Comcast v. Behrend: U.S. Supreme Court Reiterates “Rigorous” Analysis Required at Class Certification Stage
Today, the U.S. Supreme Court once again instructed federal courts that a rigorous, and often merits-overlapping, analysis of Rule 23’s requirements is obligatory at the class certification stage. The case, Comcast v. Behrend, involved accusations against Comcast for violations of the Sherman Act by cornering the cable market in Philadelphia. According to the plaintiffs, the company would “cluster” its cable television operations within a particular region by swapping its systems outside the region for competitor systems inside the region, thus lessening competition and leading to supra-competitive prices. Based on these allegations, a group of plaintiff-subscribers filed a class action antitrust suit.
On appeal to the Supreme Court, the narrow issue was whether the district court had properly certified the class under Rule 23(b)(3) – which requires that questions of law or fact common to class members predominate over those affecting individual members. Central to this analysis was the lower court’s finding that damages resulting from Comcast’s alleged violations could be calculated on a classwide basis. The conclusion was based primarily on the damages regression model offered by the plaintiffs’ expert, which, critically, did not isolate the damages applicable to the plaintiffs’ specific antitrust liability theory: Comcast’s alleged “overbuilder-deterrence impact” (i.e., its reduction of competition from cable companies entering networks where an incumbent already operated). Despite this failure to isolate damages to the plaintiffs’ liability theory, the district court and Third Circuit granted class certification. The lower courts approved the expert’s method since examination of the proper calculation of damages would involve consideration of the merits – an analysis with “no place in the class certification inquiry.”
The Supreme Court, however, reversed and denied class certification in a 5-4 decision. The majority started by noting the exceptional nature of class actions; the rigorous analysis required of courts in assessing Rule 23’s elements; and the frequent need to “probe behind the pleadings” into the case’s merits at the certification stage. The court stated, “[b]y 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.” The court also made clear that the “rigorous” analysis at certification required plaintiffs to “satisfy through evidentiary proof” at least one of the provisions of Rule 23(b).
Ultimately, the majority concluded: “[R]espondents’ model [fell] far short of establishing that damages [were] capable of measurement on a classwide basis. . . . In light of the model’s inability to bridge the differences between supra-competitive prices in general and supra-competitive prices attributable to the deterrence of overbuilding, Rule 23(b)(3) cannot authorize treating subscribers within the Philadelphia cluster as members of a single class.” The majority’s opinion, therefore, premised that a Rule 23(b)(3) class required an evidentiary showing that classwide damages could be calculated. The class failed because the model offered “[could not] possibly establish that damages are susceptible of measurement across the entire class for purposes of Rule 23(b)(3).”
The dissent, in contrast, argued that a class action could be certified despite the individualized issues presented by the damages calculation. The minority claimed that today’s decision did not stand for the proposition that Rule 23(b) requires proof that plaintiffs’ damages could be determined on a classwide basis. The minority’s position is difficult to square with the explicit language of the majority opinion, which held that certification was improper because of the plaintiffs’ inability to provide a factual basis showing classwide damages were available.
Practical Impact
The Behrend decision marks another pro-defendant, class action ruling by the high court, coming on the heels of its recent landmark decisions in Wal-Mart Stores, Inc. v. Dukes and AT&T Mobility v. Concepcion. The Supreme Court sent another strong message that class certification is a major event – one that requires courts to rigorously analyze all aspects of the plaintiffs’ case, including their calculation of damages. The decision further emphasizes that the rigorous analysis: (a) requires plaintiffs to make an evidentiary showing of satisfaction of Rule 23(b) requirements; and (b) Rule 23(b)(3), with large sized classes, requires an evidentiary showing that damages are capable of determination on a classwide basis.
Going forward, district courts should scrutinize heavily all aspects of the plaintiffs’ case at certification, including class definitions, liability theories, and the computation of damages. If such analysis necessitates an overlap with the merits of a case, it may offer a previously-rare opportunity for defendants to challenge the basic legal foundations of a case before the most devastating risks of damages materialize with a certified class.
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