Delivering some good news for advocates of competitive markets, the Ninth Circuit U.S. Court of Appeals has vacated a 2-1 decision that would have made it more difficult for antitrust claimants to secure class certification. Yesterday (Aug. 3, 2021) the court decided to rehear the matter en banc, issuing a brief order in the case of Olean Wholesale Grocery Coop., Inc. v. Bumble Bee Foods LLC, 993 F.3d 774 (9th Cir. 2021).
As we wrote previously, we are witnessing rapid market concentration and the emergence of dominant players in important industries. In the meantime, antitrust law and enforcement are under attack as weak, ineffectual, and out of step with the modern economy. The three-judge panel's April 6 determination -- that Federal Rule of Civil Procedure 23(b)(3) requires a district court to find that no more than a de minimis number of class members are uninjured before certifying a class -- did not appear to be well thought out, neither jurisprudentially nor practically. In fact, it was so out of step the court itself took the unusual step of inviting attorneys in the case to argue whether the full court should reexamine the issue.
Notably, the now-vacated Olean decision was not all bad. The split panel found “no issue with Plaintiffs’ use of averaging assumptions in its regression models”; determined that even if individualized differences existed, “a higher initial list price as a result of Defendants’ price-fixing scheme could have raised the baseline price at the start of negotiations and could have affected the range of prices that resulted from negotiation”; and, reiterated the principle that the presence of individualized damages cannot, by itself, defeat class certification under Rule 23(b)(3).
However, the three-judge panel also determined that the burden of proof of predominance requires the District Court to resolve factual disputes by a preponderance of the evidence and that the question for the District Court is not whether common issues could predominate at trial but whether they actually do, before certifying the class.
Then the panel really jumped the median strip. Rule 23(b)(3), it determined, required a proposed class to be defined in a way that would exclude class members who did not suffer legal injury caused by a defendant’s wrongdoing. According to the decision, a class that includes more than a de minimis number of uninjured members infers that issues common to the class do not predominate over individual issues, so a district court may not certify the class. While it didn’t draw a bright line, the decision suggested the de minimis threshold would top out at about 5% or 6% of class members, while 12.7% would likely be too many.
By conflating the question of whether issues common to injured class members predominate over individual issues with the question of how the class is defined, the Ninth Circuit's new and unrealistic de minimis requirement presented in its April opinion would have erected an unnecessary procedural hurdle to class certification. The holding was a remarkable repudiation of Rule 23's design, not a single aspect of which suggests that the presence of some number of uninjured parties within the proposed class should determine whether “questions affecting only individual members” predominate.
The dissenting judge was spot on.
We were encouraged by Circuit Judge Andrew Hurwitz's dissent, though. The judge observed that the critical question is not “what percentage of class members is injured, but rather whether the district court can economically ‘winnow out’ uninjured plaintiffs to ensure they cannot recover for injuries they did not suffer. … If the district court can ensure that uninjured plaintiffs will not recover, their mere presence in the putative class does not mean that common issues will not predominate.” The presence of uninjured class members, he wrote, merely reflects the possibility that “an injurious course of conduct may sometime fail to cause injury.”
Judge Hurwitz was spot on. It is often difficult or even impossible for class action plaintiffs in antitrust cases to define the proposed class in a way that includes only class members who suffered recoverable damages without violating the prohibition against “fail-safe” class definitions.
We were also encouraged -- and now it's clear we had good reason -- that the court invited counsel to argue for or against en banc review. Had the opinion survived, it would have constructed an additional and higher hurdle for plaintiffs, awarding them with a harsher punishment even than those who cause antitrust injury.
Of course, a review is just that. We anxiously await the decision of the full court.
See our May 13, 2021, post for further examination of the issue.
Edited by Tom Hagy for MoginRubin LLP.