On March 27, 2013, the United States Supreme Court, in Comcast Corp. v. Behrend, Case No. 11-864 (U.S. Mar. 27, 2013), issued an important decision regarding the role of a district court in determining whether to certify a class under Federal Rule of Civil Procedure 23(b)(3). Consistent with its prior decisions in this area, specifically Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541 (U.S. 2011), the Court reasserted its position that a district court must conduct a “rigorous analysis” as to whether a putative class satisfies the predominance requirement of Rule 23(b)(3), even where that “rigorous analysis” forces the district court to conduct some review of the merits of the underlying claim. The Court further indicated that, in certain cases, the individualized nature of the damages claimed might preclude class certification. The importance of this decision is that it provides defendants with a clearly articulable and reasonable defense to class certification.
Factual and Procedural Background
The original class action in Comcast had been brought by subscribers to Comcast’s cable television services. The plaintiffs alleged that Comcast’s operations in the Philadelphia area violated federal antitrust laws, leading to the elimination of competition and anti-competitive pricing. Ultimately, the plaintiffs asked the district court to certify a class containing approximately two million current and former Comcast subscribers. While the plaintiffs asserted four different theories of injury in the case, the district court accepted only one of these theories – the “overbuilder theory” – as forming an allowable basis for class certification. However, the damage model that was offered by the plaintiffs’ expert in support of class certification was based on calculated damages for all four theories of injury, rather than providing a damage calculation specifically related to the one theory of injury that the district court had accepted. Despite this flaw in the analysis, the district court certified the class.
In reviewing the certification decision on appeal, the United States Court of Appeals for the Third Circuit rejected the argument that class certification was improper because plaintiffs’ damage calculation was not limited to the specific theory of injury on which class certification was based. While the Court of Appeals was divided on this issue, the Court of Appeals affirmed the certification decision of the district court on the basis that the challenge to the methodology used for the calculation of damages required a review of the merits of the underlying substantive claim which had “no place in the class certification inquiry.” Behrend v. Comcast Corp., 655 F.3d 182, 207 (3d Cir. 2011).
Supreme Court Decision
The Supreme Court, in a 5-4 decision authored by Justice Scalia, reversed the decision of the Court of Appeals, holding that it was improper for the Court of Appeals to refuse to consider the individualized questions raised by the flaws in plaintiffs’ damage calculation simply because such a consideration would invariably force the district court to make some inquiry into the merits of the underlying substantive claim at the class certification stage. The Supreme Court held that this approach by the Court of Appeals was inconsistent with its precedents, most recently in Wal-Mart, requiring a “rigorous analysis” into whether the requirements of Rule 23 are satisfied, even where that “rigorous analysis” forces the district court to inquire into the merits of the underlying substantive claim.
In its decision, the Court focused on four key areas that have important implications for future class certification decisions by district courts:
- The Court made it clear that it may well be legal error for a district court to refuse to review the evidence offered by the plaintiffs to determine whether the requirements of the class-certification rule have been satisfied on the basis that the evidence relates to the merits of the case.
- Building upon its decision in Wal-Mart, the Court stated that the “predominance” requirement of Rule 23 is more demanding in a Rule 23(b)(3) damages class action than in other types of class actions.
- The Court indicated that expert evidence that is offered in support of class certification, specifically evidence related to damage calculations, must be reasonably linked to the specific theory of liability on which a plaintiff seeks certification.
- Perhaps most importantly for future class certifications decisions, the Court concluded that the individualized nature of damages in a case such as this often “will inevitably overwhelm questions common to the class.”
In dissent, Justice Ginsburg and Breyer sought to limit the reach of the majority opinion by asserting that because the briefing of the parties had focused on the standard for the admissibility of expert opinion at the class certification stage, the Court should not have expanded its review to include the question of the adequacy of the plaintiffs’ damage model to support class certification. In seeking to limit the opinion of the Court, the dissent asserted that the opinion of the Court “should not be read to require, as a prerequisite to certification, that damages attributable to a classwide injury be measurable on a classwide basis.”
Importance of the Comcast Decision for Future Class Actions
This decision, following the trajectory from the Court’s decision in Wal-Mart, further clarifies the role district court’s must play in analyzing the requirements for certifying a class. The Court makes it clear that the “rigorous analysis” to be conducted by the district court must indeed be rigorous, particularly in Rule 23(b)(3) damages class actions, even if it requires the district court to delve into the merits of the underlying claims. The district court must conduct a thorough analysis of whether the damage calculation methodology put forth by plaintiffs in support of class certification is reasonably tied to the asserted theory of liability or whether it is simply speculative. The Court also makes it clear that where damages are individualized, rather than subject to classwide proof, class certification may be inappropriate. The result of this decision, along with the Court’s prior decision in Wal-Mart, is to continue a trend where it may become increasingly difficult and expensive for plaintiffs’ to obtain class certification in Rule 23(b)(3) damages class actions.