Opinion ID: 620898
Heading Depth: 2
Heading Rank: 2

Heading: Daubert and Class Certification

Text: Under Rule 702 and Daubert v. Merrell Dow Pharma- ceuticals Inc., 509 U.S. 579 (1993), expert testimony is admissible only if (1) the expert testifies to valid technical, scientific, or other specialized knowledge; and (2) that testimony will assist the trier of fact. NutraSweet Co. v. X-L Eng’g Co., 227 F.3d 776, 787-88 (7th Cir. 2000). Before the hearing on class certification, plaintiffs moved to exclude the report of defendant’s expert, Dr. Monica Noether, a private consulting economist. Plaintiffs argued that Noether’s “economic analyses are fundamentally defective” and that her opinion “should be stricken as a whole.” 3 3 Northshore argues that plaintiffs moved to strike only Noether’s initial report, not her later testimony and supplemental report, thereby waiving any argument to exclude those materials. We disagree. Plaintiffs moved to strike Noether’s expert report and also explicitly requested that “her opinion . . . be stricken as a whole,” App. 1261, in part because Noether lacked expertise regarding antitrust issues affecting “consumers of healthcare plans.” App. 1264. Plaintiffs renewed that objection at the start of the hearing on class certification, Dkt. 418 at 5, and objected when Noether offered new information during that hearing in response to Dranove’ rebuttal report, id. at 67-68, 94-95. The district court repeatedly put off dealing with the substance of these objections. Id. at 5, 69, 95. Plaintiffs’ objections gave the district court and defendant ample opportunity to address the issues. Where the district court repeatedly put off dealing with the issues, plaintiffs did not need to renew their unsuccessful objection every (continued...) 12 No. 10-2514 The district court denied plaintiffs’ motion. Although it agreed that “Noether’s report . . . include[s] some misleading information and analysis,” the court concluded that plaintiffs’ “two opportunities — in their reply brief and at oral argument — to respond to the conclusions contained in Noether’s report” were sufficient to address the report’s failings. Evanston Northwestern Healthcare, 268 F.R.D. at 77. For this reason, the district court declined to “undertake a Daubert analysis at this procedural juncture,” explaining that it was giving “Noether’s report the weight it believes it is due.” Id. When an expert’s report or testimony is “critical to class certification,” we have held that a district court must make a conclusive ruling on any challenge to that expert’s qualifications or submissions before it may rule on a motion for class certification. American Honda Motor Co. v. Allen, 600 F.3d 813, 815-16 (7th Cir. 2010); see also Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541, 255354 (2011) (expressing doubts regarding district court’s conclusion that “Daubert did not apply to expert testimony at the certification stage of class-action proceedings”).4 3 (...continued) time the same witness attempted to provide additional information. 4 We issued American Honda one day after the district court here issued its initial decision denying class certification. The redacted version of the district court’s decision available to (continued...) No. 10-2514 13 In American Honda, we used the word “critical” broadly to describe expert testimony important to an issue decisive for the motion for class certification. If a district court has doubts about whether an expert’s opinions may be critical for a class certification decision, the court should make an explicit Daubert ruling. An erroneous Daubert ruling excluding non-critical expert testimony would result, at worst, in the exclusion of expert testimony that did not matter. Failure to conduct such an analysis when necessary, however, would mean that the unreliable testimony remains in the record, a result that could easily lead to reversal on appeal. The district court’s refusal to rule on plaintiffs’ Daubert motion was an error under American Honda. Noether’s opinions were undoubtedly “critical” to the district court’s decision. Her report and testimony laid the foundation for Northshore’s entire argument in opposition to class certification, and the district court obviously relied on Noether’s reasoning when making its decision, quoting and discussing it many times. E.g., Evanston Northwestern Healthcare, 268 F.R.D. at 86 (noting that Noether’s “analysis . . . cast[s] doubt” on Dranove’s contract analysis); id. (observing that Noether’s supplemental report “suggest[s]” errors in Dranove’s contract analysis). Given the importance of Noether’s opinions, the district court needed to rule conclusively on plain- 4 (...continued) the public was released some time later, after our decision in American Honda. 