Robert Brown v. Electrolux Home Products, Inc.

Case: 15-11455 Date Filed: 03/21/2016 Page: 1 of 27
[PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
________________________
No. 15-11455
________________________
D.C. Docket No. 1:08-cv-00030-LGW-BKE
ROBERT BROWN,
on behalf of himself and all others similarly situated,
MICHAEL VOGLER,
on behalf of himself and all others similarly situated,
Plaintiffs-Appellees,
versus
ELECTROLUX HOME PRODUCTS, INC.,
d.b.a. Frigidaire,
Defendant-Appellant.
________________________
Appeal from the United States District Court
for the Southern District of Georgia
_______________________
(March 21, 2016)
Before WILSON and WILLIAM PRYOR, Circuit Judges, and BUCKLEW, *
District Judge.
*
Honorable Susan C. Bucklew, United States District Judge for the Middle District of Florida,
sitting by designation.
Case: 15-11455 Date Filed: 03/21/2016 Page: 2 of 27
WILLIAM PRYOR, Circuit Judge:
This interlocutory appeal involves a class action over smelly washing
machines. Across the country, consumers have filed class actions against the
manufacturers of front-loading washing machines. See, e.g., In re Whirlpool Corp.
Front-Loading Washer Prods. Liab. Litig., 722 F.3d 838 (6th Cir. 2013); Butler v.
Sears, Roebuck & Co., 727 F.3d 796 (7th Cir. 2013); Tait v. BSH Home Appliances
Corp., 289 F.R.D. 466 (C.D. Cal. 2012). Front-loaders are considered an
improvement over traditional top-loading machines because they use less water
and energy. But the initial models have a problem: the rubber seal on the front door
of the machine retains water, which allows mildew to grow. The mildew then
stains clothes and creates a foul odor. In this case, consumers from California and
Texas filed a class action against Electrolux Home Products, the manufacturer of
Frigidaire front-loading washing machines. After the district court certified two
statewide classes, see Terrill v. Electrolux Home Prods., Inc., 295 F.R.D. 671 (S.D.
Ga. 2013), Electrolux filed this interlocutory appeal. We now vacate the class
certification. Although several of Electrolux’s arguments fail, we agree with
Electrolux that the district court abused its discretion in determining the
predominance requirement of Federal Rule of Civil Procedure 23(b)(3). For that
reason, we vacate its order and remand for further proceedings.
2
Case: 15-11455 Date Filed: 03/21/2016 Page: 3 of 27
I. BACKGROUND
Electrolux Home Products, a Delaware corporation headquartered in
Georgia, manufacturers front-loading washing machines under the Frigidaire
brand. Front-loaders are the next stage in the evolution of the washing machine.
While traditional top-loading machines completely fill up with water and spin the
clothes around with an agitator, front-loading machines only partially fill up and
tumble the clothes in and out of the water. This process saves both water and
energy.
To prevent water from leaking, front-loaders come with a rubber seal known
as a “bellow.” Frigidaire machines initially came with a convoluted bellow, which
is not as smooth as the S-shaped bellow that is now available. The plaintiffs allege
that convoluted bellows are defective because they trap water, which allows
mildew to grow in the washing machine. But Electrolux contends that owners can
easily avoid the mildew problem by wiping down the machine and leaving the door
open after use.
Robert Brown, a Californian, and Michael Vogler, a Texan, purchased
Frigidaire front-loading washing machines with convoluted bellows. Vogler saw a
poster from Frigidaire in the department store where he bought his machine. But
Brown never saw any advertisements from Frigidaire. Both consumers discovered
mildew in their machines. All Frigidaire front-loading washing machines come
3
Case: 15-11455 Date Filed: 03/21/2016 Page: 4 of 27
with a full one-year warranty. The warranty includes several exceptions, including
damage caused by “misuse.”
After Michael Terrill, a consumer from Wisconsin, filed a putative class
action against Electrolux in the district court and amended the complaint to add
Brown, Vogler, Palecia Boyd, and Denise Pack as named plaintiffs, the district
court dismissed all of the named plaintiffs except Brown and Vogler. The amended
complaint alleges two types of claims: warranty claims and consumer claims. The
warranty claims include breach of express warranty under California law, breach
of the implied warranty of merchantability under California and Texas law, and
violations of the Magnuson-Moss Warranty Act, 15 U.S.C. § 2310. The claims
under the Magnuson-Moss Act are identical to the other warranty claims because
they are also based on state law. See Walsh v. Ford Motor Co., 807 F.2d 1000,
1012 (D.C. Cir. 1986). The consumer claims include violations of the California
Unfair Competition Law and violations of the Texas Deceptive Trade Practices–
Consumer Protection Act. The consumer claims stem from Electrolux’s failure to
disclose the defective nature of the convoluted bellow in its advertisements and
marketing materials. For example, the Frigidaire website boasted that its front-
loading washing machines would “keep your clothes looking their best” without
mentioning the defective bellow or the mildew problem. The amended complaint
seeks damages in the form of a refund of the purchase price or the difference in the
4
Case: 15-11455 Date Filed: 03/21/2016 Page: 5 of 27
resale value of the washing machines, as well as any injuries caused by the
mildew, including soiled laundry.
