New Authority for Class Action Defendants Allowing Merits-First Bifurcated Discovery
The cost and burden of class action discovery often puts undue pressure on defendants to settle cases that have little or no merit. To relieve this pressure, courts sometimes permit bifurcated discovery, with the parties first addressing class certification issues and later, if warranted, merits issues. Recently, in Physicians Healthsource, Inc. v. Janssen Pharms., Inc., the District of New Jersey ordered bifurcated discovery but reversed the normal mechanics, limiting the first phase to merits issues before permitting any class discovery. The result is the same, though: potentially enormous time- and cost-savings. This strategy may be worth considering in cases where there are potentially dispositive merits issues.
Plaintiff in Physicians Healthsource claimed defendants sent faxes violating the Telephone Consumer Protection Act (“TCPA”). The parties disputed whether the faxes actually fell within the scope of the TCPA as commercial advertisements, a clearly dispositive issue under the statute. Defendants argued that bifurcation permitting the parties to address this threshold issue first would save time and money. The court agreed and limited the first phase of discovery to four months to address only this issue, citing Fed R. Civ. P. 42(b) — which provides that issues may be tried separately “to expedite and economize.”
Plaintiffs commonly raise three arguments in opposing bifurcation: (1) bifurcation causes undue delay and prejudice to plaintiffs; (2) because class and merits issues overlap, bifurcation results in discovery disputes and/or duplication of effort; and (3) bifurcation is inappropriate since the “rigorous analysis” required at the class certification stage requires inquiry into the merits. Merits-first bifurcation is not susceptible to any of these arguments:
- Merits-First Bifurcation Is Efficient: As the Physicians Healthsource court noted, bifurcation “has the potential to save the parties and the Court from the substantial costs and burdens associated with whole scale class action discovery. ” Discovery on the threshold issue could be completed quickly, after which “the District Court may determine that summary judgment is warranted.” The Court was not persuaded that plaintiff would be unduly prejudiced, particularly since the faxes at issue were sent in 2008 and plaintiff did not sue until about four years later.
- Merits-First Bifurcation Has No Potential For Overlap: The Physicians Healthsource court found that in this case merits and class issues were “totally distinct,” and because “there will be no significant overlap between the two,” there is “no real danger of a duplication of efforts or corresponding increase in litigation costs[.]”
- Merits-First Bifurcation Does Not Handicap Plaintiffs’ Class Certification Motion: In Wal-Mart v. Dukes, the Supreme Court noted that the “rigorous analysis” required for class certification “will entail some overlap with the merits of the plaintiff’s underlying claim.” But merits-first bifurcation, of course, contemplates resolution of the action well before the certification motion.
Given the underlying rationale, defendants arguing for merits-first bifurcation should show that an early summary judgment motion is viable. Though parties frequently wait until discovery is closed, Fed R. Civ. P. 56(b) expressly permits such motions to be made “at any time until 30 days after the close of all discovery.”
While the cases where merits-first bifurcation can be employed will be limited, the potential for early resolution and enormous time- and cost-savings makes Physicians Healthsource a case worth bookmarking.