The Second Circuit Holds That Comcast Does Not Require Automatic Denial of Rule 23(b)(3) Class Certification in Cases Presenting Individualized Damages Issues
In Roach v. T.L. Cannon Corp., No. 13-3070-cv, 2015 WL 528125 (2d Cir. Feb. 10, 2015), the Second Circuit Court of Appeals held that Comcast Corp. v. Behrend, 133 S. Ct. 1426 (2013), does not require district courts to first find that damages are capable of classwide measurement before certifying classes under Federal Rule of Civil Procedure 23(b)(3). Under existing Second Circuit Rule 23(b)(3) precedent, individualized damages inquiries do not automatically preclude class certification if, in the case as a whole, individual questions do not predominate over any common questions. In Roach, the Second Circuit read Comcast as not overruling this precedent. Roach confirms that, in the Second Circuit, individualized damages issues are not per se dispositive of Rule 23(b)(3)’s predominance test.
In Roach, former employees (“Plaintiffs”) sued a restaurant chain asserting several claims based on the chain’s alleged failure to pay amounts due for hours worked or rest breaks not taken. Plaintiffs moved to certify a Rule 23(b)(3) class. The magistrate judge recommended granting the motion as to one claim that sought recovery on behalf of minimum-wage employees, finding that whether the chain had an alleged policy to undercompensate minimum-wage employees was “subject to generalized proof that predominated over individualized questions.” Plaintiffs objected to the extent the magistrate failed to recommend the certification of all claims.
In response to Plaintiffs’ objection, the district court denied certification as to all claims. The U.S. Supreme Court decided Comcast after the magistrate had issued his recommendation. The district court read Comcast as requiring Plaintiffs to offer a method of measuring damages “across the entire class for purposes of Rule 23(b)(3).” Finding the alleged damages “highly individualized,” the district court ruled without inquiring whether Plaintiffs’ claims presented any common questions of law or fact. Citing Comcast, it rejected Plaintiffs’ argument that individualized damages do not per se defeat a finding of common-question predominance.
On interlocutory review, the Second Circuit first observed that, under Circuit precedent, the need to individually assess damages is only a “factor” in deciding whether issues susceptible to generalized proof outweigh individual issues “when certifying the case as a whole.” Turning to Comcast, the Second Circuit stressed that, by the time that case reached the Supreme Court, the plaintiffs in Comcast no longer contested the district court’s holding that Rule 23(b)(3) required a classwide method of proving damages. As the Second Circuit explained, the issue before the Supreme Court concerned only the suitability of plaintiffs’ proposed damages model for this task.
In the end, the Supreme Court in Comcast concluded that individual damages issues predominated because the damages model failed to isolate and measure the damages caused by the only theory of injury that the district court in Comcast had recognized as actionable. Hence, according to the Second Circuit, the question presented in Comcast—whether the plaintiffs “had…establish[ed] that damages could be measured on a classwide basis”—did not include the more fundamental question of whether Rule 23(b)(3) invariably requires a classwide method of proving damages issues.
The Second Circuit acknowledged that “Comcast reiterated that damages questions should be considered at the certification stage when weighing predominance issues.” But it found this requirement consistent with existing Second Circuit case law treating the need for individualized proof as a “factor” in the predominance inquiry. Accordingly, it concluded that Comcast did not overrule this precedent, and the district court erred in denying Plaintiffs’ class certification motion solely due to the presence of individualized damages issues.
As for Comcast’s actual holding, the Second Circuit provided this formulation: “[A] model for determining classwide damages relied upon to certify a class under Rule 23(b)(3) must actually measure damages that result from the class’s asserted theory of injury.” Suggesting a Circuit-wide consensus, it cited decisions by the First, Fifth, Sixth, Seventh, Ninth, and Tenth Circuits that it claimed articulate a similar understanding of Comcast’s holding. The Second Circuit, in another opinion issued on the same day as Roach, adopted the Ninth Circuit’s articulation of Comcast’s holding to affirm a district court’s class certification order. See Sykes v. Mel S. Harris and Assocs LLC, Nos. 13-2742-cv, 13-2747-cv, 13-2748-cv, 2015 U.S. App. LEXIS 2057 (2d Cir. Feb. 10, 2015) (“[T]he plaintiffs must be able to show damages stemmed from the defendant’s actions that created the liability.”).
Roach’s narrow reading of Comcast, even if correct, fails to convey Comcast’s fundamental insight that individual damages issues can overwhelm common liability issues, defeating predominance. Thus, the presence of individual damages issues, even if not dispositive of predominance, requires plaintiffs to either show the issues do not predominate or offer a classwide damages model that overcomes the need to decide them. Either way, under Comcast, district courts cannot ignore the problem of individual damages issues when deciding class certification motions. Roach’s narrow Comcast reading does not alter this reality.