In Re New Motor Vehicles Can. Export Anti. Lit.

include roughly thirteen million pur car TORRUELLA, Before Circuit Judge, chasers. There is no reliable means for SELYA, Senior Circuit Judge, and measuring the size of injunctive class, LYNCH, Circuit Judge. but it is potentially massive.1 LYNCH, Circuit Judge. By token, the same an erroneous failure This multi-district to certify consumer action al- a class where individual claims leges a conspiracy by automobile are may manufac- small deprive plaintiffs of the only turers to illegally block lower-priced im- realistic mechanism to vindicate meritori ports Canada, from which is alleged ous See, claims. e.g., Tardiff, 365 F.3d at have price inflated the of new cars sold in 7 (citing Prods., Amchem Inc. Windsor, America. granted We interlocutory 591, 617, U.S. S.Ct. appeal under Federal Rule of Civil Proce- (1997)). L.Ed.2d 689 All of these concerns 23(f) dure from the district court’s certifi- very much implicated here. 1. The district court observed that “it is rea- than a hundred million American consum- sonable to infer that proposed federal ers.” In re New Motor Vehicles Canadian injunctive millions”; class numbers in the Export (Motor Litig. Antitrust IV), Vehicles defendants represented have to the district No. MDL 2006 WL *2at & n. proposed that the (D.Me. includes "more 2006). Mar. Export An- Canadian Vehicles Motor New re-We holdings. our summarize We V), (Motor Vehicles Litig. injunctive titrust certification verse (D.Me.2006) (certifying six ex- F.R.D. of a lack Act for Clayton class under classes); New re damages emplar state dismissal controversy and order live Export Anti- Canadian Vehicles jurisdiction no is there Because claim. VI), (Motor Litig. trust Act, remand we Clayton under or- (D.Me.2007) (supplemental F.R.D. the sev- determination court for state certification der of fed- existence concerning the issues eral Cana- Motor Vehicles classes); In re New representation On the jurisdiction. eral (Motor Vehi- Litig. Antitrust Export dian diversity jurisdic- there parties that (or- (D.Me.2007) VII), F.R.D. 20 cles state dam- at least tion over appointing and class action certifying of der the certification claims, review we ages Vehicles counsel); New Motor In re cer- vacate We damages classes. the (Motor Litig. Antitrust Export Canadian free re- court is tification; district the (D.Me.2007) VIII), F.R.D. a Vehicles orders certification the class consider of class support in (memorandum order record. complete more order). describing the Before certification the issues, we sketch I. certification case. underlying outline Background at least from is that claim this case background The extensive currency exchange the through the thoughtful decisions many in recited strong United the between rate differential See, New Motor In re e.g., court. Canadian cheaper the and dollar Litig. States Antitrust Export Canadian Vehicles in opportunities2 arbitrage created 136 dollar I), F.Supp.2d (Motor Vehicles Ca- lower-priced to sell market3 gray the federal (dismissing (D.Me.2004) These States. United in the cars nadian Motor claims); New Vehi- In re the dif- from arose opportunities arbitrage Litig. Antitrust Export cles Canadian a bro- at which price between 126 ference II), F.Supp.2d (Motor Vehicles (plus in Canada buy a vehicle could ker personal (asserting pendent (D.Me.2004) United to the the vehicle exporting jurisdic- costs subject matter supplemental and broker States) at which the price and claims); New In re law state tion over a deal- vehicle, resell could Export Anti- Canadian Vehicles States. consumer, in United or III), 350 er (Motor Vehicles Litig. trust were en- arbitrage opportunities in These (D.Me.2004) (denying F.Supp.2d 160 and agreements trade by liberal hanced dismiss); New Motor In re motion to part safety automotive harmonization Litig. Export Antitrust Canadian Vehicles between standards environmental and IV), MDL (Motor No. result, an As a in the 1990s. 2006) countries (certify- two (D.Me. Mar. WL in sold cars new most could make exporter class); re relief injunctive ing federal the seller which "in is one market gray 3. A of simulta- practice Arbitrage describes methods unethical legal but sometimes uses selling securi- identical buying and neously chain distribution a manufacturer’s to avoid different ties, in assets currency, or other goods) imported (esp. goods thereby sell markets, profiting from hope of "with by the envisioned those than prices lower Black’s markets.” in those difference price Dictionary 989 Law Black’s manufacturer.” ed.2004). (8th Dictionary 112 Law ed.2004). (8th Canada physically indistinguishable ing from dealerships; threatened to comparable models sold in the United terminate dealerships sold export- States replacing speedometer ers. odometer with gauges that measured miles Plaintiffs allege that these business instead of kilometers. All of circum- these practices had the effect of suppressing the stances converged in what refer supply of Canadian cars in the United “perfect aas storm” of cross-border States. This stifling supply led to in- arbitrage opportunities. key creases two prices in the domestic allege Plaintiffs that individual automo- United States automobile market: bile manufacturers engaged business Suggested Manufacturer’s Retail Price practices, legal both illegal, designed (“MSRP”) and the dealer price. invoice to restrict the flow of Canadian cars into represents MSRP retail price pre- the United States. alleg- Manufacturers sented to the public. The dealer invoice edly refused to honor warranties on Cana- price represents the manufacturer-deter- dian cars in the United States and discour- mined net price wholesale to dealers.4 aged dealers from installing domestic Both the MSRP and the list dealer invoice gauges cars; on Canadian they mandated price are determined annually by manufac- export” “no clauses in agreements sales turers and apply nationally. plain- Under between dealers and consumers and re- tiffs’ theory, prices these two in turn de- quired Canadian dealers to conduct due fine the bargaining parameters for the diligence into potential customers price actually paid by consumers. Actual were likely export to their cars out of sales prices vary according to individual Canada; and withheld information negotiations between dealers and consum- safety about recalls exporting from cus- ers, plaintiffs but that assume negotiated tomers. Manufacturers also im- allegedly prices fall within the range between the posed disciplinary measures on Canadian dealer price invoice and the MSRP. dealers who sold exporting customers. When Canadian cars Defendants5 were take the discovered in position that the States, the United practices automakers business would im- described above amount pose “chargeback,” a to vertical monetary penalty restraints between manufactur- sometimes amounting to of ers thousands dol- and their dealers do that not violate lars, on the Canadian dealer who the sold the antitrust Plaintiffs, laws. however, al- car; manufacturers threatened to lege withhold that defendants violated section 1 of inventory of desirable models from offend- the Sherman byAct conspiring to coordi- 4. distinguish Plaintiffs Canada, between Ltd., list and effec- of Co., Honda Motor Honda tive dealer prices. invoice Canada, list dealer Inc., America, Inc., Nissan North price invoice annually determined for the LLC, Chrysler Chrysler LLC, Chrysler Motors national market the manufacturers. Effec- Inc., USA, Canada and Mercedes-Benz LLC. tive prices dealer invoice reflect dealer or addition, plaintiffs the named two automo- regions-specific provided by incentives the associations, bile dealers’ the domestic Na- manufacturers. Similarly, the effective tional Automobile Dealers Association MSRP takes into account direct manufactur- ("NADA”) and the Canadian Automobile incentives, er-to-consumer such as cash back ("CADA”). Dealers Association Two auto- offers. This distinction is plaintiffs' crucial to makers originally named as defendants are no theory of impact. antitrust longer in the case: Toyota Motor Sales U.S.A., appeal Defendants on include Inc. Ford Motor entered into a agree- settlement Company, Canada, Ford Company plaintiffs, of ment with plaintiffs and voluntarily Ltd., General Corp., Motors General Motors America, dismissed BMW of North LLC. prices purchase higher in resulted pricing practices business anti-export their nate consumers. by individual paid in- response in industry the across after arbitrage opportunities creased dis- the' in proceedings Throughout accom- defendants that allege Plaintiffs any have denied court, the defendants trict over conspiracy illegal plished argued also They have conspiracy. through meetings and several course existed, it would conspiracy if such even other and practices of best dissemination in market domestic impacted not have associa- dealer through the information entirely the effects due to any case agreements horizontal illegal These tions. have Defendants vertical restraints.6 legal the effectiveness enhanced allegedly the- contrary plaintiffs’ argued also According restraints. vertical legal extant flood been no have would there ory, illegal for” theory, “but given States United into the cars Canadian suppression its and conspiracy horizontal Canada, in cars sold newof number con- American competition, inter-brand and arbitrage, opportunities limited and prices lower paid have sumers gray spottiness size small injury. antitrust-type suffered thus have if even assert Defendants market. allege example, For on MSRPs there had minivan LX 2002 Windstar Ford’s mar- American prices invoice dealer (USD) in Canada $16,448 MSRP im- widespread no ket, was there States —a (USD) United $22,340 no have consumers, pact for a MSRP 26%. difference or causation either theory to show viable in Canada lower 13% was SC430 Lexus plaintiff the to apply would that damages claim Plaintiffs States. in the United than classes. to conspired not had car-makers if the that Cana- exporting from arbitrageurs impede II. States, manu- the United to the cars dian pricing these not maintain could facturers Injunctive Nationwide Relief forced have been would instead gaps Class Plaintiff across lowering prices compete to certification challenge the States. Defendants United plain- basis on the class injunctive anti- theory of summarize, plaintiffs’ To injunctive to sue standing lack tiffs In stages. two operates trust laws. antitrust federal under relief conspiracy horizontal stage, first consider- a threshold standing is Because ar- to maintain manufacturers allowed render may which ation, the resolution deal- MSRPs national tificially inflated irrelevant, we dis- arguments subsequent States. United within prices invoice er Seldin, 422 U.S. v. Warth it first.7 cuss official higher stage, the second way, Either argument. issue, in oral issue decided has not court district compliance about vigilant be must courts it would inquiry that deeming merits it a regardless standing requirements certification at the resolve to premature Calderón, Pagán v. V, argue, see 131 n. parties at F.R.D. what the stage. Motor Cir.2006), must (1st F.3d cycle of entire life throughout the so remain cannot defendants object Plaintiffs Hovenkamp, & Areeda generally II See case. 23(b)(2) Rule challenge to the standing raise a ed.2000). (2d 335b, ¶ Law Antitrust present they failed appeal because class on waived. been not has issue their For court. to the argument raised previously claim defendants part, 490, 498-99, 95 S.Ct. 45 L.Ed.2d 343 status. IV, Motor Vehicles 2006 WL (1975). 623591, at *1-2. Plaintiffs injunctive seek federal relief 10, 2006, On March the district court pursuant to section Clayton 16 of the Act issued an order certifying a nationwide behalf a nationwide under Rule injunctive 23(b)(2).8 class under Rule 23(b)(2) for alleged violations of section so, *1. In doing the court noted that a of the Sherman Act. Section 16 makes injunction national was only relief injunctive available “against relief threat- available to members the proposed class ened loss or damage by a violation of the who reside in twenty-seven states because 26; laws.” 15 U.S.C. see also had previously dismissed pro- Inc. Cargill, Colo., Inc., 479 Monfort of posed nationwide class for damages under 104, 110-11, U.S. S.Ct. 93 L.Ed.2d the federal antitrust laws as well as state- (1986). Plaintiffs allege injunctive law claims for all but twenty- is necessary relief because conspiracy three states and the District of Columbia. is ongoing and will continue unless en- Id. at *7. has, The district court with the joined by the court. agreement parties, stayed determi- Specifically, plaintiffs seek injunction nation of class notice issues pending this require defendants to honor appeal. warranties in the United States on all new motor sold Canada; vehicles enjoin the The district court addressed the scope defendants from blacklisting Canadian ex- standing injunctive seek relief under porters; enjoin the defendants from ex- section 16 Clayton Act in the course changing certain information with each of analyzing the typicality requirement of other, including blacklists and methods for 23(a)(3). Rule IV, Motor Vehicles avoiding export sales; enjoin chargebacks WL 623591, at *3-4. Defendants ar- had dealers; Canadian enjoin the tracking gued that some named did of Canadian cars’ Vehicle Identification standing have injunction sue for an be- (“VINs”); Numbers enjoin American man- cause not all plaintiffs named actually paid ufacturers from penalizing American deal- an overcharge due the alleged to conspira- ers for buying or selling Canadian vehi- cy, and actually paid less because of cles; enjoin the Canadian Automobile it. Id. at *3. Dealers’ (“CADA”) Association and the National Automobile Dealers’ correctly Association court held that a plaintiff (“NADA”) from discouraging acting seeking or to relief under section 16 need not prevent exports; Canadian enjoin the show actual antitrust damages but only a defendants from withholding safety recall “threatened loss or damage.” 15 U.S.C. information based aon vehicle’s export 26; § see Cargill, also 479 at 111, U.S. 107 8. The court injunctive found the relief class the class a 23(b)(2). as whole.” Fed.R.Civ.P. requirements met the 23(a) of Rule —numer The court held that the defendants fall within osity, commonality, typicality, adequa language the 23(b)(2) of Rule because cy requirements turned to the of Rule —then had acted or refused grounds to act gener on 23(b)(2). 23(a); Fed.R.Civ.P. Motor Vehicles ally applicable to the class. Motor Vehicles IV, 623591, 2006 WL 23(b)(2) at *2-6. Rule IV, 623591, 2006 WL at *1. The court further allows for class actions party op when "the held proposed that the the satisfied posing the class has acted or refused to act on requirement rule's injunctive that relief be grounds apply class, that generally to the so "appropriate ... respect to the class as a injunctive that final relief or corresponding whole.” Id. at *7-10. declaratory appropriate relief is respecting

