United States: Supreme Court's Comcast Ruling Adds To Difficulties For Class Action Plaintiffs

Frederick D. Braid is a Partner in our New York office and Brian M. Doyle an Associate in our Boston office

Decision is a Positive Development for Management in the Defense of Class Action Litigation

In Comcast Corp. v. Behrend, No. 11-864, decided on March 27, 2013, the U.S. Supreme Court again rejected certification of a very large plaintiff class. In so doing, the Court held that the predominance requirement in Federal Rule of Civil Procedure 23(b)(3) requires that damages must be capable of measurement on a class-wide basis and be specifically tied to the theory of liability underlying the case. The Court further held that class certification inquiries require a rigorous analysis, which may include an analysis of the merits of the underlying claim, in order to satisfy the prerequisites of Rule 23(b)(3).

Background

In this antitrust matter, Comcast Corporation, a provider of cable-television services to residential and commercial customers throughout the country, engaged in a series of swap transactions in which it traded its subscribers in certain markets to other cable television providers in return for their subscribers in the Philadelphia market. This enabled Comcast to aggregate a concentration of 60 percent of the Philadelphia cable market. Comcast's Philadelphia market subscribers filed a class action antitrust suit claiming that Comcast's swap agreements violated the Sherman Act by monopolizing or attempting to monopolize cable services within the Philadelphia market. They argued that Comcast's clustering harmed subscribers there by eliminating competition and keeping prices for cable services above competitive levels.

The plaintiffs advanced four theories of antitrust impact, only one of which survived, namely that Comcast's actions reduced the level of competition from "overbuilders," i.e., companies that build competing cable networks in areas where an incumbent cable company already operates. The district court found validity in the overbuilder theory because Comcast's anticompetitive clustering conduct effectively deterred the entry of overbuilders in the Philadelphia market. The district court found that damages resulting from the overbuilder-deterrence impact could be calculated on a class-wide basis, which was established by expert testimony; however, the model did not isolate damages by theory and therefore might include damages attributable to one or more of the three rejected theories. Regardless, the district court certified the class, Comcast appealed and the U.S. Court of Appeals for the Third Circuit affirmed.

The Third Circuit rejected Comcast's argument attacking the damages model because it failed to account for damages resulting solely from overbuilder deterrence, the only theory of liability remaining in the case. The court noted that an attack on the merits of the damages model was inappropriate at the class certification stage and further noted that an exact calculation of damages was not required. Rather, the Third Circuit said, the plaintiffs need only assure the court that "if they prove antitrust impact, the resulting damages are capable of measurement" on a class-wide, as opposed to an individualized, basis.

The Supreme Court Decision

The Supreme Court reversed the Third Circuit, finding that a "rigorous analysis" of the prerequisites of Rule 23(b) will frequently entail "overlap with the merits of the plaintiff's underlying claim." Accordingly, the Court found it incumbent upon the district court to entertain arguments against the damages model that bore directly on the propriety of class certification and noted that failure to do so would allow plaintiffs to present a general damages theory, with nearly endless permutations, instead of one tailored to the common claims of all the class members.

Applying what it characterized as a "straightforward application of class-certification principles," the Court required that any damages model must measure only those damages attributable to the theory of liability. If the model fails to meet this standard, it cannot establish that damages are susceptible of measurement across the entire class. For purposes of Rule 23(b)(3), courts must conduct a "rigorous analysis" to determine the efficacy of the damages model, even if that requires an inquiry into the merits of the underlying claim. Anything less, the Court indicated, would reduce Rule 23(b)(3)'s predominance requirement to a nullity.

Practical Implications and Open Questions

Proponents of a class action must not only satisfy the numerosity, commonality, typicality and representativeness prerequisites of Rule 23(a), but they must also satisfy one of three additional requirements in Rule 23(b). In Comcast, the plaintiffs failed to bring their purported class within Rule 23(b)(3), which requires that "the questions of law or fact common to class members predominate over any questions affecting only individual members" and that the class action will most "fairly and efficiently adjudicate the controversy." Taken together, the Comcast decision — and its predecessor in the Supreme Court, Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541 (2011), an employment discrimination case — signal rough sledding for mega-class actions like Comcast's and Walmart's proffered classes, respectively, of two million and one and a half million members. The common thread in both cases is the Supreme Court's insistence on rigorous analysis of both the Rule 23(a) and (b) prerequisites at the class certification stage of the litigation, even where such analysis involves getting into the merits of the case, and its rejection of expert-developed models as insufficient in reliably demonstrating uniform class-wide applicability.

In Wal-Mart, where the commonality requirement of Rule 23(a)(2) was at issue, the Court held that the class members must be shown to "have suffered the same injury," which it further refined as a demonstration that the claims depend upon a common contention whose resolution is central to each claim and will, therefore, necessarily resolve the litigation for all class members. Putting it another way, the Court said that what matters "'is not the raising of common 'questions' . . . but rather the capacity of a classwide proceeding to generate common answers apt to" resolve the litigation. This demands a "rigorous analysis" that will frequently overlap, the Court noted, with the merits of the underlying claim. Significantly, in Wal-Mart, the Court also held that backpay claims could not be pursued under Rule 23(b)(2), and were available only under 23(b)(3).

In Comcast, where the predominance requirement of Rule 23(b)(3) was at issue, the Court accepted without issue the District Court's finding that satisfaction of the predominance requirement (i.e., that the commonality of law or fact issues predominate over individual class member issues) would necessitate demonstrating both that proof of the injury could be established at trial through evidence common to the class and "that the damages resulting from that injury are measurable "'on a class-wide basis'" through use of a '"common methodology.'" Ultimately, the Court found that the expert model developed for proving damages was premised upon the four theories of antitrust impact originally advanced in the litigation, and not the single overbuilder theory that remained in the case after the other three theories had been rejected.

The Supreme Court's tightening of Rule 23(b)(3) requirements in Comcast, coupled with Wal-Mart's restricting backpay claims solely to Rule 23(b)(3), should ease considerably the threat to employers from potential class action mega-judgments.

The question remains as to whether Daubert hearings on expert testimony, which are intended to test the validity of the opinions of experts, will necessarily become part of class certification proceedings. Although the Supreme Court did not decide this issue in either Wal-Mart or Comcast, it expressed skepticism in Wal-Mart at the district court's conclusion that Daubert did not apply to expert testimony at the class certification stage of the litigation. This skepticism and the Court's requirement of a rigorous analysis of both Rule 23(a) and (b) requirements that will frequently overlap with the underlying merits of the case suggest that the Court would, if faced squarely with the issue, hold that Daubert hearings must be part of the certification proceeding in appropriate circumstances.

It appears that the combination of Wal-Mart and Comcast will dampen the appetites of the plaintiffs' bar to pursue class actions for damages on a nationwide basis in all but the rarest of circumstances. Indeed, Comcast also indicates that even regionally based class action litigation may be problematical. Perhaps the stringent requirements of these cases will force the plaintiffs' class action bar to think in even smaller terms, e.g., individual employment facilities or several locally geographic employment facilities under common management control. In any event, Comcast, like Wal-Mart, is a positive development for management in the defense of class action litigation.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions