Supreme Court Will Review Class Certification In Comcast Antitrust Case

Supreme Court Will Review Class Certification In Comcast Antitrust Case

WASHINGTON, D.C. - (Mealey's) The U.S. Supreme Court on June 25 agreed to decide "[w]hether 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" (Comcast Corporation, et al. v. Caroline Behrend, et al., No. 11-864, U.S. Sup.).

 

Merits Issues 

The Third Circuit U.S. Court of Appeals on Aug. 23 affirmed the certification of a class of approximately 2 million non-basic cable television customers in the Philadelphia market on its claims that Comcast Corp. worked to establish a monopoly in the Philadelphia market and then increased prices once it had eliminated competition. 

Comcast sought review in light of the Supreme Court's opinion in Wal-Mart Stores, Inc. v. Dukes (131 S.Ct. 2541 [2011] [enhanced version available to lexis.com subscribers]), arguing that "Dukes emphasized that district courts are required to resolve any 'merits question[s]' bearing on class certification, even if the plaintiffs 'will surely have to prove [those issues] again at trial in order to make out their case on the merits.' . . .  In this case, however, the Third Circuit repeatedly . . . declin[ed] to consider several 'merits arguments' directly relevant to the certification analysis." 

Comcast contended that Dukes rejects the Third Circuit's interpretation of Eisen v. Carlisle & Jacquelin (417 U.S. 156 [1974] [enhanced version]) as holding that any arguments that addressed the merits of the subscribers' claims were "not properly before" the court.  Rather, Dukes "held that district courts must resolve any 'merits question[s]' that bear on the 'propriety of certification under [Federal Rules of Civil Procedure] 23(a) and (b).' . . .  Under Dukes, the district court was required to engage in a 'rigorous analysis' to determine whether Plaintiffs had 'in fact' satisfied the prerequisites for class certification . . . not, as the Third Circuit viewed the relevant inquiry, whether they 'could prove [their claims] through common evidence at trial,'" Comcast said. 

In their opposition, the class contended that "Comcast mischaracterizes the rigorous analysis conducted by both the district court and the appellate court below.  Despite Comcast's unsupported assertions, the district court resolved all disputes - including merits issues - necessary to conclude that the class met Rule 23's prerequisites for certification.  And the Third Circuit reviewed those determinations using the stringent standard this Court first set forth in General Telephone Company of the Southwest v. Falcon, 457 U.S. 147 (1982), and reiterated in Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541 (2011).  Most importantly, at no point did the Third Circuit attempt to 'resuscitate' an incorrect interpretation of Eisen v. Carlisle & Jacquelin, 417 U.S. 156 (1974)." 

Exclusivity 

The U.S. District Court for the Eastern District of Pennsylvania certified a class of all cable television customers who subscribe or subscribed at any time since Dec. 1, 1999, to video program services, other than solely basic cable services, from Comcast or any of its affiliates in the company's Philadelphia cluster.  The cluster is defined as all customers in Philadelphia and geographically contiguous areas representing the 16-county Philadelphia metropolitan area. 

According to the customers, Comcast conspired with other cable providers to carve up the nation into separate markets so that cable providers would have the markets exclusively.  The customers claimed that Comcast and its competitors struck deals whereby competitors agreed to exchange assets so that companies would be able to maintain exclusivity over clusters of markets. 

The Third Circuit concluded that the District Court's Jan. 7, 2010, opinion certifying the class properly applied the standards of In re Hydrogen Peroxide Antitrust Litigation (552 F.3d 305 [3rd Cir. 2008] [enhanced version]) in finding that the customers "established by a preponderance of evidence that they would be able to prove through common evidence (1) class-wide antitrust impact (higher cost on non-basic cable programming), and (2) a common methodology to quantify damages on a class-wide basis." 

In Hydrogen Peroxide, the Third Circuit said that district courts must perform a "rigorous analysis" and that an "overlap between a class certification requirement and the merits of a claim is no reason to decline to resolve relevant disputes when necessary to determine whether a class certification requirement is met." 

Relevant Market 

The Third Circuit affirmed the District Court's conclusion that the Philadelphia designated marketing area (DMA) is a relevant geographic market and rejected Comcast's argument that the District Court's reasoning failed because it did not apply the consumer demand substitutability test.  The District Court had noted that "[t]he conduct at issue here centers on Comcast's attempt to acquire substantially all of the cable systems in the Philadelphia DMA" and that "the record evidence shows that consumers throughout the DMA can face similar competitive choices and suffer the same alleged antitrust impact resulting from Comcast's clustering conduct in the Philadelphia DMA." 

The District Court had also found support for the customers' expert's conclusion that Comcast's swaps and acquisitions in the Philadelphia DMA eliminated actual or potential competition and led to higher rates.  The expert asserted that Comcast's clustering strategy made it profitable for it to deny direct broadcast satellite (DBS) providers access to its regional sports programming content, which led to the reduction in DBS penetration in the Philadelphia DMA. 

"This evidence belies Comcast's claim that there is no change at the individual level when Comcast aggregates surrounding franchises," the Third Circuit said. 

Antitrust Impact, Damages 

The Third Circuit commented that the District Court's determination regarding the relevant geographic market "was made solely for the purposes of class certification and will not be binding on the merits." 

Moreover, the appeals court said that "[m]any of Comcast's contentions ask us to reach into the record and determine whether Plaintiffs actually have proven antitrust impact.  This we will not do.  Instead, we inquire whether the District Court exceeded its discretion by finding that Plaintiffs had demonstrated by a preponderance of the evidence that they could prove antitrust impact through common evidence at trial." 

The Third Circuit also found that the District Court did not abuse its discretion in finding that the class met its burden of demonstrating that there is a common methodology available to measure damages on a classwide basis. 

Circuit Judge Ruggero J. Aldisert wrote the majority opinion and was joined by Circuit Judge D. Michael Fisher. 

Dissent In Part 

Judge Kent A. Jordan joined in the majority's conclusion that the District Court did not abuse its discretion when it determined that the customers could establish antitrust impact through evidence common to a class comprising Comcast cable television customers in the Philadelphia DMA, although he did not agree with the majority's reasoning. 

Moreover, "because I conclude that damages cannot be proven using evidence common to that entire class, I would vacate the certification order to the extent it provides for a single class as to proof of damages, and I would remand the case to the District Court to consider whether the class can be divided into subclasses for the purpose of proving damages," Judge Jordan said. 

Comcast is represented by Miguel A. Estrada of Gibson, Dunn & Crutcher in Washington. 

The class is represented by Barry Barnett and Daniel H. Charest of Susman Godfrey in Dallas; Samuel D. Heins, Vincent J. Esades and David Woodward of Heins Mills & Olson in Minneapolis; Anthony J. Bolognese and Joshua H. Grabar of Bolognese & Associates in Philadelphia; and Joseph Goldberg of Freedman Boyd Hollander Goldberg Ives & Duncan in Albuquerque, N.M.

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