Antitrust Alert: Supreme Court’s Comcast Ruling Raises Class Action Standard

The U.S. Supreme Court has reaffirmed that courts must conduct a "rigorous analysis" to determine whether antitrust class action plaintiffs meet the requirements for class certification, even when that requires inquiry into the merits of the underlying claims, and individual issues of damages may preclude class certification.  The recent decision in Comcast Corp. v. Behrend, No. 11-864 (U.S. Mar. 27, 2013), affirms that plaintiffs must prove that damages for the class as certified are in fact capable of proof on a class-wide basis.


Comcast provides cable services to businesses and residences.  Starting in 1998, Comcast began efforts to increase its market share of cable television services in the Philadelphia Designated Market Area ("Philadelphia DMA").  One of these efforts was a "clustering" strategy in which Comcast purchased competitor cable providers in the Philadelphia DMA and then swapped their cable systems outside the region for competitor systems located in the region.  As a result of nine clustering transactions, Comcast's share of subscribers in the Philadelphia DMA allegedly increased from 24 percent in 1998 to 70 percent in 2007.

In 2003, the named plaintiffs, subscribers to Comcast's cable-television services, filed a class action antitrust suit against Comcast, claiming that Comcast entered into unlawful swap agreements, in violation of Sherman Act § 1, and monopolized or attempted to monopolize services in the cluster, in violation of § 2.  The proposed plaintiff class included nearly all Comcast non-basic cable television customers in the Philadelphia area since December 1999, who purportedly paid too much for their subscriptions as a result of Comcast's conduct.  In 2007, the District Court certified the proposed class pursuant to Federal Rule of Civil Procedure 23(b)(3), which requires that "questions of law or fact common to class members predominate over any questions affecting only individual members."  Following the Third Circuit's late 2008 decision in In re Hydrogen Peroxide Antitrust Litigation, the District Court granted Comcast's motion to reconsider its class certification decision.  In clarifying the appropriate standard of proof for class certification determinations in Peroxide, the Third Circuit had stated that it is proper for a district court to inquire into the merits of a suit to the extent necessary to determine if a requirement under Rule 23 is met.

In 2010, following evidentiary hearings and oral argument, the District Court recertified the proposed class.  In doing so, the District Court accepted the testimony of plaintiffs' damages expert and found that plaintiffs had demonstrated that they would be able to establish antitrust damages for the entire class using common evidence on a class-wide basis.  However, the District Court accepted only one of the plaintiffs' four theories of antitrust impact, namely that Comcast's clustering strategy in the Philadelphia DMA had deterred the entry of "over builders" (companies that build competing networks in areas where an incumbent cable company already operates).  The District Court certified the class despite the expert's acknowledgement that the model "did not isolate damages resulting from any one theory of antitrust impact," but instead included damages for all four theories of liability, including the three that had been rejected by the District Court.

A divided panel of the Third Circuit Court of Appeals affirmed.  On appeal, Comcast argued the class was improperly certified because the model failed to attribute damages resulting from over builder deterrence, the only theory of injury remaining in the case.  The court refused to consider the argument because, in its view, such an "attac[k] on the merits of the methodology [had] no place in the class certification inquiry."  The Court of Appeals emphasized:  "At the class certification stage," plaintiffs were not required to "tie each theory of antitrust impact to an exact calculation of damages."  According the court, it had "not reached the stage of determining on the merits whether the methodology is a just and reasonable inference or speculative."  Rather, the court said, plaintiffs must "assure us that if they can prove antitrust impact, the resulting damages are capable of measurement and will not require labyrinthine individual calculations."  In the court's view, that burden was met because plaintiffs' model calculated "supra-competitive prices regardless of the type of anticompetitive conduct."  In this respect, the Third Circuit appeared to go back on its decision in Peroxide, where the Third Circuit ruled that the decision whether to certify a class requires a rigorous analysis of the evidence and arguments, which may include an inquiry into the merits of the claim. 

The Supreme Court granted certiorari and, on March 27, 2013, ruled in favor of Comcast, holding the Third Circuit should have taken a closer look at the plaintiffs' damages model before certifying the class.  Specifically, the Supreme Court held that the Third Circuit's decision contradicted precedents, including the Supreme Court's 2011 Wal-Mart Stores v. Dukes decision, that require courts facing a class certification question to "probe behind the pleadings" and conduct a "rigorous analysis" that "will frequently entail 'overlap with the merits of the plaintiff's underlying claim.'" 

In particular, the Court ruled that courts must conduct a rigorous analysis to determine whether the damages model supporting plaintiff's damages theory is consistent with its liability case.  "By refusing to entertain arguments against [plaintiffs'] damages model that bore on the propriety of class certification simply because those arguments would also be pertinent to the merits determination, the Court of Appeals ran afoul of our precedents requiring precisely that inquiry."  In doing so, it appears that the Supreme Court affirmed the standard set forth in Peroxide

In addition, the Supreme Court found that, because only one of Plaintiffs' theories of antitrust impact had been accepted by the District Court, a model purporting to serve as evidence of damages must measure only those damages attributable to that specific theory.  Since Plaintiffs' expert admitted that his model did not, the Supreme Court found that Plaintiffs' model "falls far short of establishing that damages are capable of measurement on a class wide basis," which precluded Plaintiffs from demonstrating Rule 23(b)(3) predominance. 

The Supreme Court thus reversed the Third Circuit's class certification order. 

Importance of Comcast for antitrust class actions  

There are some important lessons in the Supreme Court's Comcast ruling: 
  • District courts facing a class certification question must undertake a "rigorous analysis" of whether Rule 23(b)(3)'s predominance requirement is satisfied, even if that analysis overlaps with the merits of Plaintiffs' underlying claims.
  • A plaintiff seeking class certification in federal court must demonstrate that damages can be established on a class-wide basis.  This means that defendants may be able to defeat class certification by demonstrating individualized proof of damages.
  • Expert evidence offered by the proponent of class certification may be insufficient if it is not reasonably tied to plaintiff's liability theory. 

At bottom, the Supreme Court's decision is the latest in a line of cases from the Supreme Court and lower courts demonstrating that district courts facing a class certification question must conduct a rigorous analysis to determine if Rule 23(b)(3)'s requirements are met, and that individualized proof of damages may preclude class certification. 

Lawyer Contacts

For more information, please contact your principal Jones Day representative or either of the lawyers listed below.

Paula Render

John Majoras

Jeffrey A. LeVee
Los Angeles

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