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Archive for the ‘Antitrust Class Actions’ Category

The United States Supreme Court issued its decision in Comcast Corp. v. Behrend, No. 11-864 today.  In a 5-4 decision, the Court held that the class of cable subscribers had been improperly certified.  Justice Scalia, writing for the majority, reasoned that the expert testimony offered by the plaintiff to show that antitrust damages were capable of class-wide proof addressed alleged damages that did not logically flow from the plaintiff’s theory of class-wide liability.  The majority held that the trial court had erred by refusing to consider questions concerning the expert testimony on damages that might overlap with the “merits,” while the Third Circuit had erred by accepting the plaintiffs’ contention that it had a class-wide theory of damages through expert testimony without actually scrutinizing the factual basis for that contention:

The Court of Appeals simply concluded that respondents “provided a method to measure and quantify damages on a classwide basis,” finding it unnecessary to decide “whether the methodology [was] a just and reasonable inference or speculative.” 655 F. 3d, at 206.  Under that logic, at the class-certification stage any method of measurement is acceptable so long as it can be applied classwide, no matter how arbitrary the measurements may be.  Such a proposition would reduce Rule 23(b)(3)’s predominance requirement to a nullity.

The dissenting Justices would have dismissed the writ of certiorari as having been improvidently granted.  The dissent’s criticism of the majority’s holding has more to do with the procedural posture of the case and the methodology used by the majority in reaching its factual conclusions than with the legal class certification concepts underlying the majority’s reasoning.  In particular, the dissent faulted the majority for having changed the issue on review after the conclusion of briefing and took issue with the majority’s analysis of the factual basis for the expert’s opinions.

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Congratulations to my BakerHostetler partner, Bob Abrams, and the rest of his antitrust litigation team on a successful result in the Southeastern Milk Antitrust Litigation.  Below is a copy of a press release summarizing the case and settlement.  Also see these links to articles from the Wall Street Journal and Huffington Post.

Settlement brings total award to more than $300 million; agreement includes substantial changes to business conduct in the Southeast dairy industry

CLEVELAND – January 22, 2013 – BakerHostetler is proud to announce the third and final settlement agreement with the remaining defendants in the Southeast Milk Antitrust Litigation (MDL 1899—E.D. Tenn.). Dairy Farmers of America (DFA) and the remaining defendants/co-conspirators in the lawsuit that claims violation of federal antitrust laws have reached a settlement agreement with the certified class of Southeastern dairy farmers across 14 states totaling $158,600,000.

“The Southeast milk market has been reformed to the benefit of dairy farmers,” said Robert G. Abrams of BakerHostetler, lead attorney for the plaintiffs. “The monetary recovery itself is very substantial and the resulting conduct changes will significantly and positively impact competition in the southeast dairy industry.”

The settlement was reached in advance of the January 22, 2013 trial date and brings the total award for the certified class to more than $300 million. Previous settlements were reached in July 2011 with defendants Dean Foods for $140 million as well as Southern Marketing Agency and James Baird for $5 million plus changes in milk marketing conduct.

In addition to the monetary award, DFA agreed to change its business conduct in the Southeast, including taking steps to increase raw milk prices; removing cancellation penalties on certain full-supply agreements with bottling plants and not entering into new full supply agreements during the Settlement’s term; modifying membership agreements to improve farmer ability to change cooperatives; enhancing price-related information on milk checks; boosting transparency through auditing and disclosure commitments; and facilitating delegate votes on additional meaningful changes to conduct.

“We have always believed strongly in the southeast farmers’ case—a belief that has now been vindicated by three excellent settlements,” said Abrams.

The BakerHostetler team working on behalf of the certified class of Southeastern dairy farmers was led by Robert G. Abrams and includes Robert Brookhiser Jr., Gregory Commins, Joanne Lichtman, Terry Sullivan, William DeVinney, Dan Foix, Carey Busen, Bridget Merritt, Nicole Skolout.

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For those of you looking in-depth coverage of developments and trends in antitrust law, be sure to check out the new blog, The Antitrust Advocate, sponsored by the BakerHostetler Antitrust and Trade Regulation Team.  The Antitrust Advocate, “provides insights and commentary surrounding complex antitrust litigation and trade regulation.”  The blog offers practical tips for litigating antitrust class actions, as well as covering the latest in substantive antitrust and trade regulation law.

