July 5, 2012

US Supreme Court To Hear Case About Evidence Of Damages At The Class Certification Stage

Consumer Advertising Law Blog

On the heels of its watershed decision in Wal-Mart Stores, Inc. v. Dukes, the Supreme Court last week granted cert in Comcast Corp. v. Behrend, which involves a crucial question about the evidence a court should consider when determining whether damages can be awarded on a class-wide basis. This sets the stage for the Court further to define the extent a court should or is required to consider the merits of a claim at the class certification stage.

Brought in 2003, the underlying case is an antitrust challenge filed against Comcast in the Eastern District of Pennsylvania, but the question presented applies to class actions generally, including consumer false advertising class actions. The District Court certified a class under Rule 23(b)(3), concluding that "there is a common methodology available to measure and quantify damages on a class-wide basis." A divided panel of the Third Circuit affirmed. Finding that Dukes was not controlling, it followed language from a previous Supreme Court case, Eisen v. Carlisle & Jacquelin (which the Court effectively retired in Wal-Mart), to the effect that courts should not decide merits issues when considering class certification. As a result, it held that its role was limited to ascertaining that Plaintiffs "could prove [their claims] through common evidence at trial." As to damages, the court held that "[w]e have not reached the stage of determining on the merits whether the methodology [offered by Plaintiffs] is a just and reasonable inference or speculative," and thus challenges to that methodology "have no place in the class certification inquiry." Judge Jordan disagreed with the majority with regard to damages. He argued that the court was required to undertake a more searching inquiry -- including merits consideration -- to establish whether damages could be awarded on a class basis. He found that they could not, concluding that "Plaintiffs have failed to show that damages can be proven using evidence common to the class, [and] they have failed to show . . . that damages can be proven using any evidence whatsoever – common or otherwise."

Comcast petitioned the Supreme Court to review the decision, arguing that the Third Circuit's determination of a Rule 23 motion without resolving merits arguments in general ran afoul of Dukes. When the Court granted cert, however, it reformulated the question to focus on damages alone: "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." This reformulation of the Question Presented sets the stage for another potentially watershed decision that could affect class certification in all types of cases, including consumer false advertising class actions. Businesses that are potential targets of class actions should be on alert for the outcome.

© Arnold & Porter Kaye Scholer LLP 2012 All Rights Reserved. This blog post is intended to be a general summary of the law and does not constitute legal advice. You should consult with counsel to determine applicable legal requirements in a specific fact situation.

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