13 the de rejected court The district Health Physicians 484; State Ocean S.Ct. reasoning argument, standing fendants’ Blue Shield & Cross Plan, Blue v. Inc. plaintiffs the named not or Cir.1989). that (1st 1101, 1106 R.I., F.2d 883 “[t]hey con overcharge, an actual suffered requirements that means in turn This or loss a threatened confronted or front are less relief injunctive for standing on restrictions from resulting damage 4 of section under than those stringent laws ... [that] competition standing 15, for § Act, U.S.C. 15 Clayton *4. The Id. at prevent.” to designed Petrolera Cia damages claims. pursue to propositions on two relied court Inc., Caribbean, 754 Arco Caribe, v. Inc. First, question. into called are now that Cir.1985) (“Congress (1st 404, 407-08 F.2d exchange “whether that court reasoned to range a broader empowered the class [within periods during some rates standards because actions § 16 bring cars Canadian made temporarily period] than those exacting less be met to price not therefore expensive more need 16, plaintiff a § 4; under under standing of affect not does competitive, an than rather injury threat a only show injunction an seek to these injury.”). accrued conspira a of such continuation against 9 added). Second, the (emphasis Id. cy.” sig “a must demonstrate Plaintiffs years now two opinion an noted impending injury from threat nificant ex no indication is “[t]here old viola contemporary from ... or violation opportunities arbitrage change-related Mid- recur.” or continue likely ended.” permanently have Group, Cont’l v.Co. Prods. Paper West Cir.1979) (3rd appeal, out on 573, point defendants Inc., As the F.2d from Article Corp. v. Hazeltine emanates standing issue Radio Zenith (quoting live remain a 89 S.Ct. that there Inc., requirement Research, 395 U.S. Ill’s course (internal throughout (1969)) quo controversy or case L.Ed.2d Zwickler, 394 in v. omitted). Golden threatened litigation. aof marks tation L.Ed.2d 108-09, plain S.Ct. injury for which be an U.S. jury must fails plaintiff (1969). if a named If compensation entitled tiff controversy, continuing Cargill, such actually occurred. establish injury power invoke may no normally There she 110-13, 107 S.Ct. U.S. own her relief seek alleged courts injuries federal types doubt a puta- members of other artificially inflat or behalf paying here —consumers Littleton, U.S. O’Shea class. violations—are tive to antitrust due prices ed 674 669, L.Ed.2d 38 494, S.Ct. 488, v. Sonotone Reiter injuries. antitrust Iowa, 419 U.S. Sosna 2326, (1974); see also 339, 330, S.Ct. U.S. Corp., 442 553, 42 L.Ed.2d 402, S.Ct. 393, Vehi (1979); Motor see also L.Ed.2d a named only not (“There must (1975) (“Higher 623591, at *3 IV, 2006 WL cles controversy or a case has ... who plaintiff anti resulting from consumers for prices filed, at and complaint time the injuries.”). antitrust violations trust higher from actually protected cars rose po- defendants’ court noted 9. The district expert conceded prices. Plaintiffs' export domestic complained-of because sition that two-way restrictions flow the defendants’ to restrict operated restrictions in such as vice consumers as well American protect Canada cars into could American IV, WL United versa, buying cars consumers scenario. the value 623591, when during periods n. 23. at *3 States Canadian prices of dollar Canadian the time the class action by 101-02, is certified 103 S.Ct. 75 L.Ed.2d 675 District Court ... but there must be a (1983)). live controversy at the time this Court reviews Plaintiffs have failed to establish case.”)- Under circumstances, certain continuing presence requisite a court may find that the requisite contro- threatened injury. “perfect storm”

