Supreme Court Hears Oral Argument in Antitrust Class Action Against Comcast

This posting was written by Jeffrey May, Editor of Trade Regulation Reporter.

As the U.S. Supreme Court heard oral argument on November 5 about the appropriate standard for class certification in a consumer antitrust action against cable provider Comcast Corporation, the justices spent much of the time trying to determine whether the parties actually had opposing views on the appropriate legal standard (Comcast Corp. v. Behrend, Dkt. 11-864).

The case could impact the ability of consumers to pursue damages class actions if the Court were to impose tougher standards on lower courts as they consider motions for class certification.

“[I]t seems to me that except for the question of how good the expert report is, none of the parties have any adversarial difference as to the appropriate legal standard,” commented Justice Elena Kagan. “And, you know, usually we decide cases based on disagreements about law, and here I can't find one.”

In deciding to take up the case, the U.S. Supreme Court “wanted to talk about . . . whether a district court at a class certification stage has to conduct a Daubert inquiry, in other words, [whether it] has to decide on the admissibility of expert testimony relating to class-wide damages,” according to Justice Kagan. Comcast's counsel had argued that the complaining cable customers’ damages model no longer fit the legal theory that remained in the case.

In June 2012, the Supreme Court agreed to review a decision of the U.S. Court of Appeals in Philadelphia (655 F.3d 182, 2011-2 Trade Cases ¶77,575), upholding the certification of a class of approximately two million cable television customers in the Philadelphia area. The customers allege that Comcast engaged in unlawful monopolization.

The appellate court ruled that the lower court satisfied the “rigorous analysis” standard established by the Third Circuit in In re Hydrogen Peroxide Antitrust Litigation (552 F.3d 305, 2008-2 Trade Cases ¶76,453) in determining that questions of fact or law common to class members predominated over individual issues, for purposes of meeting the certification requirements of Federal Rule of Civil Procedure 23(b)(3).

In its petition, Comcast asked whether a district court may certify a class action without resolving “merits arguments” that bear on prerequisites for certification under Rule 23, including whether purportedly common issues predominate over individual ones under Rule 23(b)(3).

In granting certiorari, the Court limited its review to the question: “Whether 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.”

There was some question as to whether Comcast waived its right to object to the admissibility of the expert testimony. Comcast's counsel asserted that Comcast had never said that its objection was only to the weight and not to the admissibility of the evidence.

Counsel for the customers contended that Comcast was so profoundly uninterested in Daubert, and was so focused on arguing weight and probativeness as opposed to admissibility, that it never even cited the case at the district court level. The Supreme Court's 1993 decision in Daubert v. Merrell Dow Pharmaceuticals, Inc. (509 U. S. 579), sets out certain requirements for the admission of expert testimony.

Chief Justice John Roberts suggested that the Court should answer the question presented as reformulated and send it back down to the district court to determine whether or not the parties adequately preserved the objection or not. “[T]he district court presumably can decide based on the proceedings and all that below, all the scars and mess-ups, whether or not it was adequately preserved or not,” he noted.

Supreme Court to Consider State Action, Class Certification Next Term

This posting was written by Jeffrey May, Editor of CCH Trade Regulation Reporter.

On the last day of the October 2011 term, the U.S. Supreme Court granted petitions for certiorari in two closely-watched antitrust cases: (1) a Federal Trade Commission (FTC) action challenging a Georgia hospital combination, and (2) a consumer class action against cable provider Comcast Corporation.

State Action Doctrine

In the FTC action, the Court will consider the scope of the state action doctrine. At the request of the FTC, the U.S. Solicitor General in March petitioned the Court to review a decision of the U.S. Court of Appeals in Atlanta (2011-2 Trade Cases ¶77,722, 663 F.3d 1369), holding that the proposed combination of the only two hospitals in Albany, Georgia, was immune from antitrust attack under doctrine. The appellate court had upheld dismissal (2011-1 Trade Cases ¶77,508, 793 F. Supp. 2d 1356) of the Commission’s complaint for injunctive relief pending the completion of an administrative proceeding.

In April 2011, the FTC issued an administrative complaint challenging the transaction (CCH Trade Regulation Reporter ¶16,588). The FTC alleged that a local hospital authority’s purchase of Palmyra Park Hospital’s assets from HCA, Inc. and subsequent lease to Phoebe Putney Health System, Inc. (PPHS)—the operator of Phoebe Putney Memorial Hospital—would substantially lessen competition or tend to create a monopoly in the inpatient general acute-care hospital services market in Georgia’s Dougherty County and surrounding areas. The agency also sought injunctive relief to prevent the consummation of the plan prior to the completion of the administrative proceeding. Pending conclusion of the court action, the FTC stayed its administrative proceedings (CCH Trade Regulation Reporter ¶16,620).

In its petition for certiorari, the government asked the Court to consider:

(1) whether the Georgia legislature, by vesting the local government entity with general corporate powers to acquire and lease out hospitals and other property, has “clearly articulated and affirmatively expressed” a “state policy to displace competition” in the market for hospital services; and

(2) whether such a state policy, even if clearly articulated, would be sufficient to validate the alleged anticompetitive conduct, given that the local government entity neither actively participated in negotiating the terms of the hospital sale nor had any practical means of overseeing the hospital’s operation.

According to the petition, the case presents the question of whether a hospital’s acquisition of its only rival, effectuated by using a substate governmental entity’s general corporate powers, is exempt from antitrust scrutiny under the “state action doctrine.” The appellate court decision conflicts with decisions of the Fifth, Sixth, Ninth, and Tenth Circuits, the agency contends.

The petition for review, FTC v. Phoebe Putney Health System, Inc., Dkt. 11-1160, was granted on June 25, 2012.

Class Action Certification

The Court has also decided to consider a decision of the U.S. Court of Appeals in Philadelphia (2011-2 Trade Cases ¶77,575, 655 F.3d 182), upholding the certification of a class of approximately two million cable television customers in the Philadelphia area. The customers allege that Comcast engaged in monopolization, attempted monopolization, and market or customer allocation through a series of acquisitions and cable system swap arrangements.

The appellate court ruled that the lower court satisfied the “rigorous analysis” standard established in In re Hydrogen Peroxide Antitrust Litigation (2008-2 Trade Cases ¶76,453, 552 F.3d 305) in determining that questions of fact or law common to class members predominated over individual issues, for purposes of meeting the certification requirements of Federal Rule of Civil Procedure 23(b)(3).

The High Court may see things differently.

Comcast petitioned the Court for review in January. Comcast argued that the “Third Circuit’s view that ‘merits arguments’ are ‘not properly before [the court]’ at the class certification stage . . . cannot be reconciled with this Court’s decision in [Walmart Stores, Inc. v. ] Dukes and breaks sharply with the Eighth and Ninth Circuits, which have correctly recognized that such limitations on review of ‘merits’ issues at the certification stage are no longer supportable after Dukes.”

In its petition, Comcast asked: whether a district court may certify a class action without resolving “merits arguments” that bear on prerequisites for certification under Federal Rule of Civil Procedure 23, including whether purportedly common issues predominate over individual ones under Rule 23(b)(3).

In granting certiorari, the Court limited its review to the question: “whether 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 petition for review, Comcast Corp. v. Behrend, Dkt. 11-864, was granted on June 25, 2012.