Recent Decisions Buck Anti-Class-Action Trend, With AAI’s Help

Mar 16 2012
Amicus Program

Three U.S. courts of appeals have recently issued decisions favorable to class action treatment of antitrust actions, each of which was supported by an amicus brief by the American Antitrust Institute (AAI).

In 'Sullivan v. DB Investments, Inc.', ___ F. 3d ___ (Dec. 20, 2011), the Third Circuit on rehearing en banc reversed a panel decision that had struck down a $295 million settlement of a nationwide price fixing class action against DeBeers brought by direct and indirect purchasers. Although the district court found the settlement fair, reasonable, and adequate, the appeals panel agreed with objectors who complained that the existence of substantive variations in the state antitrust laws underlying the indirect purchasers damages claims should preclude a court from finding that common issues affecting the class as a whole predominate. In particular, the panel accepted objectors’ claims that the settlement class was faulty because it included indirect purchasers in states that had no Illinois Brick repealer. The panel also rejected a stipulated injunction because plaintiffs could not demonstrate any threat of injury in light of changes in the marketplace.

While ignoring the apparent anomaly of objectors complaining the settlement was too generous to the class, the Third Circuit rejected the objections to the settlement based on reasoning consistent with the AAI’s amicus briefs. Noting “commonality is informed by the defendant’s conduct as to all class members and any resulting injuries common to all class members,” the court held that differences in state law did not preclude class certification under Rule 23(b)(3), particularly in the context of a settlement class, where issues of trial manageability are irrelevant. According to the court, whether all members of the class have colorable damages claims was not a predominance issue and was inappropriate for determination as part of the Rule 23 class certification process. The Third Circuit opined that the ability of parties to achieve global peace was a valid use of the class action device, that a settlement of purportedly invalid claims did not expand state substantive rights, and that federalism concerns were not implicated because the Illinois Brick rule under federal and some state laws did not reflect a policy judgment that indirect purchasers do not merit antitrust protection. The court also held that a stipulated injunction under Rule 23(b)(2) was within the discretion of the settling parties as long as the relief was applicable to the class as a whole.

In Messner v. Northshore University Healthsystem, ___ F.3d ___ (Jan. 13, 2012), the Seventh Circuit reversed the district court’s denial of class certification in a case that sought damages in connection with a completed hospital merger that the Federal Trade Commission found to violate Section 7. The district court denied certification because it concluded the plaintiffs could not show “common impact,” i.e. could not show through common evidence that the class was injured by the antitrust violation, where the evidence of price increases was not uniform across the services provided by the hospital, and where some class members were not injured. The Seventh Circuit reversed, concluding the plaintiffs’ expert’s methodology could show antitrust injury through common evidence even if price increases were not uniform. Following the reasoning in the AAI’s brief, the court reaffirmed that the fact that some (or all) members of the class are unlikely to be injured is not a bar to class certification, and even if the class includes members who could not have been harmed, class certification should not be denied unless the class is so overbroad to include “a great many” who could not be injured and the problem cannot be resolved by redefining the class.

In American Express Merchants’ Litigation, ___ F.3d ___ (Feb. 1, 2012), the Second Circuit reaffirmed its prior holding in the same case that a class action waiver in an arbitration clause was unenforceable when it would prevent a plaintiff from vindicating its statutory rights under the Sherman Act because proceeding on an individual basis would be prohibitively expensive. Citing an amicus brief by the AAI, the court previously found that it would be prohibitively expensive for the plaintiffs to prosecute individual cases because, even under fee shifting, they could not hope to recover their expert witness expenses or be fully compensated for their attorney’s fees, including the risk of loss. The court concluded that the Supreme Court’s decision in AT&T Mobility v. Concepcion, like the decision in Stolt-Nielsen v. AnimalFeeds Int’l, did not undermine Mitsubishi’s vindication-of-statutory-rights exception to the enforceability of arbitration agreements, noting that “[e]radicating the private enforcement component from our antitrust scheme cannot be what Congress intended when it included strong private enforcement mechanisms and incentives in the antitrust statutes.”

In these three cases and others, the AAI has defended the critical importance of class actions to the enforcement of the antitrust laws and sought to counter the trend disfavoring antitrust class actions. These recent cases represent a hopeful development in limiting the roadblocks to class actions erected by the Supreme Court and some lower courts. The briefs were written by AAI Advisory Board Members Eric Cramer, Josh Davis, and Dan Gustafson with assistance from Andrew Curley, Avidan Stern, and Karla Gluek. The AAI’s amicus program has enjoyed other recent successes as well. For more information on these cases and the AAI’s amicus program more generally, click here.