versy exists “between a named defendant that allegedly precipitated massive arbi- and a member of represented the class trage opportunities selling for Canadian the named plaintiff, even though the claim cars in the United States long ago. ceased plaintiff named has become moot” theory Plaintiffs’ due plaintiffs pos- to that violation individual circum- its that Sosna, exceptional stances. arbitrage opportunities 419 U.S. at 95 S.Ct. arose early this decade due to a combi- nation of relaxed trade restrictions be- The defendants contend that even if the tween the United Canada, States and plaintiffs named standing had to seek in- physical harmonization of cars manufac- junctive relief at some time past, in the markets, tured for the two differen- circumstances have changed such that tial between the values of American and there longer is no a live controversy be- Canadian currencies. The last factor has tween named and the defendants varied since the beginning of the class bolster standing to seek in- period, themselves measure junctive relief. agree. We windows of actual arbitrage opportunity in Section 16’s requirement of “threatened large part according to undulations in ex- injury,” 15 U.S.C. dovetails with Ar- change rates. ticle Ill’s requirement in order to After the district obtain the in- relief, certified forward-looking a plaintiff junctive class, must it face a parties threat of ordered the injury that is both “ immediate,’ ‘real make ‘conjectural’ submissions regarding proposed or end ” ‘hypothetical.’ O’Shea, dates for the damages U.S. at classes. Plaintiffs’ 94 S.Ct. Golden, 669 (quoting expert 394 U.S. at submitted an affidavit indicating 956). 109-10, 89 S.Ct. “Past exposure to that arbitrage opportunities for Canadian illegal conduct not in does itself show a significant cars enough United present case or controversy regarding in- prices States for new vehicles ended in junctive ... relief unaccompanied if by any May 2003. The district court accordingly continuing, present adverse effects.” Id. adopted April 2003 as the endpoint 495-96, 89 S.Ct. 956. state classes. Motor Vehicles VI, 241 F.R.D. at 79. Plaintiffs have not As with the other elements standing, any made effort since district court’s it who, is plaintiffs by invoking federal ruling to demonstrate whether or when jurisdiction, bear the burden of establish prevailing primarily, exchange ing presence of a of injury. threat conditions— rates between Canada and the United Ctr., McInnis-Misenor v. Me. Med. (1st might 63, Cir.2003) reasonably F.3d expected Bennett (citing v. States — once Spear, again to 154, 167-68, U.S. those during resemble the S.Ct. 1154, period. (1997)). This good reason, L.Ed.2d 281 is for “There as must be some immediacy the of or value the imminence to United States dollar rela- the threatened injury.” Id. at 68 tive to (citing the Canadian dollar years in the City Angeles Los Lyons, 95, 461 U.S. 1998-2003 hit an apex unseen in of at least nature speculative the underscores nearly five century.10 In the last half the injury. future hypothetical 2003, at which plaintiffs’ the time April since years the dam- injury to actual concede plaintiffs Medical v. Maine In McInnis-Misenor has exchange rate abated, the classes ages the Center, inquired whether this court In dollar.11 of the Canadian in fallen favor immi or “immedia[te] faced an plaintiff case, that alone of the circumstances support injury that threat of nen[t]” threat. current any realistic eliminates F.3d at 68. court. 319 in federal standing that claim nature speculative The lacking where standing that was We held day create addi- one could rates exchange was plaintiff to the injury any possible is reinforced opportunities arbitrage tional may which events “contingent on several in the inherent contingency by a second Here, at 72. happen.” not may or future theory of threatened plaintiffs’ any that named suggest nothing to there is injury to antitrust order for harm. intention an “imminent” harbors plaintiff member, also in- she must a class befall anoth car coincidence buy a new to at a time when car a new purchase to tend arbitrage-friendly of “perfect storm” er exploi- for ripe opportunities arbitrage conditions. in- market certified The tation. ... persons as “[a]ll defined

junctive class the contro- to revive attempt Plaintiffs intended or or leased purchased who that defendants’ by arguing versy vehicle new motor or lease purchase sales cross-border to hinder conspiracy from a Unit- by a defendant manufactured true, the ar- if this were Even ongoing. from period during dealer ed States the rele- point ignores gument 10, 2006.” The 2001, to March January suffer is whether question vant who thirty-six individuals names complaint stemming from injury threat realistic the United cars in leased new bought or an- An violations. alleged those Nowhere, period. during States standing are distinct and violation titrust any make al- however, complaint does necessary prerequisites independently in- a named regarding legation injunctive by the sought relief for the new vehicle another buy or lease tention to An- Hovenkamp, II Areeda & class. See as could be frame a time such within (2d ed.2000); ¶ 335f, at 297 Law titrust the in- cf. fact that imminent. deemed Co., F.3d P.R., v. P.R. Tel. Inc. SAS peri- ato restricted has been junctive class Cir.1995). (1st 39, 43 early 2006 covering 2001 to of time od alleged during which period undisputed judicial notice these We take opportunities occurred. arbitrage it present, has facts. Between $1.40 Cana- $0.96 and generally cost between was (“CAD") April United purchase exchange one rate on dian dollar USD, publica- ("USD”). During period, as $1.00 CAD to $1.43 States dollar exchange significantly rate has opinion, the exchange has risen of this rate Instead, rela- only level. once for $1.00 USD returned to once $1.40 CADto above has been domestic dollar between value of the This occurred tive length of time. any September steady On decline. the rate less when or more years 1998 and dollar Canadian value of the CAD $1.61 $1.40 ranged between dollar. As States the United surpassed Statistics $1.00 5E Historical USD. 1, 2008, exchange was rate (S. February et al. Carter to 5-574 5-572 United States Reserve Federal $1.00 USD. CAD eds., 2006); $0.90 Statistical Re- Reserve Federal Cana- for Rates Canada, Historical Release: http:// Statistical da, Historical Rates lease: http://www.federalreserve.gOv/releases/h www.federalreserve.gov/releases/h 10/hisl/dat 10/hist/dat00_ca.htm. 00_ca.htm. corresponds with This deviation 23(b)(2) The Rule class is vacated for F.Supp.2d 126.14 Whether diversity lack of a live controversy between basis is sound has not been tested. parties such as justify would an injunctive At argument, oral point- defendants remedy. injunctive The relief claim is dis- ed out that proceeding on the basis of missed. diversity jurisdiction require analy-

sis of each individual state-based class. Defendants also conceded that diversity III. provide could an independent basis for fed- Jurisdiction over Remaining jurisdiction eral for at least some of the Classes state-law damages classes. The district

Plaintiff court has not had the opportunity to assess The injunctive claim for relief under the whether each state class satisfies the re- Clayton provided Act jurisdic- federal quirements §of 1332 and may do so on tional spine of this case. That basis for remand. federal jurisdiction is gone, now and the The district may, court in the alterna question jurisdiction of federal over the tive, consider whether to exercise its dis damages state-law presents claims itself. cretion to continue exerting supplemental may It be that the district court could jurisdiction, see § 28 U.S.C. over the jurisdiction retain over the damages state damages state claims. See Rodríguez v. claims theories, on either of two but we Mortgage Doral Corp., leave it to the district court to decide on (1st Cir.1995) (“In an appropriate situa remand jurisdiction.12 whether there is tion, a federal court may [supple retain parties and the district court have jurisdiction mental] over state-law claims referred diversity, see 28 U.S.C. notwithstanding early demise of all 1332,13 § aas basis for maintaining the claims.”). foundational federal In weigh damages state classes in federal court. To ing this option, the district court should this point in the proceedings, however, the consider totality “the of the attendant cir state claims have analyzed been cumstances,” including considerations of as within the court’s supplemental jurisdic- judicial economy, fairness parties, to the tion based on presence of the federal and the nature applicable state law. See, claim. e.g., II, Motor Vehicles 335 Id. Although challenge defendants plain- menced on or after the date of enactment of standing tiffs' class, injunctive maintain the Act.”). neither side addressed to this any court jurisdictional might issues that arise in the September 14.In its addressing order event that we injunctive vacated the federal supplemental jurisdiction over the state-law class. purport We do not to raise an exhaus- claims, the district court in addition asserted tive questions checklist of to address on re- pendent personal jurisdiction over certain Ca- mand, but advert to some salient issues. nadian defendants based personal ju- on the risdiction created federal antitrust The Class Action Fairness Act of 2005 II, claim. Motor ("CAFA"), 109-2, F.Supp.2d Pub.L. 119 Stat. at 4 128; see also In re (amending 1332) New Motor § 28 U.S.C. Vehicles Cana- was enacted Export dian complaints Litig., after the Antitrust F.Supp.2d this action filed. (D.Me.2004) diversity jurisdiction existence of 147-48 (finding personal ju- must therefore, express under the risdiction over defendants). terms of the certain Canadian CAFA, be determined pre-CAFA under the To the extent that the district relied diversity statute. See CAFA claim, Stat. existence of the personal federal ("[CAFA] apply any shall civil jurisdiction may action com- yet be an issue on remand.

