Opinion ID: 354255
Heading Depth: 1
Heading Rank: 3

Heading: The National Class Certification

Text: 39 An analysis of the national class certification should begin by examining the district court's order. Judge Varner's Order and Memorandum Opinion deals initially with the requirements of 23(a). After establishing that these requirements have been satisfied, 22 the court then turns to the predominance and superiority requirements of 23(b)(3). As to the first of these requirements (that questions of law or fact predominate over any questions affecting only individual members), the district court begins by rejecting the defendants' argument that individual proof of injury and damages will be necessary as to each class member, and, therefore, common issues will not predominate. The court reasoned that: 40 Acceptance of this argument would effectively preclude the use of class actions in antitrust cases. It is too widely recognized to require citation that antitrust price-fixing cases are particularly suited for class action treatment in spite of the fact that the fact of injury and the amount of damages may require individual proof by class members. . . . Furthermore, the Court cannot share Defendants' viewpoint that the fact of injury, as distinct from the amount of damages, will not be susceptible of generalized proof. . . . It is the opinion of this Court that proof, that artificially high price levels prevailed in the national school bus market as a result of the conspiracy alleged herein will constitute proof of the fact of injury to the class of purchasers of such buses. . . . In the opinion of this Court, none of Defendants' other arguments on the issue of predominance of common questions is of sufficient weight to counterbalance the fact that the central and predominant issue herein is whether or not Defendants have acted to monopolize or restrain trade in school buses. 41 App. 166-167. 42 The contention of the defendants which the district court considered the more serious is whether the class action is the superior method to deal with this controversy, and, in particular, the question of manageability. The manageability problem envisioned by the district court was whether the certification of the nationwide class would cause this court to be swamped with . . . hundreds of individual proceedings to determine the amount of individual damages suffered by individual class members. App. 168. The district court recognized that, in light of the variations in purchasing methods and other incidents of sale presented by the defendants, it may indeed be necessary to treat all or many damage claims individually. Thus, the court stated: 43 In the face of this possibility, it would be irresponsible for the Court to certify the classes herein, and especially the nationwide class, without first satisfying itself that there exists a mechanism for avoiding such a paralyzing development. Upon consideration, the Court has proposed that it can, without going beyond its statutory powers and without violating the constitutional and statutory rights of Defendants, bifurcate the trial of the matter, and, after a jury determination, if any, of the issue of liability of nation-wide Defendants in this Court, sever the cases of class members or groups of members separated geographically and transfer the severed cases to other district courts for trial of all remaining issues, which will be primarily or exclusively damage issues. 44 App. 169. 45 A reading of the district court's order seems to lead to the conclusion that the court intended to allow a nationwide class to exist only for a determination of the issue of liability. In fact, Judge Varner recognized that the national class would be totally unmanageable if he alone had to handle all the issues of the case. A review of the district court's order, therefore, must focus in on the propriety of the certification for this limited purpose, and then, if appropriate, examine the bifurcation, severance, and transfer plan proposed by Judge Varner. 46 Judge Varner certified the national class for a determination of liability after explaining that the question common to the class was the existence of an antitrust violation. App. 167. We stated earlier, however, that the issue of liability in antitrust cases includes not only the question of violation, but also the question of fact of injury, or impact. See Terrell v. Household Goods Carriers' Bureau, 494 F.2d 16, 20 (5th Cir. 1974). Therefore, for the certification of the national class to be upheld, we must determine whether the existence of the antitrust violation is a question common to all members of the class, and, if so, whether this question predominates over all other issues which affect only individual members of the class. In making the determination as to predominance, of utmost importance is whether impact should be considered an issue common to the class and subject to generalized proof, or whether it is instead an issue unique to each class member, and thus the type of question which might defeat the predominance requirement of 23(b)(3).A. The Antitrust Violation and the Requirement of a Question Common to the Class. 47 The district court's order finds that proof of the national conspiracy is a question common to the class. 23 Unfortunately, we are presently unable to agree with this conclusion because the little evidence that there is in the record as to how the plaintiffs intend to establish the conspiracy seems to indicate that proof of the conspiracy cannot be made in a manner common to all members of the class. 