Brown and Vogler moved for class certification, which the district court
granted. The district court certified the following two statewide classes:
California Class: All persons and entities who purchased, other than
for resale, after March 5, 2004, and while in the State of California, a
Frigidaire front-loading washing machine with a convoluted bellow.
Texas Class: All persons and entities who purchased, other than for
resale, after March 5, 2004, and while in the State of Texas, a
Frigidaire front-loading washing machine with a convoluted bellow.
Brown represents the California class for the claims under California law, and
Vogler represents the Texas class for the claims under Texas law.
The district court recognized that it must conduct a “rigorous analysis” to
determine whether a class action satisfies Rule 23. Terrill, 295 F.R.D. at 682
(quoting Vega v. T-Mobile USA, Inc., 564 F.3d 1256, 1266 (11th Cir. 2009)). And
it explained that “[a] party seeking class certification must affirmatively
demonstrate his compliance with the Rule.” Id. (quoting Wal-Mart Stores, Inc. v.
Dukes, 131 S. Ct. 2541, 2551 (2011)). But the district court also stated that it
“resolves doubts related to class certification in favor of certifying the class,” id. at
683, and that it “accepts the allegations in the complaint as true,” id. at 682
(quoting Mazur v. eBay Inc., 257 F.R.D. 563, 566 (N.D. Cal. 2009)), and “draws
5
Case: 15-11455 Date Filed: 03/21/2016 Page: 6 of 27
all inferences and presents all evidence in the light most favorable to” the party
seeking class certification, id. at 680.
The district court concluded that “the questions of law or fact common to
class members predominate over any questions affecting only individual
members,” Fed. R. Civ. P. 23(b)(3). With respect to the consumer claims, the
district court concluded that every element was susceptible to classwide proof.
Electrolux argued that causation would require individual proof because the class
members must prove that they did not already know about the mildew problem,
which was well-publicized at the time, when they purchased their front-loading
washing machines. But the district court concluded that “each class member
presumably relied on the fact that Defendant provided Washing Machines suited
for cleaning and freshening clothing.” Terrill, 295 F.R.D. at 696. The district court
explained that the class members “can show their reliance on Defendant’s failure
to disclose the Washing Machines’ alleged design defect and the inevitable
consequences of that defect through classwide proof that they purchased Machines
to clean and freshen their clothes rather than to soil and odorize them.” Id. As for
the warranty claims, the district court concluded that most of the elements were
susceptible to classwide proof. It rejected Electrolux’s argument that the questions
whether the class members gave Electrolux pre-suit notice of the defect, whether
the class members gave Electrolux an opportunity to cure the defect, and whether
6
Case: 15-11455 Date Filed: 03/21/2016 Page: 7 of 27
the defect manifested during the warranty period would require individual proof.
The district court speculated that Brown and Vogler might not need to prove pre-
suit notice, an opportunity to cure, or manifestation of the defect under California
or Texas law: pre-suit notice and an opportunity to cure might not be required
when the defendant had “prior knowledge of the design defect,” id. at 689, 692,
and manifestation of the defect might not be required “when a latent defect existed
during the warranty period but was discovered after the warranty period,” id. at
691. But the district court never answered these preliminary questions of state law.
Instead, it concluded that the questions whether pre-suit notice, an opportunity to
cure, and manifestation of the defect are required under California and Texas law
are “common questions” that weigh in favor of class certification. Id. at 689–92.
The district court also rejected several other challenges to predominance. For
example, Electrolux argued that the individual nature of the plaintiffs’ damages
defeats predominance for every claim. The district court disagreed because the
“many . . . common issues” of liability outweigh the individual issues of damages.
Id. at 697. It cited the general rule that “the presence of individualized damages
issues does not prevent a finding that the common issues in the case predominate.”
Id. (quoting Allapattah Servs., Inc. v. Exxon Corp., 333 F.3d 1248, 1261 (11th Cir.
2003)). Electrolux also argued that misuse—one of its affirmative defenses to the
warranty claims—defeats predominance. It argued that this defense would require
7
Case: 15-11455 Date Filed: 03/21/2016 Page: 8 of 27
the plaintiffs to prove, for each class member, that the mildew in their washing
machine was not caused by their own misuse—for example, leaving damp clothes
in the washer for too long, failing to perform routine maintenance, or installing the
machine in a damp area. The district court rejected this argument because misuse
has “classwide application” and “goes to the common issue of causation.” Id. The
district court also cited the general rule that “unique affirmative defenses rarely
predominate where a common claim is established.” Id. at 696.
