DAMAGE METHODOLOGY TRENDS WITHIN FALSE ADVERTISING AND PRODUCT DEFECT CLASS ACTIONS

By Dan Werner, Ph.D., CPA and Garrett Glasgow, Ph.D.¹

I. INTRODUCTION

Over the past decade, courts have increasingly focused on issues related to the calculation of damages during the class certification stage.² At the class certification stage, Rule 23(b)(3) requires the court to find that common issues predominate, including with respect to the alleged injury.³ Cases such as Comcast highlight the need for a damages model to be tied to the theory of liability and for damages to be measurable on a classwide basis.⁴ The increased rigor with respect to issues of predominance and damages can also be seen through the evolution of damage approaches within false advertising and product defect litigation. As a result, engaging a damages expert at the class certification stage is now a de facto requirement in many cases.

This article reviews several different approaches to calculating damages in false advertising and product defect class action litigation in recent years. Specifically, we review the full refund approach, the promised discount approach, and several different applications of a price premium approach, including a simple price comparison, regression analysis, conjoint surveys, and economic market simulations. Although one or more damages methodologies may be available in theory, practitioners must be careful to design and implement their damages model in a manner that fits the facts of the case. Whether a damages model is sufficient for class certification often hinges on the details of implementation and the facts of the case, as we show in several examples.