569 U.S. 27 (2013), 11-864, Comcast Corp. v. Behrend

Docket Nº:11-864
Citation:569 U.S. 27, 133 S.Ct. 1426, 185 L.Ed.2d 515, 81 U.S.L.W. 4217, 85 Fed.R.Serv.3d 118, 24 Fla.L.Weekly Fed. S 125
Opinion Judge:Scalia, Justice
Party Name:COMCAST CORPORATION, et al., Petitioners v. CAROLINE BEHREND et al
Attorney:Miguel Estrada argued the cause for petitioners. Barry Barnett argued the cause for respondents.
Judge Panel:Scalia, J., delivered the opinion of the Court, in which Roberts, C. J., and Kennedy, Thomas, and Alito, JJ., joined. Ginsburg and Breyer, JJ., filed a dissenting opinion, in which Sotomayor and Kagan, JJ., joined, post, p.___. Justice Ginsburg and Justice Breyer, with whom Justice Sotomayor and ...
Case Date:March 27, 2013
Court:United States Supreme Court
 
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569 U.S. 27 (2013)

133 S.Ct. 1426, 185 L.Ed.2d 515, 81 U.S.L.W. 4217, 85 Fed.R.Serv.3d 118, 24 Fla.L.Weekly Fed. S 125

COMCAST CORPORATION, et al., Petitioners

v.

CAROLINE BEHREND et al

No. 11-864

United States Supreme Court

March 27, 2013

Argued November 5, 2012

ON WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT

Behrend v. Comcast Corp., 655 F.3d 182 (3d Cir. Pa., 2011)

SYLLABUS

[185 L.Ed.2d 517] [133 S.Ct. 1428] Petitioners, Comcast Corporation and its subsidiaries, allegedly " cluster" their cable-television operations within a particular region by swapping their systems outside the region for competitor systems inside the region. Respondents, named plaintiffs in this class-action antitrust suit, claim that they and other Comcast subscribers in the Philadelphia " cluster" are harmed because Comcast's strategy lessens competition and leads to supra competitive prices. They sought class certification under 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." The District Court required them to show (1) that the " antitrust impact" of the violation could be proved at trial through evidence common to the class and (2) that the damages were measurable on a classwide basis through a " common methodology." The court accepted only one of respondents' four proposed theories of antitrust impact: that Comcast's actions lessened competition from " overbuilders," i.e., companies that build competing networks in areas where an incumbent cable company already operates. It then certified the class, finding that the damages from overbuilder deterrence could be calculated on a classwide basis, even though respondents' expert acknowledged that his regression model did not isolate damages resulting from any one of respondents' theories. In affirming, the Third Circuit refused to consider petitioners' argument that the model failed to attribute damages to overbuilder deterrence because doing so would require reaching the merits of respondents' claims at the class-certification stage.

Held: Respondents' class action was improperly certified under Rule 23(b)(3). Pp. ___ - ___, 185 L.Ed.2d, at 521-524.

(a) A party seeking to maintain a class action must be prepared to show that Rule 23(a)'s numerosity, commonality, typicality, and adequacy-of-representation requirements have been met, Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338, 350, 564 U.S. 338, 131 S.Ct. 2541, 180 L.Ed.2d 374, 391, and must satisfy through evidentiary proof at least one of Rule 23(b)'s provisions. The same analytical principles govern certification [133 S.Ct. 1429] under both Rule 23(a) and Rule 23(b). Courts may have to " 'probe behind the pleadings before coming to rest on the certification question,' and [a] certification is proper only if 'the trial court is satisfied, after a rigorous analysis, that [185 L.Ed.2d 518] [Rule 23's] prerequisites

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. . . have been satisfied.' " Ibid. The analysis will frequently " overlap with the merits of the plaintiff's underlying claim" because a " 'class determination generally involves considerations that are enmeshed in the factual and legal issues comprising the plaintiff's cause of action.' " Ibid. Pp. ___ - ___, 185 L.Ed.2d, at 521.

(b) The Third Circuit ran afoul of this Court's precedents when it refused to entertain arguments against respondents' damages model that bore on the propriety of class certification simply because they would also be pertinent to the merits determination. If they prevail, respondents would be entitled only to damages resulting from reduced overbuilder competition. A model that does not attempt to measure only those damages attributable to that theory cannot establish that damages are susceptible of measurement across the entire class for Rule 23(b)(3) purposes. The lower courts' contrary reasoning flatly contradicts this Court's cases, which require a determination that Rule 23 is satisfied, even when that requires inquiry into the merits of the claim. Wal-Mart, supra, at 350-351, and n. 6, 131 S.Ct. 2541, 180 L.Ed.2d 374. Pp. ___ - ___, 185 L.Ed.2d, at 521-522.

