Plaintiff filed a putative class action against American Tower Corp. alleging violations of federal securities laws and purported to be brought on behalf of “members of the public who were harmed by the securities fraud.” In re American Tower Corp. Securities Litig., 648 F.Supp.2d 223, 224-25 (D.Mass. 2010). Eventually, the parties negotiated a settlement of the class action which provided for the distribution of unclaimed funds through a cy pres fund. Id., at 224. Lead Plaintiff moved the district court for authorization to distribute the cy pres funds “to The Peggy Browning Fund, a private, nonsectarian, not-for-profit organization with 501(c)(3) tax-deductible status.” Id. The federal court denied the motion because plaintiff sought “to disburse settlement funds to a non-profit organization with little connection to the harms class members suffered,” id. Because the author has received numerous inquiries from defense and plaintiff counsel concerning the proper scope of a cy pres fund, we include this article on the district court’s ruling.
The district court noted that the proper inquiry was to “determine whether the Peggy Browning Fund is an appropriate recipient of any residual settlement funds” of the class action settlement. In re American Tower Corp., at 224. The court explained that the purpose of the use of a cy pres fund is effect a distribution of class action settlement funds “to a ‘next-best’ recipient” when it is impractical to distribute the settlement funds to the class members. Id., at 224-25 (citing In re Airline Ticket Commission Antitrust Litig., 268 F.3d 619, 626 (8th Cir.2001)). “‘In such cases, the court, guided by the parties' original purpose, directs that the unclaimed funds be distributed for the prospective benefit of the class.’” Id. (citation omitted). The federal court easily concluded, then, that the Peggy Browning Fund was “an inappropriate recipient of any unclaimed class funds.” Id. “Disbursement of unclaimed funds must have some relationship to the harm suffered by class members…. However, the Peggy Browning Fund focuses on labor issues…. Therefore, it does not appear that funds donated to the Peggy Browning Fund would benefit the class or address the harms suffered by class members.” Id. (italics added). The district court therefore denied the motion, without prejudice to Lead Plaintiff renewing the request and noting that Lead Plaintiff “should, if possible, propose a national organization whose work relates to the harm suffered by class members in this case.” Id.
NOTE: The author notes that trial courts are far too willing to authorize the distribution of cy pres funds to practically any organization. In such cases, the courts appear to be more interested in punishing the defendant than in effecting a distribution of funds to the “next-best” recipient.
Download PDF file of In re American Tower Corp. Securities Litigation]]>Plaintiffs filed a putative class action in Wisconsin state court against Burlington Northern Santa Fe Railway Company and Burlington Northern Santa Fe Corporation alleging that defendants’ “failure to inspect and maintain a railroad trestle caused the town to flood in July 2007, damaging their property.” In re Burlington Northern Santa Fe Railway Co., 606 F.3d 379, 379-80 (7th Cir. 2010). Defense attorneys removed the class action to federal court under CAFA (Class Action Fairness Act); plaintiffs then amended the complaint to remove the class action allegations and the district court remanded the matter to state court on the ground that without the class action allegations federal court jurisdiction was lacking under CAFA. Id., at 379. Id. Defense attorneys sought leave to appeal the remand order; the Seventh Circuit granted the petition and reversed.
The Seventh Circuit noted that “the parties battled extensively over jurisdiction” in the district court. In re Burlington, at 380. Defense attorneys argued diversity jurisdiction existed because the joinder of the non-diverse individual employee defendants was fraudulent, but the district court found it to be tactical rather than fraudulent. Id. The district court agreed, however, that jurisdiction existed under CAFA, and denied plaintiffs’ first motion to remand. Id. Plaintiffs thereafter sought and obtained leave of court to amend the complaint to remove the class action allegations. Id. The federal court also considered the motion to amend to be “an implied motion to remand the case, which it granted.” Id. In the district court’s view, because the amended complaint did not contain any class action allegations, jurisdiction under CAFA no longer existed. Id.
