COMCAST CORP. ET AL. v. BEHREND ET AL.
No. 11-864
SUPREME COURT OF THE UNITED STATES
March 27, 2013
569 U. S. ____ (2013)
OCTOBER TERM, 2012
Syllabus
NOTE: Whеre it is feasible, a syllabus (headnote) will be released, as is being done in connection with this case, at the time the opinion is issued. The syllabus constitutes no part of the opinion of the Court but has been prepared by the Reporter of Decisions for the convenience of the reader. See United States v. Detroit Timber & Lumber Co., 200 U. S. 321, 337.
SUPREME COURT OF THE UNITED STATES
Syllabus
COMCAST CORP. ET AL. v. BEHREND ET AL.
CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT
No. 11-864. Argued November 5, 2012—Decided March 27, 2013
Held: Respondents’ class action was improperly certified under
(a) A party seeking to maintain a class action must be prepared to show that
(b) The Third Circuit ran afoul of this Court‘s precedents when it refused to entertain arguments against respondents’ damages model that bore on the propriety of class certification simply because they would also be pertinent to the merits determination. If they prevail, respondents would be entitled only to damages resulting from reduced overbuilder competition. A model that does not attempt to measure only those damages attributable to that theory cannot establish that damages are susceptible of measurement across the entire class for
(c) Under the proper standard for evaluating certification, respondents’ model falls far short of establishing that damages can be measured classwide. The figure respondents’ expert used was calculated assuming the validity of all four theories of antitrust impact initially advanced by respondents. Because the model cannot bridge the differences between supra-competitive prices in general and supra-competitive prices attributable to overbuilder deterrence,
655 F. 3d 182, reversed.
SCALIA, J., delivered the opinion of the Court, in which ROBERTS, C. J., and KENNEDY, THOMAS, and ALITO, JJ., joined. GINSBURG and BREYER, JJ., filed a dissenting opinion, in which SOTOMAYOR and KAGAN, JJ., joined.
Opinion of the Court
NOTICE: This opinion is subject to formal revision before publication in the preliminary print of the United States Reports. Readers are requested to notify the Reporter of Decisions, Supreme Court of the United States, Washington, D. C. 20543, of any typographical or other formal errors, in order that corrections may be made before the preliminary print goes to press.
SUPREME COURT OF THE UNITED STATES
No. 11-864
COMCAST CORPORATION, ET AL., PETITIONERS v. CAROLINE BEHREND ET AL.
ON WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT
[March 27, 2013]
JUSTICE SCALIA delivered the opinion of the Court.
The District Court and the Court of Appeals approved certification of a class of more than 2 million current and former Comcast subscribers who seek damages
I
Comcast Corporation and its subsidiaries, petitioners here, provide cable-television services to residential and commercial сustomers. From 1998 to 2007, petitioners engaged in a series of transactions that the parties have described as “clustering,” a strategy of concentrating operations within a particular region. The region at issue here, which the parties have referred to as the Philadelphia “cluster” or the Philadelphia “Designated Market Area” (DMA), includes 16 counties located in Pennsylvania, Delaware, and New Jersey.1 Petitioners pursued their
clustering strategy by acquiring competitor cable providers in the region and swapping their own systems outside the region for competitor systems located in the region. For instance, in 2001, petitioners obtained Adelphia Communications’ cable systems in the Philadelphia DMA, along with its 464,000 subscribers; in exchange, petitioners sold to Adelphia their systems in Palm Beach, Florida, and Los Angeles, California. As a result of nine clustering transactions, petitioners’ share of subscribers in the region allegedly increased from 23.9 percent in 1998 to 69.5 percent in 2007. See 264 F. R. D. 150, 156, n. 8, 160 (ED Pa. 2010).
