defeating class certification by attacking plaintiffs' classwide...

Defeating Class Certification by Attacking

Plaintiffs' Classwide Damages Models

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TUESDAY, FEBRUARY 20, 2018

Presenting a live 90-minute webinar with interactive Q&A

Jeremy M. Creelan, Partner, Jenner & Block, New York

Aaron Dolgoff, Vice President, Charles River Associates, Boston

Cedric D. Logan, Partner, Wheeler Trigg O'Donnell, Denver

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Predominance:

Comcast and the World That Came

Before

Jeremy Creelan

[email protected]

February 20, 2018

6

Pre-Amchem: Increasing Scrutiny of Certification

• As class actions used increasingly to bring mass tort claims in 1980s, courts increased scrutiny of certification on predominance and other Rule 23 grounds. For example:

– Castano v. Am. Tobacco Co., 84 F.3d 734, 740 (5th Cir. 1996) (tobacco): “The district court erred in its analysis in two distinct ways. First, it failed to consider how variations in state law affect predominance and superiority. Second, its predominance inquiry did not include consideration of how a trial on the merits would be conducted.”

– In re Am. Med. Sys., Inc., 75 F.3d 1069, 1085 (6th Cir. 1996) (penile implants): “As this case illustrates, the products are different, each plaintiff has a unique complaint, and each receives different information and assurances from his treating physician. Given the absence of evidence that common issues predominate, certification was improper.”

– Boughton v. Cotter Corp., 65 F.3d 823 (10th Cir. 1995) (hazardous emissions from uranium mill)

7

Amchem Prod., Inc. v. Windsor (1997):

“Cohesiveness” Test

• Purported class action on behalf of all those exposed to

defendant’s asbestos

• Settlement class – neither party intends to litigate

• District Court certified class based on shared experience of

asbestos exposure & interest in prompt compensation; held

that settlement was fair

• 3d Cir. vacated for lack of predominance under Rule

23(b)(3)

8

Amchem Prod., Inc. v. Windsor (1997):

“Cohesiveness” Test

• Ginsburg for Majority (6)

– “The Rule 23(b)(3) predominance inquiry tests whether proposed

classes are sufficiently cohesive to warrant adjudication by

representation.”

– Predominance readily met in consumer or securities fraud as well

as antitrust cases

– Predominance may be met in mass tort cases arising from common

cause or disaster

– Fact that all members had been exposed to asbestos was

insufficient to meet predominance, as different members were

exposed to different products for different amounts of time in

different ways, and differences in state law compounded those

disparities

– Settlement class – lower bar?

9

Amchem Progeny:

Predominance Requirement Powerful

• Predominance requirement satisfied:

– Smilow v. Sw. Bell Mobile Sys., Inc., 323 F.3d 32, 39–40 (1st Cir.

2003)

– Gunnells v. Healthplan Servs., Inc., 348 F.3d 417 (4th Cir. 2003)

– In re Visa Check/MasterMoney Antitrust Litig., 280 F.3d 124 (2d Cir.

2001)

• Predominance requirement NOT satisfied:

– Danvers Motor Co. v. Ford Motor Co., 543 F.3d 141, 148 (3d Cir.

2008)

– Broussard v. Meineke Disc. Muffler Shops, 155 F.3d 331 (4th Cir.

1998)

– Jackson v. Motel 6 Multipurpose, Inc., 130 F.3d 999 (11th Cir. 1997)

10

Amchem Progeny:

Predominance Requirement Unclear

• Individualized damages a bar to certification

– Randall v. Rolls-Royce Corp., 637 F.3d 818 (7th Cir. 2011)

– Blades v. Monsanto Co., 400 F.3d 562, 570-71 (8th Cir. 2005)

• Individualized damages NOT a bar to certification (majority)

– Yokoyama v. Midland Nat’l Life Ins. Co., 594 F.3d 1087, 1089 (9th

Cir. 2010)

– In re New Motor Vehicles Canadian Exp. Antitrust Litig., 522 F.3d 6

(1st Cir. 2008)

– Allapattah Servs. v. Exxon Corp., 333 F.3d 1248, 1261 (11th Cir.

