May 5, 2021
The U.S. Court of Appeals for the 9th Circuit recently weighed in on the effect of uninjured class members on class certification—decertifying three classes in Olean Wholesale Grocery Coop. v. Bee Foods LLC.
Olean concerned an alleged price fixing conspiracy for packaged tuna. The conspiracy itself is largely undisputed as several defendants pled guilty in parallel criminal actions. The issue before the 9th Circuit in the civil suit was whether plaintiffs met Federal Rule of Civil Procedure 23’s predominance requirement—specifically, whether plaintiffs sufficiently demonstrated that they could prove class-wide impact through common evidence.
At the district court, plaintiffs moved to certify three classes, using a statistical regression model which they claimed demonstrated that 94.5% of the proposed classes paid an average 10.28% overcharge. Defendants challenged the model, arguing that it relied on averages which blurred the line between injured and uninjured class members. Defendants further argued that when they ran a similar regression model, they found that at most 72% of the proposed classes paid an overcharge. The district court refused to address Defendants’ arguments or evidence, instead finding that plaintiffs’ method was “plausibly reliable” and that defendants’ challenge was “ultimately a merits decision” for the jury. In a published opinion, the 9th Circuit reversed.
The Court first joined its sister circuits in holding that a plaintiff must meet the preponderance of evidence standard in complying with Rule 23. It also endorsed the use of averages within statistical methods, distinguishing the case from those that fail to use large enough sample sizes to yield “statistically robust” results. The Court cautioned that district courts must closely scrutinize such statistical evidence to verify “actual, not presumed, conformance” with Rule 23.
Moving onto the issue of uninjured class members, the Court first stated that issues surrounding class members’ spectrum of damages ordinarily should not preclude certification. The Court nonetheless faulted the district court for failing to address the issue presented regarding whether a portion of the proposed classes may have suffered no injury. “Rather than resolving the dispute . . . the district court merely considered whether plaintiffs’ statistical evidence was ‘plausibly reliable’ and otherwise left determination of this question to the jury. . . . But resolving this dispute is of paramount importance to certification . . . .” Indeed, the Court stressed the importance of these issues being decided at the pre-trial stage, agreeing with the 7th Circuit that deferring these issues “amounts to a delegation of judicial power to the plaintiffs, who can obtain class certification just by hiring a competent expert[,]” and that if “‘savvy crafting of the evidence’ were enough to guarantee predominance, there would be little limit to class certification in our modern world of increasingly sophisticated aggregate proof.” Providing further color, the Court expounded:
Suppose the jury ultimately decides Defendants’ expert is right and the plaintiffs’ model sweeps in 28% uninjured class members. Too late: the damage has been done. By then, Defendants would have possibly weathered years of litigation at untold costs, only to discover that the case never should have reached the merits at all. Rule 23’s objective—that only cases suitable for class adjudication be certified—would have been effectively undermined.
While the Court was unified on these findings, a split panel majority pressed further, holding that plaintiffs must establish with common proof that “all (or nearly all)” putative class members were injured and that class certification is improper where more than a de minimis number of class members were not injured. The majority refused to quantify a threshold, but suggested that anything beyond 5-6% of the proposed class should preclude certification, citing with approval the DC Circuit’s 2019 ruling in In re Rail Freight Fuel Surcharge Antitrust Litigation, which held the “outer limits” at 5-6% and found no predominance where 12.7% of the proposed class suffered no injury, and the 1st Circuit’s 2018 ruling in In re Asacol Antitrust Litigation, which reversed class certification where “around 10%” of proposed class members were uninjured.1 As defendants submitted evidence that 28% of the proposed class was uninjured—which the majority noted is “easy enough to tell that  would be out-of-bounds”—the panel majority found that the district court abused its discretion in rebuffing the issue altogether.2 The Court vacated the decision and remanded the case “with instructions to resolve the factual disputes concerning the number of uninjured parties in each proposed class before determining predominance.”
In a concurring and dissenting opinion, Judge Hurwitz largely agreed with the majority that district courts must resolve factual disputes bearing on predominance and that Olean should be vacated and remanded. Judge Hurwitz, however, dissented from the panel’s discussion of de minimis uninjured class members, arguing that “the de minimis rule is a solution in search of a problem.” According to Judge Hurwitz, the panel majority misunderstood the inquiry:
The critical question is not what percentage of class members is injured, but rather whether the district court can economically ‘winnow out’ uninjured plaintiffs . . . . If the district court can ensure that uninjured plaintiffs will not recover, their mere presence . . . does not mean that common issues will not predominate.
Put more simply, Judge Hurwitz argues that “if . . . identifying the uninjured members would be relatively simple, there is likely no reason to deny Rule 23 certification on liability.”
On April 28, the Ninth Circuit issued a sua sponte order noting that one of the judges of the Court requested briefing by the parties as to whether the case should be reheard en banc. The order specifically requested that the parties address “whether Federal Rule of Civil Procedure 23(b)(3) requires a district court to find that no more than a ‘de minimis’ number of class members are uninjured before certifying a class.”
If Olean in its current state is found to be the law of the Ninth Circuit, it is poised to have far reaching implications as it is already being cited in courts around the country by defendants seeking to defeat class certification. Should this strategy prove successful, plaintiffs will face yet another hurdle to certifying large, unwieldy classes that cannot be defined to exclude uninjured putative members. For antitrust defendants, class certification presents a substantial opportunity to defeat the claims and avoid “weathered years of litigation at untold costs.”
1District courts are in accord, with the District of Massachusetts denying class certification in In re Intuniv Antitrust Litigation, finding that at least 8% of a proposed class were uninjured, and with the Eastern District of Pennsylvania in Vista Healthplan Inc. v. Cephalon Inc. finding 5% to be sufficient to deny class certification.
2Beyond a mere damages issue, the panel majority also alluded the potentially “serious” implications regarding federal jurisdiction and Article III standing, expressing skepticism “that Article III permits certification of a class where countless unnamed class members lack standing.” While the 9th Circuit refused to address this issue further, the U.S. Supreme Court recently heard oral argument in TransUnion LLC v. Ramirez, where the issue presented is whether Article III or Rule 23 allow a damages class action where a majority of the class suffered no actual injury.