On March 27, 2013, the U.S. Supreme Court handed down its much awaited decision in Comcast Corp. v. Behrend, No. 11-864, an antitrust case out of the Third Circuit. Comcast makes it clear, building on the Court’s seminal decision in Wal-Mart Stores, Inc. v. Dukes, that class certification cannot rest on the pleadings, but must be based on evidence, even when that evidence would lead a court to consider the merits of a case. Further — in what appears to be a continuing battle within the Court on the predominance requirement — the Court determined that the lack of a classwide methodology to demonstrate damages meant that the predominance criterion of Rule 23(b)(3) could not be met, and reversed the certification of the class.
Comcast was brought by Philadelphia cable subscribers alleging that Comcast had violated the Sherman Act by monopolizing Philadelphia’s cable market. The district court certified a class of 2 million current and former Comcast subscribers in the Philadelphia area, holding “that the element of antitrust impact is capable of proof at trial through evidence that is common to the class . . ., and . . . there is a common methodology available to measure and quantify damages on a class-wide basis.” A divided panel of the Third Circuit affirmed on July 11, 2011, after Wal-Mart, and distinguished Wal-Mart, holding that it was inapplicable: “The factual and legal underpinnings of Wal-Mart—which involved a massive discrimination class action and different sections of Rule 23—are clearly distinct from those of this case. Wal-Mart therefore neither guides nor governs the dispute before us.”
The question before the Supreme Court, as recast by the Court, was “whether a district court may certify a class action without resolving whether the plaintiff class has introduced admissible evidence, including expert testimony, to show that the case is susceptible to awarding damages on a class-wide basis.”
On the Wal-Mart merits issue, the Court was very clear that: “Repeatedly, we have emphasized that it ‘may be necessary for the court to probe behind the pleadings before coming to rest on the certification question,’ and that certification is proper only if ‘the trial court is satisfied, after a rigorous analysis, that the prerequisites of Rule 23(a) have been satisfied.'” As to predominance, Justice Scalia held: “The same analytical principles govern Rule 23(b). If anything, Rule 23(b)(3)’s predominance criterion is even more demanding than Rule 23(a)” precisely because money damages class actions were considered to be “adventuresome” unlike injunctive and declararatory relief class actions.
On the predominance requirement, there is a not-so-subtle dialogue taking place on the Court betweeen the liberal and conservative justices. Recall that in Wal-Mart, Justice Scalia announced a much more stringent commonality requirement under Rule 23(a): there must be a claim that is based on a “common contention, and that common contention must drive the resolution of the classwide issue that is central to the claims at stake.” In Amgen Inc. v. Connecticut Retirement Plans and Trust Funds, No. 11-1085, a securities class action, Justice Ginsburg reasoned that materiality was a merits question, and that the only issue for class certification was whether the question of materiality was a predominant one, or an individualized one. She emphasized that predominance is to viewed in terms of whether common questions predominate. She then reasoned that materiality is an objective question that can be proved through evidence common to the class, and that individual questions can never predominate as to materiality because even if down the road that common proof fails, the case simply would end. As I have previously blogged about, Amgen arguably lowered the predominance requirement, at least in the securities context.
The Amgen decision was met with strong dissents from Justices Thomas and Scalia. And in Comcast, we see Justice Scalia coming back to say that the predominance criterion is a difficult one to meet. Accordingly, the Court rules that when damages are so individualized that they outweigh any common elements of the case, a class may not be certified under the predominance requirement of Rule 23(b)(3): “By 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. And it is clear that, under the proper standard for evaluating certification, respondents’ model falls short of establishing that damages are capable of measurement on a classwide basis…. respondents cannot show Rule 23(b)(3) predominance: Questions of individual damage calculations will inevitably overwhelm questions common to the class.”
The Comcast dissent, led by Justice Ginsburg, argues that individualized damages have not historically meant that class treatment was not available, and then tries to cabin the opinion to the antitrust context. As Justice Scalia counters: “This case … turns on the straighforward application of class-certification principle; it provides no occasion for the dissent’s extended discussion… of substantive antitrust law.”
Notwithstanding the dissent’s best efforts, there is no reason why Comcast should be confined to the antitrust context, and the dissent fails to provide any real reason. Thus, predominance is strengthened again… at least for now.