48 The evidence brought to our attention by the plaintiffs as to how they plan to establish this nationwide conspiracy was set forth in their brief and consists of a deposition of one of the Alabama distributors. According to the plaintiffs, this deposition is substantial evidence that the manufacturers decide what price their distributor is to bid in any given situation. Brief of Appellees at 6. An examination of this deposition, however, reveals that it is evidence of nothing more than the fact that antitrust violations might have occurred in Alabama and several other southern states. The deposition in no way establishes a nationwide conspiracy. For example, the Alabama distributor gave the following response when asked about how he would seek competitive allowances from one of the manufacturers: 49 Q. And what would you tell (the manufacturer)? 50 A. Tell him I had an invitation to bid in such and such a county for five buses, what do you want me to do. I mean, are you going to help me on this bid, or do you know you know, I can't bid if you don't help me, you know. . . . 51 Q. All right. If he couldn't help you, then you just didn't bid at all? 52
53 App. 70-71. 54 The distributor testified further that the manufacturer he dealt with had never given him a competitive allowance in Jefferson and Montgomery counties and that he had also never been the low bidder in those counties. The situation, however, was different in Mobile County where the distributor was the low bidder so long as he was given a competitive allowance. App. 42-43. As to the effect of this conspiracy on states outside of Alabama, the plaintiffs' only evidence consists of the following portion of a letter from the same Alabama distributor to his manufacturer: 55 With this thought in mind, I think the pending anti-trust suit in Alabama should be discussed. If this suit is filed, you can believe it will be against my company and Thomas Built Buses, Inc. What action do you plan to take from a local standpoint? There are many hidden factors concerning this type which should be discussed. I predict suits will eventually be filed in other southern states, such as Tennessee, Mississippi, and Louisiana. What policy does Thomas have concerning past regional sales managers in these areas? The present price situation in Alabama is largely due to price policies in North Carolina, South Carolina, and Florida, of which Thomas is a part. 56 Brief of Appellees at 7. 57 The district court's error in certifying this nationwide class for a determination of liability was in failing to take the steps necessary to determine the manner in which the plaintiffs proposed to prove the antitrust violation. No one questions that it is the plaintiffs who have the burden of establishing that all requirements of Rule 23 have been met, and in this case they have failed to prove to us that there are any common issues of law or fact which predominate over individual issues. The excerpts from the deposition of the Alabama distributor are probative only of the possibility of an Alabama conspiracy they in no way establish that a price fixing scheme was contemplated in California, New York, Idaho, etc. Of greater importance, however, is whether we are supposed to infer from this offer of proof by the plaintiffs that this is the manner in which they plan on establishing the nationwide conspiracy i.e. by an examination through testimony, exhibits, etc., of the various school bus markets on a state by state basis. If this is the situation, then we fail to see how common issues of fact predominate. Of course, it may very well be that if the plaintiffs had been allowed discovery as to this point they would have uncovered evidence which not only would have established a nationwide conspiracy, but evidence which at the same time would have been common to all members of the class. It may be that the plaintiffs have this evidence now. We only point out that in a situation wherein one seeks to represent a nationwide class in order to obtain redress for harm done from a nationwide conspiracy consideration should be given to whether the addition or subtraction of any of the plaintiffs to or from the class will have a substantial effect on the substance or quantity of evidence offered. If such addition or subtraction of plaintiffs does affect the substance or quantity of evidence offered, then the necessary common question might not be present. 24 This point limits somewhat the breadth of Judge Varner's statement that antitrust price-fixing cases are particularly suitable for class action treatment. App. 166. While this statement is generally true, this particular litigation might not fit into the category of a classic antitrust price-fixing conspiracy where all legal and factual issues relating to the conspiracy are uniformly related to all those allegedly harmed. Rather, in this case neither the products involved nor the purchasers appear to be standardized. The plaintiffs' class includes different sizes of governmental buyers, operating under different conditions throughout the United States, and the products involved, while commonly known as school bus bodies, apparently differ in many respects and have been marketed under various arrangements at different times. 25 Because of these factors, the defendants contend that a common scheme to rotate bids, fix prices, etc., cannot be demonstrated as to all defendants. While we do not necessarily agree with this assessment, it does appear from the limited record before us that the plaintiffs plan to proceed state by state and prove by varying evidence fifty different price-fixing conspiracies. Possibly the plaintiffs think if they can prove that a conspiracy existed in every state, they can then term these different violations one nationwide conspiracy. If this is indeed the plaintiffs' plan, then the national class should not have been certified since there would be no evidence linking the different conspiracies to each other in order to establish the one common conspiracy. 26 Common issues of fact do not predominate in such a situation even though all the plaintiffs might have separate causes of actions against the same defendants based upon similar theories of recovery. 58 The Court, however, is presently unable to make the determination as to whether the conspiracy issue is a question common to the class. It would be unfair for us to make this determination based on the present state of the record since the plaintiffs have been placed at a severe disadvantage by the district court's decision to prohibit discovery. Consequently, a remand of this case is necessary, and, on remand, the plaintiffs should be afforded the opportunity to attempt to establish through appropriate discovery the proper predicate for class certification. 59
