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D.C. Circuit Says “All Means All” When Proving Injury to Class Members

V&E Antitrust Update, September 3, 2019

The D.C. Circuit is the latest appellate court to weigh in on one of the most important issues in class certification under Rule 23(b)(3): whether a damages class meets the predominance requirement, and thus whether the class can be certified, if it contains class members uninjured by the alleged conduct. In In re Rail Freight Fuel Surcharge Antitrust Litigation (Rail Freight II), the Court said no.1 Relying on recent decisions by the First Circuit in In re Asacol Antitrust Litigation and In re Nexium Antitrust Litigation, the D.C. Circuit acknowledged that there may be a de minimis exemption, but left little room for its application and refused to say what that exemption might look like.2 The D.C. Circuit thus joins a growing number of circuits holding that class certification should be denied if plaintiffs’ injury model sweeps in persons that could not have been injured, and it takes arguably the narrowest interpretation of how many uninjured class members is too many.

Background of the Case

The Rail Freight cases involves a group of over 16,000 shippers allegedly harmed by a price-fixing conspiracy between four of the largest freight railroads in the U.S. The shippers, who are customers of the railroads, allege that the railroads conspired to fix the rate-based fuel surcharges, which is an additional charge above the shipping price that applies when fuel rises above a certain level.

Eight named plaintiffs in the direct purchaser case moved to certify a class under Rule 23(b)(3) consisting of all shippers who paid rate-based fuel surcharges for unregulated services purchased from the defendants between July 1, 2003 and December 31, 2008. In Rail Freight I, the district court initially certified the class in 2012.3 The court did not address the issue of “false positives” — that is, uninjured class members — that the plaintiffs conceded their damages model included. The D.C. Circuit vacated the certification on interlocutory review in light of the Supreme Court’s decision in Comcast Corp. v. Behrend,4 and remanded the case to the district court, expressing concern that the presence of uninjured class members erodes the predominance requirement of Rule 23(b)(3).5 Rail Freight II represents the second attempt by the plaintiffs to obtain class certification, this time unsuccessfully.6 The district court pointed out, among other things, the presence of over 2,000 uninjured class members — or 12.7% of the proposed class — in the plaintiffs’ damages model.

The D.C. Circuit’s Opinion in Rail Freight II

The D.C. Circuit took a tough stance on Rule 23(b)(3)’s predominance requirement, citing its own language in Rail Freight I that predominance requires plaintiffs to “show that they can prove, through common evidence, that all class members were in fact injured by the alleged conspiracy.”7 The Court thus officially took an “all means all” interpretation of injured class members, but it went on to agree — albeit for the sake of argument — that even under the district court’s analysis of a “virtually all” or de minimis standard, a class with 12.7% uninjured members far exceeds wherever the standard may be.

In so ruling, the Court recognized the broader debate over when the need for individualized proof of injury and causation (i.e., the presence of uninjured or potentially uninjured class members) destroys predominance. The Court reiterated the district court’s observation in Rail Freight II that 5 to 6% of uninjured class members is the outer limits of de minimus under existing law. The Court also agreed with the First Circuit in Asacol that the absolute number estimate of uninjured class members is relevant to a practical determination of predominance; filtering out 10% of a 60 member class is obviously easier than 10% of a 6,000 person class.

The D.C. Circuit also rejected plaintiffs’ efforts to minimize the extent of uninjured shippers. The plaintiffs argued that the uninjured class members were a de minimis portion of the class because they represented less than 1% of the railroads’ revenue from the alleged conspiracy. But the D.C. Circuit held that “revenue is irrelevant to predominance, which looks to whether elements such as causation and injury may be proved through common evidence, not how much the defendants benefited from any wrongdoing.”8 The plaintiffs also pointed to evidence outside the damages model suggesting that those shippers actually were injured, but the D.C. Circuit found the evidence incomplete and inconclusive about whether those shippers were injured or not.9

The Court did not do future plaintiffs any favors. First, its language is carefully crafted to be read as upholding a requirement that plaintiffs must show some injury to all class members: the Court discusses but does not adopt the district court’s de minimis exemption, and the Court characterizes the 5 to 6% threshold as a standard set by other courts. Second, the Court chops away at the First Circuit’s Nexium case, something the First Circuit did itself in Asacol. For a full analysis of the First Circuit’s approach to class injury in those decisions, see our summary here. In Nexium, the First Circuit held that plaintiffs could prove injury by providing affidavits with unrebutted testimony by class members affirming injury. The D.C. Circuit minimized the importance of Nexium, restricting its application not only to cases where the injury-in-fact claims will go unchallenged, but also to cases where the question presented in the challenge is more complex than a binary answer.10

Takeaways

Recent opinions on whether a class can be certified with uninjured class members are trending in favor of defendants. First, plaintiffs should be wary of relying on Nexium’s suggestion that individualized means of showing injury are acceptable at the class certification stage. In cases where there would be “genuinely contested affidavits” posing anything more than a “single unitary question,” courts have refused to certify the class.11

Second, it is becoming increasingly important for plaintiffs to develop a damages model that credibly shows injury to “virtually all” class members, and likewise that defendants have a stronger case to challenge damages models that credibly fail to show injury to virtually all class members. When the plaintiffs’ model shows uninjured class members, the Rail Freight II decision suggests that courts will take a dim view if plaintiffs try to remedy that flaw by relying on other evidence to establish those class members really were injured. When it comes to proving that class members were injured in the D.C. Circuit, for now, all still means all.

Visit our website to learn more about V&E’s Antitrust practice. For more information, please contact Vinson & Elkins lawyers Alden Atkins or Ryan Will.

1 In re Rail Freight Fuel Surcharge Antitrust Litig., No. 18-7010, 2019 WL 3850581 (D.C. Cir. Aug. 16, 2019).

Id. at *4-5 (citing In re Asacol Antitrust Litig., 907 F.3d 42 (1st Cir. 2018); In re Nexium Antitrust Litig., 777 F.3d 9 (1st Cir. 2015)).

In re Rail Freight Fuel Surcharge Antitrust Litig. (Rail Freight I), 287 F.R.D. 1, 43 (D.D.C. 2012), vacated, 725 F.3d 244 (D.C. Cir. 2013).

Comcast Corp. v. Behrend, 569 U.S. 27 (2013) (vacating class certification where plaintiffs’ damages model did not correspond to plaintiffs’ theory of antitrust injury).

Rail Freight I, 725 F.3d at 253-55.

In re Rail Freight Fuel Surcharge Antitrust Litig., 292 F. Supp. 3d 14 (D.D.C. 2017).

Rail Freight II, 2019 WL 3850581, at *4 (quoting Rail Freight I, 725 F.3d at 252).

Id. at *6.

Id.

10 Id. at *5.

11 Id.


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This information is provided by Vinson & Elkins LLP for educational and informational purposes only and is not intended, nor should it be construed, as legal advice.