Class Certification Fights Derail Rail Freight Antitrust Case As Sears And Whirlpool Cases Move To Next Cycle

The U.S. Court of Appeals for the D.C. Circuit has rejected a district court’s certification of an antitrust class action in In re Rail Freight Fuel Surcharge Antitrust Litigation, becoming the third U.S. Court of Appeals in recent months to grapple with whether, and to what extent, class action plaintiffs must show that damages can be measured on a classwide basis under the Supreme Court’s March 2013 decision in Comcast Corp. v. Behrend.

While the D.C. Circuit reversed the D.C. district court’s certification of a class in the Rail Freight case, class action plaintiffs survived the heightened Comcast standard for showing classwide damages in decisions by the Seventh Circuit, in Butler v. Sears, Roebuck, & Co., and by the Sixth Circuit, in Whirlpool v. Glazer, in both of which class certification was upheld for claims involving washing machine defects.

These cases demonstrate how class action plaintiffs and defendants are navigating the new ground rules resulting from the Comcast decision.  In a recent article, Constantine Cannon’s Ankur Kapoor looked at how Comcast is affecting the battles over class certification in the federal courts.

In Comcast, the U.S. Supreme Court rejected certification in an antitrust class action against Comcast, the nation’s biggest cable provider.  The plaintiffs in that case argued that Comcast was monopolizing the Philadelphia market and illegally raising prices.  In a 5-4 decision, the Supreme Court rejected certification because the plaintiffs failed to offer an adequate method for establishing damages for millions of customers.  The court stated “it is clear that, under the proper standard for evaluating certification, respondents’ model falls far short of establishing that damages are capable of measurement on a classwide basis,” and therefore “individual damage calculations will inevitably overwhelm questions common to the class.”

In Rail Freight, the plaintiffs alleged that thousands of companies paid higher prices as a result of a price-fixing conspiracy by the four largest freight railroads companies in the United States.  The D.C Circuit reversed the district court’s certification of the class and remanded the case for reconsideration in light of Comcast.  The D.C. Circuit focused on whether the plaintiffs could satisfy the predominance requirement for class actions under Federal Rule of Civil Procedure 23 by showing, “through common evidence, injury in fact to all class members.”

The court found that the plaintiff’s damages’ model detected injury in “legacy contracts” that were negotiated before any alleged conspiracy took place, and therefore the plaintiffs’ damage model identified “injury where none could exist.”  In rejecting class certification, the D.C. Circuit further stated that “certification is far from automatic…[A]s we see it, [Comcast] sharpens the defendants’ critique of the damages model as prone to false positives.”  The court added that it was “indisputably the role of the district court to scrutinize the evidence before granting certification ….”  In summary, the court stated:  “No damages model, no predominance, no class certification.”

In Butler v. Sears, however, the Seventh Circuit found, in a decision authored by Judge Richard Posner, that class certification was appropriate under the Comcast standard.  In that case, the plaintiffs sought certification of two classes of consumers that purchased Sears washing machines.  The first class purchased washing machines that allegedly had a defective control unit that caused them to stop randomly.  The second class purchased machines that allegedly had a design defect that caused mold to build up.  The district court certified the control unit class, but rejected certification of the mold class.  On appeal, the Seventh Circuit approved certification for both classes.

The Supreme Court took up Butler and remanded the case back to the Seventh Circuit in light of Comcast.   On remand, the Seventh Circuit reaffirmed its prior ruling and preserved certification for both classes.  In clarifying the predominance standard of Rule 23, the court held that “Predominance is a question of efficiency.”  The court reasoned that “there is a single, central, common issue of liability: whether the Sears washing machine was defective.”  The court further stated that “it would drive a stake through the heart of the class action device, in cases in which damages were sought, to require that every member of the class have identical damages.”

In Whirlpool, a similar class action case to Butler, the Sixth Circuit also reached a similar result.  In that case, the plaintiffs also alleged a mold problem in washing machines purchased by a class of consumers.  The Supreme Court reversed the Sixth Circuit’s affirmance of class certification and remanded “for further consideration in light of Comcast.”  Like the Seventh Circuit in Butler, the Sixth Circuit reaffirmed certification after remand.

The Sixth Circuit held that the plaintiffs could pursue their class action because they shared “common questions” about the machines’ alleged design flaws.  The court stated that Rule 23 does not mandate that a plaintiff seeking class certification “prove that each element of a claim can be established by classwide proof.”  The court added, “what the rule does require is that common questions ‘predominate over any questions affecting only individual [class] members.’”

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