2003)

11

Comcast v. Behrend (2013):

“Rigorous Analysis” of Predominance

• Purported class action on behalf of 2M Comcast

subscribers

• Sherman Act claims challenging alleged “clustering”

scheme to eliminate competition in Philadelphia area

• District Ct rejected 3 of Ps’ 4 theories of anti-competitive

impacts; accepted “overbuilder deterrence” theory b/c

“capable of measurement on classwide basis” and “capable

of classwide proof”

• Ps’ expert damages analysis included all 4 impacts; did not

isolate “overbuilder” theory

12



• Scalia for Majority (5)

– “Rigorous analysis” required at class certification to confirm Ps’

damages case consistent with liability case under FRCP 23(b)(3)

– Overlap with merits analysis

– Ps’ expert did not tie supra-competitive prices to “overbuilder

deterrence” theory damages incapable of measurement on a

classwide basis if based on Ps’ expert analysis

13



• Ginsberg for Dissent (4)

– Court should dismiss cert. as improvidently granted b/c question

presented whether expert evidence admissible at certification

– “no new ground” on FRCP 23(b)(3) standards

– Class may be certified even if damages not provable in aggregate

– Ps’ expert analysis did allow classwide proof of damages because

Comcast agreed that Ps’ 3 other theories had no impact on prices

14



• Key Takeaways

– Part of pantheon of recent SCOTUS cases shifting merits analyses

earlier in life of a case

– Lingering difficulties for appeals courts trying to review half-formed

factual record from certification stage

– Strategic Note: Identify mismatch between Ps’ theory and damages

model before class cert. consideration

15



• Questions

– Would courts take Scalia at his word? • Or limit Comcast to its facts?

• Or limit Comcast to nexus between damages theory and liability theory?

– Comcast addressed combined liability-damages class

certification: impact on liability-only or damages-only

classes?

– What relationship between Comcast and Daubert analysis?

– Would individualized damages calculations block

certification?

– Was Comcast about reliability of damages analysis or case

management or Due Process?

Dukes dicta; Comcast implies Daubert applies

Circuit Courts agree that Daubert applies at class certification:

In re Blood Reagents Antitrust Litig., 783 F.3d 183 (3d Cir. 2015).

Unger v. Amedisys Inc., 401 F.3d 316, 323 n.6 (5th Cir. 2005).

Am. Honda Motor Co. v. Allen, 600 F.3d 813, 815-16 (7th Cir. 2010).

Sher v. Raytheon Co., 419 F. App’x. 887, 890 (11th Cir. 2011).

Ellis v. Costco Wholesale Corp., 657 F.3d 970 (9th Cir. 2011).

Modified Daubert:

In re Zurn Pex Plumbing Prods. Liab. Litig., 644 F.3d 604, 612 (8th

Cir. 2011) (“focused” Daubert analysis at class certification).

17

Question 1 Raised by Comcast: How

“Rigorous” Must the Analysis Be?

File a Daubert Motion or Not?

Tyson Foods v. Bouaphakeo, 136 S. Ct. 1036 (2016).

Donning and doffing case under the Fair Labor Standards Act.

Plaintiff introduced expert testimony with representative evidence

Held: “Representative evidence that is statistically inadequate or

based on implausible assumptions could not lead to a fair or accurate

estimate[.] Petitioner, however, did not raise a challenge to

respondents’ experts’ methodology under Daubert.”

Concurrence: What about the completely uninjured class members?

Dissent: District Courts must ensure continuing compliance with Rule

23.

18

Question 2: Must Damages be Measureable on A

Classwide Basis to Meet Predominance?

Certified Question:

Whether a district court may certify a class action without resolving whether

the plaintiff class had introduced [evidence] to show that the case is

susceptible to awarding damages on a class-wide basis.

Majority:

[R]espondents’ model falls far short of establishing that damages are capable

of measurement on a classwide basis.” “If the model does not even attempt to

[measure such damages], it cannot possibly establish that damages are

susceptible of measurement across the entire class for purposes of Rule

23(b)(3).”

Dissent:

“[T]he decision should not be read to require, as a prerequisite to class

certification, that damages attributable to a classwide injury be measureable

‘on a class-wide basis.’”

19

Early Circuit Court Decisions

In re: Rail Freight Fuel Surcharge Antitrust Litigation, 725 F.3d

244 (D.C. Cir. 2013)

“No damages model, no predominance, no class certification.”

