SUPPLEMENTAL ORDER ON CLASS CERTIFICATION OF STATE DAMAGE CLASSES
This case involves an alleged antitrust conspiracy to elevate or maintain U.S. car prices by preventing lower-priced Canadian cars from entering the American market. Remaining damage claims are based upon various state antitrust and consumer protection statutes. On May 12, 2006, I entered a preliminary order that approved certification of separate Rule 23(b)(3) damage classes of retail purchasers in each of five "exemplar" states. Order on Mot. for Class Cert.: Exemplar State Damage Classes ("May 12 Order") (Docket Item 361). Although the defendants had not challenged the plaintiffs' proposed ending date ("the present") for the class, I became concerned about the typicality of certain named plaintiffs' claims. I reserved judgment on the ending date for membership in the five classes and permitted further discovery and briefing. After oral argument on February 21, 2007, I now conclude that the class period should end April 30, 2003. Cross-border arbitrage opportunities may have waxed and waned before that date, but their scope is a proper subject for antitrust impact and damage analysis when the record is complete. I also address the remaining proposed statewide damage classes, and direct the preparation of a certification order. Once it is entered, it will be final for appeal purposes under Fed. R. Civ. P. 23(f).
In my May 12 Order, I did not finally certify the five exemplar classes because under the typicality analysis I was uncertain that the named plaintiffs' claims were "typical of the claims . . . of the class." Fed. R. Civ. P. 23(a)(3). The Supreme Court has said that if, at the time the class is certified it is clear that the named plaintiffs suffered no injury, they cannot represent the class. Gen. Tel. Co. v. Falcon, 457 U.S. 147, 156 (1982) (discussing East Tex. Motor Freight Sys., Inc., v. Rodriguez, 431 U.S. 395, 403 (1977)).1 Here, comments by the plaintiffs' lawyers led me to conclude that at least one named plaintiff in Kansas had purchased his vehicle at a time when exchange rates made Canadian car prices higher than American cars, contrary to the overall theory of the plaintiffs' case. From the exchange, I thought that my concern involved a narrow question of determining actual prices and exchange rates.2 As a result, I said in my May 12 Order:
One final issue that comes up under typicality . . . raises concern about the ending date for the proposed classes: that particular named plaintiffs' claims (or the defenses to those claims) may not be typical of those of the class. As I have already noted, the plaintiffs virtually concede that their Kansas plaintiff bought a car at a time, 2005, when the exchange rates were such that Canadian cars were priced higher than American cars; since there was no arbitrage opportunity, the conspiracy could not have increased American prices. This concession calls into question the chronological scope of the damage class: when should the class end? The plaintiffs' reply memorandum suggests that this is a discovery problem; that some defendants used data in their response to the plaintiffs' certification motion that the plaintiffs had not seen previously; that the plaintiffs need to see comparable data for all the defendants; and that therefore I should not deny certification based on a merely "speculative conflict." Essentially, the plaintiffs ask me to certify the class now at its broadest and worry later about its proper scope and whether the named plaintiffs' claims are typical.
I do not believe that is the proper way to proceed. Instead, as to certification of the individual state damage classes, I defer decision until the pertinent discovery problems are resolved and I request Magistrate Judge Kravchuk to hold a prompt conference and set appropriate deadlines. Then I will determine the class definition (and whether the named plaintiffs are representative).
1. A different question is presented if that fact appears after certification. Gen. Tel. Co., 457 U.S. at 156.
2. Indeed, in rejecting then the defendants' challenge to the opening date of the class, I observed merely that the Fourth Amended Complaint "is broad enough to permit proof that the conspiracy had begun earlier [than January 1, 2001] and thus that impact could have started January 2001. n.46 (citation omitted).
3. Both sides urge upon me the make-or-break effect of a class certification ("an intense pressure is brought to bear upon the defendants with no judicial finding that any fact out there is so," Hr'g Tr. p. 66, Feb. 21, 2007 (defendants); "So, you know, there is a flip side to his argument too, and that's why the courts that have considered class certification tend to urge certification, tend to lean in favor of certification because without it-and indeed the public policy surrounding Rule 23 recognizes that . . . without the device as the first step, the plaintiffs will never really ever be able to get their day in court," Id. pp. 85-86 (plaintiffs)). Certainly those generally recognized effects make me take very seriously the importance of the decision and reinforce my ordinary desire as a trial judge to "get it right," but they cannot lead me in one direction or the other. That would be an unprincipled rule of law.
4. Hall's rebuttal report actually says that without the ten percent calculation, the period of export profitability would have ended in May 2004 (suggesting an alternate class ending date of April 30, 2004 rather than January 2004). Rebuttal Expert Report of Prof. Robert E. Hall on the Timing of Profitability of Exporting New Vehicles from Canada to the United States ("Hall Rebuttal Rpt.") ¶ 12 (Docket Item 475). Since the plaintiffs cite this paragraph of Hall's report as the basis for their January 2004 date, see Pls.' Reply Mem. at 6, I assume the January date is an error; but it is immaterial to my analysis because I accept the plaintiffs proposed ending date of April 30, 2003.
5. Dr. Hall's analysis is persuasive that price differentials at some level inspire cross-border arbitrage opportunities. Whether an illegal agreement halting Canadian imports (or removing their threat) produced antitrust causation or retail purchase price impact remains to be proven at trial or demonstrated at summary judgment. The question for me at certification, however, is not who will win the merits of that argument, but whether the plaintiffs' proof, adequate or inadequate, meets the tests of commonality, impact and predominance. I concluded in my May 12 Order that it does. As I also observed then, this is not the time to determine what vertical restraints the individual manufacturers maintained, their legality and their effect.
