The Supreme Court shut down a proposed class action against Comcast last week, another step in the right direction for employers faced with class action lawsuits. (Comcast Corp. et al v. Behrend et al, No. 11-864 (March 27, 2013).)
Though the decision is highly technical and the case did not involve employment claims, the U.S. Supreme Court’s ruling is noteworthy for employers. The Court held that before a class can be certified, class plaintiffs must introduce admissible evidence to establish that damages can be awarded on a class-wide basis. The proposed class consisted of 2 million cable television subscribers in the Philadelphia area who claim that Comcast and its subsidiaries “cluster” their cable television operations within a particular region by swapping their systems outside the region for competitor systems inside the region, which allegedly reduces competition and drives up prices. The same class certification standard applies to employment class actions brought in federal court – and California courts as well, since California’s class certification rule was modeled after the federal rule.
The Comcast plaintiffs sought class certification under Federal Rule of Civil Procedure 23(b)(3), which requires that “questions of law or fact common to class members predominate over any questions affecting only individual members.” The District Court required the plaintiffs to show: (1) that the anticompetitive impact of the violation could be proved at trial through evidence common to the class; and (2) that the damages were measurable on a class-wide basis through a “common methodology.” The District Court nevertheless certified the class, and the Third Circuit Court of Appeals affirmed, stating that it had “not reached the stage of determining on the merits whether the methodology is a just and reasonable inference or speculative.”
The Supreme Court reversed, overturning class certification finding that certification was improper under the standards set forth in Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541 (2011). The Supreme Court ruled 5-4 that the plaintiffs could not bring their claims as a class, saying the questions of individual damage calculations would inevitably overwhelm questions common to the class. Comcast, 2013 U.S. Dist LEXIS 47439 at *14. “The Third Circuit ran afoul of this Court’s precedents when it refused to entertain arguments against respondents’ damages model that bore on the propriety of class certification simply because they would also be pertinent to the merits determination.” Comcast, 2013 U.S. Dist LEXIS 47439 at *4. The Court reiterated that it “‘may be necessary for the court to probe behind the pleadings before coming to rest on the certification question,” and that certification is proper only if “the trial court is satisfied, after a rigorous analysis, that the prerequisites of Rule 23(a) have been satisfied.” Id. at *12.
Employers are already seizing on the Comcast ruling to oppose or seek reconsideration of class certification in labor and employment cases.
On March 29, a federal judge in New York ruled that, based on the two-day-old Comcast decision, a group of workers at Applebee’s restaurants in New York and Connecticut could not pursue some of their wage-and-hour claims against the restaurant operator as a class action. (Roach v. T.L. Cannon Corp., 2013 U.S. Dist. LEXIS 45373 (N.D.N.Y. Mar. 29, 2013) (“Plaintiffs contend that damages need not be considered for Rule 23 certification even if such damages might be highly individualized . . . This position is in contravention of the holding of Behrend”). As in Comcast, the Applebee’s plaintiffs did not have a consistent damages model that could be measured class-wide.
On April 1, the Supreme Court cited its Comcast holding and vacated a ruling by the 7th Circuit Court of Appeals in Ross v. RBS Citizens, which previously had certified a wage-and-hour class action. The Supreme Court remanded the case to the lower court for further consideration of whether class certification is appropriate in light of Comcast. RBS will get another opportunity to defend against class certification based on the Comcast decision.
It will take some months for the Supreme Court’s decision to percolate through the district courts and circuit courts before it is clear how Comcast’s holdings will apply in employment cases. Two things are clear from the Court’s ruling that favor employers: class plaintiffs have a high hurdle at class certification state, to convince the court at that early stage that if they can prove liability, the resulting damages can be measured will not require “labyrinthine individual calculations” and that federal judges must perform a rigorous analysis of the evidence, probing behind the allegations in many cases to the merits of the plaintiff’s underlying claim.