The decline of class actions.

• Author: Klonoff, Robert H.
• Position: III. New Rigorous Federal Case Law A. Heightened Evidentiary Burdens 4. Resolving Challenges to Admissibility (Including Daubert Challenges - F. Hodge O'Neal Corporate and Securities Law Symposium: The Future of Class Actions

4. Resolving Challenges to Admissibility (Including Daubert Challenges) at the Class Certification Stage

   This author's approach--which cuts back considerably on Hydrogen Peroxide and Szabo----does not mean that courts should never resolve contested issues at class certification. If defendant contends that the evidence relied upon by plaintiffs for class certification would be inadmissible at trial, the court must decide the admissibility question at the class certification stage. For example, if testimony relied on by plaintiffs in support of certification would be admissible under one view of the substantive law but inadmissible under another, the court must decide the legal issue to ensure that, in fact, plaintiffs' evidence supporting class certification would in fact be admissible at trial. (162)

   The issue of admissibility frequently arises in the expert witness context, where the defendant raises a Daubert challenge to the admissibility of an expert's testimony bearing on class certification on the ground that it is not generally accepted in the relevant scientific, technical, or professional community. Some recent decisions have held that the court must resolve the Daubert challenge at the class certification stage. (163) As the Seventh Circuit stated in American Honda Motor Co., Inc. v. Allen: (164)

   [W]hen an expert's report or testimony is critical to class certification ... a district court must conclusively rule on any challenge to the expert's qualifications or submissions prior to ruling on a class certification motion. That is, the district court must perform a full Daubert analysis before certifying the class if the situation warrants. (165) The Eleventh Circuit has followed American Honda, finding that the district court erred in refusing to apply Daubert at the class certification stage. (166)

   The Eighth Circuit, by contrast, has squarely rejected American Honda in In re Zurn Pex Plumbing Products Liability Litigation. (167) There, the defendant moved to strike the testimony of two experts on Daubert grounds. The district court declined to conduct a full-blown Daubert inquiry but instead conducted a "focused" inquiry based on the evidence produced thus far. (168) The Eighth Circuit affirmed the district court's refusal to conduct a full-blown Daubert analysis, reasoning:

   Zurn's desire for an exhaustive and conclusive Daubert inquiry before the completion of merits discovery cannot be reconciled with the inherently preliminary nature of pretrial evidentiary and class certification rulings. The main purpose of [the] Daubert exclusion is to protect juries from being swayed by dubious scientific testimony. That interest is not implicated at the class certification stage where the judge is the decision maker. (169) Several district courts have similarly adopted a modified, less rigorous Daubert inquiry. (170) Moreover, some district courts have refused to apply even a modified version of Daubert, holding that Daubert is entirely inapplicable at class certification. (171)

   The Supreme Court has not resolved this issue. In Dukes, the Supreme Court suggested that it was sympathetic with the approach in American Honda, but it did not definitively decide the issue. The Court stated: "The District Court concluded that Daubert did not apply to expert testimony at the class certification stage of class-action proceedings. We doubt that is so, but even if properly considered, [the expert's] testimony does nothing to advance [plaintiffs'] case." (172) As noted, the Supreme Court did not resolve the Daubert issue in Comcast Corp. v. Behrend, even though that issue was encompassed in the question presented, because defendant had failed to object to the admission of plaintiffs' expert evidence at the trial level, thus waiving the issue. (173)

   Although Hydrogen Peroxide requires plaintiffs to satisfy too high of a standard at the class certification stage, the same cannot be said of the American Honda approach. If an expert will not be permitted to testify at all at trial, plaintiff should not be able to rely on that inadmissible testimony in support of class certification. As one court put it, "class certification decisions must be made based on admissible evidence." (174) A Daubert inquiry ensures that plaintiffs' evidence meets minimal standards of reliability and admissibility, and it therefore enables the court to assess whether plaintiffs can prove their claims on a classwide basis with evidence the jury will be permitted to consider. But once the court determines that plaintiffs' evidence satisfies the Daubert threshold for admissibility, the court should not resolve the question of whether plaintiffs' or defendants' evidence is more persuasive.

