General Publications April 28, 2016

“Tyson Shouldn’t Affect Automotive Class Actions,” Law360, April 28, 2016.

Extracted from Law360

On March 22, 2016, the U.S. Supreme Court issued its much anticipated decision in Tyson Foods Inc. v. Bouaphakeo, holding that damages in a class action can be established by “statistical sampling.” While many believe that the Tyson Foods decision could have a significant effect on class certification proceedings, the impact should be minimal in the automotive class action context.

In Tyson Foods, the plaintiffs sued under the Fair Labor Standards Act seeking overtime compensation for their time spent “donning and doffing” protective equipment. Tyson Foods challenged the class on many grounds, including that damages would be impossible to ascertain given that no two employees put on or remove equipment in the same manner. To calculate damages, the plaintiffs relied on statistical models to aggregate and average the time that employees spent getting their equipment on and off. These models were then used to extrapolate the amount of overtime compensation due to the class. The class was ultimately certified, the case proceeded to a jury trial, and the class was awarded $2.9 million in damages.

Many expected the Supreme Court to reverse the certification decision based on its opinions in Wal-Mart Stores Inc. v. Dukes and Comcast Corp. v. Behrend. In Comcast, the court held that the lack of a common methodology for proving damages is fatal to Rule 23 predominance because “[q]uestions of individual damage calculations will inevitably overwhelm questions common to the class.” Similarly, the Wal-Mart decision reversed the certification of a nationwide class of female employees who claimed that they were subject to unlawful discrimination. The plaintiffs introduced statistical evidence about pay and promotion disparities in order to demonstrate a company policy of discrimination, but the court held that representative proof deprived Wal-Mart of the right to litigate individual defenses and could not be used to prove commonality.

The Supreme Court, however, did not reverse the class certification decision in Tyson Foods. Instead, it found that the plaintiffs were entitled to apply a statistical model to establish class-wide proof of liability and damages, especially when that model was not directly challenged. The court rejected Tyson Foods’s reliance on Wal-Mart, noting that “Wal-Mart does not stand for the broad proposition that a representative sample is an impermissible means of establishing class-wide liability.” Rather, “[w]hether a representative sample may be used to establish class-wide liability will depend on the purpose for which the sample is being introduced and on the underlying cause of action.”

The court observed that statistical sampling, like all evidence, is simply a means that parties can rely on in appropriate cases to establish a fact. Therefore, the question of when and whether statistical evidence can be used to establish class-wide issues of fact is a case-specific inquiry. The court found that statistical models were appropriate in Tyson Foods because each of the individual Tyson Foods employees — unlike the Wal-Mart class members — could rely on the same statistical analysis presented for the class if they were to bring the actions individually.

The Supreme Court’s approval of the use of statistical sampling in Tyson Foods is, for the reasons discussed above, limited and should not significantly impact automotive class actions. The court expressly refused to draw a bright-line rule and instead emphasized the importance of a case-specific analysis. Although the Tyson Foods decision impresses on all automotive defendants to raise Daubert challenges to attempted uses of representative and statistical evidence, it is unlikely that an automotive class action will involve analogous facts that would support the use of such statistical evidence to prove class-wide damages.

Currently, the majority of automotive class actions focus on “benefit of the bargain” damages, with plaintiff classes seeking to recover the diminution in value resulting from disclosure of whatever defective product exists in the vehicle of issue. Many of the claims in these cases are based on alleged false advertising and are likewise raised under state consumer protection statutes, with plaintiffs claiming to have relied on affirmative statements from the defendant manufacturers when deciding to purchase the subject vehicles. To recover under these theories, each putative class member must prove that he or she relied on a manufacturer’s misrepresentation or omission to buy a vehicle and suffered financial injury as a result.

In nearly all automobile class actions, there is no basis for presuming that each putative class member saw and relied on the same messages from a manufacturer in making the purchase decision. Manufacturers’ messages differ in countless ways, including by message. Class members receive information about class vehicles from all sorts of places — including from family, friends, private resellers, the Internet, television, magazines and car-buying guides. Similarly, third-party information varies in countless ways, including by topic and message and by vehicle class, model and model year. In short, the class before the Supreme Court in Tyson Foods is far different from the class before courts in automotive class actions. The tight-knit nature of the Tyson Foods class allowed the high court to make a decision on a damages model that courts should never reach in automotive class cases.

Even if a court were to get past other individualized issues to consider proposed class-wide damages, the clear distinctions between the Tyson Foods case and typical automobile class actions should preclude a similar result. Plaintiffs in these cases must be able to show through common proof that each putative class member suffered injury in the form of lost value. That common proof simply does not exist.

Determining whether any putative class member suffered harm presents a whole collection of individual issues. For example, many class members would pay the same price for their vehicle today even knowing what they later learn about the alleged defects in the vehicles. Others will have resold their vehicles in ways or at times that make it impossible to have suffered a loss. And most importantly, depreciation of vehicles simply does not fit neatly into a statistical formula in a way that may occur in other cases. A vehicle’s price reflects numerous factors that a formula cannot capture. A buyer’s negotiating style, intent and appetite for bargaining; the vehicle’s make, model, damage, mileage and maintenance history; and the region where the vehicle is located are all unique factors that impact a car’s value.

So while some feel that the Tyson Foods decision may represent a shift in class damages analysis, there should not be an impact felt in automobile class actions. Manufacturer defendants who find themselves in these cases should be able to resort to the same defenses and arguments that have served them well in the past.

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