After the district court certified the California and Texas classes, Electrolux
filed a petition for permission to take an interlocutory appeal, Fed. R. Civ. P. 23(f).
We granted its petition. Brown and Vogler have asked us to dismiss the petition as
improvidently granted, but we decline.
II. STANDARD OF REVIEW
We review a class certification for abuse of discretion. Local 703, I.B. of T.
Grocery & Food Emps. Welfare Fund v. Regions Fin. Corp., 762 F.3d 1248, 1253
(11th Cir. 2014). But abuse of discretion is a “continuum,” Henry J. Friendly,
Indiscretion About Discretion, 31 Emory L.J. 747, 756 (1982), and in the context
of class actions, review for abuse of discretion often “does not differ greatly from
review for error,” Abrams v. Interco Inc., 719 F.2d 23, 28 (2d Cir. 1983) (Friendly,
J.). “[W]ith great power comes great responsibility; the awesome power of a
district court [to certify a class action] must be ‘exercised within the framework of
8
Case: 15-11455 Date Filed: 03/21/2016 Page: 9 of 27
rule 23.’” Klay v. Humana, Inc., 382 F.3d 1241, 1251 (11th Cir. 2004) (quoting
Castano v. Am. Tobacco Co., 84 F.3d 734, 740 (5th Cir. 1996)), abrogated in part
on other grounds by Bridge v. Phoenix Bond & Indem. Co., 553 U.S. 639 (2008).
III. DISCUSSION
Electrolux challenges the class certification on two primary grounds: it
contends that the district court articulated the wrong standard for class certification
and that Brown and Vogler cannot satisfy the predominance requirement of Rule
23(b)(3). We address each argument in turn.
A. The District Court Misstated the Standard for Class Certification.
Electrolux contends that the district court made two misstatements of law
when it articulated the standard for class certification. First, the district court erred
by stating that it “resolves doubts related to class certification in favor of certifying
the class.” Terrill, 295 F.R.D. at 683. Second, the district court erred by stating that
it “accepts the allegations in the complaint as true,” id. at 682 (quoting Mazur, 257
F.R.D. at 566), and “draws all inferences and presents all evidence in the light
most favorable to” the party seeking class certification, id. at 680. Brown and
Vogler concede that these statements were erroneous.
The parties are correct that the district court misstated the law when it said
that it “resolves doubts related to class certification in favor of certifying the
class.” Id. at 683. The party seeking class certification has the burden of proof.
9
Case: 15-11455 Date Filed: 03/21/2016 Page: 10 of 27
Valley Drug Co. v. Geneva Pharm., Inc., 350 F.3d 1181, 1187 (11th Cir. 2003).
And the entire point of a burden of proof is that, if doubts remain about whether
the standard is satisfied, “the party with the burden of proof loses.” Simmons v.
Blodgett, 110 F.3d 39, 42 (9th Cir. 1997). All else being equal, the presumption is
against class certification because class actions are an exception to our
constitutional tradition of individual litigation. See Comcast Corp. v. Behrend, 133
S. Ct. 1426, 1432 (2013); Hansberry v. Lee, 311 U.S. 32, 40–41 (1940). A district
court that has doubts about whether “the requirements of Rule 23 have been met
should refuse certification until they have been met.” Fed. R. Civ. P. 23 advisory
committee’s note to 2003 amendment; accord In re Hydrogen Peroxide Antitrust
Litig., 552 F.3d 305, 321 (3d Cir. 2008); Wallace B. Roderick Revocable Living
Trust v. XTO Energy, Inc., 725 F.3d 1213, 1218 (10th Cir. 2013).
The district court also misstated the law when it said that it “accepts the
allegations in the complaint as true,” Terrill, 295 F.R.D. at 682 (quoting Mazur,
257 F.R.D. at 566), and “draws all inferences and presents all evidence in the light
most favorable to Plaintiffs,” id. at 680. The party seeking class certification has a
burden of proof, not a burden of pleading. See Halliburton Co. v. Erica P. John
Fund, Inc., 134 S. Ct. 2398, 2412 (2014). He “‘must affirmatively demonstrate his
compliance’ with Rule 23” by proving that the requirements are “in fact” satisfied.
