Supreme Court Watch: Comcast v. Behrend: Clarifying The Preliminary Evidentiary Showing For Class Certification

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Supreme Court Comcast case considers whether class certification should be denied where the plaintiff is unable "to establish that damages could be measured on a classwide basis"; Court underscores the role of “rigorous analysis” by the trial court to ensure admissible evidence supports "that damages are susceptible of measurement across the entire class"; the case has implications for the type and quality of evidence necessary in the early stages of a class action, in Comcast v. Behrend, 569 U.S. _, 133 S.Ct. 1426 (March 27, 2013) (No. 11-864)

In Comcast v. Behrend, 569 U.S. _, 133 S.Ct. 1426 (March 27, 2013) (No. 11-864), the Supreme Court held that not only must class action plaintiffs satisfy the Fed. R. Civ. P. 23(a) requirements for class certification, but the same analysis is necessary in dealing with the requirements of Fed. R. Civ. P. 23(b). Applying the Rule 23(a) "rigorous analysis" for whether common questions of liability predominate, to Rule 23(b)'s question of damages has important implications for whether a court will consider the merits of a class-action dispute. Comcast, 569 U.S. at _ ("And for purposes of Rule 23, courts must conduct a ‘rigorous analysis’ to determine whether that is so.") (quoting Wal-Mart Stores, Inc. v. Dukes, 564 U.S. _, 131 S. Ct. 2541, 180 L. Ed. 2d 374 (2011)). The Supreme Court described the court’s duty to take a ‘close look’ at whether commonquestions predominate over individual ones," as required under Rule 23. Comcast, 569 U.S. at _ (citation omitted). Significantly, the case raises questions about what preliminary evidence must be offered for class certification, including evidence to support the applicable damages theory for the class.

Summary Facts And Proceedings

The case involved a civil antitrust action brought by more than 2 million current and former cable subscribers alleging that Comcast engaged in an anticompetitive strategy by entering into unlawful swap agreements and monopolizing services in violation of 15 U.S.C. §§ 1, 2. The plaintiffs claimed that Comcast's “clustering” strategy to concentrate operations eliminated competition and increased cable prices. The plaintiffs sought class certification under Fed. R. Criv. P. 23(b)(3) which requires a court finding "that the questions of law or fact common to class members predominate over any questions affecting only individual members.” Of four antitrust theories proffered to support a finding of liability, the district court had found that the plaintiff's evidence could support only one of four plausible theories as capable of class-wide proof under Fed. R. Civ. P. 23(a). In assessing Rule 23(b) requirements for a class-wide proof of damages suffered, the court avoided reaching the merits of the claim. It noted that only one of the four theories of liability could possibly yield to a common calculation of damages (the "overbuilder" model). Specifically,

proof at trial through evidence that [was] common to the class rather than individual to its members”; and (2) that the damages resulting from that injury were measurable “on a class-wide basis” through use of a “common methodology.”
Comcast, 569 U.S. at _.


A divided panel of the Third Circuit affirmed, but emphasized that, “[a]t the class certification stage,” respondents were not required to “tie each theory of antitrust impact to an exact calculation of damages.” According to the court, it had “not reached the stage of determining on the merits whether the methodology is a just and reasonable inference or speculative.” Rather, the court said, respondents must “assure us that if they can prove antitrust impact, the resulting damages are capable of measurement and will not require labyrinthine individual calculations.” Ibid. In the court's view, that burden was met because respondents' model calculated “supra-competitive prices regardless of the type of anticompetitive conduct.” Behrend v. Comcast Corp., 655 F. 3d 182 (3d Cir. 2011).

Addressing The Question Presented

In an opinion authored by Justice Antonin Scalia, the majority and dissent disagreed whether the original question presented in the case had been modified. As the majority noted, the quesiton presented when certiorari review was granted was:

Whether a district court may certify a class action without resolving whether the plaintiff class had introduced admissible evidence, including expert testimony, to show that the case is susceptible to awarding damages on a class-wide basis.
Comcast v. Behrend, 569 U.S. _, n.4 (March 27, 2013) (quoting 567 U. S., at _, 133 S.Ct. 24 (2012)).

