The judge in this case denied class certification, ruling that the plaintiffs failed to present “a viable methodology for establishing classwide antitrust injury and damages.”
Retained by Joint Counsel for the Defense
Judge Richard Seeborg of the U.S. District Court for the Northern District of California denied class certification to two groups of plaintiffs in a matter involving alleged price fixing by manufacturers of optical disk drives (ODDs). The plaintiffs claimed that the defendants engaged in bid rigging of certain direct purchasers’ prices of ODDs and that this alleged conduct was part of a larger industrywide conspiracy, causing prices for all direct purchasers to increase. Indirect purchaser plaintiffs claimed that the elevated ODD component costs were passed through to consumers in the form of higher prices for notebook and desktop computers, Xboxes, and external ODDs.
Central to this matter was whether the plaintiffs would be able to establish, using common proof, that all putative class members were similarly damaged.
In the indirect purchaser action, Cornerstone Research was jointly retained by counsel for the defendants. Our expert submitted a report in support of the defendants’ opposition to class certification. The analysis demonstrated that the claims made by the plaintiffs and the plaintiffs’ economic expert were fundamentally flawed and that the plaintiffs’ expert’s proposed methodology could not show that all or nearly all proposed class members were impacted by the alleged conspiracy. Judge Seeborg agreed with the opinions expressed in our expert’s report and found that the plaintiffs failed to present “a viable methodology for establishing classwide antitrust injury and damages.”
Central to this matter at the class certification phase was whether the plaintiffs would be able to establish, using common proof, that all putative class members were similarly damaged by the defendants’ alleged anticompetitive behavior. For indirect purchaser plaintiffs, this required establishing that any damages to direct purchaser plaintiffs were passed through distribution chains to indirect purchaser plaintiffs. Our expert based her opinions on a thorough analysis of market facts, including data produced by third parties in distribution chains between the defendants and indirect purchasers. She concluded that the plaintiffs’ expert failed to offer a methodology that could establish that an overcharge on an ODD would be passed through to indirect purchasers using common evidence.
In her report, our expert cited the various types, prices, pricing strategies, and costs of devices that contain ODDs, as well as the fact that an overcharge on an ODD would represent a small portion of the costs of the products purchased by indirect purchasers. She found that the indirect purchaser plaintiffs could not provide common evidence that the alleged overcharges on ODDs were passed from direct purchasers to the proposed indirect purchasers.
On October 3, 2014, Judge Seeborg denied class certification for both groups of plaintiffs, stating that the plaintiffs’ experts failed to pass the court’s “rigorous analysis” test now required under the evolving class certification standard. With respect to the proposed class of indirect purchasers and the issue of pass-through, Judge Seeborg cited evidence that ODDs account for a relatively small portion of the costs of the products into which they are incorporated. He also pointed to evidence regarding certain sellers’ pricing strategies in his conclusion that plaintiffs had not presented a persuasive explanation for their claims. He stated:
As in GPU, it would appear “that the only way to fully assess pass-through in this action would be to conduct a wholesaler-by-wholesaler and reseller-by-reseller investigation, which would essentially result in ‘thousands of mini-trials, rendering this case unmanageable and unsuitable for class action treatment.’”