Earlier this month, the Seventh Circuit Court of Appeal held that “commonality of damages” was not required under Wal-Mart v. Dukes, 131 S. Ct. 2541 (2011) and Comcast v. Behrend, 133 S. Ct. 1426 (2013) for class certification in a consumer case involving claims that “organic” roof shingles did not meet an industry standard. In the Matter of IKO Roofing Shingle Prods. Liab. Litig., No. 14-1532 (7th Cir. July 2, 2014) (slip opinion available here). Purchasers of the shingles sued IKO, alleging that the defendant falsely told customers that the shingles met an industry standard. Plaintiffs asked the district court to certify a class that would cover IKO’s sales of the product in various states since 1979, but the motion was denied by the multidistrict litigation judge in the Central District of Illinois. The district court stated that Comcast and Dukes required proof “that the plaintiffs will experience a common damage and that their claimed damages are not disparate” and that “’commonality of damages’ is essential.” Slip op. at 6.
Circuit Judge Frank Easterbrook authored the opinion for the panel consisting of Judges Wood and Kanne. The panel wrote that the district court incorrectly interpreted Comcast; such an interpretation would make “class actions about consumer products impossible.” Slip op. at 6. Distinguishing Dukes as having “nothing to do with commonality of damages,” the opinion stated, “[i]t dealt instead with the need for conduct common to members of the class, and it concerned Rule 23(a)(2) rather than Rule 23(b)(3).” Id. However, in a suit like IKO Roofing, which alleges a defect common to all instances of a consumer product, “the conduct does not differ.” Id. at 6-7.
Furthermore, while Comcast does discuss injury under Rule 23(b)(3), all it requires is that the theory of loss (damages) match the theory of liability. Id. at 7. In Comcast, the plaintiffs specified four theories of liability, but the district judge had only certified a class limited to one of the four theories. However, the plaintiffs’ damages expert estimated harm assuming all four of the theories were established. Because there was only one certified theory of liability but four theories of damages, the theory of loss failed to match the theory of liability. Id. In IKO Roofing, the panel found that the plaintiffs submitted two theories of damages that matched their theory of liability: the first being the difference between the market price between the product as represented and a tile that does not satisfy the industry standard, which is applied to every purchaser, and the second being purchasers whose tiles actually failed could recover damages if the alleged defect (not meeting the industry standard) caused the failure.
The panel stated that although the district court was not required to certify this class action if there were other issues that make class treatment unwieldy despite any common issues, here, the lower court failed to apply the correct legal standard—“commonality of damages” is not a requirement for certification. It is too early to tell, but IKO Roofing’s holding may have positive implications for wage-and-hour class actions, if utilized in employee class certification arguments.