Petition for Leave to Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 06 CV 5932-Nan R. Nolan, Magistrate Judge.
SUBMITTED DECEMBER 30, 2009
Before POSNER, EVANS, and TINDER, Circuit Judges.
American Honda Motor Company and Honda of America Manufacturing (collectively "Honda") seek leave to appeal the district court's grant of class certification pursuant to Federal Rule of Civil Procedure 23(f). Specifically, Honda asks us to resolve whether the district court must conclusively rule on the admissibility of an expert opinion prior to class certification in this case because that opinion is essential to the certification decision. Since this is the type of question that Rule 23(f) was designed to address, and because the district court's analysis was incomplete, we accept the appeal. See Allen v. Int'l Truck & Engine Corp., 358 F.3d 469, 470 (7th Cir. 2004) ("The parties' comprehensive submissions show not only that immediate review would promote the development of the law... but also that the district court committed an error best handled by a swift" action.).
Plaintiffs are purchasers of Honda's Gold Wing GL1800 motorcycle; they allege that the motorcycle has a design defect that prevents the adequate dampening of "wobble," that is, side-to-side oscillation of the front steering assembly about the steering axis. In other words, they claim that the defect makes the steering assembly shake excessively and they want Honda to fix the problem. Plaintiffs moved for class certification pursuant to Rule 23(b)(3). To demonstrate the predominance of common issues, they relied heavily on a report prepared by Mark Ezra, a m otorcycle engineering expert. Ezra's report opined that motorcycles should "by [their] design and manufacture exhibit decay of any steering oscillations sufficiently and rapidly so that the rider neither reacts to nor is frightened by such oscillations." Assuming that human reaction time to wobble is 1/2 to 3/4 of a second, Ezra opined that wobble should decay, or dissipate, to 37% of its original amplitude within 3/4 of a second to ensure that riders do not perceive and react to the oscillations. This standard, which Ezra devised himself and characterizes as "reasonable," was published in theJune 2004 edition of the Journal of the National Academy of Forensic Engineers. After testing one used GL1800 serviced to factory condition, Ezra concluded that it failed to meet his wobble decay standard. He also concluded that his standard could be achieved in the GL1800 motorcycle by replacing the regular ball bearings in the steering assembly with tapered ones.
Honda moved to strike the report pursuant to Daubert v. Merrell Dow Pharms., Inc., 509 U.S. 579 (1993), arguing that Ezra's wobble decay standard was unreliable because it was not supported by empirical testing, was not developed through a recognized standard-setting procedure, was not generally accepted in the relevant scientific, technical, or professional community, and was not the product of independent research. In the alternative, Honda argued that even if the standard was reliable, Ezra did not reliably apply it to this case because he only tested one motorcycle and did not account for variables that could affect the wobble decay rate.
The district court concluded that it was proper to decide whether the report was admissible prior to certification because "most of Plaintiffs' predominance arguments rest upon the theories advanced by Mr. Ezra." Allen v. Am. Honda Motor Co., 264 F.R.D. 412, 425 (N.D. Ill. 2009). The court then discussed Honda's Daubert arguments. It noted that it was concerned that, among other things, Ezra's wobble decay standard may not be supported by empirical evidence, the standard has not been generally accepted by the engineering community, and Ezra's test sample of one may be inadequate to conclude that the entire fleet of GL1800s is defective. The court then concluded, "Viewing all of the arguments together, the court has definite reservations about the reliability of Mr. Ezra's wobble decay standard. Nevertheless, the court declines to exclude the report in its entirety at this early stage of the proceedings." Id. at 428. The court denied Honda's motion to exclude "without prejudice," id. at 437, and granted Plaintiffs' motion for class certification in part, certifying two classes of individuals who purchased GL1800s.
In Szabo v. Bridgeport Machs., Inc., 249 F.3d 672, 676 (7th Cir. 2001), we held that a 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. And in West v. Prudential Sec., Inc., 282 F.3d 935, 938 (7th Cir. 2002), we held that a plaintiff cannot obtain class certification just by hiring a competent expert. We emphasized, "A district judge may not duck hard questions by observing that each side has some support.... Tough questions must be faced and squarely decided, if necessary by holding evidentiary hearings and choosing between competing perspectives." Id. But we have not yet specifically addressed whether a district court must resolve a Daubert challenge prior to ruling on class certification if the testimony challenged is integral to the plaintiffs' satisfaction of Rule 23's requirements.
Plaintiffs argue that we do not need to accept this appeal because district courts in this circuit generally agree that a Daubert challenge must be resolved prior to class certification. This is true, though the courts have relied on different authority, including other district court decisions, to reach their conclusion. See, e.g., Reed v. Advocate Health Care, No. 06 C 3337, 2009 WL 3146999, at *21 (N.D. Ill. Sept. 28, 2009); In re Ready-Mixed Concrete Antitrust Litig., 261 F.R.D. 154, 162 (S.D. Ind. 2009); Srail v. Village of Lisle, 249 F.R.D. 544, 557, 560-61 (N.D. Ill. 2008); cf. Szabo, 249 F.3d at 675 (accepting an appeal pursuant to Rule 23(f) in part because the district court relied largely on decisions by other district judges "[a]t critical junctures"). Further, in many of these cases, including the case at hand, this issue was heavily contested. Finally, other appellate courts have not directly addressed whether challenges to experts must be resolved prior to certification. See, e.g., In re Hydrogen Peroxide Antitrust Litig., 552 F.3d 305, 315 n.13 (3d Cir. 2008) (noting that parties agreed that lower court properly addressed admission of expert testimony); Dukes v. Wal-Mart, Inc., 509 F.3d 1168, 1174, 1179 (9th Cir. 2007) (withdrawing and superceding prior opinion, 474 F.3d 1214, which held that full Daubert examination should not be conducted at class certification stage), reh'g granted, 556 F.3d 919 (9th Cir. 2009); In re Initial Public Offering Sec. Litig., 471 F.3d 24, 42 (2d Cir. 2006) (disavowing suggestion that expert's testimony may establish component of class certification "simply by being not fatally flawed"). Given the uncertainty surrounding the propriety of conducting a Daubert analysis at the class certification stage, and the frequency with which this issue arises, we find the question to be one appropriate for resolution under Rule 23(f). See Blair v. Equifax Check Servs., Inc., 181 F.3d 832, 835 (7th Cir. 1999).
