U.S. Judge Janis L. Sammartino in California’s Southern District certified a price fixing class action against “Big Tuna” this summer following a Daubert review of experts, keeping with Ninth Circuit precedent and focusing on the rigorousness of the review of expert reliability, but not the admissibility of evidence.
This is just one in a growing line of cases that address the propriety of a Daubert review at the class certification stage, a country-wide discussion following the cryptic message handed down from the Supreme Court in Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541 (2011): “The District Court concluded that Daubert did not apply to expert testimony at the certification stage of class-action proceedings. We doubt that is so.”
The meaning of “we doubt that is so” has been addressed in several circuits, with most favoring such a review. One circuit, the Eighth, held a Daubert review at the certification stage is unnecessary, apparently seeing “we doubt that is so” as a casual remark. There are a couple circuits that are somewhat on the fence, but they, too, are lurking toward a Daubert review at the certification stage. (Scroll down to the Addendum for a circuit-by-circuit review.)
In the case before Judge Sammartino, direct and indirect purchasers of tuna brought later-consolidated actions in 2015 against the three largest domestic producers of tuna. The companies go to market under familiar brands: Bumble Bee, StarKist and Chicken of the Sea (In re Packaged Seafood Prods. Antitrust Litig., 2019 U.S. Dist. LEXIS 127054, 2019-2 Trade Cas. [CCH] P80,868, 2019 WL 3429174). The U.S. Department of Justice also filed multiple criminal indictments against corporate tuna executives, resulting in guilty pleas and fines as the DOJ continues investigating.
Judge Sammartino held that, although the parties didn’t ask her to strike any expert testimony, Daubert still required her to ensure that the testimony was “not only relevant, but reliable."
“Several courts have noted that where expert testimony is used to prove impact, the predominance and Daubert standards often overlap,” the judge said, citing a 2017 ruling from the U.S. District Court for the District of Columbia in Rail Freight Surcharge Antitrust Litigation, which quoted a 2015 Pennsylvania District Court ruling in In re Processed Egg Products Antitrust Litigation that "the line between Daubert and class-wide impact ‘might prove somewhat illusory.'" (See In re Rail Freight Fuel Surcharge Antitrust Litig. - MDL No. 1869, 725 F.3d 244, 406 U.S. App. D.C. 371, 2013 U.S. App. LEXIS 16500, 2013-2 Trade Cas. [CCH] P78,481, 86 Fed. R. Serv. 3d [Callaghan]229, 2013 WL 4038561 and In re Processed Egg Products Antitrust Litigation, 312 F.R.D. 124, 2015 U.S. Dist. LEXIS 177172.)
Judge Sammartino said Daubert is not the only hurdle expert testimony must clear at the class certification stage—the rigorous analysis required by Rule 23 may require the court to determine whether the expert's evidence supporting certification is in fact persuasive, and may also require the court to resolve factual disputes between dueling experts, if their disagreements pertain to whether the class plaintiffs can prove impact. Judge Sammartino cited a 2017 Northern District of California ruling In re Korean Ramen Antitrust Litigation which in turn cited the Ninth Circuit’s Ellis v. Costco Wholesale Corp., which approved the application of Daubert at class certification (Ellis v. Costco Wholesale Corp., 657 F.3d 970, 982 [9th Cir. 2011]). The Ellis court said, though, that the lower court erred in refusing to weigh competing expert opinions. A Daubert analysis is only a part of the “rigorous analysis” required by Dukes, the Ellis court determined.
‘Admissibility Must Not Be Dispositive’
Last year, on May 3, 2018, the Ninth Circuit held in Sali v. Corona Regional Medical Center that Daubert standards did not apply when weighing certification. In fact, the panel found U.S. District Judge Phillip S. Gutierrez of the Central District of California abused his discretion in denying certification because he excluded proof that tended to support certification of a class of nurses who brought employment claims against a hospital. This case “aptly illustrates why we license greater evidentiary freedom at the class certification stage,” the appellate court held (Sali v. Corona Regional Medical Center, 889 F.3d 623, 2018 U.S. App. LEXIS 11497, 100 Fed. R. Serv. 3d [Callaghan] 1149).