The named plaintiffs, respondents here, are subscribers to Comcast‘s cable-television services. They filed a class-action antitrust suit against petitioners, claiming that petitioners entered into unlawful swap agreements, in violation of
Respondents sought to certify a class under
Respondents proposed four theories of antitrust impact: First, 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. Second, Comcast‘s activities reduced the level of competition from “оverbuilders,”
The District Court accepted the overbuilder theory of antitrust impact as capable of classwide proof and rejected the rest. Id., at 165, 174, 178, 181. Accordingly, in its certification order, the District Court limited respondents’ “proof of antitrust impact” to “the theory that Comcast engaged in anticompetitive clustering conduct, the effect of which was to deter the entry of overbuilders in the Philadelphia DMA.” App. to Pet. for Cert. 192a–193a.3
The District Court further found that the damages resulting from overbuilder-deterrence impact could be calculated on a classwide basis. To establish such damages, respondents had relied solely on the testimony of Dr. James McClave. Dr. McClave designed a regression model comparing actual cable prices in the Philadelphia DMA with hypothetical prices that would have prevailed but for petitioners’ allegedly anticompetitive activities. The model calculated damages of $875,576,662 for the entire class. App. 1388a (sealed). As Dr. McClave acknowledged, however, the model did not isolate damages resulting from any one theory of antitrust impact. Id., at 189a–190a. The District Court nevertheless certified the сlass.
A divided panel of the Court of Appeals affirmed. On appeal, petitioners contended the class was improperly certified because the model, among other shortcomings, failed to attribute damages resulting from overbuilder deterrence, the only theory of injury remaining in the case. The court refused to consider the argument because, in its view, such an “attac[k] on the merits of the methodology [had] no place in the class certification inquiry.” 655 F. 3d 182, 207 (CA3 2011). The court emphasized that, “[a]t the class certification stage,” respondents were not required to “tie each theory of antitrust impact to an exact calculation of damages.” Id., at 206. According to the court, it had “not reached the stage of determining on the merits whether the methodology is a just and reasonable inference or speculative.” Ibid. Rather, the court said, respondents must “assure us that if they can prove antitrust impact, the resulting damages are capable of measurement and will not require labyrinthine individual calcula-tions.” Ibid. In the court‘s view, that burden was met because respondents’ model calculated “supra-competitive prices regardless of the type of anticompetitive conduct.” Id., at 205.
We granted certiorari. 567 U. S. ___ (2012).4
II
The class
Repeatedly, we have emphasized that it “‘may be necessary for the court to probe behind the pleadings before coming to rest on the certification question,’ and that certification is proper only if ‘the trial court is satisfied, after a rigorous analysis, that the prerequisites of
The same analytical principles govern
III
Respondents’ class action was improperly certified under
A
We start with an unremarkable premise. If respondents prevail on their claims, they would be entitled only to damages resulting from reduced overbuilder competition, since that is the only theory of antitrust impact accepted for class-action treаtment by the District Court. It follows that a model purporting to serve as evidence of damages in this class action must measure only those damages attributable to that theory. If the model does not even attempt to do that, it cannot possibly establish that damages are susceptible of measurement across the entire class for purposes of
The District Court and the Court of Appeals saw no need for respondents to “tie each theory of antitrust impact” to a calculation of damages. 655 F. 3d, at 206. That, they said, would involve consideration of the “merits” having “no place in the class certification inquiry.” Id., at 206-207. That reasoning flatly contradicts our cases requiring a determination that
B
There is no question that the model failed to measure damages resulting from the particular antitrust injury on which petitioners’ liability in this action is premised.5
The scheme devised by respondents’
This methodology might have been sound, and might have produced commonality of damages, if all four of those alleged distortions remained in the case. But as Judge Jordan‘s partial dissent pointed out:
“[B]ecause the only surviving theory of antitrust impact is that clustering reduced overbuilding, for Dr. McClave‘s comparison to be relevant, his benchmark counties must reflect the conditions that would have prevailed in the Philadelphia DMA but for the alleged reduction in overbuilding. In all respects unrelated to reduced overbuilding, the benchmark counties should reflect the actual conditions in the Philadelphia DMA, or else the model will identify ‘damages’ that are not the result of reduced overbuilding, or, in other words, that are not the certain result of the wrong.” 655 F. 3d, at 216 (internal quotation marks omitted).