Comcast, 133 S. Ct. at 1432 (quoting Wal-Mart, 131 S. Ct. at 2551). And the
10
Case: 15-11455 Date Filed: 03/21/2016 Page: 11 of 27
district court must conduct a “rigorous analysis” to determine whether the movant
carried his burden, which “will frequently entail ‘overlap with the merits of the
plaintiff’s underlying claim.’” Id. (quoting Wal-Mart, 131 S. Ct. at 2551). Of
course, the district court can consider the merits “only” to the extent “they are
relevant to determining whether the Rule 23 prerequisites for class certification are
satisfied.” Amgen Inc. v. Conn. Ret. Plans & Trust Funds, 133 S. Ct. 1184, 1195
(2013). But if a question of fact or law is relevant to that determination, then the
district court has a duty to actually decide it and not accept it as true or construe it
in anyone’s favor. See Comcast, 133 S. Ct. at 1432–33; Szabo v. Bridgeport
Machs., Inc., 249 F.3d 672, 675–76 (7th Cir. 2001); Gariety v. Grant Thornton,
LLP, 368 F.3d 356, 365–66 (4th Cir. 2004). The district court erred when it stated
the opposite.
Brown and Vogler argue that these misstatements by the district court are
harmless because they played no role in its actual analysis, but the harmfulness of
an error does not matter when we are going to remand anyway. See United States
v. Molina-Guevara, 96 F.3d 698, 705 (3d Cir. 1996). And here, we must vacate the
class certification because the district court abused its discretion in assessing
predominance, as we will explain below. On remand, we are confident that the
district court will apply the correct standard for class certification.
11
Case: 15-11455 Date Filed: 03/21/2016 Page: 12 of 27
B. The District Court Abused Its Discretion in Assessing Predominance.
Electrolux contends that the district court abused its discretion when it
decided that “the questions of law or fact common to class members predominate
over any questions affecting only individual members,” Fed. R. Civ. P. 23(b)(3).
To determine whether the requirement of predominance is satisfied, a district court
must first identify the parties’ claims and defenses and their elements. See Klay,
382 F.3d at 1254 & n.7. The district court should then classify these issues as
common questions or individual questions by predicting how the parties will prove
them at trial. See id. at 1255. Common questions are ones where “the same
evidence will suffice for each member,” and individual questions are ones where
the evidence will “var[y] from member to member.” Blades v. Monsanto Co., 400
F.3d 562, 566 (8th Cir. 2005).
After identifying the common and individual questions, the district court
should determine whether the common questions predominate over the individual
ones. We have adopted the following rule of thumb:
[I]f common issues truly predominate over individualized issues in a
lawsuit, then the addition or subtraction of any of the plaintiffs to or
from the class [should not] have a substantial effect on the substance
or quantity of evidence offered. . . . If, on the other hand, the addition
of more plaintiffs leaves the quantum of evidence introduced by the
plaintiffs as a whole relatively undisturbed, then common issues are
likely to predominate.
12
Case: 15-11455 Date Filed: 03/21/2016 Page: 13 of 27
Vega, 564 F.3d at 1270 (first and second alterations in original) (quoting Klay, 382
F.3d at 1255). “But predominance requires a qualitative assessment too; it is not
bean counting,” and the “relative importance” of the common versus individual
questions also matters. Butler, 727 F.3d at 801; see also Rutstein v. Avis Rent-A-
Car Sys., Inc., 211 F.3d 1228, 1234 (11th Cir. 2000) (explaining that predominance
“can only be determined after considering what value the resolution of the class-
wide issue will have in each class member’s underlying cause of action”). District
courts should assess predominance with its overarching purpose in mind—namely,
ensuring that “a class action would achieve economies of time, effort, and expense,
and promote . . . uniformity of decision as to persons similarly situated, without
sacrificing procedural fairness or bringing about other undesirable results.”
Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 615 (1997) (alteration in original)
(quoting Fed. R. Civ. P. 23 advisory committee’s note to 1966 amendment).
Electrolux makes four arguments about predominance. First, it contends that
the plaintiffs cannot prove causation—an element of their consumer claims—on a
classwide basis. Second, Electrolux argues that the district court was wrong to
conclude that predominance is satisfied for the warranty claims without first
answering several preliminary questions of state law. Third, Electrolux contends
that the plaintiffs cannot prove damages on a classwide basis for any of their
claims. Finally, Electrolux contends that misuse—one of its defenses to the
13
Case: 15-11455 Date Filed: 03/21/2016 Page: 14 of 27
plaintiffs’ warranty claims—will require individual proof. We agree with
Electrolux’s first two arguments, which require us to vacate the class certification
and remand to the district court, and on remand, the district court should revisit
Electrolux’s last two arguments.
1. The Consumer Claims Do Not Satisfy Predominance Because the
Plaintiffs Cannot Prove Causation on a Classwide Basis.
Electrolux argues that the district court misapplied California and Texas law
when it concluded that the plaintiffs could prove causation on a classwide basis.
Electrolux argues that causation requires individual proof. We agree and will
discuss California law first and Texas law second.
a. California Law
The California Unfair Competition Law prohibits “unfair competition,”
which includes “any unlawful, unfair or fraudulent business act or practice.” Cal.