17 require legal the meets class proposed is some there assumption theOn F.3d 208 certification, Mowbray, for ments least at over jurisdiction for federal basis to power short, has the “a court In 298. at claims, turn we class remaining state some certification the premises [at disputed test damages the state of certification to the the class action if when stage] and classes. not another.” but premise on one proper be Here, the 4-5. at F.3d rdiff, 365 Ta IV. steps of as to both challenged are premises Class Review Standards of of theory. Decisions Certification function predictive performing rul certification class review We discretion, its broad “[e]xercising in classes, for including those ings, the must evaluate court the district ... 208 Mowbray, discretion. of abuse for critically without ... evidence has teeth: standard This 295. at F.3d class- the turn to defendant allowing the court, mak- a when unwieldy occurs An abuse into an proceeding certification an upon ruling, relies discretionary 432 a ing PolyMedica, merits.” on trial aof factor, consideration omits However, improper as we both at 17. F.3d or weight, to substantial entitled emphasized, factor have courts circuit other but of factors mix correct plaintiff certify a mulls to whether weighing in as- judgment error clear some overlap with makes inevitably may class of discretion An abuse them. saying merits regarding assessment critical incor- an adopts if court occurs the Univ. also See, Regents e.g., case. (USA), rule. legal rect Boston First Suisse v. Credit Cal. Cir.2007), cert. (5th 372, 380 Furthermore, Inc., F.3d omitted). 482 (citation — 1120, 169 U.S.-, 128 S.Ct. denied, pure pose “can appeal certification contrary (2008). It would Tardijf, 957 L.Ed.2d de novo” reviewed of law issues prerequi- analysis “rigorous to questions of mixed at Review F.3d 365 certify- Rule 23 before established sites from non-deferential varies fact of law toas on blinders put to a class” ing defer issues law-dominated for review mer- implicates it because simply issue fact-dominat review clear-error ential Bell Mobile v. Sw. the case. Smilow Sec. its Carp. PolyMedica In re ones. ed Cir.2003). (1st 32, 38 (1st Inc., F.3d 323 Sys., 4 F.3d (PolyMedica), Litig. 23(f) necessar- appeal aof Rule Regu review Our Cir.2005) v. Watts (citing Johnson -thé the merits (1st [of] “review ily Cir. includes Co., F.3d lator as liability insofar theory of court’s district 1995)). relevant issues also concern our scope of Intertwined Suisse, F.3d Credit certification.” far of how question is the appeal review legal testing ingo should court a district certifica the class premises factual V. dis premises such stage. When behind may “probe court Damages Classes puted, State Falcon, v. Sw. Tel. Co. Gen. pleadings,” History Procedural A. 2364, 72 S.Ct. U.S. Illinois, 431 Brick Illinois Applying (1982), “formulate L.Ed.2d L.Ed.2d 720, 97 S.Ct. will U.S. issues specific how as to prediction dismissed (1977), assess out” order play plaintiffs’ federal damages 2003, claims and certifying fifteen additional state in March 2004 plaintiffs because were indi- damages classes for a total of twenty. rect purchasers. I, Motor Vehicles VI, 307 Motor 79, Vehicles F.R.D. at 84. F.Supp.2d at 137. Illinois Brick embodies 15, 2007, On June the court issued an policy a judgment that the reach of dam- order and explanatory memorandum under ages for federal antitrust violations 23(c)(1)(B) does Rule defining the class and not extend to purchasers, indirect even if claims, issues, class and defenses. Motor they have suffered in fact. VII, 17; Vehicles 243 F.R.D. Motor Vehi- ¶ II See Hovenkamp, 395, Areeda & supra, VIII, cles 243 F.R.D. 20. at 554-55. 1. Requirements After dismissal Class damages federal for Certifica-

claim, plaintiffs filed a second amended complaint which added damages un- claims certify To damages statewide der common and statutory law fifty for all classes, the district court had to evaluate states and the District of Columbia. Mo- whether the four requirements threshold III, tor Vehicles F.Supp.2d 168, 23(a) of Rule met, as well as whether After considering each disputed for state15 23(b)(3)’s Rule two prerequisites additional whether plaintiffs pled had facts sufficient Amchem, were satisfied. 614, 521 U.S. at state claim laws, under that state’s 2231; Smilow, 117 S.Ct. 323 F.3d at 38. district court dismissed state law dam- 23(a) (1) Rule requires that there be nu- ages claims for all but twenty-three states (2) merosity, there common questions be and the District of Columbia. Id. at 168. (3) fact, law or representative’s the class propriety of that dismissal is not now class, (4) claims typical be before us. This appeal is from three or- representative’s representation of the class certify ders did state damages classes. adequate. 23(a). Fed.R.Civ.P. To cer- discovery

Before was completed, tify 23(b)(3), class under Rule a judge 29, July 2005, moved on certify must further find “that the questions of six exemplar classes state law or fact common to class pre- members 12, claims.16 May On the court pre any dominate over questions affecting only liminarily certified five of the six exemplar individual (“predominance”), members” state damages 23(b)(3) classes under Rule and that “a class superior action is to other asked additional regard materials available fairly methods for and efficiently ing the date on which the period adjudicating controversy” (“superiori- should IV, end. Motor ty”). Vehicles 23(b)(3). Fed.R.CivJP. In classes F.R.D. at 129.17 21, 2007, On March 23(b)(3), certified under Rule the Rules court issued a supplemental order conclud “invite[ ] a close look at the case before it ing that period for the state accepted is Amchem, as a class action.” damages claims should end April 521 U.S. at 117 S.Ct. 2231 (quoting B. 15. The defendants not did move California, to dismiss all Mexico, defendants chose New claims, state consented and Tennessee. to the dismissal of some of the state claims. III, F.Supp.2d 17.The Kansas class was not certified because plaintiffs conceded representa- that the class 16. requested, had in a tive injured had in fact been the al- order, March desig- side each leged conspiracy and thus standing. lacked exemplar nate three The plaintiffs states. se- V, Motor Vehicles F.R.D. at 131. Maine, Kansas, Vermont, lected and the predominance typical, but injury not the Civil Continuing Work Kaplan, affected.”); see also Fed- also assessment Amendments Committee: (I), 18, Amchem, Harv. n. 117 S.Ct. 81 at 623 Procedure 521 U.S. Civil Rules eral of (1967)). 356, are sim- typicality 390 and (predominance L.Rev. 2231 & H.B. 6 A. Conte respects); in ilar some numerosity was not that held The court Actions Newberg on Class Newberg, estab- adequacy was disputed and ed.2002). (4th ques- 18:8, 24 2 § at n. V, at F.R.D. 235 Vehicles lished. Motor (anti- impact a of common tions this case concluded 130, also 141. It causation) of proof method common superior and trust-type far the bywas action dispute The real at 148. all three criteria. Id. relevant to proceeding. damages evidence common whether around revolved 23(a)’s commonality of requirement Rule impact of prove be used could bar, generally courts have a and low consumers on U.S. conspiracy alleged 7A application.” “permissive it a given resulting dam- (“common any and impact”) Miller, R. Wright, Arthur Alan Charles at (“common damages”). Id. proof of ages Kane, Practice and Federal Kay Mary yet not it did 129, The court noted 132.18 ed.2005). (3d 1763, § at 221 Procedure determine enough evidence have trouble not have court did The district plaintiff of whether question merits commonality in this case. finding sufficient con- or antitrust actually suffered classes ques- to the common pointed The court repeatedly It injury. protection sumer if conspiracy; a there was tions whether question of address it would emphasized invoice either dealer example, so, at it affected record —for proper a later on 136, 131, MSRPs; there was 139. and whether at or prices summary judgment.19 or consumer antitrust of state any violation noted, there is the district As V, 235 Motor Vehicles laws. protection crite- among the certification overlap & New- 130; 6 Conte also F.R.D. at see 23(a)(2), typicali- commonality, Rule ria of 18:5, (gathering 14 n. 3 at & supra, berg, 23(a)(3), Rule predominance, Rule ty, “allegations concern- that hold that cases (“[I]f of 23(b)(3). proof n. 4 Id. at 130 efficacy an existence, of scope, and ing the class, common across impact is not ade- present questions conspiracy alleged plaintiffs’ claim the named only is then not viola- claim, the antitrust link causal between is the an antitrust 18. To establish sought by plaintiffs. damages (1) tion and a violation of prove typically must Sullivan, requires It at 1103. thus laws, (2) 34 F.3d as injury suffered an antitrust violation, (3) showing that injury-in-fact and an estimated of both result activity. antitrust v. Nat'l Foot damages. injury Sullivan is the result measure (1st Servs., Edwards Cir. v. Inc. A.G. League, 34 F.3d & Co. Fin. ball Cordes Cir.2007). (2d appropriate, Sons, Inc., 1994). to be For a class action & F.3d that common "plaintiffs to demonstrate need 21, 2007 its in March of a court reiterated the existence prevail [both] as issues deter- "make a injury.” v. Blades that it would the fact order conspiracy final (8th impact Co., antitrust Cir. the existence 400 F.3d mination Monsanto 2005). stage.” are established two elements certification If at the these added). VI, (emphasis proof, the measure by common 241 F.R.D. proof, halting as Cana- illegal agreement left to individual can sometimes "Whether threat) pro- (or removing below. we discuss their imports further dian purchase or retail antitrust causation duced con- injury The element proven at trial or to be price remains "impact” or "fact referred to as text is often Id. at summary judgment.” Co., Body demonstrated Bird damage.” Alabama Blue Cir.1978). (5th It 82 n. & n. quately common to class members to satis- prices voice most, and MSRPs for if not fy the commonality requirement”). all, of their vehicles.” Expert Report of ¶ Hall, Robert E. Ph.D. 51. Even though predominance “[T]he criterion is retail sales of cars are individually negoti- far however, more demanding,” than the ated, Professor Hall opined that class commonality Amchem, requirement. members would experienced have common U.S. at 117 S.Ct. 2231. Under the impact from changed MSRPs deal- predominance inquiry, “a district court prices er invoice a change because in these must formulate prediction as to how prices would shift the entire negotiating specific will play issues out in order to (or range, benefiting harming) essentially determine whether common or individual all consumers. predominate issues given case.” Professor initially Hall proposed two Mowbray, F.3d at 298. In antitrust approaches different to establishing com- actions, common issues do not pre mon of damages evidence to class mem- dominate if fact of antitrust violation bers. The approach first rely would be to and the fact impact of antitrust cannot be (“Nash on statistical models equilibri- through established proof. common See ums”) used in the auto industry predict to Co., Blades v. Monsanto market (8th outcomes. Under Cir.2005). his second ap- The district court did not proach, method, a benchmark the U.S.- predominance find typicality and easily as Canadian market would be evaluated established commonality. as The court against a comparable market affected analyze chose to under the heading of typi by challenged conduct. Both cality ap- whether were asserting proaches, asserted, Hall Professor would sufficiently proof common of impact, Motor account for “heterogeneity vehicles, across V, 130-40, F.R.D. and it dealers, consumers, time, and they [and] considered under the heading predomi of can be used identify peri- cars or time nance any resulting damages ods for which there are no damages.” Id. likewise established sufficient ¶ 62. Hall Professor also asserted that ly proof, common id. at 142-45. In consid data existed that would allow him to im- issues, eration of these the district court plement models, these though the most relied on the submissions the parties’ of detailed data were in the hands of defen- experts.

