Court Opinion

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Opinions of the United
2004 Decisions                                                                                                             States Court of Appeals
                                                                                                                              for the Third Circuit

1-9-2004

Weisfeld v. Sun Chem Corp
Precedential or Non-Precedential: Non-Precedential

Docket No. 02-4478

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                                                               NOT PRECEDENTIAL

                   UNITED STATES COURT OF APPEALS
                        FOR THE THIRD CIRCUIT

                                  No. 02-4478

         JOSEPH WEISFELD, on his own behalf and as representative of
            a class of similarly situated current and former employees
                                    of defendants

                                                   Appellant

                                         v.

 SUN CHEMICAL CORP; KOHL & M ADDEN PRINTING INK CORP., a division
of SUN CHEMICAL CORP.; FLINT INK CORPORATION; INX INTERNATIONAL
        INK CO; MONARCH COLOR CORPORATION; MICHELMAN INC;
   INTERNATIONALPAPER CO; GEORGIA-PACIFIC CORPORATION, CORP,
     as successor toJAMES RIVER CORP.; PIERCE & STEVENS CORP.; TACC
     INTERNATIONALCORP., as successor to MIRACLE ADHESIVES CORP.;
          ABC CORP.I-X, being fictitious defendants whose indentities are not
                                 presently known

                  Appeal from the United States District Court
                         for the District of New Jersey
                     (D.C. Civil Action No. 01-cv-02100)
                   District Judge: Honorable Joel A. Pisano

                   Submitted Under Third Circuit LAR 34.1(a)
                              December 12, 2003

            Before: AMBRO, FUENTES and GARTH, Circuit Judges

                        (Opinion filed    January 9, 2004)
                                         OPINION

AM BRO, Circuit Judge

       Joseph Weisfeld appeals the decision of the District Court denying his motion for

class certification. Weisfeld filed a civil antitrust lawsuit alleging that companies in the

ink printing industry illegally restrained the labor market in that industry by entering into

a series of “no hire” agreements. In October 2002 the District Court denied W eisfeld’s

motion for class certification, stating he failed to satisfy the requirements of Rule 23(b)(3)

of the Federal Rules of Civil Procedure (“FRCP”). Thereafter, Weisfeld timely filed a

petition pursuant to Rule 5(a) of the Federal Rules of Appellate Procedure and Rule 23(f)

of the FRCP for leave to appeal the District Court’s decision. W e granted Weisfeld

permission to appeal and have jurisdiction pursuant to 28 U.S.C. § 1292(e). For the

reasons that follow, we affirm the District Court’s decision.

                                              I.

       Weisfeld was, until May 31, 2000, an employee of Sun Chemical Corporation

(“Sun”). In his First Amended Complaint, Weisfeld brings suit on behalf of himself and

       all persons who were employed by defendants, or any predecessor, affiliate
       or subsidiary of any defendant, at any time during the period beginning at
       least as early as May 1, 1997 and continuing through May 1, 2001 inclusive
       (the “Class Period”), and who suffered damages as a result of defendants’
       illegal conspiracy and violation of the antitrust laws.

Despite failing to revise his complaint, Weisfeld sought to narrow the definition of the

                                              2
class in his motion for class certification. The new proposed class was defined as

       personnel who provide technical services and who possess specialized
       knowledge and skills in the manufacture, distribution and sale of printing
       inks who were employed by defendants, or any predecessor, affiliate or
       subsidiary of any defendant, at any time during the period beginning at least
       as early as May 1, 1997 and continuing through May 1, 2001 (the “Class
       Period”), and who suffered damages as a result of defendants’ illegal
       conspiracy and violation of the antitrust laws.

The District Court considered this revised class definition in its analysis, and we will do

the same. See, e.g., Robidoux v. Celani, 987 F.2d 931, 937 (2d Cir. 1993) (stating that a

court “is not bound by the class definition proposed in the complaint”).

