Opinion analysis: No common ground
on Mar 29, 2013 at 4:30 pm
The majority’s opinion in Comcast v. Behrend transforms a complex issue into a simple one. By doing so, the majority provokes a dissent that, among other things, tries to put the kibosh on one possible interpretation of the majority’s opinion that could be disastrous to antitrust class actions. As in Amgen Inc. v. Connecticut Retirement Plans and Trust Funds, both the majority and the dissent in Comcast show a division on the Court over whether class actions require common questions, or common answers.
Also as in Amgen, Comcast concerns the predominance requirement of Rule 23(b)(3), which permits a court to certify a class action if, among other things, issues common to the class “predominate” over issues that are unique to each class member. Previously in Comcast, the plaintiffs-respondents filed an antitrust class action alleging that the defendant-petitioner Comcast engaged in unlawful, anticompetitive conduct to monopolize the Philadelphia area. The plaintiffs-respondents advanced four theories to support their antitrust claims, but the district court only certified the class action as to one theory – that Comcast acquired a significant share of the Philadelphia area, which unlawfully deterred competitors, or “overbuilders,” from entering the market.
Comcast argued before the district court that the plaintiffs-respondents’ evidence showing antitrust impact – that the alleged antitrust violation harmed each member of the class – did not sufficiently prove impact on a common basis. Comcast, in particular, attacked an expert model which compared the actual prices for Comcast’s services to a competitive benchmark designed to reflect what Comcast’s services would have cost “but for” its anticompetitive conduct. The model showed an increase in price for all class members due to Comcast’s alleged anticompetitive conduct. Comcast argued, however, that the model was not reliable because, among other things, it did not isolate the impact of the overbuilder deterrence theory from the other three theories proposed by the plaintiffs-respondents.
The district court disagreed, and noted that, whatever its accuracy, the proffered evidence was sufficient to show that antitrust impact could be proven on a common basis, and would not result in thousands of mini-trials. Thus, in the district court’s view, a class action was warranted under Rule 23(b)(3) because common issues would predominate over individual issues. The Third Circuit affirmed, and noted that the plaintiffs-respondents did not need to prove antitrust impact, just that the impact was capable of common proof.
The Court granted certiorari, but reformulated the question presented as one concerning whether the expert’s model had to be admissible under Daubert for class certification purposes. Consequently, the justices during oral argument focused on what standard of admissibility, if any, should apply to evidence like the expert’s model offered to show a predominance of common issues.
The majority opinion, however, sidesteps these issues of admissibility entirely. It first invokes Wal-Mart v. Dukes to reiterate that a district court is free to consider the merits if the merits overlap with a requirement for class certification. Although Wal-Mart only dealt with the Rule 23(a)(2) requirement of commonality, the majority stresses that the overlap exception applies equally to the Rule 23(b)(3) requirement of predominance.
The majority opinion then turns to the plaintiffs-respondents’ model, and concludes that it is insufficient to establish predominance. The opinion, written by Justice Scalia, points out that the model does not isolate the impact of overbuilder deterrence from the other antitrust theories proposed by the plaintiffs-respondents. Accordingly, the plaintiffs-respondents fail to establish predominance because their does not “bridge the differences between supra-competitive prices in general and supra-competitive prices attributable to the deterrence of overbuilding.”
The dissent, written by Justice Ginsburg and joined by Justices Breyer, Sotomayor, and Kagan, first takes issue with the majority’s attempt to sweep aside the issue of admissibility that the Court directed the parties to brief and which was the focus of oral argument. In the dissent’s view, the Court should dismiss the writ of certiorari as improvidently granted rather than “abandon the question we instructed the parties to brief.”
The dissent then admonishes the majority for conflating antitrust impact with proof of the amount of damages. As I have discussed in prior work, proof of antitrust impact does not require an accurate determination of the amount of damages for each plaintiff, just that each class member was, in fact, injured by the alleged antitrust conduct. Typically courts have only required for class certification purposes that antitrust impact be capable of proof on a classwide basis, with the amount of damages typically calculated on the back end on an individual basis. But the majority suggests in footnote 4 that the evidence of antitrust impact at issue in this case must further prove that “the case is susceptible to awarding damages on a class-wide basis.”
The dissent points out emphatically that courts have never required proof of recoverable damages on a common basis to certify an antitrust class action. In fact, the dissent states that “[r]ecognition that individual damage calculations do not preclude class certification under Rule 23(b)(3) is well nigh universal,” with “[l]egions of appellate decisions across a range of substantive claims” supporting this view. [p. 4]. Moreover, the dissent stresses that the ruling here is “good for this day and case only” because the plaintiffs-respondents conceded that the amount of recoverable damages must be susceptible to classwide proof. Accordingly, the dissent is quick to stress that the majority “breaks no new ground” on this issue. This is important because a further requirement of proving the amount of damages for each individual plaintiff on a classwide basis would make it difficult, if not impossible, to certify antitrust class actions.
Common Questions v. Common Answers
In the end, the majority and dissent disagree on whether, for purposes of class certification under Rule 23(b)(3), plaintiffs only have to show that there are questions common to the class, or go further and provide answers to all issues that are common to the class. This explains why the majority is at ease in evaluating the expert model provided to show antitrust impact. In the majority’s view, a court must determine whether the evidence sufficiently answers the issue of damages for each class member. Because the model does not isolate the impact of overbuilder deterrence from other causes, the majority concludes that the plaintiff-respondents have no such common answer to the issue of damages. Indeed, Justice Scalia, in writing the majority in Wal-Mart, stressed that “common answers” were necessary to certify a class action.
The dissent, however, only focuses on whether there are common questions – issues that are capable of proof that is common to the class – not whether the class already has the answers at the class certification stage. That explains why the dissent stresses that the Court should defer to the findings of the lower courts instead of evaluating the answers themselves. Moreover, the dissent includes a brief discussion of antitrust law to show that the issue of antitrust impact does not generally require a precise model of “how Comcast’s conduct led to higher prices in the Philadelphia area,” only “that Comcast’s brought about higher prices” in the market as a whole, which is a question that, in the dissent’s view, was capable of proof common to the class through the methods used by the plaintiffs-respondents. Indeed, Justice Ginsburg, in writing the majority in Amgen, stressed that only “common questions” were necessary to certify a class.
How the Court ultimately resolves this issue over common questions versus common answers will have enormous ramifications for the law of class actions. Comcast had the potential to provide an answer to this question, but apparently we will have to wait for another case and another day.
Disclosure: Goldstein & Russell, P.C., whose attorneys work for or contribute to this blog in various capacities, is among the counsel to the respondents in this case.