“When conducting its ‘rigorous analysis’ into whether the Rule 23(a) requirements are met, the district court need not dispense with the standards of admissibility entirely,” the Ninth Circuit held. “The court may consider whether the plaintiff’s proof is, or will likely lead to, admissible evidence. Indeed, in evaluating challenged expert testimony in support of class certification, a district court should evaluate admissibility under the standard set forth in Daubert …. But admissibility must not be dispositive. Instead, an inquiry into the evidence’s ultimate admissibility should go to the weight that evidence is given at the class certification stage. This approach accords with our prior guidance that a district court should analyze the 'persuasiveness of the evidence presented’ at the Rule 23 stage. The district court abused its discretion here by declining to consider [a piece of evidence] solely on the basis of inadmissibility.”
The U.S. Supreme Court declined to review Sali on May 3, 2019, exactly one year after the Ninth Circuit’s decision.
A February 2019 article in The Antitrust Source (published by the ABA) -- Waging the Merits War at Class Certification: Does Expert Evidence Streamline the Process? -- calls for more clarity on the level of review required of expert testimony at the class certification stage. Written by former MoginRubin LLP partner Jodie Williams (now in-house counsel at Qualcomm) and Michelle Lowery of McDermott Will & Emery, the article provides a good point-counterpoint perspective on the issue.
From the plaintiffs’ perspective, Waging the Merits says, moving for class certification was once an exercise in demonstrating the plausibility of the allegations. It has over the past 20 years ballooned into a much more in-depth analysis of the underpinnings of a case where “reliable proof is critical, supported by those qualified to opine on the economic and econometric significance of that proof at trial.” A better course, from the plaintiffs’ perspective, would be to return class certification to a “procedural motion rather than an evidentiary motion,” a change that would reduce the amount of work and litigation expense needed, otherwise there is the risk of “mini-trials in the middle of pre-trial litigation with discovery ongoing,” resulting in the opposite of litigation streamlining, the article says.
From the defense perspective, Waging the Merits says, “courts should give more serious consideration to expert methodologies at the class certification stage and eliminate before summary judgment or trial those models that cannot work.” Defendants put a great deal of work into Daubert challenges to class certification and argue that the economic models proposed by plaintiffs don’t work. While much of the prevailing case law gives courts the green light to entertain Daubert challenges and conduct rigorous reviews, courts “routinely accept plaintiffs’ models” and grant certification, as the defense side of the article concedes.
Waging the Merits concludes on a hopeful note. As courts continue to examine the issue, “perhaps precedent will evolve to streamline evidentiary issues at the class certification stage … If courts can provide more certainty on these expert issues early in the case, they will pave the way for cases to be resolved early or fast-tracked to trial.”
Two More Circuits Moving Toward Daubert Reviews
The issue has not been absolutely settled in the Sixth and Tenth Circuits, but district courts in those circuits are conducting Daubert reviews at the class certification stage.
The Sixth Circuit held in 2014 that applying Daubert when weighing certification is not an abuse of discretion in determining whether an expert is reliable (In re Carpenter Co., No. 14-0302, 2014 U.S. App. LEXIS 24707 [6th Cir. Sept. 29, 2014]).
On May 22 of this year, a federal court in Michigan noted other district court holdings in the Sixth Circuit which found that the evidentiary rules are not strictly applied – that courts can consider evidence that may not be admissible at trial (In re FCA US LLC Monostable Elec. Gearshift Litig., 382 F. Supp. 3d 687 [E.D. Mich. May 22, 2019]; Ganci v. MBF Inspection Servs., Inc., 323 F.R.D. 249, 257 [S.D. Ohio 2017] [quoting Rockey v. Courtesy Motors, Inc., 199 F.R.D. 578, 582 (W.D. Mich. 2001)]).
The Eastern District of Michigan court held in May that, “The parties do not appear seriously to contest whether the Daubert analysis applies at this stage of the case, and there are several indicators from appellate courts suggesting that it does. Therefore, the Court will do so here, keeping in mind, however, that the challenged testimony is not being offered to prove the merits of the plaintiffs' claims, but only to establish that the merits of those claims properly can be adjudicated by means of collective litigation.”
