April 23, 2010
Seventh Circuit Rules that Daubert Applies During Class Certification
In an April 7, 2010, decision, American Honda Motor Co. v. Allen, the Seventh Circuit held that "when an expert's report or testimony is critical to class certification, . . . a district court must conclusively rule on any challenge to the expert's qualifications or submissions prior to ruling on a class certification motion. That is, the district court must perform a full Daubert analysis before certifying the class is the situation warrants." (Opinion at p. 6) This is not a surprise given the recent push by the Second, Third, Fifth and Seventh Circuits to delve further into the merits during class certification and to resolve mixed issues of law and fact that are relevant to class certification by a preponderance of the evidence (See, e.g., In re Hydrogen Peroxide Antitrust Litig., 552 F.3d 305, 311-12 (3d Cir. 2008); Oscar Private Equity Investments v. Allegiance Telecom., Inc. 487 F.3d 261, 268 (5th Cir. 2007); In re IPO Securities Litig., 471 F.3d 24, 40 (2d Cir. 2006); Szabo v. Bridgeport Machines, Inc., 249 F.3d 672, 676 (7th Cir. 2001).
On the whole, this is a positive development. As I wrote in a law review comment in 2004, "Most courts faced with evidentiary concerns during certification evade Daubert challenges by claiming that this asks them to travel into the prohibited area of 'merit inquiry.' Courts have not uniformly applied the restriction against an inquiry into the merits, which has produced a hodgepodge of discretionary decisions that lack a principled justification. When conducting a rigorous analysis in complex cases, district courts must often examine more than just the pleadings to understand the claims, defenses, facts, and applicable substantive law before 'mak[ing] a meaningful determination of the certification issues.' This examination does not stop when the court encounters an expert opinion." (at p. 1080) Although I have some concerns about the move toward a merits inquiry at class certification (particularly when discovery is curtailed), when an expert is used to support the Rule 23(a) or 23(b) requirements, it makes sense to subject that expert to a full Daubert analysis particularly given all that rides on the class certification decision.
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