dants. Expert Submissions Witnesses expert, defense Joseph Professor P. Plaintiffs primarily relied on their ex- Kalt of University, Harvard filed his ex- pert Professor Robert E. pert Hall Stanford report September 30, on 2005. Even University Institute, who, and Hoover assuming a conspiracy, disputed he that along with the expert, defense assumed there was any common on either that allegations conspiracy the national prices manufacturer-to-dealer were true. July In his report, Pro- or the individual dealer-to-consumer sales. fessor Hall noted that collectively the de- His critique focused on a description of the fendants’ sales accounted for 89% of the actual gray market for Canadian vehicles U.S. market and 84% of the Canadian States, the United which he asserted market. He concluded that “if defendants spotty, erratic, was and too insignificant to were impose unable export restraints or affect market, the national even absent were less them, effective in imposing any activity. collusive He also criticized would [have] lower[ed] U.S. in- [dealer] Professor Hall for not distinguishing be- He constraints. horizontal alleged and manufacturers’ effects tween preliminary he had offered that stated those restraints vertical legal deposition his formulas mathematical As dam- conspiracy. horizontal alleged approach viability of both any were there establish disputed he ages, damages proposed of his approach asserted proof methods common preliminary model, he included approach suggested Hall’s Professor report. rebuttal in his just model damages was equilibriums Nash employing his view asserted again of Jo- Hall Report Expert Professor phrase.” empty “an evi- common on based methods Kalt, there Ph.D. 63-64. P. seph model he dence, econometric as the such critique, Kalt’s Professor reply to for the account could proposing, was report a rebuttal submitted Hall Professor in which dimensions “major issue He took December mem- among potential vary might regarding conclusions Kalt’s Professor ¶ 50. bers.” and, regression applying market20 gray arbi- on data Kalt’s to Professor analysis and Predominance Typicality 3. con- activity, export and trage opportunity [between price gap larger “a pre- that cluded evidence, the district On this is prices] car States and United exemplar state Canadian five certified liminarily and activity export greater with presen- associated that the held The court classes. of result the is not relationship by Hall, supported by Professor tation Robert Report of Rebuttal studies, for randomness.” sufficed economic extrinsic ¶25. re- his Specifically, Hall, Ph.D. im- E. of proof showing common purposes in- $1,000 that “a suggested “unexceptiona- gressions found The court pact.21 given model for a price gap in crease the other theory that plaintiffs’ the ble” an associated is, average, on car] [of the a equal, restriction being things percent.” at least exports in coming increase into cars lower-priced supply mar- gray in ¶ increase minor 24. The an Id. will exert market States United the the con- despite 2001-2002 sales prices. ket car on domestic pressure upward opportunities, arbitrage greater 137. ceded at V, F.R.D. Vehicles Motor conspir- of a lack the then, indicate did not to the both apply will pressure This one. an effective suggested rather acy, but and to manufacturers pay dealers prices deal- consumers paid prices equi- that a Nash argued Hall Professor may negotiations individual While ers. the effects distinguish could model librium starting price, the final any determine those from restraints of unilateral MSRP, negotiations most for point suggest- he also and conspiracy, horizontal con- for most price purchase final and the reduce discovery might further ed invoice dealer is between sumers evi- direct by yielding modeling need effect, Id. and MSRP. price of the unilateral effectiveness on the dence study Hall cited example, Professor For the contours described Kalt had 20. Professor pass on to con- tend showing that dealers 2001, 2000, gray market in given pricing incentives at least some sumers gray market argued that the Hall Professor V, 235 by manufacturers. impact of reflect the al., $1000 et Busse (citing M. at 137 F.R.D. conspiracy and alleged horizontal in Auto Asymmetric Cash Back: Information were arbitrage opportunities relevant (Nat'l Bureau of Promotions Manufacturer present in 2000. Paper Series No. Working Econ. Res. 2004)). negotiating overall range would be elevat- impact establish or causation. Motor Ve ed, resulting V, in higher consumer prices hicles F.R.D. 132. The district across the board. 138-39. The court turned to superior Maine court deci court accepted sions, some of these contentions which the court summarized as hold adequate as to demonstrate ing that “indirect purchasers in Maine plaintiffs’ named typical claims would be produce must specific proof that paid class, although the court was higher prices care- as result of the conspiracy (in ful to note that it was not then deciding the face possibility that all such proof of impact was increases were absorbed at the retailer level).” sufficient to withstand a 134; (“Because motion for sum- Id. at see also id. mary judgment. Id. at 139. purchasers indirect must demonstrate that overcharges passed them, have been on to The court was also careful to note that such present claims entirely separate proffered proof impact common level of evidence proof than that found might insufficient under some states’ in a purchaser direct claim.” Mel (quoting Id. at laws. 132. The sponte court sua nick v. Corp., CV-99-709, Nos. Microsoft examined the laws of five of the exemplar CV-99-752, 2001 WL at *6 states determine what level of proof of 2001))). (Me.Super.Ct. Aug. Likewise, consumer each required state the Maine protection statute, consumer what inferences acceptable to show Me.Rev.Stat. §§ Ann. tit. 205-A to impact.22 court concluded that there purchasers allows indirect recover, to but range. California, end, awas at per one injury presumed. V, is not Motor Vehicles mitted “an inference impact, of antitrust 235 F.R.D. at (citing State v. Wein even as to purchasers, indirect from the schenk, (Me.2005)). 868 A.2d 200 of conspiracy.”23 135; existence Id. at (“In see also id. context, the consumer at The court also discussed the that states a portion of illegal least overcharge by fell poles. between those two New Mexi- a manufacturer will presumably passed co, be concluded, it seems to allow indirect by on independent distributors to con purchasers to establish impact antitrust sumer class members higher form of through correlation analysis. See at id. prices.” (quoting Global Minerals & Met 136. Tennessee and Vermont yet have not als Corp. Court, v. Superior 113 Cal. fully question. addressed the See id. The App.4th Cal.Rptr.3d 28, 44-45 court noted that in states like Maine where (2003)) (internal quotation marks omit the passing on of an antitrust or consumer ted)). protection injury to purchasers indirect presumed, cannot be plaintiffs might have Maine was at the other end spec- difficulty proving injury to individual con- trum, evidence, requiring inference, not of sumers if their proof common can establish impact. While the Maine antitrust statute only an injury. inference of See id. at 139. explicitly permits recovery for in- indirect jury, Me.Rev.Stat. § Ann. tit. Turning question to the predominance of Maine Law yet Court has not 23(b)(3), commented under Rule the court found there on purchasers what indirect must show to were at least five disputed common issues parties 22. The filed on briefs these issues of say Defendants rep- this is not an accurate state substantive law before the March law, resentation of press California but do not 2007 order. The parties’ court found that the point appeal. briefing did not change prior cause toit its views. not preclude does damages of ual amounts certification.24 class favor of weighing Smilow, at 323 F.3d certification. that class argued Defendants Id. at damages in consum- (“The of stages of individuation at both impact common lack of determinative rarely of common actions is the lack theory and er plaintiffs’ 23(b)(3).”); Alan 7B Charles predominance. Rule damages defeat under of proof Kane, Miller, Kay found Mary it had that R. Arthur Wright, court reiterated The impact prove varia- to Often those at 235. proposal plaintiffs’ supra, suffi- preliminarily proof according through common can be determined tions the existence out cient, pointed it calcu- formulaic or mathematical universal in fa- weighs issue disputed evidentiary a common of need lation, obviating the it. certification, against not vor of claim. Smi- individual on each hearings 4-5). at F.8d Tardiff, 365 (citing Id. at proposed 40. Plaintiffs low, com- proof plaintiffs’ adequacy Motor Vehi- here. approach use such even impact, mon V, 143-44. The 235 F.R.D. cles or consum- cognizable constitutes “not overwhelmed that it was noted court determi- “are merits injury, protection er calcula- damage offer plaintiffs’ by the [state] in each are common nations dam- models,” “conclude[d] but it tion Id at trial. resolved would be class” deny yet ground ages [were] ques- that the disagreed 144-^5; also id. see also Id. at certification.” pre- damages defeats individual prob- (specifying n. 63 at 145 First, questions. faced). common dominance damages models lems here, “[w]here, as noted the court raised district court Finally, regarding predominate questions common damages date for the end question pre- find the generally courts liability, then round Another at 140. classes. satisfied requirement dominance ensued, accompanied reports expert remain.” issues if individual even argu- same many repeating briefing Smilow, at F.3d 323 (quoting 143 Id. at the choice of court focused The ments. it would that Second, stated 40). the court order; 21, it 2007 its March date end certification the class at determine additional the defendants’ that commented proving method stage whether a class that its views not alter critiques did The at 144. adequate. damages was VI, Vehicles Motor be certified.25 should among are differences there that fact mere defendants’ Over at 80-82. 241 F.R.D. individ- their regarding of a members footnote, explained court district a were: issues 24. Those First complied it had it believed that agreement to (a) horizontal there a Was court the district requirement Circuit supply? restrict specific how as to prediction particular "formulate (b) under illegal itWas out,” Mowbray, F.3d at play will issues laws? state’s analysis” of agreement “rigorous have illegal (c) conduct ... Did the that it Smilow, criteria, at protection F.3d consumer or Rule prove propose to "early premises as the disputed state test the that it VI, Vehicle on,” it? at 4. Motor Tardiff, F.3d so, to con- impact sufficient (d) is that If court noted 81 n.7. F.R.D. particular state’s standing under fer particular level mandate did not PolyMedica laws? judge at fact-finding by the district its conspiracy and (e) long did How stage. Id. certification impact last? (footnote V, at 142 F.R.D. omitted). (2d Cir.2006) insistence that the (re court determine wheth- [hereinafter In re ] IPO “alleged er the conspiracy horizontal actu- quiring a “definitive assessment of Rule 23 ally impacted American car prices,” the requirements,” including the resolution of court refused to reexamine issue—as relevant factual Unger disputes); v. Amed well as the related of “what issue vertical Inc., (5th isys 401 F.3d 321-22 Cir. restraints the individual manufacturers 2005) (requiring courts to find facts favor maintained, legality their and their ef- ing class certification through the use of fect”—at that time. Id. at 80-82 & n. 5. “rigorous, though preliminary, standards 15, 2007, On June the court entered an proof’); Thornton, Gariety v. Grant order of compliance class certification in LLP, (4th Cir.2004) (re 368 F.3d 23(c)(1)(B). with Rule quiring that “the spelled factors out in Rule 23 ... be through addressed find B. Appeals Defendants’ from Certifica- ings”); Machs., Inc., Szabo v. Bridgeport the Damages Classes (7th Cir.2001) (re 675-76 In challenging the certification of the quiring legal “whatever factual and inqui classes, state damages primari defendants necessary ries are under Rule 23” to “re ly argue that did not disputes solve the before deciding whether engage in a sufficiently searching inquiry class”). certify These circuits’ use into the relevant merits issues. It is a “findings” term in this context question settled inquiry that some into the should not be confused with binding find merits at the class stage certification is not ings on the merits. judge’s consider only permissible but appropriate to the ation of merits at the issues class certifica extent that the overlap merits the Rule 23 tion stage pertains only to that stage; Falcon, criteria. 160, 102 U.S. S.Ct. factfinder, ultimate judge or jury, 2364; PolyMedica, 6; 432 F.3d at Mow must still reach its own determination on bray, 208 F.3d at 297-98. It is less settled IPO, these 39; issues. In re 471 F.3d at degree what inquiry merits is required Gariety, 368 F.3d at 366. at the class certification stage, and the Supreme yet Court has not addressed the On the other spectrum, end issue. Third and Eighth Circuits sometimes re- quire inquiry and preliminary into reso- Our sister agree circuits that when disputes, lution of but do require class criteria and overlap, merits the dis findings and do not hold that such inquiry trict court must conduct a searching inqui always will necessary. Blades, be ry regarding criteria, the Rule 23 but how F.3d at 575 (holding that sometimes they articulate necessary the degree of courts will required be to resolve factual inquiry ranges along spectrum a which disputes preliminarily at the class certifica- suggests substantial differences. The Sec stage caution); but voicing ond, Fourth, Newton Fifth, v. and Seventh Circuits Pierce, Lynch, Merrill Smith, coalesce Fenner & around the rigorous more end of Inc., (3d Cir.2001) (“A 259 F.3d spectrum, this forbidding district courts from class relying plaintiffs’ on certification requires decision a allegations of thor- sufficiently ough proof common examination of the factual requiring legal (“In the courts specific allegations.”); to make findings id. at 168 reviewing a each Rule 23 certification, criterion is met. motion for Miles v. a preliminary (In Lynch Merrill & inquiry Co. re Initial Pub. into the merits is sometimes neces- Offering Litig.), 24, 33, Sec. sary to determine alleged the make it will be a presumption to sure as a class properly resolved can be claims proof given in a case. action”). viable form PolyMedica companion In and its this both grappled with issue court has This (In case, re Xcel- that “a Stuebler Xcelera.Com in Smilow We have said as well. (1st Litig.), era.com Sec. 430 F.3d 503 rigorous must conduct district court court, Cir.2005), we, along with the district prerequisites, Rule 23’s analysis” of the evidence submitted rigorously “a district tested Mowbray in F.3d at to determine whether the both sides prediction as court must formulate out,” presumption was rea- F.3d fraud-on-the-market play specific how issues will sonably applicable, specifically whether the at 4-5 Tardiff, 365 F.3d at 298. See also be able to demonstrate presumption the common (noting that market was efficient. At the class “the com- that the litigation early stages of noted, plaintiffs we necessarily stage, certification control- allegations plaint’s facts” that present needed to “basic in class certification ling” apply does not could be presumption fraud-on-the-market machinery action because “class situations invoked, though applicabili- even its actual a court has and in our view expensive is PolyMedi- at trial. early ty was to be resolved disputed premises power to test ca, of the F.3d at 19. Our review action would be if and when the class another”). of whether district court’s determination premise but not on one proper presump- or not the fraud-on-the-market action, PolyMedica, In a securities was not on the tion could be invoked based to look the court “was entitled we said that expla- in district court’s level of detail in pleadings its evaluation” beyond the nation, sup- the evidence but on “whether gen- of class certification question both the apply pre- ports determination its fraud-on- applicability erally and Xcelera, 430 F.3d at 512. sumption.” even presumption specifically, the-market Xcelera, court ac- example, overlapped with though questions those testimony of two com- tively evaluated PolyMedica, 432 merits of the case. credited experts preliminarily peting pre- fraud-on-the-market at 6. The F.3d this expert, determination plaintiffs’ allows class actions sumption securities surveying expert upheld —after necessary ele- to establish re- testimony ourselves—on clear error proof. common through reliance ment of view. Id. 512-16. efficient, theory goes, market is If the read, and Xcelera could PolyMedica all incorporate publicly will prices market limiting as information, properly, think not including material but we available probe into that district courts requirement that an investor misrepresentations, so viability premises on the buys or sells stock reliance who only injury employing to cases theory in fact price market integrity of the this injury. Under legal presumptions in reliance on the buying selling or stock view, searching a in our approach, at 7- circuit’s See id. misrepresentations. material not there are is in order where long- inquiry would no common issues 8. Because facts, also a novel basic but only disputed in a class action predominate er securities Plain- injury. theory legally cognizable reli- if could not at trial establish without com- make their case tiffs cannot through proof the common ance causation, they only can proof mon courts presumption, fraud-on-the-market if means through common prove causation stage probe at the class certification viable; viability that theory novel is their factual basis of the fraud-on-the-market depends ability probe viability turn on their plaintiffs’ estab into through proffered theory lish—-whether mathematical mod and to formulate some els or further data or other predictions means—the key as to how issues this key logical steps theory. behind their complex develop novel and case would was theory Such reliance on a however, novel to estab hampered, by incomplete rec- primary lish a element of a claim necessi time, by ord at the as well as the fact that searching inquiry tates a more into plaintiffs’ yet had expert fully formu- whether will prove be able to aspects analysis. lated all of his The court pivotal theory elements of their at trial. pointed ruling out that it was on class especially This impli so when a case discovery certification before complet- was the sort of factors that we have cates ed and relying upon was 23(f) important deemed in the Rule calcu representation they fill in the lus, namely, granting when the of class gaps in their evidence with further discov- status “raises the stakes litigation so ery and further repeatedly work. It said substantially that likely the defendant will it willing that was to take another look at feel pressure irresistible to settle.” Mow questions these when the record was more bray, complete.26 We do not need to now resolve This court has had little occasion to dis “findings” regarding the class certification timing cuss the of the issuance of class necessary, criteria are ever we do but hold orders, certification much of damages less a requirement when Rule 23 relies on 23(b)(3). classes under Rule See Mow a complex theory injury, novel or as to as 23(c)(1)(A) bray, 208 F.3d at 299 n. 7. Rule predominance case, inquiry does in this says only that the court must act “at an engage the district court must in a search- 23(c)(1)(C) early practicable time.” Rule ing inquiry viability into theory of that provides also that a class certification or necessary the existence of the facts may der be altered or amended before theory to succeed. final judgment.27 A district court which