Bus. & Prof. Code § 17200. A plaintiff cannot recover damages for violations of
the statute; he can obtain only an injunction or “restitution.” In re Tobacco II
Cases, 207 P.3d 20, 29 (Cal. 2009). Restitution means “any money or property,
real or personal, which may have been acquired by means of [the defendant’s]
unfair competition.” Cal. Bus. & Prof. Code § 17203. The “by means of”
requirement for restitution is “less stringent” than but-for causation, Tobacco II,
207 P.3d at 3, but “one who was not exposed to the alleged misrepresentations and
therefore could not possibly have lost money or property as a result of the unfair
14
Case: 15-11455 Date Filed: 03/21/2016 Page: 15 of 27
competition is not entitled to restitution,” Pfizer Inc. v. Superior Court, 105 Cal.
Rptr. 3d 795, 803 (Cal. Ct. App. 2010); accord Am. Honda Motor Co. v. Superior
Court, 132 Cal. Rptr. 3d 91, 101 (Cal. Ct. App. 2011); Kaldenbach v. Mut. of
Omaha Life Ins. Co., 100 Cal. Rptr. 3d 637, 652 (Cal. Ct. App. 2009).
Brown argues that the California class is entitled to restitution because
Electrolux engaged in both “unfair” and “fraudulent” business practices when it
failed to mention the defective bellow or mildew problem in its advertisements.
Electrolux responds that Brown cannot prove, on a classwide basis, that Electrolux
acquired the class members’ money “by means of” its omissions, Cal. Bus. & Prof.
Code § 17203. The district court rejected Electrolux’s argument because it
concluded that the class members were exposed to uniform business practices.
The district court misunderstood the plaintiffs’ complaint. Brown alleges
that Electrolux engaged in unfair competition by omitting essential information in
its advertisements. The only advertisements that Brown has identified are on
Frigidaire’s website, but he has made no effort to prove that any member of the
California Class visited the website before purchasing his washing machine.
Brown instead admitted that he never saw any advertisements from Frigidaire.
Because the class members were not exposed to a uniform misrepresentation, the
claim under the California Unfair Competition Law is unsuitable for class
treatment. See Simon v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 482 F.2d 880,
15
Case: 15-11455 Date Filed: 03/21/2016 Page: 16 of 27
883 (5th Cir. 1973); Mazza v. Am. Honda Motor Co., 666 F.3d 581, 595 (9th Cir.
2012).
We reject Brown’s argument that Electrolux never challenged the
certification of his claim of “unfair” business practices, as opposed to his claim of
“fraudulent” business practices, in the district court. In its opposition to the motion
for class certification, Electrolux challenged the certification of all claims under
the California Unfair Competition Law. And its challenge went to the requirements
for restitution, which apply equally to claims of unfair business practices and
fraudulent business practices alike. Even if Electrolux did not articulate its
arguments with the utmost precision, it did not forfeit anything because “the
burden to prove whether class certification is appropriate rests on the plaintiffs”
and the district court “has the responsibility of conducting its own inquiry as to
whether the requirement of Rule 23 have been satisfied.” Valley Drug, 350 F.3d at1188–89 & n.16.
b. Texas Law
The Texas Deceptive Trade Practices–Consumer Protection Act prohibits
“[f]alse, misleading, or deceptive acts or practices in the conduct of any trade or
commerce.” Tex. Bus. & Com. Code Ann. § 17.46(a). To recover under the Act, a
plaintiff must prove that he “relied on” the defendant’s conduct to his detriment.
Id. § 17.50(a)(1)(B). This reliance element requires that the plaintiff “actually did
16
Case: 15-11455 Date Filed: 03/21/2016 Page: 17 of 27
rely” on the defendant’s statement or omission, not that the defendant “wanted
purchasers to rely on its advertisements and other representations.” Henry Schein,
Inc. v. Stromboe, 102 S.W.3d 675, 694 (Tex. 2002).
Electrolux contends that the reliance element defeats predominance because
it requires individual proof. Texas adopted its class-action rule based on federal
Rule 23, Sw. Ref. Co. v. Bernal, 22 S.W.3d 425, 433 (Tex. 2000), and Electrolux
explains that no Texas court has ever certified a class action under the Texas
Deceptive Trade Practices–Consumer Protection Act, see Tex. S. Rentals, Inc. v.
Gomez, 267 S.W.3d 228, 237 (Tex. App. 2008). That a plaintiff could prove
reliance on a classwide basis is “a near-impossibility,” according to the Texas
Court of Appeals. Id. (quoting Fid. & Guar. Life Ins. Co. v. Pina, 165 S.W.3d 416,
423 (Tex. App. 2005)).
The district court certified a class because it concluded based on
Southwestern Bell Telephone Co. v. Marketing on Hold Inc., 308 S.W.3d 909 (Tex.
2010), that the plaintiffs could prove reliance on a classwide basis. The district
court erred.
