On March 7, 2014, Judge Gerald Rosen of the U.S. District Court for the Eastern District of Michigan issued an opinion and order fully reinstating his September 13, 2013, order granting the plaintiffs’ motion for class certification in Cason-Merenda v. VHS of Michigan, Inc., Case No. 06-15601, 2014 U.S. Dist. LEXIS 29447 (E.D. Mich. Mar. 7, 2014). The September 13 order certified a class of over 20,000 registered nurses (“RNs”) in this workplace antitrust case alleging that hospitals in the Detroit Metropolitan Area (“DMA”) conspired to suppress nurse wages. The lone non-settling defendant petitioned to appeal that decision pursuant to FRCP 23(f). Although the Sixth Circuit denied the petition, it vacated the class certification decision and ordered the District Court to reconsider the motion in light of the Supreme Court’s decision in Comcast Corp. v. Behrend, 133 S.Ct. 1426 (2013). The District Court held that Comcast did not apply because the differing damage theories in this case were mutually exclusive; and by contrast the differing damage theories in Comcast were complementary. Accordingly, the Court ruled that it was unnecessary for plaintiffs to demonstrate at the class certification stage which liability theory caused the damages asserted.
As such, this is an important ruling insofar as it limits Comcast on this theory.
Plaintiffs alleged that eight Detroit area hospitals had engaged in a conspiracy to suppress nurse wages in the DMA. Count I alleged that the defendants entered into an agreement to suppress RN wages in violation of §1 of the Sherman Act. Count II asserted that the defendants exchanged RN wage information in a manner that unlawfully suppressed RN wages also in violation of §1. In a previous decision, which we blogged about here, the Court granted the defendants’ motion for summary judgment as to count I but denied it as to count II. On September 13, 2013, the Court granted plaintiff’s motion for class certification, which we blogged about here. Cason-Merenda v. Detroit Medical Center, Case No. 06-15601, 2013 U.S. Dist. LEXIS 131006 (E.D. Mich. Sept. 13, 2013). The Court held that plaintiffs had adequately demonstrated that antitrust impact and damages could be shown with class-wide proof based on their expert’s benchmark analysis that compared the RNs’ wages to what hospitals paid for RNs supplied by temporary agencies. Id. at *45-46. The Sixth Circuit denied defendant’s petition to appeal, but vacated the decision and ordered that it be reconsidered in light of the Supreme Court’s decision in Comcast. Cason-Merenda, 2014 U.S. Dist. LEXIS 29447, at *2.
The District Court began by analyzing the Supreme Court’s Comcast decision. Id. at *2-11. In Comcast the plaintiffs alleged that Comcast had entered into unlawful “swap agreements” in violation of §§1 and 2 of the Sherman Act. The swap agreements allegedly had the effect of clustering Comcast operations in specific regions, and the clustering had four different types of anticompetitive effects (“antitrust impact”). Id. at *3-4. In a decision that was affirmed by the Third Circuit, the district court granted class certification but held that only one of the theories of antitrust impact (“overbuilding deterrence”) was capable of being proved on a class-wide basis. The Supreme Court reversed. The plaintiffs’ expert had acknowledged that his damage model did not isolate damages resulting from any one theory of antitrust impact but instead calculated damages resulting from the alleged anticompetitive conduct as a whole. Id. at *5. Thus, the Supreme Court held that the damage methodology included damages that were not the result of the wrong. Id. at *9.
The defendant argued that the plaintiffs’ damages model in Cason-Merenda presented the same problem as the damages model in Comcast. The complaint asserted two theories of recovery, including: (i) that the defendant hospitals conspired to suppress wages paid to RNs in the DMA; and (ii) that the defendant hospitals exchanged compensation related information among themselves in a manner that reduced competition among hospitals in the wages paid to RNs in the DMA. But, as in Comcast, the expert’s damages model did not tie the damages to either theory of liability. Id. at *11-13.
The District Court disagreed that Comcast applied. According to the Court, in Comcast each of the four theories of liability would have resulted in a separate and distinct harm to the members of the class, and the damages model calculated damages resulting from the alleged anticompetitive conduct as a whole. Thus, the damages model impermissibly rested upon a methodology that included damages that were not the result of the sole anti-competitive theory left in the case – i.e., the deterrence of overbuilding. By contrast in Cason-Merenda the plaintiffs were pursuing theories of harm that, in the Court’s view, were mutually exclusive. The Court agreed with plaintiffs that if wages were set by the hospitals pursuant to an alleged agreement, then it could not also be true that wages were set independently in a market in which wage competition was softened as a result of an unlawful exchange of wage information. Id. at *17-23. The Court noted that ultimately at trial the plaintiffs would have to demonstrate a causal connection between the alleged violation (the unlawful wage exchange conduct) and the alleged antitrust harm suffered by the class. Id. at *21 n.5. But because the two theories of antitrust impact were mutually exclusive, it was unnecessary for plaintiffs to do so at the class certification stage.
Implications for Employers
The District Court is correct that there are factual differences between Comcast and Cason-Merenda. But the question here is whether a plaintiff must show, at the class certification stage, whether the alleged damages have been caused by the alleged violation. In other words, is it sufficient, at the class certification stage, for the plaintiff to present a damage model that can be shown with class-wide proof, and leave it for trial to show that those damages were caused by the alleged violation. In Comcast the Supreme Court expressly stated that “at the class-certification stage (as at trial), any model supporting a plaintiff’s damages case must be consistent with its liability case, particularly with respect to the alleged anticompetitive effect of the violation.” Comcast, 133 S.Ct. at 1433 (internal quotations and citations omitted). The question is whether that requirement is satisfied in a case like Cason-Merenda where alternative theories of harm are found to be mutually exclusive. In all likelihood, the defendant will again file a Rule 23(f) petition to appeal. It will be interesting to see if the Sixth Circuit accepts it.