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My partner, Bob Abrams, sent me a copy of the order granting Plaintiffs’ Renewed Motion for Class Certification in Allen v. Dairy Farmers of America, an antitrust class action brought on behalf of dairy farmers alleging monopolization and a conspiracy to fix milk prices by various milk cooperatives and processors.  Abrams’ team has been appointed as class counsel for one of the subclasses certified as part of the order. 

The opinion includes an interesting analysis of at least two important issues: First, the extent to which intra-class conflicts of interest can prevent class certification and the extent to which the creation of subclasses can remedy those conflicts; and Second, the extent to which a defendant can avoid class certification in an antitrust case by pointing out alleged flaws in the plaintiffs’ expert’s opinion that a common, class-wide antitrust injury exists or by presenting conflicting expert testimony.  The second issue is one that may be clarified when the Supreme Court rules later this term on Comcast v. Behrend.

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This is the fourth of what will be six posts summarizing my notes of the six presentations at the ABA’s 16th Annual Class Actions Institute held last month in Chicago.  For more on this excellent conference, see my October 31November 5, and November 6 CAB posts.

The fourth session was entitled “Sifting Through All the Big Shoulders,” Litigating Class Actions Alongside Opt-Outs – Free-Riding or Riding Shotgun.  Vincent J. Esades moderated another distinguished panel, which included Professor Geoffrey Parsons Miller, The Honorable Lee H. Rosenthal, and attorneys Joseph R. Saveri and David C. Eddy.

Managing parallel class and opt out cases in multidistrict litigation is an increasingly common and complicated venture, especially in antitrust litigation, where individual institutional plaintiffs may have a sufficient enough individual stake to justify hiring their own counsel and pursue their own claims.  A potential free-rider problem arises in this context because individual plaintiffs have a right under Rule 23(b)(3) to opt out of any class, at least for the purpose of pursuing damages claims.  This means that individual plaintiffs and their lawyers can take advantage of the time and effort expended by the named plaintiffs and their counsel early on in the case, only to opt out later and pursue their own litigation without having to share the benefits of any recovery with class counsel.

The panelists seemed to agree that there is an inherent tension between the opt out rights embodied in Rule 23 and the burdens on the courts of managing both class and individual litigation over the same issue.   They also seemed to agree that, short of re-writing Rule 23, there is no simple solution to ensure that the parties and attorneys who come late to litigation are not free riders on the efforts of others.  Professor Miller raised the question whether these problems suggest a fundamental change is needed in how mass litigation occurs, including a convergence of mass tort and class actions or a recognition that those labels don’t mean anything in the context of certain multidistrict litigation.  Alternatively, can existing rules of civil procedure could be used to solve the problem?  Whether the solution to this problem is litigation reform, a change in judicial philosophy, or creative solutions already within existing rules, much of the discussion surrounded a very pragmatic question, “What’s the blueprint?”

The allocation of fees and costs between a class and individual plaintiffs raises a host of difficult questions, including 1) can a court force an opt-out to pay a portion of the fees of class counsel? 2) does a court have jurisdiction to require the defendant to pay any portion of any individual settlement with one or more plaintiffs into an escrow account, where a portion of any fee award can be claimed by the counsel for other plaintiffs, depending on the work performed? and 3) if allocation between counsel is somehow permitted, how should non-monetary aspects of settlements be valued, such as agreements to provide a guaranteed source of supply of a particular product?

The judge does, of course, have express case management authority under Rule 16 as well as more general inherent discretionary case management authority.  However, the problem in using these case managemnt tools tends to be a lack of information about the precise problems that need to be resolved.  Judge Rosenthal pointed out that the judge is typically not in a good position to make that decision without the help of the lawyers because there is usually very little information the economic incentives driving different groups of lawyers.   (In what might have been the most quotable quip of the entire program, she implored the three lawyers on the panel, “How do I get you guys to lift up your skirts?”)  If there is more transparency by the parties and their attorneys, she argued, a judge would be a better able to allocate costs fairly.  Once the problems and incentives are identified, there are case management tools available to incentivize conduct properly, even if a judge does not have direct authority to order one party to pay another’s fees.  For example, the judge can help parties to understand the benefits of coordination of efforts voluntarily.