Southwestern Bell is inapposite. There, a class of consumers sued a phone
company for overcharging them on their bills. Id. at 914. The Texas Supreme
Court held that the consumers could prove reliance on a classwide basis because
the inflated price on their bills was a uniform misrepresentation by the phone
17
Case: 15-11455 Date Filed: 03/21/2016 Page: 18 of 27
company, and the class members all relied on that misrepresentation when they
paid their bills without objection. Id. at 922–23. Here, by contrast, we cannot
presume that the class members relied on any uniform misrepresentation. As
explained above, we have no inkling whether the class members saw any
advertisements from Frigidaire, much less uniform advertisements, before they
purchased their washing machines. Unlike in Southwestern Bell, the Texas class
will need to prove reliance on an individual basis. This necessity means that their
claim under the Texas Deceptive Trade Practices–Consumer Protection Act cannot
proceed as a class action. See Wal-Mart, 131 S. Ct. at 2552 n.6; Sandwich Chef of
Tex,, Inc. v. Reliance Nat. Indem. Ins. Co., 319 F.3d 205, 219 (5th Cir. 2003); In re
Clorox Consumer Litig., 301 F.R.D. 436, 446 (N.D. Cal. 2014).
The district court abused its discretion when it certified the consumer claims.
These claims do not satisfy predominance because their elements of causation
require individual proof. In concluding otherwise, the district court misapplied
California and Texas law.
2. The District Court Abused Its Discretion by Certifying the Warranty
Claims Without First Resolving Preliminary Questions of State Law that
Bear on Predominance.
Electrolux next argues that the district court prematurely certified the
warranty claims because it did not first resolve several questions of state law that
were relevant to predominance. That is, the district court could not determine
18
Case: 15-11455 Date Filed: 03/21/2016 Page: 19 of 27
predominance without first deciding whether California and Texas law require pre-
suit notice, an opportunity to cure, and manifestation of the defect. We agree.
A district court must decide all questions of fact and law that “b[ear] on the
propriety of class certification.” Comcast, 133 S. Ct. at 1432. For example, a
question of state law bears on predominance if, answered one way, an element or
defense will require individual proof but, answered another way, the element or
defense can be proved on a classwide basis. It does not matter whether the question
also pertains to the merits; if a question of law bears on a requirement of Rule 23,
then the district court must answer it. See Vega, 564 F.3d at 1266. “[B]ecause each
requirement of Rule 23 must be met, a district court errs as a matter of law when it
fails to resolve a genuine legal or factual dispute relevant to determining the
requirements.” Hydrogen Peroxide, 552 F.3d at 320.
The questions of state law that Electrolux asked the district court to
resolve—whether the plaintiffs must prove pre-suit notice, an opportunity to cure,
and manifestation of the defect—bear on predominance. If California and Texas
law do not excuse pre-suit notice and an opportunity to cure when the defendant
had “prior knowledge of the design defect,” as the district court speculated, Terrill,
295 F.R.D. at 689, 692, then each class member will need to prove that he gave
Electrolux pre-suit notice and an opportunity to cure. This showing could require
individual proof. See Cohen v. Implant Innovations, Inc., 259 F.R.D. 617, 642
19
Case: 15-11455 Date Filed: 03/21/2016 Page: 20 of 27
(S.D. Fla. 2008). And if California and Texas law require the defect to manifest,
then each class member will need to prove that his washing machine actually grew
mildew during the warranty period. This showing could also require individual
proof. See Gen. Motors Corp. v. Garza, 179 S.W.3d 76, 82–84 (Tex. App. 2005).
Because the answers to these preliminary questions of California and Texas law
could affect whether Rule 23(b)(3) is satisfied, the district court had a duty to
resolve them. See Cole v. Gen. Motors Corp., 484 F.3d 717, 727–30 (5th Cir.
2007).
The district court erred when it classified these preliminary questions as
“common questions” that weigh in favor of class certification. Terrill, 295 F.R.D.
at 689–92. “[A]ny competently crafted class complaint literally raises common
‘questions.’ . . . What matters to class certification . . . is not the raising of common
‘questions’—even in droves—but, rather the capacity of a classwide proceeding to
generate common answers apt to drive the resolution of the litigation.” Wal-Mart,
131 S. Ct. at 2551 (third alteration in original) (quoting Richard A. Nagareda,
Class Certification in the Age of Aggregate Proof, 84 N.Y.U. L. Rev. 97, 131–32
(2009)). A question is common when “determination of its truth or falsity will
resolve an issue that is central to the validity of each one of the claims in one
stroke.” Id. Answering the questions whether California and Texas law require pre-
suit notice, an opportunity to cure, and manifestation of the defect would not
20
Case: 15-11455 Date Filed: 03/21/2016 Page: 21 of 27
resolve issues that are “central to the validity” of the plaintiffs’ warranty claims. Id.Answering them would instead help the district court determine what the law is in
California and Texas, which in turn would help it identify the overall mix of
individual versus common questions for purposes of predominance. Because the
district court punted these questions instead of answering them, it abused its
discretion.