However, the respondents contended that since the petitioners had not objected to the expert testimony below, they could not argue that the testimony was inadmissible. The majority concluded:

but it does not make it impossible for them to argue that the evidence failed “to show that the case is susceptible to awarding damages on a class-wide basis.” Petitioners argued below, and continue to argue here, that certification was improper because respondents had failed to establish that damages could be measured on a classwide basis. That is the question we address here.
Instead, the dissent contended that the better course would have been for the Court to dismiss the writ of certiorari as improvidently granted. The reason for this was practical -- the parties' briefing had focused on the question on use of expert evidence at the class-certification stage of the case, it was ill-considered for the Court to now go and decide a different issue -- whether the plaintiff's damages model could support class certification. Indeed, noted the dissent, the plaintiff had forfeited is question by its failure to timely object and move to strike the respondent's expert evidence. This alone was "reason enough to dismiss the writ as improvidently granted."

Majority Analysis

Justice Scalia’s wrote the opinion for the court majority, made up of Chief Justice John G. Roberts, Jr., and Justices Anthony M. Kennedy, Clarence Thomas, and Samuel Anthony Alito, Jr. The five believed that the district court as well as the Third Circuit had "improperly certified" the case against Comcast as a class-action:

By refusing 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, the Court of Appeals ran afoul of our precedents requiring precisely that inquiry. And it is clear that, under the proper standard for evaluating certification, respondents' model falls far short of establishing that damages are capable of measurement on a classwide basis. Without presenting another methodology, respondents cannot show Rule 23(b)(3) predominance: Questions of individual damage calculations will inevitably overwhelm questions common to the class. This case thus turns on the straightforward application of class-certification principles
In particular, the majority noted that the expert damages proof was insufficient to warrant class certification:

The scheme devised by respondents’ expert, Dr. McClave, sought to establish a “but for” baseline — a figure that would show what the competitive prices would have been if there had been no antitrust violations. Damages would then be determined by comparing to that baseline whatthe actual prices were during the charged period. The “but for” figure was calculated, however, by assuming a market that contained none of the four distortions that respondents attributed to petitioners’ actions. In other words, the model assumed the validity of all four theories of antitrust impact initially advanced by respondents: decreased penetration by satellite providers, overbuilder deterrence, lack of benchmark competition, and increased bargaining power. At the evidentiary hearing, Dr. McClave expressly admitted that the model calculated damages resulting from “the alleged anticompetitive conduct as a whole” and did not attribute damages to any one particular theory of anticompetitive impact.

. . .

Prices whose level above what an expert deems “competitive” has been caused by factors unrelated to anaccepted theory of antitrust harm are not “anticompetitive” in any sense relevant here. “The first step in a damages study is the translation of the legal theory of the harmful event into an analysis of the economic impact of that event.” Federal Judicial Center, Reference Manual on Scientific Evidence 432 (3d ed. 2011) (emphasis added). The District Court and the Court of Appeals ignored that first step entirely.
Comcast, 569 U.S. at _.

The majority opinion echoed the point that the decision on class certification will necessarily entail some consideration of the merits. As the Court noted in the Wal-Mart Stores decision two years ago: "Frequently that 'rigorous analysis' will entail some overlap with the merits of the plaintiff’s underlying claim. That cannot be helped." Wal-Mart Stores, 564 U.S. at _, 131 S. Ct. at 2551).

While class certification was foreclosed, the Court noted that "[t]he other theories of liability" advanced for relief "may well be available for the plaintiffs to pursue as individual actions." Comcast, 569 U.S. at _ n.3. This, of course, could be slight consolation for plaintiffs in terms of minimizing the costs of trial. Comcast, 569 U.S. at _ n.3. This, of course, could be slight consolation for plaintiffs in terms of minimizing the costs of trial.

Dissent

Justices Ruth Bader Ginsburg and Stephen G. Breyer, wrote an unusual joint dissent, joined by Justices Sonia Sotomayor, and Elena Kagan. The dissenters implicitly could accept a bifurcated model of class-action proceedings. For them, once there was a sufficient basis for certification of the class based on a commonality of their liability theories, probing the adequacy of the damages move was premature. At the certification stage of the litigation, a showing of a damage model capable of showing a general injury was sufficient. For at least two dissenters, liability was the key question to be resolved through a class certification. This was in contrast to the majority opinion's that would require compliance with Fed. R. Civ. P. 26(b), as well as he Rule 26(a)requirements.

