This article originally appeared in the Daily Journal on February 26, 2018.
Petitions for writs of mandate are some of the trickiest devices in a California appellate litigator’s bag. The briefing is often hurried, the record necessarily incomplete, and the Court of Appeal has almost plenary discretion whether to consider them at all. Nine times out of ten the court denies the petition immediately and without explanation. The rest of the time, it chooses from an array of options ranging from denying the petition with instructions to stetting a formal hearing with oral argument. Any result is virtually always case-specific and unpublished.
Once in a rare while, however, the Court of Appeal will consider a writ petition that raises an issue of first impression, and publish a decisive order, called a preemptory writ, that creates new and binding precedent which significantly impacts California law. It is very uncommon, but it does happen — most recently in late-January, with Apple Inc. v. Superior Court (Shamrell), 2018 DJDAR 1038 (Jan. 31, 2018).
In Shamrell, Division One of the Fourth District Court of Appeal ruled for the first time that in every California class action, trial courts must determine at the class certification stage whether expert witness theories concerning certification constitute admissible evidence under Sargon Enterprises, Inc. v. University of Southern California. That case, decided by the California Supreme Court in 2012, states California’s test for determining the admissibility of expert and scientific testimony, and has been described as an analogue to the federal Daubert standard.
The Shamrell ruling is an unqualified win for business and adds a significant — though far from insurmountable — hurdle for plaintiffs seeking class certification in cases involving novel or complex theories of class composition or damages.
The complaint in Shamrell centered around the power button on the iPhone 4, 4S, and 5. Allegedly, after a while, the button ceases functioning properly on some phones, preventing users from being able to lock their phones, wake them up, or turn them on and off. The plaintiffs alleged Apple knew of the defects and sold the phones anyway, creating a class of consumers who suffered common injuries and damages.
When the litigation reached the class certification stage, the trial court raised a number of concerns about the plaintiffs’ theories, especially as to how plaintiffs would determine the class size and damages for all the putative class members. Across multiple rounds of briefing, the plaintiffs proffered the testimony of three experts who averred that they had formulas and methodologies which could calculate both the class size and the difference between what the class-members paid for their phones at the time of purchase, and what they would have been willing to pay for their phones had they known of the risk that their power buttons would stop working down the road. That difference would be based on the cost of repairing the phones or their diminished trade-in values, as well as surveys into how much customers would pay for a phone without a working power button.
Apple opposed certification by contending that the methodologies employed by plaintiffs’ experts were unsound. Apple explained that it had offered free repairs to phone owners affected by defective power buttons, and those who didn’t take the company up on its offer — i.e. the members of the proposed class — had established their lack of damages in their decision. It questioned whether plaintiffs’ experts’ theories conflicted with one another, and whether they accurately represented accepted approaches within the field or could fairly calculate the class size.
Most importantly, Apple argued that the trial court needed to determine whether the experts’ theories were sufficiently reliable to constitute admissible expert evidence under Sargon. The Sargon opinion synthesized California’s statutes and existing case law to hold that trial courts have a “gatekeeping” function when it comes to expert testimony, and must evaluate proffered expert evidence and exclude testimony that is based on unreasonable data, is unsupported by the data even if reasonable, or is speculative. Sargon placed the focus on an expert’s principles and methodology, rather than his or her ultimate conclusions. It expressly allowed for conflicting principles and methodologies among experts, as long as they all meet a baseline level of reliability.
The trial court declined Apple’s invitation to apply Sargon to plaintiffs’ experts at the class certification stage. It ruled that Sargon applies to the admissibility of expert evidence at trial, while class certification is merely a preliminary inquiry into whether the case is appropriate to proceed as a class action. Requiring a Sargon analysis at that stage would, the trial court feared, turn class certification into a vast endeavor with hearing after hearing into whether expert testimony is sufficiently reliable to go to a jury, drawing focus from the relevant question of whether the case is appropriate for class-wide relief at all. Ultimately, the court certified the class.
