Expert opinion in class certifications: Second Circuit revisits, disavows In re Visa Check and joins majority rule.

• Author: Davis, Dwight J.

IN VIRTUALLY every putative class action, the entire case will turn on the certification decision. Once a class is certified, an overwhelming majority of the cases go on to settlements, many with large monetary recoveries. On the other hand, those cases that do not survive class certification are typically dismissed, either by summary judgment or by a nuisance payment to the named plaintiff. Accordingly, of utmost concern at the certification stage is the plaintiff's evidence of manageability of the litigation, predominance of common issues and the superiority of a class action over individual cases-elements required by Rule 23 of the Federal Rules of Civil Procedure as prerequisites for class actions. In recent years, the artillery of choice for class action attorneys at the certification stage is the utilization of expert testimony to either establish or challenge the requirements for class certification. (1) Arguably, the use of certain types of expert opinion at this stage of class litigation is inappropriate altogether, but nevertheless it has become an increasingly common practice. (2)

Federal courts, with relatively minimal guidance from the U.S. Supreme Court, have continuously struggled over exactly how, and in some cases whether, to consider expert testimony at the class certification stage. In particular, federal courts have grappled with the use of experts while at the same time negotiating between a "rigorous analysis" of the class certification requirements as required by General Telephone v. Falcon (3) and the prohibition against an inquiry of into the merits of plaintiff's claims proscribed by Eisen v. Carlisle & Jacquelin. (4) Indeed, as recently stated, "the question of when an expert opinion is an appropriate tool in determining whether a class may be certified is a tricky one." (5)

How courts interpret the Supreme Court's guidance from Eisen and General Telephone has become inextricably tied to whether and to what extent courts allow expert testimony to be introduced at the class certification stage. Courts relying on the no-merits-inquiry mandate from Eisen significantly limit the use of expert testimony, while courts that separate an inquiry into the merits of the case from inquiry into the requirements of Rule 23 generally allow the use of expert testimony from both parties. (6) A thoughtful and thorough discussion of this issue can be found in the Second Circuit's recent detailed opinion on this subject, In re Initial Public Offering Securities Litigation ("In re IPO"), (7) in which the court reversed its decidedly plaintiff-friendly construction of Rule 23-accepting plaintiffs' factual allegations as true and refusing to sift through disputed factual issues when considering class certification-as first articulated by that court in Visa Check.

2. Visa Check Court's Construction of Rule 23 Established "Fatally Flawed" Standard

   1. Factual and Procedural Background

      In Visa Check, (8) plaintiffs, a number of merchants and three trade associations, brought an antitrust class action against defendants Visa and MasterCard, alleging that defendants created a tying arrangement in violation of federal antitrust laws, by means of their "honor all cards" policy, which required stores that accept defendants' credit cards to accept their debit cards, as well. Plaintiffs further alleged that defendants attempted and conspired to monopolize the debit card market in violation of the Sherman Act. (9)

      Plaintiffs moved to certify a class consisting of "all persons and business entities who have accepted Visa and/or MasterCard credit cards and therefore are required to accept Visa Check and/or MasterMoney debit cards under the challenged tying arrangements, during the fullest period permitted by the applicable statutes of limitations." (10) Both parties introduced expert reports in support of their respective positions in favor of and in opposition to class certification. The experts gave competing views on whether a method could be devised to litigate the plaintiffs' complex antitrust claims, thus avoiding individualized trials. The court disregarded the fact that the experts offered opposing views on whether the facts of the case were susceptible to class-wide proof. Instead, the court held that the expert testimony offered by the plaintiffs was admissible for the "narrow purpose" of supporting their class certification motion. Moreover, the court stated that merely because the defendants and their expert disagreed with the plaintiffs' expert conclusions was not a basis for denying class certification. (11)

   2. Second Circuit Opinion

      The Second Circuit upheld the district court's ruling. The court began its analysis of the issue of expert testimony at the class certification stage citing Eisen for the proposition that "a motion for class certification is not an occasion for examination of the merits of the case." (12) Presumably wary that allowing competing expert opinions would run afoul of the Supreme Court's mandate in Eisen prohibiting a merits inquiry at this stage, the court announced that a district court is "obliged to determine only 'whether [the plaintiffs] had shown, based on methodology that was not fatally flawed, that the requirements of Rule 23 were met.'" (13) The court went on to conclude that a district judge, at the class certification stage, "may not weigh conflicting expert evidence or engage in statistical dueling of experts." (14)

      Essentially, the Second Circuit in Visa Check established a principle that as long as a plaintiff can provide expert testimony whose methodology is not "fatally flawed" (a term which the court did not define), such expert...