February 22, 2019
By Mark B. Blocker, Frank J. Favia Jr., and Olivia E. Sullivan
How should issues of individualized damages impact a court’s analysis of whether predominance is satisfied under Federal Rule of Civil Procedure 23(b)(3)?
Prior to the U.S. Supreme Court’s decision in Comcast Corp. v. Behrend, 569 U.S. 27 (2013), federal courts appeared to be split on this issue. Many litigants and commentators believed Comcast brought clarity when the majority found predominance lacking because individualized damage calculations overwhelmed questions common to the class.
But since Comcast, federal courts have issued what might appear to be conflicting decisions regarding how, if at all, individualized damages impact predominance. This has resulted in confusion among lawyers and parties.
A close review of these seemingly conflicting decisions allows for harmonization. Although the presence of individualized damages issues may not preclude a finding of predominance when damages can be determined mechanically or with minimal effort, individualized damages can preclude predominance when the necessity for individualized evidence undermines manageability.
A finding of predominance under Rule 23(b)(3) requires that questions of law or fact common to class members predominate over any questions affecting only individual members. Absent an efficient and reliable methodology for calculating each class member’s damages, it could be necessary for the court to hold a series of individual hearings or mini-trials to determine whether particular class members were damaged, or the amount of such damages.
Prior to Comcast, courts in the Second, Third, Fourth, Fifth and Eleventh Circuits found predominance lacking when the need to conduct individual hearings to determine whether particular class members were damaged made a class proceeding inefficient or unmanageable. See e.g., Sacred Heart Health Sys. Inc. v. Humana Military Healthcare Servs. Inc., 601 F.3d 1159 (11th Cir. 2010); McLaughlin v. Am. Tobacco Co., 522 F.3d 215 (2d Cir. 2008), abrogated on other grounds by Villoldo v. BNP Paribas S.A., 648 F. App’x 53 (2d Cir. 2016); Steering Comm. v. Exxon Mobil Corp., 461 F.3d 598 (5th Cir. 2006); Newton v. Merrill Lynch, Pierce, Fenner & Smith Inc., 259 F.3d 154 (3d Cir. 2001); Windham v. Am. Brands Inc., 565 F.2d 59 (4th Cir. 1977).
Courts in the Fourth, Fifth and Eleventh Circuits also held, pre-Comcast, that predominance was not satisfied where the court would need to conduct individual hearings to determine the amount of damages to each class member. See, e.g., Exxon Mobil Corp., 461 F.3d at 602-05; Little v. T-Mobile USA Inc., 691 F.3d 1302, 1306-08 (11th Cir. 2012); Bell Atl. Corp. v. AT&T Corp., 339 F.3d 294, 305-07 (5th Cir. 2003); Windham, 565 F.2d at 67-70.
Despite this longstanding case law, other courts issued decisions which, on the surface, appeared to conflict with the principle that individualized damages issues can prevent a finding of predominance. The Ninth Circuit, in particular, has been steadfast in holding that the existence of individualized damages issues, standing alone, does not preclude predominance.
When the Supreme Court decided Comcast in 2013, many litigants and commentators predicted that the decision would bring uniformity to federal case law regarding the impact on predominance of individualized damages issues. The majority in Comcast concluded that the plaintiff’s proffered damages model fell “far short of establishing that damages are capable of measurement on a class wide basis,” and held that, absent a viable class-wide damages model, questions of individual damage calculations “will inevitably overwhelm questions common to the class.” 569 U.S. at 34.
But the dissent in Comcast suggested that the majority decision “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.” Id. at 41.
Since the Comcast decision, many courts have continued to find predominance lacking when individualized issues regarding the fact of damages to particular class members make proceeding as a class action infeasible or unmanageable.
Recently, in Riffey v. Rauner, the Seventh Circuit held that predominance was not satisfied because individualized inquiries into whether each class member suffered damages overwhelmed questions common to the proposed class. 910 F.3d 314, 319-20 (7th Cir. 2018). Similarly, in In re Asacol Antitrust Litigation, the First Circuit found predominance lacking where the plaintiffs failed to provide a manageable mechanism to identify which class members were damaged. 907 F.3d 42, 54-55 (1st Cir. 2018).
