September 13, 2019 Practice Points

The D.C. Circuit Affirms Denial of Class Certification Because Antitrust Plaintiffs Failed to Offer Proof of Classwide Injury

The court’s opinion provides excellent guidance to counsel handling class action claims.

By D. Scott Carlton

In a decision highlighting the importance of common proof for class action claims, the United States Court of Appeals for the District of Columbia Circuit recently issued an opinion affirming the denial of class certification to a plaintiff group of rail shippers. See In re Rail Freight Fuel Surcharge Antitrust Litig. - MDL No. 1869, No. 18-7010, 2019 WL 3850581 (D.C. Cir. Aug. 16, 2019). The court’s opinion provides a detailed analysis of the common proof requirement for those claims necessitating evidence of causation and injury, and thus it offers excellent guidance to counsel handling class action claims.  

The appeal arose from multi-district litigation that consolidated eighteen antitrust actions. The plaintiffs alleged that the nation’s largest freight railroads conspired to fix rate-based fuel charges, which purportedly violated Section 1 of the Sherman Act, 15 U.S.C. § 1. The plaintiffs also sought damages under Section 4 of the Clayton Act, 15 U.S.C. § 15. Relevant here, Section 4 requires a plaintiff to prove injury “in his business or property by reason of anything forbidden in the antitrust laws.” 15 U.S.C. § 15(a).

Following consolidation, the “direct-purchaser plaintiffs” moved for class certification under Rule 23(b)(3) of the Federal Rules of Civil Procedure. To obtain class certification, the plaintiffs were required to show that each member of the proposed class suffered “injury to its business or property and a causal relation between the two.” Plaintiffs offered two regression models—a “common factor model” and a “damages model”—constructed by an economist as evidence that causation injury and damages could be established on a classwide basis. The “damages model”, however, showed that 2,037 members of the 16,065 class suffered no injury as a result of the alleged conspiracy since those members received “only negative overcharges.”

Relying on the Supreme Court’s decision in Comcast Corp. v. Behrend, 569 U.S. 27 (2013), the D.C. Circuit noted the plaintiffs’ obligation to offer common proof of both injury and causation. Without common proof, the court acknowledged that individual issues of injury would predominate. Plaintiffs’ damages model, however, showed that 12.7 percent of the proposed class (2,037 members) suffered no injury at all.

The court rejected the plaintiffs’ argument that any lack of injury fell within any de minimus exception to the common injury requirement. Plaintiffs were also unable to offer an alternative, “short of full-blown, individual trials,” to determine whether individuals in the class suffered injury as a result of the alleged price-fixing conspiracy. The court further rejected plaintiffs’ contention that individualized issues of injury should be deferred by the district court. The court held that such an approach is inconsistent with the “hard look” required of district courts by Comcast and Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338 (2011).

In addition to the regression models, plaintiffs relied on evidence that defendants “enforced fuel surcharges ‘uniformly and with few exceptions.’” The court held that such evidence failed to address the causation element because “imposing fuel surcharges does not show injury caused by the conspiracy.” Finally, plaintiffs invoked a study showing that a group of one-time shippers within the putative class may have paid higher prices collectively. The study, however, failed to identify those shippers or the percentage of them that “were in fact harmed by the alleged conspiracy.”

The D.C. Circuit’s decision demonstrates the importance of offering common proof for each element of a claim during the class certification stage. When causation and injury are necessary elements of a claim, common proof of classwide injury can become particularly tricky. Plaintiffs therefore must be particularly scrupulous with respect to the common proof they offer to address the injury and causation components.

D. Scott Carlton is of counsel with Paul Hastings in Los Angeles, California.

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