       Given the District Court’s well-written summation of the facts underlying

Weisfeld’s complaint, we repeat them only briefly here. See Weisfeld v. Sun Chemical

Corp., 210 F.R.D. 136 (D.N.J. 2002). Weisfeld alleges that defendants, who control a

dominant market share in the manufacturing of printing inks, entered into a conspiracy in

violation of Section One of the Sherman Act, 15 U.S.C. § 1, to restrain the labor market

for technical employees in that industry. Specifically, Weisfeld alleges that defendants

implemented “no hire” policies by which each agreed not to hire the employees of their

competitor printing ink manufacturers. According to W eisfeld, these agreements

adversely affected the national market for employees with “specialized knowledge and

skills” in the ink printing industry, resulting in lower salaries and lost opportunities to

seek more gainful employment within the industry.

                                               3
                                              II.

       We review a decision granting or denying class certification for abuse of

discretion. In re LifeUSA Holding Inc., 242 F.3d 136, 143 (3d Cir. 2001). The District

Court abused its discretion if its decision “rests upon a clearly erroneous finding of fact,

an errant conclusion of law or an improper application of law to fact.” In re General

Motors Corp. Pick Up Truck Fuel Tank Prods. Liab. Litig., 55 F.3d 768, 783 (3d Cir.

1995) (citations and quotations omitted). Although a court should be cautious in making

a class certification decision based on its own impression of a case’s merits, some inquiry

into the factual and legal issues underlying a plaintiff’s causes of action is usually

necessary. See Newton v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 259 F.3d 154,

166-168 (3d Cir. 2001).

                                             III.

       In denying class certification in this case, the District Court concluded that

Weisfeld failed to meet both the predominance and superiority requirements of

Rule 23(b)(3).1 On appeal, he alleges three errors: (1) the District Court analyzed the no

hire agreements under a rule of reason standard rather than as a per se violation; (2) the

Court misinterpreted our decision in In re Linerboard Antitrust Litig., 305 F.3d 145 (3d

       1
         Rule 23(b)(3) of the FRCP provides that an action may be maintained as a class
action if, in addition to meeting the requirements of subsection (a), “the court finds that
the questions of law or fact common to the members of the class predominate over any
questions affecting only individual members, and that a class action is superior to other
available methods for the fair and efficient adjudication of the controversy.”

                                              4
Cir. 2002), as increasing the amount of proof required to show predominance at the class

certification stage; and (3) it concluded that a class action was not the superior method for

resolving the dispute because the determination of detrimental impact would involve too

many individual issues. To an extent, all three issues involve whether Weisfeld has

sufficiently demonstrated that antitrust injury, or impact, is susceptible to common proof.

Although we disagree with certain statements made by the District Court as detailed

below, we agree with its overall analysis and conclusions.

       Section One of the Sherman Act states: “Every contract, combination in the form

of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several

States, or with foreign nations, is hereby declared to be illegal.” 15 U.S.C. § 1. Courts

have interpreted this language to prohibit two types of unreasonable restraints of trade.

They are conduct that is unreasonable per se and conduct that violates the “rule of

reason.” See FTC v. Indiana Fed’n of Dentists, 476 U.S. 447 (1986). “Under the per se

test, ‘agreements whose nature and necessary effect are so plainly anti-competitive that no

elaborate study of the industry is needed to establish their illegality’ are found to be

antitrust violations.’” Eichorn v. AT&T Corp., 248 F.3d 131, 138 (3d Cir. 2001) (quoting

Nat’l Soc’y of Prof. Eng’rs v. United States, 435 U.S. 679, 692 (1978)). Conduct that

does not constitute a per se violation is analyzed under the rule of reason test. Eichorn,

248 F.3d at 138. Based largely upon our decision in Eichorn, the District Court

concluded that the no hire agreements did not constitute a per se antitrust violation.

                                               5
       While Weisfeld argues a per se violation occurred in this case, we conclude that

the issue is irrelevant to whether the requirements of Rule 23(b)(3) are met for class

certification purposes.2 It appears the confusion stems from the following statement made

by the District Court: “Plaintiff argues that when a defendant has been accused of price

fixing, impact should be presumed as a matter of law. Antitrust injury may be presumed

when a plaintiff alleges a per se violation of the antitrust laws.” Weisfeld, 210 F.R.D. at

142. This statement goes further than does the Supreme Court, for it has specifically

rejected the contention that antitrust injury may be presumed in the case of a per se

antitrust violation. Atlantic Richfield Co. v. USA Petroleum Co., 495 U.S. 328, 341

(1990).

