Strategically Limiting Discovery In Class Litigation .
Presenting a live 90-minute webinar with interactive Q&AStrategically Limiting Discovery in ClassLitigation: Tactics for Defense CounselLeveraging Motions to Stay, Bifurcation Motions andCost-Shifting Motions to Reduce Discovery Time and ExpenseWEDNESDAY, FEBRUARY 10, 20161pm Eastern 12pm Central 11am Mountain 10am PacificToday’s faculty features:Ryan Bangert, Partner, Baker Botts, DallasJessica B. Pulliam, Partner, Baker Botts, DallasKatherine F. Murray, Of Counsel, Paul Hastings, Los AngelesThe audio portion of the conference may be accessed via the telephone or by using your computer'sspeakers. Please refer to the instructions emailed to registrants for additional information. If youhave any questions, please contact Customer Service at 1-800-926-7926 ext. 10.
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STRATEGICALLY LIMITING DISCOVERYIN CLASS LITIGATION: TACTICS FORDEFENSE COUNSELFaculty:Katherine F. Murray, Paul Hastings LLPJessica B. Pulliam, Baker Botts LLPRyan Bangert, Baker Botts LLP
LIMITING CLASS DISCOVERY Recent Changes to the FRCPsSeeking a Stay of DiscoveryBifurcating DiscoveryPre-certification Daubert ChallengesCost-Shifting MotionsUnnamed Class Members6
LIMITING CLASS DISCOVERY Recent Changes to the FRCPsSeeking a Stay of DiscoveryBifurcating DiscoveryPre-certification Daubert ChallengesCost-Shifting MotionsUnnamed Class Members7
CLASS ACTIONS CAN BE SUBJECT TO ABUSE Because class action lawsuits present opportunities forabuse, “a district court has both the duty and the broadauthority to exercise control over a class action and to enterappropriate orders governing the conduct of counsel andparties.” Gulf Oil Co. v. Bernard, 452 U.S. 89, 100 (1981). “[I]t bears repeating that ‘[c]lass action are unique creatureswith enormous potential for good and evil.’” Besinga v.United States, 923 F.2d 133, 135 (9th Cir. 1991). “Neither the judges on this panel nor other federal judges sofar as we are aware have denied that the class action is aworthwhile device, and indeed is indispensable for thelitigation of many meritorious claims. But like many othergood things it is subject to abuse.” Thorogood v. Sears,Roebuck and Co., 627 F.3d 289, 294-95 (7th Cir. 2010).8
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RECENT CHANGES TO THE FRCPS"The test for plaintiffs' and defendants' counselalike is whether they will affirmatively search outcooperative solutions, chart a cost-effectivecourse of litigation, and assume sharedresponsibility with opposing counsel to achievejust results." — Chief Justice Roberts10
EFFECTIVE DATE OF CHANGESThe amendments will govern in all civil casescommenced on or after December 1, 2015, and"insofar as just and practicable, all proceedingsthen pending."11
CHANGES TO RULE 26(B)(1)Language removed from Rule 26(b)(1): "For good cause, the court may order discovery ofany matter relevant to the subject matter involved inthe action." Language allowing discovery "reasonablycalculated to lead to the discovery of admissibleevidence."12
NEW WATCHWORD IS "PROPORTIONALITY"Parties may obtain discovery regarding any nonprivileged matter that is relevant to any party's claimor defense and proportional to the needs of the case,considering the importance of the issues at stake inthe action, the amount in controversy, the parties'relative access to relevant information, the parties'resources, the importance of the discovery inresolving the issues, and whether the burden orexpense of the proposed discovery outweighs its likelybenefit. ― Fed. R. Civ. P. 26(b)(1).13
PROPORTIONALITY IN CLASS ACTIONS The proportionality standard arguably should limitpre-certification discovery to what is necessary topermit the court to make an informed decision onclass certification. Proportionality also should limit the scope of precertification discovery. Expense to defendants will often dwarf the amount of the namedplaintiff’s claims. The size of the named plaintiff's claims may be balanced,however, against the need to determine whether a class shouldbe certified.14
