In re: Blood Reagents Antitrus v. , 783 F.3d 183 ( 2015 )

PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
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No. 12-4067
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IN RE: BLOOD REAGENTS ANTITRUST LITIGATION
Ortho Clinical Diagnostics, Inc.,
Appellant
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On Appeal from the District Court
for the Eastern District of Pennsylvania
(D.C. No. 2-09-md-02081)
(Honorable Jan E. DuBois)
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Argued: February 12, 2014
Before: SMITH, CHAGARES, and SCIRICA, Circuit Judges
(Filed: April 8, 2015)
Richard E. Coe, Esq.
Joanne C. Lewers, Esq.
Chanda A. Miller, Esq.
Paul H. Saint-Antoine, Esq. [ARGUED]
Drinker, Biddle & Reath
18th & Cherry Streets
One Logan Square, Suite 2000
Philadelphia, PA 19103
Counsel for Appellant
Jay S. Cohen, Esq.
Jeffrey J. Corrigan, Esq. [ARGUED]
Rachel E. Kopp, Esq.
Jeffrey L. Spector, Esq.
Spector, Roseman, Kodroff & Willis
1818 Market Street
Suite 2500
Philadelphia, PA 19103
Counsel for Appellees
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OPINION OF THE COURT
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SCIRICA, Circuit Judge.
The principal issues in this appeal under Federal Rule
of Civil Procedure 23(f) in this antitrust action are (1)
whether Rule 23 requires scrutiny under Daubert v. Merrell
Dow Pharmaceuticals, Inc., 509 U.S. 579 (1993), of
challenged expert testimony and (2) the propriety of class
certification in light of the Supreme Court’s decision in
Comcast Corp. v. Behrend, 133 S. Ct. 1426 (2013)
2
(Comcast), which reversed Behrend v. Comcast Corp., 655
F.3d 182 (3d Cir. 2011) (Behrend), after the District Court
relied on Behrend in granting class certification. Because we
find that the District Court had no opportunity to consider the
implications of Comcast and hold that, if applicable, a court
must resolve any Daubert challenges to expert testimony
offered to demonstrate conformity with Rule 23, we vacate
and remand.1
I.2
Plaintiffs are direct purchasers of traditional blood
reagents, products used to test blood compatibility between
donors and recipients, from two companies, defendants
Immucor, Inc., which has settled with plaintiffs, and Ortho-
Clinical Diagnostics, Inc., the appellant here. Plaintiffs claim
1
The District Court had jurisdiction under 15 U.S.C.
§ 15(a) and 28 U.S.C. § 1331. We have appellate jurisdiction
under 28 U.S.C. § 1292(e) and Rule 23(f). We review the
grant of class certification for an abuse of discretion, which
occurs if the certification “rests upon a clearly erroneous
finding of fact, an errant conclusion of law or an improper
application of law to fact.” In re Hydrogen Peroxide Antitrust
Litig., 552 F.3d 305, 312 (3d Cir. 2008) (citation omitted).
“Whether an incorrect legal standard has been used is an issue
of law to be reviewed de novo.” Id. (alteration and citation
omitted).
2
The District Court’s Memorandum provides a more
detailed description of the alleged facts in this case. See In re
Blood Reagents Antitrust Litig., 283 F.R.D. 222 (E.D. Pa.
2012).
3
Ortho and Immucor violated federal antitrust law by
conspiring to fix traditional blood reagent prices.
By 1999, the entire domestic supply of traditional
blood reagents had come under the control of Ortho and
Immucor in a duopoly in which both companies anticipated
they could raise their prices and increase their profits.3 In
November 2000, Ortho and Immucor executives attended an
annual trade meeting at which plaintiffs assert the conspiracy
began. Soon thereafter, both Ortho and Immucor began
increasing traditional blood reagents prices in rapid
succession, and by 2009, many prices had risen more than
2000%. Following a Department of Justice probe, a number
of private suits were filed and transferred by the Judicial
Panel on Multidistrict Litigation to the District Court, which
consolidated them in December 2009.
