In re Stericycle

Financial expert testimony is critical to class actions, which are their own breed of lawsuits. What is still an unresolved issue is whether courts must perform a full Daubert inquiry at the class certification stage. A contract case illustrates the strategies the parties pursue to achieve or thwart class certification.

A number of medical facilities filed suit on behalf of hundreds of thousands of customers alleging the defendant, a large medical waste disposal company, breached consumer contracts by applying “automated price increases” (API) without providing notice or justification to the customer. The plaintiffs asked for class certification and engaged an accomplished expert to show it was possible to determine damages on a class-wide basis. For his analysis and calculation, the damages expert relied on the defendant’s own data.

Defendant disavows own data: The defendant, opposing the class certification, filed a Daubert motion to exclude the testimony. Its primary argument was that the expert’s analysis was unreliable. For one, the defendant’s database system did not adequately track contracts over time, which would make it necessary to do a manual review of each customer file. Also, there was variance in the contracts, undermining many of the expert’s assumptions.

The court noted the question at this stage in the litigation was “whether plaintiffs’ expert evidence is sufficient to demonstrate common questions of fact warranting certification of the proposed class, not whether the evidence will ultimately be persuasive.” It performed a Daubert review, finding the expert was “highly qualified” to testify and there was no real challenge to the expert’s actual method and the calculations he used. Instead, the defendant questioned the underlying data. This line of attack was a losing strategy considering the expert relied completely on the defendant’s own database, the court said.

After finding the testimony was admissible, the court determined the plaintiffs met the requirements for class certification. The plaintiff expert’s testimony showed there was a reliable, common formula for calculating damages on a class wide basis, the court emphasized.

The case is In re Stericycle, Inc., 2017 U.S. Dist. LEXIS 21861 (Feb. 16, 2017).

Extra: PricewaterhouseCoopers has a study of Daubert challenges involving financial experts that includes a useful discussion of the ways in which different courts have handled Daubert challenges at the class certification stage.