Court May Consider Merits of Damages Methodology During Class Certification

April 12, 2013

By:   Christopher P. Wesierski and Ashley A. Reagan

This case arises from the approval of a class of more than 2 million current and former Comcast subscribers.  The class alleged Comcast violated antitrust laws by engaging in unlawful swap agreements to concentrate their services in a particular region.  Comcast used a “clustering” strategy where it acquired competitor cable providers in the region and swapped the Comcast systems from outside regions with the competitor systems in the region.  This resulted in a 23.9% increase in Comcast subscribers.  The class argued that, as subscribers, they had been harmed because Comcast competitors had been eliminated and prices for cable services had been set above competitive levels.  The Comcast subscribers sought class certification.

Four theories of antitrust impact were proposed during certification: (1) 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; (2) 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; (3) Comcast reduced the level of “benchmark” competition on which cable customers rely to compare prices; and (4) Clustering increased Comcast’s bargaining power relative to content providers.

The district court accepted the overbuilder theory of antitrust impact as capable of classwide proof and rejected the rest.  It determined that the damages claimed were measurable on a class-wide basis and that questions of fact as to the issue of overbuilders predominated over individual inquiry.  The court of appeals affirmed.  The court of appeals rejected Comcast’s argument that the class had failed to attribute damages resulting from overbuilder deterrence, finding that such an attack on the merits of the methodology had no place in the class certification inquiry.  According to the court, it had not reached the stage of determining the issues on their merits.  

The question on appeal was whether class certification was proper.  The U.S. Supreme Court found that the class should not have been certified.  In response to the reasoning provided by the court of appeals, the Court noted that it may be necessary to probe behind the pleadings before reaching a decision on the question of certification.  A trial court must perform a rigorous analysis which frequently entails overlap with the merits of the plaintiff’s underlying claim.  By refusing to entertain arguments against the damages model utilized by the class, the court of appeals ran afoul of case precedent.  At the class certification stage, any model supporting a plaintiff’s damages case must be consistent with its liability case.  Under the proper standard for evaluating certification, the damages are not capable of measurement on a class-wide basis.  Questions of individual damages will inevitably overwhelm questions common to the class.  The model utilized by the class did not even attempt to evidence damages resulting from overbuilder competition and considered all 4 theories of impact.

Facts and analysis based upon Comcast Corp. et al. v. Behrend, et al., decided on March 27, 2013 by the United States Supreme Court.