In 2014 the Tenth Circuit, in In re Urethane Antitrust Litigation, affirmed a district court’s decision to certify a class and deny the defendants’ Daubert motions. The court found the plaintiffs’ model was capable of showing that a conspiracy to price fix polyurethane products could affect all buyers. Regarding the defense Daubert motions, the court only examined whether the plaintiff expert’s methodology was reliable (Dow Chem. Co. v. Seegott Holdings, Inc. [In re Urethane Antitrust Litig.], 768 F.3d 1245, 2014 U.S. App. LEXIS 18553, 2014-2 Trade Cas. [CCH] P78,920).
Earlier this year on April 11, U.S. District Judge Daniel D. Crabtree in Kansas noted in In re EpiPen Marketing, Sales Practices & Antitrust Litigation, 2019 U.S. Dist. LEXIS 62495, 2019 WL 1569294, that the trend of authority favors Daubert-style challenges at the class certification stage but offered these comments based on his review of precedent:
- “The court must not confuse the ‘rigorous analysis’ required at the class certification stage with an exposition into the merits of the claim; but, ‘sometimes it may be necessary for the court to probe behind the pleadings before coming to rest on the certification question.’ In accord with this latter sentiment, ‘[t]he class determination generally involves considerations that are enmeshed in the factual and legal issues comprising the plaintiff's cause of action.’"
- “Before granting or denying class certification based on expert evidence, a court must 'ensure that the basis of the expert opinion is not so flawed that it would be inadmissible as a matter of law.’”
- "[T]he role and scope of the Daubert analysis increases in step with the importance of the expert opinion to plaintiff's showing of Rule 23(a)'s requirements.” In some cases “a nearly full-fledged Daubert analysis may be appropriate.”
- In the case of a Daubert challenge, it is “incumbent on the challenging party to establish the importance of the expert relative to the putative class plaintiff's Rule 23(a) burden.”
The bottom line is that courts do consider Daubert motions at the class certification stage, but should only do so where the expert’s opinion is critical to showing that the Rule 23 factors are met.
That should be the limit of the “rigorous” analysis necessary at the class cert stage: it is a procedural motion meant to prove that the Rule 23 factors are met.
Even under the current jurisprudence, so long as the proposed expert models are capable of proving common impact and predominance, the class should be certified regardless of admissibility or other evidentiary issues that can be resolved at a later time.
Article edited by Tom Hagy for MoginRubin LLP
Circuit and District Court Decisions, Grouped by Circuit, Regarding the Rigorousness of Daubert Examinations at the Class Certification
In re Initial Public Offerings Securities Litigation, 471 F.3d 24 (2006) -- “We conclude (1) that a district judge may not certify a class without making a ruling that each Rule 23 requirement is met and that a lesser standard such as "some showing" for satisfying each requirement will not suffice, (2) that all of the evidence must be assessed as with any other threshold issue, (3) that the fact that a Rule 23 requirement might overlap with an issue on the merits does not avoid the court's obligation to make a ruling as to whether the requirement is met, although such a circumstance might appropriately limit the scope of the court's inquiry at the class certification stage, and (4) that the cases pending on this appeal may not be certified as class actions.”
In re Blood Reagents Antitrust Litigation, 783 F.3d 183 (3d Cir. 2015) -- “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.”
In re Processed Egg Products Antitrust Litigation, 312 F.R.D. 124, 2015 U.S. Dist. LEXIS 177172 -- Followed In Re Blood Reagents Antitrust Litigation. Held that, after considering the evident and the “shortcomings” of the plaintiff expert’s model, the court ruled against class certification in the antitrust case.
Brown v. Nucor Corp., 576 F.3d 149, 2009 U.S. App. LEXIS 17643, 106 Fair Empl. Prac. Cas. (BNA) 1718, 92 Empl. Prac. Dec. (CCH) P43,642 -- Evidence need not be conclusive to be probative, and even evidence that is of relatively weak probative value may be useful in meeting the commonality requirement.
In re Carpenter, No. 14-0302, 2014 U.S. App. LEXIS 24707 (6th Cir. Sept. 29, 2014) -- In this antitrust case, a district court applied a full Daubert analysis to the witnesses who were critical to the class-certification determination but granted class certification. The Sixth Circuit affirmed, said this was not an abuse of discretion.
Honda Motor Co. Inc. v. Allen, 600 F.3d 813, 815-16 (7th Cir. 2010) -- Court required Daubert analysis where expert opinion is "critical" to class certification determination.
