2nd Cir. Rejects Extreme Interpretation of Comcast

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Courts have long held that individual and varying damages calculations for putative class members does not necessarily preclude class certification. However, a shadow of doubt was cast over this well-settled principle by the United States Supreme Court’s decision in Comcast Corp. v. Behrend, 133 S. Ct. 1426 (2013). In Comcast, the Supreme Court reversed the district court and Third Circuit Court of Appeals’ certification orders because it found that the plaintiff’s expert testimony was insufficient to establish classwide damages. Predictably, defense counsel have cited Comcast to argue that individual damages issues preclude certification. If adopted, this rationale would effectively end class actions as we know them, given that most class actions involve varying individual damages.

Recently, the influential Court of Appeals for the Second Circuit weighed in on the scope of Comcast and whether it overruled the law of its Circuit, holding that class certification cannot be denied merely because damages have to be ascertained on an individual basis. Roach v. T.L. Cannon Corp., No. 13-3070-cv (2d Cir. Feb. 10, 2015) (slip op. available here). In Roach, the plaintiff alleged that T.L. Cannon, an Applebee’s restaurant franchisee, had a policy of not paying hourly employees an extra hour of pay when working a ten-hour work day as was required at the time by New York law (the “spread-of-hours” claim) and that the defendant required its managers to subtract pay for required rest breaks that the employees did not take (the rest break claim). The magistrate judge recommended that the spread-of-hours claim be certified, finding the common question of whether the company had a policy of depriving employees of an extra hour of pay predominated over individual issues, but ultimately denied certification of the rest break claim because the class representatives were inadequate. The district court, without considering whether common issues existed, denied certification of both claims on the sole basis that the presence of individualized damages precluded certification under Comcast. Slip op. at 9.

The Second Circuit disagreed with the lower court, holding that the court had misinterpreted Comcast. Id. at 26. According to the Second Circuit, Comcast did not hold that a class cannot be certified under Rule 23(b)(3) simply because damages cannot be measured on a classwide basis. Id. at 19. Rather, Comcast’s more narrow ruling was “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.” Id. at 20. Although Comcast reiterated that the damages question should be considered at the certification stage, the fact that damages may have to be ascertained on an individual basis is only a factor to consider when determining whether common issues outweigh individual issues. Id at 22. The Roach court noted that its ruling was consistent with the five other Circuits that had applied Comcast, including the Ninth Circuit’s decision in Leyva v. Medline Indus. Inc., 716 F.3d 510 (9th Cir. 2013). The court then vacated the order denying class certification and remanded the case.

Authored by:
Robert Drexler, Senior Counsel