]]> In reversing the remand order, the Circuit Court relied on “[t]he well-established general rule…that jurisdiction is determined at the time of removal, and nothing filed after removal affects jurisdiction.” In re Burlington, at 380-81 (citations omitted). The Seventh Circuit found this rule to be dispositive. The Court held that “CAFA is, at base, an extension of diversity jurisdiction.” Id., at 381. And “[e]ven in cases filed originally in federal court, later changes that compromise diversity do not destroy jurisdiction.” Id. (citations omitted). Moreover, under Seventh Circuit authority, “CAFA jurisdiction attaches when a case is filed as a class action” and “even if the class is not certified, jurisdiction continues.” Id. (citations omitted). The “limited question” presented, then, is “whether CAFA jurisdiction also continues when the post-removal change is not the district court's denial of class certification but is instead the plaintiffs' decision not to pursue class certification.” Id. The Court held that there are “compelling reasons” to treat the situations in the same way. Accordingly, the Circuit Court reversed the remand order. Id.Download PDF file of In re Burlington Northern Santa Fe Railway]]>Plaintiff filed a putative class action against American Tower Corp. alleging violations of federal securities laws and purported to be brought on behalf of “members of the public who were harmed by the securities fraud.” In re American Tower Corp. Securities Litig., 648 F.Supp.2d 223, 224-25 (D.Mass. 2010). Eventually, the parties negotiated a settlement of the class action which provided for the distribution of unclaimed funds through a cy pres fund. Id., at 224. Lead Plaintiff moved the district court for authorization to distribute the cy pres funds “to The Peggy Browning Fund, a private, nonsectarian, not-for-profit organization with 501(c)(3) tax-deductible status.” Id. The federal court denied the motion because plaintiff sought “to disburse settlement funds to a non-profit organization with little connection to the harms class members suffered,” id. Because the author has received numerous inquiries from defense and plaintiff counsel concerning the proper scope of a cy pres fund, we include this article on the district court’s ruling.
The district court noted that the proper inquiry was to “determine whether the Peggy Browning Fund is an appropriate recipient of any residual settlement funds” of the class action settlement. In re American Tower Corp., at 224. The court explained that the purpose of the use of a cy pres fund is effect a distribution of class action settlement funds “to a ‘next-best’ recipient” when it is impractical to distribute the settlement funds to the class members. Id., at 224-25 (citing In re Airline Ticket Commission Antitrust Litig., 268 F.3d 619, 626 (8th Cir.2001)). “‘In such cases, the court, guided by the parties' original purpose, directs that the unclaimed funds be distributed for the prospective benefit of the class.’” Id. (citation omitted). The federal court easily concluded, then, that the Peggy Browning Fund was “an inappropriate recipient of any unclaimed class funds.” Id. “Disbursement of unclaimed funds must have some relationship to the harm suffered by class members…. However, the Peggy Browning Fund focuses on labor issues…. Therefore, it does not appear that funds donated to the Peggy Browning Fund would benefit the class or address the harms suffered by class members.” Id. (italics added). The district court therefore denied the motion, without prejudice to Lead Plaintiff renewing the request and noting that Lead Plaintiff “should, if possible, propose a national organization whose work relates to the harm suffered by class members in this case.” Id.
NOTE: The author notes that trial courts are far too willing to authorize the distribution of cy pres funds to practically any organization. In such cases, the courts appear to be more interested in punishing the defendant than in effecting a distribution of funds to the “next-best” recipient.
Download PDF file of In re American Tower Corp. Securities Litigation]]>Four class actions were filed against General Mills – one each in California, Florida, New Jersey and Ohio – arising out of defendant’s marketing of its Yo-Plus and/or Yo-Plus Light yogurts. In re General Mills, Inc., YoPlus Yogurt Prod. Marketing & Sales Prac. Litig., ___ F.Supp.2d ___ (Jud.Pan.Mult.Lit. June 8, 2010) [Slip Opn., at 1]. Each class action sought to represent only a statewide class, id. Defense attorneys filed a motion with the Judicial Panel for Multidistrict Litigation (MDL) requesting centralization of the class actions pursuant to 28 U.S.C. § 1407 in the Southern District of Florida; plaintiffs in each of the class actions opposed pretrial coordination. Id. While the Judicial Panel recognized that the class actions “do share some factual questions regarding General Mills’s nationwide marketing of its Yo-Plus and/or
Yo-Plus Light yogurt,” the Florida class action was “already certified as a statewide class of all persons who purchased Yo-Plus yogurt in Florida to obtain its claimed digestive benefits.” Id. Moreover, “The other three actions seek similar putative statewide classes encompassing consumers from different states. Accordingly, the certified and putative classes will likely not overlap significantly.” Id. Finally, in light of the fact that General Mills was the sole defendant, “the parties have every ability to cooperate and minimize the possibilities of duplicative discovery and/or inconsistent pretrial rulings.” Id. Accordingly, the Judicial Panel denied the motion to centralize the class actions. Id., at 2.
