Monday, December 6, 2010
Posted by D. Daniel Sokol
Steven R. Peterson (Compass Lexecon) and Andrew Y. Lemon(Compass Lexecon) provide Rigorous Analysis to Bridge the Inference Gap in Class Certification.
ABSTRACT: Federal appellate courts increasingly require a rigorous analysis showing that the requirements of Rule 23 of the Federal Rules of Civil Procedure are satisfied before a district court permits a lawsuit to proceed as a class action. In particular, courts require that plaintiffs demonstrate using common evidence that all or almost all proposed class members would have suffered injury as a result of the defendant's alleged conduct. In this article, we show that there is generally a limit to what one can infer about injury to individuals from common evidence—that is, the inference gap. Moreover, this inference gap exists even in circumstances where ideal common evidence shows injury in the aggregate. To explain how economics can help bridge the inference gap, we examine three special cases where the inference gap can be bridged and discuss several recent class actions that show how courts are using economic analysis to determine whether Rule 23 has been satisfied.