Plaintiffs seek damages under the Clayton Act, see 15
U.S.C. § 15, for alleged horizontal price fixing in violation of
the Sherman Act, see 15 U.S.C. § 1. In July 2012, after
preliminary approval of plaintiffs’ settlement with Immucor,
the court held a hearing to determine whether to certify
plaintiffs’ class of “[a]ll individuals and entities who
purchased traditional blood reagents in the United States
directly from Defendants Immucor, Inc., and Ortho-Clinical
3
During the 1980s and 1990s, the traditional blood
reagent market was highly competitive. Faced with more than
a dozen competing companies and low profit margins, Ortho
considered abandoning the industry while Immucor
approached bankruptcy. At some point in the 1990s, Immucor
began to acquire competing producers and by 1999, Immucor
and Ortho were the only remaining firms in the U.S. market.
4
Diagnostics, Inc. at any time from January 1, 2000 through
the present.” 283 F.R.D. at 247. The court then certified the
class over Ortho’s objection. We granted Ortho’s petition to
appeal under Rule 23(f).
II.
Plaintiffs relied in part on expert testimony to produce
their antitrust impact analyses and damages models. The
District Court evaluated the testimony, the reliability of which
Ortho consistently challenged, and, in part by holding that the
testimony “could evolve to become admissible evidence” at
trial, determined that plaintiffs had met Rule 23(b)(3)’s
predominance requirement. See 283 F.R.D. at 243-45
(quoting Behrend, 655 F.3d at 204 n.13). Relying on our
decision in Behrend, the court rejected Ortho’s challenges to
plaintiffs’ damages models as irrelevant to class certification
because, the court reasoned,
[v]irtually all of Ortho’s arguments go to the
merits of the models [plaintiffs’ expert] has
constructed: the question whether the models
give rise to “a just and reasonable inference or
[are] speculative.” Behrend, 655 F.3d at 206.
These merits questions have some force, and
they may prove persuasive at the summary
judgment stage. However, they do not overlap
with the Rule 23 requirements, because they
neither implicate a need for individual proof nor
convince the Court that [the] models could not
“evolve to become admissible evidence.” Id. at
204 n.13.
5
Blood Reagents, 283 F.R.D. at 240-41 (third alteration in
original).
On appeal, Ortho contends the trial court failed to
rigorously scrutinize whether “questions of law or fact
common to class members predominate over any questions
affecting only individual members.” Fed. R. Civ. P. 23(b)(3).
In particular, pointing to Comcast, Ortho asserts the trial court
erred by declining to address at class certification whether
plaintiffs’ damages models were capable of producing just
and reasonable damage estimates at trial and by accepting
plaintiffs’ theory as capable of proving classwide antitrust
impact.4 Ortho also argues that, under the class certification
4
More specifically, Ortho contends that plaintiffs’
expert’s methodologies cannot prove antitrust impact as a
matter of law because they are incapable of distinguishing
lawful price increases resulting from the creation of a duopoly
from price increases resulting from the alleged price-fixing
conspiracy. Ortho bases this argument in part on statements in
Comcast such as, “Prices whose level above what an expert
deems ‘competitive’ has been caused by factors unrelated to
an accepted theory of antitrust harm are not ‘anticompetitive’
in any sense relevant here,” 133 S. Ct. at 1435, and the
suggestion that a damages model must be able “to bridge the
differences between supra-competitive prices in general and
supra-competitive prices attributable to” the antitrust
violation, id. See also, e.g., id. at 1433 (stating that “a model
purporting to serve as evidence of damages . . . must measure
only those damages attributable to” the “theory of antitrust
impact accepted for class-action treatment,” and those
damages must be “susceptible of measurement across the
entire class”); id. at 1435 (“The first step in a damages study
6
standard, the trial court should have scrutinized the plaintiffs’
expert’s testimony under Daubert.
III.
A.
Because the District Court did not have the
opportunity to consider Comcast’s later-issued guidance in
the first instance, we will vacate the class certification order
and remand for reconsideration. Without foreclosing what
other conclusions the District Court might reach regarding
Comcast’s ramifications for antitrust damages models5 or
proving antitrust impact,6 we believe Behrend’s “could
evolve” formulation of the Rule 23 standard did not survive
Comcast. See Comcast, 133 S. Ct. at 1433 (criticizing
Behrend for “finding it unnecessary to decide ‘whether the
[expert’s damages] methodology [was] a just and reasonable
inference or speculative’” and indicating that such a
methodology is not “acceptable so long as it can be applied
classwide, no matter how arbitrary the measurements may be”
(second alteration in original) (quoting Behrend, 655 F.3d at
206)). As we stated in In re Hydrogen Peroxide Antitrust
Litigation, the “proper task” of the trial court is “to consider
carefully all relevant evidence and make a definitive
is the translation of the legal theory of the harmful event into
an analysis of the economic impact of that event.’” (quoting
Federal Judicial Center, Reference Manual on Scientific
Evidence 432 (3d ed. 2011))).
