In Re South Dakota Microsoft Antitrust Litigation

KONENKAMP, Justice

(concurring).

[¶ 38.] I concur in this decision, but with reservations. I express these reservations in view of the prospect that we may be .reviewing this case again before any final resolution. At some point, the plaintiffs’ expert, Professor Leffler, must verify his untested economic theories, just as all scientists must establish the reliability of their methods. By his own admission, Dr. Leffler offers only a prediction, a hypothesis that given enough time and data, he can adequately calculate damages for the class members. In an indirect purchaser action, the plaintiffs' must prove the actual damages to each class member. See generally SDCL 37-1-33. To date, the Professor’s theories have not proven effective in accomplishing this task.

A. Daubert Standards and Class Certifícation

[¶ 39.] While my concerns' with the plaintiffs’ theories on damages are not so serious as to discommend class certification, the question remains whether those theories will survive the Daubert hearing. Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579 , 113 S.Ct. 2786 , 125 L.Ed.2d 469 (1993); - Kumho Tire Co., Ltd. v. Carmichael, 526 U.S. 137 , 119 S.Ct. 1167 , 143 L.Ed.2d 238 (1999). This Court’s opinion acknowledges that the full Daubert criteria have yet to be applied here. These standards cannot be satisfied by simply establishing- the threshold tests for achieving class action status. Each expert’s theories must pass the rigors of scientific methodology.

[¶ 40.] Though the substantive arguments may be similar, evaluating expert evidence in accord with Daubert entails an inquiry “distinct fr'om” the appraisal of expert evidence in support of a motion for class certification. In re Visa Check/MasterMoney Antitrust Litigation, 280 F.3d 124 , 132 n. 4 (2d Cir.2001). Trial courts should • not “postpone consideration of a motion for class certification for the sake of waiting until a Daubert examination is appropriate.” Id.; see SDCL 15-6-23(c)(1) (“As soon as practicable after commencement of an action brought as a class action, the court shall determine by order whether it is to be so maintained.”). In applying discretion to grant or deny a motion for class certification, the court’s inquiry “is not whether the plaintiff or plaintiffs have stated a cause of action or will prevail on the merits, but rather whether the requirements of Rule 23 are met.” Eisen v. Carlisle & Jacquelin, 417 U.S. 156, 178 , 94 S.Ct. 2140, 2153 , 40 L.Ed.2d 732 (1974):

[¶41.] On the other hand, SDCL 19-15-2 (Rule 702) governs the admissibility of expert testimony. The test for admissibility, the Daubert standard, was adopted in South Dakota in State v. Hofer, 512 N.W.2d 482, 484 (S.D.1994). See also Estate of Dokken, 2000 SD 9, ¶ 51 , 604 N.W.2d 487, 500 (Amundson, J., concurring specially) (explaining that Kumho expands the Daubert gate-keeping function). To abide by Daubert-Kumho, the proponent offering expert testimony must show that the expert’s theory or method qualifies as scientific, technical, or specialized knowledge under SDCL 19-15-2 (Rule *681 702). State v. Guthrie, 2001 SD 61, ¶ 34 , 627 N.W.2d 401, 416-16 . This burden is met by establishing that there has been adequate empirical proof of the validity of the theory or method. Edward J. Imwink-elried, Evidentiary Foundations 287 (4th ed. 1998). Under this standard, a court considers admissibility based on technical methodology, not the scientific correctness of an opinion because “[i]t is not the trial court’s role to decide whether an expert’s opinion is correct.” See Smith v. Ford Motor Co., 215 F.3d 713 (7th Cir.2000). In deciding whether to admit expert testimony, a court must ensure that the opinion rests on a reliable foundation. Daubert, 509 U.S. at 597 , 113 S.Ct. at 2799 , 125 L.Ed.2d at 485 . The standards set forth in Daubert are not limited to what has traditionally been perceived as scientific evidence. These standards must be satisfied whenever scientific, technical, or other specialized knowledge is offered. Kumho, 526 U.S. at 141 , 119 S.Ct. at 1171 , 143 L.Ed.2d at 246 .

[¶ 42.] When “[f]aced with a proffer of expert [testimony on scientific, technical, or other specialized knowledge],” the trial judge must determine at a preliminary hearing “whether the expert is proposing to testify to (1) scientific knowledge that (2) will assist the trier of fact to understand or determine a fact in issue.” Daubert, 509 U.S. at 592 , 113 S.Ct. at 2796 , 125 L.Ed.2d at 482 . See also SDCL 19-9-7 (Rule 104(a)) (preliminary questions determined by court). Thus the trial court, not the jury, must make a preliminary assessment whether the reasoning or methodology underlying the testimony is scientifically valid and whether that reasoning or methodology can be applied to the facts in issue. Id. That has yet to be established here.

