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U.S. Supreme Court Reverses Class Certification, Rejecting Damages Model

In 23(b)(3) Class, Certification, Class Actions, Class vs. Merits Discovery, Damages, Damages Experts, Experts, Use of Experts to Show Class Damages on March 27, 2013 at 4:07 pm
Comcast Cables

Comcast Cables (Photo credit: dmuth)

In a class action ruling that may impact employers’ attacks on wage & hour class certification motions, the U.S. Supreme Court issued a 5 to 4 ruling today reversing certification of a proposed antitrust class action.  See Comcast Corp., et al. v. Behrend, et al., No. 11-864, 569 U.S. ___ (Mar. 27, 2013).  Justice Scalia, writing for the Court, concluded that the class was improperly certified under Rule 23(b)(3) because plaintiff’s damages model fell short of establishing that damages can be measured classwide.  The District Court and Third Circuit approved certification of a class of more than 2 million current and former Comcast subscribers who sought damages for alleged violations of the federal antitrust laws.

At the trial court level, plaintiffs proposed four theories of antitrust impact, only one of which–the “overbuilder” theory–the trial court accepted.  To establish damages, plaintiffs relied solely on the testimony of Dr. James McClave, who designed a regression model comparing actual cable prices in one area with hypothetical prices that would have prevailed but for defendant’s allegedly anticompetitive practices.  Dr. McClave acknowledged that the model did not isolate damages resulting from any one theory of antitrust impact.  Id. at 4.

The Supreme Court held that the class was improperly certified.

By 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. And it is clear that, under the proper standard for evaluating certification, respondents’ model falls far short of establishing that damages are capable of measurement on a classwide basis. Without presenting another methodology, respondents cannot show Rule 23(b)(3) predominance: Questions of individual damage  calculations will inevitably overwhelm questions common to the class.

The Court reasoned that the “model failed to measure damages resulting from the particular antitrust injury on which petitioners’ liability in this action is premised.”  Id. at 8.  Justice Scalia emphasized that “it may be necessary for the court to probe behind the pleadings before coming to rest on the certification question, . . . Such an analysis will frequently entail overlap with the merits of the plaintiff ’s underlying claim.” Id. at 6 (internal quotations omitted).

By CHARLES H. JUNG

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