Wallace B. Roderick Revocable Living Trust v. XTO Energy, 725 F.3d

1213 (10th Cir. 2013)

The Tenth Circuit reversed certification and remanded to the district

court to “consider the extent to which material differences in damages

determinations will require individual inquiries.”

20

Must Damages be Measureable on a

Classwide Basis? (Cont’d)

The need for individual damages calculations alone does not

defeat a finding of predominance:

Leyva v. Medline Industries, Inc., 716 F.3d 510 (9th Cir. 2013)

In re Whirlpool Corp., 722 F.3d 838 (6th Cir. 2013)

Butler v. Sears, 727 F.3d 796 (7th Cir. 2013)

In re Deepwater Horizon, 739 F.3d 790 (5th Cir. 2014)

In re Nexium Antitrust Litig., 777 F.3d 9 (1st Cir. 2015)

Roach v. T.L. Cannon, 778 F.3d 401 (2d Cir. 2015)

Neale v. Volvo Cars of N. Am., LLC, 794 F.3d 353 (3d Cir. 2015)

Brown v. Electrolux Home Products, 817 F.3d 1225 (11th Cir. 2016)

21

But the Door is Still Open

Fifth, Sixth and Seventh Circuits: those cases involved liability

only classes.

First, Second and Ninth Circuits all noted that there was an easy

way to calculate individual damages in those cases.

Still an open question after these cases about how to evaluate a

putative class where damages are not measureable on a

classwide basis and individual damages are not readily calculable.

22

Consider The Ninth Circuit

Individual calculations cannot defeat class certification.

Leyva v. Medline Industries, Inc., 716 F.3d 510 (9th Cir. 2013).

A proposed class damages model can pass muster even if it is “an

approximation . . . uncertain, contingent, or difficult of

ascertainment” for certain California state claims.

Pulaski & Middleman, LLC v. Google, Inc., 802 F.3d 979, 989

(2015).

“Class wide damages calculations under the UCL, FAL, and CLRA

are particularly forgiving.” Lambert v. Nutraceutical Corp., 870

F.3d 1170 (2017)

23

Consider The Ninth Circuit (cont’d)

So is Comcast toothless? Not so fast . . .

Doyle v. Chrysler Group, LLC (9th Cir. 2016) (unpublished):

Reversed certification because plaintiff had not demonstrated that

damages could be measured on a classwide basis.

Distinguished Leyva and Pulaski because those cases involved “a

common methodology for calculating damages”.

24

When Do Individual Damages Calculations

Tip the Predominance Scale?

Brown v. Electrolux Home Products, 817 F.3d 1225 (11th Cir.

2016)

Noted that the predominance issue is qualitative, and the individual

issues raised by damages determinations are often easy issues to

resolve when damages calculations are formulaic.

Recognized that an “exception” to the blackletter rule when

computing individual damages will be complex and fact-specific.

Remand to consider whether common issues of liability and damages

together predominate over individual issues.

25

Question 3 Raised by Comcast: How

Precisely Must the Liability Theory and

Damages Model Align?

Comcast: Class liability and damages theories must align:

“[A] model purporting to serve as evidence of damages in this class

action must measure only those damages attributable to that theory.”

“Calculations need not be exact . . . but at the class certification stage

(as at trial) any model supporting a ‘plaintiff’s damages case must be

consistent with its liability case’”

Model does not establish that class damages are capable of

measurement if the model “identifies damages that are not the result

of the wrong.”

26

Liability and Damages Must Align

From the defense perspective, this is probably where the most

fruitful application of Comcast has been, but the lower courts are

not aligned on what this requirement actually means in practice.

Compare:

Hughes v. Ester C. Co., NBTY, Inc., 2016 WL 6092487 (E.D.N.Y.

Sept. 30, 2016); In re 5-Hour Energy Mktg. & Sales Practices Litig.,

2017 WL 2559615, at *9–11 (C.D. Cal. June 7, 2017)

Goldemberg v. Johnson & Johnson Consumer Companies, Inc., 2016

WL 5817012 (S.D.N.Y. Oct. 4, 2016).

27

Consider The Ninth Circuit (cont’d)

Brazil v. Dole Packaged Foods, LLC, 2014 WL 5794873 (Nov. 6,

2014)

Plaintiff’s expert’s asserted that he could calculate classwide

damages: Class certified.

Proposed model was carried out, and failed: Class decertified.