The majority‘s only response to this was that “[a]t the class certification stage we do not require that Plaintiffs tie each theory of antitrust impact to an exact calculation of damages, but instead that they assure us that if they can prove antitrust impact, the resulting damages are capable of measurement and will not require labyrinthine individual calculations.” Id., at 206. But such assurance is not provided by a methodology that identifies damages that are not the result of the wrong. For all we know, cable subscribers in Gloucester County may have been overcharged because of petitioners’ alleged elimination of satellite competition (a theory of liability that is not capable of classwide proof); while subscribers in Camden County may have paid elevated prices because of petitioners’ increased bargaining power vis-à-vis content providers (another theory that is not capable of classwide proof); while yet other subscribers in Montgomery County may have paid rates produced by the combined effects of multiple forms of alleged antitrust harm; and so on. The permutations involving four theories of liability
In light of the model‘s inability to bridge the differences between supra-competitive prices in genеral and supra-competitive prices attributable to the deterrence of overbuilding,
“competitive” has been caused by factors unrelated to an accepted theory of antitrust harm are not “anticompetitive” in any sense relevant here. “The first step in a damages study is the translation of the legal theory of the harmful event into an analysis of the economic impact of that event.” Federal Judicial Center, Reference Manual on Scientific Evidence 432 (3d ed. 2011) (emphasis added). The District Court and the Court of Appeals ignored that first step entirely.
The judgment of the Court of Appeals for the Third Circuit is reversed.
It is so ordered.
GINSBURG and BREYER, JJ., dissenting
SUPREME COURT OF THE UNITED STATES
No. 11-864
COMCAST CORPORATION, ET AL., PETITIONERS v. CAROLINE BEHREND ET AL.
ON WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT
[March 27, 2013]
JUSTICE GINSBURG and JUSTICE BREYER, with whom JUSTICE SOTOMAYOR and JUSTICE KAGAN join, dissenting.
Today the Court reaches out to decide a case hardly fit for our consideration. On both procedural and substantive grounds, we dissent.
I
This case comes to the Court infected by our misguided reformulation of the question presented. For that reason alone, we would dismiss the writ of certiorari as improvidently granted.
Comcast sought review of the following question: “[W]hether a district court may certify a class action without resolving ‘merits arguments’ that bear on [Federal Rule of Civil Procedure] 23‘s prerequisites for certification, including whether purportedly common issues predominate over individual ones under
Our rephrasing shifted the focus of the dispute from the District Court‘s
As it turns out, our reformulated question was inapt. To preserve a claim of error in the admission of evidence, a party must timely object to or move to strike the evidence.
Comcast‘s forfeiture of the question on which we granted review is reason enough to dismiss the writ as improvidently granted. See Rogers v. United States, 522 U. S. 252, 259 (1998) (O‘Connor, J., concurring in result) (“[W]e ought not to decide the question if it has not been cleanly presented.“); The Monrosa v. Carbon Black Export, Inc., 359 U. S. 180, 183 (1959) (dismissal appropriate in light of “circumstances ... not fully apprehended at the time certiorari was granted” (internal quotation marks omitted)). The Court, however, elects to evaluate whether respondents “failed to show that the case is susceptible to awarding damages on a class-wide basis.” Ante, at 5, n. 4 (internal quotation marks omitted). To justify this second revision of the question presented, the Court observes that Comcast “argued below, and continue[s] to argue here, that certification was improper because respondents had failed to establish that damages could be measured on a classwide basis.” Ibid. And so Comcast did, in addition to endeavoring to address the question on which we granted review. By treating the first part of our reformulated question as though it did not exist, the Court is hardly fair to respondents.
Abandoning the question we instructed the parties to brief does “not reflect well on the processes of the Court.” Redrup v. New York, 386 U. S. 767, 772 (1967) (Harlan, J., dissenting). Taking their cue from our order, respondents did not train their energies on defending the District Court‘s finding of predominance in their briefing or at oral argument. The Court‘s newly revised question, focused on predominance, phrased only after briefing was done, left respondents without an unclouded opportunity to air the issue the Court today decides against them. And by resolving a complex and fact-intensive question without the benefit of full briefing, the Court invites the error into which it has fallen. See infra, at 5–11.
II
While the Court‘s decision to review the merits of the District Court‘s certification order is both unwise and unfair to respondents, the opinion breaks no new ground on the standard for certifying a class action under
To gain class-action certification under
Recognition that individual damages calculations do not preclude class certification under
* A class may be divided into subclasses for adjudication of damages.
