In a major victory for consumers, the Sixth Circuit Court of Appeals has, for a second time, affirmed a district court’s class certification ruling, this time in light of the more rigorous standards imposed by the U.S. Supreme Court’s recent ruling in Comcast Corp. v. Behrend, 133 S. Ct. 1426 (2013). Insofar as some had speculated that Comcast rendered class certification impossible as a practical matter, the Sixth Circuit’s ruling is among the most significant class action jurisprudence developments of 2013 thus far. See Glazer v. Whirlpool Corp., No. 10-4188, (6th Cir. July 18, 2013) (slip opinion available here).

The underlying multi-district consolidated action pending in Ohio’s Northern District alleges that Whirlpool’s “front-loading washing machines (the Duets) allow mold and mildew to grow in the machines, leading to ruined laundry and malodorous homes.” Slip op at 2. Following the district court’s certification of a class, the Sixth Circuit heard an interlocutory appeal pursuant to Federal Rule 23(f) and affirmed the trial court’s grant of certification, yielding a decision now known as “Whirlpool I”. 

Whirlpool persisted, unsuccessfully petitioning the Sixth Circuit for en banc rehearing and then filing a certiorari petition with the U.S. Supreme Court, which was granted. This resulted in the Supreme Court remanding the case to the Sixth Circuit (not the trial court) under the “grant, vacate, and remand” procedural device, which specifically directed the Sixth Circuit to reconsider Whirlpool’s Rule 23(f) appeal in light of Comcast v. Behrend. Slip op. at 2-3. Notwithstanding Comcast, the Sixth Circuit reconsidered its prior ruling but reached the same conclusion: affirming the district court order certifying a class for the determination of liability. See slip op. at 3.

The Sixth Circuit’s decisive analysis, under the often-dispositive rubric of determining whether common questions of law or fact predominate, distinguishes Comcast as follows: “Here the district court certified only a liability class and reserved all issues concerning damages for individual determination; in Comcast Corp. the court certified a class to determine both liability and damages. Where determinations on liability and damages have been bifurcated, see Fed. R. Civ. P. 23(c)(4), the decision in Comcast—to reject certification of a liability and damages class because plaintiffs failed to establish that damages could be measured on a classwide basis—has limited application.” Slip op. at 27. Consequently, plaintiffs’ counsel will likely style class actions akin to the liability-damages bifurcation in Glazer v. Whirlpool that kept the Sixth Circuit’s predominance analysis outside the ambit of Comcast.

Additionally, the decision, known as “Whirlpool II”, represents some pushback with respect to another relatively recent Supreme Court decision thought to spell trouble for the future of class actions, Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541 (2011), which some Court observers presumed to open the class certification inquiry to a full-scale determination on the merits. Seizing on Dukes, Whirlpool argued that the district court had committed reversible error by avoiding “several questions of fact arising from the evidence presented by the parties in connection with the motion to certify a class.” Slip op. at 13. However, the Sixth Circuit held that the “rigorous analysis” mandated by Dukes does not imply that a trial court must engage in the extensive merits-based determinations advocated for by Whirlpool. See slip op. at 13-14.

The influential Seventh Circuit Court of Appeals has issued a decision concerning expert testimony that is likely to be influential in other jurisdictions faced with forging a fair and workable jurisprudence for the admission of expert opinion testimony. See Schultz v. Akzo Nobel Paints, LLC, No. 12-1902 (7th Cir. June 26, 2013) (slip opinion available here).

The Schultz decision arises from a survivor action, in which the wife of a now-deceased worker at American Motors (also deceased) alleged that benzene in defendant’s paint caused the plaintiff to develop acute myeloid leukemia (AML). In the opinion, written by Circuit Judge Diane Wood (perhaps the Seventh Circuit’s most prominent liberal voice and also frequently mentioned as a Supreme Court candidate), the Court of Appeals held that the district court had erred in granting the defendant’s motion for summary judgment substantially on the basis of the plaintiff’s expert’s opinion having been deemed unreliable and thereby having been excluded. See slip op. at 1-2.

The plaintiff’s expert used so-called “Monte Carlo Analysis” to make a probabilistic determination as to the likelihood of benzene exposure having substantially contributed to causing the plaintiff’s cancer. See slip op. at 3-5. Though the expert took the plaintiff’s history of smoking into consideration in his analysis, the defendant’s expert seized on this fact, and also determined a higher threshold for safe benzene exposure. See slip op. at 6-8. The plaintiff’s expert took issue with the threshold used by the defendant’s expert, contending it to be “way out of the mainstream,” and explained that, in his opinion, there is no threshold below which benzene exposure is safe. Id. In striking the plaintiff’s expert’s testimony, the district court gave considerable weight to his “no threshold” view, and assailed him, as well, for not taking due account of the plaintiff’s smoking. See slip op. at 8.

