February 27, 2015

Second Circuit Holds Individualized Damages, Standing Alone, Do Not Preclude Class Certification

Two years ago, in Comcast v. Behrend et.al, the Supreme Court caught the attention of employers facing class action lawsuits by holding that plaintiffs cannot “show Rule 23(b)(3) predominance” when “[q]uestions of individual damage calculations will inevitably overwhelm questions common to the class.” Since then, numerous companies have sought to use Comcast as a shield against class certification in employment cases, which often involve damages that will vary among individual class members. Recently, the Second Circuit Court of Appeals issued a significant decision interpreting the breadth of Comcast’s holding that “questions of individual damage calculations will inevitably overwhelm questions common to the class.” Because this decision may embolden plaintiffs’ counsel, employers facing class actions should acquaint themselves with it.

In Roach v. T.L. Cannon Corp., plaintiffs alleged violations of the Fair Labor Standards Act (FLSA) and the New York Labor Law. The district court applied Comcast broadly and in a way favorable to employers. It held that because damages could not be measured on a class-wide basis and were individualized, under Comcast, these questions of individualized damage calculations would “overwhelm questions common to the class.”

The Second Circuit rejected the district court’s Comcast interpretation. In doing so, it held that to obtain class certification under Comcast, plaintiffs need only put forth a damages model that “actually measure[s] damages that result from the class’s asserted theory of injury.” In class proceedings, a model is generally a calculation of damages prepared by an expert that projects total class-wide damages (e.g., that a particular practice of an employer caused employees to suffer damages). Thus, the Second Circuit essentially held that as long as employees can link their claims to a common cause of damages and meet the other requirements of Rule 23, class certification is proper. Of equal significance, the Second Circuit also explained that while courts may consider whether damages are individualized at the class certification stage, the presence of individualized damages, standing alone, is not enough to defeat class certification.

With this ruling, the Second Circuit has joined several of its sister circuits in chipping away the potential impact of Comcast. Generally, these courts reject the broadest reading of Comcast and hold that individualized damages alone are not enough to defeat class certification. Even so, the law in this area continues to evolve, and employers facing class action lawsuits need to continue to scrutinize how the Court of Appeals and district court in their jurisdiction have applied Comcast. The complex employment litigation team at Faegre Baker Daniels will continue to provide updates on significant developments.

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