Posts belonging to Category Certification Rulings

In a major victory for consumers, a Santa Clara Superior Court judge has certified a class of Land Rover owners and lessees who allege that a factory defect in the vehicles’ alignment geometry created uneven tire wear.  See Colon v. Jaguar Land Rover North America, LLC, No. 1-06-CV-075163 (Santa Clara Super. Ct. Jul. 12, 2012) (Order Granting Motion for Class Certification) (available here).

Beyond the obvious benefit to the newly-certified Colon class members, this decision is expected to help countless other California plaintiffs in auto defect and product liability cases.  In Judge James P. Kleinberg’s analysis, he rejects the American Honda standard relied upon by the defendant, which requires a consumer class certification movant to “provide substantial evidence of a defect that is substantially certain to result in malfunction during the useful life of the product.”  Order at 6, citing American Honda Motor Co. v. Super. Ct., 199 Cal. App. 4th 1367, 1374 (Cal. Ct. App. 2011).  Judge Kleinberg held that, “under both federal and California law, proof of manifest damage is not a prerequisite to class certification.”  Order at 6.  He noted that such a requirement would violate the basic precepts of both California and federal class action jurisprudence, as “imposing this certification requirement . . . would require plaintiffs to prove the legal and factual merits of the claim at the time of class certification, which goes directly against clear contrary authority.  Id.

Additionally, the court rejected the defendant’s argument that individual issues would predominate because uneven tire wear did not occur in all class vehicles, and those with uneven tire wear have varying degrees of it among the affected models.  See Order at 7.  Judge Kleinberg concluded that such differences are “an issue of individual damages, not liability,” and “if Plaintiff can prove the existence of an inherent defect . . . Plaintiff will have demonstrated liability based on common evidence, and the fact that class members would later have to individually prove . . . their damages does not defeat class certification.”  Id.

Perhaps the most ominous prediction that accompanied the Supreme Court’s Wal-Mart v. Dukes decision was that a wave of decertifications would nullify many, if not most, already-certified actions.  Yet more than a year after Dukes, that prediction has not come to pass, a fact underscored by a recent decision from California’s Central District.  See Kingsbury v. U.S. Greenfiber, LLC, No. 08-CV-00151 (C.D. Cal. Jul. 2, 2012) (order denying motion to reconsider order granting class certification) (available here).  In Kingsbury, the plaintiff successfully moved for certification in May of 2011, a ruling that was upheld with the court’s denial of the defendant’s motion to reconsider.  Id.

The action was filed in 2008 by a group of homeowners whose homes contained allegedly defective insulation that was prone to water retention and mold contamination.  See Order at 1-2.  The plaintiffs claim that the defendant failed to inform them of the mold risk.  Id.  In attempting to reverse the 2011 class certification ruling, the defendant argued that decertification was required under both Dukes and the Supreme Court’s other much-discussed 2011 class action decision, AT&T v. Concepcion, and that Concepcion also supported the defendant’s contention that all disputes with the plaintiffs should be resolved in arbitration.  See Order at 2-3.  Judge A. Howard Matz rejected both arguments.  Id. at 10.

As to the Concepcion-based arbitration argument, Judge Matz found that the defendant had waived any entitlement to arbitration, “because even before [Concepcion] was decided, [the defendant] was well aware of its right to arbitrate.  By engaging in extensive litigation for almost four years, [the defendant] waived its arbitration rights.”  Order at 3.

Addressing the defendant’s argument that common questions of law or fact did not predominate in light of the new standard presented in Dukes, the court held that “Dukes does not alter the Court’s decision to certify a class,” because “there are numerous common contentions that are central to the resolution . . . of each class member’s claim.”  Order at 10.  Judge Matz went on to enumerate the predominant common questions, and in doing so provided useful guidance for plaintiffs and counsel who confront perhaps the most recurring of class action defenses where commonality is dispositive to certification.  The common questions included: whether the defendant’s purchase agreement is deceptive under California’s Unfair Competition Law; whether the at-issue insulation is prone to water retention and mold; whether a reasonable consumer would expect disclosure of these risks; whether the presence of the at-issue insulation affects home values; and whether the defendant concealed material information about the insulation.  Id. at 10.

