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Comcast won a major victory at the U.S. Supreme Court today when the court threw out an antitrust class action that accused the cable operator of illegally raising prices in the Philadelphia market.
The 5-4 decision by Justice Antonin Scalia rejected a lower court's certification of a class of all Comcast customers in the Philadelphia area, because the court relied on an expert who couldn't explain how to calculate damages based on the economic theory of the case.
While the decision is specific to the antitrust suit against Comcast, it signals the court's growing willingness to tighten the rules for establishing class actions. The corporate targets of those lawsuits frequently complain that given the potentially devastating cost of a courtroom loss, they are forced to settle once a judge has certified a class. Under Scalia's reasoning in the Comcast case, courts will have to take a more critical look at the evidence showing how consumers were harmed as a group, and how damages can be awarded, before allowing the case to proceed.
"Is it a change in the law? Scalia’s not that explicit," said Ankur Kapoor, a partner with Constantine Cannon who specializes in antitrust defense. "It doesn’t overturn the older cases, but his language clearly indicates yes, this is a change in the law."
Scalia's reasoning drew a strong dissent from the court's liberal wing, who said the case shouldn't have been taken up in the first place and the majority rigged the game in favor of Comcast by changing the question lawyers were required to answer after their briefs were done.
"Today the Court reaches out to decide a case hardly fit for our consideration," said Justices Ruth Bader Ginsberg and Stephen Breyer, who were joined by Sonia Sotomayor and Elena Kagan.
In the case, Comcast was accused by plaintiff lawyers of establishing a dominant position in the Philadelphia market and then gouging customers with a variety of tactics. The lawyers advanced four theories, but the court struck down three of them, leaving only the theory that Comcast's dominance deterred so-called "overbuilders" who move into established markets to provide competing cable service.
Comcast argued the court couldn't establish a class of all Philadelphia customers based on the expert's testimony since overbuilding only applied to certain parts of the market. The expert also compared prices in Philadelphia to other markets to show they were excessive, but his calculations included the effects of the three other allegedly anticompetitive practices the court refused to consider.
The Supreme Court threw out the case, saying Rule 23 governing class actions requires a case to be capable of delivering classwide damages. "We start with an unremarkable premise," Scalia wrote, which is that plaintiffs are only entitled to damages under the theory of the case. If those damages can't be calculated, he said, there's no class.
In the Philadelphia market, higher prices could be attributed to lack of direct broadcast satellite competition in some counties and Comcast's price advantage in buying programming in others, Scalia wrote.
"The permutations involving four theories of liability and 2 million subscribers located in 16 counties are nearly endless," he said.
Ginsberg and Breyer said the majority damaged the credibility of the court by taking the case and deciding a question of fact best left to the trial court, however.
"The Court’s ruling is good for this day and case only," the said in dissent. "In the mine run of cases, it remains the `black letter rule' " that courts can still certify a class action whenever common questions predominate, they said, even if the court must later use separate procedures to determine individual damages.
Kapoor of Constantine Cannon said lower courts have already been whittling away at the looser standards the justices cited in their dissent. Going forward, he said, plaintiff lawyers won't have to prove the case that people were hurt by antitrust violations, but they do need "a sound methodology that can show damages on a classwide basis."
The decision also could be a boon to employment lawyers. Attorneys at Seyfarth Shaw said in their firm's blog that the case "is incredibly important for any class action lawsuit dependent upon expert analysis to cross the class certification threshold." Combined with the court's Wal-Mart vs. Dukes decision in 2011, plaintiff lawyers will have to spend more on expensive experts to show how an entire class of consumers or employees were hurt before judges can reward them with class certification.
"It has brought into perspective the importance of defendants’ efforts to fully engage in the `battle of the experts,' as success in the certification arena may very well depend upon it," wrote Rebecca Bjork and Gerald L. Maatman, Jr. of Seyfarth Shaw.
