Court rules common damages not required for class certification, reinstates consumer product class action

by Jay Pate

Federal courts throughout the country have treated the decision in Wal–Mart Stores, Inc. v. Dukes, 131 S.Ct. 2541 (2011) as narrowing the circumstances that are appropriate for class action litigation. In Dukes, the Supreme Court emphasized that plaintiffs seeking certification of a class must establish that “there are questions of law or fact common to the class.” The court explained that a “common contention, moreover, must be of such a nature that it is capable of classwide resolution—which means that determination of its truth or falsity will resolve an issue that is central to the validity of each one of the claims in one stroke.” Id., at 2551.

The plaintiffs in Dukes contended that discretionary acts by various Wal-Mart managers of more than 2,000 local stores throughout the country produced discriminatory effects. When writing that commonality under Rule 23(a)(2) requires proof of the same injury, the Supreme Court observed that each store was managed independently; it held that when multiple managers exercise discretion, conditions at different stores do not present a common question. Citing the Dukes decision, courts have overthrown jury verdicts, thrown out settlements, and rejected or decertified class actions, in many instances undoing years of litigation

The Supreme Court’s subsequent decision in Comcast Corp. v. Behrend, S.Ct. 1426 (2013), has created similar interest, at least among lawyers defending putative class actions. Courts have been somewhat inconsistent in their understanding and application of Comcast.

The plaintiffs in Comcast filed an antitrust suit and specified four theories of liability. The district judge certified a class limited to one of these four. The plaintiffs’ damages expert, however, estimated harm starting with the assumption that all four theories had been established. Thus, the Supreme Court held there was no evidence that plaintiffs had suffered a loss under the single theory that had been granted class treatment. Without a theory of loss that matched the theory of liability, the class could not get anywhere and class certification was inappropriate.

The Seventh Circuit recently considered the impact of Dukes and Comcast in In re IKO Roofing Shingle Products Liability Litigation, No. 14–1532, — F.3d —- (7th Cir. July 02, 2014). The plaintiffs seek to represent a class of purchasers of organic asphalt roofing shingles against IKO Manufacturing and affiliated firms. What distinguishes an “organic” asphalt tile is the inclusion of a layer made from felt or paper; tiles that include a fiber-glass layer are not called organic, even though asphalt itself has organic components. The plaintiffs contend that IKO falsely told customers that these shingles met an industry standard known as ASTM D225 (concerning organic felt shingles), and that compliance had been ascertained by use of a testing protocol known as ASTM D228 (which specifies procedures for sampling, examination, physical testing, and analyses of asphalt-containing materials used in roofing).

Plaintiffs asked the district court to certify a class that would cover IKO’s sales in eight states since 1979. The district court declined the motion for class certification. According to the district court, inevitable differences in each consumers’ experiences with IKO’s tiles prevented class certification. For example, some tiles would fail because of exposure to the elements regardless of hwo they were constructed, some tiles will be ripped off by tornadoes or hurricanes, some will fail early because of improper installation and some will last indefinitely despite flunking the D225 protocol.

The district court read Comcast and Dukes, to require proof “that the plaintiffs will experience a common damage and that their claimed damages are not disparate.” On appeal, the Seventh Circuit has now reversed the district court. In re IKO Roofing, No. 14–1532. According to the court of appeals, “[i]f [the district court] is right, then class actions about consumer products are impossible.”

The Seventh Circuit note that Dukes “has nothing to do with commonality of damages.” Id. Rather, Dukes is concerned with “the need for conduct common to members of the class.” Id., (emphasis added). In Dukes, commonality was lacking because the “conduct” was different managers independently exercising his or her discretion as to the particular circumstances raised in each situation. In contrast, “[i]n a suit alleging a defect common to all instances of a consumer product, however, the conduct does not differ.” Id.

According to the Seventh Circuit, the district court also misread Comcast. The plaintiffs in Comcast were not entitled to certification because they had failed to present evidence showing a loss related to the only liability theory appropriate for class-wide treatment. In contrast, the Seventh Circuit noted that “[p]laintiffs in our litigation have two theories of damages that match their theory of liability.” Id. The plaintiffs allege that every purchaser of a tile is injured (and in the same amount per tile) by delivery of a tile that does not meet the quality standard represented by the manufacturer. In other words, plaintiffs seek the “difference in market price between a tile as represented and a tile that does not satisfy the D225 standard. This remedy could be applied to every member of the class.” Id.

Alternatively, the plaintiffs allege that purchasers whose tiles actually failed are entitled to recover damages, if nonconformity to the D225 standard caused the failure. The court of appeals held that this approach also did not “ run afoul of Comcast” because the remedied matches the theory of liability.

The Seventh Circuit held that the district court erred by denying the plaintiffs’ motion to certify “under a mistaken belief that ‘commonality of damages’ is legally indispensible.” Id. The case was remanded to the district court to reconsider the question of class certification under proper standard.

Heygood, Orr & Pearson fighting for consumer rights

The attorneys at Heygood, Orr & Pearson have represented numerous plaintiffs in consumer fraud and consumer class action lawsuits. For example, we have represented individuals who allege they were misled by claims made by Samsung regarding the memory capacity of its Galaxy S4 phone and dozens of consumers who claim they were defrauded into investing in life settlements.

Our law firm has represented clients across the country in class action lawsuits against multimillion dollar companies, making sure that when consumers are hurt by corporate wrongdoing, the companies that do so are held accountable for their actions. Heygood, Orr & Pearson is AV-rated, the highest rating available from Martindale-Hubble, the top law firm rating service. Our partners Michael Heygood, Jim Orr, and Eric Pearson are all Board Certified in Personal Injury Trial Law by the Texas Board of Legal Specialization and have all been voted by their peers as “Super Lawyers” in the state of Texas for several consecutive years.*

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* Michael Heygood, James Craig Orr, Jr. and Eric Pearson were selected to the Super Lawyers List, a Thomson Reuters publication, for the years 2003 through 2014.