Contrary assertions, to defendants’ has taken an initial look at the merits is the district court did not believe itself lim not foreclosed from later entertaining, by ited Eisen v. Jacquelin, Carlisle & 417 post-discovery, summary judgment mo U.S. 94 S.Ct. 40 L.Ed.2d from defendants asserting plain (1974), Instead, inquiries. non-merits tiffs cannot requisite establish the anti attempted to meet obligations its protection trust and consumer PolyMedica, Mowbray, under through and our oth- common means. See 3 Conte & er rigorous cases to conduct a analysis 7:15, at Newberg, swpra, at 48-57. In stage. deed, certification See it is not uncommon to defer final V, 241 F.R.D. at ability 81 n. 7. The court’s decision on pending certifications comple- attempt prob- Defendants to answer advisory be conditional. The committee by saying lem these statements demonstrate explain inappropriate. class action vehicle is in fact 27. The 2003 amendments to Rule 23 deleted provision allowing to certifications theory 7:16, step plaintiffs’ The first of re- discovery. relevant tion of that the defendants’ quires demonstrating 57-59. result in an increase in dealer actions did on class certification the decision When in the prices invoice and MSRPs United discovery has full class made before is depends This in turn on at least States. here, necessarily it is completed, as been First, have two factors. there would had Eighth Circuit As predictive. more world, be, in this a flood of but-for noted, may require revis- decision has lower-priced Canadian cars significantly discovery. of full upon completion iting resale in the coming across the border for 567; Blades, Gariety, see also 400 F.3d during arbitrage times of United States enough cars to cause manu- opportunities, at 368. steps protect to take facturers case, posture of certifica- In another this by competition American market from this completion of before being tion decided nationally prices. plain- set As decreasing any con- discovery might not raise note, very large without a tiffs themselves of the In case it does because cerns. this border, poised cars to cross the number of of the theories ad- novelty complexity the automobile impact a nationwide on prof- in the evidence gaps and the vanced required by plaintiffs’ the sort market of multi- expressed fered. The district theory col- theory implausible, is and the adequacy about the times its concern ple view, plaintiffs’ expert In Pro- lapses. our and ex- showings plaintiffs’ yet, several at the time of class fessor Hall had not willingness ques- certification, potential- to revisit the pressed fully answered such of the ly questions as how the size record in front of relevant once it had a better influx of cars would be established but-for those concerns. it. We share that influx would have to be large or how theory on indirect Plaintiffs’ sufficiently to affect the national market complex. In- both novel and purchasers is prices invoice raise effective dealer is sometimes jury price-fixing cases MSRPs. not, Plaintiffs do difficult to establish. Second, be able to plaintiffs must however, price-fixing theo- advance such any permissible sort out the effects Rather, theory ry. from the effects vertical restraints of a “but- are the result higher prices conspira- horizontal alleged, impermissible theo- step In one of for” world. raised below but cy. question was This illegal stifling of ry, but for the defendants’ Hall fully addressed. Professor was not would have competition, the manufacturers conclusory manner purely in a asserted prices invoice had to set dealer separated out the effects could be to the losing to avoid sales MSRPs lower If equilibriums. using concept of Nash coming across cars lower-priced Canadian means for not have a viable plaintiffs do resale in the United States. the border for these two sets distinguishing between two, invoice higher In dealer step it effects, show that was they cannot stifling the im- enabled that caused prices conspiracy and MSRPs horizontal upon market injury to con- the domestic national competition pact resulted theory depends.28 their prices. retail which higher in the form of sumers restraints), viability they go to the questions and vertical are both 28. While these rely (the theory upon which proof a novel susceptible to common themselves through of their claim an element gray and the establish potential market size sense, factual these means. common the effects of horizontal distinction between step As for the second theo- damages, may properly which ascer- ry, time”); Newton, it must include some means of deter- tained at a later mining each member of the class was (affirming 187-88 denial of class status injured, fact if even the amount of each where plaintiffs only provided had not no injury individual could be determined a model formula for measuring damages, but separate proceeding. fundamentally Predominance is not more had also not demon- by damages questions defeated individual strated of damages). ability “The fact long liability subject as as is still to com- aggregate calculate the amount of dam- 6; proof. Tardiff, here, mon 365 F.3d at ages,” plaintiffs propose Smi- as to do low, 40; 323 F.3d at Newberg, 6 Conte & “does not duty absolve from the 18:27, supra, § at 91. This is because the to prove each [class member] was harmed question Newton, class action can be limited to practice.” the defendants’ liability, leaving damages for later indi- F.3d at 188. vidualized Tardiff, determinations. See court, The district while expressing 7; Smilow, 41; 365 F.3d at 323 F.3d at 6 skepticism regarding plaintiffs’ proposal Newberg, 18:53, § Conte & supra, at 179 measuring damages, relied on this 10, 18:56, & n. Establishing 190-92.29 court’s consideration in Smilow of an in- however, liability, requires still showing complete damages model. It that in noted injured that class members were at the Smilow, this court accepted had as suffi- consumer level. It is unclear to us how representation cient a by plaintiffs’ expert plaintiffs intend to make this connection. that he “could a computerized fashion” might intend to use their method of calculating damages. Mo- damages prove V, model both fact of dam- tor Vehicles 235 F.R.D. at (quoting ages Smilow, 40) (internal and the damages. measure of those 323 F.3d at quotation so, omitted). If the district court would enough need marks proposed computer- information preliminarily evaluate ized model in Smilow would draw from the proposed whether the records, model will be able to defendant’s which listed the con- establish, without need for individual de- sumers charged who were allegedly many terminations for Smilow, millions of po- illegal fees. 323 F.3d at 40-41. members, tential is, which consumers That the model would have relied on impacted by alleged clearly data that established which con- See, violation and which were not. e.g., sumers injury. suffered Professor Hall Blades, data,in 400 F.3d at 570 (affirming similarly denial of claimed that defendants’ class status where the actual prices paid provide hands would the information he by class members could not model; be determined would damages need for his wheth- via common proof because “[t]he amount er that data will be sufficient to establish premiums paid, any, if is relevant to consumer-level for each class mem- determination of impact ... question is not ber is a that can now be answered merely an assessment of the amount discovery completed. of with questions question are akin to the of market 29. The district court noted that "some states efficiency employ- in securities class actions permit purchase consumers to recover the full ing presumption fraud-on-the-market price liability proven,” simpli- once further PolyMedica reliance. Cases like and Xcelera fying the calculation of individual demonstrate that such factual bases of theo- V, awards. Motor Vehicles 235 F.R.D. at 143 proof