Download PDF file of In re General Mills, Inc., YoPlus Yogurt Prod. Marketing & Sales Prac. Litigation Transfer OrderPlaintiffs filed a putative class action against American Honda and Honda of America (collectively “Honda”) alleging product defect liability concerning Honda’s Gold Wing GL1800 motorcycle; specifically, the class action complaint alleged that a design defect in the steering assembly causes the motorcycle to “wobble.” American Honda Motor Co., Inc. v. Allen, 600 F.3d 813, 814 (7th Cir. 2010). Plaintiffs moved the district court to certify the litigation as a class action under Rule 23(b)(3), relying heavily on an expert’s opinion that common issues predominate; Honda opposed class action treatment and challenged the expert opinion relied upon by plaintiffs in their motion. Id. Defense attorneys moved under Daubert v. Merrell Dow Pharms., Inc., 509 U.S. 579 (1993), to strike plaintiffs’ expert report on the grounds that the expert’s “wobble decay standard was unreliable because it was not supported by empirical testing, was not developed through a recognized standard-setting procedure, was not generally accepted in the relevant scientific, technical, or professional community, and was not the product of independent research.” Id. The district court agreed to rule on the admissibility of the report prior to ruling on class certification because the report was central to the motion, id. But while the court announced “definite reservations about the reliability of [the expert’s] wobble decay standard,” it refused to exclude the report entirely “at this early stage of the proceedings.” Id., at 814-15. The district court granted class action certification, id., at 815, and Honda sought leave to appeal, id., at 814. The Seventh Circuit granted Honda’s request and reversed.
The Circuit Court explained that the issue before it was “whether the district court must conclusively rule on the admissibility of an expert opinion prior to class certification in this case because that opinion is essential to the certification decision.” American Honda, at 814. The Court summarized the expert’s “wobble decay” opinion, which was based on a standard the expert himself had devised and that he himself characterized as “reasonable.” Id. The expert opinion was important because “most of Plaintiffs' predominance arguments rest upon the theories advanced by [their expert].” Id. (quoting Allen v. Am. Honda Motor Co., 264 F.R.D. 412, 425 (N.D. Ill. 2009)). In response to Honda’s objections and following the Daubert hearing, the district court “noted that it was concerned that, among other things, [the expert’s] wobble decay standard may not be supported by empirical evidence, the standard has not been generally accepted by the engineering community, and [his] test sample of one may be inadequate to conclude that the entire fleet of GL1800s is defective.” Id., at 814-15. Nevertheless, the lower court believed it was too early in the litigation to dismiss the4 expert’s opinion in its entirety, and so it granted class action treatment without prejudice to Honda moving to exclude the expert’s opinion. Id., at 815.
]]> As a matter of first impression in the Seventh Circuit, the Court “specifically addressed whether a district court must resolve a Daubert challenge prior to ruling on class certification if the testimony challenged is integral to the plaintiffs' satisfaction of Rule 23's requirements.” American Honda, at 815. The Circuit Court held “that when an expert's report or testimony is critical to class certification, as it is here…, a district court must conclusively rule on any challenge to the expert's qualifications or submissions prior to ruling on a class certification motion.” Id., at 815-16. Thus, in the Seventh Circuit’s view, “the district court must perform a full Daubert analysis before certifying the class if the situation warrants.” Id., at 816. This includes not only the expert’s qualifications, but “any challenge to the reliability of information provided by an expert if that information is relevant to establishing any of the Rule 23 requirements for class certification.” Id.In this case, the district court “started off on the right foot by beginning to undertake what might have become a fairly extensive Daubert analysis,” and both acknowledged “and largely agreed with” Honda’s concerns about the reliability of the testimony of plaintiff’s expert, “[y]et the district court ultimately declined, without further explanation, ‘to exclude the report in its entirety at this early stage of the proceedings.’” American Honda, at 816. The Circuit Court explained at page 816 that the district court’s analysis (or lack thereof) constituted an abuse of discretion: “The court's effective statement of admissibility here is not even conclusory; it leaves open the questions of what portions of [the expert’s] testimony it may have decided (or will decide) to exclude, whether [the expert] reliably applied the standard to the facts of the case, and, ultimately, whether Plaintiffs have satisfied Rule 23(b)(3)'s predominance requirement. As a result, the district court never actually reached a conclusion about whether [the] expert report was reliable enough to support Plaintiffs’ class certification request. Instead it denied Honda's motion to exclude without prejudice and noted that the case was in an ‘early stage of the proceedings.’”
