More than a year ago the U.S. Supreme Court issued its historic decisions in a class action case by Wal-Mart employees, and in a second class action case by AT&T cell phone owners. Many declared class actions dead. Our panel of experts from northern and southern California discusses the impact on class certification, the use of arbitration, as well as the rise in food, beverage, and supplement litigation. They are Robert Herrington of Greenberg Traurig; Jahan Sagafi of Lieff Cabraser Heimann & Bernstein; Bernice Conn of Robins, Kaplan, Miller & Ciresi; and Layne Melzer of Rutan & Tucker. The roundtable was moderated by California Lawyer
and reported by Laurie Schmidt of Barkley Court Reporters.
Moderator: How have courts responded to the Wal-Mart decision (Wal-Mart Stores, Inc. v. Dukes (131 S. Ct. 2541 (2011)) and what trends have emerged around class certification?
has ushered in renewed interest in challenges based on the lack of commonality. Defense lawyers are now more surgical in their approach to the issue. Consistent with the language in Dukes
, the task is now to identify the "dispositive issues" and then explain why they cannot be resolved based on common proof.
Most courts have embraced that where expert testimony bears on class certification a full Daubert
examination is appropriate (see Daubert v. Merrell Dow Pharms.
, Inc., 509 U.S. 579 (1993)). Interestingly, the Court's comments in Dukes
regarding the application of Daubert
at class certification were largely dicta. Justice Scalia, commenting on the district court's view that a full Daubert
analysis did not apply to expert testimony at class certification, remarked: "we doubt this is so."
The Ninth Circuit (along with courts in the Seventh and Eleventh Circuits) has taken that comment and "run with it." So you have cases like Ellis v. Costco Wholesale Corp.
(657 F.3d 970, 986-987 (9th Cir. 2011)) where a rigorous Daubert
analysis is endorsed. On the other hand, courts in the Eighth and the Third Circuits in cases like In re Zurn Pex Plumbing Prods. Liability Litig.
(644 F.3d 604, 613 (8th Cir. 2011)) and Behrend v. Comcast Corp.
(655 F.3d 182, 204 n. 13 (3d Cir. 2011)) respectively appear to favor a sort of "Daubert
lite" analysis, focusing primarily on "probable" or "plausible" admissibility. The Supreme Court has taken up Behrend so we will presumably see this emerging split resolved next term.
So far, Dukes
appears to have benefitted defense lawyers. It's particularly troubling that Daubert
has morphed from an analysis designed to ensure that jurors don't hear unreliable science into a procedural tool for disposing of cases pre-trial. Daubert
motions have become companion motions to summary judgment motions.
We view the Daubert
issue as a good development. Dukes
has put plaintiffs to their proof. One way that premise - that plaintiffs need to provide evidence - has filtered down as a potential strategic tool for defendants is as a motion to strike class allocations at the pleading stage of the case. Courts are approving it. The Sixth Circuit recently did and there are a number of district court cases. (Pilgrim v. Universal Health Card, LLC
, 660 F.3d 943, 946-48 (6th Cir. 2011).) The Fifth Circuit has an unpublished decision approving a motion to strike class allegations. (In re Katrina Canal Breaches Litig.
, 401 Fed. Appx. 884, 886-87 (5th Cir. Nov. 11, 2010).)
has certainly allowed defense counsel to make some mischief, but it's a mixed bag, since it also maintains the traditional structure of Rule 23, allowing certification based on a single common issue. Dukes
also reaffirms that the artificial bifurcation between class cert and merits discovery is not viable. It provides significant support for plaintiffs in initial case management conferences seeking to avoid bifurcation of discovery, because the merits and the class cert analyses can blur. You are entitled to that discovery from the beginning.
In many cases a lot of evidence is in the defendant's hands, so you can't allege it in your initial complaint. A lot of evidence needs to be adduced after filing a complaint before you can submit your Rule 23 briefing. So a premature motion to strike class allegations or to "deny certification" would be inappropriate.
leaves open the possibility of Rule 23(c)(4) issue certification. Plaintiffs lawyers have been slow to develop that area. It's a practical tool that can achieve limited common adjudication of certain issues and then allow the court to switch back to individual adjudication, whether it's within the liability context or solely for damages.
