In re: Rail Freight Fuel Surcharge Antitrust Litigation
Carter G. Phillips argued the cause for appellees. With him on the brief were Joseph R. Guerra, Kathleen Moriarty Mueller, Saul P. Morgenstern, Thomas A. Isaacson, John M. Nannes, Tara L. Reinhart, J. Scott Ballenger, Veronica S.
Anton Metlitsky and Warren D. Postman were on the brief for amicus curiae Chamber of Commerce of the United States of America in support of defendants-appellees.
Before: GARLAND, Chief Judge, and ROGERS and KATSAS, Circuit Judges.
Opinion for the Court filed by Circuit Judge KATSAS.
KATSAS, Circuit Judge: This case involves a putative class of over 16,000 shippers allegedly harmed by a price-fixing conspiracy among the nation‘s largest freight railroads. The district court denied class certification because the plaintiffs’ regression analysis—their evidence for proving causation, injury, and damages on a class-wide basis—measured negative damages for over 2,000 members of the proposed class. Based on that consideration, we affirm.
I
This appeal arises out of eighteen antitrust actions consolidated by the Multidistrict Litigation Panel. The defendants are the four largest freight railroads in the United States: BNSF Railway Company; CSX Transportation, Inc.; Norfolk Southern Railway Company; and Union Pacific Railroad Company. The plaintiffs, who are their customers, allege that the railroads conspired to fix rate-based fuel surcharges. Railroads impose fuel surcharges—additional charges above the base shipping price—when the price of fuel rises above a certain trigger price. Rate-based surcharges are calculated as a percentage of the base shipping price.
Following consolidation, the action was divided into one case involving direct purchasers and another involving indirect purchasers. All plaintiffs alleged that the railroads violated
The eight named plaintiffs in the direct-purchaser case—Carter Distributing Company; Dakota Granite Company; Donnelly Commodities, Inc.; Dust Pro, Inc.; Nyrstar Taylor Chemicals, Inc.; Olin Corporation; Strates Shows, Inc.; and US Magnesium LLC—moved to certify a class under
The district court initially certified the class. It noted that if individualized proof were necessary to establish causation and injury, then the plaintiffs could not satisfy the
On interlocutory review, we vacated the certification order and remanded for reconsideration in light of Comcast Corp. v. Behrend, 569 U.S. 27 (2013). In re Rail Freight Surcharge Antitrust Litig.–MDL No. 1869, 725 F.3d 244 (D.C. Cir. 2013) (Rail Freight I). We explained that, for an antitrust class action, common questions “cannot predominate where there exists no reliable means of proving classwide injury in fact.” Id. at 253. We expressed concern with the district court‘s failure to address “the damages model‘s propensity toward false positives,” which left us with no way of knowing whether “the overcharges the damages model calculates for class members [are] any more accurate than the obviously false estimates it produces for legacy shippers.” Id. at 254. Finally, we stressed that
On remand, after permitting supplemental discovery and expert reports, the district court denied class certification. In re Rail Freight Surcharge Antitrust Litig., 292 F. Supp. 3d 14 (D.D.C. 2017) (Rail Freight II). The court concluded that Dr. Rausser‘s expert opinions were reliable enough to be
The plaintiffs filed a petition for permission to appeal the class-certification decision under
II
We begin with the question of our jurisdiction. Orders denying class certification are neither final decisions under
In this case, the plaintiffs filed a timely petition for permission to appeal, which was enough under
III
The party seeking class certification “must affirmatively demonstrate” that the commonality and predominance requirements are satisfied. Wal-Mart, 564 U.S. at 350. This requires a “rigorous analysis” that often will “overlap with the merits.” Id. at 351 (quotation marks omitted). Three recent cases address the contours of this analysis. In Wal-Mart, the Supreme Court ordered decertification of a Title VII class where the plaintiffs presented insufficient proof that the defendant had engaged in a general policy of sex discrimination. Id. at 352–55. In Comcast, the Court ordered decertification where the regression analysis used to show common injury did not track the underlying theory of liability. 569 U.S. at 36–38. The Court rejected a contention that, at the class-certification stage, ”any method of measurement is acceptable so long as it can be applied classwide, no matter how arbitrary the measurements may be.” Id. at 36. But in Tyson Foods, the Court held that concerns about the validity of a statistical sample used to prove class-wide averages—which the Court described as presenting a common objection to the claims of each class member—should be addressed “as a matter of summary judgment, not class certification.” 136 S. Ct. at 1047 (quotation marks omitted).
IV
The direct-purchaser plaintiffs raise claims under
The parties dispute the extent to which a court, in conducting the “hard look” required by
We need not resolve this dispute because Dr. Rausser‘s damages model, even if sufficiently reliable, does not prove classwide injury. As the district court explained, his model indicates that the proposed class consists of 16,065 shippers. Rail Freight II, 292 F. Supp. 3d at 136. The plaintiffs maintain that the alleged conspiracy injured every one of them. Yet the damages model also indicates that 2,037 members of the
The plaintiffs argue that their model measures these negative damages only because of normal prediction error. The district court found that prediction error could not “account for all—or even a substantial portion of—the 2,037 shippers that the model shows to be uninjured.” Rail Freight II, 292 F. Supp. 3d at 139. The plaintiffs take issue with that finding, but it is not clearly erroneous. In any event, the plaintiffs’ argument about prediction error at most suggests that their damages model might falsely have measured no injury for as many as 2,037 shippers. This line of reasoning describes a possible problem with their own evidence; it does not point to affirmative evidence—much less common affirmative evidence—that a conspiracy did in fact injure these shippers.