One key question debated by the panelists was whether procedures used in mass tort litigation can be applied to the class action context.  On one hand, as one panelist pointed out, the management of class and individual actions in a single MDL raises different challenges than the management of mass tort cases in an MDL.  In the mass tort context, one panelist pointed out, all the parties and their attorneys have to be involved in the proceedings from the beginning because of the nature of mass torts as a collection of individual actions.  In the class action context, by contrast, individual plaintiffs can wait and see how the class action proceedings develop before having to get involved individually through their own counsel.  On the other hand, as with any complex litigation, there are models and protocols that both parties and judges to look to in order to bring efficiencies to the litigation even when not every problem can be solved.  While mass tort litigation is not completely analogous it can provide a source of ideas for judicial management of certain problems.

In the end, the point was made that this is not so much an issue of jurisprudence as it is a problem of judicial management.  As with any issue with case management, the solutions will develop over time through experience, trial, and error.

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Editor’s Note: I don’t often use this blog as a platform to brag about my firm, but I thought a recent success by my partner, Bob Abrams, and his cross-office antitrust team in Washington, DC and Los Angeles, was noteworthy.  Abrams’ group came over to Baker Hostetler last year from Howrey, and they have been a fantastic addition to our class action practice, adding depth and expertise in the antitrust area.  Congratulations to the team on achieving a great result.

Baker Hostetler represents a certified class of dairy farmers located in 14 Southeastern States against Dairy Farmers of America, Dean Foods and a number of other defendants in an action alleging violations of Section 1 of the Sherman Act.  The lawsuit alleges that Defendants and alleged Co-Conspirators violated federal antitrust laws and as a result prices paid to dairy farmers were lower than they otherwise would have been.

After recently approving antitrust class settlements with Dean Foods and two other defendants worth $145 million and significant structural relief, the United States District Court for the Eastern District of Tennessee granted in its entirety Baker Hostetler’s motion for fees and expenses, noting “the quality of the work done by class counsel has been exceptional, not only with respect to the pleadings filed but also the oral advocacy during oral argument on various motions.” 

In commenting on the wide-scale complex litigation led by Baker Hostetler partner Bob Abrams and his team, the Court noted:

Class counsel, who have extensive experience in complex class action litigation, have efficiently and competently managed their enormous task and have vigorously and effectively, prosecuted the case on behalf of the class. They have also been opposed by equally experienced and highly competent counsel for defendants and have achieved an excellent result for their clients.

Baker Hostetler continues to litigate against non-settling defendant Dairy Farmers of America and others, and trial in the matter is set for November 6, 2012.

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Two readers sent me tips yesterday on important decisions from the Second and Third Circuit Courts of Appeals that will be of interest to class action practitioners:

First, John G. Papianou of the Philadelphia firm Montgomery, McCracken, Walker & Rhoads, LLP forwarded a copy of the Third Circuit’s decision in Long v. Tommy Hilfiger U.S.A., Inc., No. 11-1554 (3d Cir., Jan. 24, 2012).  The Third Circuit affirmed a lower court’s decision (summarized in this February 14, 2011 CAB Post) holding that 1) the Fair and Accurate Credit Transactions Act (FACTA) prohibits a merchant from printing a consumer’s expiration month (as opposed to the entire expiration date) on a credit card receipt but that 2) the standard for a willful violation of FAСTA is one of objective reasonableness, meaning that if a merchant acted in conformance with a reasonable, albeit erroneous, interpretation of the statute, it cannot be held liable for a willful violation, regardless of its subjective knowledge or intent.

Second, New York securities class action lawyer Noah L. Shube forwarded a copy of the Second Circuit’s highly anticipated decision in In Re American Express Merchants’ Litigation, No. 06-1871 (2d Cir., Feb. 1, 2012).  In that case, the Second Circuit reaffirmed its conclusion invalidating a class arbitration waiver on federal statutory grounds.  The case had been vacated and remanded by the U.S. Supreme Court to reconsider in light of its recent decision in  AT&T Mobility v. Concepcion.  Yesterday’s decision follows a previous ruling finding the clause unenforceable, which had previously been vacated, remanded for reconsideration in light of the Court’s decision in Stolt-Nielsen, S.A. v. AnimalFeeds Int’l Corp., 130 S. Ct. 1758 (2010), only to be reaffirmed by the Second Circuit in a March 8, 2011 ruling (discussed in this March 9, 2011 CAB entry).  In yesterday’s decision, the Second Circuit relied on the federal law of arbitrability, a concept not squarely addressed in either of the Supreme Court’s recent class arbitration decisions, in holding the class arbitration waiver unenforceable.

The Baker Hostetler class action team is putting together a more detailed alert discussing yesterday’s decision in In re American Express Merchants’ Litigation, and I’ll post a link to that alert as soon as it is available.

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