Even in Dukes
-like situations, you've got cases like Judge Posner's opinion in McReynolds v. Merrill Lynch
, Pierce, Fenner & Smith, Inc. (672 F.3d 482 (7th Cir. 2012)), where denial of 23(c)(4) and 23(b)(2) certification were reversed, based on the objective component of the decision-making.
There is a disappearing distinction between merits and class discovery. It's very hard for defendants to maintain that they should be required only to provide limited discovery when you consider the emphasis on Daubert
. The quality of discovery will directly impact the quality of the expert opinions in the case. As much as defendants don't like a full-blown discovery, it moves the case along a lot quicker, which is a primary objective of many judges today. Ultimately, Dukes
requires plaintiffs to plead tighter cases, to re-evaluate the statistical evidence they submit, and, in employment cases, look for class-wide conduct that isn't purely discretionary.
also makes it very difficult, in any case seeking "non-formulaic" monetary relief, to certify a Rule 23(b)(2) injunctive relief class action. Before, Dukes
courts tended to inquire whether the plaintiff was "primarily" seeking injunctive relief such that monetary relief was merely "incidental." Often this degenerated into a fight about "how much" money was being sought and the plaintiff's sincerity in seeking an injunction. According to Dukes
, any case in which individualized damage determinations are required is not appropriate for certification under Rule 23(b)(2) as a mandatory injunctive relief class. This limitation was echoed by our Ninth Circuit in Ellis v. Costco
(cited earlier). Significantly, a Rule 23(b)(2) class can be easier to certify because it denies a defendant the ability to raise "predominance" or "manageability" challenges. Now most cases will not be able to seek certification under these more lenient standards.
While it's true that you essentially cannot have individualized relief under (b)(2), that does not mean no monetary relief, as you acknowledged. For example, in Delarosa v. Boiron, Inc.
(275 F.R.D. 582 (C.D. Cal. 2011)), the court said that because the determination of damages did not require individualized analysis, certification for money damages was appropriate under (b)(2).
Decisions, most notably out of the Seventh Circuit, are coming down approving the use of Rule 23(c)(4) class actions, and using this provision as a way to certify certain issues.
I have yet to see a defendant who didn't argue that highly individualized damage issues barred class certification. But you really have to balance that with finding a remedy when an employer is engaging in systematic wrongdoing.
If you try to certify a Rule 23(c)(4) class, you take the defense issue out of it.
I don't think you eliminate the issue. Courts still need to balance how to correct systemic wrongdoing, even on a small scale, against an employer's right to conduct its business and make employment decisions that it believes are in its best interest. It's already hard for courts to balance those competing interests, and Dukes
doesn't make it easier.
I don't think Dukes
somehow facilitates systemic wrong because it makes class actions harder to certify. If there is systemic wrong, then that should be amenable to "common proof." Assuming you can satisfy the other Rule 23 prerequisites, such a case is appropriate for class certification. If the claim cannot be shown by common proof, then there probably isn't systemic wrong. Dukes
simply provides the analytical filter to separate out cases that should not survive as class actions.
That may give defendants two bites of the apple by challenging plaintiffs' evidence at class certification and liability. In a consumer case, if there is an overall significant difference in the efficacy between, say, Vioxx and some other drug, then class certification may be appropriate. Nonetheless, it still might work for many people. But is that a violation of the law and a sufficiently serious common issue that it's appropriate to have a class action and avoid the necessity for individual adjudications discussing the same science with the same experts over and over?
Separately, the question of individualized defenses under Dukes
is coming up more and more, and is now before the California Supreme Court. If the court goes with Justice Werdegar's practical recognition of the importance of the vindication of individual rights, avoidance of windfalls to defendants, and the appropriateness of representative testimony for liability in Brinker Restaurant Corp. v. Superior Court
(53 Cal. 4th 1004 (2012)), that will be very different than the court of appeal's approach in Duran v. United States Bank Nat'l Assn.
(203 Cal. App. 4th 212 (2012)), which focused on a due process right to individualized determinations (even when there's no affirmative defense like the Title VII scheme in Dukes
), requiring individual determinations of liability person by person. Under Duran
's logic, you effectively could not ever have an employment class action.