(c) Under the proper standard for evaluating certification, respondents' model falls far short of establishing that damages can be measured classwide. The figure respondents' expert used was calculated assuming the validity of all four theories of antitrust impact initially advanced by respondents. Because the model cannot bridge the differences between supra competitive prices in general and supra competitive prices attributable to overbuilder deterrence, Rule 23(b)(3) cannot authorize treating subscribers in the Philadelphia cluster as members of a single class. Pp. ___ - ___, 185 L.Ed.2d, at 522-524.

655 F.3d 182, reversed.

Miguel Estrada argued the cause for petitioners.

Barry Barnett argued the cause for respondents.

Scalia, J., delivered the opinion of the Court, in which Roberts, C. J., and Kennedy, Thomas, and Alito, JJ., joined. Ginsburg and Breyer, JJ., filed a dissenting opinion, in which Sotomayor and Kagan, JJ., joined, post, p.___.

OPINION

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Scalia, Justice

The District Court and the Court of Appeals approved certification of a class of more than 2 million current and former Comcast subscribers who seek damages [133 S.Ct. 1430] for alleged violations of the federal antitrust laws. We consider whether certification was appropriate under Federal Rule of Civil Procedure 23(b)(3).

I

Comcast Corporation and its subsidiaries, petitioners here, provide cable-television services to residential and commercial customers. From 1998 to 2007, petitioners engaged in a series of transactions that the parties have described as " clustering," a strategy of concentrating operations within a particular region. The region at issue here, which the parties have referred to as the Philadelphia " cluster" or the Philadelphia " Designated Market Area" (DMA), includes 16 counties located in Pennsylvania, [185 L.Ed.2d 519] Delaware, and New Jersey.1 Petitioners pursued their clustering strategy by acquiring competitor cable providers in the region and swapping their own systems outside the region for competitor systems located in the region. For instance, in 2001, petitioners

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obtained Adelphia Communications' cable systems in the Philadelphia DMA, along with its 464,000 subscribers; in exchange, petitioners sold to Adelphia their systems in Palm Beach, Florida, and Los Angeles, California. As a result of nine clustering transactions, petitioners' share of subscribers in the region allegedly increased from 23.9 percent in 1998 to 69.5 percent in 2007. See 264 F.R.D. 150, 156, n. 8, 160 (ED Pa. 2010).

The named plaintiffs, respondents here, are subscribers to Comcast's cable-television services. They filed a class-action antitrust suit against petitioners, claiming that petitioners entered into unlawful swap agreements, in violation of § 1 of the Sherman Act, and monopolized or attempted to monopolize services in the cluster, in violation of § 2. Ch. 647, 26 Stat. 209, as amended, 15 U.S.C. § § 1, 2. Petitioners' clustering scheme, respondents contended, harmed subscribers in the Philadelphia cluster by eliminating competition and holding prices for cable services above competitive levels.

Respondents sought to certify a class under Federal Rule of Civil Procedure 23(b)(3). That provision permits certification only if " the court finds that the questions of law or fact common to class members predominate over any questions affecting only individual members." The District Court held, and it is uncontested here, that to meet the predominance requirement respondents had to show (1) that the existence of individual injury resulting from the alleged antitrust violation (referred to as " antitrust impact" ) was " capable of proof at trial through evidence that [was] common to the class rather than individual to its members" ; and (2) that the damages resulting from that injury were measurable " on a class-wide basis" through use of a " common methodology." 264 F.R.D., at 154.2

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Respondents proposed four theories of antitrust impact: First, Comcast's clustering made it profitable for Comcast to withhold local sports programming from its competitors, resulting in decreased market penetration by direct broadcast satellite providers. Second, Comcast's activities reduced the level of competition from " overbuilders," [133 S.Ct. 1431] companies that build competing cable networks in areas where an incumbent cable company already operates. Third, Comcast reduced the level of " benchmark" competition on which cable customers rely to compare prices. Fourth, clustering increased Comcast's bargaining power relative to content providers. Each of these forms of impact, respondents alleged, increased cable subscription rates throughout the Philadelphia DMA.

The District Court accepted the [185 L.Ed.2d 520] overbuilder theory of antitrust impact as capable of classwide proof and rejected the rest. Id., at 165, 174, 178, 181. Accordingly, in its certification order, the District Court limited respondents' " [p]roof of antitrust impact" to " the theory that Comcast engaged in anticompetitive clustering conduct, the effect of which was to deter the entry of overbuilders in the Philadelphia DMA." App. to Pet. for Cert. 192a-193a.[3]

The District Court further found that the damages resulting from overbuilder-deterrence impact could be calculated on a classwide basis. To establish such damages, respondents had relied solely on the testimony of Dr. James McClave.

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Dr. McClave designed a regression model comparing...

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