       “Per se and rule-of-reason analysis are but two methods of determining
       whether a restraint is ‘unreasonable,’ i.e., whether its anticompetitive
       effects outweigh its procompetitive effects.
       ...
       The purpose of the antitrust injury requirement is different. It ensures that

       2
          As we have recognized, the “Supreme Court has been cautious in extending the
per se approach to claims that fall outside certain previously enumerated categories of
liability.” Eichorn, 248 F.3d at 143 (citations omitted). In Eichorn, we held that the no
hire agreement at issue did not constitute a per se violation and, in fact, did not constitute
an unreasonable restraint of trade at all. Id. at 144, 145-146. But the facts in Eichorn are
different than those here. In Eichorn, AT&T adopted a policy not to allow employees of
Paradyne Corp., an AT&T affiliate, to transfer to other divisions of AT&T. The purpose
of the policy was to make Paradyne more attractive to potential buyers. Shortly
thereafter, Paradyne was sold, and AT&T entered into a post-closing agreement in which
it agreed not to hire, solicit or rehire any Paradyne employee or consultant whose
compensation exceeded $50,000 for a period of 245 days (8 months). Id. at 136-37. In
this case, however, Weisfeld alleges that the three largest manufacturers in the ink
printing industry conspired not to hire each others’ employees for a period of four years.

                                              6
       the harm claimed by the plaintiff corresponds to the rationale for finding a
       violation of the antitrust laws in the first place . . . .

Id. (citation omitted).

       It is true that In re Linerboard used the phrase “presumption of impact” in

discussing the “Bogosian short cut.” In re Linerboard, 305 F.3d at 151; see also

Bogosian v. Gulf Oil Corp., 561 F.2d 434 (3d Cir. 1977). In Bogosian, we stated that

“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.”

561 F.2d at 454. Properly understood, therefore, the presumption (or “short cut”) in

Bogosian is that, even if issues requiring individualized proof are present, evidence of a

common antitrust injury to every class member flowing from an alleged antitrust violation

can, in certain circumstances, satisfy the requirements of Rule 23(b)(3). See Newton, 259

F.3d at180 n.21 (citing Bogosian for the proposition that antitrust injury “may be

presumed when it is clear the [antitrust] violation results in harm to the entire class”)

(emphasis added). The “Bogosian short cut,” however, does not allow a court to presume

antitrust injury because a per se violation occurred.

       Weisfeld’s second claim of error is that the District Court misinterpreted our

decision in In re Linerboard as to the type and amount of evidence required to

demonstrate whether antitrust injury is susceptible to common proof for class certification

purposes. In support of his motion for class certification, Weisfeld provided a three-page

                                              7
expert declaration. The expert states he planned to use two approaches, multiple

regression and yardstick analysis, as common proof that the no hire agreements artificially

depressed the compensation levels of class members.3 The District Court stated that it

was “not convinced” that Weisfeld’s expert “will be able to prove impact on a classwide

basis.” Weisfeld, 210 F.R.D. at 144. Contrary to the support presented by the plaintiffs’

experts in In re Linerboard, the District Court found telling that Weisfeld’s expert

provided only “naked conclusions” that common proof would demonstrate injury to class

members. Id. at 144-45. Weisfeld alleges the District Court improvidently rejected his

generalized proof of common impact, in effect requiring specific proof of classwide

impact as if the case were ready for trial.

       We conclude, however, that the District Court did not misinterpret our prior

decisions. Weisfeld correctly points out that multiple regression and yardstick analyses

have been widely accepted in this Circuit. As discussed in greater detail below, however,

Weisfeld’s expert provides no independent analysis or evidence to support his

       3
         Generally speaking, regression analysis seeks to define statistically the
relationship between a dependent variable (i.e., salary) and one or more independent
variables (e.g., education or work experience). Multiple regression analysis allows one to
control for other independent variables so as to isolate and identify the effect of a single
independent variable (i.e., the alleged no hire agreements) on the dependent variable.
       A yardstick analysis seeks to identify the effect of an independent variable on a
dependent variable (i.e., the effect of the alleged no hire agreements on salary) by
comparing the dependent variable in one industry (i.e., salary in the ink printing industry)
with that in another (or yardstick) industry. Selection of the yardstick industry is based on
its similarity — for example, in terms of structure, product demand, capital, labor and
materials input trends and product technology — to the industry being investigated.

