Comcast 'Cluster' Class Shouldn't Have Been Set
WASHINGTON (CN) - The Supreme Court on Wednesday disbanded a prematurely certified class of Comcast customers who allegedly paid higher rates.
In a December 2010 lawsuit, six Comcast customers accused the cable giant of trying to monopolize the market for non-basic-cable-television in the greater Philadelphia area.
They said Comcast increased its market share there from 24 percent in 1998 to about 70 percent by 2007 by engaging in a series of acquisitions and swaps with competing cable providers.
After a four-day evidentiary hearing that included submission of 32 expert reports in January 2010, a federal judge certified a class consisting of roughly 2 million cable-television subscribers in parts of Pennsylvania, New Jersey and Delaware.
One expert for the subscribers calculated that Comcast's anticompetitive activities damaged the entire class by more than $875 million.
Comcast's appeal blasted the expert, Dr. James McClave, for calculating this figure by using a regression model that failed to isolate damages to the sole theory of injury remaining in the case.
This theory alleges that Comcast's activities reduced the level of competition from "overbuilders," companies that build competing cable networks in areas where an incumbent cable company already operates.
The 3rd Circuit upheld certification after finding that attributing damages in the model would require the court to prematurely assess the merits of the case.
In taking up the case last year, the U.S. Supreme Court resolved to address this issue.
A five-justice majority reversed Wednesday, finding that certification fails under Federal Rule of Civil Procedure 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," Justice Antonin Scalia wrote for the court. "And it is clear that, under the proper standard for evaluating certification, respondents' model falls far short of establishing that damages are capable of measurement on a classwide basis. Without presenting another methodology, respondents cannot show Rule 23(b)(3) predominance: Questions of individual damage calculations will inevitably overwhelm questions common to the class. This case thus turns on the straightforward application of class-certification principles; it provides no occasion for the dissent's extended discussion of substantive antitrust law."
Scalia emphasized the common sense in measuring damages attributable to the sole theory of antitrust impact on the table.
"If the model does not even attempt to do that, it cannot possibly establish that damages are susceptible of measurement across the entire class for purposes of Rule 23(b)(3)," he wrote. "Calculations need not be exact, but at the class-certification stage (as at trial), any model supporting a 'plaintiff 's damages case must be consistent with its liability case, particularly with respect to the alleged anticompetitive effect of the violation.'" (Parentheses in original.)
Believing that such an analysis would improperly reach the merits "flatly contradicts our cases requiring a determination that Rule 23 is satisfied, even when that requires inquiry into the merits of the claim," Scalia added.
Justices Ruth Bader Ginsburg and Stephen Breyer co-wrote the dissenting opinion, which Justices Sonia Sotomayor and Elena Kagan joined.
"This case comes to the court infected by our misguided reformulation of the question presented," they wrote. "For that reason alone, we would dismiss the writ of certiorari as improvidently granted.
"Comcast sought review of the following question: '[W]hether a district court may certify a class action without resolving 'merits arguments' that bear on [FederalRule of Civil Procedure] 23's prerequisites for certification, including whether purportedly common issues predominate over individual ones under Rule 23(b)(3).' We granted review of a different question: '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.' Our rephrasing shifted the focus of the dispute from the District Court's Rule 23(b)(3) analysis to its attention (or lack thereof) to the admissibility of expert testimony. The parties, responsively, devoted much of their briefing to the question whether the standards for admissibility of expert evidence set out in Federal Rule of Evidence 702 and Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U. S. 579 (1993), apply in class certification proceedings. Indeed, respondents confirmed at oral argument that they understood our rewritten question to center on admissibility, not Rule 23(b)(3).
"As it turns out, our reformulated question was inapt. To preserve a claim of error in the admission of evidence, a party must timely object to or move to strike the evidence. In the months preceding the District Court's class certification order, Comcast did not object to the admission of Dr. McClave's damages model under Rule 702 or Daubert. Nor did Comcast move to strike his testimony and expert report. Consequently, Comcast forfeited any objection to the admission of Dr. McClave's model at the certification stage. At this late date, Comcast may no longer argue that respondents' damages evidence was inadmissible.
"Comcast's forfeiture of the question on which we granted review is reason enough to dismiss the writ as improvidently granted," the dissenting judges continued.
The plaintiffs say Comcast engaged in similar anticompetitive conduct in the Chicagoland area, and a suit over an alleged Boston cluster is pending.