The Bitter and Sweet of the <i>Wal-Mart/Comcast/Halliburton</i> Triumvirate: More Grounds for Defeating Class Certification, But More Exposure to Discovery

The Bitter and Sweet of the Wal-Mart/Comcast/Halliburton Triumvirate: More Grounds for Defeating Class Certification, But More Exposure to Discovery

Corporate litigants are still celebrating recent United States Supreme Court victories by defendants in high-profile class-action cases. As they should. After all, the trio of cases, Wal-Mart Stores, Inc. v. Dukes, Comcast Corp. v. Behrend, and Halliburton Co. v. Erica P. John Fund, Inc., mark a fundamental change in class litigation. Following these decisions, lower courts must now engage in a "rigorous analysis" of the prerequisites for class certification—an analysis that frequently "will entail some overlap with the merits of the plaintiff's underlying claim." Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541, 2551 (2011). Going forward, corporate defendants opposing class certification have a number of new arrows in their litigation quiver to defeat class certification.

Yet with these victories comes the threat of additional costs by way of discovery. With merits considerations now fair game at the certification stage, so too may be class discovery. Historically, class defendants have successfully bifurcated merits discovery from class discovery, cabining their discovery exposure at the class stage. Going forward, however, courts may well give plaintiffs wider berth at the class discovery stage, given the significance that merits issues now play in the certification analysis.

This Commentary discusses how federal district courts have approached discovery in the wake of Wal-Mart, Comcast, and Halliburton. To date, most courts confronting class discovery issues have expanded the scope of plaintiffs' precertification discovery to include merits-based inquiries. But not all courts have followed suit, with some still limiting the scope of discovery in meaningful ways, and others shifting the financial burden of discovery. And still other courts have seized upon more active case management plans to streamline class discovery dramatically. Class-action defendants should pay heed to this developing class-action discovery landscape.


In 2011, the Supreme Court raised the bar for plaintiffs seeking class certification by requiring lower courts to conduct a "rigorous analysis" to determine whether the prerequisites for certification are met. Wal-Mart, 131 S. Ct. at 2551 (reversing the grant of class certification due to a lack of commonality under Fed. R. Civ. P. 23(a)(2)). This "rigorous analysis," the Court explained, often will "entail some overlap with the merits of the plaintiff's underlying claim." Id. In the words of the Court, a merits-entwined inquiry for purposes of class certification "cannot be helped." Id. at 2551-52 (collecting cases).

Two years later, the Supreme Court doubled-down on its "rigorous analysis" requirement for class certification, applying the teachings of Wal-Mart to prospective Rule 23(b)(3) classes as well. See Comcast Corp. v. Behrend, 133 S. Ct. 1426, 1432 (2013) (reversing the grant of class certification due to a lack of predominance under Fed. R. Civ. P. 23(b)(3)). In Comcast, the Court criticized the lower court's "refus[al] to entertain arguments against respondents' damages model that bore on the propriety of class certification, simply because those arguments would also be pertinent to the merits determination." Id. at 1432-33. Rather, the Court's precedents "flatly" require a determination that Rule 23 is satisfied, "even when that requires inquiry into the merits of the claim." Id. at 1433.

The third installment in the Supreme Court's class-action trilogy came in 2014 in Halliburton Co. v. Erica P. John Fund, Inc., 134 S. Ct. 2398 (2014). There, the Supreme Court opened the door even further to merits-based defenses at the class-certification stage—this time in the context of securities class actions. In Halliburton, the Court held that securities defendants can rebut the presumption of reliance under a fraud-on-the-market theory not only during the merits phase but also during class certification. Id. at 2414-15. Securities defendants, moreover, can rebut this presumption through the use of direct and indirect evidence alike. Id. at 2417.

The Wal-Mart/Comcast/Halliburton triumvirate marked big wins for class-action defendants, enabling them to raise merits-based defenses that might otherwise never be presented to a court. That is so because many class cases are settled following certification, given the high stakes of merit-stage proceedings. Now, those merits issues are ripe for consideration at the class stage, to the extent they inform the certification analysis.

But with these new rights come potential new discovery responsibilities. The class-action discovery landscape is changing in the aftermath of Wal-Mart and its progeny. Now more than ever, defendants must balance their litigation strategy to maintain a strong likelihood of defeating class certification while controlling discovery costs.

The "Old Rules" of Precertification Discovery

Before Wal-Mart/Comcast/Halliburton, district courts faced a "threshold question" of whether any precertification discovery was needed. See Manual for Complex Litigation § 21.14 (4th ed. 2004). For claims that rest on readily available and undisputed facts or that raise only issues of law, precertification discovery generally was not warranted. Id.