Regression model did not account for advertising spending, prices of

competing products, and did not verify reliability of his assumptions

regarding competing products’ labels

Affirmed, 660 Fed.Appx. 531 (9th Cir. 2016): “Because Brazil did

not explain how this premium could be calculated with proof

common to the class, the district court did not abuse its discretion

by granting Dole’s motion to decertify.”

28

Consider the Ninth (again)

But see Briseno v. ConAgra Foods:

Plaintiffs’ expert asserted that he could use regression

analysis to determine damages, but could not isolate damages

flowing solely from allegedly false aspect of “100% natural”

claim.

Court granted amended motion for class certification that relied

on regression + conjoint analyses to isolate price premium.

Affirmed: “Not an abuse of discretion for the district court to

conclude that Plaintiffs’ proffered model tracked their theory of

liability and was therefore sufficient to survive class certification.”

29

Liability and Cognizable Damages

Theory Must Align

Harnish v. Widener University School of Law, 833 F.3d 298 (3d

Cir. 2016):

Not only must damages model measure damages attributable solely

to Plaintiffs’ theory of liability, but it must measure a legally cognizable

theory of damages pursuant to underlying state law.

A flawed damages model can prevent certification, even without

Comcast.

Did not cite Comcast.

30

Three Key Points

First, the “rigorous analysis” of damages evidence includes

considering whether class damages experts satisfy FRE 702 and

Daubert.

Second, although individual damage calculations alone will not

defeat predominance in most circuits, courts are increasingly

willing to consider the need for such inquiry as a factor in deciding

whether common issues outweigh individual issues.

Third, proof of class damages must measure only those damages

attributable to Plaintiffs’ theory of liability.

31

Arguments Under Comcast That

Have Been Successful

1. Insufficiently developed model.

District court cannot perform its “rigorous analysis” without substance.

2. Model fails to eliminate the need for individual inquiry.

Courts have recognized that the need for such inquiries can defeat

predominance.

3. Model fails to measure damages flowing from the alleged injury.

Or the method does not measure damages in a way that is

cognizable under the underlying substantive law.

32

Comcast and the Application of

Damages Methods at Class Certification

February 20, 2018

Aaron Dolgoff

Vice President

[email protected]

200 Clarendon Street Boston, Massachusetts 02116-5092 617-425-3000

Topics covered

Using examples from securities, antitrust and labor/employment class actions:

• Briefly introduce a few damages methods Plaintiffs might use at Class

Certification phase

• Discuss various Plaintiffs and Defendant arguments supporting or rebutting

these methods

• Provide some lessons from case outcomes

34

Securities Litigation Damages Approaches

• In securities class actions every class member will necessarily have

individualized damages calculations based on the size and timing of their

respective trades

– Individual calculations do not preclude a common approach (i.e., individual calculations are not

necessarily a barrier to class certification)

• Two generic approaches to damages in securities suits:

(1) Stock price inflation: Actual purchase price – “But-for” purchase price

Economic models are used to estimate the “but-for” price

(2) Rescission of out-of-pocket losses: Actual purchase price – Actual sale price

[perhaps offset for unrelated losses]

35

Securities Litigation Comcast Decisions – Summary

• Some damage methods are easier to establish classwide application

– Claims securities “worthless”/ rescission claims (Cromeans v. Morgan Keenan, Dodona v.

Goldman Sachs)

– Statutory formulas (§11 of 1933 Securities Act) (NJ Carpenters Health v Residential Capital)

– Burden remains on plaintiff to offer evidence of damages methodology (e.g., Kosmos Energy Ltd.

Securities Litigation in which the court found plaintiffs offered no evidence in support of

predominance requirement for a §11 claim)

• Damage claims requiring estimation of stock price inflation (i.e., 10(b)-5) generally

require an economic method and expert opinion

– Event study method has become most commonly applied method to determine stock price

inflation

– Applying an event study to a damages formula is insufficient: plaintiffs need to show how their

damages methodology tracks their theory of liability (e.g., BP Securities Litigation 1 – class

denied)

36

Securities Litigation Event Study Method

1. Identify events

– Disclosure vs misstatement

– Cannot directly test impact of an omission

2. Define length of event windows

– Tradeoff: isolating window to the identified event vs statistical confidence

3. Calculate excess return using an appropriate economic model

– Control for market, industry and/or other exogenous factors (i.e., factors unrelated to

the event being tested)

4. Test statistical significance

37

Securities Litigation Issues in Measuring Value Impact of an Event

• Confoundment (i.e., the isolation problem)

– Defining the event window

– Isolating individual effects (example: controlling for earnings announcements)

– Impact on statistical significance

• How does the event information relate to plaintiffs’ theory of harm?

