The Proof is in the Pleading: When is Admissible Evidence Required to Support Class Certification?

BACKGROUND

Rule 23 of the Federal Rules of Civil Procedure requires plaintiffs in a class action suit to prove to a court that “questions of law or fact common to class members predominate over any questions affecting only individual members” to proceed in a class action lawsuit. Although the Supreme Court has never explicitly held that the plaintiff must do so using admissible evidence, in Wal-Mart Stores, Inc. v. Dukes (2011), the Court said it “doubt[ed]” that Daubert does not “apply to expert testimony at the certification stage of class-action proceedings.” Daubert governs the admissibility of an expert witness’s testimony in federal court.

In Sail v. Corona Regional Medical Center (2018), the Central District of California refused to grant certification to a class because it would not consider evidence that would not be admissible at trial during the class certification proceedings. In May, the Ninth Circuit reversed, holding that a court may consider inadmissible evidence when deciding whether to grant a class certification. The Ninth Circuit reached this decision because of the challenges a plaintiff faces in obtaining admissible evidence. The Ninth Circuit explained that “the evidence needed to prove a class’s case often lies in a defendant’s possession and may be obtained only through discovery.” In other words, requiring that a plaintiff provide evidence—prior to discovery—that is in the defendant’s possession would be an unreasonable standard.

On November 1, the Ninth Circuit refused a petition for a rehearing en banc. Judge Carlos Bea, along with four other judges, dissented. In a sharply worded dissent, Judge Bea wrote that the Ninth Circuit fell “on the short side of a lopsided circuit split,” noting that only one other circuit agreed with the Ninth Circuit’s decision.

THE ISSUE

Must the evidence presented during class certification proceedings be admissible at trial?

THE SPLIT

The Eighth Circuit and now the Ninth Circuit allow courts to consider inadmissible evidence at the class certification stage. Conversely, the Second, Third, Fifth, and Seventh Circuits require admissible evidence for class certification. Additionally, the Sixth Circuit and the Eleventh Circuits held that they require admissible evidence, but did so in unpublished opinions.

The Eighth Circuit, in In re Zurn Pex Plumbing Products Liability Litigation (2011), held that evidence for class certification does not have to be admissible at trial. However, the Eighth Circuit noted that a class’s status could change after discovery, writing that “exhaustive and conclusive Daubert inquiry before the completion of merits discovery cannot be reconciled with the inherently preliminary nature of pretrial evidentiary and class certification rulings.” Additionally, the district court in this case allowed the evidence only after a “focused Daubert analysis which scrutinized the reliability of the expert testimony in light of the criteria for class certification and the current state of the evidence.” This rule, according to Judge Bea, is more stringent than the Ninth Circuit’s new standard.

The Second, Third, Fifth, Seventh Circuits require admissible evidence during the class certification stage. The Third Circuit explained that a party cannot meet the standard articulated in Rule 23 through potentially inadmissible evidence  In re Blood Reagents Antitrust Litig, (2015). Similarly, these other circuits also require that a district court determine whether or not evidence is admissible at the certification stage. To support this opinion, these Circuits often cited the Supreme Court case Comcast Corporation v. Behrend (2013) which held that a plaintiff must have “evidentiary proof” to satisfy Rule 23.

LOOKING FORWARD

Although the Supreme Court has not explicitly ruled on this issue, now that the gap between the circuits has widened, they might have reason to do so. Until then, a plaintiff should be thoughtful when selecting a forum in which to bring a class action lawsuit.

Just When You Thought You Knew Who Was Coming to the Pre-Game: Third Party Pre-Hearing Document Production in Arbitration

BACKGROUND

The Federal Arbitration Act (FAA) provides the statutory framework for the enforcement of arbitration decisions. Arbitration is a contractual agreement between the parties to resolve their dispute through the alternative dispute resolution mechanism. Due to the contractual relationship between the parties of an arbitration and the scope of the FAA, an arbitrator has limited powers with regard to her discovery powers against third parties who are not part of the arbitration.

Section 7 of the FAA gives arbitrators the power to summon, in writing, any person to attend as a witness and in a proper case, to bring with her any book, record, document, or paper which may be deemed material as evidence in the case. However, Section 7 does not make clear how far the arbitrator’s power extends.

THE ISSUE

Whether the FAA grants arbitrators the power to order third parties to produce documents prior to an arbitration hearing.

THE SPLIT

The Circuits have divided on this question: the 6th and 8th Circuits have held that the FAA does grant arbitrators that power, while the 2nd, 3rd, and 4th have held that it does not. The latter group was recently joined by the 9th Circuit, demonstrating the liveliness of the dispute.

In COMSAT Corp. v Nat’l Csi. Found. (1999), for example, the Fourth Circuit held that the FAA does not authorize arbitrators to subpoena third parties during pre-hearing discovery, absent a showing of special need or hardship “under unusual circumstances.” Similarly, the Second Circuit, in Life Receivables Tr. V. Syndicate 102 at Lloyd’s of London (2008), and the Third Circuit, in Hay Group, Inc. v. E.B.S. Acquisition Corp. (2004), interpreted §7 of the FAA as not granting arbitrators the power to subpoena third parties to produce documents prior to an arbitration hearing unless it is done in connection with the third party’s attendance at the arbitration hearing. And finally, in 2017, the Ninth Circuit held that § 7 of the FAA does not grant arbitrators the power to order third parties to produce documents prior to an arbitration in CVS Health Corp. v. Vividus LLC (2017).

But the Eighth Circuit, in the matter of In re Security Life Insurance Co. of America (2000) came to a different conclusion. The Eighth Circuit held that “implicit in an arbitration panel’s power to subpoena relevant documents for production at a hearing is the power to order the production of relevant documents for review by a party prior to the hearing.” The Sixth Circuit similarly recognized that an arbitrator may compel pre-hearing documentation production from a third party in American Federation of Television and Radio Artists, AFL-CIO v. WJBK-TV (New World Communications of Detroit, Inc.) (1999). The court was persuaded by Meadows Indem. Co. Ltd. v. Nutmeg Ins. Co., a decision by the Middle District of Tennessee held that the FAA grants arbitrators the power to order third parties to produce documents prior to an arbitration hearing where the third party was nevertheless “intricately related to the parties involved in the arbitration and are not mere third-parties who have been pulled into this matter arbitrarily.” (Interestingly, the Eighth Circuit also relied on Meadows in its ruling.)

In the Fifth and Eleventh Circuits, even though the circuits themselves have not established positions on the question, some of their lower courts have. For example, the Eastern District of Louisiana embraced the position of the Second, Third, Fourth, and Ninth Circuits in  Chicago Bridge & Iron Co. N.V. v. TRC Acquisition, LLC (2014). And the Southern District of Florida and the Northern District of Georgia held in Stanton v. Paine Webber Jackson & Curtis, Inc. (1988) and Festus & Helen Stacy Foundation, Inc. v. Merrill Lynch, Pierce Fenner, & Smith Inc. (2006), respectively, that § 7 of the FAA impliedly permits the arbitration panel to order document discovery prior to a hearing.

LOOKING FORWARD

Even though six of the twelve circuits have not yet weighed in on this issue, the decisions from the lower courts in many of those jurisdictions demonstrates that a general approach in answering this question has not yet developed. Accordingly, the split is alive and well. A resolution to this split is necessary to determine the power of arbitrators prior to an arbitration agreement—and given the Court’s recent jurisprudence broadly interpreting the power of arbitration agreements, it may be particularly inclined to finally hand down an answer to this question.