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Comcast Corp. v. Behrend: Supreme Court Grants Certiorari Regarding Evidence Requirements at Class Certification

Posted in Class Certification Standards

Yesterday, the U.S. Supreme Court granted certiorari in Comcast Corp. v. Behrend, No. 11-864 (docket), to address the question of “[w]hether 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.”  The Court will review the Third Circuit’s opinion in Behrend v. Comcast Corp., 655 F.3d 182 (3d Cir. 2011). 

This case is a putative antitrust class action alleging that acquisitions by Comcast of other cable providers and “swap agreements” that Comcast entered into with competing cable providers were anticompetitive and led to monopolization by Comcast of the Philadelphia market area.  The case has a complex factual and procedural history.  The district court ultimately certified a class, finding, after a four-day evidentiary hearing, that antitrust impact could be proven through common evidence to establish damages on a class-wide basis.  The Third Circuit affirmed, applying its “rigorous analysis” standard from In re Hydrogen Peroxide Antitrust Litigation, 552 F.3d 305 (3d Cir. 2008), but noting that “at the class certification stage, we are precluded from addressing any merits inquiry unnecessary to making a Rule 23 determination.”  Behrend, 655 F.3d at at 190.  In discussing class certification standards, the Third Circuit concluded that:

Many of Comcast’s contentions ask us to reach into the record and determine whether Plaintiffs actually have proven antitrust impact. This we will not do. Instead, we inquire whether the District Court exceeded its discretion by finding that Plaintiffs had demonstrated by a preponderance of the evidence that they could prove antitrust impact through common evidence at trial.

. . .

Although in Hydrogen Peroxide we heightened the inquiry a district court must perform on the issue of class certification, nothing in that opinion indicated that class certification hearings were to become actual trials in which factual disputes are to be resolved. Indeed, as we explained in Hydrogen Peroxide, a district court may inquire into the merits only insofar as it is “necessary” to determine whether a class certification requirement is met. 552 F.3d at 316. Eisen still precludes any further inquiry. See Eisen, 417 U.S. at 178, 94 S.Ct. 2140 (“[T]he question is not whether the plaintiff or plaintiffs … will prevail on the merits, but rather whether the requirements of Rule 23 are met.” (quoting Judge Wisdom’s holding in Miller v. Mackey Int’l, Inc., 452 F.2d 424, 427 (5th Cir.1971))); Hydrogen Peroxide, 552 F.3d at 317 (“Eisen is best understood to preclude only a merits inquiry that is not necessary to determine a Rule 23 requirement.”). We allow preliminary merits inquiries when necessary for Rule 23 because of the potentially “decisive effect on litigation” of a certification decision, Newton, 259 F.3d at 167, but those inquiries remain limited and non-binding on the merits at trial, Hydrogen Peroxide, 552 F.3d at 318. Nothing in Hydrogen Peroxide requires plaintiffs to prove their case at the class certification stage; to the contrary, they must establish by a preponderance that their case is one that meets each requirement of Rule 23. To require more contravenes Eisen and runs dangerously close to stepping on the toes of the Seventh  Amendment by preempting the jury’s factual findings with our own.

Id. at 197, 199-200.

With respect to the specific issue of damages, which is the focus of the question presented as formulated by the Supreme Court, the Third Circuit wrote that:

At the class certification stage we do not require that Plaintiffs tie each theory of antitrust impact to an exact calculation of damages, but instead that they assure us that if they can prove antitrust impact, the resulting damages are capable of measurement and will not require labyrinthine individual calculations. Cf. Newton, 259 F.3d at 187. We are satisfied that Plaintiffs’ damages model meets this burden.

Additionally, the cases that Comcast offers are distinguishable on multiple grounds. Most to the point, those cases considered the merits of experts’ theories following adverse jury verdicts; here, we address only whether Plaintiffs have provided a method to measure and quantify damages on a class-wide basis. We have not reached the stage of determining on the merits whether the methodology is a just and reasonable inference or speculative.

Id. at 206. 

Judge Jordan dissented from the ruling on damages, finding that, under Daubert, the plaintiffs’ proffered expert testimony “fails the requirement of ‘fit’ because it is disconnected from Plaintiffs’ only viable theory of antitrust impact . . . and, thus, the proffered expert testimony cannot help the jury determine whether reduced overbuilding caused damages.”  Id. at 216 (Jordan, J., dissenting).

Comcast’s petition for certiorari focuses on the Supreme Court’s opinion last term in Wal-Mart Stores, Inc. v. Dukes, arguing that Wal-Mart requires the lower courts to decide the types of merits issues that the Third Circuit refused to take up.  The petition also argues that the Third Circuit’s focus on whether the claims could be proven through common evidence was the wrong approach because Wal-Mart requires a determination of whether class certification requirements were in fact proven.  The cert petition, however, was seeking somewhat broader review than the Supreme Court ultimately granted – the Court’s order granting certiorari appears to limit its review to the damages question and the issue of the admissibility of expert testimony.

This case could have broad impact on class actions, including insurance cases, but that will depend on how the opinion is written (which could take seven months to a year).  If the Court were to simply hold that Daubert applies at class certification (as Wal-Mart suggested in dictum) and then determine whether or not the expert in this case has satisfied that standard (or perhaps remand for the district court to reassess that question), that would not constitute any significant shift in federal class action law.  The general rule most courts are following is that Daubert applies at class certification, although there is some debate about how strongly it applies (see my posts about the Seventh Circuit’s decision in Messner and the Eighth Circuit’s decision in Zurn Pex Plumbing).  The Court might resolve that debate, but in my view that is a relatively small quibble in the grand scheme of class action law.  If the Court were to, in the course of addressing the damages and expert testimony issues, also comment on the extent to which the merits must be considered at class certification and whether the Third Circuit got that right or wrong under Wal-Mart, that type of ruling would have a much greater impact.  It seems possible the Court could go that far even though the question presented is not as broad as Comcast may have desired.  If the Court reaches into the issue of the extent to which the merits can be considered on class certification, Wal-Mart’s discussion of deciding merits issues at class certification, which is strongly favorable to defendants seeking such rulings, could be reaffirmed and extended, or it could be scaled back, swinging the pendulum back towards plaintiffs.  It is also possible that the Court could address in a broader fashion the extent to which the need for individual adjudication of damages, where a court concludes that liability can be resolved on a class-wide basis, makes class certification inappropriate.