Blawgletter wrote a paper class cert in antitrust cases for a Practising Law Institute program that went webinar last month. Read it here if you dare:
Where to file. From a plaintiff's perspective do you have favorite courts to file antitrust class actions. What are the undesirable courts from a defense perspective. Are there circuits that are relatively more plaintiff or defense friendly?
The rules on changing venue[1] and centralizing multidistrict litigation[2] of course restrict choices among district courts. The MDL process creates more uncertainty due to the weight the Judicial Panel on Multidistrict Litigation[3] gives to parties’ preferences; individual judges’ case loads, experience, and willingness to take on extra work; the locations of grand juries; and other factors that don’t often figure into regular motions to transfer venue.
Within those limits, the circuit’s law on the substantive issues matters as much as, or more than, any sense that one circuit treats class actions more favorably than others do. You wouldn’t bring a reverse-payment settlement case, for example, in the Second, Eleventh, or Federal Circuit but would instead bring one, if at all, in the Sixth.[4]
Beyond that, most lawyers who represent antitrust plaintiffs would likely gravitate to the circuits that have the most expertise in antitrust class actions – the Second, Third, Seventh, Ninth, and D.C. Circuits. The Third and Seventh stand out, partly due to their strong historical interest in class actions and antitrust law. Recent examples include Hydrogen Peroxide and its progeny[5] in the Third Circuit and Text Messaging[6] in the Seventh.
The Fifth Circuit seems to have won a reputation for using “license” to toughen class certification standards, at least in securities law cases.[7]
Pleading: How has the Twombly pleading test impacted antitrust class certification cases? Have there been changes in the types of antitrust class actions you are seeing? Are nearly all cases section 1 price fixing cases?
The courts of appeals have just started grappling with how Twombly and Iqbal affect class certification. None seems to have addressed the question yet. In at least one case, a district court rejected a defense motion to deny class certification under Twombly and Iqbal, holding that the complaint does not “fail[] to plausibly allege fact consistent with a class action.”[8]
But the question remains of how Twombly’s plausibility test intersects with Hydrogen Peroxide, In re IPO,[9] and other decisions that require some delving into the merits. The Third Circuit hinted at an answer in In re Ins. Brokerage Antitrust Litig., where the court noted that “Twombly aligns the pleading standard with the summary judgment standard” by requiring “evidence of record . . . of ‘something more than merely parallel behavior’ . . . something ‘plausibly suggest[ive of] (not merely consistent with) agreement’”.[10] If Twombly defines the summary judgment standard, doesn’t it also set the test for whether plaintiffs have shown, by a preponderance of the evidence, that they have satisfied the predominance requirement of Rule 23(b)(3)? Common issues can’t predominate, the reasoning goes, if the class-wide evidence that plaintiffs offer (to show, for example, antitrust impact) fails to support a plausible antitrust claim. As a formal matter, plaintiffs may have to show under Rule 23 that they can support their Twombly-plausible antitrust claims with evidence common to all, or almost all, class members.
Case management/scheduling. Does dividing discovery into class and merits phases make sense -- for judicial economy? For plaintiffs? For the defense? What is the common practice now -- concurrent class and merits work or staggered? Have you seen any innovations in case management or scheduling?
Putting discovery into class and merits phases never did make much sense for plaintiffs, and it makes even less sense now. Under Hydrogen Peroxide, IPO, and like decisions, plaintiffs must furnish evidence that shows, by a preponderance, their ability to support plausible antitrust claims with proof common to the class. They can’t get away with saying we think we can establish, for example, that almost all class members sustained antitrust injury/impact and that they can calculate damages using a class-wide methodology. And of course the Supreme Court in Twombly pooh-poohed the very idea of phasing discovery in antitrust cases, deeming it “an undertaking not easily susceptible to the kind of line drawing and case management that the dissent envisions.”[11]
But plaintiffs shouldn’t shy from limiting discovery to what they need. Lawyers in my firm routinely offer to restrict each side’s initial production of electronic documents to the five custodians that the other side chooses. The Seventh Circuit’s pilot project on e-discovery and the Sedona Conference also favor phasing discovery to start with the easy stuff – the most accessible and relevant documents and information.[12] And Rule 26 requires courts to impose limits where the discovery “can be obtained from some other source that is more convenient, less burdensome, or less expensive.” Fed. R. Civ. P. 26(b)(2)(C)(i).
Experts. What are best and worst practices in managing experts? Also, are there any innovations in managing costs generally? In antitrust cases, what types of experts are used in class certification -- is it always economists?