5
See generally Comcast, 133 S. Ct. at 1433-35.
6
See supra note 4 and accompanying text.
7
determination that the requirements of Rule 23 have been met
before certifying a class.” 552 F.3d 305, 320 (3d Cir. 2008).
“Class certification requires a finding that each of the
requirements of Rule 23 has been met,” id.; factual
determinations “must be made by a preponderance of the
evidence,” id. at 307. “‘[A]ctual, not presumed, conformance’
with the Rule 23 requirements remains necessary,” id. at 322
(quoting Gen. Tel. Co. of Sw. v. Falcon, 457 U.S. 147, 160
(1982)), and “[a] party’s assurance to the court that it intends
or plans to meet the requirements is insufficient,” id. at 318.7
B.
We join certain of our sister courts to hold that a
plaintiff cannot rely on challenged expert testimony, when
critical to class certification, to demonstrate conformity with
Rule 23 unless the plaintiff also demonstrates, and the trial
court finds, that the expert testimony satisfies the standard set
out in Daubert. The Supreme Court has emphasized that the
class certification analysis must be “rigorous.” Comcast, 133
S. Ct. at 1432 (quoting Wal-Mart Stores, Inc. v. Dukes, 131 S.
Ct. 2541, 2551 (2011)). This “rigorous analysis” applies to
expert testimony critical to proving class certification
7
Similarly, “[u]nder the present structure of Rule
23(c), . . . a district court [is] no longer permitted to issue a
‘conditional certification’ . . . because [a] trial court must
‘make a definitive determination that the requirements of
Rule 23 have been met before certifying a class.’” In re NFL
Players Concussion Injury Litig., --- F.3d ---, ---, No. 14-
8103, 2014 WL 7331936, at *6 (3d Cir. Dec. 24, 2014) (third
alteration in original) (citation and internal quotation marks
omitted) (quoting Hydrogen Peroxide, 552 F.3d at 320).
8
requirements. See, e.g., Comcast, 133 S. Ct. at 1433 (citing
Dukes, 131 S. Ct. at 2551-52); Hydrogen Peroxide, 552 F.3d
at 323. As part of the “rigorous analysis,” the Court has
clarified, “[a] party seeking class certification must
affirmatively demonstrate his compliance” with Rule 23.
Dukes, 131 S. Ct. at 2551. This means that the party seeking
certification must “be prepared to prove that there are in fact
sufficiently numerous parties, common questions of law or
fact, typicality of claims or defenses, and adequacy of
representation, as required by Rule 23(a). The party must also
satisfy through evidentiary proof at least one of the provisions
of Rule 23(b).” Comcast, 133 S. Ct. at 1432 (emphasis in
original) (quotation marks and citation omitted). Expert
testimony that is insufficiently reliable to satisfy the Daubert
standard cannot “prove” that the Rule 23(a) prerequisites
have been met “in fact,” nor can it establish “through
evidentiary proof” that Rule 23(b) is satisfied. Other courts of
appeals have reached this conclusion. See Messner v.
Northshore Univ. HealthSystem, 669 F.3d 802, 812 (7th Cir.
2012) (“When an expert’s report or testimony is ‘critical to
class certification,’ we have held that a district court must
make a conclusive ruling on any challenge to that expert’s
qualifications or submissions before it may rule on a motion
for class certification.” (quoting Am. Honda Motor Co. v.