Kingsbury is far from an outlier among cases where defendants have invoked Dukes in an attempt to decertify misrepresentation and non-disclosure claims.  See, e.g., Johnson v. General Mills, Inc., 276 F.R.D. 519 (C.D. Cal. 2011) (Carney, J.) (finding predominance of common questions, notwithstanding Dukes); Jermyn v. Best Buy Stores, Inc., 276 F.R.D. 167 (S.D.N.Y. 2011) (McMahon, J.) (same).  More notable are the instances where decertification motions were denied in Dukes-like employment discrimination cases or other circumstances with a similarly subjective, individualized element.  See, e.g., United States of America v. City of New York, 276 F.R.D. 22 (E.D.N.Y. 2011) (Garaufis, J.) (denying decertification motion in employment discrimination case, notwithstanding Dukes); DL v. District of Columbia, 277 F.R.D. 38 (D.D.C. 2011) (Lamberth, J.) (denying decertification motion in Individuals with Disabilities and Education Act action and distinguishing Dukes).  The latter cases further undermine the myth that few certifications would survive post-Dukes.

Some federal courts have insisted that, to certify a class, the plaintiff moving for certification must establish that the defendant’s at-issue unlawful conduct injured every single putative class member — a virtually insuperable standard.  In addition to being effectively impossible to satisfy, a leading class action scholar argues that the “classwide injury” criterion perpetuates fallacies that result in claims ideally suited for classwide adjudication being denied certification and, more often than not, the plaintiffs and prospective class members never obtaining relief.  See Sergio J. Campos, Proof of Classwide Injury, 37 BROOK. J. INT’L L., 750 (forthcoming 2012) (draft available here).

Professor Campos begins his paper with a compelling example: Suppose an individual protected by a statute akin to Title VII is seeking employment and finds a good fit in a help-wanted ad, but the ad clearly states that those of her ethnic background “need not apply.”  See Campos at 751-52.  Should this individual be precluded from bringing her suit as a class action unless she is able to establish, at the class certification stage, that “‘each person for whom [she] will ultimately seek relief was a victim of the employer’s discriminatory policy’”?  Campos at 752, quoting Int’l Bd. Of Teamsters v. United States, 431 U.S. 324, 336 (1977).

The Supreme Court’s reasoning in the Teamsters case excerpted by Professor Campos exemplifies the broad and troubling tendency whereby federal courts demand proof of classwide injury, effectively nullifying numerous archetype class actions, such as that set out in Professor Campos’ hypothetical.  He equates the hypothetical’s insistence on classwide injury with the U.S. Supreme Court’s predominance analysis in Dukes v. Wal-Mart, requiring that plaintiffs, to establish the predominance of common questions of law or fact, identify common questions capable of “generat[ing] common answers.”  See Campos at 755-56, quoting Dukes v. Wal-Mart, 131 S. Ct. 2541, 2551 (2011), quoting Nagareda, Richard A., Class Certification in the Age of Aggregate Proof, 84 N.Y.U. L. Rev. 97, 98-109 (2009).

As such, Professor Campos argues, the Supreme Court’s most recent and expansive articulation of class action jurisprudence, Dukes, is grounded in multiple fallacies, as are the numerous lower-court decisions that have required classwide injury.  The first fallacy that Campos identifies is the “All at Once Fallacy,” whereby courts believe that, in order to ensure that common questions predominate, a class action must be capable of resolving all issues “in one fell swoop.”  Campos at 756, 766.  Yet by, for instance, bifurcating liability and damages determinations, the initial liability determination is capable of giving way to a damages phase in which determinations are made as to each class member who has suffered injury.  Id. at 770.  The commonly adopted bifurcation procedure thus exemplifies that class actions need not necessarily entail adjudication in “one fell swoop.”

The second fallacy embodied in the classwide injury approach is that it treats the class action as an “extraordinary remedy,” similar to a preliminary injunction, which effectively forces plaintiffs to prove that they will succeed on the merits.  This runs contrary to the weight of extensive precedent strictly distinguishing the procedural, class certification phase from the post-certification merits determination.  Id. at 781.  Campos persuasively argues that imposing such an analysis at the class certification stage demonstrates a fundamental misunderstanding of the purpose of class actions, in particular the leveling effect whereby plaintiffs are able to “invest” in equal proportion to defendants; while defendants have the same incentive to invest in their defense whether facing an individual or class action, plaintiffs do not have parallel incentives.  See id. at 783-84.  Accordingly, “a merits determination prior to class certification defeats the purpose of the class action.  The class action is designed to permit the plaintiffs to invest in the merits on equal terms with the defendant.  Thus, a class action only works if it is available before a court decides the merits, not after.”  Id. at 785.