Kleen Prods. LLC v. Int'l Paper, 2017 U.S. Dist. LEXIS 83321, 2017-1 Trade Cas. (CCH) P80,012, 2017 WL 2362567 --
Court deferred resolving challenges to the plaintiffs’ expert’s models until summary judgment. It accepted as sufficient for class certification purposes certain models.
In re Steel Antitrust Litigation, No. 08-C-5214, 2015 WL 5304629 (N.D. Ill. Sept. 9, 2015) -- Defendants filed formal Daubert motions against each of the plaintiffs’ proposed experts. After a three-day evidentiary hearing the court found plaintiffs had not proffered any model that could accurately measure impact or damages. It denied the Daubert motion, though, finding plaintiffs’ experts applied reliable methodologies and admissible models. The court ultimately denied class certification for impact and damage.
Messner v. Northshore Univ. Healthsystem, 669 F.3d 802 (7th Cir. 2012) -- Vacated a district court order denying class certification. Held “the court should not turn the class certification proceedings into a dress rehearsal for the trial on the merits. On issues affecting class certification, however, a court may not simply assume the truth of the matters as asserted by the plaintiff. If there are material factual disputes, the court must receive evidence and resolve the disputes before deciding whether to certify the class.”
In re Zurn-Pex Plumbing Prods. Liab. Litig., 644 F.3d 604, 612-14 (8th Cir. 2011) -- Eighth Circuit decided there was no reason to conduct at full Daubert inquiry at the certification stage. It held that the trial court’s "focused inquiry" was sufficient.
Ellis v. Costco Wholesale Corp., 657 F.3d 970, 982 (9th Cir. 2011) -- Approved the application of Daubert at the class-certification stage but said the lower court erred in refusing to weigh competing expert opinions. A Daubert analysis is only a part of the “rigorous analysis” required by Dukes.\
In re Packaged Seafood Prods. Antitrust Litig., 2019 U.S. Dist. LEXIS 127054, 2019-2 Trade Cas. (CCH) P80,868, 2019 WL 3429174 -- Followed Ellis.
Sali v. Corona Regional Medical Center, 889 F.3d 623, 2018 U.S. App. LEXIS 11497, 100 Fed. R. Serv. 3d (Callaghan) 1149 -- Daubert standards do not apply at the certification stage. District court abused its discretion in denying certification because it excluded proof that tended to support class certification of a class of nurses who brought employment claims against a hospital. Case “aptly illustrates why we license greater evidentiary freedom at the class certification stage.”
Dow Chem. Co. v. Seegott Holdings, Inc. (In re Urethane Antitrust Litig.), 768 F.3d 1245, 2014 U.S. App. LEXIS 18553, 2014-2 Trade Cas. (CCH) P78,920 -- Affirmed a district court’s decision to certify a class and deny the defendants’ Daubert motions. The court found the plaintiffs’ model was capable of showing that a conspiracy to price fix polyurethane products could affect all buyers. Regarding the defense Daubert motions, the court only examined whether the plaintiff expert’s methodology was reliable.
In re EpiPen (Epinephrine Injection, USP), Sales Practices & Antitrust Litig., 2019 U.S. Dist. LEXIS 62495, 2019 WL 1569294 -- “Before granting or denying class certification based on expert evidence, a court must 'ensure that the basis of the expert opinion is not so flawed that it would be inadmissible as a matter of law.’”
Childress v. JPMorgan Chase & Co., 2019 U.S. Dist. LEXIS 110396 (E.D.N.C. July 2, 2019) -- The Court was persuaded by authorities which have concluded that where a movant has proffered expert testimony in support of its motion for class certification, and such testimony is critical to the issue of class certification, a full Daubert inquiry is appropriate.
District of Columbia
In re Rail Freight Fuel Surcharge Antitrust Litig. - MDL No. 1869, 725 F.3d 244, 406 U.S. App. D.C. 371, 2013 U.S. App. LEXIS 16500, 2013-2 Trade Cas. (CCH) P78,481, 86 Fed. R. Serv. 3d (Callaghan) 229, 2013 WL 4038561 -- The court denied class certification after finding that evidentiary flaws should not be deferred to summary judgment for resolution. The court said that if damages models cannot withstand scrutiny at the class certification stage, “that is not just a merits issue.”