– Undisclosed risk vs. Realization of risk

• Is the information really “news”?

– Public disclosure

– Dissemination mechanisms (e.g., analyst reports)

• Statistical confidence / reliability of model

38

Securities Litigation Does the Event Related to Theory of Harm? BP Securities Litigation II Example

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39

“Pre Explosion” or “Process Safety” Subclass

“Post Explosion” or

“Spill Severity” Subclass

Securities Litigation BP Securities Litigation II– Post-Explosion Subclass

• Plaintiffs’ damage method

– Damage theory: defendants withheld information about the severity of the oil spill

– Event study method applied to a set of disclosure dates

– Constant $ of inflation between disclosures

• Defendant arguments

– It is improper to carry-back stock price declines to the first alleged spill severity misstatement

because there is no evidence defendants had the same information at that earlier time

– Improper overlap of corrective disclosure events between Pre-Explosion and Post-Explosion

subclasses

• Subclass certified

– Defendants arguments concern loss causation – challenging the “fit” between alleged corrective

events and alleged fraudulent statements.

– Failure to prove loss causation is not an impediment to class certification

– “Plaintiffs’ task … is to present a legally viable, internally consistent and truly classwide approach

… Whether Plaintiffs have properly executed under the approach is a question for a different day.”

40

Securities Litigation BP Securities Litigation II– Pre-Explosion Subclass

• Plaintiffs’ damage method

– Damage theory: Consequential damages theory

• “Materialization-of-risk” - misstatements deprived investors the opportunity to divest prior to realization of risk

– Event study to measure price impact of realization of risk across 8 corrective events (reduced by amount known

to the market, i.e., risks voluntarily assumed by investors)

– Apportion across alleged misrepresentation dates (linear step-up over time)

• Defendant arguments

– Corrective events were not related to the process safety misstatements

– Arbitrary allocation (back-casting) method; can produce irrational results

– Failure to measure value of an undisclosed risk, as distinct from value impact from realization of that risk.

• Subclass not certified

– Selection of improper corrective events not relevant: loss causation need not be proven at class certification

– “Plaintiffs damage model [back-casting] need not be perfect. It need not be ‘correct.’ … [the] damages

methodology contains its flaws, but is not wholly arbitrary.”

– Fatal flaw denying certification: consequential damages theory cannot be applied uniformly

• Lumps together those who would have bought at heightened risk with those who would not

• Presumes investor reliance on factors other than price (i.e., risk), a theory inconsistent with fraud-on-the-market theory

41

Securities Litigation Alternatives to Event Study Method

• Indicators from factual record

– Contemporaneous analyst reports

– Plaintiff or other investor valuation analyses

• Direct valuation of alleged misstatement / omission

– E.g., discounted cash flow method to value an earnings misstatement regarding earnings

• Regression or other benchmarking techniques

– Statistically isolating effects of similar information disclosures in cross-sectional studies

– Issues

• Comparability

• Controls for case-specific factors

42

Antitrust

Damages Approach

• Antitrust damages may be measured by a model of overcharges, where actual

prices paid are compared to but-for prices

• Multiple regression is used to separate the impact of the alleged misconduct

from other supply and demand factors affecting price:

43

𝑷𝒓𝒊𝒄𝒆𝒊,𝒕 =∝ +𝜷𝑫𝒆𝒎𝒂𝒏𝒅 𝑭𝒂𝒄𝒕𝒐𝒓𝒔𝒊,𝒕 + 𝜸𝑺𝒖𝒑𝒑𝒍𝒚 𝑭𝒂𝒄𝒕𝒐𝒓𝒔𝒊,𝒕 + 𝜹𝑪𝒐𝒏𝒅𝒖𝒄𝒕𝒕 + 𝜺𝒊,𝒕

𝛿 = coefficient providing average overcharge estimate (by time period, or other

sub-class)

Antitrust Steps in Using Regression Models

44

1. Collect data

2. Specify the regression model equation

– Variables to represent supply and demand factors

– Controls for sub-classes (time periods, customer groups, etc.)

