On March 27, the Supreme Court in a divided 5-4 opinion reversed the certification of an antitrust class of more than 2 million cable subscribers. In Comcast Corp. v. Behrend, No. 11-864, 569 U.S. ___ (2013), the Supreme Court held that the lower courts failed to sufficiently scrutinize the plaintiffs’ damages theory, the use of which could not establish damages on a class-wide basis.
The plaintiffs alleged that Comcast’s conduct in the Philadelphia area violated Sections 1 and 2 of the Sherman Antitrust Act, which prohibits various anticompetitive business activities. The plaintiffs presented four theories of injury, or “antitrust impact,” which totaled, under their expert’s regression analysis, just over $875 million in damages. Despite acknowledging that only one of the four theories was capable of proof on a class-wide basis, and the plaintiffs’ expert’s admission that his analysis did not isolate damages to any particular impact theory, the district court certified the case as a class action.
A Method to End the Madness: Class-Action Plaintiffs Must Provide Methodology that Proves Damages on Class-Wide Basis
The United States Court of Appeals for the Third Circuit affirmed the certification, rejecting Comcast’s attacks on the methodology of the plaintiffs’ damages model as “hav[ing] no place in the class certification inquiry.”
The Supreme Court reversed, first holding that the “rigorous analysis” that the lower courts must undertake when assessing Rule 23(a) class prerequisites also applies to Rule 23(b), the provision at issue in this case which requires, for class certification, that “questions of law or fact common to class members predominate over any questions affecting only individual members.” This analysis, the Court reiterated from its recent landmark decision in Wal-Mart Stores, Inc. v. Dukes, frequently overlaps with the merits of the plaintiffs’ underlying claim.
The Court then began with "an unremarkable premise" - that the plaintiffs, if successful, could only recover damages on the lone theory certified by the district court. Because their expert's damages model did not and could not establish such damages - indeed, the proposed model could not isolate damages for any of the four discrete theories - the Court held that certification was improper as damages were incapable of being established on a class-wide basis.
Under Comcast, class-action plaintiffs must be prepared to set forth a methodology for establishing damages on a class-wide basis at the certification stage. This holding, to a large degree, should deflate reliance on Sterling v. Velsicol Chemical Corp., 855 F.2d 1188 (6th Cir. 1988), a case that plaintiffs in Ohio and Kentucky often cite for the proposition that individualized damages issues will not defeat class certification.
In cases where certification – many times the “death knell” of the litigation – did not result in a settlement, what generally followed was a trial on liability and then, if the plaintiffs were successful, separate proceedings to determine damages, usually involving any number of devices: representative mini-trials, the use of a special master, settlement – or a combination of any or all of the above. Precisely the kind of individualized proceedings that destroyed the hallmark of the class-action device. Madness, indeed.
Comcast seemingly puts an end to the potential madness, now requiring class-action plaintiffs, in order to obtain certification, to set forth a methodology for proving damages on a class-wide basis.