6. The commentators have said that the class definition should be precise, Manual for Complex Litigation (Fourth) § 21.222 (2004), and that is so, in order that people can determine whether they are class members. Id. But precise or not, the accuracy of the ending date cannot be confidently established at certification in a case where causation and impact may diminish as outside market forces (e.g., exchange rates) fluctuate.
7. PolyMedica held that "[t]he district court was entitledto look beyond the pleadings . . . in its resolution of the class-certification question." In re PolyMedica Corp. Sec. Litig., 432 F.3d 1, 19 (1st Cir. 2005). PolyMedica based that holding upon the statement from Tardiff that "a court has the power to test disputed premises early on if and when the class action would be proper on one premise but not another," Tardiff v. Knox County, 365 F.3d 1, 4-5 (1st Cir. 2004); from Smilow that a "district court must conduct a rigorous analysis of the prerequisites established by Rule 23 before certifying a class," Smilow v. Southwestern Bell Mobile Sys., 323 F.3d 32, 38 (1st Cir. 2003); from Mowbray that "a district court must formulate some prediction as to how specific issues will play outin order to determine whether common or individual issues predominate in a given case," In re Waste Mgmt. Holdings, Inc., v. Mowbray, 208 F.3d 288, 298 (1st Cir. 2000); and PolyMedica's preference for "the majority view" which it characterized as: "a district court is not limited to the allegations raised in the complaint, and should instead make whatever legal and factual inquiries are necessary to an informed determination of the certification issues." PolyMedica, 432 F.3d at 5. I do not read PolyMedica as mandating a particular level of factfinding by the district judge at the certification stage. First, under all the cited cases considerable discretion is left to the district judge. Second, what is appropriate for determining whether there is an efficient market in a securities case is quite different from market determinations, market behavior and market definitions for antitrust purposes. I continue to believe that I followed the teaching of PolyMedica correctly in examining the proof the plaintiffs will use and the defenses the defendants will raise. I have looked "beyond the pleadings," "test[ed] designated premises," "conduct[ed] a rigorous analysis of the [Rule 23] prerequisites," tried to predict "how specific issues will play out," and made the inquiries I believe are necessary. See May 12 Order at 16-24. PolyMedica also counsels: Exercising its broad discretion, and understanding the correct definition [in PolyMedica, of an efficient market] and the factors relevant to that determination, the district court must evaluate the plaintiff's evidence of [in PolyMedica, an efficient market] critically without allowing the defendant to turn the class-certification proceeding into an unwieldy trial on the merits. 432 F. 3d at 17 (emphasis original).
8. There would also be some procedural unfairness in making an entirely new ruling on the record now. Magistrate Judge Kravchuk made perfectly clear as she arranged for discovery and briefing on the class-ending-date issue that she was not reopening my original May 12 decision. Rpt. of June 1, 2006 Disc. Conf. and Order, at 2 (Docket Item 369) ("[W]hile the court certainly wanted to hear from both sides regarding the economic analysis underlying the proposed 'closing date,' this briefing opportunity was not intended as a relitigation of the motion for class certification."). If I were inclined now to reverse my ruling of May 12, in fairness I would have to allow the plaintiffs fulsome discovery on all the issues that the defendants have posed and give notice that the entire issue of damage class certification was up for reexamination. For the same reason, I do not resolve a computation controversy the specifics of which emerged just days before the hearing, a controversy that continues to develop. (On December 1, 2006, Dr. Kalt said that Dr. Hall wrongly interpreted certain data entries made by the Power Information Network, LLC, which compiles automobile pricing data for certain manufacturers, Kalt Rpt. at 24-25; Dr. Hall responded on December 15, 2006, that he had interpreted the data entries correctly, citing published articles, which I have examined. Hall Rebuttal Rpt. ¶¶ 15-16. Nothing further happened on the record until February 16, 2007, five days before the February 21, 2007, oral argument, when the defendants filed an a ffidavit by a Power employee stating that Dr. Hall had misinterpreted the data entries. Decl. of Mike Murray (Docket Item 519). Clearly the plaintiffs were not in a position to respond to that late-filed affidavit before the hearing; post-hearing briefing continues to develop the issue. I learned only yesterday from the defendants' reply memorandum that Power maintains different sets of data with different applicable glossaries. I am not in a position to resolve that controversy now.)
9. Daigle v. Maine Med. Ctr., Inc., 14 F.3d 684, 689 (1st Cir. 1994), is similar: "Since the federal Evidence Rules governing hearsay and impeachment do not seek to displace the Health Act's policy of limiting frivolous malpractice suits, the federal rules [which the court did not enforce] and the state statute can peacefully coexist, each operating within its own sphere of influence."
10. These states appear to be unlike Alabama, where the state supreme court has held that Alabama's ban on class actions in consumer cases extends to every other state's deceptive practices law if the lawsuit is in Alabama state court and has labeled the bar on class actions as a procedural bar. See O'Keefe v. Mercedes-Benz USA, 214 F.R.D. 266, 285 (E.D. Pa. 2003) (discussing Ex Parte Exxon Corp., 725 So. 2d 930 (Al. 1998)).
11. The states are: Arizona, Arkansas, Idaho, Kansas, Massachusetts, Michigan, Minnesota, Mississippi, Nebraska, Nevada, New Hampshire, North Dakota, South Dakota, West Virginia and Wisconsin.
12. At oral argument I expressed my concern that a class member would not be able to make an intelligent decision whether to opt out of the proposed settlement classes given the current state of proceedings, as well as my concern over the expense and confusion of several successive notices.