Comcast Corp. v. Behrend

• Decision Date: 27 March 2013
• Docket Number: No. 11–864.,11–864.
• Citation: 185 L.Ed.2d 515,133 S.Ct. 1426,569 U.S. 27
• Parties: COMCAST CORPORATION, et al., Petitioners v. Caroline BEHREND et al.
• Court: U.S. Supreme Court

569 U.S. 27

133 S.Ct. 1426

185 L.Ed.2d 515

COMCAST CORPORATION, et al., Petitioners

v.Caroline BEHREND et al.

No. 11–864.

Supreme Court of the United States

Argued Nov. 5, 2012.

Decided March 27, 2013.

Miguel Estrada, Washington, DC, for Petitioners.

Barry Barnett, Dallas, TX, for Respondents.

Sheron Korpus, Kasowitz, Benson, Torres & Friedman LLP, New York, NY, Miguel A. Estrada, Counsel of Record, Darryl J. May, Ballard Spahr LLP, Philadelphia, PA, Mark A. Perry, Scott P. Martin, Gibson, Dunn & Crutcher LLP, Washington, DC, for Petitioners.

Barry Barnett, Counsel of Record, Daniel H. Charest, Susman Godfrey L.L.P., Dallas, TX, Anthony J. Bolognese, Joshua H. Grabar, Bolognese & Assocs., LLC, Philadelphia, PA, Samuel D. Heins, Vincent J. Esades, David Woodward, Heins Mills & Olson, P.L.C., Minneapolis, MN, Joseph Goldberg, Freedman, Boyd, Hollander, Goldberg, Urias & Ward, P.A., Albuquerque, NM, for Respondents.

Justice SCALIA delivered the opinion of the Court.

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 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, 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 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 (E.D.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

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," 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 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' "proof 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.

Dr. McClave designed a regression model comparing actual cable prices in the Philadelphia DMA with hypothetical prices that would have prevailed but for petitioners' allegedly anticompetitive activities. The model calculated damages of $875,576,662 for the entire class. App. 1388a (sealed). As Dr. McClave acknowledged, however, the model did not isolate damages resulting from any one theory of antitrust impact. Id., at 189a–190a. The District Court nevertheless certified the class.

A divided panel of the Court of Appeals affirmed. On appeal, petitioners contended the class was improperly certified because the model, among other shortcomings, failed to attribute damages resulting from overbuilder 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." 655 F.3d 182, 207 (C.A.3 2011). The court emphasized that, "[a]t the class certification stage," respondents were not required to "tie each theory of antitrust impact to an exact calculation of damages." Id., at 206. According to the court, it had "not reached the stage of determining on the merits whether the methodology is a just and reasonable inference or speculative." Ibid . Rather, the court said, respondents must "assure us that if they can prove antitrust impact, the resulting damages are capable of measurement and will not require labyrinthine individual calculations." Ibid. In the court's view, that burden was met because respondents' model calculated "supra-competitive prices regardless of the type of anticompetitive conduct." Id., at 205.

We granted certiorari. 567 U.S. ––––, 133 S.Ct. 24, 183 L.Ed.2d 673 (2012).⁴

II

The class action is "an exception to the usual rule that litigation is conducted by and on behalf of the individual named parties only." Califano v . Yamasaki, 442 U.S. 682, 700–701, 99 S.Ct. 2545, 61 L.Ed.2d 176 (1979). To come within the exception, a party seeking to maintain a class action "must affirmatively demonstrate his compliance" with Rule 23. Wal–Mart Stores, Inc. v. Dukes, 564 U.S. ––––, ––––, 131 S.Ct. 2541, 2551–2552, 180 L.Ed.2d 374 (2011). The Rule "does not set forth a mere pleading standard." Ibid. Rather, a party must not only "be prepared to prove that there are in fact sufficiently numerous parties, common questions of law or fact," typicality of claims or defenses, and adequacy of representation, as required by Rule 23(a). Ibid. The party must also satisfy through evidentiary proof at least one of the provisions of Rule 23(b). The provision at issue here is Rule 23(b)(3), which requires a court to find that "the questions of law or fact common to class members predominate over any questions affecting only individual members."

Repeatedly, we have emphasized that it " ‘may be necessary for the court to probe behind the pleadings before coming to rest on the certification question,’ and that certification is proper only if ‘the trial court is satisfied, after a rigorous analysis, that the prerequisites of Rule 23(a) have been satisfied.’ " Ibid. (quoting General Telephone Co. of Southwest v. Falcon, 457 U.S. 147, 160–161, 102 S.Ct. 2364, 72 L.Ed.2d 740 (1982) ). Such an analysis will frequently entail "overlap with the merits of the plaintiff's underlying claim." 564 U.S., at ––––, 131 S.Ct., at 2551. That is so because the " ‘class determination generally involves considerations that are enmeshed in the factual and legal issues comprising the plaintiff's cause of action.’ " Ibid. (quoting Falcon, supra, at 160, 102 S.Ct. 2364 ).

The same analytical principles govern Rule 23(b). If anything, Rule 23(b)(3)'s predominance criterion is even more demanding than Rule 23(a). Amchem Products, Inc. v. Windsor, 521 U.S. 591, 623–624, 117 S.Ct. 2231, 138 L.Ed.2d 689 (1997). Rule 23(b)(3), as an " ‘adventuresome innovation,’ " is designed for situations " ‘in which "class-action treatment is not as clearly called for." ’ " Wal–Mart, supra, at ––––, 131 S.Ct., at 2558 (quoting Amchem, 521 U.S., at 614–615, 117 S.Ct. 2231 ). That explains Congress's addition of procedural safeguards for (b)(3) class members beyond those provided for (b)(1) or (b)(2) class members (e.g., an opportunity to opt out), and the court's duty to take a " ‘close look’ " at whether common questions predominate over individual ones. Id., at 615, 117 S.Ct. 2231.

III

Respondents' class action was improperly certified under Rule 23(b)(3). By refusing to entertain arguments against respondents' damages model that bore on the propriety of class certification, simply because those...