In construction product defect class actions, defendants often argue that discovery should be bifurcated into two phases—“class” and “merits” discovery. These defendants contend that bifurcation helps to alleviate the costs and burdens of a potentially meritless class action in either or both of two ways: (1) by allowing the possibly expensive exploration of the substance of a case to take place only after the proposed class is certified and (2) by preventing the plaintiff’s counsel from finding a more adequate class representative through discovery. Further, they note that Federal Rule of Civil Procedure 23(c)(1)(A) requires a court to decide class certification “[a]t an early practicable time.”
However, the true effect of the defendants’ strategy is to hamstring the plaintiff’s ability to present a suitable class certification motion to the court and significantly delay the plaintiff’s ability to build its case and, ultimately, the action as a whole. In accordance with recent U.S. Supreme Court decisions, and other factors, this defense tactic should be rejected by courts.
Historically, in deciding a motion for class certification, a district court had limited ability to probe into the merits of an action. See, e.g., Eisen v. Carlisle & Jacquelin, 417 U.S. 156, 177, 185 (1974) (“There is nothing in either the language or history of Rule 23 that gives a court any authority to conduct a preliminary inquiry into the merits of a suit in order to determine whether it may be maintained as a class action. . . .”). Therefore, a defendant could argue that a plaintiff had no need to seek merits discovery before a court’s class determination. However, following the Supreme Court’s decisions in Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541 (2011), and Comcast Corp. v. Behrend, 133 S. Ct. 1426 (2013), a court’s class certification inquiry is now required to reach into the merits of the action in order that the court satisfy its obligation to conduct a “rigorous analysis.”
In Dukes, the Supreme Court held that a court may certify a class only if it “is satisfied, after a rigorous analysis” of the relevant facts and issues, that each requirement of Rule 23 has been met. “Frequently that ‘rigorous analysis’ will entail some overlap with the merits of the plaintiff’s underlying claim.” Dukes, 131 S. Ct. at 2551. Specifically, the Court stated that a plaintiff must “demonstrate that the class members ‘have suffered the same injury’” as the plaintiff in order to meet the commonality prong of Rule 23. “The class determination generally involves considerations that are enmeshed in the factual and legal issues comprising the plaintiff’s cause of action.” Id. at 2551–52 (citation omitted). In reviewing Dukes, the Southern District of New York commented that the case “illustrates the need to develop the record fully before a class motion is considered.” Chen-Oster v. Goldman, Sachs & Co., 285 F.R.D. 294, 298 (S.D.N.Y. 2012). The Chen-Oster court noted the effect of Dukes on the availability of bifurcation: “[B]ecause of the ‘rigorous analysis’ required by Dukes, courts are reluctant to bifurcate class-related discovery from discovery on the merits.” 285 F.R.D at 300 (citing In re Cmty. Bank of N. Va. Mortg. Lending Practices Litig., 2011 WL 4382942, at *3 (W.D. Pa. Sept. 20, 2011), in which the court denied bifurcation in light of Dukes).
Two years later, in Comcast, the Supreme Court reiterated and expanded on the holdings of Dukes. The Court held that the provisions of Rule 23 must be “satisf[ied] through evidentiary proof,” Comcast, 133 S. Ct. at 1432, and concluded that in order for a class to be certified, the moving party must show that “damages are capable of measurement on a classwide basis.” Id. at 1433.
Even before Dukes and Comcast, the Federal Judicial Center, in its Manual for Complex Litigation, observed:
[I]nformation about the nature of the claims on the merits and the proof they require is important to deciding certification. Arbitrary insistence on the merits/class discovery distinction sometimes thwarts the informed judicial assessment that current class certification practice emphasizes.
Manual for Complex Litigation (Fourth) § 21.14 (2004).
Since Dukes and Comcast, there is no bright line between class and merits discovery such that bifurcation is a viable approach to discovery. To satisfy the Supreme Court precedent of Dukes and Comcast, a plaintiff should be afforded the opportunity to explore “merits” evidence before moving for class certification.
As the district courts for the District of Columbia and the Eastern District of Pennsylvania have observed, “bifurcated discovery ‘belies the principles of judicial economy.’” In re Rail Freight Fuel Surcharge Antitrust Litig., 258 F.R.D. 167, 172 (D.D.C. 2009) (quoting In re Plastics Additives Antitrust Litig., 2004 WL 2743591, at *3 (E.D. Pa. Nov. 29, 2004)). Specifically, the bifurcation of discovery fails to promote judicial economy in that it causes disputes regarding whether requested discovery is class- or merits-based.
The leading treatise on class action litigation explains:
If such an order bifurcating discovery is signed, the defense then [often] objects to all of the discovery demands claiming all are “merits discovery.” As a result, additional motions, hearings and delay disrupt the flow of information. Eventually, the court will have to order discovery or modify the original order separating “merits” from “class issues.” Alternatively, the court can immerse itself in the discovery process and rule on each demand, declaring it “merits” or “class issues” discovery. In any event, the expected economies of discovery bifurcation are rarely achieved.
Newberg on Class Actions § 9:44 n.4 (4th ed. 2012).
This concern has been echoed by district courts throughout the country. See, e.g., In re Rail Freight Fuel Surcharge, 258 F.R.D. at 174; In re Plastics Additives, 2004 WL 2743591; In re Hamilton Bancorp, Inc. Secs. Litig., 2002 WL 463314, at *1 (S.D. Fla. Jan. 14, 2002); Gray v. First Winthrop Corp., 133 F.R.D. 39, 41 (N.D. Cal. 1990).
Bifurcation also tends to result in the duplication of effort and expense for the parties. For example, when discovery has been bifurcated, a defendant may seek to limit a witness’s deposition to class issues, thereby necessitating a second deposition of that witness later in the litigation in order to address merits issues.
Last, discovery limited by bifurcation is not supported by the Federal Rules of Civil Procedure, which “should be construed and administered to secure the just, speedy, and inexpensive determination of every action and proceeding.” Fed. R. Civ. P. 1. Bifurcation of discovery unnecessarily delays proceedings and the ultimate resolution of an action. A party wishing to limit the scope of discovery, or control its sequence, has the burden to show “good cause” for such an order. Fed. R. Civ. P. 26(c)(1).