60 Assuming that at some point the district court finds that the conspiracy issue is a question common to the class, the court must then decide whether this question predominates over all other issues which affect only individual members of the class, and whether the class action is the superior method to deal with this controversy. As to the predominance issue, the district court has already explained that the question of damages is an individual question. 27 Also of great significance, however, is whether the question of impact is likewise a question unique to each member of the class. The district court was of the opinion that proof of impact as to each member of the plaintiffs' class could be made in a generalized manner, and that it would not be necessary at the trial on liability for each member of the plaintiffs' class to prove this factor on an individual basis. If the district court is correct on this point, then the conspiracy issue might well predominate over all other individual issues. But, if generalized proof of impact is in fact improper, then the district court must carefully consider whether this requirement of individual proof does not defeat the class certification on either predominance or manageability grounds. 61 The defendants admit that some price-fixing cases are suitable for class action treatment by virtue of their factual simplicity an unlawful overcharge with respect to a homogeneous or fungible product which was marketed in a similar manner throughout the country. In this type of situation, impact and buyer become almost synonymous, and, therefore, once the illegal overcharge as to the homogeneous products has been established, it is most reasonable to assume injury or impact upon a showing of proof of purchase. The defendants, of course, argue that this case is dramatically different from such an example. Because of the unique nature of the product and the different modes of purchase, the defendants assert that an individual examination involving each class member is required before a decision as to impact can be made. In effect, the defendants contend that no facet of the competitive situation in one state is relevant to the competitive situation in another state. The plaintiffs counter these arguments by citing a Second Circuit case which basically reiterates the defendants' example of those cases which are fit for class action treatment. In In re Master Key Antitrust Litigation, 528 F.2d 5 (2nd Cir. 1975), the Second Circuit stated: 62 If the appellees establish at the trial for liability that the defendants engaged in an unlawful national conspiracy which had the effect of stabilizing prices above competitive levels, and further establish the appellees were consumers of that product, we would think that the jury could reasonably conclude that appellants' conduct caused injury to each appellee. 63 Id. at 12 n. 11. 64 Several circuits have concerned themselves with the question of what type of proof is required in order to satisfy the impact issue. The above quote reflects the position taken by the Second Circuit in one particular case. Master Key involved an alleged conspiracy by four defendants (manufacturers of builders' hardware and lock and key systems) to fix prices and to eliminate inter-and intraband competition among their dealers. It is of course impossible for us to know whether the rather broad language used by the Second Circuit in its opinion means that proof of purchase will always satisfy the impact requirement in price-fixing cases once violation has been established. 28 65 The Third Circuit has recently dealt with this problem of impact and class certification. In Bogosian v. Gulf Oil Corp., 561 F.2d 434 (3rd Cir. 1977), sixteen major oil companies were sued by two independent service station dealers who sought class certification on behalf of all present and former lessee gasoline dealers of the defendants. The gravamen of the plaintiffs' complaint was that the defendants jointly imposed a system of lease arrangements which eliminated price competition among defendants on sales to independent dealer lessees. 29 The district court refused to certify the plaintiffs' class partly because the fact of damage element would have to be proven on an individual basis. The Third Circuit, however, reversed this decision, and in so doing dealt extensively with the impact problem. The court recognized that fact of damage is nothing more than the simple concept of causation, and that any evidence which is logically probative of a loss attributable to the violation will satisfy this element. The Court explained that: 66 There is absolutely no requirement that the loss be personal or unique to plaintiff, so long as the plaintiff has suffered loss in his business or property, for as we have noted, this second aspect of fact of damage is not concerned with any policy of limiting liability. Thus, when an antitrust violation impacts upon a class of persons who do have standing, there is no reason in doctrine why proof of the impact cannot be made on a common basis so long as the common proof adequately demonstrates some damage to each individual. Whether or not fact of damage can be proven on a common basis therefore depends upon the circumstances of each case. 67 Id. at 454. 