14 No. 10-2514 tiffs’ challenge to her opinions before it turned to the merits of plaintiffs’ motion for class certification. Instead of ruling on the admissibility of Noether’s report, the court said it would give the report “the weight . . . it is due.” Id. at 77. We recognize that this is a time-honored and often acceptable approach toward many difficult evidentiary issues when the judge is the trier of fact. This approach does not suffice, however, when expert testimony is in fact critical to class certification. As we explained in American Honda, a district court cannot merely “leave[ ] open the questions of what portions of [the expert’s] testimony it may have decided (or will decide) to exclude.” American Honda, 600 F.3d at 816. Those tough questions must be faced and squarely decided. Id. at 817, citing West v. Prudential Securities, Inc., 282 F.3d 935, 938 (7th Cir. 2002); see also Szabo, 249 F.3d at 676 (“Before deciding whether to allow a case to proceed as a class action . . . a judge should make whatever factual and legal inquiries are necessary under Rule 23.”). To avoid this conclusion, Northshore proposes that we adopt the asymmetric rule that a definitive Daubert ruling is necessary only when a district court grants class certification, as in American Honda, but not when the court denies certification, as here. In effect, Northshore argues that a plaintiff should be allowed to rely on an expert’s opinion in support of class certification only if that opinion is backed by reliable methods and information, but that a defendant may rely on unqualified or unhelpful “expert” opinions. No. 10-2514 15 This result-oriented attempt to narrow American Honda finds support in neither the irrelevant cases cited by Northshore nor anything in American Honda itself. We did not suggest in American Honda that denials of class certification should be exempt from the strictures of Daubert and Rule 702. We made clear that whenever an expert’s report or testimony is critical to a class certification decision, a district court must rule conclusively on a challenge to the expert’s qualifications or opinions before ruling on class certification, without regard to whether the district court ultimately grants or denies that motion. See American Honda, 600 F.3d at 815-16. The ruling is just as important to the plaintiffs as it is to the defendants. Northshore’s proposed rule would also create an unworkable logical conundrum, requiring a court to determine first whether to certify a class before considering the admissibility of the evidence it relied upon in making that determination. We also reject two secondary arguments Northshore makes for its proposed limitation of American Honda. First, Northshore emphasizes that such a limitation must be read into American Honda because only plaintiffs bear the burden of satisfying Rule 23’s requirements while defendants may present no evidence if they so choose. Northshore Br. 29, citing Carnegie v. Household Int’l, Inc., 376 F.3d 656, 662 (7th Cir. 2004); In re American Medical Systems, Inc., 75 F.3d 1069, 1086 (6th Cir. 1996). The general point about the burden of proof is correct but has no bearing on Rule 702, which applies to plaintiffs and defendants alike, regardless of which side bears the burden of proof. The fact that a defendant 16 No. 10-2514 is not required to present evidence to defeat class certification does not give that defendant license to offer irrelevant and unreliable evidence. Second, Northshore argues that we must have meant for American Honda to apply only to decisions granting class certification because a Daubert hearing is unnecessary when certification is denied on grounds not addressed by the expert in dispute. (Northshore Br. 30). But a Daubert hearing is necessary under American Honda only if the witness’s opinion is “critical” to class certification. That requirement is not met if the court decides the motion for class certification on grounds not addressed by the witness. To conclude on this procedural issue, we decline Northshore’s invitation to cut the holding of American Honda in half with a new exception for denials of class certification. The district court should have ruled definitively on plaintiffs’ Daubert motion and objections before ruling on their motion for class certification. Northshore also argues that any error under American Honda was harmless. We disagree. As explained in the following section, the district court frequently discussed Noether’s opinions in reaching the substantive decision that we find erroneous. We proceed to the primary substantive dispute between the parties regarding the proper application of Rule 23(b)(3) to the facts of this case.