decision in Wal-Mart v. Dukes, the Supreme Court reversed, stating that class certification under Rule 23(b) called for “rigorous analysis.”  The Court stated that such an analysis will often overlap with the merits of the underlying claim and that the Rule 23(b)(3) “predominance” criterion may be more demanding than a Rule 23(a) analysis.  Ultimately, the Court held that “[b]y refusing to entertain arguments against respondents’ damages model that bore on the propriety of class certification, simply because those arguments would also be pertinent to the merits determination, the Court of Appeals ran afoul of our precedents requiring precisely that inquiry.” Comcast Corp. v. Behrend, No. 11–864, 2013 WL 1222646, at *5 (U.S. March 27, 2013).  With regard to the plaintiffs’ expert’s damages model, the Court emphasized the model’s failure to measure the damages attributable to the specific theory of antitrust violation on which the plaintiffs’ claims were based.  In light of this shortcoming, the Court said, the model “cannot possibly establish that damages are susceptible of measurement across the entire class for purposes of Rule 23(b)(3).”  Id.

The Behrend decision is a significant win for defendants—including employers—in class action litigation.  Class certification is generally the most crucial part of a class action lawsuit and can often have serious ramifications on settlement negotiations.  By requiring lower courts to take a closer look at plaintiffs’ evidence prior to certification and to consider defendants’ arguments even if they relate to the merits of the underlying claim, the Court’s decision should make it more difficult to get a class certified.