On November 5, 2012 the U.S. Supreme Court heard arguments in Comcast Corporation v. Behrend, No. 11-864 which arose from an action brought by Philadelphia cable subscribers alleging that Comcast monopolized Philadelphia’s cable market and excluded competition in violation of Sections 1 and 2 of the Sherman Act, 15 U.S.C. §§ 1-2.  Transcript of the oral argument.pdf.

The Court had agreed to decide the limited question “[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.”  The issue is of such potential importance to class action jurisprudence that ten amicus briefs were filed by such diverse organizations as the Equal Employment Advisory Counsel and the American Antitrust Institute.  The Court’s Proceedings and Orders.pdf.

The Background

The district court in Comcast had recertified the Philadelphia class and issued an amended certification order in January, 2010 finding that “the element of anti-trust impact is capable of proof at trial through evidence that is common to the class . . . and that there is a common methodology available to measure and quantify damages on a class-wide basis.”  264 F.R.D. 150, 154 (E.D. Pa. 2010).

The Third Circuit granted Comcast a Rule 23 (f) appeal and reviewed the order for abuse of discretion.  A divided panel of the appellate court affirmed on July 11, 2011, finding the decision in Wal-Mart v. Dukes, 131 S. Ct. 2541 (2011), inapplicable.  It stated:

The factual and legal underpinnings of Wal-Mart, which involved a massive discrimination class action and different sections of Rule 23-are clearly distinct from those of this case.  Wal-Mart therefore neither guides nor governs the dispute before us.  (Emphasis added).

The appellate court instead followed In re Hydrogen Peroxide Antitrust Litigation, 551 F.3d 305 (3d Cir. 2008), commenting:

“Although in Hydrogen Peroxide we heightened the inquiry a district court must perform on the issue of class certification, nothing in that opinion indicated that class certification hearings were to become actual trials in which factual disputes are to be resolved.  [A] District court may inquire into the merits only insofar as it is “necessary” to determine whether a class certification requirement is met.  *  *  *  Eisen [v. Carlisle & Jacquelin, 417 U.S. 156 (1974)] still precludes further inquiry.”

Thus, the Third Circuit avoided resolving damage issues and determined that plaintiffs “could prove [their claims] through common evidence at trial.”  It also declined to apply any Daubert v. Merrill Dow Pharmaceuticals, Inc. analysis of the plaintiff’s expert testimony.  In Wal-Mart, Justice Antonia Scalia, writing for the majority, observed that the district court “concluded that Daubert did not apply to expert testimony at the certification stage of class-action proceedings” but stated “we doubt that is so.”

The Third Circuit addressed the issue in a footnote, stating:

[A]lthough the Supreme Court recently hinted that Daubert may apply for evaluating expert testimony at the class certification stage, it need not turn class certification into a mini-trial.  Wal-Mart, 131 S. Ct. at 2553-54.  We understand the Court’s observation to require a district court to evaluate whether an expert is presenting a model which could evolve to become admissible evidence, and not requiring a district court to determine if a model is perfect at the certification stage.

Oral Argument

Comcast appeared to be the perfect setting from which the Court could issue broad legal pronouncements about expert witnesses and class certification.  But, the first few minutes of oral argument seemed to undermine that notion.  Indeed, three justices questioned whether Comcast waived the Daubert question by not objecting that the expert’s testimony was inadmissible evidence.  As Justice Kagan commented: “[W]e wanted to decide a legal question . . . .  And, . . . your clients waived their argument that this was inadmissible evidence.”  Justice Sotomayor asserted: “You really can’t deny that you never raised the word ‘Daubert’ below until the very end.”  Undaunted, counsel for Comcast, Miguel Estrada, disagreed, pointing out in rebuttal that Comcast told the district court “the model does not work”, “flaws preclude its use”, and that “this model is bunk”.

As the oral argument progressed there were other surprises – apparent agreement on the application of Daubert at class certification; if it is raised.  Barry Barnett, counsel for Respondents, in answering the Justices’ questions, agreed that the district court should decide admissibility, if the issue had been properly raised before the court.

Still other Justices searched for appropriate standards.  Justice Sotomayor explained that “every judge before . . . he or she certifies a class, has to decide whether the methods being used are probative and relevant, sufficient to prove . . . common questions of damages.”

Given the dialogue, Chief Justice Roberts suggested a potential solution:  “We are having an elaborate discussion about whether or not this was a claim that was waived below.  No court has addressed that yet.  . . . So it seems to me that one option for the court . . . is to answer the question and then send it back to the court to determine whether . . . the parties adequately preserved that . . . objection or not.”

And, counsel for Respondent agreed that was an option.

However resolved, the resulting opinion may have a major impact on class action jurisprudence, when certification turns on the admissibility of expert testimony. 

The Bottom Line:  The Supreme Court’s opinion could have a critical impact on class actions and inform district courts on Daubert’s application at the class certification stage, how specific the objections to expert testimony must be to trigger Daubert scrutiny and the applicable standards.