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From Antitrust Law Daily, March 31, 2014

E-book purchasers can proceed as class in price fixing case

By Jeffrey May, J.D.

The federal district court in New York City has certified a class of millions of consumers who allegedly paid inflated prices for electronic books or e-books as a result of a conspiracy between Apple Inc. and major publishers to fix prices. “If certification were not appropriate here, no antitrust class action could be certified,” the court concluded, noting that the plaintiffs “have proffered a sophisticated damages model to reliably determine damages” (In Re: Electronic Books Antitrust Litigation, March 28, 2014, Cote, D.).

Following the federal district court’s finding that Apple played a central role in orchestrating the price fixing conspiracy in per se violation of the antitrust laws, the plaintiffs moved for certification of a class of e-book purchasers, pursuant to Rules 23(a) and (b)(3) of the Federal Rules of Civil Procedure. In advance of a damages trial, the plaintiffs sought certification of a class of consumers in 23 states and U.S. territories who purchased an e-book published by one of the publisher defendants between April 1, 2010, and May 21, 2012.

The class plaintiffs anticipate relying on the doctrine of collateral estoppel and do not intend to retry Apple’s liability. A motion for summary judgment on the issue is pending. The class plaintiffs, as well as the plaintiff States and the U.S. Department of Justice, have settled with each of the publisher defendants.

In its effort to defeat certification, Apple asked the court to exclude the opinions of the plaintiffs’ economics expert. The expert—Roger G. Noll—is a Ph.D. economist and a professor emeritus of economics at Stanford University.

According to the court, Apple “chiefly argues that Noll’s damages model could not reliably determine each class member’s damages, and consequently plaintiffs cannot meet the commonality and predominance requirements.” The company also argued that dissimilarities between e-book purchasers prevented a finding of predominance under Rule 23(b)(3).

Apple did not contest the numerosity or typicality elements of certification, which the court concluded were satisfied by the plaintiffs, along with the other elements of Rule 23(a). Over Apple’s objections, the court ruled that the predominance, superiority, and ascertainability requirements of Rule 23(b)(3) were satisfied. Thus, class certification was granted.

Predominance. The plaintiffs established that common issues concerning liability and damages overwhelmingly predominated over individualized issues, the court ruled. Apple had unsuccessfully argued that the class members were too dissimilar because of the uniqueness of each e-book transaction and because many class members received offsetting benefits that flowed from the challenged conduct, such as a decline in some e-book prices and the growth of free and self-published e-books.

The existence of the purported pro-competitive effects did not provide an impediment to certification of a class, in the court’s view. These “benefits” could constitute a common issue for the class. Moreover, damages would be calculated by multiplying the relative overcharge by the actual purchase prices of the e-books during the class period. “[A]n antitrust defendant may not alter this well-settled measurement of damages by speculatively raising potential offsets, even when those offsets are directly related to the goods at issue,” the court explained. Apple was barred from proposing these offsets to any damages calculation.

Expert testimony. The court also refused to exclude the plaintiffs’ expert economist who opined that the plaintiffs could show class-wide anticompetitive harm and damages—to both putative class members and consumers in the plaintiff States—of over $280 million. Apple failed to persuade the court that the expert’s damages model could not reliably establish damages for each class member, and that the use of that model to determine damages would constitute an improper “trial by formula.” Noll’s model was capable of reliably estimating class members’ damages, in the court’s view. The expert had run a multiple regression analysis on transaction records for more than 149 million sales of 1.3 million different titles, it was noted.

In addition, Apple’s request for a hearing “with live testimony by Dr. Noll” before a decision was rendered on its motion to exclude Noll’s opinions was denied. “When, as here, it is overwhelming clear that an expert’s opinions meet the standards of Daubert and Rule 702, a hearing would be an empty ‘formality’ and is not required,” the court explained.

The case is 11 MD 2293 (DLC).

Attorneys: Steve W. Berman, George W. Sampson, and Sean Matt (Hagens Berman Sobol Shapiro LLP); Jeff D. Friedman and Shana Scarlett (Hagens Berman Sobol Shapiro LLP); and Douglas Richards, Kit A. Pierson, Emmy L. Levens, and Jeffrey B. Dubner (Cohen Milstein Sellers & Toll PLLC) for class plaintiffs. Cynthia Richman, Theodore J. Boutrous, Jr., and Daniel G. Swanson (Gibson, Dunn & Crutcher, LLP) and Howard E. Heiss and Edward Moss (O’Melveny & Myers LLP) for Apple Inc.

Companies: Apple Inc.

MainStory: TopStory Antitrust NewYorkNews

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