Indep. Assn. of Continental Pilots, 242 F. 3d 290, 298 (CA5 2001) (Labor-Management Reporting and Disclosure Act and Railway Labor Act); Beattie v. CenturyTel, Inc., 511 F. 3d 554, 564–566 (CA6 2007) (Federal Communications Act); Arreola v. Godinez, 546 F. 3d 788, 801 (CA7 2008) (Eighth Amendment). Antitrust cases, which typically involve common allegations of antitrust violation, antitrust impact, and the fact of damages, are classic examples. See In re Visa Check/MasterMoney Antitrust Litigation, 280 F. 3d 124, 139–140 (CA2 2001). See also 2A P. Areeda, H. Hovenkamp, R. Blair, & C. Durrance, Antitrust Law ¶331, p. 56 (3d ed. 2007) (hereinafter Areeda & Hovenkamp); 6 A. Conte & H. Newberg, Newberg on Class Actions §18:27, p. 91 (4th ed. 2002). As this Court has rightly observed, “[p]redominance is a test readily met” in actions alleging “violations of the antitrust laws.” Amchem, 521 U. S., at 625.
The oddity of this case, in which the need to prove damages on a classwide basis through a common methodology was never challenged by respondents, see Brief for Plaintiffs-Appellees in No. 10–2865 (CA3), pp. 39–40, is a further reason to dismiss the writ as improvidently granted. The Court‘s ruling is good for this day and case only. In the mine run of cases, it remains the “black letter rule” that a class may obtain certification under
III
Incautiously entering the fray at this interlocutory stage, the Court sets forth a profoundly mistaken view of antitrust law. And in doing so, it relies on its own version of the facts, a version inconsistent with factual findings made by the District Court and affirmed by the Court of Appeals.
A
To understand the antitrust problem, some (simplified) background discussion is
As plaintiffs below, respondents attempted to meet these requirements by showing that (1) Comcast obtained a 60% or greater share of the Philadelphia market, and that its share provides it with monopoly power; (2) Comcast acquired its share through exclusionary conduct consisting of a series of mergers with competitors and “swaps” of customers and locations; and (3) Comcast consequently injured respondents by charging them supra-competitive prices.
If, as respondents contend, Philadelphia is a separate well-defined market, and the alleged exclusionary conduct permitted Comcast to obtain a market share of at least 60%, then proving the
B
So far there is agreement. But consider the last matter respondents must prove: Can they show that Comcast injured them by charging higher prices? After all, a firm with monopoly power will not necessarily exercise that power by charging higher prices. It could instead act less competitively in other ways, such as by leading the quiet life. See J. Hicks, Annual Survey of Economic Theory: The Theory of Monopoly, 3 Econometrica 1, 8 (1935) (“The best of all monopoly profits is a quiet life.“).
It is at this point that Dr. McClave‘s model enters the scene. His model first selects a group of comparable outside-Philadelphia
C
1
The special antitrust-related difficulty present here stems from the manner in which respondents attempted to prove their antitrust injuries. They proffered four “non-exclusive mechanisms” that allegedly “cause[d] the high prices” in the Philadelphia area. App. 403a. Those four theories posit that (1) due to Comcast‘s acquisitions of competitors, customers found it more difficult to compare prices; (2) one set of potential competitors, namely Direct Broadcast Satellite companies, found it more difficult to obtain access to local sports broadcasts and consequently decided not to enter the Philadelphia market; (3) Comcast‘s ability to obtain programming material at lower prices permitted it to raise prices; and (4) a number of potential competitors (called “overbuilders“), whose presence in the market would have limited Comcast‘s power to raise prices, were ready to enter some parts of the market but decided not to do so in light of Comcast‘s anticompetitive conduct. 264 F. R. D. 150, 161–162 (ED Pa. 2010).
For reasons not here relevant, the District Court found the first three theories inapplicable and limited the liability-phase proof to the “overbuilder” theory. See App. to Pet. for Cert. 192a–193a. It then asked the parties to brief whether doing so had any impact on the viability of McClave‘s model as a measure of classwide damages. See 264 F. R. D., at 190. After considering the parties’ arguments, the District Court found that striking the three theories “does not impeach Dr. McClave‘s damages model” because “[a]ny anticompetitive conduct is reflected in the [higher Philadelphia] price [which Dr. McClave‘s model determines], not in the [the model‘s] selection of the comparison counties, [i.e., the lower-price ‘benchmark counties’ with which the Philadelphia area prices were compared].” Id., at 190–191. The court explained that “whether or not we accepted all [four] theories ... is inapposite to Dr. McClave‘s methods of choosing benchmarks.” Ibid. On appeal, the Third Circuit held that this finding was not an abuse of discretion. 655 F. 3d 182, 207 (2011).