COURTS HAVE BEGUN INTERPRETING THE NEW RULE26 LANGUAGE Carr v. State Farm Mut. Auto. Ins., 2015 U.S. Dist. LEXIS 163444 (N.D.Tex. Dec. 7, 2015): The Committee Notes to the amendments: “restoring the proportionalitycalculation to Rule 26(b)(1) does not change the existing responsibilities ofthe court and the parties to consider proportionality, and the change does notplace on the party seeking discovery the burden of addressing allproportionality considerations. Nor is the change intended to permit theopposing party to refuse discovery simply by making a boilerplate objectionthat it is not proportional.”Held: The amendments to Rule 26 “do not alter the basic allocation of theburden on the party resisting discovery to . . . specifically object and show thatthe requested discovery does not fall within Rule 26(b)(1)’s scope of properdiscovery.”Roberts v. Clark Cnty. Sch. Dist., 2016 U.S. Dist. LEXIS 3590 at *2122 (D. Nev. Jan. 11, 2016): Citing Chief Justice John Roberts’ 2015 Year-End Report on the FederalJudiciary: “The 2015 amendments to Rule 26(b)(1) emphasize the need toimpose ‘reasonable limits on discovery through increased reliance on thecommon-sense concept of proportionality.’ The fundamental principle ofamended Rule 26(b)(1) is ‘that lawyers must size and shape their discoveryrequests to the requisites of a case.’ The pretrial process must provideparties with efficient access to what is needed to prove a claim or defense, buteliminate unnecessary or wasteful discovery. This requires active involvementof federal judges to make decisions regarding the scope of discovery.”(internal citations omitted).15
OLD RULE 37(E): FAILURE TO PROVIDE . Absent exceptional circumstances, acourt may not impose sanctions under these rules ona party for failing to provide electronically storedinformation lost as a result of the routine, good-faithoperation of an electronic information system.16
NEW RULE 37(E): FAILURE TO PRESERVE ESIFailure to Preserve Electronically Stored Information.Ifelectronically stored information that should have been preserved inthe anticipation or conduct of litigation is lost because a party failedto take reasonable steps to preserve it, and it cannot be restored orreplaced through additional discovery, the court:(1) upon finding prejudice to another party from loss of theinformation, may order measures no greater than necessary to curethe prejudice; or(2) only upon finding that the party acted with the intent to depriveanother party of the information's use in the litigation may:(a) presume that the lost information was unfavorable to theparty;(b) instruct the jury that it may or must presume theinformation was unfavorable to the party; or(c) dismiss the action or enter a default judgment.17
NEW RULE 37(E) Requires that, to impose "death penalty" sanctionsor a sanction of a negative inference, a court mustfind the following: (1) information should have been preserved; (2) information was lost because party failed to takereasonable steps to preserve; (3) information cannot be restored or replaced throughadditional discovery; (4) party acted with intent to deprive the requesting partyof the information. Absent intent, sanctions must be "no greater thannecessary to cure the prejudice."18
LIMITING CLASS DISCOVERY Changes to the FRCPsSeeking a Stay of DiscoveryBifurcating DiscoveryPre-certification Daubert ChallengesCost-Shifting MotionsUnnamed Class Members19
TRIAL COURTS HAVE DISCRETION TO STAYDISCOVERY FOR "GOOD CAUSE"The court may, for good cause, issue an orderto protect a party or person from annoyance,embarrassment, oppression, or undue burdenor expense. — F.R.C.P. 26(c)(1).20
TRIAL COURTS HAVE DISCRETION TO STAYDISCOVERY FOR "GOOD CAUSE" The federal rules do not provide for a blanket stayof discovery pending resolution of dispositivemotions. Courts generally disfavor protective orders stayingdiscovery pending decision on an early dispositivemotion. Courts will reject conclusory assertions concerningthe need for a stay; instead, they require specificand particularized showings of fact.21
FACTORS TO ARGUE WHEN YOU SEEK A STAY Strength of motion precipitating the stay Whether discovery is needed to decide the motion Breadth of requested discovery Burden to respond to discovery Prejudice to the Plaintiff from a stay22
EXCEPTION IN SECURITIES CLASS ACTIONS The Private Securities Litigation Reform Act(“PSLRA”) reverses the presumption favoringdiscovery. “In any private action arising under this chapter, alldiscovery and other proceedings shall be stayedduring the pendency of any motion to dismiss,unless the court finds upon the motion of any partythat particularized discovery is necessary topreserve evidence or to prevent undue prejudice tothat party.” 15 U.S.C. § 78u–4(b)(3)(B)23
ERICA P. JOHN FUND V. HALLIBURTON Defendants in "fraud-on-the-market" securitiesclass actions must be permitted to rebutpresumption of reliance by showing absence ofprice impact. On remand from the Supreme Court, Halliburtonsecured a stay of discovery pending classcertification while it contested price impact.24