Likewise, before Wal-Mart/Comcast/Halliburton, even when some discovery was necessary to determine whether the prerequisites for certification were met, courts routinely bifurcated discovery between certification issues and those relating to the merits of the allegations. See, e.g., Cox v. Zurn Pex, Inc. (In re Zurn Pex Plumbing Prods. Liab. Litig.), 644 F.3d 604, 612-13 (8th Cir. 2011) (explaining that it is common in putative class actions for defendants to seek "bifurcated discovery" between class certification and merits issues); Larson v. Burlington N. & Santa Fe Ry. Co., 210 F.R.D. 663, 665 (D. Minn. 2002) ("Here, we conclude that the mandate of Rule 1, Federal Rules of Civil Procedure, is best implemented by bifurcated discovery—that is, by completing discovery as to the claims of the four named-Plaintiffs, prior to extensive discovery on the merits of the 'class claims.'"). Bifurcated discovery was utilized to "increase efficiency" in complex cases and reduce attendant discovery costs for defendants. See Zurn Pex, 644 F.3d at 613.

The "New Rules" of Precertification Discovery

In light of recent Supreme Court decisions, trial courts face new questions over the appropriate scope of precertification discovery. Put simply, if defendants can raise merits-based defenses to defeat class certification, as the Supreme Court has authorized, can plaintiffs pursue discovery on the merits before a certification decision?

So far, few opinions address this question head-on. As a general rule, district courts retain broad discretion to manage discovery disputes, and this discretion extends to decisions over bifurcating discovery in class actions. In re Groupon Secs. Litig., No. 12 C 2450, 2014 U.S. Dist. LEXIS 26212, at *5-6 (N.D. Ill. Feb. 24, 2014); see also Evans v. Linden Research, Inc., No. C 11-01078 DMR, 2012 U.S. Dist. LEXIS 58024, at *5-6 (N.D. Cal. Apr. 25, 2012). Courts are utilizing this discretion in different ways.

Some Courts Decline to Bifurcate Discovery Post-Wal-Mart/Comcast/Halliburton. In the wake of Wal-Mart/Comcast/Halliburton, a growing number of district courts are now "reluctant to bifurcate class-related discovery from discovery on the merits." See Chen-Oster v. Goldman, Sachs & Co., 285 F.R.D. 294, 300 (S.D.N.Y. 2012) (collecting cases); see also Groupon, 2014 U.S. Dist. LEXIS 26212, at *12 (denying defendant's motion for bifurcated discovery and noting that, "in terms of bifurcation, the lesson of [Comcast] is more detrimental to the Defendants' argument than helpful").

For example, in Chen-Oster, the Southern District of New York cited Wal-Mart as the basis for refusing to bifurcate discovery before certification. 285 F.R.D. at 298-301. The court permitted plaintiffs to pursue discovery directed not only "toward general [employment] policies" of Goldman Sachs, which the defendant conceded related to the prerequisites for certification, but also to pursue discovery related to "individualized personnel data" that arguably went to the merits of the plaintiffs' case. Id. at 300-01. As the court explained, "[Wal-Mart] does not … militate in favor of bifurcating discovery prior to certification. On the contrary, if anything, [Wal-Mart] illustrates the need to develop the record fully before a class motion is considered." Id. at 298.

Similarly, in Groupon, the Northern District of Illinois relied on Wal-Mart and Comcast in denying the defendant's motion to bifurcate discovery. 2014 U.S. Dist. LEXIS 26212, at *12, *15. There, the court looked to three factors to determine whether bifurcated discovery is appropriate: (i) expedience, (ii) economy, and (iii) severability, "meaning whether class certification and merits issues are closely enmeshed." Id. at *6. In discussing the economy of bifurcated discovery, the court noted that oftentimes, "bifurcation can actually increase the costs of litigation because of disputes over what constitutes merits and what constitutes class discovery." Id. at *14. Likewise, because the class-certification analysis post-Wal-Mart will entail some overlap with the merits of the underlying claims, bifurcation will not create the same efficiencies as before. Id. at *14-16 (concluding that defendants had not established a "good reason" to bifurcate discovery).

Several district courts have followed suit in denying defendants' motions for bifurcated discovery, in the wake of recent Supreme Court precedent. See, e.g., Johnson v. Flakeboard Am. Ltd., No. 4:11-2607-TLW-KDW, 2012 U.S. Dist. LEXIS 83702, at *16-17 (D.S.C. Mar. 26, 2012) ("The Supreme Court's decision in [Wal-Mart] supports Plaintiffs' contention that discovery into the merits of the [employment discrimination] claim is necessary before entering findings of fact on whether Rule 23 standards have been met."); In re Cmty. Bank of N. Va. Mortg. Lending Practices Litig., MDL No. 1674, 2011 U.S. Dist. LEXIS 107366, at *24 (W.D. Pa. Sept. 20, 2011) (denying bifurcation in light of Wal-Mart); cf. Feske v. MHC Thousand Trails Ltd. P'ship, No. 11-CV-4124-PSG, 2012 U.S. Dist. LEXIS 47236, at *6 (N.D. Cal. Apr. 3, 2012) (holding that disclosure of members of putative class was "even more appropriate in the wake of [Wal-Mart]").