– Functional form (linear or nonlinear effects)

3. Estimate regression model using actual data

4. Test statistical significance (e.g.,is 𝜹 statistically different from zero?)

5. Use regression model to estimate predicted prices absent the alleged

misconduct (“But-for price”)

Antitrust Potential Certification Issues in Use of Regression Models

• Is the model specification reliable?

• Are there data integrity, sample size

or other statistical problems?

• Are 𝜷 and 𝜸 the same across

plaintiffs or various subclasses?

45

𝑷𝒓𝒊𝒄𝒆𝒊,𝒕 =∝ +𝜷𝑫𝒆𝒎𝒂𝒏𝒅 𝑭𝒂𝒄𝒕𝒐𝒓𝒔𝒊,𝒕 + 𝜸𝑺𝒖𝒑𝒑𝒍𝒚 𝑭𝒂𝒄𝒕𝒐𝒓𝒔𝒊,𝒕 + 𝜹𝑪𝒐𝒏𝒅𝒖𝒄𝒕𝒕 + 𝜺𝒊,𝒕

• Does 𝜹 vary across plaintiffs or

subclasses?

• Does 𝜹 vary between class members

and non-class members?

• Does 𝜹 reflect plaintiffs’ liability theory

and not other factors or alternative

liability theories?

Antitrust In re Rail Freight Fuel Surcharge Antitrust Litigation

• Plaintiffs alleged 4 rail freight carriers conspired to increase freight prices through fuel surcharges

• Plaintiffs’ expert controlled for various factors believed to affect prices of all rail shipments and found a

significant change in the relationship between fuel prices and freight rates at the start of the class

period

• Appellate court decision focused on one of Defendant’s rebuttal arguments: “false positives”

– Defendants found plaintiff’s model estimated damages for customers with rates set by contracts

signed before the alleged misconduct.

46

Plaintiff Reply to Defendant Arguments Court

Pre-class shippers are not part of class;

relevant issue is whether the class paid

higher rates

Although false positives don’t disprove the model… Plaintiffs

misapprehend their burden… It is not enough to submit a

questionable model whose unsubstantiated claims cannot be refuted

through a priori analysis… we have no way of knowing the

overcharges the damages model calculates for class members is any

more accurate than the obviously false estimates it produces for

legacy shippers.

The conspiracy may have predated the class

period, thus tainting even legacy contracts

Plaintiffs failed to present any evidence of this possibility, a claim that

is also at odds with the district court’s factual findings.

Antitrust In re High-Tech Employee Antitrust Litigation (1 of 2)

47

Plaintiff model Defendant Critique Court Finding

Conduct Regression

• Show impact of anti-

solicitation agreements

and quantify damage by

each proposed class

• Controls for benchmark

period of two years before

and after the class period.

• Plaintiffs should have produced

disaggregated models which

would show dramatically different

results for each Defendant.

• If benchmark period is restricted

to just after the class period the

model shows over-compensation

rather than under-compensation.

• Failure to control for value of

equity compensation.

• Failed to control for the fact that

compensation within firms is

correlated, thus requiring the use

of “clustered standard errors.”

• Defendant expert does not appear to have created a

truly disaggregated model… moreover, his use of so

many variables may “minimize artificially” the effects

of the anti-solicitation agreements. Aggregation may

also be appropriate given limited sample size.

• Defendants fail to explain why it makes sense to limit

the benchmark period (e.g., by showing that the pre-

conduct period is not comparable to the post-conduct

period).

• Defendant’s control for equity compensation (S&P

500) does not reflect variations in Defendants’ stock

prices or compensation.

• The fact that when standard errors are clustered the

results are not significant at the 95% level does not

render the regression inadmissible / unreliable.

Court not persuaded that the Conduct Regression by itself provides plausible method of showing

detrimental effects were experienced by all or nearly all class members… Nevertheless, the Court is

persuaded that the regression provides reasonable method of … showing impact generally, and

providing a measure of class-wide damages.

Antitrust In re High-Tech Employee Antitrust Litigation (2 of 2)

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Plaintiff model Defendant Critique Court Finding

Common Factors Analysis

• Statistical model to assess

firm wide compensation

structures and the

formulaic way in which total

compensation varied over

time” (evidence of “rigid

wage structure”)

• Almost all of the model’s “fit” is

explained by employer and job title

• Cannot establish that compensation

of different employees with different

job titles are correlated over time.

