Monday is class action day at the U.S. Supreme Court. I've
already told you about Amgen v. Connecticut Retirement Plans, in
which the justices will decide whether shareholders in a
securities class action must provide evidence of the materiality
of the defendant's alleged misstatements in order to win class
certification. The other case the court will hear on Monday,
Comcast v. Behrend, also deals with standards for class
certification, but the court's eventual decision in Comcast
could affect a swath of cases much broader than securities fraud
class actions.
Comcast, as we've reported, is an antitrust class action in
which two million Philadelphia area residents alleged that their
cable provider engaged in anticompetitive "clustering,"
conspiring with other providers essentially to assure all of
them a monopoly in different zones of the map. When the case was
in federal district court in Philadelphia, U.S. District Judge
John Padova knocked out most of the plaintiffs' theories,
leaving alive only an argument that Comcast's alleged clustering
blocked competition from "overbuilders," which offer alternative
telecom service. Padova's ruling meant that the class's damages
would be limited to the impact of overbuilders declining to
enter the market.
The plaintiffs' expert, however, had presented a damages
report that encompassed all of the plaintiffs' theories. Comcast
argued that the class could not be certified because the
plaintiffs couldn't show classwide issues predominated on
damages, since the expert report didn't segregate the impact of
the alleged lack of competition from overbuilders from the other
supposedly anticompetitive effects of Comcast's clustering.
Padova nevertheless certified the class, concluding that the
expert's model, regardless of the specifics, showed that "there
is a common methodology available to measure and quantify
damages on a class-wide basis."
A divided panel of the 3rd Circuit Court of Appeals agreed.
The majority held that to be certified as a class, plaintiffs
merely had to be able to show by a preponderance of evidence
that there was classwide impact from Comcast's allegedly
anticompetitive behavior and that a methodology existed for
determining common damages. The majority cited the U.S. Supreme
Court's 1974 decision in Eisen v. Carlisle and said that
district courts aren't supposed to conduct a preliminary inquiry
into the merits of a suit when they decide whether to certify a
class, so just showing that it's reasonably possible to
calculate damages is enough to justify certification.
Comcast's Supreme Court lawyers at Gibson, Dunn & Crutcher
argued in their merits brief that the 3rd Circuit majority
erroneously applied Eisen instead of the Supreme Court's more
recent directives in its 2011 ruling in Wal-Mart v. Dukes. Under
Dukes, Comcast asserted, courts are required to engage in a
rigorous analysis at the class cert stage to assure themselves
that classwide issues predominate. In this case, Comcast argued,
the trial court's class certification ruling didn't resolve the
question of admissible evidence to support the plaintiffs'
theory of classwide damages -- particularly because Comcast
believes the conclusions of the plaintiffs' expert must be
tested in a Daubert hearing to determine whether they're even
statistically sound.
"Because plaintiffs' damages model does not calculate
damages from the sole theory of antitrust impact approved by the
district court, and in any event is insufficiently helpful and
reliable to be considered in the certification inquiry,
plaintiffs failed to carry their burden of proof ... and class
treatment is inappropriate," the Comcast brief said.
The class, represented by Susman Godfrey, countered that
under any standard for class certification, its expert evidence,
admitted at the district court without a Daubert challenge by
Comcast, "would meet any applicable test for admission and
validly show, on a class-wide basis, that all class members
suffered measurable damages."
The Comcast class is notably bitter, given what we've
previously reported about Comcast reneging on an almost complete settlement after the Supreme Court granted cert. But you can see
that the issue before the court has implications far beyond this
case. If the court agrees with Comcast about what standard of
proof for classwide damages must apply to class certification
decisions, that ruling has the potential to add layers of
complexity and expense to the increasingly risky business of
class action litigation.
I called Comcast counsel Miguel Estrada of Gibson Dunn and
class counsel Barry Barnett of Susman but didn't hear back.
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