Because orders granting class certification are interlocutory and not appealable in state court, Apple petitioned for a writ of mandate to the Court of Appeal, arguing the trial court erred in failing to conduct a Sargon-compliant analysis of the testimony proffered by plaintiffs’ experts. The appellate court requested an informal response from the plaintiffs before staying the litigation and issuing a formal order to show cause why Apple’s petition should not be granted.
The Court of Appeal ultimately granted a preliminary writ. Its opinion acknowledged that class certification is a limited-scope determination that affords trial courts substantial discretion but held the Shamrell trial court erred by failing to analyze plaintiffs’ proffered expert testimony under Sargon. The court explained that Sargon’s gatekeeping function goes to the fundamental question of evidentiary admissibility, and that any ruling reliant on inadmissible evidence is erroneous. Thus, where class certification is dependent on expert theories to establish the appropriateness of class-wide relief, those theories must be a form of admissible evidence under Sargon. The basis and reasoning behind any proffered expert testimony must be intellectually sound and follow a progression of logic, rather than resorting to speculation, unreasonableness, or irrationality.
The court explained that Sargon need not create as extraordinary an undertaking as the trial court feared, however. Compliance with Sargon should be flexible at class certification and does not necessarily even require a separate evidentiary hearing. But the trial court needs to comply with it one way or another, much as federal trial courts must apply their Daubert standard to expert testimony proffered at the class certification stage.
The Shamrell court further concluded the error was prejudicial because there was a potential logical flaw in plaintiffs’ reasoning. Plaintiffs’ theory of damages posited that the affected iPhones would have sold at a lower price if the power button defect had been disclosed to purchasers at the time of purchase, but their experts’ measures of damages (the costs of repairs or diminished trade-in value) were calculated long after the time of purchase, and there was no testimony explaining why those figures would necessarily align with consumer purchasing decisions. Likewise, surveys about what consumers would pay for a phone without a working power button are specious with a function as essential as on and off, and don’t really describe a product where the power button worked fine for a while. Given these methodological concerns, and similar formula-type questions related to determining the class size, the Court of Appeal found a reasonable chance the trial court might have excluded plaintiffs’ experts’ testimony had it conducted a Sargon analysis. Hence, reversal.
The court’s ruling makes sense given California precedent, which generally requires judicial decision-making to be based on admissible evidence, and recognizes only one standard, Sargon’s, for the admissibility of an expert’s opinion. And while certification is mere litigation milestone on its face, in practice it’s often a class action’s climax. The financial risk of proceeding to trial against a large class is so great that many defendants have little practical choice but to settle once a class is certified. Given its determinative role, requiring certification decisions which rest on expert or scientific evident to meet the baseline standard of admissibility is a reasonable policy aim.
Further, to the extent a jury may be asked to decide between competing proposals for calculating damages or other elements of the plaintiffs’ claims that also turn on expert opinions, judicial economy favors courts conducting their gatekeeping functions at the earliest sensible opportunity. While the Shamrell rule may increase the burdens on plaintiffs to establish the logical soundness of their experts’ testimony, which will no doubt raise costs for plaintiffs and deter some state class action litigation, the Court of Appeal expressly recognized that trial courts have wide latitude to limit those burdens substantially.
A separate lesson, of course, lies in the fact that a case as significant as Shamrell arose through an extraordinary writ petition. It’s a forceful reminder that writ petitions challenging interlocutory orders can lead to significant reversals and, though uncommon, even the creation of new law. Trial attorneys and sophisticated litigants should always keep the potential for a writ petition in the backs of their minds, because a well-conceived and well-argued writ petition can make an outcome-determinative difference — in that case and future ones.
Ben Feuer is the chairman of California Appellate Law Group LLP*, a 16-lawyer appellate boutique in San Francisco and Los Angeles with several attorneys who specialize purely in appellate writs. Ben handles civil and business appeals and writs in the California Courts of Appeal, the California Supreme Court, the 9th Circuit, and the U.S. Supreme Court. You can reach him at email@example.com or find him at www.calapplaw.com.
Appellate Zealots is a monthly column on recent appellate decisions written by the attorneys of the California Appellate Law Group LLP.
*In July 2022, the California Appellate Law Group was renamed the Complex Appellate Litigation Group.
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