From the defense side, Brinker
and the court's discussion of the class certification standard was welcome. I had a hearing a few days after Brinker
came down, and the superior court judge in Orange County commented that we might need to re-brief the motion for class certification given the state Supreme Court's clarification that evidence is, in fact, required at the class certification stage. Sort of the trickle-down effect of Dukes
. And I don't know what that portends for Duran
. Either California will once again depart from the federal standard in terms of class certification and go its own way, or we will see something where the California Supreme Court ends up echoing what Dukes
had to say.
Moderator: How have California's appeal courts applied the Concepcion decision (AT&T Mobility LLC v. Concepcion, 131 S. Ct. 1740 (2011))? In the year since that case came down, how has it impacted the state Supreme Court's prior ruling in Gentry (Gentry v. Superior Court, 42 Cal. 4th 443 (2007))?
I should disclose that I have been strongly opposed to arbitration for most of my legal career. Concepcion
in particular is an appalling decision that reflects the court's ideological split. The Court has largely exempted from a state court's review of unconscionability a particular type of contract clause in contracts between private parties. Federal arbitration law did not develop in a consumer context, a distinction often ignored these days. Arbitration is an appropriate procedure when two parties of equal bargaining strength agree to it, but there are fundamentally different considerations when you're talking about parties of radically unequal bargaining power. It is hard to reconcile Concepcion
as anything other than an ideological and maybe even politically motivated decision.
The Court in Concepcion
did not say that there was no place for an unconscionability defense. And there are other viable defenses to the enforcement of an arbitration clause that survive Concepcion
. But under principles of Federalism, given the preference for arbitration expressed in the FAA, courts are not free to disfavor arbitration as California state courts did prior to Concepcion
. Unfortunately, California courts are still struggling to come to grips with Concepcion
. You have cases such as Brown v. Ralphs Grocery Co.
(197 Cal. App. 4th 489 (2011)) where the court concluded Concepcion
does not apply to cases involving unwaivable "wage and hour" statutory rights or enforcement of public rights under PAGA (the California Labor Code's private attorney general act; see Cal. Labor Code § 2698-2699.5). Conversely, you have cases like Iskanian v. CLS Transportation Los Angeles, LLC
, 206 Cal. App. 4th 949 (2012) holding that Concepcion
is the law of the land and the Supreme Court did not distinguish between the type of dispute to be arbitrated. An agreement to arbitrate cannot be ignored merely because the court views this form of dispute resolution inimical to broader public policy goals.
The problem is many consumers don't know they have a claim, and the vast majority don't bother to pursue the claim because it takes time, so 99 percent of people effectively won't get a remedy. AT&T has insulated itself from judicial review of its behavior toward its customers.
The decision heralds a revival of the Lochner era, where the conservative core fetishizes the freedom of contract (see Lochner v. New York
, 198 U.S. 45 (1905)). It's an ivory tower, over-simplified view of how consumers engage in commercial activity, or employees relate to their employers.
Shifting to Concepcion
's impact, courts are grappling with how to ensure that the FAA doesn't abridge substantive rights. For example, the National Labor Relations Board, in D.R. Horton, Inc., (357 NLRB No. 184 (2012)), explained how enforcing a class action ban violates substantive employment rights. This argument hasn't fared well largely because courts don't seem to comprehend that the right to "concerted action for mutual aid or protection" from the National Labor Relations Act are substantive rights to act collectively.
decision is a wake-up call for businesses. After the decision came down, many companies sat on the sidelines to see the lower courts' reactions and how they would apply it. In California, the reaction has been surprisingly consistent. Although there are plenty of decisions following Concepcion
, there also are decisions that continue to strike down arbitration clauses either because of lack of mutuality or notice. In a recent decision, the Second Circuit struck down an arbitration clause based on a lack of notice (see Schnabel v. Trilegiant Corp.
, 2012 WL 3871366 (2d Cir. 2012)). Now, companies are looking strategically at the use of arbitration clauses and other types of agreements that often are included in consumer and employment agreements, including reasonable limitations on the statute of limitations and pre-filing notice provisions.