Reviewing the expert’s report on the merits, the Seventh Circuit held that “our examination of the record reveals that exclusion is the inescapable result when the Daubert analysis is carried to its conclusion.” American Honda, at 817. The issue here was one of reliability rather than qualifications, but the Circuit Court noted that “even the most ‘supremely qualified expert cannot waltz into the courtroom and render opinions unless those opinions are based upon some recognized scientific method and are reliable and relevant under the test set forth by the Supreme Court in Daubert.’” Id. (citing Clark v. Takata Corp., 192 F.3d 750, 759 n.5 (7th Cir.1999)). Based on the Court’s analysis, the expert’s testimony was unreliable, see id., at 817-18, and “expert testimony that is not scientifically reliable should not be admitted, even ‘at this early stage of the proceedings,’” id., at 819 (citation omitted). Because the expert’s testimony formed the foundation for Rule 23(b)(3)’s predominance test, class action certification could not stand. Id. Accordingly, the Seventh Circuit granted Honda’s petition for leave to appeal and vacated the denial of Honda’s motion to strike and the district court’s order grant of class action treatment. Id.
NOTE: In response to plaintiffs’ request that the Circuit Court deny leave to appeal, the Seventh Circuit explained, “Given the uncertainty surrounding the propriety of conducting a Daubert analysis at the class certification stage, and the frequency with which this issue arises, we find the question to be one appropriate for resolution under Rule 23(f).” American Honda, at 815 (citation omitted).
Download PDF file of American Honda v. Allen]]>In 2003, three plaintiffs filed individual state court lawsuits against various defendants, including Residential Funding, “alleging violations of the Maryland Secondary Mortgage Loan Law.” Moffitt v. Residential Funding Co., LLC, ___ F.3d ___ (4th Cir. May 3, 2010) [Slip Opn., at 1, 4]. The lawsuits were dismissed in 2006 on statute of limitations grounds, “[b]ut in 2009, the Maryland Court of Appeals reversed, permitting the cases to go forward.” Id., at 4 (citation omitted). Plaintiffs’ counsel then advised the various defendants, in writing, “that plaintiffs intended to amend their individual complaints into class actions.” Id. Plaintiffs’ counsel also provided defendants with copies of the three anticipated class action complaints. Id. The draft class action lawsuits alleged that the putative class covered “thousands of members” and, though they did not pray for a specific amount in damages, the cover letter estimated that the damage suffered by each class member ranged from $20,000 to $90,000. Id. Believing that the draft complaint constituted “other paper[s]” within the meaning of 28 U.S.C. § 1446(b) and that the draft class action complaints established federal jurisdiction under the Class Action Fairness Act (CAFA), and “[f]earing that the thirty-day deadline would expire before plaintiffs actually filed the amended complaints,” defense attorneys removed the lawsuits to federal court. Id. Plaintiffs’ counsel thereafter filed the amended class action complaints in the federal court, id., at 4-5, and “defendants filed motions for leave to amend their original notices of removal in order to base removal on plaintiffs’ actual filing of the complaints,” id., at 5. Plaintiffs then moved to remand the class actions to state court, id., at 5. Plaintiffs’ counsel conceded that the amended class action complaints fell within the scope of CAFA for purposes of federal court jurisdiction, but they argued that the removals were premature because neither the letter nor the draft class action complaints constituted “other paper[s]” within the meaning of § 1446(b). Id. The district court denied the motion, id. Plaintiffs obtained leave to appeal the district court’s order, id., at 5-6, and the Fourth Circuit affirmed.
