Trial Magazine

After Comcast Corp. v. Behrend (133 S. Ct. 1426 (2013)), plaintiffs have looked to new methods of calculating classwide damages. In that case, the U.S. Supreme Court held that the plaintiffs’ damages model failed to establish that damages could be measured on a classwide basis because the model did not measure damages resulting from the particular alleged antitrust injury. Courts have subsequently required class action plaintiffs’ damages models to “measure only those damages attributable to [the defendant’s conduct],” as noted in Comcast.

One method of calculating damages to meet this standard is through conjoint analysis, a market research tool used to measure customer preferences, such as their willingness to pay for specific product features or combinations of features. Respondents are shown a set of product profiles containing multiple product features and asked to select the profile that they prefer. Marketing experts then use a regression analysis to compare the values of certain features—for example, vacation package options or a particular add-on service—to estimate the relative value of each feature. Through conjoint analysis, you can determine the difference in value between what product owners thought they were receiving and what they actually received based on the nondisclosed defect or the false advertising.

Conjoint analysis can be helpful when plaintiffs must demonstrate expectation damages in consumer protection and breach-of-warranty claims. A market researcher can use conjoint analysis to determine how much consumers in the appropriate market value an attribute of or a representation made about a particular product. An economist can then use that value to determine how much of the purchase price, if any, consumers should be refunded. There are two specific types of cases in which this analysis is particularly useful.

False advertising and product labeling cases. Conjoint analysis can shed light on the percentage of the price premium that is associated with the challenged or false claim. It can help estimate the perceived value of a certain product feature or claim, such as a product being labeled as “all natural” or “made in the U.S.A.” or being advertised as compliant with certain state or federal regulations. You may need to reflect other market factors that may impact price such as brand equity.

Product defect cases. This can be helpful when you need to quantify potential economic damages related to a product defect. For example, suppose the marketing expert finds that a representation that a stain repellent will work 100 percent of the time, if false, would result in a 45 percent reduction in the number of consumers purchasing that item. The economist would then take the “willingness to pay” determined by the marketing expert and compare that to the actual amounts consumers paid for the product and to relevant market conditions that potentially affect market price (such as supply and demand) to provide an opinion on how much should be refunded to the class.

Here are some cases in which conjoint surveys were accepted by courts:

• In re Whirlpool Corp. Front-Loading Washer Prods. Liab. Litig., 45 F. Supp. 3d 724, 750–53 (N.D. Ohio 2014)
• Khoday v. Symantec Corp., 93 F. Supp. 3d 1067, 1082–83 (D. Minn. 2015)
• In re Lenovo Adware Litig., 2016 WL 6277245 (N.D. Cal. Oct. 27, 2016)
• Sanchez–Knutson v. Ford Motor Co., 181 F. Supp. 3d 988, 996 (S.D. Fla. 2016)
• In re Dial Complete Mktg. and Sales Practices Litig., No. 11-MD-2263-SM, MDL No. 2263 (D.N.H. Mar. 27, 2017)
  

Potential pitfalls. Courts have not always accepted conjoint analysis as a model for awarding classwide damages, and some have denied class certification on that basis. For example, some courts have found that conjoint surveys fail to consider the supply side—the seller’s willingness to sell—or other relevant market conditions. In Saavedra v. Eli Lilly and Co. (2014 WL 7338930, at *5 (C.D. Cal. Dec. 18, 2014)), the plaintiffs sought to use conjoint analysis to demonstrate how much less patients would have been willing to pay for the defendant’s antidepressant had they been adequately informed about the drug’s withdrawal risks. The court held that because the prescription drug market is so impacted by regulations and restrictions, measuring consumers’ willingness to pay was not a workable damages model.

Under the right set of facts and with proper methodology, conjoint analysis is becoming an increasingly accepted method for proving classwide damages in consumer cases.

Sally M. Handmaker is an associate at Cohen Milstein in Washington, D.C. She can be reached at shandmaker@cohenmilstein.com.