The class certification motion is the defining moment of a class action lawsuit. The outcome can have a drastic effect on the value of a lawsuit and can transform a commercial dispute into a bet-the-company case. As a result, the parties devote substantial resources to marshal the strongest evidence possible during the class certification stage. Often, that evidence includes expert testimony. Indeed, plaintiffs increasingly rely on expert testimony to demonstrate that liability and damages are susceptible to class-wide proof, thereby warranting adjudication of the lawsuit as a class under Federal Rule of Civil Procedure 23 (Rule 23).
But what level of scrutiny should a trial court apply to expert testimony at the class certification stage? While the Supreme Court has not directly weighed in on the issue, its opinions in Wal-Mart v. Dukes and Comcast v. Behrend suggest that it may favor a full Daubert analysis. In dicta, the Supreme Court in Dukes wrote, "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." Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541, 2553–34 (2011) (citation omitted). In Comcast, the Supreme Court reaffirmed that class certification requires a "rigorous analysis" that includes examination of expert opinions, and concluded that it was erroneous to "refus[e] to entertain arguments against [the plaintiffs'] damages model that bore on the propriety of class certification simply because those arguments would also be pertinent to the merits determination." Comcast Corp. v. Behrend, 133 S. Ct. 1426, 1432–33 (2013). Absent clear guidance from the Supreme Court, the circuit courts, and the district courts therein, have taken contradictory positions as to what degree Daubert is applicable at the class certification stage. However, there now appears to be a growing trend requiring that expert opinions at the class certification stage be subject to a full and rigorous Daubert analysis.
Circuits Adopting Full Daubert Analysis
Third Circuit. The Third Circuit became the most recent court to hold that expert testimony "critical to class certification" under Rule 23 must satisfy the Daubert reliability standard. In re Blood Reagents Antitrust Litig., 783 F.3d 183, 187 (3d Cir. 2015). In Blood Reagents, direct purchasers of traditional blood reagents (products used to test blood compatibility between donors and recipients) brought a putative class action against the makers of blood reagents alleging that the defendants engaged in a price-fixing conspiracy. In their motion for class certification, the plaintiffs relied, at least in part, on expert testimony to produce their antitrust impact analyses and damages models. The district court granted class certification, concluding in part that the expert testimony on damages "could evolve to become admissible evidence" at trial. Blood Reagents, 783 F.3d at 185–86(quoting Behrend v. Comcast Corp., 655 F.3d 182, 204 n.13 (3d Cir. 2011)).
The Third Circuit vacated class certification and remanded for reconsideration, holding that the "could evolve" standard did not survive the Supreme Court's decision in Comcast, which required the court to conduct a "rigorous" Rule 23 analysis. Rather, the court held that "a plaintiff cannot rely on challenged expert testimony, when critical to class certification, to demonstrate conformity with Rule 23 unless the plaintiff also demonstrates, and the trial court finds, that the expert testimony satisfies the standard set out in Daubert." Blood Reagents, 783 F.3d at 187.
Seventh Circuit. The Seventh Circuit has been at the forefront on this issue, finding in 2010 that the trial court should conduct a full Daubert analysis of expert testimony offered at the class certification stage. Am. Honda Motor Co. v. Allen, 600 F.3d 813, 815–16 (7th Cir. 2010). In American Honda, the proposed class of purchasers of a particular motorcycle alleged that a design defect caused the motorcycle to wobble. At class certification, the plaintiffs offered expert testimony to demonstrate predominance of common issues, and the defendants challenged the reliability of the expert's testimony. The district court concluded that it was proper to decide whether the report was admissible prior to certification since "most of Plaintiffs' predominance arguments rest upon the theories advanced by [their expert]." Am. Honda, 600 F.3d at 814.However, even though the court shared the defendants' concerns about the reliability of the plaintiffs' expert, the district court declined to exclude the report in its entirety, noting that it was too early in the proceedings to make such a determination. The Seventh Circuit vacated class certification, holding that "a district court must conclusively rule on any challenge to the expert's qualifications or submissions prior to ruling on a class certification motion" when an expert's report or testimony is critical to class certification. Am. Honda, 600 F.3d at 815–16.