The plaintiffs further argue that predominance does not require common evidence extending to all class members. That contention appears inconsistent with our statement in Rail Freight I that the plaintiffs, to establish predominance, must “show that they can prove, through common evidence, that all class members were in fact injured by the alleged conspiracy.” 725 F.3d at 252; see also id. (“we do expect the common
In assessing how many individual adjudications are too many, both the district court and the parties invoke cases addressing the question of when, if ever, a class may include concededly uninjured members. Strictly speaking, this case does not present that question, for the plaintiffs here insist that each member of the proposed class was injured. Nonetheless, the cited cases bear some similarity to this one: Uninjured class members cannot prevail on the merits, so their claims must be winnowed away as part of the liability determination. And that prospect raises the same kind of question at issue here—when does the need for individualized proof of injury and causation destroy predominance? See, e.g., In re Asacol Antitrust Litig., 907 F.3d 42, 51–58 (1st Cir. 2018); In re Nexium Antitrust Litig., 777 F.3d 9, 18–22 (1st Cir. 2015).
The plaintiffs complain that the district court arbitrarily imposed a six-percent upper limit on the percentage of uninjured parties who may be included in a certified class. In fact, the court‘s analysis was more nuanced. As the court
The absence of any winnowing mechanism sharply distinguishes Nexium, the plaintiffs’ best case. There, the class included purchasers of a drug allegedly shielded from competition by the unlawful suppression of a generic alternative. 777 F.3d at 13–14. The problem of uninjured class members arose because a small percentage of the class, due to brand loyalty, would have purchased the drug even if a less expensive generic alternative had been available. Id. at 19–20. The First Circuit held that the uninjured class members could manageably be winnowed by having individual consumers file minimal, likely unrebutted affidavit testimony indicating whether, if given the choice, they would have purchased the branded drug or a generic alternative. Id. at 20–21.
Nexium does not support class certification here. For one thing, the First Circuit sharply limited that decision in Asacol. There, the Court explained that any winnowing mechanism must be truncated enough to ensure that the common issues predominate, yet robust enough to preserve the defendants’
The plaintiffs also invoke the Supreme Court‘s discussion of uninjured class members in Tyson Foods. The defendants there sought review of the question whether a certified class may contain any uninjured members. But the Supreme Court reserved that question, 136 S. Ct. at 1049, and the district court here decided it in the plaintiffs’ favor, Rail Freight II, 292 F. Supp. 3d at 133–35. So, this aspect of Tyson Foods does not advance the plaintiffs’ appeal. The Supreme Court also addressed a further “new argument” raised for the first time in merits briefing—that plaintiffs at the certification stage must prove that all class members were injured or establish a manageable process for culling out uninjured class members. 136 S. Ct. at 1049. The Court held that this argument was “premature” because the parties disagreed about what culling mechanisms might be available and the district court had not yet addressed the question. See 136 S. Ct. at 1050. This holding rested on the inappropriateness of raising new issues
Finally, the plaintiffs argue that the 2,037 class members for whom their damages model shows no injury are a de minimis portion of the class because their shipments make up less than one percent of the railroads’ overall revenue from the alleged conspiracy. But revenue is irrelevant to predominance, which looks to whether elements such as causation and injury may be proved through common evidence, not how much the defendants benefited from any wrongdoing.
V
Looking beyond Dr. Rausser‘s regression analysis, the plaintiffs point to other evidence that they say can prove injury and causation on a class-wide basis. In Rail Freight I, we concluded that Dr. Rausser‘s analysis was “essential” to the plaintiffs’ case for certification: “No damages model, no predominance, no class certification.” 725 F.3d at 253. The district court reached the same conclusion on remand, after careful review of all the documentary and expert evidence. This was not an abuse of discretion.
The plaintiffs invoke documentary evidence that the defendants enforced fuel surcharges “uniformly and with few exceptions.” Rail Freight II, 292 F. Supp. 3d at 122; see id. at
Next, the plaintiffs invoke the expert testimony of Dr. James McClave, who argued that the 2,037 shippers must have been harmed by the conspiracy. Dr. McClave reasoned that because these shippers made fewer purchases on average, and thus had less bargaining power than the rest of the class, they must have been more susceptible to injury. Moreover, Dr. McClave‘s own study concluded that the defendants’ smallest customers—roughly 10,000 shippers who made only one purchase either before or during the class period—collectively paid higher prices than did larger shippers.
This analysis is not common proof of injury to the 2,037 shippers. For one thing, of the 10,000 shippers studied by Dr. McClave, only 3,700 were in the class, and Dr. McClave did not indicate how many of them were included among the 2,037 class members for whom Dr. Rausser‘s model showed no injury. Moreover, evidence that a group of one-time shippers may have paid higher prices collectively does not prove that all (or almost all) of them were injured individually. And, as the
The plaintiffs respond that Dr. McClave‘s analysis, even if inconclusive, at least suggests that reduced bargaining power made the 2,037 shippers more vulnerable to any conspiracy. This line of reasoning parallels one rejected by the Supreme Court in Wal-Mart. There, an expert opined that Wal-Mart‘s “strong corporate culture” made it “vulnerable to gender bias.” 564 U.S. at 354 (quotation marks omitted). The Court found this evidence insufficient to prove that injury could be established on a class-wide basis, because the expert could not say what percentage of adverse employment decisions were in fact caused by bias. Id. The McClave study is similarly incomplete because, as explained above, it does not attempt to identify which of the small shippers, or what percentage of them, were in fact harmed by the alleged conspiracy.
VI
In Asacol, the First Circuit noted the absence of even a single case “allowing, under
Affirmed.