In state courts, sometimes you lose even when you win. In a recent false-advertising class action, a California Superior Court entered an order concluding that the testimony of the plaintiffs’ expert—who was the linchpin of the case for class certification and on the merits—was inadmissible, which meant that the defendant was entitled to judgment as a matter of law. See Wallace v. Monier, LLC (pdf), No. S-CV-0016410 (Cal. Super. Ct. Placer Cty. Jan. 28, 2013).
Sounds great, right—so what’s the problem? The judge waited to decide these issues until after a jury trial on the class claims in which the plaintiffs were seeking damages in excess of $500 million, plus an additional amount in punitive damages. That’s a huge waste of the parties’ and the court’s resources. Many businesses would have lacked the fortitude to endure that gauntlet and agreed to a blackmail settlement in order to mitigate the enormous risk presented by the inappropriate class-action jury trial.
The case involved false-advertising claims under California law against the maker of “slurry coated” roofing tiles, which the plaintiffs alleged were prone to developing cosmetic defects during their 50-year life. To support class certification and to prove liability and damages, the plaintiffs relied on the testimony of 22 homeowners, who were selected by a statistician from the more than 100,000 who had purchased and installed the roofing tiles. The plaintiffs proposed to extrapolate from the sample homeowners’ experiences to make findings regarding liability and damages for the rest of the class.
The defendant raised numerous challenges to the admissibility of the statistician’s testimony and plaintiffs’ proposed trial plan, but these challenges were deferred until after trial. (The court heard testimony about the challenges during breaks in the trial.) Following an eight-week trial, the jury returned a verdict of $7.41 million for the plaintiff.
The trial court then finally turned to the defendant’s legal challenges. Relying on an analogy to the U.S. Supreme Court’s rejection of “Trial by Formula” in Wal-Mart Stores, Inc. v. Dukes, the trial court excluded the statistician’s testimony on the ground that his sampling techniques were neither reliable nor generally accepted by recognized authorities in the field. Because the plaintiffs’ case for class certification and liability hinged on that testimony, the court threw out the verdict and granted the defendant judgment as a matter of law. The court then denied the defendant’s motion for decertification as moot (though it is apparent from the court’s reasoning that no class should have been certified).
Although the end result was a defense victory, it was achieved at a much higher cost than necessary. There is no reason that the defendant’s legal and evidentiary challenges were postponed until post-trial motions. And although it is not categorically the case that defendants are better off in federal court, it seems less likely that a federal court would have deferred some of the key evidentiary and legal issues until after a jury verdict. Here, the defendants in Wallace had no choice; the case predated the 2005 enactment of the Class Action Fairness Act.