Tenth Circuit. Recently, one district court in the Tenth Circuit concluded that a full Daubert inquiry at class certification is appropriate. Miller v. Farmers Ins. Grp., No. CIV-10-466-F, 2012 WL 8017244, at *5 (W.D. Okla. Mar. 22, 2012). Citing the Supreme Court's statement in Dukes, the court concluded that "[a]lthough the statement was dictum, . . . Daubert and Rule 702 apply with full force at the certification stage." Miller, 2012 WL 8017224, at *5; see also In re Cox Enters., Inc. Set-Top Cable Television Box Antitrust Litig., No. 12-MDL-2048-C, 2014 WL 107674, at *1 (W.D. Okla. Jan. 9, 2014) (acknowledging defendant's assertion that Daubert was the appropriate standard and applying Daubert).
Eleventh Circuit. In Sher v. Raytheon Co., 419 F. App'x 887, 889 (11th Cir. 2011), the district court declined to rule on the defendant's challenge to the plaintiffs' expert testimony in support of class certification, stating that it was unnecessary at the class certification stage "to declare a proverbial winner in the parties' war of the battling experts or dueling statistics." Citing American Honda, the Eleventh Circuit reversed, noting that the "district court must make the necessary factual and legal inquiries and decide all relevant contested issues prior to certification." Sher, 419 F. App'xat 891.
Circuits Adopting "Focused" Daubert Review
Eighth Circuit. The Eighth Circuit has taken a contrary approach. In In re Zurn Pex Plumbing Products Liability Litigation, 644 F.3d 604, 614 (8th Cir. 2011), the Eighth Circuit held that a "focused" rather than full Daubert inquiry was all that was required at the class certification stage. The court concluded that the district court acted appropriately in only analyzing the expert's testimony in light of criteria for class certification and the current state of the evidence. The district court was not required, it held, to determine whether such evidence would be admissible at trial. Specifically, the Eighth Circuit concluded that courts should resolve expert disputes at class certification only "to the extent 'necessary to determine the nature of the evidence that would be sufficient, if the plaintiffs' general allegations were true, to make out a prima facie case for the class.'" Zurn, 644 F.3dat 611 (quoting Blades v. Monsanto Co., 400 F.3d 562, 567 (8th Cir. 2005)). The Eighth Circuit went on to explain that it has "never required a district court to decide conclusively at the class certification stage what evidence will ultimately be admissible at trial." Zurn, 644 F.3d at 611. Reasoning that the court's inquiry on a motion for class certification is only "tentative," the court held that a full Daubert analysis is unnecessary. The court further reasoned that because the purpose of Daubert is to protect juries from being swayed by dubious scientific testimony, the interests of a full Daubert analysis are not implicated at the class certification stage.
Circuits Not Directly Addressing the Applicability of Daubert
First Circuit. Prior to Comcast and Dukes, the First Circuit held that a "searching inquiry" of expert witness testimony was required at the class certification stage. In re New Motor Vehicles Canadian Exp. Antitrust Litig., 522 F.3d 6, 24 (1st Cir. 2008). The court did not explicitly address Daubert in its analysis, although its inquiry did extend to the merits of the expert's arguments. District courts in the First Circuit, however, have interpreted New Motors as not requiring a full Daubert analysis prior to class certification. See In re Neurontin Mktg., Sales Practices & Prods. Liab. Litig., 257 F.R.D. 315, 327 (D. Mass. 2009) ("'Technical disputes' . . . should generally be resolved at a Daubert hearing as opposed to at the class certification stage. Thus, the Court could have certified the class after conducting a preliminary review of [the expert's] results." (citation omitted)); Natchitoches Parish Hosp. Serv. Dist. v. Tyco Int'l, Ltd., 262 F.R.D. 58, 64 (D. Mass. 2008) ("Despite requiring a 'searching inquiry' as to viability, New Motor Vehicles does not require the court to require a full-blown Daubert hearing prior to class certification.").