   In sum, the court at class certification should conduct a rigorous review of the evidence supporting class certification. That means it should satisfy itself that plaintiffs' evidence, if credited by the fact finder, would establish the elements of the claims on a classwide basis. The court should also satisfy itself that the evidence is admissible, and this determination may involve a full-scale Daubert review in the case of expert witness evidence. Once the court determines that plaintiffs' evidence is sufficiently probative to be admissible at trial, however, it should not weigh plaintiffs' evidence against defendant's evidence in an effort to determine which side's evidence to credit.

   2. Stringent Requirement of a Class Definition

      Recent case law has also imposed rigorous obligations on plaintiffs in defining the scope of the putative class action. A class definition, of course, is critical to ascertain who is in the class, who is subject to notice, and who is bound by the judgment. (175) Prior to 2003, the requirement of a class definition was solely a matter of case law, (176) and it was not even mentioned in Rule 23. (177) In 2003, Rule 23 was amended to state that "[a]n order that certifies a class action must define the class and the class claims, issues, or defenses." (178) The rule, however, does not elaborate on what constitutes an adequate class definition.

      The Manual for Complex Litigation contains some general guidance. First, the definition should contain "objective criteria" and "avoid subjective standards (e.g., a plaintiff's state of mind) or terms that depend on resolution of the merits (e.g., persons who were discriminated against)." (179) A definition that turns on the merits is sometimes called a "fail-safe" class, because the class is certified (and a binding judgment entered) only if plaintiff wins the case. (180) Second, "the class definition [should] capture[] all members necessary for efficient and fair resolution of common questions of fact and law in a single proceeding. (181) Third, "[t]he class definition should describe the operative claims, issues, or defenses." (182) The Manual also recognizes that more specificity is needed for (b)(3) classes, which allow opt-outs, than for (b)(1) and (b)(2) classes, which are mandatory. (183) In the case of a putative Rule 23(b)(2) class, it states that "[t]here is no need to identify every individual member at the time of certification ... as long as the court can determine at any given time whether a particular individual is member of the class." (184) A Rule 23(b)(3) class, however, "require[s] a class definition that will permit identification of individual class members." (185)

      Between 1966 and 2000, relatively few cases turned on the adequacy of the class definition. (186) In most cases, courts allowed plaintiffs to reformulate the definition to satisfy any concerns. (187) In recent years, however, a significant number of courts have utilized the requirement of an adequate class definition to deny class certification. In the last five years alone, dozens of cases have denied class certification because of a flawed definition (either solely on that ground or as one of alternative grounds). (188) Although some of these decisions can be justified on their particular facts, others have adopted an overly demanding approach to evaluating class definitions.

      An example of the latter approach is Cole v. ASARCO Inc. (189) In that case, a district court found plaintiffs' proposed class definition of "[a]ll individuals and entities who owned or had an interest in real property in the Class Area as of May 14, 2001" to be "untenable." (190) The court concluded that, "[a]bsent a cognizable class, determining whether plaintiffs or the putative class satisfy the other Rule 23(a) and (b) requirements is unnecessary." (191) Similarly, in Sanders v. Apple Inc., (192) the court granted defendant's motion to strike plaintiff's class allegations. (193) The Sanders court couched its discussion of unascertainability in terms of Article III standing, stating that the class needed to "be defined in such a way that anyone within it would have standing." (194) In Brazil v. Dell, Inc., (195) the court struck plaintiffs' class allegations on the ground that the proposed definition, including "California persons or entities who purchased Dell computer products that '[defendant] falsely advertised,'" was an impermissible fail-safe class. (196) And in Barasich v. Shell Pipeline Co., (197) the court found the proposed definition of "[a]ll commercial fisherman whose oyster leases were contaminated by oil discharged during Hurricane Katrina due to the negligence of defendants" to be inadequate, noting in particular that plaintiffs had not included any geographical boundaries in their definition. (198) To the extent that the definitions in those cases were flawed at all, they could have been fixed with minor tinkering. Denying class certification is a judicial overreaction--an approach that is the polar opposite of the approach taken by most courts in the 1960s through the mid-1990s.

      In many instances, what courts are doing under the guise of reviewing the class definition is applying the explicit requirements of...