Class action cases are once again front and center in the U.S. Supreme Court in the October 2012 term, which began on Monday. The Court has accepted three class action cases — each of which could have a substantial effect on class action jurisprudence in Ohio and federal courts.
Comcast v. Behrend
U.S. Supreme Court Case No. 11-864
The first case — Comcast v. Behrend, U.S. Supreme Court Case No. 11-864 — will likely have the most far-reaching effect on class action law. The issue in the case is this:
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.
The Comcast Plaintiffs allege that Comcast monopolized Philadelphia’s cable market and excluded competition in violation of the Sherman Act. Because Plaintiffs would be required at trial to prove damages as an element of their claims, Plaintiffs attempted to satisfy Rule 23(b)(3)’s predominance requirement by introducing an expert witness who proposed to calculate damages on a class-wide basis. Comcast’s experts in turn presented a number of challenges to Plaintiffs’ damages model.
The district court certified the class under Rule 23(b)(3), finding that “there is a common methodology available to measure and quantify damages on a class-wide basis.” A divided panel of the Third Circuit affirmed. The majority declined to address Comcast’s challenges to Plaintiffs’ damages model on the grounds that “[w]e have not reached the stage of determining on the merits whether the methodology [offered by Plaintiffs] is a just and reasonable inference or speculative,” and that Comcast’s “attacks on the merits of the methodology” have “no place in the class certification inquiry.”
As for whether Plaintiffs’ damages expert satisfied the standards for admission of expert testimony under Daubert, the majority examined only whether the model “could evolve to become admissible evidence,” and accepted Plaintiffs’ “assur[ances]” to that effect.
The Third Circuit based its refusal to resolve “merits” questions on Eisen v. Carlisle & Jacquelin, 417 U.S. 156 (1974). Comcast points out in its Merit Brief that the Court in Wal-Mart Stores, Inc. v. Dukes rejected this interpretation of Eisen and required the Third Circuit to resolve any merits questions bearing on the propriety of certification under Rule 23. The Court will hear oral argument in Comcast on November 5, 2012.
Interestingly, a very similar issue regarding the intersection of merits inquiries and expert testimony at the certification stage is also before the Ohio Supreme Court in Cullen v. State Farm Mut. Auto. Ins. Co., Ohio Supreme Court Case No. 2012-0535 and Stammco v. United Tel. Co. of Ohio, Ohio Supreme Court Case No. 2012-0169, which we have discussed in earlier articles:
- Will the Ohio Supreme Court Visit Aisle 23 at Wal-Mart? May 2012
- Ohio Supreme Court to Consider Fundamental Class Action Issues August 2012
- Appellees File Merit Brief in Stammco v. United Telephone Company of Ohio October 2012
Standard Fire Insurance Co. v. Knowles
U.S. Supreme Court No. 11-1450
The second case to be decided by the U.S. Supreme Court this term is Standard Fire Insurance Co. v. Knowles, U.S. Supreme Court Case No. 11-1450. We previously discussed the facts and issues before the Court in this case in U.S. Supreme Court to Decide Whether a Class Action Fairness Act Loophole Should be Closed from September 2012.. This case addresses the Class Action Fairness Act and will address a loophole that has been exploited by Plaintiffs’ attorneys in certain jurisdictions. Oral argument has not yet been scheduled in the case.
Amgen v. Conn. Retirement Systems
U.S. Supreme Court No. 11-1085
The third case to be decided this term is Amgen v. Conn. Retirement Systems, U.S. Supreme Court No. 11-1085. The issues to be decided by the Court are:
- Whether, in a misrepresentation case under Securities and Exchange Commission Rule 10b-5, the district court must require proof of materiality before certifying a plaintiff class based on the “fraud on the market” theory; and
- Whether, in such a case, the district court must allow the defendant to present evidence rebutting the applicability of the “fraud on the market” theory before certifying a plaintiff class based on that theory.
In this case, Connecticut Retirement alleges that Amgen Inc. artificially inflated the market price for Amgen stock by making misrepresentations regarding the safety of two Amgen products.
Connecticut Retirement moved to certify a class of persons who purchased Amgen stock. The start of the class period corresponds to a public statement by Amgen regarding an FDA advisory committee meeting. Connecticut Retirement alleges that Amgen misrepresented that the meeting would not focus on the safety of one of its products.
The predominance inquiry under Rule 23 turned on the element of reliance. Connecticut Retirement asserted that the putative class members were entitled to a “fraud on the market” based presumption of class-wide reliance.
Amgen opposed class certification on the ground that Connecticut Retirement did not, and could not, establish that the alleged misrepresentations were material. Amgen also sought to affirmatively rebut any such presumption by showing that the market was already “privy to the truth.”
The district court rejected Amgen’s arguments and granted Connecticut Retirement’s class certification motion, holding that Connecticut Retirement could invoke a presumption of reliance because, “to trigger” the presumption, Connecticut Retirement “need only establish that an efficient market exists.” The trial court refused to determine whether the alleged misrepresentation was material, finding that this question concerned the merits of the case and should be deferred.
The Ninth Circuit affirmed the district court’s order, rejecting Amgen’s contention that Connecticut Retirement had to prove materiality at the class certification stage in order to avail itself and the class of the “fraud on the market” presumption of reliance. Rather, Connecticut Retirement had only to “allege materiality with sufficient plausibility to withstand a 12(b)(6) motion.”
Oral argument has been set in the case for November 5, 2012. We will continue to follow each of these cases as they move through oral argument and toward final disposition in the Court.