Certiorari Summary Dispositions

Post Update: The impact of the Comcast ruling has already been felt in other class action cases. Following the Comcast decision, the Court granted two petitions for a writ of certiorari and remanded for further consideration in light of the Comcast decision. See RBS Citizens, N.A., et al. v. Ross, Synthia G., et al. (No. 12-165) (overtime class action under Illinois state law ); Whirlpool Corp. v. Glazer, et. al (No. 12-322) (consumer class action alleging defective washing machines).

In addition to these two remands, it is notable that a third case has been listed for certiorari review and it raises a number of the same issues approached in Comcast. This case, In re Zurin Prx Plumbing Products Liability Litigation, 644 F.3d 604 (8th Cir. 2011), involved class of homeowners suing a manufacturer of polyethylene plumbing systems (pex) as inherently defective. The district court rejected defendant industry's motion to strike the testimony by the plaintiff's expert. The trial court refused to do this, but did grant the plaintiff's class certification on warranty and negligence claim, denying certification as to consumer protection claims. The Eighth Circuit affirmed en banc. The issue the circuit focused on involved

Here, both sides agree that the relevant expert testimony must be evaluated and weighed by the court before it decides to certify a class. Zurn urges that we adopt a new rule, requiring a district court to determine conclusively at an early stage, not just whether or not expert evidence is sufficient to support class certification under Rule 23, but also whether that evidence will ultimately be admissible at trial. It urges us to follow the approach used by a Seventh Circuit panel in American Honda Motor Company, Inc. v. Allen, 600 F.3d 813, 816–17 (7th Cir. 2010) (per curiam).
The Eighth Circuit noted this was an issue of some division between the circuits as an alternate approach had been litigated in American Honda Motor Company, Inc. v. Allen, 600 F.3d 813, 816–17 (7th Cir. 2010) (per curiam), where the circuit requiring a district court to determine conclusively at an early stage, not just whether or not expert evidence is sufficient to support class certification under Rule 23, but also whether that evidence will ultimately be admissible at trial." The Eighth Circuit noted that "no other circuit has followed the approach advocated in American Honda, and at least one court sitting en banc has rejected it." In re Zurin, 600 F.3d at 611 n.4). See Dukes v. Wal–Mart Stores, Inc., 603 F.3d 571, 602 n. 22 (9th Cir. 2010) (en banc), rev'd on other grounds , 564 U.S. _, 131 S. Ct. 2541, 180 L. Ed. 2d 374 (2011). While an Eleventh Circuit panel mentioned the case in a recent unpublished opinion, the issue in that case was the weight afforded to certain expert testimony, not its admissibility. Sher v. Raytheon, 419 Fed.Appx. 887, 890, 2011 WL 814379 at *3 (11th Cir. Mar. 9, 2011) (No. 09–15798) (unpublished).

Conclusion

The Comcast decision requiresmust be prepared to address the certification requirements outlined by both Fed. R. Civ. P. 23(a) and 23(b) with the same sort of "rigorous analysis." This may require a court to resolve a question on the merits of the litigation before the proper class to pursue the litigation is designated. More significant are the many issues that remain in the wake of the case, including:

  • Does Comcast preclude the general practice of some circuits to routinely certify classes that raise individualized damages issues or bifurcate the proceedings, trying liability as a class and damages as individualized claims?
  • What impact, if any, does Comcast have on the approach of some parties in a class action to pursue only one theory of damages and concede claims for individual additional or different damages over and above those alleged for class-wide liability?
  • As the focus of Comcast was a "straightforward application of class-certification principles" and not with the admissibility of evidence, is Daubert an appropriate standard to use at class certification stage (e.g., can a court resolve class certification only in cases truly capable of collective resolution (as well as liability)?
  • What is the impact on class litigation where damages tend to be inherently individualized? For these case, will it be harder to bring these cases as a class now?

For the briefs filed in the case, transcript of the oral argument, and more information, see Supreme Court Watch: Comcast v. Behrend - Examining Expert Evidence In The Class Action Certification Process.

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