In another closely-watched case, the Supreme Court issued an opinion in Comcast v. Behrend, and reversed certification of a Rule 23(b)(3) antitrust class based on the lower courts’ refusal to scrutinize the plaintiffs’ expert proposed damage model because doing so would require an inquiry into the merits.  In a 5-4 decision that split largely among ideological lines, the Court re-emphasized its earlier decision in Wal-Mart Stores, Inc. v. Dukes that courts must conduct a “rigorous analysis” of plaintiffs’ damages theories even if that analysis involves an inquiry into overlapping merits issues.  More importantly, the decision potentially undermines the long-standing rule that individualized determinations of damages are not an obstacle to class certification.

In Comcast, the Supreme Court reversed a Third Circuit decision upholding class
certification in an antitrust action brought on behalf of more than 2 million
current and former Comcast cable-television subscribers, claiming the cable company used an anti-competitive “clustering strategy” that drove up prices in the Philadelphia  market.  To satisfy predominance under Rule 23(b)(3), plaintiffs had to prove both that (1) the existence of individual injury resulting from the antitrust violation (“antitrust impact”) could be proven with evidence common to the class, and (2) damages to the class were measurable on a class-wide basis using a “common methodology.” Plaintiffs offered the testimony of a statistical expert who offered a model purportedly able to measure damages on a classwide basis that was premised on all four of plaintiffs’ antitrust impact theories.  The district court, however, rejected three of plaintiff’s four certification theories.

On appeal, a divided Third Circuit Court of Appeals panel affrmed. It rejected Comcast’s argument that the class was improperly certified because Dr. McClave’s model failed to attribute damages resulting from the only theory of injury remaining in the case. The court did so by distinguishing class certification and merits determinations, holding that “the merits of the methodology [had] no place in the class certification inquiry,” and that at the class certification stage, plaintiffs were not required to tie a specific theory of antitrust impact to an “exact calculation of damage.”

Justice Scalia, continuing to write for the majority of the Court in its class action decisions, concluded that the decisions below “flatly contradict[ed]” the Supreme Court’s prior precedents, in particular Dukes, that require a “rigorous analysis” of Rule 23’s requirements even if that analysis necessarily “entail[s] overlap with the merits of the plaintiff’s underlying claim.”

Specifically, the Court found fault in the Comcast plaintiffs’ damages model
because while it purported to serve as evidence of classwide damages, it failed
to measure damages actually attributable to plaintiffs’ (only remaining) theory
of liability: “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.’”  Slip op. at 7 (“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 dissent, authored by Justices Ginsburg and Breyer, contended that the writ was improperly granted because the defendant never objected to the damages model under Daubert and therefore had forfeited any objection at the class certification stage.  The dissent also criticized the holding that a question about individual damages could overturn certification, stating that “The Court’s ruling is good for this day and case only. In the mine run of cases, it remains the “black letter rule”  that a class may obtain certification under Rule 23(b)(3) when liability questions common to the class predominate over damages questions unique to class members.”  Dissent at 5.

For class action practitioners, there appear to be three main takeaways: 1) Behrend strengthened the Court’s 2011 ruling in Dukes that any Rule 23 requirement that overlaps with the merits should be carefully scrutinized during class certification; 2) although the Court did not answer the question directly, both the majority and dissent implied that Daubert challenges are appropriate at the class action stage; 3) despite the Dissent’s objection, defendants should continue to argue that individualized damages can be a basis to oppose certification.

It hasn’t taken long for Behrend to make an impact, as the Supreme Court remanded two cases for reconsideration following Behrend. The first, Whirlpool Corp. v. Glazer, arising out of the Sixth Circuit, dealt with the propriety of an overbroad class that included both injured and uninjured members. The second, RBS Citizens, N.A. v. Ross, from the Seventh Circuit, dealt with the applicability of Dukes and the strengthened Rule 23(a)(2)’s commonality requirement to FLSA wage-and-hour litigation.

For all other information relating to Behrend argument and opinion, check out the always excellent coverage from the SCOTUS blog.

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