In siding with Comcast Corp. in an antitrust class action, the United States Supreme Court heightened the class action standard by finding that individualized proof of damages can block class certification. This builds on the Supreme Court’s decision in Wal-Mart Stores, Inc. v. Dukes, 564 U.S. __, 131 S.Ct. 2541 (2011),that had previously raised the bar for plaintiffs seeking class certification.
In Comcast Corp. v. Behrend, 569 U.S. __ (2013), the Supreme Court ruled that a proposed class of plaintiffs challenging Comcast’s business model of “clustering” its cable services was improperly certified by both the District Court and the Third Circuit. In so holding, the Court found that the damage model presented at the class certification stage was insufficient to show that the damages it calculated were definitely tied to the single antitrust theory that remained in the case.
The named plaintiffs filed a class action antitrust suit in the Eastern District of Pennsylvania, alleging that Comcast entered into unlawful “swap agreements” with other cable providers in order to monopolize the market for cable-television services in certain “cluster” areas. 264 F.R.D. 150 (E.D.Pa. 2010). Plaintiffs initially presented four theories of antitrust impact. The District Court dismissed all but one, which alleged that Comcast’s behavior reduced the competition provided by “overbuilders” — other cable providers that build cable networks in areas where an incumbent network already has penetrated. At the class certification stage, plaintiffs presented evidence from an expert witness who developed an economic regression model comparing actual cable prices to hypothetical prices that would have prevailed but for Comcast’s allegedly anticompetitive practices. The expert acknowledged that the model did not isolate damages that would have occurred only from reduction of competition provided by “overbuilders,” the only theory that remained in the case. The District Court found the damages model to be sufficient to meet plaintiff’s burden to demonstrate damages for the purpose of class certification. The Third Circuit affirmed, emphasizing that “(a)t the class certification stage,” respondents were not required to “tie each theory of antitrust impact to an exact calculation of damages.” 655 F.3d 182, 206 (3d Cir. 2011).
The Supreme Court reversed, holding that both the District Court and the Third Circuit’s holdings “flatly contradict(ed) our cases requiring a determination that Rule 23 is satisfied, even when that requires inquiry into the merits of the action.” Further, “(b)y refusing to entertain arguments against respondents’ damages model that bore on the propriety of class certification, simply because those arguments would also be pertinent to the merits determination, the Court of Appeals ran afoul of our precedents requiring precisely that inquiry.” Writing for the majority, Justice Scalia noted that in Wal-Mart, the Court “emphasized that it ‘may be necessary for the court to probe behind the pleadings before coming to rest on the certification question,’ and that certification is proper only if ‘the trial court is satisfied, after a rigorous analysis, that the prerequisites of Rule 23(a) have been satisfied.’ … The same principles govern Rule 23(b).”
Four Justices (Ginsburg, Breyer, Sotomayor, and Kagan) vigorously dissented, stating that “(t)he decision 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…in particular, when adjudication of questions of liability common to the class will achieve economies of time and expense, the predominance standard is generally satisfied even if damages are not provable in the aggregate.”
The Comcast decision reaffirms what the Court previously made clear in Wal-Mart: That in deciding whether to certify a class, district courts must inquire into the merits of the action in sufficient detail to ensure that impact and/or damages can be proven on a classwide basis. This decision further raises the bar for plaintiffs seeking class certification in antitrust or other complex lawsuits.