We remand to the district court so it can answer these questions of state law
in the first instance. We express no view on what the answers are, and we express
no view on whether the answers, if unfavorable to the plaintiffs, will defeat
predominance and prevent class certification. The latter determination “is
committed in the first instance to the discretion of the district court.” Califano v.
Yamasaki, 442 U.S. 682, 703 (1979).
3. The Plaintiffs’ Damages Do Not Necessarily Defeat Predominance.
Electrolux argues that none of the plaintiffs’ claims satisfies predominance
because their damages will require individual proof. The district court rejected this
argument because it concluded that the common questions of liability outweighed
the individual questions of damages. Electrolux contends that this analysis
conflicts with the recent decision of the Supreme Court in Comcast Corp. v.
Behrend, 133 S. Ct. 1426.
21
Case: 15-11455 Date Filed: 03/21/2016 Page: 22 of 27
We disagree with Electrolux’s argument. Comcast did not change the law
about the effect of individual damages on predominance. Nevertheless, under
existing law, the individual nature of the plaintiffs’ damages is still relevant to
whether predominance is satisfied.
As the district court correctly explained, “the presence of individualized
damages issues does not prevent a finding that the common issues in the case
predominate.” Allapattah Servs., 333 F.3d at 1261. The “black letter rule”
recognized in every circuit is that “individual damage calculations generally do not
defeat a finding that common issues predominate.” William B. Rubenstein,
Newberg on Class Actions § 4:54 (5th ed.). Although damages often raise
numerous “individual” questions, predominance is “a qualitative rather than a
quantitative concept. It is not determined simply by counting noses: that is,
determining whether there are more common issues or more individual issues,
regardless of relative importance.” Parko v. Shell Oil Co., 739 F.3d 1083, 1085
(7th Cir. 2014). And, relatively speaking, individual issues of damages are
sometimes easy to resolve because the calculations are formulaic. See Klay, 382
F.3d at 1259–60. District courts have many tools to decide individual damages:
“(1) bifurcating liability and damage trials with the same or different juries;
(2) appointing a magistrate judge or special master to preside over individual
damages proceedings; (3) decertifying the class after the liability trial and
22
Case: 15-11455 Date Filed: 03/21/2016 Page: 23 of 27
providing notice to class members concerning how they may proceed to prove
damages; (4) creating subclasses; or (5) altering or amending the class.” In re Visa
Check/MasterMoney Antitrust Litig., 280 F.3d 124, 141 (2d Cir. 2001) (footnote
omitted), abrogated in part on other grounds by In re Initial Pub. Offerings Sec.
Litig., 471 F.3d 24 (2d Cir. 2006).
Contrary to Electrolux’s argument, Comcast did not alter the black-letter
rule that individual damages do not always defeat predominance. The issue in
Comcast was whether the plaintiffs could use an expert model to prove their
damages on a classwide basis, even though the model did not match their theory of
liability. See Comcast, 133 S. Ct. at 1431. The Supreme Court held that they could
not and, for that reason, the class action did not satisfy predominance. See id. at
1432–35. But the Supreme Court did not hold that individual damages necessarily
defeat predominance or that a plaintiff seeking class certification must present an
expert damages model. The Court assumed those points because the parties had
conceded them. See id. at 1430 (“The District Court held, and it is uncontested
here, that to meet the predominance requirement respondents had to show . . . that
the damages . . . were measurable ‘on a class-wide basis’ through use of a
‘common methodology.’” (emphasis added) (quoting Behrend v. Comcast Corp.,
264 F.R.D. 150, 154 (E.D. Pa. 2010)). Such assumptions are not holdings, see
Brecht v. Abrahamson, 507 U.S. 619, 631 (1993), and they do not overrule our
23
Case: 15-11455 Date Filed: 03/21/2016 Page: 24 of 27
precedents. Indeed, the Comcast Court confirmed that its decision did not break
new ground but instead “turn[ed] on the straightforward application of class-
certification principles.” Comcast, 133 S. Ct. at 1433. And other courts agree that
Comcast did not change the law that a class action can sometimes be maintained
notwithstanding the need to prove individual damages. See, e.g., Roach v. T.L.
Cannon Corp., 778 F.3d 401, 408 (2d Cir. 2015); Neale v. Volvo Cars of N. Am.,
LLC, 794 F.3d 353, 374–75 & n.10 (3d Cir. 2015); In re Deepwater Horizon, 739
F.3d 790, 815 (5th Cir. 2014); Butler, 727 F.3d at 800–01. But cf. In re Rail
Freight Fuel Surcharge Antitrust Litig.–MDL No. 1869, 725 F.3d 244, 255 (D.C.
