Feb 17

Second Circuit Says Comcast Does Not Bar Class Certification When Damages Require Individual Proof

Last week the Second Circuit joined a number of other circuits in ruling that the Supreme Court’s decision in Comcast Corp. v. Behrend, 569 U.S. ___, 133 S. Ct. 1426 (2013), does not require plaintiffs seeking class certification under Rule 23(b)(3) to show that damages ”are capable of measurement on a classwide basis.” Roach v. T.L. Cannon Corp., No. 13-3070, slip op. at 3-4, 2015 WL 528125 (2d Cir. Feb. 10, 2015). The decision vacated a denial of class certification when “the district court’s sole reason” was its belief that “Comcast permits certification under Rule 23(b)(3) only when damages are measurable on a classwide basis.” Slip op. at 3, 26. The Second Circuit concluded that Comcast did not overrule the “well established” case law in the circuit that a need to determine damages on an individual basis is one factor to be considered in a Rule 23(b)(3) predominance analysis but generally is not sufficient, by itself, to defeat class certification. Id. at 13-14.

The plaintiffs in Roach are former employees at Applebee’s restaurants Cannon owned and operated in upstate New York. They allege that several Cannon policies result in underpayment of wages in violation of the federal Fair Labor Standards Act and New York state law. A magistrate judge recommended that a Rule 23(b)(3) class be certified for some but not all of the state-law claims. The district court, however, denied certification of all the state-law claims because it found that the former employees’ claimed damages were “highly individualized” and because it “construed Comcast as holding that ‘[t]he failure of the proponent of the class to offer a damages model that [is] “susceptible of measurement across the entire class for purposes of Rule 23(b)(3)” [is] fatal to the certification question.’” Roach, slip op. at 8 (quoting district court decision, which quoted Comcast).

The Second Circuit granted plaintiffs’ Rule 23(f) petition and concluded that the district court misread Comcast. Although the Supreme Court identified the question it was addressing in Comcast as whether plaintiffs “had . . . establish[ed] that damages could be measured on a classwide basis,” 133 S. Ct. at 1431 n.4, the Second Circuit observed that both the majority and dissenting opinions noted that no party in Comcast had contested the trial court’s holding that, to satisfy the predominance requirement, the plaintiffs had to show that both the proposed class’s injury and the resulting damages could be established with common proof. Roach, slip op. at 14-15, 17-19; see also Comcast, 133 S. Ct. at 1430 (majority opinion) and 1436 (dissenting opinion).

The Second Circuit explained:

Comcast, then, did not hold that a class cannot be certified under Rule 23(b)(3) simply because damages cannot be measured on a classwide basis.     . . .   Comcast’s holding was narrower.  Comcast held that a model for determining classwide damages relied upon to certify a class under Rule 23(b)(3) must actually measure damages that result from the class’s asserted theory of injury; but the Court did not hold that proponents of class certification must rely upon a classwide damages model to demonstrate predominance.

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To be sure, Comcast reiterated that damages questions should be considered at the certification stage when weighing predominance issues; but this requirement is entirely consistent with our prior holding that “the fact that damages may have to be ascertained on an individual basis is . . . a factor that we must consider in deciding whether issues susceptible to generalized proof ‘outweigh’ individual issues.”

Roach, slip op. at 19-20, 22 (quoting McLaughlin v. Am. Tobacco Co., 522 F.3d 215, 231 (2d Cir. 2008)). The court said its reading of Comcast was consistent with the First, Fifth, Sixth, Seventh, Ninth, and Tenth Circuits’ interpretations. Roach, slip op. at 22-24 (citing cases).

The Second Circuit declined to address whether class certification of plaintiffs’ state-law wage claims was appropriate or not. Id. at 26 n.5. It rejected the district court’s “sole reason” for denying class certification and remanded the case for consideration of the Rule 23 issues raised in plaintiffs’ objections to the magistrate judge’s report and recommendation.

The decision in Roach v. T.L. Cannon Corp. continues what is becoming a consistent trend in the circuit courts of reading Comcast narrowly. Comcast certainly gives defendants a basis to scrutinize an opposing expert’s theories and methodologies at the class certification stage—in particular, the fit between the plaintiff’s liability theory and the expert’s damage methodology. Whether damages can be measured on a class-wide basis or will require individualized proceedings is a factor to be considered. The district court went wrong here by failing to “evaluate whether the individualized damages questions predominate over the common questions of liability . . . .”   Id. at 25. But, as several circuit cases now show, Comcast’s somewhat unusual procedural background could limit how much its discussion of the plaintiffs’ failure to establish that damages could be measured on a classwide basis can be applied in other cases. Id. at 22-24 (citing cases).

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