The Circuit Court began its analysis by observing that it “need not decide whether the cases were improperly removed” because even if they were “the amended complaints provided an independent basis for the district court to retain jurisdiction.” Moffitt, at 3. Plaintiffs’ “principal argument” is that federal court jurisdiction “did not exist at the time of removal,” accordingly, the motion for remand should have been granted. Id., at 6. The Fourth Circuit recognized that the removal statute requires the case be subject to federal court adjudication “at the time the removal petition is filed,” id. (citation omitted), but held that “the mere fact that a case does not meet this timing requirement is not ‘fatal to federal-court adjudication’ where jurisdictional defects are subsequently cured.” Id. (citation omitted). It was therefore unnecessary for the Court to decide whether federal court jurisdiction over the cases existed at the time defense counsel removed them to federal court, because “plaintiffs independently conferred jurisdiction on the district court by filing their amended class action complaints prior to moving to remand.” Id., at 7. The Circuit Court also reasoned, “Requiring pointless movement between state and federal court before a case is tried on the merits can…impose significant costs on both courts and litigants[,]” and “Here, it would be a waste of judicial resources to remand these cases on the basis of an antecedent violation of the removal statute now that jurisdiction has been established.” Id., at 8. Put simply, the Fourth Circuit found that “these cases would likely end up in federal court regardless of whether we ordered remands at this juncture.” Id. Thus, “considerations of judicial economy weigh against requiring such a pointless exercise and in favor of allowing this case to go forward in a federal forum where jurisdiction has been perfected.” Id. The Circuit Court therefore affirmed the district court order denying plaintiffs’ motion to remand the class actions to state court, id., at 9.
Download PDF file of Moffitt v. Residential Funding]]>Plaintiffs filed a putative class action against Energy Transfer Partners and its affiliates alleging that they manipulated the price of natural gas futures and options in violation of the Commodities Exchange Act (CEA). Hershey v. Energy Transfer Partners, L.P., ___ F.3d ___, 2010 WL 2510122, *1 (5th Cir. June 23, 2010). According to the allegations underlying the class action complaint, plaintiffs bought and sold natural gas futures and options on the New York Mercantile Exchange (NYMEX), and sought “to represent a class of natural gas futures and options contracts traders.” Id. The class action alleged that defendants “manipulate[ed] the price of natural gas delivered at the Houston Ship Channel (‘HSC’) and alleged economic harm to [plaintiffs’] NYMEX natural gas futures contracts caused by that manipulation.” Id. Defense attorneys moved to dismiss the class action on the ground that the CEA required plaintiffs to allege that defendants specifically intended to manipulate NYMEX natural gas futures contracts; the district court agreed and dismissed the complaint. Id., at *1, *4. Plaintiffs appealed and the Fifth Circuit affirmed.
We do not here summarize the natural gas futures market. See Hershey, at *1-*2. The issue presented, as a matter of first impression in the Fifth Circuit, was whether defendants were correct in arguing that in order to assert a claim under the CEA plaintiffs were required “to allege that Defendants specifically intended to manipulate the price of natural gas” at a specific location (the Henry Hub) thereby satisfying the requirement under the CEA “that the manipulation be specifically directed toward the underlying commodity of the contract.” Id., at *4. And the district court was considering this defense against a backdrop of regulatory action in that defendants previously had paid $10 million to the Commodities Futures Trading Commission (CFTC) and $30 million to the Federal Energy Regulatory Commission (FERC) to settle claims that defendants “created and then exploited price differences between the HSC and the Henry Hub, a major confluence of natural gas pipelines and the settlement price for all NYMEX natural gas futures contracts.” Id., *1, *3. Not surprisingly, plaintiffs’ class action complaint “substantially mirror[ed] the allegations in regulatory actions against Defendants by the CFTC and FERC.” Id., at *3.
