Rail Freight Fuel Surcharge Antitrust Litig. - MDL No. 1896 v. BNSF Ry. Co.

• Decision Date: 16 August 2019
• Docket Number: No. 18-7010,18-7010
• Parties: IN RE: RAIL FREIGHT FUEL SURCHARGE ANTITRUST LITIGATION - MDL NO. 1869, Dakota Granite Company, on behalf of itself and all others similarly situated, et al., Appellants v. BNSF Railway Company, et al., Appellees
• Court: U.S. Court of Appeals — District of Columbia Circuit

934 F.3d 619

IN RE: RAIL FREIGHT FUEL SURCHARGE ANTITRUST LITIGATION - MDL NO. 1869,

Dakota Granite Company, on behalf of itself and all others similarly situated, et al., Appellants

v.BNSF Railway Company, et al., Appellees

No. 18-7010

United States Court of Appeals, District of Columbia Circuit.

Argued September 28, 2018

Decided August 16, 2019

Reissued August 30, 2019

Kathleen M. Sullivan argued the cause for appellants. With her on the briefs were Stephen R. Neuwirth, Sami H. Rashid, Michael D. Hausfeld, and Michael P. Lehmann.

Carter G. Phillips, argued the cause for appellees. With him on the brief were Joseph R. Guerra, Kathleen Moriarty Mueller, Saul P. Morgenstern, Thomas A. Isaacson, John M. Nannes, Tara L. Reinhart, J. Scott Ballenger, Veronica S. Lewis, Samuel M. Sipe, Jr., Linda S. Stein, Andrew S. Tulumello, Lucas C. Townsend, and Kent A. Gardiner.

Anton Metlitsky and Warren D. Postman were on the brief for amicus curiae Chamber of Commerce of the United States of America in support of defendants-appellees.

Before: Garland, Chief Judge, and Rogers and Katsas, Circuit Judges.

Katsas, Circuit Judge:

This case involves a putative class of over 16,000 shippers allegedly harmed by a price-fixing conspiracy among the nation’s largest freight railroads. The district court denied class certification because the plaintiffs’ regression analysis—their evidence for proving causation, injury, and damages on a class-wide basis—measured negative damages for over 2,000 members of the proposed class. Based on that consideration, we affirm.

I

This appeal arises out of eighteen antitrust actions consolidated by the Multidistrict Litigation Panel. The defendants are the four largest freight railroads in the United States: BNSF Railway Company; CSX Transportation, Inc.; Norfolk Southern Railway Company; and Union Pacific Railroad Company. The plaintiffs, who are their customers, allege that the railroads conspired to fix rate-based fuel surcharges. Railroads impose fuel surcharges—additional charges above the base shipping price—when the price of fuel rises above a certain trigger price. Rate-based surcharges are calculated as a percentage of the base shipping price.

Following consolidation, the action was divided into one case involving direct purchasers and another involving indirect purchasers. All plaintiffs alleged that the railroads violated section 1 of the Sherman Act, 15 U.S.C. § 1, by conspiring to fix prices. The direct purchasers sought treble damages under section 4 of the Clayton Act, 15 U.S.C. § 15, and the district court held that they stated a claim, In re Rail Freight Surcharge Antitrust Litig. , 587 F. Supp. 2d 27 (D.D.C. 2008). The indirect purchasers sought injunctive relief under section 16 of the Clayton Act, 15 U.S.C. § 26, and raised various state-law claims. The district court held that the state claims were preempted by federal law, but it declined to dismiss the federal claims.

In re Rail Freight Surcharge Antitrust Litig., 593 F. Supp. 2d 29 (D.D.C. 2008), aff’d, Fayus Enters. v. BNSF Ry. Co., 602 F.3d 444 (D.C. Cir. 2010).

The eight named plaintiffs in the direct-purchaser case—Carter Distributing Company; Dakota Granite Company; Donnelly Commodities, Inc.; Dust Pro, Inc.; Nyrstar Taylor Chemicals, Inc.; Olin Corporation; Strates Shows, Inc.; and US Magnesium LLC—moved to certify a class under Federal Rule of Civil Procedure 23(b)(3). The proposed class consisted of all shippers who paid rate-based fuel surcharges for unregulated services purchased from the defendants between July 1, 2003 and December 31, 2008. To show that causation, injury, and damages could be proved on a class-wide basis, the plaintiffs invoked two regression models constructed by their economist, Dr. Gordon Rausser. The "common factor model" identified seven variables said to determine the price of the defendants’ services, including fuel surcharges. The "damages model," controlling for those variables, sought to isolate price increases attributable to the alleged conspiracy. The railroads criticized these models on various grounds, including that they measured damages for shipments made under legacy contracts fixed before any conspiracy allegedly began.

