Commercial Litigation and Arbitration

Must Evidence Submitted at Class Certification Stage be Admissible into Evidence (Rule 56 Standard)? Circuit Split

Lujan v. Cabana Mgmt., Inc., 2012 U.S. Dist. LEXIS 104585 (E.D.N.Y. July 26, 2012):

More problematic is the question whether a declaration submitted in connection with a Rule 23 motion to certify a class must be based on personal knowledge and free of inadmissible hearsay. Although defendants urge the Court to measure plaintiffs' Rule 23 submissions by the standard applicable to Rule 56 affidavits, they cite no Second Circuit case law specifically holding that Rule 56's requirements govern filings under Rule 23.... Indeed, one decision issued out of the Southern District of New York (and overlooked by the parties) has held to the contrary — i.e., that Rule 56 does not apply to Rule 23. See Levitt v. Pricewaterhousecoopers, LLP, No. 04 Civ. 5179(RO), 2007 WL 2106309, at *1 (S.D.N.Y. July 19, 2007) (denying motion to strike for lack of personal knowledge because Rule 56 applies only to summary judgment motions).

Outside the Second Circuit, courts are split as to how stringently to apply the rules of evidence at the class certification stage. See, e.g., Serrano v. Cintas Corp., Civ Nos. 04-40132, 06-12311, 2009 WL 910702, at *3 (E.D. Mich. Mar. 31, 2009) (declining to strike declarations in connection with motion to certify, despite admissibility challenges; holding that it was appropriate to consider all evidence at the class certification stage, while deferring admissibility determinations); Lewis v. First Am. Title Ins. Co., 265 F.R.D. 536, 552-53 (D. Idaho 2010) (noting split, but deciding that, for class certification purposes, court would not strictly apply evidentiary rules). That said, after reviewing Second Circuit case law addressing the evidentiary standards applicable to Rule 23 motions, this Court is of the opinion that the Second Circuit would require that such declarations be admissible (i.e., based on personal knowledge and either non-hearsay or information subject to hearsay exceptions).

In deciding a Rule 23 motion, courts in this Circuit must make determinations as to the four requirements for class certification, even though those determinations may overlap with the ultimate issues] in the case. See In re Initial Pub. Offerings Secs. Litig., 471 F.3d 24, 40-41 (2d Cir. 2006). "[T]he district judge must receive enough evidence, by affidavits, documents, or testimony, to be satisfied that each Rule 23 requirement has been met." Id. at 41. The parties seeking class certification must make their Rule 23 showing by a preponderance of the evidence. See Teamsters Local 445 Freight Div. Pension Fund v. Bombardier, Inc., 546 F.3d 196, 202-03 (2d Cir. 2008).

In 2008, the Second Circuit considered what factual finding was required on a Rule 23 motion in the context of a securities fraud putative class action. See In re Salomon Analyst Metromedia Litig., 544 F.3d 474 (2d Cir. 2008). Addressing a 2004 district court opinion that had held that on a class certification motion, the plaintiffs had to make a "prima facie" showing of a particular securities fraud element by "admissible evidence," the Second Circuit rejected the "prima facie" standard but, by its silence, implicitly accepted the admissibility requirement. See id. at 486 n.9 (discussing DeMarco v. Lehman Bros., Inc., 222 F.R.D. 243, 246-47 & n.9 (S.D.N.Y. 2004)). Furthermore, in the In re IPO case discussed above, the Second Circuit analogized the evidentiary showing under Rule 23 to "any other threshold prerequisite for continuing a lawsuit." In re IPO, 471 F.3d at 42. Significantly, in determining a threshold issue, such as jurisdiction, courts may not rely on inadmissible hearsay. See Commercial Union Ins. Co. v. Blue Water Yacht Club Ass'n, 239 F.Supp.2d 316, 319 (E.D.N.Y. 2003) (citing Kamen v. Am. Tel. & Tel. Co., 791 F.2d 1006, 1011 (2d Cir. 1986)).

Moreover, recent dictum by the Supreme Court concerning the standards for evaluating expert opinions on a class certification motion further suggests that evidence offered in connection with such a motion must satisfy admissibility requirements. See Wal-Mart Stores, Inc. v. Dukes, U.S. , 131 S.Ct. 2541, 2253-54 (2011) ("The parties dispute whether [plaintiffs' expert's] testimony even met the standards for the admission of expert testimony under Federal Rule of Civil Procedure 702 and our Daubert case. The District Court concluded that Daubert did not apply to expert testimony at the certification stage of class-action proceedings. We doubt that is so . . . .") (emphasis added) (internal citation and footnote omitted); see also All Star Carts & Vehicles, Inc. v. BFI Canada Income Fund, 280 F.R.D 78, 82 (E.D.N.Y. 2012) ("A decision as to the admissibility of the Stevens Report bears directly and importantly on the motion for class certification.") (emphasis added). For all of these reasons, this Court will now consider whether the 7/5/11 Declarations are based on a lack of personal knowledge or contain inadmissible hearsay.

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