Opinion ID: 1238875
Heading Depth: 4
Heading Rank: 2

Heading: Price Impact

Text: Plaintiffs also assert a damages theory based on an estimate of the price impact that a disclosure that Lights were not safer than full-flavored cigarettes would have had on the market. Using multiple regression analysis, plaintiffs seek to show the amount by which defendants would have had to reduce their prices to account for the concomitant reduced demand. Even if that amount could be proven by common evidence, as with the loss of value model, plaintiffs have failed as a matter of law to adduce sufficient facts to show that the price impact model is a tenable measure of harm. Cf. Supra Part I.B.1 (discussing In re IPO). Indeed, plaintiffs have not come forward with any meaningful means of estimating how the market has changed or might change in the future in response to fluctuations in the demand for light cigarettes. For instance, as we have already noted, Lights have always been priced the same as full-flavored cigarettes. Furthermore, if plaintiffs' theory of a health-driven preference for Lights were correct, one would have expected demand to drop following the publication of Monograph 13 as people returned to smoking regular cigarettes or quit smoking altogether and, correspondingly, prices to fall. But nothing of the sort happened; the market did not shift appreciably following the publication of Monograph 13. Cf. In re Burlington Coat Factory Sec. Litig., 114 F.3d 1410, 1425 (3d Cir.1997) (Alito, J.) ([B]ecause the July 29 disclosure had no effect on BCF's price, it follows that the information disclosed on September 20 was immaterial as a matter of law.). The price impact model exemplifies the kind of vague inquiry into damages that the Supreme Court forbade in Anza. In that case, the plaintiff (a steel products vendor) sued a competitor, alleging that the competitor's practice of tax evasion had permitted it to charge lower prices than the plaintiff. The Supreme Court concluded that the plaintiff had failed adequately to plead a RICO violation because the injury it had suffered to its business was too remote from the predicate racketeering acts; See Anza, 126 S.Ct. at 1997. Specifically, the Court stated that [t]he cause of [plaintiffs] asserted harms . . . is a set of actions (offering lower prices) entirely distinct from the alleged RICO violation (defrauding the State), and noted that the attenuation was clear. Id. Importantly, the Court discussed the speculative nature of the proceedings that would follow if [plaintiff] were permitted to maintain its claim. A court considering the claim would need to begin by calculating the portion of [defendant's] price drop attributable to the alleged pattern of racketeering activity. It next would have to calculate the portion of [plaintiffs] lost sales attributable to the relevant part of the price drop. Id. at 1998. Similarly, in this case, a court considering plaintiffs' price impact model would have to engage in a series of speculative calculations to ascertain whether, and in what amount, plaintiffs suffered a loss. Plaintiffs in this case argue that [u]nlike in Anza . . . the class members here are the `immediate victims' of the RICO violation, and the causal chain is no more `attenuated' than in any case in which an economist calculates an overcharge resulting from a defendant's unlawful activities. Appellees' Br. at 43. But Anza spoke not only to the remoteness of the action that had allegedly caused the plaintiffs harm, but also to the possibility that damages could have resulted from factors unrelated to the defendant's alleged acts of fraud. See 126 S.Ct. at 1997 (Businesses lose and gain customers for many reasons, and it would require a complex assessment to establish what portion of [plaintiffs] lost sales were the product of [defendant's] decreased prices.). And indeed, here, as plaintiffs' expert concedes, a number of exogenous variables bear on cigarette price, including rates of cigarette consumption, income levels of smokers, population, taxes, advertising expenditures, production costs, and plaintiffs' knowledge of health risks. Schwab, 449 F.Supp.2d at 1058. Thus, plaintiffs cannot show injury due to overall price impact on a class-wide basis and thereby satisfy Rule 23's predominance requirement because their price impact theory, like their loss of value theory, fails as a matter of law. Under In re IPO, plaintiffs must produce persuasive facts at trial that will enable them to prove injury to business or property under RICO. They have failed to persuade us that they can do so.