by Bryan J. Schwartz and Michael D. Thomas
This morning, the Supreme Court issued its ruling in Comcast v. Behrend. In a 5-4 decision written by Justice Scalia, regarding which the justices split along ideological lines, the Supreme Court’s conservative majority held that the plaintiffs’ class action was improperly certified under Federal Rule of Civil Procedure Rule 23(b)(3).
The practical impact of the Court’s ruling should be limited to antitrust cases and the particular facts of the case, according to the dissent. Written by Justices Ginsburg and Breyer, and joined by Justices Sotomayor and Kagan, the dissent states, “[t]he court’s ruling is good for this day and this case only.” Slip Op., dissent at 5. In particular, the dissent points out that the seemingly sweeping language of the majority requiring that “damages attributable to a classwide injury be measurable ‘on a class-wide basis’” (Slip Op., dissent at p. 3) could not be read as a general holding, since: "the need to prove damages on a classwide basis through a common methodology was never challenged" by the plaintiffs in the case (Slip Op., dissent at p. 5), rendering the majority’s discussions of such to be nothing more than dicta; and "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." Id.
It is a mystery why the Court granted certiorari in the first place or issued any decision ultimately. In particular, the Supreme Court granted review to decide "[w]hether a district court may certify a class action without resolving whether the plaintiff class has introduced admissible evidence..." (Slip Op., dissent at p. 1), though such did not resemble the petitioner's question presented for review. Then, the justices learned that Comcast had failed in the lower court to raise any evidentiary objections, such that the question of admissible evidence was not properly before the Supreme Court. The majority ultimately decided a totally different question (namely, whether the case was susceptible to awarding damages on a class-wide basis) without briefing by the parties on the issue. Id. at 2.
By way of background, the named plaintiffs in the Comcast antitrust class action claimed that they and other subscribers in the Philadelphia “cluster” were harmed because Comcast’s tactics lessen competition and lead to overpriced services. They sought class certification under Rule 23(b)(3), which requires that “questions of law or fact common to class members predominate over any questions affecting only individual members.”
Plaintiffs originally alleged four types of antitrust impact. The District Court ruled that the plaintiffs could proceed on only one of those theories of liability, called “overbuilding,” regarding how smaller entrants into the market were inhibited based upon Comcast’s anti-competitive behaviors, leading to higher prices. Plaintiffs’ expert prepared a damages model that did not distinguish among the four different types of antitrust impacts, but simply measured the overall effect of Comcast’s practices (an $875M damages estimate from overpriced services). Slip Op., majority at p. 4.The District Court and Third Circuit concluded that it was inappropriate to consider the merits at the Rule 23 stage, but certification was appropriate, because a method of determining class-wide damages existed, meeting the predominance standard.
Writing for the majority, Justice Scalia held that at the class certification stage (as at trial), any model supporting a plaintiff's damages case must be consistent with the liability case theory, in order to be given weight by the courts. Slip Op., majority at p. 7. See also Slip Op., majority at p. 11 (“’The first step in a damages study is the translation of the legal theory of the harmful event into an analysis of the economic impact of that event.”). The majority emphasized that consideration of the merits is permissible where it overlaps with the Rule 23(b)(3) predominance inquiry. The Court therefore held that because the plaintiffs’ damages model was not specific as to which of the four theories of antitrust liability it relied upon, and because three of the theories had been rejected, plaintiffs’ proposed damages model could not show damages on a class-wide basis. Therefore, the majority found, the class should not have been certified.
The scathing dissent begins: “Today the Court reaches out to decide a case hardly fit for our consideration. On both procedural and substantive grounds, we dissent. This case comes to the Court infected by our misguided reformulation of the question presented. For that reason alone, we would dismiss the writ of certiorari as improvidently granted.” Slip Op., dissent at p. 1.
In addition to the points discussed above, the dissent notes that the Supreme Court’s majority inappropriately fails to defer to the trial court’s factual findings, namely, that striking three of the theories of antitrust liability did not impeach the plaintiffs’ expert’s damages model. Slip Op., dissent at p. 9. Ultimately, the only conclusion that can reasonably be drawn as to why the majority insisted on deciding this case is that the conservative Court is willing to go to great lengths, including considering a case where the writ of certiorari was improvidently granted, in order to deny class certification.
The Comcast v. Behrend case should not change plaintiffs’ arguments, and courts’ analysis, that “when adjudication of questions of liability common to the class will achieve economies of time and expense, the predominance standard is generally satisfied even if damages are not provable in the aggregate.” Slip Op., dissent at p. 4.
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