In a 5-4 decision, the Supreme Court decided earlier this week that putative class plaintiffs could not bring a class action antitrust lawsuit unless they could show that their damages could be measured on a class-wide basis. Justice Scalia authored the decision for the majority, while Justices Ginsburg and Breyer issued a joint dissent.
In Comcast Corp. v. Behrend, the plaintiffs alleged that Comcast violated federal antitrust laws by taking steps to become the only cable television provider in the Philadelphia area. The plaintiffs alleged that Comcast engaged in a strategy of clustering its operations in the Philadelphia region, and that Comcast used its allegedly dominant market position to stifle competition. The plaintiffs sought to certify a class, which required them to show that the class members were all harmed by the same alleged anticompetitive conduct, and the harm from this alleged conduct could be measured the same way for all class members.
The plaintiffs proposed four theories for how Comcast’s activities had reduced competition and elevated prices, but the district court found only one of these theories capable of class-wide proof, rejecting the other three. The theory that survived the district court's scrutiny was that Comcast used its market position to deter "overbuilders" from opening competing cable networks in its region.
To show that damages could be measured on a class-wide basis, plaintiffs produced a regression model comparing actual cable prices in the Philadelphia area with hypothetical prices that would have prevailed but for Comcast’s allegedly anticompetitive activities. But the plaintiffs’ damages model assumed the validity of all four theories of antitrust impact, even though the district court had rejected three of the four. Despite these flaws in the model, the court held that the plaintiffs had met their burden of showing that damages were capable of measurement on a class-wide basis.
Comcast appealed the class-certification decision to the Third Circuit. It argued that the faulty damages model meant the plaintiffs had failed to establish that all class members’ damages could be measured in the same way. The Third Circuit refused to consider the argument on the grounds that it was premature, holding that an attack on damages methodology was appropriate only at the merits stage of the case.
The Supreme Court reversed. It held that a party seeking to certify a class must be prepared to meet all of the certification prerequisites—including that damages be measurable on a class-wide basis—at the class-certification stage. The Court further held that the Third Circuit erred when it refused to entertain Comcast’s argument against use of the damages model proffered by the plaintiffs. Despite protests from the plaintiffs’ bar that requiring a merits-like analysis at such an early stage would make it more difficult to file antitrust class actions, the Court explained that a class determination demands rigorous analysis and "generally involves considerations that are enmeshed in the factual and legal issues comprising the plaintiff’s cause of action."
The Court held that the plaintiffs had not shown that certification was appropriate because the proffered damages methodology "failed to measure damages resulting from the particular antitrust injury on which petitioners' liability in this action is premised." In other words, the model did not measure impact caused solely by the remaining theory of Comcast's alleged deterrence of overbuilder competition.
Interestingly, when the Court granted certiorari, it formulated the question it wanted the parties to address, which was "[w]hether a district court may certify a class action without resolving whether the plaintiff class has introduced admissible evidence, including expert testimony, to show that the case is susceptible to awarding damages on a class-wide basis." Although the parties addressed whether the opinions of plaintiffs' damages expert could pass muster under Daubert v. Merrell Dow Pharmaceuticals, the Court only briefly touched upon Daubert in a footnote, without ruling on the issue.
This decision comes on the heels of the Court’s 2011 decision in Wal-Mart Stores, Inc. v. Dukes. In both cases, the Court stressed that when class certification depends on predominance of commonalities across a potential class, all important facets of the claim must be capable of common proof.
Ballard Spahr’s Antitrust Group has substantial experience defending class actions involving antitrust allegations. For more information on this decision or antitrust issues in general, please contact Leslie E. John at 215.864.8212 or john@ballardspahr.com, or Jason A. Leckerman at 215.864.8266 or leckermanj@ballardspahr.com.
