heap of dollars with stethoscope

Expert’s Report Didn’t Adequately Explain Causation

While antitrust cases are often good candidates for class action treatment, it is still important for the plaintiffs to demonstrate a connection between the alleged anti-competitive conduct and the alleged harm, as a recent case from the Western District of Texas found. In Maderazo v. VHS San Antonio Partners, L.P., Case No. SA-06-CA-535-OG (W.D. Tex. Jan. 22, 2019), the plaintiffs were registered nurses working for hospitals in the San Antonio area. They contended that between 2002 and 2007, the hospitals conspired to hold down the wages paid to their nursing staffs. This was accomplished, they contended, through a combination of participation in salary surveys and in-person, email and telephone communications between human resources employees of different hospitals. The proposed class had between roughly 5,000 and 11,000 members. Following what appears from the docket to have been nearly 10 years of litigation, the plaintiffs filed an amended motion to certify the class.

While the district court reviewed the class action prerequisites under Rule 23(a), its analysis focused on the predominance requirement of Rule 23(b)(3) and in particular whether the claims could be established through common proof. The court declined to engage in a deep analysis of the merits of the claims, but found that the plaintiffs were indeed relying on common proof in the forms of the communications between the various hospitals and survey data. It found problematic, however, the plaintiffs’ proof of how the alleged injury actually caused the nurses any harm. To support their damages claim, the plaintiffs relied on an expert report that compared nursing agency fees with staff wages and purported to calculate the effect of the claimed lost earnings. As the court noted, however, the expert’s report repeatedly assumed causation and made no effort to trace how the alleged conspiracy in fact affected the wages of the class members. Without that critical element, the court concluded, there was no viable classwide claim:

“There is simply no explanation as to how Plaintiffs plan to link the alleged conspiracy to the alleged impact/injury, with either common or individual evidence.”

The court compared its analysis with that in a Michigan case, Cason-Merenda v. VHS of Michigan, 2014 WL 905828 (E.D. Mich. 2014), in which the district court had permitted a case to proceed with a similar flaw, but found material distinctions. The court in that case had already ruled on motions for summary judgment and expressed misgivings about the viability of the claims in the absence of the requisite expert testimony. In fact, the court’s opinion in the Michigan case had left open future challenges to the claims based precisely on that issue.

Without expert testimony on the issue of causation, the court found that there was no predominance under Rule 23. As a result of this finding, the court did not reach the issue of superiority, and it simply denied the motion for class certification.

The decision in Maderazo reflects some of the practical problems with this type of litigation. Without an expert on the critical issue of causation, the plaintiffs were left with common proof of liability and a potentially large damage calculation, but no way to connect the two. In this instance, the court was willing to address the problem at the certification stage, saving the parties potentially years of litigation on a case that could not survive at trial.

The bottom line:

Gaps in evidence on critical issues can be fatal to class action treatment.