2
The Court, however, concludes that “the model failed to measure damages resulting from the particular antitrust injury on which petitioners’ liability in this action is premised.” Ante, at 8. To reach this conclusion the Court must consider fact-based matters, namely what this econometric multiple-regression model is about, what it proves, and how it does so. And it must overturn two lower courts’ related factual findings to the contrary.
We are normally “reluctant to disturb findings of fact in which two courts below have concurred.” United States v. Doe, 465 U. S. 605, 614 (1984). See also United States v. Virginia, 518 U. S. 515, 589, n. 5 (1996) (SCALIA, J., dissenting) (noting “our well-settled rule that we will not ‘undertake to review concurrent findings of fact by two courts below in the absence of a very obvious and exceptional showing of error‘” (quoting Graver Tank & Mfg. Co. v. Linde Air Products Co., 336 U. S. 271, 275 (1949))). Here, the District Court found McClave‘s econometric model capable of measuring damages on a classwide basis, even after striking three of the injury theories. 264 F. R. D., at 190–191. Contrary to the Court‘s characterization, see ante, at 8–9, n. 5, this was not a legal conclusion about what the model proved; it was a factual finding about how the model worked. Under our typical practice, we should leave that finding alone.
In any event, as far as we can tell, the lower courts were right. On the basis of the record as we understand it, the District Court did not abuse its discretion in finding that McClave‘s model could measure damages suffered by the class—even if the damages were limited to those caused by deterred overbuilding. That is because respondents alleged that Comcast‘s anticompetitive conduct increased Comcast‘s market share (and market power) by deterring potential entrants, in particular, overbuilders, from entering the Philadelphia area market. See App. 43a–66a. By showing that this was so, respondents’ proof tends to show the same in respect to other entrants. The overbuilders’ failure to enter deprives the market of the price discipline that their entry would have provided in other parts via threat of the overbuilders’ expansion or that of others potentially led on by their example. Indeed, in the District Court, Comcаst argued that the three other theories, i.e., the three rejected theories, had no impact on prices. See 264 F. R. D., at 166, 176, 180–181. If Comcast was right, then the damages McClave‘s model found must have stemmed exclusively from conduct that deterred new entry, say from “overbuilders.” Not surprisingly, the Court offers no support at all for its contrary conclusion, namely, that the District Court‘s finding was “‘obvious[ly] and exceptional[ly]’ erroneous.” Ante, at 8–9, n. 5 (quoting Virginia, 518 U. S., at 589, n. 5 (SCALIA, J., dissenting)).
We are particularly concerned about the matter because the Court, in reaching its contrary conclusion, makes broad statements about antitrust law that it could not mean to apply in other cases. The Court begins with what it calls an “unremarkable premise” that respondents could be “entitled only to damages resulting from reduced overbuilder competition.” Ante, at 7. In most
Suppose in a different case a plaintiff wеre to prove that Widget, Inc. has obtained, through anticompetitive means, a 90% share of the California widget market. Suppose the plaintiff also proves that the two small remaining firms—one in Ukiah, the other in San Diego—lack the capacity to expand their widget output to the point where that possibility could deter Widget, Inc. from raising its prices. Suppose further that the plaintiff introduces a model that shows California widget prices are now twice those in every other State, which, the model concludes is (after accounting for other possible reasons) the result of lack of competition in the California widget market. Why would a court hearing that case restrict damages solely to customers in the vicinity of Ukiah and San Diego?
*
Because the parties did not fully argue the question the Court now answers, all Members of the Court may lack a complete understanding of the model or the meaning of related statements in the record. The need for focused argument is particularly strong here where, as we have said, the underlying considerations are detailed, technical, and fact-based. The Court departs from our ordinary practice, risks inaccurate judicial decisionmaking, and is unfair to respondents and the courts below. For these reasons, we would not disturb the Court of Appeals’ judgment and, instead, would dismiss the writ as improvidently granted.