ries of common appropriately, al- n. 53. though preliminarily, tested at the class certi- stage. fication Bogosian presumption court discussed the rely on an inference Plaintiffs seem order, pric- May national in its any upward pressure actu- prices V, n.35, raise the necessarily plaintiffs F.R.D. at 138 but ing would There by individual consumers. ally paid any rely Bogosian disclaim intent to on the intui- theory, to this but appeal is intuitive model. if it is fair enough. is not Even appeal

tive validity plaintiffs’ that the of It is true bargainers will usual- that hard to assume theory disputed is a common issue. Cf. dealer invoice closer to the ly pay prices Tardiff, 365 F.3d at 4-5. It will be for the usually pay negotiators will price poor and theory fact finder to decide whether this MSRP, minimal in- prices closer to certification persuasive. At the class would not neces- pricing in national crease however, still stage, the district court must pay consumers would sarily mean that all of plaintiffs’ presentation that the ensure into an indi- many play factors more. Too through their will be means amenable case assump- to allow an negotiation vidual mechanism. to the class action We theoretical least without further tion—at looking proof, here not for hard factual but any price increase or development —that thorough explanation for a more of how magni- the same always will have decrease plaintiffs behind theo pivotal evidence paid. price on the final tude of effect If no real ry can be established. there is proposed Hall’s models Even if Professor many will proof, istic means of resources and dealer when MSRPs could determine setting up a trial that be wasted which were affected for prices invoice cannot win. degree, it is a further models and to what presumed whether it can be question sum, oft-expressed the district court’s paid of those affected cars purchasers all theory aspects plaintiffs’ instinct higher prices. retail developed dovetails with remained a presumption have allowed Some courts certification, At the time of class our own. in cases price-fixing of class-wide in the remained to be done more work industry in the price when “the structure plaintiffs’ damages model building conspiratorially is such that nationwide filling steps plaintiffs’ out all level fluct prices at the wholesale affected theory impact. passed: Time has now which, though differ range uated within years the district it is almost two since in all regions, higher was ent different order, all discov- May court’s would have regions range than the which completed to be ery was scheduled competitive under regions existed in all now should March Indus., Inc. v. Stone conditions.” Winoff they put their the evidence need have (In Anti Corp. re Linderboard Container forward, have had addi- best foot (3d 145, 151 Cir. Litig.), trust 305 F.3d out their models tional time to work 2002) Corp., (quoting Bogosian Oil Gulf court should now formulas. The district (3d Cir.1977)). If effec it from complete record before have a prices invoice in the real world tive dealer viability which to test greater to or than the effective equal theory impact. common proving novel is, if the in the but-for world—that MSRPs the certifi- and remand thus vacate We in the but-for negotiating range entire classes so of the state cation the entire world would have been below court, has handled this which in the real world—it negotiating range far, admirably may reconsider case so that all con presume would be easier to light class certification orders impact. The district those sumers suffered opinion and the more fully developed court remains free at a stage later record. modify or even decertify a class if later disproves evidence plaintiffs’ the assertions

