Opinion

Alison Frankel

Justices throw up Comcast obstacle in two more class actions

By Alison Frankel
April 2, 2013

Last week, after the U.S. Supreme Court issued its deeply divided 5-to-4 ruling in¬†Comcast v. Behrend, the antitrust class action bar breathed a sigh of relief. Lawyers had been worried the court would rule broadly that in order to be certified, classes must show that they are “susceptible to awarding damages on a classwide basis,” which was the question the Supreme Court had asked Comcast counsel to address. The majority, in an opinion written by Justice¬†Antonin Scalia, seemed to answer the somewhat different question of whether trial and appellate courts may delve into the merits of the plaintiffs’ damages theory before certifying the class. Antitrust plaintiffs’ lawyers told my Reuters colleague Andrew Longstreth that the¬†Comcast¬†decision would have little impact on class certification¬†because they could tailor damages allegations to match their theories of liability.

But yesterday the Supreme Court signaled that, at the very least, class action lawyers – and not just those in the antitrust bar – will have to address the Comcast opinion if they’re going to win certification rulings. In two different cases, one involving consumer product defect claims against Whirlpool, the other over alleged wage-and-hour violations by Charter One bank, the justices granted certioriari, vacated class certification rulings by the federal circuits and sent the cases back to the appellate courts for reconsideration in light of¬†Comcast. The dissent in¬†Comcast, written jointly by¬†Justices Ruth Ginsburg¬†and¬†Stephen Breyer, said that the majority’s holding “should not be read to require, as a prerequisite to certification, that damages attributable to a classwide injury be measurable ‘on a class-wide basis,’ (since) recognition that individual damages calculations do not preclude class certification under Rule 23(b)(3) is well nigh universal.” Nevertheless, it’s now going to be up to the federal circuits to confirm the Comcast dissenters’ reading of the majority opinion.

The Whirlpool case, which comes out of the 6th Circuit Court of Appeals, is precisely the sort of class action the dissent was concerned about. The trial court, and then the appeals court, certified a statewide class of about 200,000 Ohio consumers who purchased front-loading Whirlpool washing machines that are allegedly prone to develop mold or emit a moldy smell. (The litigation is part of a much broader consumer offensive against makers and sellers of supposedly defective washing machines, as Whirlpool discusses in its¬†petition requesting Supreme Court review.) The class contains some members who claim that their machines developed mold or a moldy smell and others whose machines are still fine, so obviously there are disparities in the damages class members may ultimately be entitled to. The trial judge dealt with that issue by certifying the class only for the purpose of determining whether Whirlpool’s machines are defective. Damages, he said, would be determined individually after any finding of Whirlpool’s classwide liability. The class affirmed by the 6th Circuit, in other words, is a liability-only class, though the appeals court said that all Whirlpool buyers could show injury, and thus standing to sue, if they paid a premium price for a defect-prone product.

Whirlpool’s lawyers at¬†Mayer Brown¬†and¬†Wheeler Trigg O’Donnell¬†argued in the company’s cert petition that the class was wrongly certified since plaintiffs who have not suffered any injury do not have standing. And in a¬†supplemental brief¬†submitted after the Supreme Court’s ruling in¬†Comcast, the company said that the 6th Circuit, like the 3rd Circuit in the¬†Comcast¬†case, erred because it did not require plaintiffs to show that common evidence would resolve questions of injury and damages. Whirlpool urged the justices to grant review in order to extend Comcast’s reasoning on damages to their theory of standing.

Class counsel at¬†Lieff Cabraser Heimann & Bernstein, along with Supreme Court counsel of record¬†Samuel Issacharoff¬†of New York University Law School, countered in their¬†opposition brief¬†that Whirlpool washing machine buyers were injured even if their machines didn’t develop mold because they didn’t get what they paid for, a routine interpretation of standing, according to the class. Nor is there anything unusual, according to the brief, in the certification of a liability class that includes members with different damages. The class’s¬†supplemental brief on Comcast¬†argued that damages calculations weren’t part of the record at the 6th Circuit, though class counsel also said that the 6th Circuit plainly believes all class members have been damaged if they’ve purchased a defective washing machine.

Jonathan Selbin of Lieff Cabraser told me Tuesday that he’s not at all concerned that the Supreme Court sent the case back to the 6th Circuit in light of Comcast. “Maybe Comcast says we have to go back down and explain it again, but we just don’t see it as a problem here,” he said. “We’re going to say that Comcast doesn’t have anything to do with our case.”

Similarly,¬†Scott Michelman¬†of¬†Public Citizen Litigation Group, who is counsel to Charter One employees with overtime claims against the bank, said that Comcast shouldn’t affect the 7th Circuit’s certification of his clients’ wage-and-hour class. In that case, as in the Whirlpool case, lower courts distinguished between a classwide determination of liability and individual damages. (The bank is represented by¬†Proskauer.)

In fact, Michelman said we shouldn’t read too much into the Supreme Court’s remands of the Charter One and Whirlpool cases, since the court frequently sends cases back to the federal circuits for reconsideration in light of new rulings, even when it’s not clear that those new rulings will affect the underlying appeals court decisions. So there’s a chance that the justices were simply clearing their docket of class actions and don’t expect¬†Comcast¬†to remake class certification considerations.

But we’ll have to see how the 6th and 7th Circuits take their new assignments, to be sure.

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