The district court initially certified the class. It noted that if individualized proof were necessary to establish causation and injury, then the plaintiffs could not satisfy the Rule 23(b)(3) requirement that common questions predominate. See In re Rail Freight Fuel Surcharge Antitrust Litig., 287 F.R.D. 1, 43 (D.D.C. 2012). But the court found Dr. Rausser’s regression analysis to be "plausible" and "workable," so it concluded that causation, injury, and damages were "susceptible to proof at trial through evidence common to the class." Id. at 67. The court rejected many different criticisms of the regression models, but it did not specifically address the question of false positives for legacy contracts.

On interlocutory review, we vacated the certification order and remanded for reconsideration in light of Comcast Corp. v. Behrend, 569 U.S. 27, 133 S.Ct. 1426, 185 L.Ed.2d 515 (2013). In re Rail Freight Surcharge Antitrust Litig.-MDL No. 1869, 725 F.3d 244 (D.C. Cir. 2013) ( Rail Freight I ). We explained that, for an antitrust class action, common questions "cannot predominate where there exists no reliable means of proving classwide injury in fact." Id. at 253. We expressed concern with the district court’s failure to address "the damages model’s propensity toward false positives," which left us with no way of knowing whether "the overcharges the damages model calculates for class members [are] any more accurate than the obviously false estimates it produces for legacy shippers." Id. at 254. Finally, we stressed that Rule 23, as construed in Comcast, requires a "hard look at the soundness of statistical models that purport to show predominance." Id. at 255.

On remand, after permitting supplemental discovery and expert reports, the district court denied class certification. In re Rail Freight Surcharge Antitrust Litig., 292 F. Supp. 3d 14 (D.D.C. 2017) ( Rail Freight II ). The court concluded that Dr. Rausser’s expert opinions were reliable enough to be admissible at trial. Id. at 49-63. But in assessing predominance, the court identified three shortcomings in his damages model: first, it measured highly inflated damages for intermodal traffic (i.e. , shipments traveling by rail and another mode of transportation such as trucks or airplanes), id. at 122-26 ; second, as we had noted in the earlier appeal, the model erroneously measured damages for shipments made under legacy contracts, id. at 126-31 ; and third, the model measured negative damages—and hence no injury—for over 2,000 members of the proposed class, id. at 132-41. The court concluded that any one of these problems was enough to defeat the plaintiffs’ argument for predominance. Id. at 122.

The plaintiffs filed a petition for permission to appeal the class-certification decision under Federal Rule of Civil Procedure 23(f). A motions panel of this Court granted the petition without prejudice to reconsideration at the merits stage. In re Rail Freight Fuel Surcharge Antitrust Litig.—MDL No. 1869, No. 17-8005 (D.C. Cir. Dec. 20, 2017).

II

We begin with the question of our jurisdiction. Orders denying class certification are neither final decisions under 28 U.S.C. § 1291, Coopers & Lybrand v. Livesay, 437 U.S. 463, 98 S.Ct. 2454, 57 L.Ed.2d 351 (1978), nor injunctions immediately appealable under 28 U.S.C. § 1292(a)(1), Gardner v. Westinghouse Broad. Co. , 437 U.S. 478, 98 S.Ct. 2451, 57 L.Ed.2d 364 (1978). However, 28 U.S.C. § 1292(e) permits the Supreme Court to promulgate rules creating new categories of decisions appealable before final judgment. Exercising that authority, the Court has provided that "[a] court of appeals may permit an appeal from an order granting or denying class-action certification," if a "petition for permission to appeal" is timely filed. Fed. R. Civ. P. 23(f).

In this case, the plaintiffs filed a timely petition for permission to appeal, which was enough under Rule 23(f) to secure our jurisdiction. That jurisdiction is "discretionary," Rail Freight I , 725 F.3d at 250, and the railroads contest whether we should exercise it. But their argument on this point is perfunctory—less than one page of briefing, with no case citations—and it almost entirely duplicates their merits arguments. According to the railroads, we should conclude that the denial of class certification was correct. Then, we should dismiss the appeal as raising neither a questionable decision nor an unsettled issue—considerations that bear on whether to permit the appeal in the first place, see id. at 250-54. Because that disposition would make little sense at this juncture, we decline to revisit the motions panel’s decision accepting the appeal.

III

Federal Rule of Civil Procedure 23 sets forth various requirements for the certification of class actions. Rule 23(a) provides four "prerequisites" for any class certification, including that there must be "questions of law or fact common to the class." If these prerequisites are met, Rule 23(b)(3) permits certification if, among other things, "questions of law or fact common to class members predominate over any questions affecting only individual members." For purposes of these rules, a "common" question is one that is "capable of classwide resolution—which means that determination of its truth or falsity will resolve an issue that is central to the validity of each one of the claims in one stroke." Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338, 350, 131 S.Ct. 2541, 180 L.Ed.2d 374 (2011). In contrast, an "individual" question is one for which "members of a proposed class will need to present evidence that varies from member to member." Tyson Foods, Inc. v. Bouaphakeo, ––– U.S. ––––, 136 S. Ct. 1036, 1045, 194 L.Ed.2d 124 (2016) (quotation marks omitted).

The party seeking class...