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Posts Tagged ‘antitrust’

The Class Actions, Mass Torts and Derivative Suits Subcommittee of the Colorado Bar Association, now ably chaired by my BakerHostetler partner, Casie Collignon, held its first CLE luncheon of the year this past Friday.  The program, United States Supreme Court vs. Class Actions in 2013, featured excellent commentary about the Supreme Court’s 2013 class action decisions by The Honorable Marcia Krieger, Chief Judge, U.S. District Court for the District of Colorado, Seth Katz of Burg Simpson, and John Fitzpatrick of Wheeler Trigg O’Donnell.  Here are just a few of the many insightful observations made by each of the speakers:

Judge Krieger opened by observing that none of the cases this term have been a surprise from the standpoint of what a trial court judge would have expected given existing law.  Amgen was predictable because the question of materiality in a securities fraud case is unquestionably a common issue, so it is not surprising that it is a question for trial, not a prerequisite for class certification.  Standard Fire can be viewed as a straightforward application of agency law: a plaintiff cannot bind a class of people that he or she doesn’t yet represent.  Comcast exemplifies the importance of examining the plaintiffs’ theory of liability and the relationship to the theory of loss.  Damages are not the same as loss.  The theory by which the plaintiff establishes loss determines the measure of damages.

When asked to identify any trends that she has been seeing in class actions recently, Judge Krieger identified issue certification as a key trend.  She has been seeing more situations where the factual issues may be individualized but there are common legal issues that can be resolved classwide.  She noted that she has been inclined to grant partial certification limited to the common legal issue(s) in that situation.

From the plaintiffs’ perspective, Katz agreed that the outcome of Standard Fire was not surprising, and he went as far as to say that the outcome was correct, noting that plaintiffs’ attorneys shouldn’t be afraid of the federal courts.  Although the holding of Amgen was favorable to plaintiffs, Katz noted an issue that should be of great concern to plaintiffs, and that is the commentary from the conservative wing of the court suggesting that they might be willing to revisit the fraud-on-the-market presumption adopted in Basic Inc. v. Levinson.  Katz sees the potential of a 4-4 split on that issue, with Chief Justice Roberts being the deciding vote.  He predicts market studies being commissioned by both sides over the coming years to demonstrate or disprove the continued efficiency of the markets.

Comcast, Katz noted, caused a collective sigh of relief in the plaintiffs’ bar because it does not go as far as many would have feared by requiring Daubert hearings at the class certification phase.  He noted that one positive impact for plaintiffs arising from the “death of Eisen” (the rejection in decisions like Wal-Mart and Comcast of the idea that merits questions were off-limits at the class certification phase) is that it gives plaintiffs’ counsel an opportunity to obtain merits discovery much earlier in a case than was allowed previously.  On the other hand, Katz expressed fear about the possibility that the Court is trying to raise the bar for plaintiffs with a subtle change in the language about what common proof is necessary on the issue of damages.  Where earlier decisions required that damages be “susceptible to classwide proof,” the Comcast majority phrased the standard as requiring the plaintiff to “prove classwide damages.”  Katz predicts that defendants will argue that this means damages must be uniform, as opposed to simply being susceptible to formulaic calculation.  He noted, however, that the few lower courts that have interpreted Comcast so far have rejected a broad application of the decision.

Fitzpatrick combined philosophical commentary about the evolution of class actions with some practical tips for defense lawyers.  Standard Fire, he argued, is proof that judicial hellholes still exist.  He pointed to Amgen as an example of the dangers of accepting conventional wisdom, pointing out that the outcome in that case might well have been different if the defendants had stipulated to the existence of an efficient market.

Comcast, Fitzpatrick said, provides an opportunity for defendants to prevail at the class certification stage by discrediting a plaintiffs’ expert.  Focus not just on the opinions themselves, he suggested, but also on 1) the existence of bias; 2) the expert’s credentials, and 3) flaws in the methodology.  Scour the country for transcripts about the plaintiffs’ experts.  Look at misstatements and exaggerations in the expert’s CV.  Make sure you find and read all of their prior statements in books, media, and transcripts.  Just as important, Fitzpatrick reminded defense practitioners, is the make sure to prepare your own experts for class certification.

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There have been some significant developments in class actions in South Africa since the publication of World Class Actions this past August. South African contributor Neil Kirby of Werksmans send an update, summarizing in detail the class certification requirements outlined by the South African Supreme Court of Appeal in a seminal cartel (antitrust) case titled Children’s Resource Centre Trust vs Pioneer Food Proprietary Limited (50/2012) [2012] ZASCA 182 (29 November 2012). Click here for Kirby’s excellent summary of the decision.

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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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Forbes columnist Daniel Fisher has authored an excellent preview of the three class-action-related cases set to be decided by the U.S. Supreme Court this term.  The article, entitled Class-Action Lawyers Face Triple Threat At Supreme Court, previews the issues in each of the three cases and summarizes what’s at stake for class action lawyers.  The article points out that although the three decisions have potential to spell disaster for class action plaintiffs given the conservative majority in the Supreme Court, two of the three class-action-related decisions last term came out in favor of the plaintiffs.  I highly recommend this article, as well as Fisher’s work more generally.

For quick reference, the three cases set for decisions on class action issues this term, and the questions presented for review, are as follows:

Comcast v. Behrend, No. 11-864 – “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.”