Second Circuit. In 2006, the Second Circuit decided In re Initial Public Offering Securities Litigation (In re IPO), 471 F.3d 24, 41–42 (2d Cir. 2006), which expressly repudiated a prior line of decisions that had established a lenient standard for class certification and held instead that a district court must resolve conflicting evidence, including conflicting expert testimony, prior to certifying a class action. In re IPO, however,focused on the standards for evaluating the class certification requirements generally and did not address Daubert specifically. To date, the Second Circuit has not explicitly addressed the extent to which the Daubert standard applies to expert testimony at the class certification stage.
Since In re IPO,and post-Dukes, some district courts in the Second Circuit have noted while Daubert is applicable, the inquiry is "limited" to whether or not the expert reports are admissible to establish the requirements of Rule 23. See In re NYSE Specialists Sec. Litig., 260 F.R.D. 55, 66 (S.D.N.Y. 2009); Dandong v. Pinnacle Performance Ltd., No. 10 Civ. 8086 JMF, 2013 WL 5658790, at *13 (S.D.N.Y. Oct. 17, 2013) ("When a motion to exclude expert testimony is made at the class certification stage, the Daubert standard applies, but the inquiry is limited to whether or not the [expert reports] are admissible to establish the requirements of Rule 23. [T]he question is not . . . whether a jury at trial should be permitted to rely on [the expert's] report to find facts as to liability, but rather whether [the Court] may utilize it in deciding whether the requisites of Rule 23 have been met." (internal quotation marks and citations omitted)); see also Fort Worth Employees' Ret. Fund v. J.P. Morgan Chase & Co., 301 F.R.D. 116, 126 (S.D.N.Y. 2014) (espousing the same standard and finding the expert testimony sufficient only after conducting a robust Daubert analysis). Other district courts, however, have applied a full Daubert analysis without explicitly ruling on whether Daubert is required at the class certification stage. See IBEW Local 90 Pension Fund v. Deutsche Bank AG, No. 11 Civ. 4209 (KBF), 2013 WL 5815472, at *1 (S.D.N.Y. Oct. 29, 2013); In re Fed. Home Loan Mortg. Corp. (Freddie Mac) Sec. Litig., 281 F.R.D. 174, 181 (S.D.N.Y. 2012).
Fourth Circuit. Prior to Dukes and Comcast, district courts in the Fourth Circuit reached mixed results on the applicability of Daubert at class certification. See, e.g., In re Red Hat, Inc. Sec. Litig., 261 F.R.D. 83, 94 n.14 (E.D.N.C. 2009) (holding that a Daubert hearing was not required under the circumstances because limited merits discovery had been conducted). Contra Rhodes v. E.I. du Pont de Nemours & Co., No. 6:06-CV-00530, 2008 WL 2400944, at *10–11 (S.D. W. Va. June 11, 2008) (ordering a Daubert hearing). However, several recent decisions suggest Daubert should apply at class certification. In Coleman v. Union Carbide Corp., No. 2:11-0366, 2013 WL 5461855, at *22–23 (S.D. W. Va. Sept. 30, 2013), the court analyzed Comcast and announced that the court would conduct a Daubert analysis without explicitly ruling on whether it was required. Similarly, in Soutter v. Equifax Info. Servs. LLC, 299 F.R.D. 126, 131 (E.D. Va. 2014), the court struck a non-expert witness's affidavit at class certification on the grounds that it was not made on the basis of personal knowledge. The court relied on Comcast and Dukes, concluding that those decisions required evidence to be held to the same standard of reliability at the class certification stage as it would be at trial.
Fifth Circuit. At least one district court in the Fifth Circuit has ruled that courts should conduct a full Daubert analysis at the class certification stage. In Cannon v. BP Products North America, Inc., No. 3:10-CV-00622, 2013 WL 5514284, at *6 (S.D. Tex. Sept. 30, 2013), the district court rejected a class certification expert's testimony under Daubert because it used flawed methodology that failed to isolate relevant variables, and because the expert's theory of damages was disconnected from the plaintiffs' theory of liability.
