Despite the warnings, Wal-Mart Stores, Inc. v. Dukes did not herald the end of the class action, or even class action scholarship. Indeed, new debates have risen in its wake. One of the most interesting is what to do about classes where large numbers of class members might not have suffered any injury. Courts do certify these cases, for settlement purposes if nothing else. But should they?
One plaintiff attorney-scholar group (Joshua Davis, Eric Cramer, and Caitlin May) says "yes." In their paper The Puzzle of Class Actions with Uninjured Members, they argue that based on their analysis,
courts are free to continue to certify classes–even to award damages to classes–that contain members who suffered no legally cognizable harm.
How do they justify this? The authors make three arguments:
First, there is no valid standing objection to compensating uninjured class members. As the authors argue, several courts, including the Seventh Circuit in Kohen v. Pacific Investment Management LLC and the Second Circuit in Denney v. Deutsche Bank AG, have held that the Article III case or controversy requirement does not require each class member to independently prove her standing.
Second, there is no valid due process objection. According to the authors, the due process concerns (the class member’s right to "autonomy" or "full compensation," the defendant’s right to ) are "abstract," as opposed to the presumably concrete (or, as they put it, "practical") needs of the class member to some recovery.
Third, Shady Grove undermines any objections that class actions confer substantive rights in violation of the Rules Enabling Act. According to the authors, certifying a class that includes uninjured members and then awarding damages does not confer a new substantive right on the uninjured class members, it just changes the way in which the claims are processed.
Even if a class is certified with potentially uninjured members, a court will address the same claims and defenses. It will simply litigate common issues in a common–and therefore more expeditious–manner.
Unfortunately, none of these arguments really holds up to scrutiny.
Part of the problem here is that the plaintiffs cherry pick their cases, and ignore inconvenient details. For example, while the authors discuss Kohen, an opinion by Judge Posner that held that the defendants had not provided enough evidence to show that a proposed class definition was overbroad (thus pulling in uninjured class members), they completely ignore Judge Easterbrook’s opinion in In re Bridgestone/Firestone, which specifically detailed the problem with certifying a class that included "millions of uninjured buyers." (Emphasis in original.) Similarly, the authors discuss Denny v. Deutsche Bank AG, an opinion by the Second Circuit that upheld a settlement with class members who received bad tax advice, without ever mentioning that the opinion reviewed a "conditional certification ‘for settlement purposes only.’" (The court considered that posture very significant: it allowed it to consider solely "suffered injuries-in-fact, irrespective of whether their injuries are sufficient to sustain any cause of action.")
The biggest problem with the authors’ analysis is that it does not mention Comcast Corp. v. Behrend (which was decided five days before they posted their paper). And it appears Behrend blows a big hole in their argument. The Supreme Court there expressed grave concerns about certifying a class in which some percentage of members might have been injured, just not by the wrong the plaintiffs challenged. As it put it:
In light of the [plaintiff’s] model’s inability to bridge the differences between supra-competitive prices in general and supra-competitive prices attributable to the deterrence of overbuilding, Rule 23(b)(3) cannot authorize treating subscribers within the Philadelphia cluster as members of a single class.
Granted, the Court did not discuss standing, due process, or Shady Grove. It relied on the a far more
unremarkable premise. If respondents prevail on their claims, they would be entitled only to damages resulting from reduced overbuilder competition, since that is the only theory of antitrust impact accepted for class-action treatment by the District Court.
(Emphasis added.) In other words, the damages the plaintiffs seek have to be related to their theory of the case. A class containing large numbers of uninjured members may or may not violate standing or due process. But it is definitely overbroad. And courts–long hesitant to compensate the uninjured–have long refused to certify overbroad classes simply on ascertainability grounds.
So what can defense lawyers pull from this paper? Two things. First, the paper provides a look into what some plaintiffs’ attorneys see as one of their larger vulnerabilities: to make money they need large classes, but large classes are usually overbroad. How will they justify those classes? Second, and more prosaically, it always pays to read the underlying cases, and to be up on the state of the law.