Managing experts in antitrust cases means quality and cost control. Lead counsel needs to take responsibility for both. That will require him or her to interview candidates in order to make judgments about their suitability for the subject matter and their skill at giving persuasive testimony at hearings and trial; to minimize duplication of effort; to require each expert to do, or closely supervise, the grunt work; to monitor billings; and to encourage concise reports, which cost less and avoid errors.
Experts generally work on an hourly basis, but many will take on discrete projects for flat fees. The flatness of the fee tends to lower costs. Chances to negotiate flat fees present themselves most often at the start of a case. You should at all events require a budget. You should also consider agreeing with the other side not to depose any expert who submits a report that fully covers all opinions.
Economists account for most of the experts who work on antitrust cases. Econometricians and statisticians come in second, usually either to support or rebut opinions of economics experts or to present their own opinions on damages. Industry experts may also prove necessary to provide building blocks for the opinions of an economist or econometrician/statistician.
Certification decision. What makes certification easier in some cases and harder in others? In your opinion, what is the most significant recent class certification decision?
Certification comes easier in per se cases, particularly price-fixing cases. That happens mainly because you don’t have to prove the building blocks of market power – including relevant geographic and product markets, defendant’s share of the relevant market, and market dynamics. Monopolization cases, and rule of reason cases under section 1, involve a lot more economics and econometrics and therefore pose much greater risks for the plaintiff.
Several cases qualify for consideration as the most significant one for class certification in recent years. They include:
- Hydrogen Peroxide, IPO, and New Motor Vehicles[13] for making clear that Eisen[14] no longer bars, if it ever did bar, weighing of a merits question so long as the issue somehow overlaps with or relates to a Rule 23 requirement.
- Schleicher v. Wendt[15] for refusing to require plaintiffs to go beyond pleading a claim element (loss causation) despite defendants’ argument that certification analysis must address plaintiffs’ ability to prove the element at trial and Archdiocese of Milwaukee Supporting Fund, Inc. v. Halliburton Co.[16] for requiring the opposite.[17]
Appeals. How has interlocutory review affected class certification in antitrust cases?
The possibility of a Rule 23(f) appeal increases the time and cost of certification proceedings. The threat of reversal forces greater care by the parties and the trial judge. The procedural and substantive guidance that courts of appeals have provided in Rule 23(f) appeals has shifted the law towards tougher certification standards. The need to address the merits has pushed the class certification stage to at or near the end of discovery and the filing of motions for summary judgment. The 20-page report by a single expert in favor of certification has therefore morphed into hundreds of pages by two or more experts. Motion practice consisting of briefs and supporting expert affidavits has come to involve more and longer briefs and affidavits as well as multiple depositions, presentation of live testimony in multi-day evidentiary hearings, submission of dueling findings and conclusions, and much else.
The possibility of appeal also reduces the likelihood of early settlement. Indeed, “early” no longer means within a year after the filing of a complaint and now signifies at least twice that.
Trials. Many of these cases settle after the certification decision. Are any of these cases going to trial? Are there any lessons from cases that get to verdict?
Few, if any, antitrust class actions have gone to trial since courts of appeals started tightening the standards for certification. You would expect even fewer would reach the trial stage due to the fact that the cost of getting them there has risen so steeply. Worse, interlocutory review will seldom increase the defendant’s perception of risk on the merits, making Rule 23(f) almost a pure cost, with little or no benefit, from the plaintiff’s perspective. We’ll have to see a case get to verdict before drawing any lessons.
The future. In the future, what issues are courts most likely to struggle with? Where is there disagreement among the circuits? What needs to be resolved?
The sharp change in the economics of antitrust class actions implies that plaintiffs will bring fewer cases, particularly rule of reason ones, and that settlements will cost defendants less.
Courts of appeals and the Supreme Court will need to sort out how deeply trial judges must delve – and how deeply they may delve – into the merits under guise of applying Rule 23 requirements. The Supreme Court will explore the question in the Halliburton case,[18] a securities fraud lawsuit that pits the Fifth and Eighth Circuits against the Second and Seventh.
The Supreme Court may also speak to class actions seeking injunctive relief in the Dukes case,[19] which concerns the availability of certification under Rule 23(b)(2) where plaintiffs seek important money relief in addition to equitable relief. The ruling may touch on a question before the en banc Third Circuit in the DB Investments case, [20] although the court seems likely to focus far more on whether indirect purchaser claims predominate where some class members have no viable claim under governing state law.
[1] See 28 U.S.C. § 1404.