                                              8
conclusions of common impact. In In re Linerboard, we recognized that, in granting class

certification, “the district court used a belt and suspenders rationale to support its

conclusion that the putative class had met its burden of showing impact. In addition to

relying on the Bogosian short cut, it credited the testimony of plaintiffs’ experts . . . .”

305 F.3d at 153. We found it significant, however, that those experts engaged in

“extensive empirical investigation” and economic analysis. Id. at 513. Further, the

experts “effectively utilized supporting data, including charts and exhibits, to authenticate

their professional opinions.” Id. at 155. The In re Linerboard plaintiffs, therefore, did not

rely “solely on presumed impact and damages” and adequately demonstrated “that they

could establish [antitrust] injury on a class-wide basis.” Id. While the District Court

should not have decided (and, in fact, did not decide) at the class certification stage

whether Weisfeld could prove that the alleged no hire agreements had a common impact

on the class members, it was entirely proper for the Court to decide whether Weisfeld’s

attempt to prove antitrust injury would predominately involve common legal and factual

questions.

       Further, the cases Weisfeld cites in arguing the District Court misapplied In re

Linerboard belie his assertion that a court may not disregard the unsupported conclusions

of a expert. The expert in In re Mercedes-Benz Antitrust Litig., 213 F.R.D. 180, 189-90

(D.N.J. 2003), sampled prices charged and dealer gross profits in the relevant market area

to support his conclusion that common proof could demonstrate generalized antitrust

                                               9
injury within a certain range. In addition, In re Microcrystalline Cellulose Antitrust

Litig., 218 F.R.D. 79, 89-93 (E.D. Pa. 2003), engaged in an extensive analysis of the

opinions and supporting evidence provided by plaintiffs’ various experts before

concluding the predominance requirement of Rule 23(b)(3) had been met. The Court in

that case stated it “considered not only the pleadings and memoranda, but also the expert

declarations and factual support on record.” Id. at 83 (emphasis added); see also Nichols

v. SmithKline Beecham Corp., Civ. A. No. 00-6222, 2003 WL 302352 at *4 (E.D. Pa.

Jan. 29, 2003) (stating that, at the class certification stage, a court should examine

whether an expert “has identified a generally accepted methodology for determining

impact which is applicable to the class, whether this methodology uses evidence common

to all class members and whether his opinion has probative value”) (emphasis added)

(citation omitted).

       We must decide at this stage only whether the District Court abused its discretion

in determining that (1) common issues did not predominate in the antitrust injury inquiry

and (2) a class action was not a superior means to adjudicate this case. The predominance

requirement of Rule 23(b)(3) ensures that a proposed class is “sufficiently cohesive to

warrant certification.” In re Newton, 259 F.3d at 187 (citing Amchem Products, Inc. v.

Windsor, 521 U.S. 591, 623 (1997)). “Unlike commonality, predominance is

significantly more demanding, requiring more than a common claim.” In re Newton, 259

F.3d at 187 (citing Amchem, 521 U.S. at 623-24). As the District Court correctly

                                              10
realized, however, Rule 23(b) does not require the absence of individual issues, only that

they have less overall significance than issues common to the class. Some individual

issues will almost always be present in a class action. Further, we are well aware antitrust

defendants “routinely argue” that the complexities of their particular case prevent

common proof from predominating on the issue of antitrust impact. In re Mercedes-Benz

Antitrust Litig., 213 F.R.D. at 187 (citations omitted). We conclude, however, that the

District Court did not abuse its discretion in this case.4

       In analyzing whether common issues will predominate in the antitrust injury

inquiry, we follow the teachings of Bogosian and its progeny. In Bogosian, we relied on

the fact that the alleged anticompetitive conduct had predictable effects.

