Class Action Case Could Have Big Impact On U.S. Businesses
Jan 15, 2013

When Philadelphia-area consumers filed a class action lawsuit against cable provider Comcast Corp., they inadvertently set in motion a legal battle that could have major implications for big businesses across the United States.

Class Action Case Could Have Big Impact On U.S. Businesses

When Philadelphia-area consumers filed a class action lawsuit against cable provider Comcast Corp., they inadvertently set in motion a legal battle that could have major implications for big businesses across the United States, said veteran LeClairRyan attorney William A. Despo during a panel discussion at the Sheraton Meadowlands.

Sponsored by the New Jersey Institute for Continuing Legal Education, the Dec. 18 discussion highlighted key trends in class action litigation. Despo, a shareholder in the national law firm’s Newark office, focused on the implications of a case heard on Nov. 5 by the U.S. Supreme Court. “At issue in Comcast Corp., et al., v. Caroline Behrend, et al., No. 11-864 (2012), is the type of evidence a plaintiff must provide to the court in order to get a lawsuit certified as a class action,” Despo explained.

In its arguments before the Supreme Court, Comcast questioned the legality of the Third Circuit decision affirming the class action suit against the company. “Comcast argued that the opinions presented by the plaintiffs’ experts were not credible and that this testimony failed to meet the standards set forth in the Supreme Court decision in Daubert v. Merrell Dow Pharmaceuticals, 509 U.S. 579 (1993), ” Despo explained. “Daubert, in general, requires the court to act as a gatekeeper and evaluate the expert opinion for reliability.”

When it rules on the case later this year, the Supreme Court might reverse the Third Circuit and require an enhanced standard of proof at pre-trial certification hearings for class actions. “If that happens, it will be a significant victory for corporations, simply because it will make class actions harder to pursue,” Despo said.

On the other hand, the attorney noted, the Court might rule that class actions can indeed be certified without adhering to a Daubert evidentiary standard. “If the Court rules against Comcast here, this might not ‘open the floodgates’ to more class actions per se,” said Despo, a member of the New Jersey Bar Association’s Class Action Litigation Committee. “But it would clearly make class actions less difficult to pursue by reducing the evidentiary hurdles faced by plaintiffs early in the class action process.”

In Comcast v. Behrend, a group of cable customers in Philadelphia claimed that Comcast was using anticompetitive practices to charge unfair prices. Comcast challenged damage estimates presented by the plaintiffs’ expert witness, calling for an in-depth review, but the trial court said the case could move forward without one. The U.S. Third Circuit Court of Appeals affirmed this decision. “The Third Circuit basically said, ‘we understand there has to be some inquiry. But in the certification stage, you don’t have to go into a detailed inquiry to determine the merits of whether the plaintiff’s methodology is a just and reasonable inference or is speculative,’ ” Despo explained.

While it might be June before the Supreme Court rules on this case, some observers have noted that Justice Antonin Scalia, in a prior case involving class action certification, strongly hinted that the Daubert standard should be applied during the certification phase. “Some observers believe that one of the reasons the Supreme Court took the Comcast case was that the Third Circuit apparently didn’t get the hint,” Despo said.

When it comes to class actions, the stakes are high for American businesses, depending in part on where they are located, he added. For example, state regulations in New Jersey have paved the way for serious penalties in class action lawsuits filed by consumers. “The law now allows for $100 fines for every instance of improper conduct,” Despo said. “For instance, if a restaurant gives out, say, 5,000 or 6,000 gift cards with illegal expiration dates, there will be a $100 fine for every one of those cards. Not to mention attorney’s fees, which are included under the law. These suits can be expensive to fend off, moreover, regardless of the ultimate outcome.”

 
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