Today, the Supreme Court of the United States issued its decision in Comcast Corp. v. Behrend, --- S. Ct. ---, 569 U.S. --- (2013), an important Rule 23 decision subsequent to 2011’s landmark Wal-Mart v. Dukes decision. We have been watching this case closely as it has percolated its way up through the courts (read more here and here). On a 5-4 vote, the Supreme Court reversed the Third Circuit’s decision affirming a class certification decision under Rule 23(b)(3). You can read the decision here.
The case is incredibly important for any class action lawsuit dependent upon expert analysis to cross the class certification threshold. This is so because previously, you just knew that a plaintiff’s attorney was going to be able to convince a district judge to allow the class action to proceed to the merits, even though serious doubts about their expert analysis were present. Now, you can rest easier because today, the Supreme Court clarified that to certify a Rule 23(b)(3) class, the plaintiffs will need to establish that their expert analysis has adequately explained how the data show that a classwide determination of damages is possible.
The Supreme Court held that the Third Circuit erred in refusing to decide whether the plaintiffs’ proposed damages model could show damages on a classwide basis. This is so even though such a showing bleeds into a determination of the merits. This decision ultimately means that plaintiffs, generally speaking, will have less leverage to pressure defendants to enter into settlements in many types of class action lawsuits, including workplace class actions, that rely heavily on statistical and other kinds of expert evidence.
The case arises out of the antitrust laws. It centers on the plaintiffs' allegation that Comcast engaged in "anticompetitive clustering" by making deals with cable competitors in Philadelphia to swap assets and allocate regional cable markets among themselves. Plaintiffs claimed that this artificially increased the prices for cable services. --- S. Ct. at 3.
The plaintiffs initially advanced four theories of how this caused an “injury” under antitrust law. In granting class certification, the district court relied on only one: the “overbuilding” theory that Comcast’s conduct made it harder for competitors to build cable networks in areas already served by an incumbent. Notably, the court rejected the other three theories of classwide injury. Id. at 3 n.3. The court also accepted a damages model offered by plaintiffs’ expert to demonstrate damages. Id at 4.
In a split decision, the Third Circuit affirmed the order granting class certification. In its decision, however, the Third Circuit did not address Comcast’s challenges to the viability of plaintiffs’ expert’s methodology. Instead, the court made a more sweeping statement, that “attacks on the merits of the methodology” have “no place in the class certification inquiry.” Behrend v. Comcast Corp., 655 F.3d 182, 207 (3d Cir. 2011). Upon granting certiorari, the Supreme Court reframed the question presented for review to focus specifically on the admissibility of the class-wide damages evidence.
Today’s decision rejects the Third Circuit’s decision in striking terms, explaining that it “ran afoul of our precedents requiring precisely [the] inquiry [into the merits]” at class certification that the Supreme Court has “repeatedly . . . emphasized[.]” --- S. Ct. at 6-7. The majority also emphasized that the requirements of Rule 23(b)(3) in particular require close attention to whether a class is sustainable, describing it as an “adventuresome innovation” requiring courts to exercise their “duty” to take a “close look” at whether common questions predominate over individual ones. Id. at 6. Because the plaintiffs’ model admittedly did not even attempt to measure the damages attributable to the only theory of damages certified, the Third Circuit’s decision was reversed. Id. at 7-8.
In an unusual twist, a joint dissent was filed by Ginsburg and Breyer, joined by Sotomayor and Kagan, in which they would have dismissed the writ of certiorari as improvidently granted. (In laypersons’ terms, they believe the Supreme Court should not have taken the case after all, because some procedural defects make it unworthy of the Justices’ attention). Specifically, they argued that the reformulated question they actually granted review to consider required an analysis of the reliability of the plaintiffs’ expert report under Daubert v. Merrill Dow Pharmaceuticals, Inc., 509 U.S. 579 (1993). It turns out, as was clear in argument of this case, that Comcast never did file any challenge to the plaintiffs’ expert under Rule 702. They also argued in their dissent that the majority opinion, in their view, really breaks no new ground as a matter of class certification law. Id. at 3-5. And finally, they expressed the view that the majority relies on mistaken understandings of the facts as found below and certain precepts of antitrust law. Id. at 5-11.
In short, as the Supreme Court has focused attention on class action law, as it will continue to do this term in the area of class arbitration, it has brought into perspective the importance of defendants’ efforts to fully engage in the “battle of the experts,” as success in the certification arena may very well depend upon it.