       If the price structure in the industry is such that nationwide the
       conspiratorially affected prices at the wholesale level fluctuated within a
       range which, though different in different regions, was higher in all regions
       than the range which would have existed in all regions under competitive
       conditions, it would be clear that all members of the class suffered some
       damage, notwithstanding that there would be variations among all dealers
       as to the extent of their damages.

Bogosian, 561 F.2d at 455 (emphasis added). Since neither the parties nor the District

Court in Bogosian focused on these issues, we remanded the case for further

       4
         The superior means requirement is closely related to the predominance
requirement because it is generally true that “only where predominance exists do the
economies of scale justify aggregating claims in a class action.” In re Mercedes-Benz
Antitrust Litig., 213 F.R.D. at 186. This is such a case. Therefore, because we conclude
the District Court did not abuse its discretion in determining that common issues did not
predominate, we need not engage in the largely duplicative superior means analysis.

                                              11
consideration. Id. In In re Linerboard, we found “significant” the findings of plaintiffs’

expert that “[d]espite any variations in particular boxes or customers, prices for all

corrugated containers would have responded over time to linerboard price increases in a

similar manner.” 305 F.3d at 153 (emphasis added) (quotations omitted). Even the cases

Weisfeld cites recognize a plaintiff must present some evidence that the antitrust injury

suffered by class members is within a manageable range. In In re Mercedes-Benz,

plaintiffs’ expert found that car prices remained “within a small range for the seven

dealers sampled.” 213 F.R.D. at 189. In such a situation, the Court concluded other

variables could be controlled for using benchmark and multiple regression analysis. Id.

The expert’s analysis in In re Microcrystalline Cellulose showed that, even though the

alleged antitrust activity affected numerous products, the prices of all products in this

industry still moved closely together. 218 F.R.D. at 92.

       Although rejecting the notion that antitrust injury in an employee boycott or no

hire context can never be proven by common evidence, we affirm the District Court’s

conclusion that common issues do not predominate in this case. In addition to decreased

salaries, Weisfeld alleges the deprivation of new job opportunities. Yet Weisfeld testified

that he neither sought employment outside of Sun nor responded to the inquiries of “head

hunters.” This demonstrates that, at least in regard to lost employment opportunities, an

individualized inquiry may be required for each class member. In regard to salary levels,

the proposed class includes individuals employed in positions that vary widely in terms of

                                             12
skill requirements and responsibilities. Indicative of this is that, at Sun alone, these

positions have more than 20 compensation grades. The District Court correctly notes that

both the decreased salary and deprivation of opportunities inquiries would require

considering numerous individual factors. These include: “whether a covenant not to

compete was included in a particular employee’s contract; the employee’s salary history,

educational and other qualifications; the employer’s place of business; the employee’s

willingness to relocate to a distant competitor; and [employees’] ability to seek

employment in other industries in which their skills could be utilized (e.g.,

pharmaceuticals, cosmetics).” Weisfeld, 210 F.R.D. at 144.

       Finally, the declaration proffered by Weisfeld’s expert provides no guidance. For

class certification purposes, an expert’s opinion need not be supported by the type of

specific evidence that would be used at trial (or even to survive summary judgment). But

s/he must present some support. Weisfeld’s expert claims he conducted a preliminary

analysis. Yet there is no actual analysis in the declaration itself and no discussion of the

evidence on which his analysis was based. There are no studies or findings attached to

the declaration. In addition, the declaration is silent as to whether the salaries for all

members of the proposed class exhibit any sort of correlation over time. The declaration

contains only bare conclusions and a statement that the expert “proposes” to use a

multiple regression model (which may not take into account all relevant variables). Such

support is insufficient to satisfy the predominance requirement of Rule 23(b)(3) in this

                                              13
case.

                                            IV.

        In this context, we affirm the District Court’s decision denying Weisfeld’s motion

for class certification.

TO THE CLERK:

               Please file the foregoing Opinion.

                                          By the Court,

                                          /s/ Thomas L. Ambro, Circuit Judge

                                             14