Cir. 2013).
The black-letter rule has always been subject to exceptions. For example,
individual damages defeat predominance if computing them “will be so complex,
fact-specific, and difficult that the burden on the court system would be simply
intolerable.” Klay, 382 F.3d at 1260. Furthermore, individual damages defeat
predominance when they are accompanied by “significant individualized questions
going to liability.” Id. (citing Sikes v. Teleline, Inc., 281 F.3d 1350, 1366 (11th Cir.
2002), abrogated in part on other grounds by Bridge, 553 U.S. 639; Rutstein, 211
F.3d at 1234, 1240).
We leave it to the district court on remand to decide whether the latter
exception is satisfied here. The district court concluded that the individual
24
Case: 15-11455 Date Filed: 03/21/2016 Page: 25 of 27
questions of damages in this case were outweighed by numerous questions of
liability that are common to the class. But, as explained above, the district court
could not be sure that many of those questions of liability—namely, pre-suit
notice, an opportunity to cure, and manifestation of the defect—are common to the
class because it did not first resolve several preliminary questions of state law. On
remand, the district court must resolve those preliminary questions and reconsider
the issue of predominance. We express no view on this issue and leave it to the
discretion of the district court, where it belongs.
4. Electrolux’s Defense of Misuse Does Not Necessarily Defeat
Predominance.
Electrolux contends that the warranty claims do not satisfy predominance
because causation will require individual proof. Electrolux does not raise any
specific concerns about causation, except for its affirmative defense of misuse.
Electrolux argues that the plaintiffs will need to prove that the convoluted bellows,
as opposed to misuse by the owners, caused the mildew to grow in their washing
machines. The district court rejected this argument because it concluded that
Electrolux’s defense has “classwide application.” Terrill, 295 F.R.D. at 697. The
district court also concluded that even if misuse would require individual proof,
“unique affirmative defenses rarely predominate where a common claim is
established.” Id. at 696.
25
Case: 15-11455 Date Filed: 03/21/2016 Page: 26 of 27
We disagree that misuse can be proved classwide, but we agree that
individual affirmative defenses generally do not defeat predominance.
Nevertheless, like damages, the individual nature of the affirmative defenses is still
relevant to whether predominance is satisfied.
The district court erred when it stated that Electrolux’s defense of misuse
was a common question. Although Electrolux raised this defense against every
class member, the applicability of a defense does not make it a “common”
question. See Wal-Mart, 131 S. Ct. at 2551. What matters is the type of evidence
that the parties will submit to prove and disprove the defense. Here, the class
members will need to prove that the mildew in their washing machines did not
arise from their own misuse. That showing will require individual proof. See
Marcus v. BMW of N. Am., LLC, 687 F.3d 583, 604 (3d Cir. 2012); Parkinson v.
Hyundai Motor Am., 258 F.R.D. 580, 595 (C.D. Cal. 2008).
The district court was nevertheless correct when it stated that individual
affirmative defenses ordinarily do not defeat predominance. “The general rule,
regularly repeated by courts in many circuits, is that ‘[c]ourts traditionally have
been reluctant to deny class action status under Rule 23(b)(3) simply because
affirmative defenses may be available against individual members.’” Newberg on
Class Actions § 4:55 (alteration in original) (quoting Smilow v. Sw. Bell Mobile
Sys., Inc., 323 F.3d 32, 39 (1st Cir. 2003)). Like damages, affirmative defenses are
26
Case: 15-11455 Date Filed: 03/21/2016 Page: 27 of 27
often easy to resolve, see, e.g., Waste Mgmt. Holdings, Inc. v. Mowbray, 208 F.3d
288, 297 (1st Cir. 2000), and district courts have several tools available to manage
them, see Smilow, 323 F.3d at 39–40.
But like damages, affirmative defenses are still relevant to the question of
predominance. See Waste Mgmt. Holdings, 208 F.3d at 295. Individual affirmative
defenses can defeat predominance in some circumstances. For example, the
affirmative defenses could apply to the vast majority of class members and raise
complex, individual questions. See, e.g., Sacred Heart Health Sys., Inc. v. Humana
Military Healthcare Servs., Inc., 601 F.3d 1159, 1177–83 (11th Cir. 2010). Or the
affirmative defenses could be coupled with several other individual questions. See
Barnes v. Am. Tobacco Co., 161 F.3d 127, 147 n.25 (3d Cir. 1998).
We again leave these questions to the district court on remand. As explained,
the district court too hastily concluded that several questions in this litigation were
common to the class. On remand, the district court must reconsider these questions.
We express no view about them and leave them, like all questions of class
certification, to the discretion of the district court.
IV. CONCLUSION
We VACATE the class certification and REMAND for further proceedings
consistent with this opinion.
27