The Seventh Circuit undertook a de novo review to determine whether the district court properly followed the framework for determining the admissibility of expert testimony under Federal Rule 702, which has effectively codified the U.S. Supreme Court’s decision in Daubert v. Merrell Dow Pharm., Inc., 509 U.S. 579 (1993). See slip op. at 10-14. While acknowledging district courts’ roles as “gatekeepers” of expert testimony, the Seventh Circuit explained that “the key to the gate is not the ultimate correctness of the expert’s conclusions,” but rather, “the soundness and care with which the expert arrived at her opinion” that is the proper focus of a Daubert analysis, a focus that the Schultz trial court did not adhere to. Slip op. at 10.

Though received as a disappointment by some in the defendants’ bar, the plaintiff’s expert in fact used a methodology identical to the defendant’s expert. That the plaintiff’s expert merely arrived at a different conclusion regarding minimum level of benzene exposure that was necessary to cause AML is matter properly resolved by a jury. The district court’s tacit assumption that there is one single correct conclusion, to the exclusion of all others, was the essence of the district court’s erroneous, now-reversed, ruling. The purpose of this particular instance of expert testimony was not to determine whether or not benzene caused plaintiff’s cancer, with perfect epistemological certainty. Rather, the proper inquiry is whether the analysis, irrespective of its ultimate conclusion, is sound. Quite often, there will be two expert analyses, both exceeding the Daubert soundness threshold, but each reaching diametrically different conclusions. Thereafter, the established civil litigation procedures determine which conclusion is more likely to be accurate. This affirmation of the established division of labor between judge and jury is the upshot of the Seventh Circuit’s ruling in Schultz.

The grant of summary judgment was thus reversed, and the case was remanded to the district court for proceedings consistent with the Seventh Circuit’s opinion.

By now, and most prominently in AT&T Mobility v. Concepcion, the narrative whereby the U.S. Supreme Court interprets the Federal Arbitration Act (FAA) so as to put the continued viability of class actions in doubt is sufficiently familiar that the time is ripe for a counter-narrative. And that is exactly what Stanford Law School Professor Janet Cooper Alexander sets out in a new article, To Skin a Cat: Qui Tam Actions as a State Legislative Response to Concepcion, 46 U. MICH. J.L. REFORM 101 (forthcoming Summer 2013) (available here). Alexander, a former Supreme Court clerk to Justice Thurgood Marshall and currently the Fredrick I. Richman Professor of Law at Stanford, is a recognized expert on civil procedure, federal jurisdiction, and the historical evolution of procedure in state and federal courts, in addition to having compiled a substantial body of work as a practitioner as a partner at Morrison & Forester before becoming an academic.

In the article, Alexander begins with the premise that Concepcion has spelled the demise of “virtually all consumer and employment claims,” and notes that there is no realistic likelihood of federal legislation that would return such class actions to their status quo ante. However, Alexander identifies “an alternative approach that could be taken at the state level,” and describes that alternative approach as entailing “statutory qui tam actions to enforce civil penalties for violations of state consumer protection and employment laws.” Indeed, though not formally under the qui tam rubric, the California Labor Code’s Private Attorneys General Act, known as PAGA, performs exactly as Alexander describes, and has thus far proven immune to Concepcion-based challenged, most notably in Brown v. Ralphs Grocery Co., 197 Cal. App. 4th 489 (2011), cert denied, 132 S. Ct. 1910 (2012).

Alexander contends that “the rationale of Concepcion simply does not apply” to PAGA actions, since they are brought for public rather than private benefit, to ensure compliance with state law. Alexander states her thesis thusly: “Indeed, allowing private parties to contract away the state legislature’s chosen means of enforcing claims belonging to the state would seriously impair the state’s ability to execute core governmental functions. It would be an intrusion into state sovereignty that should give pause to neo-federalists such as the majority in Concepcion.” Alexander at 101.

After noting the practical and legal challenges to legislating around Concepcion, Alexander distinguishes PAGA as an exemplary qui tam-like action, and suggests both amendments to it and free-standing legislation capable of meaningful enforcement of consumer and employment laws (without triggering FAA preemption). Under PAGA, employees bring representative actions that do not require satisfaction of the familiar class action elements (ascertainability, commonality, etc). PAGA actions are also atypical of most private litigation, in that the nominal plaintiff is recovering civil penalties, the majority of which go to the State of California, with the plaintiff taking only a 25 percent “bounty.” See Alexander at 126-132. Thus, it is through PAGA and other qui tam analogues that Alexander proposes to achieve the public benefits associated with class actions, while avoiding the Supreme Court’s current fixation on the “liberal federal policy favoring arbitration.” Suggesting the potentially unlimited breadth of such an undertaking, Alexander writes that “[n]othing would prevent states from creating qui tam actions to enforce any statute containing civil penalties payable to the state.” Alexander at 122.

Thus far, PAGA immunity from FAA preemption has been confirmed, both in California state court (Brown v. Ralphs) as well as in federal court (Urbino v. Orkin Serv’s of California), suggesting the broader utility of the qui tam approach. Additionally, as Alexander notes, while the denial of certiorari in Brown v. Ralphs cannot necessarily be construed as an endorsement by the Supreme Court, it does mean that the case failed to sufficiently motivate at least four Justices to take it on, despite it being the single most important post-Concepcion decision with respect to preserving the ability to effect aggregate enforcement of state laws. See Alexander at 129, n.144.