We hold that when an expert's report or testimony is critical to class certification, as it is here, see Allen, 264 F.R.D. at 420 ("Mr. Ezra's wobble decay standard... forms the basis of Plaintiffs' theory of defect."), a district court must conclusively rule on any challenge to the expert's qualifications or submissions prior to ruling on a class certification motion. That is, the district court must perform a full Daubert analysis before certifying the class if the situation warrants. If the challenge is to an individual's qualifications, a court must make that determination "by comparing the area in which the witness has superior knowledge, skill, experience, or education with the subject matter of the witness's testimony." Carroll v. Otis Elevator Co., 896 F.2d 210, 212 (7th Cir. 1990). The court must also resolve any challenge to the reliability of information provided by an expert if that information is relevant to establishing any of the Rule 23 requirements for class certification.
Here, the district court started off on the right foot by beginning to undertake what might have become a fairly extensive Daubert analysis. Cf. Naeem v. McKesson Drug Co., 444 F.3d 593, 608 (7th Cir. 2006) (noting that there is no need for a court to perform the Daubert analysis in any particular or mechanical way). It noted its role as "gate-keeper" and its duty to "determine reliability in light of the proposed expert's full range of experience and training as well as the methodology used to arrive at a particular conclusion." Allen, 264 F.R.D. at 423 (quotations omitted). The district court acknowledged Honda's concerns about the reliability of Ezra's testimony and largely agreed with them. It expressed reservations about Ezra's failure to "establish the minimal amplitude required for a rider to detect an oscillation," id. at 426, his failure to "verif[y] whether a lesser or greater percentage of decay would also provide an appropriate margin of safety," id. at 427, the fact that his wobble decay standard was developed "to assist with a lawsuit and was not conceived through the logical flow of independent research," id., the questionable peer-review process that his article underwent, see id., the engineering community's lack of acceptance of his proposed standard, id., and his test sample size of one used GL1800, see id. at 427-28. Yet the district court ultimately declined, without further explanation, "to exclude the report in its entirety at this early stage of the proceedings." Id. at 428.
"We give the court great latitude in determining not only how to measure the reliability of the proposed expert testimony but also whether the testimony is, in fact, reliable, but the court must provide more than just conclusory statements of admissibility to show that it adequately performed the Daubert analysis." United States v. Pansier, 576 F.3d 726, 737 (7th Cir. 2009) (citation omitted). The court's effective statement of admissibility here is not even conclusory; it leaves open the questions of what portions of Ezra's testimony it may have decided (or will decide) to exclude, whether Ezra reliably applied the standard to the facts of the case, and, ultimately, whether Plaintiffs have satisfied Rule 23(b)(3)'s predominance requirement. As a result, the district court never actually reached a conclusion about whether Ezra's expert report was reliable enough to support Plaintiffs' class certification request. Instead it denied Honda's motion to exclude without prejudice and noted that the case was in an "early stage of the proceedings." This was not sufficient. Indeed, it was an abuse of discretion. See Nightingale Home Healthcare, Inc. v Anodyne Therapy, LLC, 589 F.3d 881, 883 (7th Cir. 2009) ("It is an abuse of discretion not to exercise discretion."); Smith v. Ford Motor Co., 215 F.3d 713, 717 (7th Cir. 2000) ("We review for abuse of discretion the district court's choice of factors to include within [the Daubert] framework as well as its ultimate conclusions regarding the admissibility of expert testimony.").
As we have explained, a district court must make the necessary factual and legal inquiries and decide all relevant contested issues priorto certification. See West, 282 F.3d at 938; Szabo, 249 F.3d at 676. The district court's actions here were more akin to the "provisional" approach that we rejected in Szabo. 249 F.3d at 676. Ezra's testimony is necessary to show that Plaintiffs' claims are capable of resolution on a class-wide basis and that the common defect in the motorcycle predominates over the class members' individual issues. Therefore, by failing to clearly resolve the issue of its admissibility before certifying the class, the district court erred. Cf. West, 282 F.3d at 938 ("A district judge may not duck hard questions by observing that each side has some support.... Tough questions must be faced and squarely decided...."(emphasis added)).
The district court was reluctant to exclude Ezra's report "in its entirety at this early stage of the proceedings," Allen, 264 F.R.D. at 428, but our examination of the record reveals that exclusion is the inescapable result when the Daubert analysis is carried to its conclusion. Under the Daubert framework, a district court must determine "whether a given expert is qualified to testify in the case in question and whether his testimony is scientifically reliable." Gayton v. McCoy, 593 F.3d 610, 616 (7th Cir. 2010). Ezra's qualifications are not at issue here; the reliability of his testimony is what Honda contests. But even the most "supremely qualified expert cannot waltz into the courtroom and render opinions unless those opinions are based ...