Premium Cable Subscribers Not Allowed to Bring Tying Claim as Class

This posting was written by Darius Sturmer, Editor of CCH Trade Regulation Reporter.

Subscribers to a communications company’s premium cable television programming packages who paid the company a monthly rental fee for an accompanying set-top box should not be certified as a class, for purposes of their claims that the company illegally tied and bundled the lease of the cable boxes to the ability to obtain premium cable programming services, the federal district court in Oklahoma City has determined.

Common v. Individualized Issues

While the proposed class satisfied the numerosity, commonality, typicality, and adequacy of representation requirements established by Federal Rule of Civil Procedure 23(a), it could not meet Rule 23(b)(3)’s burdens of showing that common issues would predominate over any individualized issues and that a class action was the superior method for adjudicating the action.

Federal Tying Claim

The subscribers could not prove all of the elements of a federal tying claim on a classwide basis because the determination of the company’s market power was not amenable to such proof, according to the court.

Since subscribers in different geographic areas faced different competitive alternatives to the defending company, such a determination required an evaluation of the actual competitive conditions of markets at a local—not national—level, the court explained.

Damages

Several methods introduced by the plaintiff’s expert for calculating aggregate damages suffered by the subscribers could not be utilized with common evidence, owing to the elasticity of demand and the subsequent need for individualized market data.

Moreover, a benchmark method proffered by the expert, in which he compared rental rates of set-top boxes in the United States to rates in Canada, was inappropriate given the expert’s failure to evaluate the different regulations in the countries and costs of Canadian and American cable providers.

Additionally, in light of the multiple regional analysis required to determine market power and impact, maintaining a class action would not be manageable, the court noted.

The decision is In Re: Cox Enterprises, Inc. Set-Top Cable Television Box Antitrust Litigation, 2012-1 Trade Cases ¶77,756.

Settlement of Diamond Resale Price Fixing Claims Upheld

This posting was written by Darius Sturmer, Editor of CCH Trade Regulation Reporter.

Approval of a proposed $295 million settlement of class action resale price fixing claims against a group of entities related to the world's principal diamond producer was proper, according to an en banc decision of the U.S. Court of Appeals in Philadelphia.

The federal district court approving the settlement did not err in granting certification of nationwide settlement classes consisting of direct purchasers of gem diamonds and indirect purchasers of rough or cut-and-polished diamonds (2008-2 Trade Cases ¶76,304), the appellate court held.

Class Certification

The proposed classes satisfied each of the four requirements enunciated in Federal Rule of Civil Procedure 23(a) as prerequisites to certification—numerosity, commonality, typicality, and adequacy of representation—as well as the predominance and superiority requirements of Rule 23(b)(3).

Predominance was easily shown based on the diamond producer’s alleged conduct and the injury it caused to each and every class member, the appellate court held. The plaintiffs also sufficiently showed that certification under Rule 23(b)(2), which applied to claims seeking injunctive or declaratory relief, was appropriate.

The appellate court rejected an argument advanced by objectors to the settlement that certification of a nationwide settlement class was improper based on differences in state law with respect to indirect purchaser standing.

Rule 23 made clear that a district court had limited authority to examine the merits of individual claims when conducting the certification inquiry. Such an inquiry was "particularly unwarranted in the settlement context" since a district court did not need to envision the form that a trial would take or consider the available evidence and methods proposed for proving the disputed element at trial, the court stated. Thus, the district court did not “inappropriately subordinate” state sovereignty in certifying the class.

Settlement

The proposed settlement was fair, adequate, and reasonable, the appellate court confirmed. It was in the best interests of the settlement classes, and was the product of arm's-length, serious, and informed negotiations between experienced and knowledgeable counsel.

The lower court did not err in approving class counsel's plan of allocation. Rejected was an argument that the previously-noted differences in state law mandated a differential allocation in the percentage of recovery within the indirect purchaser consumer settlement fund.

Dissent

A dissenting opinion contended that the predominance requirement for class certification was not satisfied because the lower court had not ensured that each class member possessed a viable or colorable legal claim.

By allowing indirect purchasers who had no standing to sue under their state's antitrust laws to be part of the settlement class, the appellate majority has created a “come one, come all” environment that “sets the class action ship in [the Ninth] Circuit badly adrift,” the dissent argued.

The decision is Sullivan v. DB Investments, Inc., 2011-2 Trade Cases ¶77,736.

Class Action Preferable to Thousands of Suits on Dietary Supplement Claims

This posting was written by William Zale, Editor of CCH Advertising Law Guide.

A purchaser of the dietary supplement Relacore established that a class action, rather than the prosecution of thousands individual small claims, was the superior method for proceeding on allegations that Carter-Reed Company violated the New Jersey Consumer Fraud Act by falsely representing that the product would shrink belly fat and improve mood, among other benefits, the New Jersey Supreme Court has ruled.

The core issues were (1) whether common issues of law and fact predominated, (2) whether the class action was superior to a myriad of individually litigated cases, and (3) whether a class action—given the number of individual claims involved—was manageable.

Carter-Reed did not dispute that the claims met the class action requirements of numerosity, commonality, typicality, and adequacy of representation.

Predominance of Common Issues

Carter-Reed argued that the purchaser had challenged only the marketing of Relacore as a weight-reducing dietary supplement and that class certification inevitably would spawn a host of individual questions concerning why a particular consumer bought Relacore and whether the advertised benefits were realized.

However, the purchaser's detailed allegations asserted that Relacore provided none of the advertised benefits, that no sound scientific evidence supported Carter Reed’s representations about Relacore, and that Carter Reed’s entire marketing scheme was nothing more than a web of lies, according to the court.

A corporate defendant engaged in a marketing scheme founded on a multiplicity of deceptions should not be in a better position in fending off a motion for class certification than a defendant engaged in a sole marketing deception, the court reasoned.

The alleged out-of-pocket ascertainable loss was the purchase price of a bottle of Relacore. While individual questions remained as to the number of bottles purchased by each class member without refunds, these questions did not present an insuperable obstacle, the court found.

Superiority, Manageability

The class action was a superior means for resolving the dispute despite a 30-day refund policy that Carter-Reed offered in some of its advertising but that did not appear on Relacore packaging and labeling, the court determined.

Denying class certification on manageability grounds was disfavored in general and not in any way justified in this case, the court held. If discovery indicates that some of Carter's Reed's claims for Relacore were scientifically sound, then the trial court would have options including subdividing, or in a worst-case scenario, decertifying the class.

The burden would be on the plaintiff to provide the necessary evidence to support the allegations that justified the grant of class certification, the court observed.

The September 29 opinion in Lee v. Carter-Reed Co., LLC, will be reported at CCH Advertising Law Guide ¶64,004 and CCH State Unfair Trade Practices Law ¶32,144.