68 The Bogosian Court felt that their position of allowing generalized proof of impact in certain situations was in no way at variance with the cases in other circuits, 30 and the Court did set forth some examples of those situations which it felt were appropriate for generalized proof of impact. 31 Ultimately, however, the Bogosian Court was unable to make a determination as to whether generalized proof of impact was proper in the case before it because neither the district court nor the parties had focused upon the factors which the Court considered determinative of that question. 69 Recently, the Fourth Circuit, sitting en banc, has had the opportunity to address the impact question. Windham v. American Brands, Inc., 565 F.2d 59 (4th Cir. 1977), deals with the attempts of growers of flue-cured tobacco in South Carolina to have certified as a class action their antitrust suit against various tobacco companies and the Secretary of Agriculture. The proposed class of South Carolina tobacco growers numbered approximately 20,000. The plaintiffs' complaint alleged that the tobacco manufacturers, with the knowledge and consent of the Secretary of Agriculture, conspired to fix prices and rig bids on flue-cured tobacco at the South Carolina tobacco auction markets, and also that these same defendants conspired to monopolize these auction markets by percentage purchase agreements and collusive bidding. 70 The Windham Court recognized initially that the gravamen of the complaint is not the conspiracy; the crux of the action is injury, individual injury. Id. at 66. Furthermore, the Court noted that while a case may present a common question of violation, the issues of injury and damage remain the critical questions in antitrust cases and are always strictly individualized. Id. The Windham Court did recognize the existence of an apparent conflict in authority regarding the impact question, and, in its affirmance of the district court's order denying class certification, 32 the Court dealt with this conflict by explaining: 71 This conflict in result among the decisions seems to reflect more a factual difference in the cases themselves than a difference over legal principles. Thus in cases where the fact of injury and damage breaks down in what may be characterized as virtually a mechanical task, capable of mathematical or formula calculation, the existence of individualized claims for damages seems to offer no barrier to class certification on grounds of manageability. On the other hand, where the issue of damages and impact does not lend itself to such a mechanical calculation, but requires separate 'mini-trial(s) of an overwhelming large number of individual claims, courts have found that the staggering problems of logistics thus created make the damage aspect of (the) case predominate, and render the case unmanageable as a class action. 72 Id. at 68 (footnotes omitted). 73 We have noted earlier in this opinion that this Circuit places great importance on the impact element of an antitrust cause of action. In Shumate & Co., Inc. v. National Ass'n of Sec. Deal., Inc., 509 F.2d 147 (5th Cir. 1975), we stated that, Whatever the nature of the alleged conspiracy . . . injury is the sine qua non for stating a cause of action. Id. at 152. We also explained that there could be no recovery of any amount of damage where the jury could only speculate either as to its occurrence or as to its causal relationship to the anticompetitive activity. 33 Id. at 153. 74 This Court has not had the opportunity to deal extensively with exactly what type of proof will establish the impact element of an antitrust cause of action, and the effect this proof will have on class certification. The Shumate Court dealt briefly with the question when it refused to reverse a district court's denial of a class certification. This denial rested on the district court's conclusion that even if a conspiracy was established by the plaintiffs' class, the controlling question as to liability was whether a class member had suffered injury. Id. at 155. Consequently, the district court decided that the difficulties likely to be encountered in maintaining the case as class actions outweighed the benefits. Id. On appeal, this Court held: 75 This case is different from one where liability can be shown as to all class members, with only the amount of damage to be determined as to each. In this antitrust case the proof of injury to business or property of each class member is critical for the determination of defendants' liability to any individual. The district court was within its discretion in deciding that common questions of fact do not predominate. See F.R.Civ.P. 23(b)(3); Smith v. Denny's Restaurants, Inc., 62 F.R.D. 459 (N.D.Cal.1974); Kinzler v. New York Stock Exchange, 62 F.R.D. 196 (S.D.N.Y.1974); Gneiting v. Taggares, 62 F.R.D. 405 (D.Idaho 1973). 76 Id. 77 The holding in Shumate affirming the district court's denial of a class certification is a recognition by this Court that the fact that a case is proceeding as a class action does not in any way alter the substantive proof required to prove up a claim for relief. The holding is also a recognition that impact is a question unique to each particular plaintiff and one that must be proved with certainty. That does not mean of course that cases do not exist wherein this requirement of certainty cannot be established by some sort of classwide proof. 