This growing trend toward broader precertification discovery does not mean, however, that plaintiffs automatically are entitled to merits-based discovery at the certification stage. To obtain such discovery, plaintiffs still must articulate how the materials they seek implicate the class-certification analysis under Rule 23. See Chen-Oster, 285 F.R.D. at 300 (concluding that because "[e]mployment policies do not exist in a vacuum[,]" discovery into putative class members' employment experiences was necessary "to support a finding of commonality"); Johnson v. Flakeboard Am. Ltd., 2012 U.S. Dist. LEXIS 83702, at *17 ("[P]laintiffs are generally entitled to pre-certification discovery to establish the record the court needs to determine whether the requirements for a class action suit have been met" (emphasis added) (quotation omitted)). Absent any overlap between the merits and the prerequisites for class certification, plaintiffs may find themselves hard-pressed to obtain such broad discovery.

Other Courts Continue to Limit the Scope and Costs of Precertification Discovery Post-Wal-Mart/Comcast/Halliburton. Other courts, however, continue to bifurcate discovery to the extent practicable following recent Supreme Court precedent. See Lake v. Unilever U.S., Inc., 964 F. Supp. 2d 893, 933 (N.D. Ill. 2013) ("While the Court recognizes that the class certification and merits issues may overlap in some respects, this alone is not enough to overcome the efficiency benefits to be gained from bifurcated discovery."); see also Christian v. Generation Mortg. Co., No. 12 C 5336, 2013 U.S. Dist. LEXIS 69855, at *11-13 (N.D. Ill. May 16, 2013) (citing the efficiency benefits of bifurcated discovery, granting the defendant's motion to bifurcate, and rejecting the plaintiffs' claim that foreclosing merits discovery "would, in effect, unfairly end the entire case").

Still Other Courts Have Adopted Less Traditional Approaches to Precertification Discovery, Including Cost-Sharing or More Active Case Management Plans. Finally, a few courts have adopted less traditional approaches to managing the scope and expense of precertification discovery. In one case, a district court even ordered the plaintiffs to bear the costs of far-reaching discovery regarding class-certification issues. Boeynaems v. LA Fitness Int'l, LLC, 285 F.R.D. 331, 334-41 (E.D. Pa. 2012). In Boeynaems, the court noted that, because class determinations require a "searching inquiry" and "very detailed analysis," the costs of precertification discovery are often unfairly "asymmetrical" to defendants. Id. Accordingly, where class certification is pending and the plaintiffs have asked for extensive discovery, "compliance with which will be very expensive," the plaintiffs should pay for the discovery they seek absent compelling circumstances to the contrary. Id. at 341 ("If the plaintiffs have confidence in their contention that the Court should certify the class, then the plaintiffs should have no objection to making an investment."). Boeynaems appears to be the first instance in which a court has addressed shifting the costs of discovery in a preclass-determination setting. Whether other courts will follow its logic remains to be seen. Boeynaems, however, is a helpful tool for defendants caught in the post-Wal-Mart/Comcast/Halliburton discovery vortex.

Another alternative to permitting extensive precertification discovery is to impose a more active case management plan upon the parties—for example, a case management plan that seeks to resolve certain "death knell" issues from the plaintiffs' complaint before turning to certification. See generally Simms v. Bayer Healthcare LLC (In re Bayer Healthcare), 752 F.3d 1065 (6th Cir. 2014). In Bayer Healthcare, the plaintiffs filed a putative class action against the manufacturers of various flea-and-tick products for dogs and cats, alleging that the manufacturers made false representations regarding their products. Id. at 1067-68. During the case management conference, the district court listened to the parties' arguments before ultimately categorizing the matter as essentially "a one-issue case." Id. at 1069. "The district court then crafted an evidentiary plan for handling the case" and "expressed concerns about spending millions of dollars in discovery." Id. Accordingly, the court limited discovery to whether the defendants could "produce studies that substantiated their advertising claims" and, if so, whether the plaintiffs could refute those studies. Id. at 1069-70.

After the parties submitted their competing evidence, the defendants moved for summary judgment. Id. at 1071. The district court granted summary judgment to the defendants on the grounds that "the case management plan provided for limited discovery and briefing" and that the defendants' studies "substantiated their advertising claims." Id. Thus, the defendants prevailed without ever engaging in extensive discovery regarding the prerequisites for class certification.

Although Bayer Healthcare presented an unusual case management plan, the Sixth Circuit affirmed the grant of summary judgment and rejected the plaintiffs' later claims that they were denied sufficient discovery. Id. at 1074, 1078. Bayer Healthcare thus provides yet another, albeit irregular, path that defendants can pursue in controlling the costs of precertification discovery.[1]


Wal-Mart, Comcast, and Halliburton offer both the bitter and the sweet to class-action defendants. These decisions arm defendants with powerful tools for defeating class certification. At the same time, the decisions increase the likelihood of broader merits discovery and increased costs at the certification stage. Given the abuse-of-discretion standard for appellate review, clearer rules governing the scope of this discovery will take time to evolve. In the meantime, class-action defendants must know their strategic options available to limit discovery while building the record to defeat class certification.

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[1] Jones Day served as counsel for defendant Merial Inc. in the trial and appellate proceedings in Bayer Healthcare.