Other courts, post-Comcast, continue to find predominance lacking when individualized issues regarding the amount of damages to particular class members make proceeding as a class action infeasible or unmanageable.
For example, in Ibe v. Jones, the Fifth Circuit found predominance lacking where a proposed class of Super Bowl ticket purchasers incurred vastly different expenses and therefore the calculation of damages for each would require a series of mini-trials. 836 F.3d 516, 530-31(5th Cir. 2016). Similarly, in Crutchfield v. Sewerage & Water Bd. of New Orleans, the court found predominance lacking where damages calculations would require individualized evidence and were not susceptible to class-wide calculation. 829 F.3d 370, 378 (5th Cir. 2016).
Comcast, however, has not brought the uniformity to federal court decisions that many expected, and seemingly conflicting case law still exists. There is, however, a unifying theme: courts deny class certification when the damages determination requires enough individualized evidence that the inquiry becomes unmanageable, whereas individualized damages may not undermine predominance when their calculation is formulaic or easily determined.
In a large percentage of cases that find predominance satisfied despite the presence of individualized damages issues, damages could be determined formulaically or with minimal effort.
For example, in Leyva v. Medline Industries Inc., the Ninth Circuit based its decision that predominance (and superiority) were satisfied in large part on the fact that damages could “feasibly and efficiently be calculated” using defendant’s computerized payroll and time-keeping database. 716 F.3d 510, 514 (9th Cir. 2013). Similarly, in Smilow v. Sw. Bell Mobile Sys. Inc., the First Circuit found predominance satisfied in large part because plaintiff’s expert testified that he could easily calculate individual damages using the defendant’s records and a computer program. 323 F.3d 32, 40-41 (1st Cir. 2003). See also Beattie v. CenturyTel Inc., 511 F.3d 554, 564 (6th Cir. 2007), (individualized damages easily determined); In re Visa Check/MasterMoney Antitrust Litigation, 280 F.3d 124, 141-42 (2d Cir. 2001) (common formula to calculate individualized damages).
Cases in which courts have found predominance satisfied due to a mechanical or formulaic methodology to calculate individualized damages are wholly distinguishable from—and not inconsistent with—cases in which courts found predominance lacking because the determination of individualized damages required numerous hearings or mini-trials. This distinction makes sense, because the critical question is not merely whether individualized damages issues exist, but whether issues common to the class predominate over individualized issues.
Where individualized damages can be determined formulaically or with minimal effort, then common issues could predominate; however, predominance could still be found lacking based on individualized issues stemming from the resolution of liability elements or affirmative defenses.
On the other hand, where individualized damages can only be determined through a series of hearings or mini-trials, those individualized issues are far more likely to overwhelm common questions. Class certification in such circumstances would undermine the very efficiencies of time, effort, and expense for which Rule 23(b)(3) is intended.
Indeed, both before and after Comcast, courts have pointed to issues of efficiency and manageability when finding predominance lacking. See, e.g., Johnson v. Nextel Commc’ns Inc., 780 F.3d 128, 147-48 (2d Cir. 2015); Sacred Heart Health Sys. Inc. 601 F.3d at 1178-79; Exxon Mobil Corp. 461 F.3d at 602-05; Windham, 565 F.2d at 67-70; Dailey v. Groupon Inc. No. 11 C 05685, 2014 BL 237928, at *10-11 (N.D. Ill. Aug. 27, 2014); Ludke v. Phillip Morris Cos., No. MC 00-1954 (D. Minn. Nov. 21, 2001).
Mark B. Blocker is a partner at Sidley Austin in Chicago and co-leader of the firm’s Global Insurance Disputes practice. His class action practice focuses on two primary areas: consumer and financial services and ERISA.
Frank J. Favia Jr. is a partner in Sidley’s Chicago office, primarily practicing in the areas of class action defense, commercial litigation and disputes, and white collar.
Olivia E. Sullivan is a litigation associate in Sidley’s Chicago office. Her practice concentrates on financial services and insurance class action defense and reinsurance disputes.