The Alexander article is notable for its skepticism that the Supreme Court is motivated by anything other than an animus against class actions. For instance, after indicating that the Justices in the Concepcion majority had been prominently aligned with state autonomy, “Concepcion demonstrates that for these Justices, a disdain for consumer class action litigation and individuals’ access to courts outweighs any commitment to federalism and state autonomy.” Alexander at 103.

Glenn Danas of Capstone Law APC, the principal architect of the winning briefing in Brown v. Ralphs, commented on Professor Alexander’s article, stating that it “hits the nail on the head in explaining how qui tam-type actions, like PAGA, provide the states with a mechanism for enforcing their own laws that cannot be emasculated or extinguished by corporations using mandatory arbitration agreements.” Danas added, “we’ve been making nearly identical arguments since Concepcion issued, with multiple appellate courts agreeing, and now the California Supreme Court will hopefully decide that public law enforcement rights such as those embodied by PAGA do not yield to waivers contained in private adhesion contracts.”

Alexander proposes drafting “[a] statute similar to PAGA [to create] a mechanism for private plaintiffs to sue to enforce statutory penalties in a qui tam action.” Alexander at 132. She thus envisions PAGA’s application to only specified California Labor Code provisions being expanded to cover “unfair competition, insurance, environmental protection, and other subjects where contracts of adhesion are common.” Id. Further, Alexander suggests changing PAGA’s confusing and much-litigated language about actions being brought on behalf of so-called “aggrieved employees” and replacing it with a clear and direct statement to the effect that such actions are brought “on behalf of the state.” Alexander at 133. In addition to greater clarity, Alexander contents that such a provision would also “make it more likely that a court would find Concepcion inapplicable.” Id.

Alexander’s thesis is far from an outlier; PAGA-like civil penalty actions have attracted considerable attention from other scholars examining how the Concepcion-created voids might be filled. See, e.g., Spencer, J., Arbitration, Class Waivers, and Statutory Rights, 35 HARV. J.L. & PUB. POL’Y 991 (Summer 2012); Wasserman, R., Legal Process in a Box, or What Class Action Waivers Teach Us about Law-making, 44 LOY. U. CHI. L.J. 391 (Winter 2013).

In a particularly vivid exemplar of the renewed potency of antitrust enforcement, District Judge Denise Cote, of the influential Southern District of New York, recently ruled that Apple had violated antitrust law by conspiring with publishers to raise retail prices of eBooks and to eliminate retail price competition. See United States v. Apple, Inc., No. 12-2826, Opinion & Order (S.D.N.Y. July 10, 2013) (available here).

As Judge Cote summarizes, “Apple and the Publisher Defendants shared one overarching interest — that there be no price competition at the retail level,” and the plan was largely successful. Opinion at 11. The crux of the problem, as Apple viewed it, was that Amazon’s pricing was too low for Apple to make a profit. “Through the vehicle of the Apple agency agreements, the prices in the nascent e-book industry shifted upward, in some cases 50% or more for an individual title. Virtually overnight, Apple got an attractive, additional feature for its iPad and a guaranteed new revenue stream, and the Publisher Defendants removed Amazon’s ability to price their e-books at $9.99.” Opinion at 12.

Apple thus set in motion a plan to conspire with publishers to force Amazon to raise its prices. To do so, Apple proposed that publishers adopt the “agency model” for eBooks, by which a publisher sets the retail price of the book, and the eBook store would then take 30 percent of that price. The agency model is reflected in the frequent apology seen at eBook sites such as Apple’s, noting that “prices are set by publishers” — a statement that is stunningly disingenuous in light of the close, conspiratorial relationship between Apple and the publishers.

After negotiating deals with Apple, five major publishers approached Amazon simultaneously with an offer it couldn’t refuse — either Amazon could move over to the new, higher-priced agency model, or it would have to wait months to begin selling best-selling titles in its store. See Opinion at 64-72. Only by colluding could the play work, because if any single publisher approached Amazon, Amazon could have balked and removed that publisher’s titles from the Kindle Store. Id.

The opinion documents Apple’s plan to undermine the dominance of Amazon and its Kindle in the emerging e-book technology, and with reference to astonishingly candid evidence including internal Apple emails and memos. In its initial meeting with publishers to discuss the conspiracy to fix prices, Apple outlined a strategy categorically at odds with U.S. antitrust laws, stating that the company “cannot tolerate a market where the product is sold significantly more cheaply elsewhere.” Opinion at 33.

Originally, the federal government had sued Apple along with the five other publishers — Lagardere SCA’s Hachette Book Group Inc and Macmillan, News Corp’s HarperCollins Publishers LLC, Pearson Plc’s Penguin Group (USA) Inc and CBS Corp’s Simon & Schuster Inc —in April of 2012. However, while the publishers settled with the government, Apple insisted they had done nothing wrong—a stance that Apple continues to hold in the wake of this week’s ruling, vowing to appeal to the Second Circuit.