]]> The Fifth Circuit affirmed the district court’s dismissal of the class action. The Circuit Court noted that it had not previously “had an opportunity to specifically adopt a pleading standard for commodities manipulation claims,” but after summarizing decisions from other circuits it concluded that “the specific intent standard appears to have substantial support.” Hershey, at *5. The Fifth Circuit concluded, “Because the specific intent standard is grounded in sound reasoning and precedent, we adopt it for private causes of action under the CEA, 7 U.S.C. §§ 13(a) and 25(a).” Id. Thus, the Court held that, in order to state a claim under the CEA, plaintiffs were in fact required to allege that defendants specifically intended to manipulate the underlying futures contract at the Henry Hub. Id. The Court added that while “no circuit has squarely addressed what constitutes the underlying commodity of a NYMEX natural gas futures * * * [b]y definition, the underlying of a futures contract depends on the contract itself.” Accordingly, plaintiffs were required to “allege that Defendants specifically intended to manipulate the underlying of that contract [involving the Henry Hub], not some hypothetical natural gas futures contract.” Id., at *6. The Court explained at page *6:The NYMEX natural gas futures contract is specifically tied to, and standardized against, the spot price at the Henry Hub. Although a party to a NYMEX natural gas futures contract, at an abstract level, deals generally with natural gas, that party may only accept or make delivery at the Henry Hub. This delivery restriction, standard to all NYMEX natural gas futures contracts, leads us to reason that the underlying commodity of a NYMEX natural gas futures contract is not natural gas wherever bought and sold, but the specific natural gas delivered at the Henry Hub.
The Fifth Circuit concluded, “The district court found that a private cause of action under the CEA requires Plaintiffs to plead that (1) Defendants possessed an ability to influence market prices; (2) an artificial price existed; (3) Defendants caused the artificial prices; and (4) Defendants specifically intended to cause the artificial price…. We agree with the district court's finding and adopt this standard for pleading under the CEA's private cause of action, 7 U.S.C. §§ 13(a), 25(a).” Hershey, at *7. Based on Circuit Court’s review of the pleadings and applicable law, the Fifth Circuit held “Plaintiffs here cannot tie Defendants' manipulation of the HSC price index to an intent or motive to manipulate the Henry Hub price,” id., at *8. The Circuit Court explained, “Under a specific intent standard, mere knowledge is not enough; Defendants must have specifically intended to impact the NYMEX natural gas futures market. Plaintiffs here allege only that Defendants knew or should have known that their manipulative actions would depress the NYMEX natural gas futures prices. Therefore, Plaintiffs have not stated a claim under the CEA.” Id. Accordingly, the Court affirmed the dismissal of the class action complaint, id., at *9.
Download PDF file of Hershey v., Energy Transfer Partners]]>Plaintiffs filed a putative nationwide class action against Apple and AT&T Mobility (ATTM) alleging federal antitrust violations; specifically, the class action complaint alleged “monopolization in violation of Section 2 of the Sherman Act, violation of the Magnuson-Moss Warranty Act, 15 U.S.C. §§ 2301, et seq., and violation of the Computer Fraud and Abuse Act, 18 U.S.C. § 1030.” In re Apple & ATTM Antitrust Litig., ___ F.Supp.3d ___ (N.D.Cal. July 8, 2010) [Slip Opn., at 1]. The district court summarized the allegations underlying the class action complaint at page 1 as follows: “Plaintiffs allege that although they were required to purchase a two-year service agreement with ATTM when they purchased their iPhones, Apple and ATTM had secretly agreed to technologically restrict voice and data service in the aftermarket for continued voice and data services for five years, i.e., after Plaintiffs’ initial two-year service period expired. Plaintiffs also allege that Apple monopolized the aftermarket for third party software applications for the iPhone, and that Apple caused the iPhone to become unusable if it detected that a customer had “unlocked” their iPhone for use with other service providers.” Defense attorneys for Apple moved for summary judgment with respect to the class action’s iPhone Operating System Version 1.1.1 claims, which the district court granted. Id., at 2. We do not here discuss that portion of the court order. Rather, as part of the same order, the district court considered plaintiffs’ motion to certify the litigation as a class action; the district court granted class action treatment to the lawsuit. Id. It is the class action certification portion of the decision that we discuss below.