We reverse in part, part, vacate in re- regarding, for example, predominance the mand in part, and order dismissal of the Falcon, common issues. See Clayton injunctive Act U.S. at relief claim. All (“Even 160, 102 S.Ct. 2364 parties a shall bear after certifica their own costs. entered, tion order is the judge remains TORRUELLA, Judge, Circuit free to modify it in light the subsequent (Concurring part, Dissenting in part).. developments in litigation.”); the In re Although I with Visa majority concur the Check/MasterMoney re- Litig., Antitrust garding injunctive class, (2d the 124, 141 Cir.2001). I respectfully F.3d dissent from the discussion of the state case, In this the district court addressed my view, classes.30 In opin- the all of the Rule 23 requirements: numerosi- ion erodes the discretion which we are ty of members; the commonality of required to afford to the district court in questions fact; of law or typicality of class certification proceedings. A district defenses; claims or adequacy of repre- court’s decision to certify a class is re- sentation; predominance of ques- common viewed under the deferential abuse dis- tions; and the superiority of the class ac- cretion Smilow, standard. See at 323 F.3d adjudicative as an And, vehicle. as (“Orders certifying or decertifying a required circuit, in this the district court class are reviewed for abuse of discre- rigorous a analysis “conduct[ed] pre- tion.”) (citing Yamasaki, v. Califano requisites 23,” established Rule Smi- 682, 703, U.S. 99 S.Ct. 61 L.Ed.2d low, 323 F.3d at and “formulate[d] (1979)); Blyden Mancusi, see also prediction as to specific how issues (2d Cir.1999) (“A district play wfould] out in order to determine court’s decision to certify a class is re- whether common or individual issues pre- viewed for discretion, abuse of and ‘[a] dominate,” Mowbray, 208 F.3d at 298. reviewing court must great- exercise even er deference when the district court has The majority does not question rigor certified a class than when -it has declined with which the court analy- its conducted ’’(citation omitted)). do so.’ Indeed, sis. the opinion applauds the grants “attemptf

Rule court’s ] district to meet obligations court broad its ... discretion to a determine conduct rigorous analysis whether a at should be certified. stage.” certification Slip op. Fed.R.Civ.P. 23. Our at 26. Rath- er, is, review therefore, the basis for focused on the majority’s whether remand on the district court properly applied certification of the cri- the damages classes is teria set out in Rule 23. the insufficiency See Mowbray, evidence available to (“An 208 F.3d at 295 abuse occurs when a court. Although opinion court, in making a discretionary faults ruling, timing (and, certification upon relies factor, improper omits thus the incompleteness con- record), I of a sideration factor entitled to substantial am concerned that in vacating and re- weight, or mulls the correct mix of manding factors order certification for recon- but makes a clear of judgment error in sideration with additional evidence from them.”). assaying Importantly, a district plaintiffs, the opinion stands for the agree I that the is properly case remanded lish jurisdiction there under to the district court so that it § first can estab- 1332 or questions At in this case are re- high issue require now that we proposition theory impact. garding certification. fact-finding before level of Although the district court admitted some that our the district court agree I plaintiffs’ proof concern about whether the particular “mandat[e] does not case law be “sufficient to withstand judge factfinding by the district level of summary judgment or for a motion for stage.” Motor Vehicles the certification trial,” law at judgment as a matter of contrary, VI, n. 7. On the 241 F.R.D. V, 235 F.R.D. at the that: PolyMedica, in we stated court remained focused properly requirements and con- on the certification ... of how much evidence question The plaintiffs’ proof cluded that “the does meet the necessary accept for a court to is commonality typicality standard.” at the class certifica- [theory of reliance] majority even admits that these Id. degree. one of stage is therefore theory questions regarding plaintiffs’ lines must draw these District courts to susceptible “are themselves .... have no illusions sensibly We (the proof potential common size of the easy. Knowing line-drawing is this gray market and the distinction between de- in the class-certification high stakes of horizontal and vertical re- the effects cision, try to move the parties will straints).” Slip op. opinion at 28 n. 29. The directions, plain- in different however, on, to conclude that more goes ... and for less evidence arguing tiffs searching inquiry into the basis of ... the district for more defendants factual theory disagree. here. I required evi- court must evaluate critically allowing dence ... without case, questions regarding turn the class certification defendant to theory viability plaintiffs’ unwieldy an trial on proceeding into not limited to certification is- impact are merits. sues, go but to the merits of the added). majority’s disagree I with the claim. (emphasis at 17 432 F.3d Xcelera, which PolyMedica and sensibly reading in drew those lines district court support position of their to cite are not entitled second- this case. We proof of common “factual bases of theories in the absence of evi- guess that decision although preliminarily, appropriately, dis- engaged it in an abuse of dence that stage.” at the class certification and re- tested decision to vacate cretion. Our securi- PolyMedica and Xcelera were the certification of mand the plaintiffs actions in which ties class allow the district court the bene- classes to the fraud-on-the-market sought to use effectively overrides discovery, fit of full effi- demonstrate market presumption assessment of how the district court’s brought ciency. Those class actions certify much evidence it needed 10(b) Exchange of the Securities of a “novel and under the banner class. Under promulgated and Rule 10b-5 Act of theory in a class certification complex” thereunder, plain- require which require dis- appear we now proceeding, ea$i individually relied that he or she prove under- tiff fully vet and test the trict courts to A re- alleged misrepresentation. legal theory. See on pinnings of a at-(“[I]n reliance view, quirement individualized searching slip op. our effectively preclude securities “would where there are not inquiry is in order 23(b)(3) Rule facts, actions under a novel fraud class but also only disputed basic of reliance issues injury.”). [individual theory legally cognizable [because] is, effect, necessarily plaintiffs’ theory overwhelm the common of the Xcelera, such, ones.” 507. The assessment of the case’s merits. As applicability of the fraud-on-the-market putting we are the cart before the horse theory appropriateness is central to the turning stage the class certification litigation: the class action as a vehicle for summary judgment into a motion for pro- theory, plaintiffs longer under the are no ceeding juncture appropriate —the prove reliance. required individualized fully viability plain- which to vet the (vacat- PolyMedica, See 432 F.3d at 18-19 theory. holding today, tiffs’ In so I fear ing remanding the class certification removing underpinnings that we are concluding after that the district court had grant the discretion we district courts to in adopting committed error the incorrect draw blurring sensible lines and further efficiency,” definition of “market one of the distinction in- between the certification invoking the elements for the fraud-on- quiry and a trial on I the merits. believe presumption). the-market In this anti- contrary this course is erroneous and case, majority trust to no points legal precedent, established and thus dissent. error committed the district court in assessing appropriateness certifica-

tion. remanding

In the certification of the

damages classes for reconsideration with evidence, benefit of additional the ma-

jority dispute conflates the as to the viabil-

ity theory the plaintiffs’ specific with the CUKO, Petitioner, Vllasi inquiries required at class certification. PolyMedica, As we noted in “a court has power disputed premises early to test MUKASEY,* Attorney Michael B. and when the class action would be if General, Respondent. proper premise on one but not another.” PolyMedica, (quoting 432 F.3d at 6 Tar- No. 07-1273. 4-5) added). diff, (emphasis 365 F.3d at United States Appeals, Court of Indeed, premises insofar as those are not First Circuit. preclusive vehicle, of the class action as a we have no requiring basis for a district Submitted Oct. inquire court to further into the merits of Decided March plaintiffs’ theory the case. While it, complex, is novel and theory, unlike the fraud-on-the-market is

not determinative of whether a class action Indeed, proper or not. the identified

uncertainties within the theory

challenge only ability

(as group) successfully prove their

theory impact. Slip op. at 26-28. case, inquiry stage tests each

* 43(c)(2), R.App. Pursuant Attorney to Fed. P. Attorney tuted for former General Alberto R. Mukasey General Michael respondent B. has been substi- Gonzáles as the herein. notes court that “[a] is not satis- that the inquire district court failed ade- requirements fied that the of Rule 23 have record; quately into the that answer ais been met should refuse certification until problem presented mismatch with the of an have prevent been met.” This does not incomplete incomplete record and of work judge modifying from its certification if it plaintiffs' expert. clear, develops, becomes as the case that the

Case Details

Case Name: In Re New Motor Vehicles Can. Export Anti. Lit.

Court Name: Court of Appeals for the First Circuit

Date Published: Mar 28, 2008

Citation: 522 F.3d 6

Docket Number: 07-2257, 07-2258, 07-2259

Court Abbreviation: 1st Cir.