Bifurcated Discovery in Class Actions: Two Reasons Why it Doesn’t Work

October 19, 2011

A common weapon in class action defendants’ arsenals is the motion to “bifurcate” discovery, splitting the process into two phases: first, discovery as it relates to the elements of Federal Rule of Civil Procedure 23 and whether a class may be properly certified, and second, discovery as it relates to the “merits” of the class’ underlying claims.  Defendants often cite to the high cost of discovery related to class actions and the burdensome undertaking of conducting merits-based discovery at such an early phase of the litigation as compelling reasons to bifurcate.

But there are at least two problems with bifurcation.

First, bifurcation often creates more problems than it resolves.  What happens when the inevitable overlap between class and merits-based discovery occurs?  The Eastern District of Pennsylvania recognized this in In re Plastics Additives Antitrust Litigation, when it denied bifurcation, finding that “class certification discovery in this litigation is not ‘easily’ differentiated from ‘merits’ discovery.”[1]  As The Manual for Complex Litigation recognizes, “information about the nature of the claims on the merits and the proof that they require is important to deciding certification.  Arbitrary insistence on the merits/class discovery distinction sometimes thwarts the informed judicial assessment that current class certification practice emphasizes.”[2]

Then, what happens when parties cannot agree as to what discovery is allowed after a bifurcation order is entered?  The Northern District of Illinois has denied motions to bifurcate in the past when “there are already discovery disputes brewing.  If the Court were to grant the bifurcation motion, the need for the parties to separate [discovery] may further complicate rather than simplify these proceedings.”[3]  When “bifurcation . . . lead[s] to additional discovery disputes that actually add time and energy to a litigation,”[4] it would seem that the process doesn’t reduce the cost or burden for either party.

Second, as the Wal-Mart v. Dukes decision made clear earlier this year, when a court is conducting a “rigorous analysis” to ensure that the requirements of Rule 23 have been met, “[f]requently that ‘rigorous analysis will entail some overlaps with the merits of the plaintiff’s underlying claim.  That cannot be helped.  The class determination generally involves considerations that are enmeshed in the factual and legal issues comprising the plaintiff’s cause of action.”[5]

When questions concerning class certification and the underlying merits of a plaintiff’s case overlap, how can a plaintiff make the case for certification when he has been denied this discovery?  What happens when defendants move to bifurcate discovery, only to later demand exacting evidence relating to the merits of plaintiffs claims at the class certification stage?  The Eighth Circuit expressed some concern related to bifurcation, as these questions arose at the class certification hearing after Defendants moved to, but then challenged plaintiffs’ expert.

It was after all Zurn [the defendant] which sought bifurcated discovery which resulted in a limited record at the class certification stage, preventing the kind of full and conclusive Daubert inquiry Zurn later requested.  While there is little doubt that bifurcated discovery may increase efficiency in a complex case such as this, it also means that there may be gaps in the available evidence.[6]

While it may be plausible for bifurcation to increase judicial efficiency in some respects, that perceived efficiency has to be weighed against the additional disputes the bifurcation order creates when plaintiffs and defendants cannot agree on what constitues “merits” discovery, what constitutes “class” discovery, and where they “overlap.”  More importantly, defendants must remember that if they insist on bifurcating discovery at the class certification stage, they cannot at the same time demand an extensive merits-based analysis by the court.  If the teaching of Dukes is that that courts may make a preliminary inquiry into the “merits” to decide issues relevant to class certification, plaintiffs need access to the “merits” to make their case.

Sources:

[1] In re Plastics Additives Antitrust Litig., No. 03-2038, 2004 U.S. Dist. LEXIS 23989, at * (E.D. Pa. Nov. 29, 2004) (“Bifurcation would be inefficient, unfair, and duplicative in this case for several reasons.  First, bifurcation would further delay the resolution of the litigation. . . .  Second, class certification discovery in this litigation is not ‘easily’ differentiated from ‘merits’ discovery. . . .  Third. . . there is no reason to believe that denial of class certification will terminate this litigation.”) (citing the Manual for Complex Litigation § 21.14).

[2] Manual for Complex Litigation § 21.14 at 292-93 (4th ed. 2004)

[3] See Terry v. Cook County Dep’t of Corr., No. 09 C 3093, 2010 U.S. Dist. LEXIS 68623, at *8 (N.D. Ill. July 8, 2010)

[4] Trading Techs. Int’l v. eSpeed, Inc., 431 F. Supp. 2d 834, 840 (N.D. Ill. 2006)

[5] Wal-Mart Stores, Inc. v. Dukes, 564 U.S. ___, 131 S. Ct. 2541, 2552 (2011) (internal citations omitted).  See also Am. Honda Co. v. Allen, 600 F.3d 813, 815 (7th Cir. 2010) (The “district court must make whatever factual and legal inquiries are necessary to ensure that requirements for class certification are satisfied before deciding whether a class should be certified, even if those considerations overlap the merits of the case.” (emphasis added));  Szabo v. Bridgeport Machs., Inc., 249 F.3d 672, 676 (7th Cir. 2001) (when questions concerning class certification overlap with the merits, the court may examine the merits as necessary to resolve the threshold questions).

[6] In re Zurn Pex Plumbing Prods. Liab. Litig., 644 F.3d 604, 612-13 (8th Cir. 2011) (emphasis added).

 


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