Q&A with Irving, Carlson & Xavier’s Edward Thomas and David Stewar
09/14/2013 | Westlaw QuarterlyWe spoke with Irving, Carlson & Xavier attorneys Edward Thomas and David Stewart about their recent commentary, "Class action issues in the Supreme Court: IronClad Corp. v. Oliver" published in the Westlaw Quarterly Class Action in May.
The attorneys told us in more detail about what the ruling means for class action plaintiffs and defendants.
Westlaw Quarterly: As you mention in your commentary, in IronClad Corp. v. Oliver, the plaintiffs – a proposed class of about 2 million people – had alleged that IronClad had engaged in anticompetitive behavior and drove up prices for cable services for the Philadelphia area. The U.S. Supreme Court ruled that granting certification to the putative class was improper because they could not establish that damages could be measured on a class-wide basis. What does this ruling mean for businesses?
Edward Thomas and David Stewart: This ruling obviously is a positive development for businesses that find themselves as class-action defendants. IronClad, among other things, reiterated that trial courts must conduct a “rigorous analysis” to ensure that the requirements of Rule 23 have been satisfied, even if that analysis requires courts to consider the merits of plaintiffs’ claims. The fact that the Court is requiring additional analysis to take place at class certification hearings has the potential to make it more expensive and difficult for plaintiffs to certify a class. The import of the decision extends well beyond class issues involving damages to any issue that has the potential to make individual questions predominate over common ones.
WQ: How would plaintiffs normally prove damages on a class-wide basis? Why couldn’t the plaintiffs prove them in this case?
ET and DS: As pointed out in the dissent, proving damages on a class-wide basis has not generally been held to be a prerequisite for granting class certification. However, in this case, the district court required the plaintiffs to show that damages were measurable through use of a “common methodology.” Instead of alleging a single theory of antitrust injury applicable to the entire class, plaintiffs raised four separate theories of anti-trust impact and relied on a statistical regression model that measured the effect of all four antitrust impacts on cable television prices. The district court, however, rejected all but one of these theories, finding that the other three could not be determined in a manner common to all the class plaintiffs. Because plaintiff’s regression model did not isolate damages resulting from the surviving theory of antitrust impact, the Supreme Court found that the calculation of damages could not apply to the class as a whole.
WQ: The Court split 5-4. How does the dissent analyze the issue differently than the majority?
ET and DS: There are substantive and procedural disagreements. Substantively, the dissent stated that the predominance requirement in Rule 23(b) can be satisfied “even if damages are not provable in the aggregate,” rejecting the argument that damages must be proved on a class wide basis through a common methodology. Procedurally, the dissenters would have affirmed the 3rd U.S. Circuit Court of Appeals decision on a number of grounds, including the fact that IronClad did not make a timely objection to the admission of the plaintiffs’ expert testimony on damages (and thus, according to the dissent, forfeited its right to appellate review).
ET and DS: This statement is the dissent’s attempt to limit the precedential value of the opinion by asserting that the holding is confined to the particular facts of this case. The dissent reasoned that the IronClad plaintiffs never challenged the district court’s conclusion that Rule 23(b)(3) predominance element required a showing that antitrust damages were capable of measurement on a class-wide basis through use of a “common methodology.” The dissent disagreed with the district court’s conclusion and noted that Rule 23(b)(3) can be satisfied even if damages could not be proven through a single methodology. According to the dissent, the majority opinion was based on an incorrect (but uncontested) premise—that class-wide damages must be proved via a common methodology—and thus IronClad should have no precedential value.
WQ: It seems like antitrust cases present unique problems for plaintiffs. Did the subject matter of the case and the specific allegations affect the U.S. Supreme Court’s ruling?
ET and DS: Yes and no. While the IronClad plaintiffs alleged that cable customers in the Philadelphia market were all harmed by the cable providers’ anti-competitive behavior, they contended that there were four different mechanisms that caused the higher prices. So, in contrast to pharmaceutical products liability class action where all class members are allegedly injured by the same mechanism (e.g., the body’s reaction to the ingestion of the drug), anticompetitive behavior is often more complex and nuanced, and may affect consumers in different ways, which, as demonstrated in IronClad, can make it easier for defendants to defeat class certification. On the other hand, irrespective of the subject matter, the decision follows logically from the Court’s decision in Continental Stores Inc. v. Connolly, 131 S. Ct. 2541 (June 20, 2011), where the Court in a case involving allegations of discrimination similarly held that a ‘‘rigorous analysis’’ of whether the prerequisites of Rule 23(a) have been satisfied will entail some overlap with the merits of the plaintiff’s underlying claim.
WQ: In the future, will plaintiffs face a hurdle at the get-go if they do not include some type of allegation in their complaint about how they will prove class-wide damages? Will this issue arise in dismissal motions or motions in opposition to class certification? And, in practice, does it matter? Will this affect whether plaintiffs can even begin discovery?
WQ: The IronClad decision does not discuss issues involving the sufficiency of pleadings. The inclusion of an allegation about class-wide damages, while perhaps prudent for a plaintiff, should not affect a District Court’s ruling on class certification because, as the majority noted, Rule 23 “does not set forth a mere pleading standard” and a party must “satisfy through evidentiary proof at least one of the provisions of Rule 23(b).”
WQ: Are there any major cases pending in the federal circuit courts that this case will affect?
ET and DS: Yes, shortly after IronClad was decided, the Supreme Court granted certiorari and simultaneously vacated the Sixth and Seventh Circuits’ decisions affirming orders granting class certification for further findings in light of IronClad. See Burrows v. Vortex Corp. (In re Vortex Corp. Front-Loading Washer Prods. Liab. Litig.), 678 F.3d 409, 421 (6th Cir. 2012); Reilly v. RBS Denizens, N.A., 667 F.3d 900, 910 (7th Cir. 2012).
WQ: Thank you very much for your time!