Plaintiff’s class action certification motion sought to certify the litigation on behalf of a nationwide class defined as follows: “All persons who purchased or acquired an iPhone in the United States and entered into a two-year agreement with Defendant AT&T Mobility, LLC for iPhone voice and data service any time from June 29, 2007, to the present.” In re Apple, at 12-13. (The motion additionally sought certification of a sub-class defined as “All iPhone customers whose iPhones were ‘bricked’ by [Apple] at any time during the Class Period.” Id., at 13. However, the district court granted Apple’s motion for summary judgment on the “bricking” claim, so the court did not address the sub-class. Id.) The federal court noted that with respect to Rule 23(a)’s requirements for class action certification, Apple and ATTM did not contest numerosity, see id., at 13-14, nor did they contest adequacy of representation, see id., at 21-22. But defendants argued that the commonality and typicality requirements of Rule 23(a) had not been met, and that Rule 23(b) had not been met.
]]> With respect to Rule 23(a)(2)’s commonality requirement, defendants argued class action treatment would be inappropriate because “(1) each class members’ state of mind is critical to an adjudication of the Sherman Act claims, (2) antitrust damages will require a highly individualized inquiry, and (3) Plaintiffs’ expert did not perform an analysis adequate to show antitrust impact on the class.” In re Apple, at 14. The district court rejected each of these claims. Defendants argued that “whether each class member ‘knowingly’ gave [them] market power by entering into a de facto five year commitment to purchase voice and data service from ATTM requires an individualized inquiry that destroys commonality, and (2) that even if there are common questions of liability, damages will require an individual inquiry into what each consumer would have done if they had known of the five year commitment.” Id., at 14-15. Plaintiffs countered that “(1) the question of whether iPhone purchasers ‘knowingly’ gave Defendants market power can be resolved on a class-wide basis by looking to the fact that purchasers signed a two year contract while Defendants maintained a uniform policy of failing to disclose their five year agreement to purchasers at the time of sale, and (2) Plaintiffs can prove damages by analyzing ‘market level’ factors, such as the value of being able to switch service providers.” Id., at 15. The district court noted that it had previously held that the class action complaint adequately alleged the existence of two iPhone aftermarkets: (1) the aftermarket for voice and data service, and (2) the aftermarket for applications.” Id. And the federal court explained also that federal law did not require individual, rather class-wide, inquiry be made “into whether consumers ‘knowingly’ entered into de facto commitments to be monopolized.” Id., at 16. And as for defendants’ claim that the opinions of plaintiffs’ expert should be excluded because she “offer[ed] a flawed analysis of damages that does not track Plaintiffs’ theory of antitrust harm,” id., at 17, the federal court performed the analysis required under the recent Ninth Circuit decision in Dukes v. Wal-Mart Stores, Inc., ___ F.3d ___, 2010 WL 1644259, at *14 (9th Cir. Apr. 26, 2010), and found the expert’s opinion adequately tracked “the overall challenged practice of the monopolization of the voice and data aftermarket,” id., at 19.With respect to Rule 23(a)(3)’s typicality requirement, defense attorneys argued in part that “‘the diversity of information and understanding [Plaintiffs] and class members had in purchasing their iPhones, particularly because the information available changed over time,’ destroys typicality,” In re Apple, at 20. The federal court disagreed, finding “Plaintiffs’ claims are reasonably co-extensive with those of the class” and “reject[ing] ATTM’s contention that the individualized knowledge of each class member precludes certification.” Id.
With respect to certification of a Rule 23(b)(2) class, defense attorneys argued that monetary relief was the primary focus of the complaint. In re Apple, at 22-23. Plaintiffs disagreed, arguing that “ending the challenged practices is important relief for the class because it would provide freedom to use their iPhone with the applications of their choice and without unwittingly agreeing to a five year service commitment with ATTM.” Id., at 23. The federal court found that the requirements of Rule 23(b)(2) had been met. Id., at 23-24. And the district court further found that class action certification under Rule 23(b)(3) was appropriate because defendants’ arguments to the contrary merely tracked their objections to commonality and typicality under Rule 23(a). Id., at 24. Accordingly, the court granted plaintiffs’ motion for class certification, id., at 24-25.
Download PDF file of In re Apple & ATTM Antitrust Litigation]]>