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Posts Tagged ‘antitrust’

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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UK legal publication The Lawyer has an interesting article out today for anyone tracking trends in class and collective action reform across the pond.  According to the article, Which?, a consumer organization granted the right to pursue collective redress on behalf of consumers harmed by conduct declared to have violated antitrust laws, isn’t convinced that it would pursue another one after facing several practical barriers in pursuing a case against a sports merchandiser for allegedly selling overpriced replica soccer jerseys.  Among the challenges cited by a lawyer for the group was the fact that few consumers found it worth their while to pursue a claim in light of the relatively modest amounts they stood to gain (£20 per person), the fact that consumers had to provide proof of purchase, and the fact that years had passed by the time the opportunity to make a claim became available. 

The report notes that even after a highly publicized media campaign highlighting the case, only about 500 consumers decided to participate.  The total amount of the settlement payout was around £18,000, plus reasonable litigation costs, as compared to a multi-million dollar penalty imposed against the company for its anti-competitive actions in the first place.   An earlier article by The Lawyervalued those costs at many hundreds of thousands of pounds, dwarfing the amount of the payout.  That article quotes a lawyer for which as saying that the use of an opt-in versus an opt-out system contributed to the discrepancy.

The issue of the cost of litigation versus the actual benefit to victims, however, is one that arises whether the system is opt-in or opt-out.  Even in the U.S., which technically has an opt-out system, actual monetary redress to alleged victims happens as a result of some sort of claim-in process, either as part of a settlement or a distribution of a judgment.  Unclaimed funds are either distributed pro-rata to those class members who do file a claim, returned to the defendant, paid to the government, or distributed to charity as part of a cy pres remedy.  In any event, the system does not in any way guaranty redress to those who don’t have the means to prove their entitlement to relief or who don’t find it worthwhile to pursue a remedy.

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The Class Action Blogosphere Weekly Review is back on its regularly scheduled day this week.  As always, here are some blog entries that might be of interest to class action practitioners…

See Carlton Fields’ class action blog Classified for links to various news tidbits relating to class actions, including a summary of a bill recently passed in the United States House of Representatives that would amend the Fair and Accurate Transaction Act (FACTA) to, among other things, “ensure that it is not abused by frivolous class-action lawsuits against businesses.”

http://www.carltonfields.com/classactionblog/blog.aspx?entry=213

Class Action Defense Blog summarizes and provides a link to a transfer of venue decision by the U.S. District Court for the Southern District of New York noting that the deference to be given to a plaintiff’s choice of forum is “diminished” in a class action:

http://classactiondefense.jmbm.com/2008/05/venue_class_action_defense_cas.html

The Complex Litigator comments on a recent entry in California Punitive Damages regarding an appeal that may affect punitive damages claims in wage and hour class actions:

http://www.thecomplexlitigator.com/2008/05/are-punitive-da.html

http://calpunitives.blogspot.com/2008/05/pending-appeal-will-affect-punitive.html

Drug and Device Law Blog provides an in-depth analysis of and a link to the Second Circuit Court of Appeals’ recent decision in Pew v. Cardarelli, No. 06-5703-mv, slip op. (2d Cir. May 13, 2008), which addresses the procedures for appellate review of remand orders in cases removed under the Class Action Fairness Act…

http://druganddevicelaw.blogspot.com/2008/05/cafa-intrigue.html

… and see more on the same decision from the Consumer Law & Policy Blog

http://pubcit.typepad.com/clpblog/2008/05/new-cafa-decisi.html

The D&O Diary continues to be the leading source of information on litigation arising out of the subprime mortgage crisis:

http://www.dandodiary.com/2008/05/articles/subprime-litigation/yes-but-the-subprime-litigation-wave-rolls-on/

How Appealing discusses a recent Sixth Circuit Court of Appeals decision upholding a large verdict in an antitrust class action:

http://howappealing.law.com/051508.html#033744

Federal Civil Practice Bulletin discusses a recent First Circuit Court of Appeals decision discussing the level of merits evaluation required (as opposed to allowed) at the class certification stage:

http://federalcivilpracticebulletin.blogspot.com/2008/05/first-circuit-discusses-degree-of.html

Elizabeth Cabraser submits entry as a guest blogger on ACSBlog regarding the use of class actions as a tool for change and social justice:

http://www.acsblog.org/guest-bloggers-class-actions-and-justice.html

Law and More comments on the Deutsche Telekom trial and the possibility that Germany may adopt an American-style class action model (see my earlier entry here)

http://lawandmore.typepad.com/law_and_more/2008/05/will-germany-wind-up-importing-american-style-class-action-lawsuits.html

Canadian blog FP Legal Post comments on recent competition class action decisions in the Canadian courts:

http://network.nationalpost.com/np/blogs/legalpost/archive/2008/05/20/divisional-court-upholds-competition-class-action-certification.aspx

Startup Company Lawyer provides some practice tips for directors and officers on ways to minimize potential class action exposure resulting from the sale of a company:

http://www.startupcompanylawyer.com/2008/05/15/what-are-directors-duties-and-what-can-they-do-to-protect-themselves-in-a-sale-of-company/

Too Old to Know Better discusses a website allowing users to submit grievances for review by a consortium of plaintiffs’ class action lawyers (see my commentary on related topics here and here):

http://too-old-to-know-better.blogspot.com/2008/05/class-action-connect.html

A franchise lawyer provides his views on the use of the class action device in franchisee’s rights’ cases on Blue Maumau:

http://www.bluemaumau.org/my_personal_bias_foragainst_using_class_action_lawsuits

Sabal Insurance Group‘s blog summarizes a seminar addressing trends in shareholder class actions in the insurance industry:

http://sabalinsurance.blogspot.com/2008/05/insurers-told-to-monitor-class-action.html

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