Sixth Circuit. Prior to Dukes and Comcast, the Sixth Circuit affirmed a district court decision suggesting that Daubert analysis at class certification was an improper consideration of the merits of the plaintiffs' claims. Bacon v. Honda of Am. Mfg., Inc., 205 F.R.D. 466, 470 (S.D. Ohio 2001), aff'd, 370 F.3d 565 (6th Cir. 2004); see also Serrano v. Cintas Corp., No. 04-40132, 2009 WL 910702, at *2 (E.D. Mich. Mar. 31, 2009) (holding that a Daubert inquiry is unnecessary at class certification), aff'd sub nom., Davis v. Cintas Corp., 717 F.3d 476 (6th Cir. 2013).
Ninth Circuit. In Ellis v. Costco Wholesale Corp., 657 F.3d 970, 982 (9th Cir. 2011), the Ninth Circuit held that that the district court correctly applied Daubert to a "battle of the experts over the issue of commonality" but did not explicitly rule on whether the Daubert analysis was required. The Ninth Circuit reasoned that "[u]nder Daubert, the trial court must act as a 'gatekeeper' to exclude junk science that does not meet Federal Rule of Evidence 702's reliability standards by making a preliminary determination that the expert's testimony is reliable." Ellis, 657 F.3d at 982. Since Ellis, district courts in the Ninth Circuit have applied conflicting standards for evaluating expert testimony at the class certification stage. Some district courts have concluded that a full Daubert analysis is warranted at class certification. See, e.g., In re Hulu Privacy Litig., No. C 11-03764 LB, 2014 WL 2758598, at *11 (N.D. Cal. June 16, 2014) (applying Daubert and noting that Ellis and Dukes suggest that Daubert is the appropriate standard for assessing expert testimony at class certification). To the contrary, other district courts have concluded that that the Eighth Circuit's "focused" application of Daubert is sufficient. See Tait v. BSH Home Appliances Corp., 289 F.R.D. 466, 495 (C.D. Cal. 2012) (interpreting Dukes and Ellis and concluding that the "tailored Daubert standard" is applicable at the class certification stage); Fosmire v. Progressive Max Ins. Co., 277 F.R.D. 625, 628–29 (W.D. Wash. 2011) (stating that the Ninth Circuit "has not yet resolved whether a full Daubert analysisis required at the class certification stage" but noting that "Zurn has struck the right balance[: it] honors the Supreme Court's dictum in Dukes by applying Daubert at class certification, but it does so in a manner that recognizes the specific criteria under consideration, as well as the differing stage of discovery and state of the evidence, at the class certification stage").
Conclusion and Practitioners' Tips
Courts are increasingly applying Daubert at the class certification stage. While some circuits, like the Third and Seventh Circuits, have made that finding more clearly and forcefully than others, commercial litigators in all circuits should be mindful of this growing trend when preparing for class certification. Specifically, commercial litigators should consider the Daubert factors from the early stages of the case and have a specific strategy to launch Daubert challenges and ensure that your expert can withstand a Daubert challenge.
Diligence. Conduct robust diligence on proposed experts. Become familiar with the common methodologies and principles experts utilize in the relevant field.
- Timing. Engage experts early in the case and ensure that they are receiving the evidence and other data necessary to perform their analyses well before class certification.
- Discovery. Consider taking a more fulsome approach to fact and expert discovery during the class certification stage. This will require devoting additional resources early in a case. Be prepared and prioritize the evidence you will need not only to defend your expert but to potentially challenge the opposing expert.
- Methodology. Work closely with your experts to ensure that their testimony and methodology satisfy the Daubert factors. Be sure to understand and question the expert's analysis and methodology to ensure that any opinions are substantiated and thoroughly supported.
Keywords: litigation, commercial, business, class certification, expert witness, Daubert
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