Supreme Court reverses class certification in Comcast Corp. v. Behrend in 5-4 decision

Posted on: April 17th, 2013 by Steve Larson
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Supreme Court BlogJustice Scalia authored in a majority opinion of the Supreme Court that rejected certification of an antitrust class action in Comcast Corp. v. Behrend, 516 U.S. ___ (2013). Chief Justice Roberts and Justices Kennedy, Thomas, and Alito joined the majority opinion, holding that it was error for the lower courts to refuse to scrutinize plaintiffs’ proffered damages model because such an inquiry would impermissibly invade the merits at the class certification phase.

At the trial court, plaintiffs argued that defendant cable companies’ conduct in the Philadelphia area violated Sections 1 & 2 of the Sherman Act under four distinct theories. Plaintiffs then offered a regression analysis developed by an economist who estimated that the combined effect of the four types of behavior on the plaintiff class over more than a decade totaled some $875 million. On the basis of this opinion, plaintiffs argued that they had sustained their burden of demonstrating that both antitrust injury (“impact”) and damages could be determined using class-wide proofs.

The trial court held that only one of the four theories was capable of proof on a class-wide basis; that individual issues predominated with respect to the other three theories. At an evidentiary hearing on the certification issue, plaintiffs’ expert admitted that his model did not isolate the damages attributable to any of the individual theories of anti-competitive conduct—including the one theory later certified by the district court. Defendants did not object to the expert’s testimony or file a Daubert objection. On interlocutory appeal a split panel of the Third Circuit affirmed.

The question certified by the Supreme Court was:

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 Court held that the “rigorous analysis” standard applied to the Rule 23(a) class prerequisites by the Court in General Telephone Corp. of Southwest v. Falcon, 457 U.S. 147 (1982), and Walmart Stores, Inc. v. Dukes, 564 U.S. ___ (2011), applies to Rule 23(b)(3). This is the first time the Court has extended the “rigorous analysis” standard to Rule 23(b), though many lower courts have done so. According to the Court, “[i]f anything, Rule 23(b)(3)’s predominance criterion is even more demanding than Rule 23(a).”

Starting with the “unremarkable premise” that, if successful, the plaintiffs would only be able to recover on the single theory that the district court certified, the Court went on to hold that “[i]t follows that a model purporting to serve as evidence of damages in this class action must measure only those damages attributable to that theory.” Since plaintiffs’ damages model did not do so, the Court held that the case was improperly certified.

Since numerous cases—including several Supreme Court cases—have held that a “merits-type” inquiry cannot be avoided if it overlaps with certification issues, the actual holding of the case is not all that remarkable. It might best be understood as increasing a bit the necessity of proving at the certification phase that damages can reliably be calculated on a class-wide basis using a common methodology, at least in antitrust cases where plaintiffs concede the point.