LIMITING CLASS DISCOVERY Changes to the FRCPsSeeking a Stay of DiscoveryBifurcating DiscoveryPre-certification Daubert ChallengesCost-Shifting MotionsUnnamed Class Members25
ONE SOLUTION: BIFURCATED DISCOVERY What does it mean to bifurcate discovery? Separate discovery of class certificationissues from discovery of merits issues. Conduct only discovery of classcertification issues until a class iscertified. Defendants often want bifurcateddiscovery; plaintiffs generally do not.26
BASIS FOR SEEKING BIFURCATED DISCOVERY A court may, “for good cause,” limit the scope ofdiscovery or control its sequence to “protect a partyor person from annoyance, embarrassment,oppression, or undue burden or expense.” Fed. R.Civ. P. 26(c)(1) The 2003 Advisory Committee Notes to Rule 23recognize that bifurcation “is appropriate to conductcontrolled discovery . . . limited to those aspectsrelevant to making the certification decision on aninformed basis.”27
BASIS FOR SEEKING BIFURCATED DISCOVERY It is the burden of the party resisting discovery (i.e.,proposing bifurcation) to show that good causeexists to limit discovery. New England Carpenters Health and Welfare Fund v. AbbottLabs., No. 12 Civ. 1662, 2013 WL 690613 (N.D. Ill. Feb. 20,2013). Hines v. Overstock, Com, Inc., No. 09 Civ. 991, 2010 WL2775921 (E.D.N.Y. July 13, 2010) (“[D]efendant bears the burdenof establishing ‘good cause” for [bifurcated discovery].”). Exemar v. Urban League of Greater Miami, Inc., (S.D. Fla. June26, 2008) (“Bifurcation is the exception rather than the rule. []The burden rests with the moving party to show that bifurcation isnecessary.”).28
BUT WHAT IS A “MERITS” ISSUE AND WHAT IS A “CLASS” ISSUE? A “class” issue is one that relates to one of the requirements of classcertification under Federal Rule of Civil Procedure 23. Rule 23(a): a plaintiff must demonstrate (1) Numerosity, (2)Commonality, (3) Typicality, and (4) Adequacy. Rule 23(b)(1) applies where either (a) class certification is warranted toprotect the defendant from inconsistent obligations vis-à-vis other classmembers, or (b) where, in practical effect, resolving one classmember’s claims would impede or impair other class members fromprotecting their interests. Rule 23(b)(2) applies where “the party opposing the class has acted orrefused to act on grounds that apply generally to the class, so that finalinjunctive relief or corresponding declaratory relief is appropriaterespecting the class as a whole[.]” Rule 23(b)(3) applies where “the court finds that the questions of law orfact common to class members predominate over any questionsaffecting only individual members, and that a class action is superior toother available methods for adjudicating the controversy.”29
WHETHER SOMETHING IS A “MERITS” ISSUE OR A “CLASS” ISSUE IS30NOT ENTIRELY CLEAR Courts have recognized that “the distinction betweenmerits-based discovery and class-related discovery isoften blurry, if not spurious.” In re Plastics AdditivesAntitrust Litig., 2004 WL 2743591, at *3 (E.D. Pa. Nov.29, 2004) “The lines between ‘merits discovery’ and ‘certificationdiscovery’ are sufficiently blurred as to make anydistinction based on these terms meaningless.”Waterbury Hosp. v. U.S. Foodservice, Inc., 2007 U.S.Dist. LEXIS 7320, at *9 (D. Conn. Feb. 1, 2007)
RECENT JURISPRUDENCE HAS BLURRED THE LINES BETWEEN CLASS31AND MERITS DISCOVERY The Old View: Eisen v. Carlisle & Jacquelin, 417 U.S. 156, 177, 185 (1974): We find nothing in either the language or history of Rule 23 that gives acourt any authority to conduct a preliminary inquiry into the merits of a suitin order to determine whether it may be maintained as a class action. In re Initial Public Offering Securities Litigation, 471 F. 3d 24 (2d Cir. 2006): (1) [A] district judge may certify a class only after making determinationsthat each of the Rule 23 requirements has been met; (2) suchdeterminations can be made only if the judge resolves factual disputesrelevant to each Rule 23 requirement and finds that whatever underlyingfacts are relevant to a particular Rule 23 requirement have beenestablished and is persuaded to rule, based on the relevant facts and theapplicable legal standard, that the requirement is met; (3) the obligation tomake such determinations is not lessened by overlap between a Rule 23requirement and a merits issue, even a merits issue that is identical with aRule 23 requirement; (4) in making such determinations, a district judgeshould not assess any aspect of the merits unrelated to a Rule 23requirement . . . .