[¶ 43.] In the Daubert hearing, the trial judge may consider the following nonexclusive guidelines for assessing an expert’s methodology: (1) whether the method is testable or falsifiable; (2) whether the method was subjected to peer review; (3) the known or potential error rate; (4) whether standards exist to control procedures for the method; (5) whether the method is generally accepted; (6) the relationship of the technique to methods that have been established as reliable; (7) the qualifications of the expert; and (8) the non-judicial uses to which the method has been put. See Guthrie, 2001 SD 61 at ¶ 35 , 627 N.W.2d at 416 (citations omitted). Daubert’s list of factors may not each apply to all experts in every case. Rogen v. Monson, 2000 SD 51, ¶28 , 609 N.W.2d 456, 462-63 (Konenkamp, J. concurring) (citing Kumho, 526 U.S. at 141 , 119 S.Ct. at 1171 , 143 L.Ed.2d 238 ). With these and perhaps other relevant considerations, a judge must ensure that the testifying experts provide a proven scientific basis for a jury to find with reasonable scientific, technical, or, as here, econometric probability that it is more likely than not that defendant’s conduct proximately caused the claimed loss to each class member.

B. Decertiñcation

[¶44.] Considering the provisional nature of the plaintiffs’ expert opinions, a Daubert hearing could result in decertifi-cation. The Supreme Court labels class actions a “nontraditional” type of litigation. United States Parole Comm’n v. Geraghty, 445 U.S. 388 , 402 100 S.Ct. 1202, 1212 , 63 L.Ed.2d 479 (1980). The action has requirements peculiar to its nature. To secure class certification, the plaintiffs must satisfy all the requirements in SDCL 15-6-23(a) and at least one of the criteria set out in SDCL 15-6-23(b). Risen, 417 U.S. at 163 , 94 S.Ct. 2140 . Here, the circuit court found that the plaintiffs satisfied all the requirements of § 15-6-23(a) and one requirement of § 15-6-23(b), namely, sub *682 section (3). SDCL 15-6-23(b)(3) provides in part that an action may be maintained as a class action if the prerequisites of subdivision (a) are satisfied, and in addition:

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(3) 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.

In my view, the plaintiffs maintain a thin hold under this provision.

[¶45.] To meet the predominance requirement of SDCL 15 — 6—23(b)(3), the plaintiffs must establish that “the issues in the class action that are subject to generalized proof, and thus applicable to the class as a whole ... predominate over those issues that are subject only to individualized proof.” Rutstein v. Avis Rentr-A-Car Sys., Inc., 211 F.3d 1228 , 1233 (11thCir.2000) (internal quotation marks omitted). As the Michigan Court of Appeals points out in a parallel case, “Dr. Leffler’s methodologies, even if they were to work with respect to small, well-defined subclasses that group class members by a very few strongly unifying characteristics, will essentially require separate trials to determine the different pass-on rates affecting the class as a whole.” A & M Supply Co. v. Microsoft Corporation, 252 Mich.App. 580, 654 N.W.2d 572, 603 (2002).

[¶46.] Despite this conclusion in A & M, I agree with the Court that this case should not guide our decision on class certification because Michigan has a different standard of review at the motion to certify stage. However, a reason justifying decertification here may be that the requirements of SDCL 15-6-23(b)(3) are no longer satisfied. Commonwealth of Pennsylvania v. Local Union 542, Int'l Union of Operating Eng’rs, 90 F.R.D. 589, 593 (E.D.Pa.1981); Edward F. Sherman, Aggregate Disposition of Related Cases: the Policy Issues, 10 Rev. Litig. 231 , 272 (1991). The Daubert hearing may reveal that Professor Leffler’s theories cannot achieve a practical answer to satisfy the plaintiffs’ burden of proof on damages.

[¶ 47.] Under SDCL 15-6-23(e)(l), a court may alter or amend a decision on class certification “before the decision on the merits.” Indeed, a court is obligated to monitor class certification and correct the decision as needed in light of evidentia-ry developments. Richardson v. Byrd, 709 F.2d 1016, 1019 (5th Cir.1983); Reynolds v. Sheet Metal Workers, Local 102, 702 F.2d 221, 225-26 (D.C.Cir.1981); Link v. Mercedes-Benz of N. Am., Inc., 550 F.2d 860 , 864 (3d Cir.1977); Reed v. Town of Babylon, 914 F.Supp. 843, 848-49 (E.D.N.Y.1996).

[¶ 48.] Professor Leffler’s economic theories have not reached methodological maturity. It remains to be seen whether they will. His “aggregate” damages proposal fails to meet the requirement that each individual member of the class in an indirect purchaser action was injured by the defendant’s alleged conduct. Alabama v. Blue Bird Body Co., 573 F.2d 309, 316-17 (5thCir.l978). Both the Court and the plaintiffs cite McKie v. Huntley, 2000 SD 160 , 620 N.W.2d 599 , to permit proof of “aggregate” damages. But that case was not a class action. To allow aggregate damages here means that some members of the class who suffered no loss may be unjustly enriched while others may be under compensated. The Professor’s theories must accommodate the requirement that damages be shown for each class member.

[¶ 49.] In certifying this class action, the circuit judge gave Dr. Leffler an op *683 portunity to prove that his theories are workable. If he fails, decertification should follow.

[¶ 50.] AMUNDSON, Retired Justice, joins this special writing.