The Second Opinion: U.S. Supreme Court Overturns Certification of Comcast Antitrust Class Action

The U.S. Supreme Court has released an important new judgment overturning certification of an antitrust class action: Comcast Corp. v. Behrend.  The ruling in Comcast emphasizes the importance of  scrutinizing the plaintiff's expert evidence at certification, even where it overlaps with the merits, and continues the  trend towards a more rigorous review of U.S. certification motions as seen in cases like Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541 (2011).  Given the significant impact which prior U.S. Supreme Court cases have had on competition class actions in Canada (e.g., Illinois Brick Co. v. Illinois, 431 U.S. 720 (1977)), it is likely that Comcast will play an important role in future litigation here as well as in the United States.


The defendant-petitioners, Comcast Corporation and its subsidiaries ("Comcast"), provided cable-television services to residential and commercial customers.  They engaged in a series of "clustering" transactions in order to concentrate their operations in particular regions.  These transactions involved the acquisition by Comcast of a competitor cable system in the relevant region, in exchange for the sale of a Comcast cable system in a different region.  The strategy greatly increased Comcast's market share in the targeted areas; in the Philadelphia area, for instance, its share of subscribers increased from 23.9 percent in 1998 to 69.5 percent in 2007.

The plaintiff-respondents were subscribers to Comcast's cable services in Philadelphia.  They filed an antitrust class action alleging that Comcast's clustering scheme harmed subscribers by eliminating competition and creating supra-competitive cable prices in violation of § 1 and 2 of the Sherman Act.  The Plaintiffs proposed four theories of antitrust impact, three of which were rejected at first instance by the District Court.  The fourth theory, which was that the clustering reduced the level of competition from "overbuilders" (i.e., companies that build competing cable networks in areas where an incumbent cable company already operates), was accepted by the District Court as being capable of classwide proof.  The U.S. Court of Appeals for the Third Circuit affirmed.

The Comcast Decision

The principal bone of contention before the U.S. Supreme Court concerned the plaintiffs' evidence that damages from the overbuilder theory could be calculated on a class-wide basis.  Their lone expert provided a regression model comparing the actual cable prices in the Philadelphia area with those that would have existed but for Comcast's clustering transactions.  The problem was that this regression model did not isolate the damages resulting from the "overbuilder-deterrence" theory of antitrust impact on which the case had been certified; instead, it calculated damages on the assumption that all four theories were correct.

The majority of the Court of Appeals below held that it was not necessary for the plaintiffs to tie their certified theory of antitrust impact to an exact calculation of damages; in its view, that would involve an attack on the "merits" of the plaintiffs' methodology.  According to the Court of Appeal, the plaintiffs needed only to "assure" the Court that the measurement of damages would not require complex individual calculations once antitrust impact was proved.

This approach was rejected by the majority of the U.S. Supreme Court.  Scalia J. (Roberts C.J. and Kennedy, Thomas and Alito JJ. concurring) held that the plaintiffs' methodology was insufficient to provide an evidentiary basis that common issues would predominate over individual damage calculations, as required by U.S. Federal Rule of Civil Procedure 23(b)(3).  In arriving at this conclusion, Scalia J. affirmed the Supreme Court's prior comments in Wal-Mart that a "rigorous analysis" was necessary before certification could be granted, even though this "will frequently entail 'overlap with the merits of the plaintiff's underlying claim'".  He thus held that the Court of Appeals erred by "[b]y refusing to entertain arguments against respondents' damages model that bore on the propreity of class certification, simply because those arguments would also be pertinent to the merits determination".  Scalia J.  went on to observe:

... If respondents prevail on their claims, they would be entitled only to damages resulting from reduced overbuilder competition, since that is the only theory of antitrust impact accepted for class-action treatment by the District Court. It follows that a model purporting to serve as evidence of damages in this class action must measure only those damages attributable to that theory. If the model does not even attempt to do that, it cannot possibly establish that damages are susceptible of measurement across the entire class for purposes of Rule 23(b)(3). ...

... The Court of Appeals simply concluded that respondents "provided a method to measure and quantify damages on a classwide basis," finding it unnecessary to decide "whether the methodology [was] a just and reasonable inference or speculative." ... Under that logic, 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. Such a proposition would reduce Rule 23(b)(3)’s predominance requirement to a nullity.


The Comcast decision will be important to Canadian class action litigants for at least two reasons.

First, in cases where the plaintiff alleges that it is possible to calculate damages on a class wide basis, Comcast emphasizes that the damages must be limited to those which follow from the plaintiff's methodology for proving liability as a common issue.  While the Court in Comcast articulated this requirement in relation to the predominance criterion in the U.S. Federal Rules, which does not find an exact parallel in the class actions statutes enacted by the Canadian provinces, most Canadian legislation still leads courts to consider whether individual issues overwhelm (and in some provinces merely "predominate" over) the common issues as part of the "preferable procedure" criterion.  In competition class actions, which often involve complex issues of causation and damages, plaintiffs typically seek to minimize the preferable procedure criterion by arguing that damages can be calculated on an aggregate basis under provisions such as s. 24(1) of Ontario Class Proceedings Act, 1992.  Canadian courts that are asked to certify aggregate damages common issues in future competition class actions may well look to Comcast before doing so.

Second, the Comcast Court's decision to carefully scrutinize the plaintiffs' expert evidence despite its overlap with the merits may prove important to Canadian courts on a more general level, as they continue to work their way through the "some basis in fact" test which currently defines the plaintiff's evidentiary burden at certification.  Where a plaintiff leads expert evidence that does not affirmatively demonstrate that a particular aspect of their claim is capable of common proof, Comcast indicates that the Court should not uncritically accept the plaintiff's speculative assurances to the contrary.  That is a principle which should be "common" to class actions on both sides of the border.

The McCarthy Tétrault Opinions Group consists of members of the firm’s litigation department whose practices focus on written advocacy and the provision of strategic advice and opinions in the context of complex business disputes and transactions.  The members of the Opinions Group are Anthony Alexander, Martin Boodman, Brandon Kain, Hovsep Afarian and Kirsten Thompson.

class actions; competition; antitrust; Comcast; Behrend; aggregate damages; some basis in fact; Wal-Mart Stores Inc. v. Dukes; Illinois Brick; predominance



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