Allen, 600 F.3d 813, 815 (7th Cir. 2010) (per curiam))); In re
Zurn Pex Plumbing Prods. Liab. Litig., 644 F.3d 604, 614
(8th Cir. 2011) (approving “a focused Daubert analysis which
scrutinized the reliability of the expert testimony in light of
the criteria for class certification and the current state of the
evidence”);8 see also Ellis v. Costco Wholesale Corp., 657
8
We have no occasion to examine whether there might be
some variation between the Seventh and Eighth Circuit
9
F.3d 970, 982 (9th Cir. 2011) (citing the Supreme Court’s
dictum in Dukes and stating, “In its analysis of Costco’s
motions to strike [expert testimony at the class certification
stage], the district court correctly applied the evidentiary
standard set forth in Daubert”). Furthermore, we believe the
Supreme Court’s dictum in Dukes buttresses our decision. See
Dukes, 131 S. Ct. at 2553-54 (“doubt[ing]” a district court’s
“conclu[sion] that Daubert did not apply to expert testimony
at the certification stage of class-action proceedings”).
In the District Court, plaintiffs relied on expert
testimony to produce most of their antitrust impact analyses
and damages models, which they offered to demonstrate that
common questions predominated over individual questions as
required by Rule 23(b)(3). The court evaluated the expert
testimony and, in part because it held the testimony “could
evolve to become admissible evidence” at trial, determined
formulations. Consistent with our holding here, both courts
limit the Daubert inquiry to expert testimony offered to prove
satisfaction of Rule 23’s requirements. See Zurn Pex, 644
F.3d at 614 (approving the district court’s “focused Daubert
analysis which scrutinized the reliability of the expert
testimony in light of the criteria for class certification and the
current state of the evidence”); Messner, 669 F.3d at 814
(“[A] Daubert hearing is necessary under American Honda
only if the witness’s opinion is ‘critical’ to class
certification.”); Am. Honda, 600 F.3d at 816 (holding that a
trial court must resolve challenges to an expert’s
qualifications as well as “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”).
10
that it satisfied Rule 23. 283 F.R.D. at 243-45 (quoting
Behrend, 655 F.3d at 204 n.13). The court also stated that
“[a]t the present stage of the litigation, the Court also rejects
Ortho’s arguments regarding the reliability of plaintiffs’
damages models.” Id. at 243.9
Because Ortho consistently challenged the reliability
of plaintiffs’ expert’s methodologies and the sufficiency of
his testimony to satisfy Rule 23(b)(3), we leave it to the
District Court on remand to decide in the first instance which
of Ortho’s reliability attacks, if any, challenge those aspects
of plaintiffs’ expert testimony offered to satisfy Rule 23 and
then, if necessary, to conduct a Daubert inquiry before
assessing whether the requirements of Rule 23 have been
met.10
9
Plaintiffs contend Ortho waived the opportunity to bring
a Daubert challenge. But in the trial court proceedings, Ortho
consistently challenged the reliability of plaintiffs’ expert’s
models and the sufficiency of his testimony to satisfy Rule
23(b)(3).
10
As we explained in Hydrogen Peroxide,
[O]pinion testimony should not be uncritically
accepted as establishing a Rule 23 requirement
merely because the court holds the testimony
should not be excluded, under Daubert or for
any other reason. Under Rule 23 the district
court must be “satisfied,” Falcon, 457 U.S.
[147,] 161 [(1982)], or “persuaded,” [In re
Initial Pub. Offerings Sec. Litig.], 471 F.3d
[24,] 41 [(2d Cir. 2006)], that each requirement
is met before certifying a class. Like any
11
IV.
For the foregoing reasons, we will vacate the class
certification order and remand for proceedings consistent with
this opinion.
evidence, admissible expert opinion may
persuade its audience, or it may not. This point
is especially important to bear in mind when a
party opposing certification offers expert
opinion. The district court may be persuaded by
the testimony of either (or neither) party’s
expert with respect to whether a certification
requirement is met. Weighing conflicting expert
testimony at the certification stage is not only
permissible; it may be integral to the rigorous
analysis Rule 23 demands.
Hydrogen Peroxide, 552 F.3d at 323 (citations and footnote
omitted). See also generally id. at 324 (“That weighing expert
opinions is proper does not make it necessary in every case or
unlimited in scope. . . . In its sound discretion, a district court
may find it unnecessary to consider certain expert opinion
with respect to a certification requirement, but it may not
decline to resolve a genuine legal or factual dispute because
of concern for an overlap with the merits.”).
12