THE SUPREME COURT HAS NOT HELPED TOCLARIFY THESE ISSUES Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541, 2551 (2011):A court may certify a class only if it “is satisfied, after a rigorous analysis” of therelevant facts and issues, that each requirement of Rule 23 has been satisfied.“Frequently that rigorous analysis will entail some overlap with the meritsof the plaintiff's underlying claim.” Comcast Corp. v. Behrend, 133 S. Ct. 1426, 1432 (2013):Repeatedly, we have emphasized that it may be necessary for the court to probebehind the pleadings before coming to rest on the certification question, and thatcertification is proper only if the trial court is satisfied, after a rigorous analysis,that the prerequisites of Rule 23(a) have been satisfied. Such an analysis willfrequently entail overlap with the merits of the plaintiff's underlying claim. That isso because the class determination generally involves considerations that areenmeshed in the factual and legal issues comprising the plaintiff's cause ofaction. Amgen Inc. v. Conn. Ret. Plans & Trust Funds, 133 S. Ct. 1184 (2013):Although we have cautioned that a court’s class-certification analysis must be“rigorous” and may “entail some overlap with the merits of the plaintiff'sunderlying claim” . . . Rule 23 grants courts no license to engage in free-rangingmerits inquiries at the certification stage. Merits questions may be considered tothe extent--but only to the extent--that they are relevant to determining whetherthe Rule 23 prerequisites for class certification are satisfied”32
WHETHER SOMETHING IS A “MERITS” OR A “CLASS” ISSUEWILL DEPEND ON THE CASE False Advertising Class Actions: Product efficacy, testing and safety issues are usually considered tobe “merits.” “All natural” cases – whether products/ingredients are “all natural” or“100% natural” are typically merits questions. Cases brought under state statutes: Company’s policies regarding compliance with statute could be both“class” and “merits” (e.g., CA’s Song-Beverly Credit Card Act, Cal.Civ. Code Section 1747.08) Employment Discrimination Class Actions: See, e.g., Chen-Oster v. Goldman, Sachs & Co., 285 F.R.D. 294(S.D.N.Y. 2012) (granting discovery of statistical data relevant toboth class and merits) Wage and Hour Class Actions See, e.g., Paulino v. Dollar General Corp., No. 12 Civ. 75, 2013 WL1773892 (N.D.W.V. Apr. 25, 2013) (granting discovery of class list,and personnel and payroll records); Ho v. Ernst & Young, LLP, No.05 Civ. 4867, 2007 WL 1394007(N.D. Cal. May 9, 2007) (grantingdiscovery of time and activity records). But most of the time, you’ll know it when you see it.33
WHAT ABOUT DAMAGES ISSUES? Until recently, damages issues were not addressed at the classcertification stage. Enter Comcast Corp. v. Behrend, 133 S. Ct. 1426 (2013): Reversed class certification in an antitrust case, concluding thatPlaintiffs’ expert had not shown how damages and liability could beshown on a class-wide basis where damages model accounted forfour possible theories of antitrust injury, when district court hadlimited case to single theory of antitrust impact. Courts should examine the proposed damages methodology at thecertification stage to ensure that it is consistent with the classwidetheory of liability and capable of measurement on a classwidebasis. Establishes that “[c]alculations need not be exact, but at the classcertification stage (as at trial), any model supporting a plaintiff'sdamages case must be consistent with its liability case.”133 S. Ct.at 1433.34
COMCAST’S IMPACT ON CLASS DISCOVERY Comcast has been interpreted as “reiterat[ing] a fundamental focus of the Rule 23analysis: The damages must be capable of determination by tracing the damagesto the plaintiff’s theory of liability. So long as the damages can be determined andattributed to a plaintiff’s theory of liability, damage calculations for individual classmembers do not defeat certification.” Lindell v. Synthes USA, No. 11-02053, 2014WL 841738, at *14 (E.D. Cal. Mar. 4, 2014). But Comcast does not mean that precertification discovery into damages issues isfair game. Defendants should draw a distinction between actual computation ofdamages and a plaintiff’s ability to compute damages on a classwide basis. As the Ninth Circuit has explained, Comcast holds that, under rigorous analysis,"plaintiffs must be able to show that their damages stemmed from the defendant’sactions that created the legal liability.” Leyva v. Medline Indus., Inc., 716 F.3d 510,514 (9th Cir. 2013). Thus, at the clas
EXCEPTION IN SECURITIES CLASS ACTIONS 23 The Private Securities Litigation Reform Act (PSLRA) reverses the presumption favoring discovery. ³In any private action arising under this chapter, all discovery and other proceedings shall be stayed during the pendency of any motion to dismiss,
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