The Seventh Circuit Court of Appeals vacated a decision declining to certify a consumer class against IKO Manufacturing, in which the district court wrote that “commonality of damages” is essential, reasoning that the district court had incorrectly read Comcast Corp. v. Behrend, 133 S. Ct. 1426 (2013), and Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541 (2011), to require proof “that the plaintiffs will experience common damage and that their claimed damages are not disparate.”
Purchasers of organic asphalt roofing shingles filed suits against IKO contending it falsely told customers its shingles complied with the ASTM D225 industry standard. The Judicial Panel on Multidistrict Litigation transferred the federal cases to the Central District of Illinois for consolidated pretrial proceedings where the plaintiffs moved to certify a class that would cover IKO’s sales in eight states since 1979. The district court declined, and the Seventh Circuit granted plaintiffs’ request for 23(f) interlocutory review. The Seventh Circuit found that the district court denied plaintiffs’ motion to certify “under the mistaken belief that ‘commonality of damages’ is legally indispensible.”
The Seventh Circuit explained that Dukes had nothing to do with commonality of damages or 23(b)(3), but dealt instead with the need for conduct common to class members and concerned 23(a)(2). “In a suit alleging a defect common to all instances of a consumer product, … the conduct does not differ.”
The Seventh Circuit further explained that Comcast does discuss the role of injury under 23(b)(3), though not in the way the district court thought. Comcast requires a theory of loss that matches the theory of liability. The IKO shingle purchasers asserted two damages theories. First, every purchaser of a shingle is injured by delivery of a shingle that does not meet ASTM D225. These damages are the difference in market price between shingles that meet the standard and those that do not, and could be applied to every class member. Second, any purchasers whose shingles actually failed are entitled to damages, if nonconformity with ASTM D225 caused the failure. These damages would require buyer-specific hearings. These are alternative damages theories, and both match the liability theory as Comcast requires.
In vacating the order and remanding the case, the Seventh Circuit stated that class certification is not necessarily required, and held that a “district judge has discretion to evaluate practical considerations that may make class treatment unwieldy despite the apparently common issues. … But when exercising its discretion, the court must apply the correct legal standards.”