• The analysis shows where an employee works

and what an employee does plays a large role in

determining salary. Plaintiff expert fails to explain

how one can infer from that that Defendant’s

salary structures were so rigid that compensation

for employees with different titles would

necessarily move together

Compensation Movement

Charts

• Track compensation for top

10 positions at Google and

Apple over time (to show

co-movement)

• Plaintiff examined only a small

fraction of the class and focused on

Technical Class employees

• In light of Plaintiffs failure to provide a broader

sampling, the Court is not persuaded that the

[charts] are particularly probative of whether

salaries for all or nearly all Class members moved

together

“the Court has concerns about the capacity of Plaintiffs’ evidence and proposed methodology to

prove impact to the All Employee Class or the Technical Class. The Court is most concerned about

whether the evidence will be able to show that Defendants maintained such rigid compensation

structures that a suppression of wages to some employees would have affected all or nearly all

Class members. The Court is also concerned that Plaintiffs’ proposed classes may be defined so

broadly as to include large numbers of people who were not necessarily harmed by Defendants’

allegedly unlawful conduct.”

Labor and Employment Minor League Baseball (Senne, et al. v. Kansa City Royals, et al.)

• Plaintiffs alleged FLSA and state wage and hour law violations (minimum wage and

overtime of minor league players)

• The court conditionally certified FLSA class with more than 2,000 players opting-in to

the class.

– Plaintiffs motion for state law class certification

– Defendants motion to decertify FLSA class

• In support of class certification Plaintiffs submitted expert declarations for survey and

damages experts

– Survey expert designed survey to obtain estimates of player hours worked at various activities / times of

year (e.g., spring training, championship season, winter); pilot survey implemented using opt-ins to FLSA

class.

– Damages expert demonstrated use of pilot survey data combined with other data (e.g., game schedule,

travel times between cities) to calculate damages

– Defendants filed motion to exclude Survey expert declaration and testimony (damages expert relies on

survey results, so exclusion of survey would effectively preclude damages analysis)

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Labor and Employment Example from Minor League Baseball (Senne, et al. v. Kansa City Royals, et al.)

50

Defendants’ Expert Rebuttal criticism Court opinion

Pilot survey sample bias (respondents

were all class opt-ins)

No reason to believe a survey conducted at a later stage will suffer from this

defect

Potential bias from non-response

(about 1/3 response rate)

Defendants have raised the possibility of non-response bias, but not

demonstrated any actual bias

Bias from ambiguity in questions

combined with predetermined

category ranges that might influence

responses

The use of closed-ended questions is an accepted practice in conduct surveys

of this nature.

Complicated survey questions invited

“best guess” answers

“Troubled” by format of the question flagged… while on its own this problem is

not sufficient to render the survey unreliable, when combined with assumptions

about players’ memories, the reliability is questionable.

Self-interest bias The methodology used in conducting the pilot is fundamentally flawed and

plaintiffs have not shown they can overcome these problems when they

conduct the more comprehensive survey. All minor league players have a

vested interest, regardless of whether they opted in to the FLSA class.

Plaintiffs have not pointed to any specific records that can be used to validate

survey results. Self-interest bias is compounded by the ability of players to

remember mundane events to come up with reliable answers.

* The above does not address Plaintiffs’ subsequent attempts for reconsideration based on additional expert declarations.

Summary Implications

• Important to empirically test assumptions about reliability of damages model across

sub-classes or compared to those outside the class

– Not enough to show potential flaws in plaintiffs’ expert opinions – need demonstrate those flaws are real

and have measurable impact

• At Class Certification stage courts are not looking for perfection from plaintiffs’

experts

– Damages calculations need not be correct

– An appropriate model incorrectly applied may still be sufficient for class certification

– Remediable errors in Plaintiffs’ methods are less likely to prevent class certification

• Expert opinions must address fundamental issues:

– Do plaintiffs provide an approach to estimate a common impact across plaintiffs or sub-classes?

– Is the damage model consistent with plaintiffs’ liability theory?

– Is the damage model confounded by alternative liability theories?

– Are there reliable data (measurable, sufficient data, unbiased) to implement the damages method?

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defeating class certification by attacking plaintiffs' classwide...

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