- Comcast Corp. v. Behrend clarifies that the Court's 2011 decision in Wal-Mart v. Dukes, which requires an inquiry into the merits to the extent necessary to resolve Rule 23 issues, extends to antitrust cases.
- The decision opens the door to analysis of damages issues in assessing compliance with Rule 23.
- Courts must rigorously analyze expert testimony at the class certification stage, whether or not a full Daubert hearing is required.
Comcast Corp. v. Behrend continues the Supreme Court trend toward a tighter analysis of class certification. In Comcast, the Court held that a class was improperly certified because the method proposed for proving classwide damages did not match the theory of liability accepted in the case. While the notion of “fit” between an expert opinion and the facts or theories of the case is not new, the Court plowed new ground by holding that damages issues are at play at the class certification stage, which provides defendants with a new weapon in their arsenal. The Court further clarified that its 2011 Wal-Mart v. Dukes decision, which reiterated the need for “rigorous analysis” of class certification in the context of employment litigation, applies to antitrust cases as well, even if this requires a court to consider issues that bear on the merits of the case. By emphasizing these principles in the context of the analysis of an expert report, the Court strongly implied that a district court must probe the validity of an expert’s application of his or her methodology to the facts of the case, not just consider whether the methodology is appropriate in the abstract. This means that the trend of substantial merits discovery prior to class certification, and enhanced class certification hearings, should continue. Courts looking to avoid the strictures of the decision may cite the dissent which attempts to limit the decision to the precise facts before the Court.
The plaintiffs, non-basic cable subscribers, brought suit alleging that Comcast’s acquisition of competitive cable systems and subscribers violated Sections 1 and 2 of the Sherman Act. Plaintiffs alleged that, through these acquisitions, Comcast increased its share of subscribers from 23.9% to 69.5% and thereafter increased its prices to above a competitive level. Plaintiffs brought suit on behalf of a class to recover the overcharge.
The district court first certified the class in 2007.1 Following the Third Circuit’s decision in In re Hydrogen Peroxide Antitrust Litigation,2 the district court granted Comcast’s motion for reconsideration. After a four-day hearing at which it received live expert and fact testimony and considered 32 expert reports, the district court recertified the class, concluding that plaintiffs would be able to demonstrate antitrust impact—the fact of damage—on the basis of classwide evidence on only one of plaintiffs’ four theories of liability.3 That theory, the “overbuilder” theory, posited that Comcast’s conduct had deterred potential competitors from entering the market. The court also concluded that plaintiffs’ class expert, an econometrician, had presented econometric models that provided a common method for determining damages. The expert, however, premised his analysis on the validity of all four of the class theories of liability, not just the one that the district court permitted to go forward on a class basis. Thus, Comcast argued and the class expert acknowledged, his model “did not isolate damages resulting from any one theory of antitrust impact.”
Comcast appealed, arguing, among other things, that plaintiffs had not established that damages were capable of measurement on a classwide basis. The Third Circuit affirmed.4
On the issues of classwide damages, the Court of Appeals first stated that Wal-Mart was distinguishable on the facts and “therefore neither guides nor governs the dispute before us.” As to the inconsistency between the single viable theory and the expert’s methodology, the Court stated that such “attacks on the merits of the methodology have no place in the class certification inquiry.”5
The Supreme Court granted certiorari to consider “whether 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,” an issue that was much narrower than the issue that Comcast sought to have reviewed.
In a 5-4 decision, the Supreme Court held that the class should not have been certified.6 The Court focused its opinion on the requirement that a court must conduct a “rigorous analysis” of the merits of a claim beyond the pleadings in order to determine whether “the prerequisites of Rule 23(a) have been satisfied.”
The Court concluded that the Third Circuit erred when it refused to “entertain arguments against [the class] damages model that bore on the propriety of class certification, simply because those arguments would also be pertinent to the merits determination.” It reasoned that if plaintiffs were to prevail on their claims, they would be entitled to damages arising only out of the theory that Comcast’s actions prevented overbuilder competition. A damages model that did not even attempt to align its measurement with the accepted theory of liability would be unacceptable.
Otherwise, the Court reasoned, “at the class certification stage any method of measurement” would satisfy a plaintiff’s burden “so long as it can be applied classwide, no matter how arbitrary the measurements may be.” This “would reduce Rule 23(b)(3)’s predominance requirement to a nullity.” The Third Circuit had stated that, “at the class certification stage we do not require that Plaintiffs tie each theory of antitrust impact to an exact calculation of damages, but instead that they assure us that if they can prove antitrust impact, the resulting damages are capable of measurement and will not require labyrinthine individual calculations.” The Supreme Court ruled that a court does not have such assurance when the method identifies damages that may not be the result of the wrong.
Expert Testimony Will Be Closely Scrutinized
The Court did not directly answer a question that some observers thought would be resolved with this decision: whether a court should undertake a full Daubert analysis at the class certification stage. Plaintiffs argued that Comcast waived a challenge to the admissibility of the expert’s methodology by not raising the issue in the lower courts. The Court concluded that, while a waiver would indeed make it impossible for Comcast to argue that the testimony was not “admissible evidence,” Comcast could still argue that the damages model failed to show that classwide damages could be awarded. While this does not directly address the Daubert issue, a fair reading of the Court’s decision, which analyzed the expert opinion, is that expert testimony must in fact meet the Daubert standard of admissibility at the class certification stage.
Another issue that has lingered in the wake of the Hydrogen Peroxide line of cases is the extent to which courts should delve into the factual assumptions underlying complex econometric equations, which are typically at issue. Many courts have been all too willing to accept the expert’s “trust me, it works!” approach. Although the defect in the factual assumptions underlying the expert analysis here was relatively obvious, the Court’s rejection of an abstract analysis of the expert methodology suggests that courts should undertake a rigorous analysis of the application of expert’s proposed models at the class certification stage.
Justices Ginsburg, Breyer, Sotomayor, and Kagan dissented in Comcast on both procedural and substantive grounds. In their view, the writ of certiorari should have been dismissed as improvidently granted, for two reasons. First, they argued that the Court had reframed the question presented and requested briefing on the issue of the admissibility of expert testimony, only to change it again to decide the case instead on the issue of predominance.
Second, the dissenting Justices concluded that the decision was contrary to existing antitrust law and improperly disturbed the lower courts’ findings of fact. The dissent stated that the majority opinion “should not be read to require, as a prerequisite to certification, that damages attributable to a classwide injury be measurable ‘on a class-wide basis’” and that the ruling was “good for this day and case only.”
Extension Beyond Comcast
For future courts troubled by the implications of Comcast, the language of the dissent may provide a hook for a court to limit Comcast to its facts. Nevertheless, the majority view likely continues the trend toward (1) more complete merits discovery prior to the class certification decision and (2) requiring hearings, including the receipt of live expert testimony, at the class certification stage. It may become difficult for plaintiffs to overcome these increasing hurdles to class certification, and the Comcast decision is certainly likely to increase the investment necessary for class action antitrust plaintiffs to present claims that are amenable to class action treatment.