Comcast Supreme Court argument not as bad for plaintiffs as feared

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December 4, 2012

Comcast Supreme Court argument not as bad for plaintiffs as feared 

Courtney L. Davenport

The Supreme Court heard oral arguments last month in Comcast Corp. v. Behrend, which was widely expected to be the corporate world’s first chance to expand the class action limitations imposed in Wal-Mart v. Dukes to the certification stage. Class action attorneys say, however, that several justices seemed reluctant to use this case to issue a broad rule on how much proof class plaintiffs must provide at the certification stage.

“The question of what they have to show for predominance really had the Court baffled. The justices seemed at a loss on the standard,” said Joshua Davis, a professor at the University of San Francisco School of Law. “That may mean they will put it off for another day.”

A class of Philadelphia consumers alleged that Comcast and other cable providers “swapped” market share in major cities so that each provider covered a major metropolitan area, and then stifled competition from providers that didn’t participate in the swap. After a four-day evidentiary hearing, including testimony from several experts and fact witnesses and a review of 32 expert reports, a federal trial court certified the class, finding that common issues predominated. Although the plaintiff had alleged four theories of antitrust impact, the court dismissed three and accepted only the claim that the swap deterred competition from providers trying to serve the area.

Comcast appealed, arguing the court was required to resolve whether the plaintiffs had common proof of damages before certifying the class. The Third Circuit affirmed certification, holding that the trial court conducted a rigorous analysis and properly concluded that the class had shown the antitrust claims was capable of proof at trial through evidence common to the class. The court found that at certification, a class is required to show only that it has evidence that could prove the alleged illegal conduct through common evidence. Plaintiffs aren’t required to prove the merits of the case, which would turn class certification into a trial and run “dangerously close to stepping on the toes of the Seventh Amendment by preempting the jury’s factual findings.”

Comcast sought certiorari on whether “a district court may certify a class action without resolving ‘merits arguments’ that bear on Rule 23’s prerequisites for certification, including whether purportedly common issues predominate over individual ones under Rule 23(b)(3).”

Corporate lobbyists were hoping the Court would apply Wal-Mart’s stringent limitations on class actions to the certification realm, especially because the majority in Wal-Mart made a passing comment about doubting the Ninth Circuit’s holding that a Daubert hearing is inappropriate at certification. (Comcast Corp. v. Behrend, No. 11-864 (U.S. oral arg. Nov. 5, 2012).)

But when the Court granted certiorari, it reformulated the question to “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.” In other words, do courts have to hold Daubert hearings for evidence admitted at the certification stage?

The problem is that Comcast admits it never requested a Daubert hearing or objected to the admissibility of the plaintiffs’ expert opinions, leaving the justices without a true legal dispute to resolve. After much discussion during Comcast’s argument about whether the plaintiffs’ damages model was sufficient and whether a class must prove common damages at certification if it has a common liability question, Justice Elena Kagan said she wondered whether those issues were relevant.

The Court “reformulated [the question] in a way which said that what we wanted to talk about was whether a district court at a class certification stage has to conduct a Daubert inquiry, in other words, has to decide on the admissibility of expert testimony relating to class-wide damages . . . your clients waived their argument that this was inadmissible evidence,” Kagan said. She later said that “this is a case where it seems to me that except for the question of how good the expert report is, none of the parties have any adversarial difference as to the appropriate legal standard . . . usually we decide cases based on disagreements about law, and here I can’t find one.”

Chief Justice John Roberts also seemed unsure how the Court should proceed. “We are having an elaborate discussion, and you did in the briefs about whether or not this was a claim waived below. No court has addressed that yet. We’re a court of review, not first view,” he said. “So it seems to me that one option for the Court, since we did reformulate the question, is to answer the question and then send it back for the court to determine whether or not the parties adequately preserved that objection or not.”

“The Supreme Court struggled to get an answer to a question it hadn’t asked. It asked about admissibility of evidence when it wanted to ask about the quantum of evidence that would satisfy Rule 23,” said John Vail of the Center for Constitutional Litigation in Washington, D.C., which wrote an amicus brief for AAJ. “I don’t know what they’re going to do, but the good thing is that judging by the oral argument, it’s not going to be a wide-ranging opinion that hurts plaintiffs.”

San Francisco class action attorney Lori Andrus said that although the Court went through “a rather rough ride” in discussing the merits requirements, the Court is limited by the question it posed, and its opinion on admissibility may be favorable to plaintiffs.

“My sense is that the Supreme Court will not require a full Daubert analysis at class certification,” said Andrus. She noted that one reason is that “Justice Kennedy referred to Daubert as ‘just magic words’ and seems to trust in a district court judge’s ability to disregard unreliable evidence.” Another sign that the Court won’t require a full Daubert hearing, she said, is that the Court has yet to grant certiorari in a similar suit—In re Zurn Pex Plumbing—in which the Eighth Circuit rejected a “full and conclusive” Daubert hearing, opting instead for a “focused” Daubert review.

“I predict that the Supreme Court will adopt a similar less-than-full-Daubert reliability test, remand Comcast for further proceedings, and deny cert in Zurn,” she said.

Davis said that if the Court answers only the admissibility question and uses succinct language, the impact on class actions could be minimal. “I think the Court will say that judges have to make a determination that evidence is sufficiently reliable,” he said. “Courts have enough discretion in whether to grant certification at this point that I don’t think it will be a big deal.”

Davis said the danger, however, could be in how the Court words the opinion. “The lower courts are a mess right now about what it is the plaintiffs have to show at certification. It’s clear that common issues must predominate, but there is lots of [disagreement] about what is required,” he said. “If the Court used sloppy language to decide [the admissibility question], it could have ramifications below” when courts use that language to decide what evidence is required at certification.

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