[4] Compare Schering-Plough, Inc. v. Fed’l Trade Comm’n, 402 F.3d 1056 (11th Cir. 2005) (holding that reverse-payment agreement did not violate Sherman Act), cert. denied, 548 U.S. 919 (2006); In re Tamoxifen Citrage Antitrust Litig., 466 F.3d 187 (2d Cir. 2006) (same), cert. denied, 127 S. Ct. 3001 (2007); In re Ciprofloxacin Hydrochloride Antitrust Litig., 544 F.3d 1323 (Fed. Cir. 2008) (same), cert. denied, 129 S. Ct. 2828 (2009), with In re Cardizem CD Antitrust Litig., 332 F.3d 896 (6th Cir. 2003) (holding that reverse payment agreement per se violated section 1).
[5] In re Hydrogen Peroxide Antitrust Litig., 552 F.3d 305 (3d Cir. 2008) (setting test for class treatment in price-fixing cases); Sullivan v. DB Investments, Inc., 613 F.3d 134 (3d Cir.), vacated and rehearing en banc granted, 619 F.3d 287 (3d Cir. 2010).
[6] In re Text Messaging Antitrust Litig., 2010 WL 5367383 (7th Cir. Dec. 29, 2010) (holding that complaint alleging conspiracy to fix prices satisfied Twombly and Iqbal pleading standards).
[7] Schleicher v. Wendt, 618 F.3d 679, 686 (7th Cir. 2010) (rejecting Oscar Private Equity Investments v. Allegiance Telecom, Inc., 487 F.3d 261 (5th Cir. 2007), to extent it required plaintiffs to prove loss causation in class certification proceedings). The Supreme Court granted review in a case that followed the rule in Oscar Private Equity. See infra note 15 and accompanying text.
[8] Boyce v. Wachovia Securities LLC, 2010 WL 1253737, at *4 (N.D.N.C. Mar. 29, 2010); see Capps v. U.S. Bank Nat’l Ass’n, 2009 WL 5149135, at *7 (D. Or. Dec. 28, 2009) (denying motion to dismiss “plaintiffs’ class-related allegations”); Hodczak v. Latrobe Specialty Steel Co., 2009 WL 911311, at *9 (W.D. Pa. Mar. 31, 2009) (recommending that district court grant motion to dismiss “collective action” allegations); Holtzman v. Caplice, 2008 WL 2168762, at *2 (N.D. Ill. May 23, 2008) (declining to apply Twombly to allegations to satisfy numerosity requirement under Rule 23(a)); Truxillo v. Johnson & Johnson, 2007 WL 4365439, at *1 (W.D. La. Dec. 12, 2007) (ruling that “plaintiff does state a claim for class action certification ‘that is plausible on its face.’”) (quoting Twombly, 550 U.S. at 570)
[9] In re Initial Public Offerings Sec. Litig., 471 F.3d 24 (2d Cir. 2006).
[10] In re Ins. Brokerage Antitrust Litig., 618 F.3d 300, 322 (3d Cir. 2010) (quoting Twombly, 550 U.S. at 560 & 557).
[11] Twombly, 550 U.S. at 560 n.6. The quote refers to discovery on the question of whether local telephone companies agreed not to compete outside their respective home territories.
[12] See Seventh Circuit Electronic Discovery Pilot Program at 11-12 (2009) (stating principle that parties should meet and confer before initial status conference on “the potential for conducting discovery in phases or stages as a method for reducing costs and burden”) (available at www.7thcircuitbar.org); The Second Conference Commentary on Proportionality in Electronic Discovery, The Sedona Conf. J. 290, 297 (Fall 2010) (stating that “the court, or the parties on their own initiative, may find it appropriate to conduct discovery in phases, starting with discovery of clearly relevant information located in the most accessible and least expensive sources. ”) (available at www.thesedonaconference.org).
[13] In re New Motor Vehicles Can. Exp. Antitrust Litig., 522 F.3d 6 (1st Cir. 2008).
[14] Eisen v. Carlisle & Jacquelin, 417 U.S. 156 (1974).
[15] 618 F.3d 679 (7th Cir. 2010).
[16] 597 F.3d 330 (5th Cir. 2010), cert. granted, 131 S. Ct. 856 (2011).
[17] Dukes v. Wal-Mart Stores, Inc., 603 F.3d 571 (9th Cir.) (en banc), cert. granted, 131 S. Ct. 795 (2010), chiefly involves certification under Rule 23(b)(2), which has less relevance to antitrust cases than Rule 23(b)(3).
[18] See supra note 16 and accompanying text.
[20] Sullivan v. DB Investments, Inc., 08-2784 (3d Cir.). The panel held, among other things, that the district court erred in certifying a Rule 23(b)(2) class because DeBeers no longer posed a real threat to competition. The court has set oral argument to the full court for February 23, 2011.
