Antitrust Law Daily Wrap Up, ANTITRUST NEWS: High Court asked to review certification in “gargantuan” class action, (Nov 20, 2014)

By Jeffrey May, J.D.

In consolidated multidistrict litigation against manufacturers of flexible polyurethane foam for conspiring to fix prices, defending manufacturers have asked the U.S. Supreme Court to weigh in on the appropriate standards for class certification and to review certification in the “gargantuan” class action that is “likely the largest class action ever certified.” The defending manufacturers contend that the class action “sweeps together dissimilar purchasers of a vast number of distinct products sold by disparate groups of varying Defendants at varying prices in a variety of markets over more than a decade” (Carpenter, Co. v. Ace Foam, Inc., Dkt. 14-577).

The manufacturers’ petition for certiorari was filed on November 18. It follows a September 29 decision of the U.S. Court of Appeals in Cincinnati, denying the manufacturers’ petition for permission to appeal a district court’s grant of class certification. The appellate court also has denied motions to reopen the appeal in order to file an emergency motion to stay issuance of class notice. In April, the federal district court in Toledo, Ohio, granted certification of two classes: a direct purchaser class and an indirect purchaser class. These class members, which range from furniture manufacturers purchasing seat padding to individuals buying pillows, seek more than $9 billion in treble damages, according to the petitioners. It is suggested that the two classes could collectively include hundreds of millions of American consumers and businesses.

In their petition, the manufacturers contend that the Court should correct the “fundamentally flawed standards used to justify the certification” in this case “at this juncture because the extraordinary amount of damages sought by Plaintiffs virtually ensures that the mere fact of class certification will end this litigation, regardless of the underlying merits of Plaintiffs’ claims.” They contend that the class action includes uninjured class members and that the appellate court's sanctioning of the certification order exacerbates the conflict in the circuits over whether absent class members must have Article III standing. The petitioners also suggest that the decision deepens a split among the circuits regarding the impact of individualized damages issues on the predominance requirement of Federal Rule of Civil Procedure 23(b)(3).

Specifically, the petitioners ask: (1) whether the standing requirements under Article III apply to all members of a class certified under Rule 23; and (2) whether certifying a class under Rule 23(b)(3) is proper where individualized damages issues predominate, and where plaintiffs rely exclusively on aggregate damages models that calculate damages purportedly incurred by the class as a whole, rather than by individual class members.

The petitioners argue that review is needed on the ground that the Sixth Circuit and three other circuits have defied the High Court’s March 2013 decision in Comcast Corp. v. Behrend (133 S.Ct. 1426, 2013-1 Trade Cases ¶78,316). In Comcast, the U.S. Supreme Court concluded that a class of cable television subscribers was improperly certified to pursue antitrust claims against the cable provider. The Court in Comcast held that the plaintiffs’ damages model fell short of establishing that damages were capable of measurement on a class-wide basis. The petitioners contend that the “manifestly erroneous view of Comcast—under which damages issues are treated as irrelevant to the predominance analysis and cannot preclude class certification under Rule 23(b)(3)—dictated the district court’s class certification analysis in this case.”

Attorneys: Theodore J. Boutrous Jr. (Gibson, Dunn & Crutcher, LLP) for Carpenter Co. William Isaacson (Boies, Schiller & Flexner LLP) and Stephen Neuwirth (Quinn Emanuel Urquhart & Sullivan, LLP) for Direct Purchaser class. Marvin Miller (Miller Law LLC) for Indirect Purchaser class.

Companies: Ace Foam, Inc.; Carpenter Co.

News: Antitrust