This past March, the Supreme Court held that a class may not be certified if its proposed damages model does not adequately limit damages to the alleged wrongful conduct that will be adjudicated before the trial court. In Comcast Corp. v. Behrend, the Court reversed class certification where the trial court had certified the class as to only one of several proposed theories of harm, but the class’ damages model failed to filter out damages attributable to the theories the court had rejected.
Although the circumstances that led to the decision in Comcast seem unusual, the principle articulated by the Court may have widespread application. One example is a recent federal court decision from California denying class certification, in part on Comcast grounds.
In In re Citimortgage, Inc. Home Affordable Modification Program (“HAMP”) Litigation, the plaintiffs sought to certify statewide classes of mortgage holders who had sought to modify their mortgages pursuant to the federal HAMP program. The putative class members were those who had made all of their “trial” payments to Citimortgage under a HAMP Trial Payment Plan Agreement, but had not been either offered a permanent HAMP agreement or given a timely written denial of eligibility for such an agreement. The court determined that the Rule 23(a) threshold requirements for class certification were satisfied, but that the class could not meet any of the Rule 23(b) prerequisites.
The class relied primarily on Rule 23(b)(3), which requires a finding that common questions predominate over individual questions and that a class action is the superior method for fairly and efficiently adjudicating the controversy. The court held that common questions did not predominate.
The common question identified by the class was whether Citi breached the Trial Payment Plan Agreement by failing to provide a permanent modification or a written denial by the deadline set forth in the agreement. The court agreed that this was a common question, but held that it did not predominate over individual issues. For example, the court held, the applicable deadline could not be determined with respect to a given agreement simply by identifying the deadline set forth in the agreement, because the deadline might have been affected by such other considerations as the parties’ course of conduct, changes in income, inaccurately reported income, or various representations regarding outstanding documentation. Moreover, the court found that individual representations made by Citi to individual plaintiffs would be critical in evaluating such issues as reliance and likelihood of deception.
The most significant aspect of the opinion, however, was the court’s determination that measuring damages would also involve a wide range of individual issues. The court stated, for example, that some borrowers might default even on a modified payment, thereby affecting the calculation of damages. Citing Comcast, the court concluded that the plaintiffs had “failed to propose a measurement that can be applied classwide and ties breach of contract and other legal theories to liability and a reliable measure of damages.”
The court’s determination that individual issues predominated is not particularly remarkable, given the factors potentially distinguishing the various class members. The same cannot be said, however, for the court’s reliance on Comcast. In Comcast, the Court refused to consider a damages model that was overbroad in that it measured damages for all unlawful conduct, not merely the unlawful conduct deemed appropriate for classwide adjudication. The flaw articulated by the Court would have undermined even a customer-by-customer damages inquiry, because even with respect to a single customer, the plaintiffs could offer no way to separate the damages attributable to one theory of harm from those attributable to the other theories. The plaintiffs’ expert in Comcast acknowledged that such a distinction could not be made.
The Court in Comcast, quoting the Third Circuit majority that it reversed, did not quarrel with the majority’s proposition that plaintiffs at the certification stage need only “assure” the court that damages are “capable of measurement and will not require labyrinthine calculations.” Rather, the Court’s concern was that “such assurance is not provided by a methodology that identifies damages that are not the result of the wrong.”
This was not the case in Citimortgage. There was no suggestion that any damages to class members in Citimortgage could not be measured pursuant to a model or formula that would take individual circumstances into account. Neither did the court provide any basis for the conclusion that differences in, for example, a customer’s likelihood of defaulting on a modified payment could not be incorporated into a damages model. Instead, the court appeared to require at the class certification stage what Comcast did not: a fully developed, Daubert-proof damage model.
Will other courts similarly interpret Comcast as imposing such a stringent requirement at the class certification stage? If so, then Comcast may have even broader implications than initially suspected.