The third and final fallacy identified in the article, “The Individualist Fallacy,” is the idea that, absent proof of classwide injury, a class action will necessarily spawn a plethora of individual trials.  Id. at 785-86.  At the heart of this fallacy is the erroneous assumption that such individual trials are inherently more accurate that aggregate determinations.  Id. at 786.  A related fallacy manifests in the skepticism, expressed in Dukes, for sampling and statistical methods, and the underlying assumption that individualized analysis, by its very nature, yields more accurate outcomes.  Yet, as Campos suggests, all forms of reasoning entail aggregation and inference and, as such, the difference between an individual trial and a classwide adjudication is merely one of degree.  See id. at 787-88.  Moreover, rigorous sampling, survey, and data analysis methods will frequently produce analyses and conclusions that are more objectively accurate and reliable than the predominantly anecdotal alternative.

Professor Campos concludes that proof of classwide injury should not be a prerequisite to class certification, and that common questions, rather than common answers, should govern in determining whether certification is appropriate.  Id. at 800-801.  He goes on to reference the landmark Supreme Court case, Marbury v. Madison, stating, “it is . . . a principle of general application in U.S. law that ‘every right, when withheld, must have a remedy, and every injury its proper redress.’”  Campos at 805, citing Marbury v. Madison, 5 U.S. 137, 163 (1803).  Professor Campos’ implication is clear: should classwide injury be required of plaintiffs at the certification stage, many injuries will have no redress, since plaintiffs will not have an available, practical remedy.  In reaching into the foundational motivations and original intent behind class actions, Professor Campos has crafted a broadly attractive proposal, one that transcends apparent ideological divisions.

Judge Claudia Wilken, of California’s Northern District, has certified a class of consumers alleging that Experian, one of the leading credit-reporting agencies, improperly disclosed their credit reports to third parties.  See Holman v. Experian, Inc., No. 11-cv-00180 (N.D. Cal. Apr. 27, 2012) (Order Granting Plaintiffs Motion for Class Certification) (available here).  The plaintiffs contend that Experian disclosed class members’ credit reports to Finex Group, LLC (“Finex”), in violation of the Fair Credit Reporting Act (FCRA).  See Order at 1.  Plaintiffs’ claims arose from disparate experiences in which their cars were towed.  Finex, a company specializing in the collection of towing-related obligations, was then contracted to collect the resulting debts, and Experian provided Finex with the plaintiffs’ credit reports, allegedly without ascertaining whether Finex had a permissible purpose.  See id. at 2-3.

Experian attacked plaintiffs’ certification motion on several fronts, first arguing that the class definition, encompassing all consumers whose reports were provided to Finex, was overly broad, since some of those records would necessarily have been furnished in compliance with FCRA.  Id. at 15-16.  Although Judge Wilken agreed that the proposed class definition was overbroad, rather than denying certification on that ground, she followed the abundant precedent holding that modifications to class definitions are within a district court’s permissible discretion in ruling on a class certification motion, and modified the class definition accordingly.  See id. at 17-18.

Experian also argued that plaintiffs’ counsel should not be appointed counsel for the class, since they invaded class members’ privacy by not seeking the court’s intervention and authority before obtaining the class list from Finex (the records custodian).  The court rejected this argument, with reference to Pioneer Electronics, Inc. v. Super. Ct., 40 Cal. 4th 360 (2007), a leading California case concerning prospective class member contact information.  Order at 34-35.  Judge Wilken made it clear that Pioneer Electronics does not require plaintiffs’ counsel to affirmatively ask the court’s permission to receive the class records, since Finex provided the information voluntarily and without objection.  She went on to note, “Experian provides no case law that supports the proposition that a recipient of confidential information can be held liable for the supplier’s improper disclosure.”  Order at 35.

The numerosity, typicality, adequacy and superiority requirements were fairly easily satisfied by plaintiffs.  Id. at 24-32.  As to commonality, Experian offered the relatively weak argument that, having issued a sequence of several different directives during the class period, the inquiry into the reasonableness of its FCRA compliance procedures would be fragmented according to those different directives.  Id. at 19.  Thus, no determination could be made as to the class period as a whole.  Id.  However, during oral argument, Experian’s counsel conceded that this impediment could be overcome by dividing the class into subclasses according to time period.  Id.  As such, Judge Wilken found that the plaintiffs satisfied the commonality element, and the class was certified.  Id. at 24, 35.  The action now moves to the merits phase.