34 But it does mean that cases do exist wherein generalized proof of impact would be improper. Let us assume, for example, that in the case before us the plaintiffs can establish the nationwide conspiracy by some sort of common proof i. e. the plaintiffs uncover some memoranda between the presidents of the school bus companies which discussed fixing prices nationwide. Given such a situation, each plaintiff must still prove that this conspiracy was actually implemented in his state and that it did in fact cause him injury. This proof of injury in a price-fixing case will generally consist of some showing by the plaintiff that, as a result of this conspiracy, he had to pay supracompetitive prices for school buses. If there was some uniformity in the quality and price of a school bus, then this requirement of impact might cause few problems. 35 But, given the diverse nature of the school bus market, we have difficulty envisioning how the plaintiffs can prove in a manageable manner that the conspiracy was indeed implemented in a particular geographical area, and that it did in fact cause damage. 36 More specifically, we do not understand how the plaintiffs can make this proof without examining the relevant school bus market where each individual plaintiff is located. If such particularized proof is necessary, then it would seem to us that each individual plaintiff's claim would receive more thorough consideration in individually litigated actions. 37 Also, and equally important, is the fact that if the effect of class certification is to bring in thousands of possible claimants whose presence will in actuality require a multitude of mini-trials (a procedure which will be tremendously time consuming and costly), then the justification for class certification is absent. 78 We are not attempting, however, to hold as a matter of law that the impact requirement in the case before us defeats any possibility of a class certification. It may be that the defendants' description of the school bus industry is inaccurate or that the plaintiffs can figure out some way to show impact as to each member of the plaintiffs' class without having to resort to lengthy individualized examinations. We have, however, attempted to emphasize the importance of this element of an antitrust cause of action, and to illustrate how this element is closely intertwined with the determinations which must be made before certifying a class under Rule 23.
79 In the recent case of Krehl v. Baskin-Robbins Ice Cream Co., 78 F.R.D. 108 (C.D.Calif.1978), the district court stated: 80 The only instances in which courts have refused to certify price-fixing cases are those in which proof of the conspiracy as to numerous defendants cannot be accomplished on a classwide basis . . . or when proof of fact of damage would be unmanageable because of the intricate nature of the market or the number of potential plaintiffs. See Windham v. American Brands, Inc., supra, (sales of flue-cured tobacco at 36 different auction centers with fluctuating price of commodity and complex variable grading system unmanageable); In re Hotel Telephone Charges, supra, (class of plaintiffs 40 million). 81 Id. at 121. Up till now, this opinion has focused in on the problems recognized by the Baskin-Robbins court. There are, however, several other areas which concern both the parties and this court. 82 For example, the only mention by us of the manageability problem has been with regard to whether proof of impact can be made in a manageable manner. However, we are also very concerned with the propriety of the plan devised by the district court in order to deal with the damage issues. Obviously, if the implementation of this bifurcation, severance and transfer scheme is improper, then the national class should not have been certified given the district court's concession that the class would be unmanageable if all damage questions had to be resolved in one forum. Unfortunately, with the record in its present state, it is impossible for us to determine whether the issues of liability and damages in this case are so interwoven that it would be violative of the Seventh Amendment to enter a bifurcation order. Consequently, there is little else that we can presently do other than to set forth the relevant law and to emphasize to the trial court the need to proceed with extreme caution in this area. 83 The defendants are also very concerned about the authority of the district court to sever the various claims of the class members, and then to transfer these claims to different forums pursuant to 28 U.S.C. § 1404(a). The defendants contend that § 1404(a) was never intended to be used as a method by which a trial court could procreate new litigation in a multitude of district courts throughout the country. They argue that the language in the statute which provides for the district court to transfer any civil action means that the transfer must encompass the entire civil action not severed parts of one action. 84 We do not feel it necessary at this time to reach the merits of the defendants' arguments. While we are concerned with whether the district court has the authority to make such transfers, we are even more concerned with whether any class action can be considered manageable within the meaning of Rule 23 if a plan which resembles judicial fission is needed in order to make it so. There is precedent in other circuits for the proposition that a class action should be considered unmanageable when the determinations of damages cannot be made by mathematical or formula computations. See, e. g., Windham v. American Brands, Inc., 565 F.2d 59, 68 (4th Cir. 1977). While we do not adopt such a position, we do have serious reservations about the manageability of a class when such a widespread transfer plan is needed in order to resolve the admittedly difficult issue of individual damages. 38