Noodle this: Two significant orders on class certification in antitrust matters issued last week. Both were heavily influenced by the threshold determination of Daubert challenges to the plaintiffs’ expert evidence. In one court, the Daubert motions were denied and the classes were certified. In the other court, the expert evidence was excluded and the class certification requests were denied (and, indeed, two related classes were decertified).
On January 19, 2017, Judge William H. Orrick of the Northern District of California issued an order certifying two classes in an action alleging a conspiracy to raise the price of Korean noodles in Korea and the United States. The court certified a class of direct purchaser plaintiffs and a class of indirect purchaser plaintiffs. The gist of the allegations was that “the Korean conspiracy impacted the price of Korean Noodles sold in the United States and that they paid more for Korean Noodles than they would have in a competitive market.”
A fundamental premise of the plaintiffs’ claims was that Korean noodles are not your average ramen. “According to plaintiffs, Korean Noodles have a unique flavor profile and are different from Japanese or Chinese ramen products (which tend to be less spicy).” That is, the plaintiffs contended that the subject noodles are premium, high-end products that do not compete with well-known Japanese brands such as Nissin and Maruchan. The defendants, in contrast, asserted that these noodles do in fact compete with Japanese, Chinese, and other instant noodle products.
In certifying the proposed classes, the district court put off to another day the determination of the relevant market: “A final determination of the relevant market and what the defendants’ market power was in that relevant market need not be decided on this motion. Plaintiffs have made a showing that, if defined as the narrower Korean Noodle market, the defendants had market power to be able to increase prices in the United States (and there is no dispute that the defendants had that power in the domestic market in Korea). That showing, combined with the modicum of evidence that the prices in the United States market were set off of the prices in the Korean market, support a preliminary showing of market power and impact.”
In opposing class certification, the defendants challenged, under Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579 (1993), the plaintiffs’ expert evidence as to classwide injury and damages. In doing so, the defendants emphasized that the econometric models used by the plaintiffs’ experts were unreliable. “Defendants raise reasonable criticisms of plaintiffs’ experts’ opinions. But it is not my job to choose which side’s experts appear strongest, at least at this stage. Instead, I need to determine that the experts’ methodologies and opinions are sufficiently reliable to support certification of the class by a preponderance of the evidence and that the experts’ opinions are admissible.” The court denied the Daubert challenges.
One other interesting note is the court’s treatment of the choice-of-law analysis for the class of indirect purchaser plaintiffs. The court identified “the distinction between states who have repealed Illinois Brick and allow indirect purchaser plaintiffs to pursue price-fixing claims and those that have not.” The court certified only a class of indirect purchaser plaintiffs from the 24 repealer jurisdictions “for purposes of Rule 23(b)(3) under the Cartwright Act.”
One day earlier on the other side of the country, Judge C. Darnell Jones II of the Eastern District of Pennsylvania granted a motion to exclude expert testimony, denied class certification in a lead case and another related case, and decertified two previously certified class actions. The multidistrict litigation involved claims against companies providing pharmaceutical benefit management services. More specifically, the claims alleged that the defendants in price fixing conspiracies to reduce reimbursements to independent pharmacies.
For various reasons, the court determined that the expert evidence offered by the plaintiffs failed to satisfy the Daubert standard. For instance, the court determined that the “regression model, while asserting that there is a difference in reimbursement rates paid to [independent pharmacies] and chain pharmacies at the national level, does not attribute that differential solely to illegal conduct.” The court also determined that the expert evidence was unreliable under Comcast Corp. v. Behrend, 133 S. Ct. 1426 (2013), in that it did not track the different theories of liability. “The teaching of Comcast is that antitrust plaintiffs must match a damages model to their theory of liability. The failure to do so here may well lead to the same paradox condemned in Comcast, i.e., a damages model unattributed to any specific theory of antitrust impact being accepted at class certification with the possibility of one or more of those theories ultimately rejected under Rule 56 or at trial.”
After it ruled that the expert evidence would be excluded, the court proceeded to address the class certification issues. It determined that the plaintiffs failed to satisfy the typicality, adequacy, cohesiveness, predominance, and superiority requirements for certification.
The court concluded that “[r]igorous analysis of pending class certification Motions leads to the conclusion that Plaintiffs’ expert submissions fail to pass Daubert scrutiny and that Plaintiffs are unable to meet their burdens under Rule 23.” The court thus granted the defendants’ motion to exclude the expert evidence, denied plaintiffs’ motions for class certification in the lead case, and decertified classes previously certified in related cases.
In sum, two courts with two distinctly different perspectives on how rigorous a Daubert analysis must be on class certification reached diametrically opposite results. Yin and yang.
In re Korean Ramen Antitrust Litigation, Case No. 13-cv-04115-WHO, 2017 WL 235052 (N.D. Cal. Jan. 19, 2017).
In re Pharmacy Benefit Managers Antitrust Litigation, Civil Action No. 06-1782, D.E. 282 (E.D. Pa. January 18, 2017).