Six Months Since Comcast: What Do Recent Decisions Mean For Antitrust Practitioners?

1. Introduction

   Every antitrust lawyer should be familiar with the U.S. Supreme Court's decision in Comcast Corp. v. Behrend, 133 S. Ct. 1426 (2013), which overturned a 3rd U.S. Circuit Court of Appeals decision affirming an order certifying an antitrust class action under Federal Rule of Civil Procedure 23(b)(3). The Supreme Court held that the plaintiffs' expert's damages model was unable to measure class-wide damages attributable to the plaintiffs' theory of antitrust impact. Because of this fundamental flaw in the damages model, individual damage calculations would overwhelm questions common to the class, and the class therefore could not be certified under Rule 23(b)(3).

   In the six months since Comcast issued, decisions applying it have fallen into three general categories: (1) opinions distinguishing Comcast, finding an acceptable common formula at the class certification stage and Rule 23(b)(3)'s predominance test satisfied; (2) opinions certifying a class as to liability only under Rule 23(c)(4) ("When appropriate, an action may be brought or maintained as a class action with respect to particular issues."); and (3) opinions applying Comcast and rejecting class certification on the ground that impact cannot be determined on a class-wide basis or no common formula exists for determining damages on a class-wide basis. See, e.g., Jacob v. Duane Reade, Inc., No. 11 Civ. 160 (JPO), 2013 U.S. Dist. LEXIS 111989 (S.D.N.Y. Aug. 8, 2013) (discussing decisions since Comcast).

   Although courts have applied Comcast inconsistently, the decisions thus far suggest that Comcast may have a greater effect on class certification in antitrust cases than in other areas, because of the complexity of isolating the impact of various categories of alleged anticompetitive conduct, and the difficulty of disaggregating the conduct for class-wide damages models. Accordingly, defendants in antitrust cases should continue to see Comcast as offering an opportunity for an early test of plaintiffs' damages models regarding class-wide damages.

   This article first summarizes the Comcast decision. It then provides a high-level overview of decisions since Comcast, focusing on appellate decisions and a sampling of district court antitrust cases. Finally, we offer some thoughts on what these cases tell us about Comcast's likely effects on antitrust class actions. In brief, recent decisions provide defense counsel with ammunition to use Comcast to challenge class certification under Rule 23(b)(3) by attacking plaintiffs' (and their experts') theories regarding class-wide impact and damages.

2. Discussion

   1. The Comcast Decision

      From 1998 to 2007, Comcast allegedly engaged in a series of transactions described as "clustering" operations, in which the company unlawfully swapped its own cable systems outside of a targeted region for competitors' systems located within the region. Plaintiffs alleged that Comcast obtained a monopoly, or attempted to obtain a monopoly, on cable services in violation of Sections 1 and 2 of the Sherman Act. They filed a motion to certify a class under Rule 23(b)(3), the relevant portion of which permits certification only if "the court finds that the questions of law or fact common to class members predominate over any questions affecting only individual members . . . ."

      Plaintiffs proposed four theories of class-wide injury. The district court rejected three of the theories but accepted a fourth theory—that clustering increased Comcast's bargaining power relative to content providers (the "overbuilder-deterrence" theory). The district court further found that the damages resulting from overbuilder-deterrence could be calculated on a class-wide basis. Plaintiffs relied on a regression model that compared actual cable prices with hypothetical prices but for Comcast's allegedly anticompetitive activities. Critically, the expert who created the model acknowledged that it did not—and could not—isolate damages resulting only from overbuilder-deterrence, but rather provided an estimate of aggregate damages based on all four of plaintiffs' theories of antitrust impact. Nonetheless, the district court certified the class and the 3rd Circuit affirmed.

      The Supreme Court reversed. Justice Antonin Scalia's majority opinion reiterated the Court's admonition in Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541 (2011), that "certification is proper only if 'the trial court is satisfied, after a rigorous analysis, that [Rule 23's] prerequisites . . . . have been satisfied.'" Comcast, 133 S. Ct at 1432 (quoting Wal-Mart, 131 S. Ct. at 2551). The majority "start[ed] with an unremarkable premise. If respondents prevail on their claims, they would be entitled only to damages resulting from reduced overbuilder competition" (Comcast, 133 S. Ct. at 1433)—the only antitrust impact theory accepted for class-action treatment by the district court. To establish a class-wide measurement of damages, the model must "measure only those damages attributable to that theory." Id. The Court explained that plaintiffs' damage "model failed to measure damages resulting from the particular antitrust injury on which [Comcast's] liability in this action is premised." Id. Under these circumstances, the model could not "possibly establish that damages are susceptible of measurement across the entire class for purposes of Rule 23(b)(3)." Id. The Court explained that, "The first step in a damages study is the translation of the legal theory of the harmful event into an analysis of the economic impact of that event. . . . The district court and the Court of Appeals ignored that first step entirely." Id. at 1435 (italics in original; citations omitted). The Court concluded that the class was improperly certified under Rule 23(b)(3) and reversed. Id.

      The dissent, written jointly by Justices Ruth Bader Ginsburg and Stephen Breyer (joined by Justices Sonia Sotomayor and Elena Kagan), tried to limit the majority's holding. It argued that the majority's opinion "breaks no new ground on the standard for certifying a class action under [Rule] 23(b)(3)," and the decision "should not be read to require, as a prerequisite to certification, that damages attributable to a class-wide injury be measurable 'on a class-wide basis.'" Id. at 1436 (citation omitted). The dissent reasoned, "when adjudication of questions of liability common to the class will achieve economies of time and expense, the predominance standard is generally satisfied even if damages are not provable in the aggregate." Id. at 1437. Thus, "[r]ecognition that individual damages calculations do not preclude class certification under Rule 23(b)(3) is well nigh universal."...