California's courts struck down or upheld arbitration clauses under the Discover Bank
decision (see Discover Bank v. Superior Court
, 36 Cal.4th 148 (2005)). The courts didn't need Concepcion
to enable them to evaluate the unconscionability of arbitration clauses. It's not clear whether Gentry is still alive following Concepcion
so the courts are trying to set clear lines by carving out certain kinds of cases. Some of the language in these cases suggests the courts just don't believe that unconscionability is really a viable defense anymore. Concepcion
strengthens the ability of businesses to insulate themselves from consumer class actions.
Moderator: What is the correct measure of restitution under the Unfair Competition Law (Cal. Bus. & Prof. Code §§ 17200-17210)?
In the recent deluge of health claims and food, beverage, and supplement litigation, the complaint often requests full restitution under the UCL, which plaintiffs will define as "everything that I paid," and everything the class paid. Often a plaintiff buys a product from a defendant, consumes it, and then alleges it had a defective label, or problematic advertising, and sues for full restitution.
What is the right measure of relief? Is it everything a plaintiff paid or an alternative valuation - more akin to the delta between the amount paid and the value received? They obviously got something, which had some value. The defense and companies wrestle with this when trying to value a case and whether to settle.
Currently, California law is all over the place. Class certification was denied in In re Vioxx Class Cases
(180 Cal. App. 4th 116, 131 (2009)) because the plaintiff could not prove the value on a class basis. Then, in In re Steroid Hormone Prods. Cases
(181 Cal. App. 4th 145, 160 (2010)), where the product was illegal to both use and sell, the court rejected the Vioxx
decision saying they should get all the money back because the product was illegal to sell and illegal to use. But it's an undecided issue.
I see Vioxx
as a failure of evidence case, not really putting into issue the whole question of restitutionary relief. The Steroid Hormone
litigation involved a flat-out illegal product. The steroid case didn't deal with the effectiveness of the drug - as opposed to some other product on the market - as did Vioxx
. That was a fairly easy distinction for that court to make.
There are core principles regarding the concept of restitution under the UCL. First, standing is different than restitution. For instance, in a false advertising case if you can prove "I wouldn't have bought this but for the deceptive ad", then you have probably "lost money or property" sufficient to demonstrate standing. However, that does not mean you are necessarily entitled to a return of the full purchase price as restitution.
Second, if you as the plaintiff received something of value in the transaction at issue, you have to account for that value. This is how one reconciles Vioxx
with Steroid Hormone
. In Vioxx
the plaintiffs alleged they paid more than they should have because there were safer more effective pain relievers. Yet the plaintiffs did not provide a comparator to Vioxx
, so there was no way for the court to measure the delta or alleged difference in value. Third, just because one has standing and can establish compensable restitution that doesn't mean you are entitled to a judgment for restitution. UCL actions are inherently equitable and courts are vested with authority to conclude based on the equities that restitution need not be made.
We're seeing a unique application of Steroid Hormone
in the food and beverage supplement area where the plaintiff will claim a violation of FDA regs or federal labeling laws. They will then say that is a violation of the California Sherman Act, the California labeling law that makes a product that is mislabeled, illegal to sell. Therefore, it is an unlawful product akin to a steroid.
Restitution simply returns the money that belongs, in good conscience, to the plaintiff. Another principle is that you need some kind of evidentiary support, and that will likely require expert testimony about the value. In Colgan v. Leatherman Tool Group, Inc.
(135 Cal. App. 4th 663 (2006)), that evidentiary support needed to be "substantial." The Colgan court drew on the penal code provision of victim restitution, which seems like a very different circumstance. It's potentially worrisome to see the injection of that type of standard.
From the business perspective, the equitable nature of the relief in the Unfair Competition Law is frustrating. It's both the ambiguity of the statute as well as the ambiguity of the potential recovery that is at issue in the case. Companies can't figure out what their risk is.
Well, if there's an ambiguous potential liability (for example, there's no clear definition of "all natural"), it would seem that the rational result, which is also a good policy result, is that the companies err on the safe side, and steer well clear of misrepresenting their products' qualities.