Standard Fire Insurance Co. v. Knowles, No. 11-1450 - “When a named plaintiff attempts to defeat a defendant’s right of removal under the Class Action Fairness Act of 2005 by filing with a class action complaint a ‘stipulation’ that attempts to limit the damages he ‘seeks’ for the absent putative class members to less than the $5 million threshold for federal jurisdiction, and the defendant establishes that the actual amount in controversy, absent the ‘stipulation,’ exceeds $5 million, is the ‘stipulation’ binding on absent class members so as to destroy federal jurisdiction?”

Amgen Inc. v. Connecticut Retirement Plans, No. 11-1085 – “1. Whether, in a misrepresentation case under SEC Rule 10b-5, the district court must require proof of materiality before certifying a plaintiff class based on the fraud-on-the-market theory.  2. Whether, in such a case, the district court must allow the defendant to present evidence rebutting the applicability of the fraud-on-the-market theory before certifying a plaintiff class based on that theory.”

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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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The United States Supreme Court has granted certiorari in another class action to be heard during the October 2012 term.  In Comcast Corp. v. Behrend, No. 11-864, an antitrust class action, the Court will address the following issue:

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.

The case is an appeal from the Third Circuit Court of Appeals’ ruling in 2011 upholding the district court’s finding that the plaintiff had presented by a preponderance of the evidence that damages could be proved on a common, class-wide basis.  However, a lengthy opinion from Judge Jordan, concurring in part and dissenting in part, took issue with the conclusions reached by the plaintiffs’ expert that antitrust damages could be established on a common basis for the class as a whole. 

As with many of the cases addressed by the Supreme Court over the past few years, this case provides an opportunity for the court to either enter a specific ruling narrowly tailored to the area of law in which it applies (here, antitrust or competition law) or a sweeping ruling impacting the procedure governing class certification more generally.  In particular, the Behrend case could potentially resolve the issue whether difficulties in proving damages on a class-wide basis is a reason to deny certification.  For many years, lower courts have relied on the rule that individualized damages issues are not a barrier to class certification.   A reversal of that rule could have a major impact on the viability of class actions in a variety of contexts.

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Emerald Supplies Ltd. v. British Airways PLC is already being heralded as a rejection of US-Style class actions in the UK, but my reading of the opinion leaves the question far from settled.  The opinion falls far short of foreclosing the possibility of a representative action in every case where the plaintiffs’ interests are not literally identical.  In fact, the opinion appears to turn on two flaws that may very well have prevented class certification under US procedure.

In articulating the standard for what constitutes “the same” interest sufficient to justify treatment of a case as a representative action under Civil Procedure Rule 19.6, Lord Justice Mummery was careful to say that “[t]his does not mean that the membership of the group must remain constant and closed throughout. It may indeed fluctuate. It does not have to be possible to compile a complete list when the litigation begins as to who is in the class or group represented.”  Opinion ¶ 63.  Instead, he articulated two problems in treating the case as a representative action, both of which would also be potentially fatal to class certification under Rule 23. 

First, he observed that there were problems in ascertaining who was a member of the proposed class:

The problem in this case is not with changing membership. It is a prior question how to determine whether or not a person is a member of the represented class at all. Judgment in the action for a declaration would have to be obtained before it could be said of any person that they would qualify as someone entitled to damages against BA. The proceedings could not accurately be described or regarded as a representative action until the question of liability had been tried and a judgment on liability given. It defies logic and common sense to treat as representative an action, if the issue of liability to the claimants sought to be represented would have to be decided before it could be known whether or not a person was a member of the represented class bound by the judgment.

Id.  Second, he observed that certain defenses might be available as to some members of the would-be class, but not others:

A second difficulty is that the members of the represented class do not have the same interest in recovering damages for breach of competition law if a defence is available in answer to the claims of some of them, but not to the claims of others: for example, if BA could successfully run a particular defence against those who had passed on the inflated price, but not against others. If there is liability to some customers and not to others they have different interests, not the same interest, in the action.

Id. ¶ 64.  In conclusion, Lord Justice Mummery returned to his concern about the inability to determine class membership without first ruling on the merits:

In brief, the essential point is that the requirement of identity of interest of the members of the represented class for the proper constitution of the action means that it must be representative at every stage, not just at the end point of judgment. If represented persons are to be bound by a judgment that judgment must have been obtained in proceedings that were properly constituted as a representative action before the judgment was obtained. In this case a judgment on liability has to be obtained before it is known whether the interests of the persons whom the claimants seek to represent are the same. It cannot be right in principle that the case on liability has to be tried and decided before it can be known who is bound by the judgment. Nor can it be right that, with Micawberish optimism, Emerald can embark on and continue proceedings in the hope that in due course it may turn out that its claims are representative of persons with the same interest.

Id. at 65.

The primary concern raised by Lord Justice Mummery is the problem of a “fail-safe” class, a common obstacle to class certification in the U.S.    Even under the seemingly more liberal US Rule 23, a class cannot be defined in such a way that requires the case to be adjudicated on the merits before it can be determined who is in the class.  (See recent CAB review quoting Anderson & Trask’s, The Class Action Playbook, comparing fail-safe classes to Schrödinger’s cat).  Thus, classes consisting of “all consumers who were defrauded” or “all purchasers who paid inflated prices due to the defendant’s act of price fixing” are not sufficiently ascertainable to be certified under Rule 23.

The secondary concern could also prevent certification under US law.  The fact that a defendant’s defenses may vary from person to person is often a consideration in denying class certification under Rule 23.

In short, it appears to this outsider that it may be too early to tell whether Emerald Supplies is truly the death knell for US-Style class actions in the UK, or whether it is simply the first in a line of decisions defining the contours of a more robust law of representative actions across the pond.

One thing is certain, though.  There are very few US judges who could get away with using the word “Micawberish” in an opinion.

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