Amicus Curiae Brief — Gaylord Container Corp. v. Garrett Paper, Inc.

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IN THE

Supreme Court of the Anited States

GAYLORD CONTAINER CORP., et al.,

Petitioners,

GARRETT PAPER, INC., et al.,

Respondents.

On Petition for a Writ of Certiorari to the

United States Court of Appeals

for the Third Circuit

BRIEF FOR AMICUS CURIAE

THE BUSINESS ROUNDTABLE

IN SUPPORT OF PETITIONERS

LEWIS H. GOLDFARB JANET L. MCDAVID

HOGAN & HARTSON L.L.P. JONATHAN S. FRANKLIN*

875 Third Avenue WILLIAM H. JOHNSON

New York, NY 10022 HOGAN & HARTSON L.L.P.

(212) 918-3513 555 Thirteenth Street, N.W.

Washington, DC 20004

(202) 637-5766

* Counsel of Record Counsel for Amicus Curiae

WILSON-EPES PRINTING Co., INC. — (202) 789-0096 -— WASHINGTON, D. C. 20001

TABLE OF CONTENTS

Page

TABLE OF AUTHORITIES ...............ssssssssssscesessssessnseees il

STATEMENT OF INTEREST OF AMICUS CURIAE.... l

STATEMENT OF THE CAGE. .00501:0ccsvscessevcscresovesosoncesrenss 3

SUMMARY OF ARGUMENT ..............s:ssccssssseessessneseeees 4

REASONS FOR GRANTING THE WRIT ..............: 6

I. THE COURT SHOULD ENSURE THAT |.

CERTIFICATION DECISIONS ARE

CAREFULLY SCRUTINIZED GIVEN

THEIR POTENTIAL TO DEPRIVE

DEFENDANTS OF THE ABILITY TO

PRESENT MERITORIOUS DEFENSES ............ 6

II. THE COURT SHOULD RESOLVE THE

WIDESPREAD CONFUSION IN THE

LOWER COURTS AS TO THE PROPRIETY

OF CERTIFYING ANTITRUST CLASS

ACTIONS DESPITE THE PRESENCE OF

INDIVIDUALIZED ISSUEG............cccceseesseseeeees 1]

III. THIS CASE PRESENTS AN IDEAL

VEHICLE TO RESOLVE THE CONFUSION

FG FRR BPA secisssevsssssinasonusscrsesescusvvesseveonennrtecnsesen 18

CONC IBIIIN vcsescsicesiessessenssrsessnennersvsnsonsnesienssnenenesereension 20

TABLE OF AUTHORITIES

Page

CASES:

Alabama v. Blue Bird Body Co., 573 F.2d 309

(SOR CW. FR cits ‘spceimeveneaenamnas 13,14 |

Amchem Products, Inc. v. Windsor, 521 U.S.

FIA CEFR hrencssscrerrenannsinaaaaas 6, 16, 19

Blair v. Equifax Check Servs., Inc., 181 F.3d |

S52 (7th Cet. 1SFOR...cuccniinieaanannaees 8,19 |

Broussard v. Meineke Discount Muffler Shops,

Inc., 155 F.3d 331 (4th Cir. 1998)...........ss00ss00es 15, 17,18

Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., |

429 US. 477 97 Th. ccc 12

Castano v. American Tobacco Co., 84 F.3d

734 (Si Ce, FSB) rscssasncisncaeiaaeaans 7,9

Coopers & Lybrand v. Livesay, 437 U.S. 463

(1978) ......++0ssseeavesesnkenvasnepeeainiehaasinn aan 6

General Tel. Co. v. Falcon, 457 U.S. 147

(IDG Z) .....++:00s-0csr00sesinnennaiolnesieiiailaaliananaaennn . 6,8, 18

Gerber v. Delta Airlines, Inc., 1996-2 Trade

Cas. 9 73 336 CD. Goa, TID vasicsssvessicenecscsscsnens 14 :

In re Cardizem CD Antitrust Litig., 200 F.R.D.

297 (ED. WiaR. BOT hi cssssisnscecserntabrdciteaaleenns 15

In re Flat Glass Antitrust Litig., 191 F.R.D.

$72 CW DD. PO So oncesnseanins 4

In re Hotel Tel. Charges, 500 F.2d 86 (9th Cir.

19974 ).....00.+1v0xssesusesenaeenenna ia 9, 10, 13

In re Lorazepam & Clorazepate Antitrust

Litig., 289 F.3d 9B QD.C. Cin, ZOUZ) ...0vcssssssesvvee 19 ’

In re Mercedes-Benz Antitrust Litig.,

__ F. Supp. 2d _, 2003 WL 556359 (D.N.J.

POR. 19, ZESD ovncsicsssensnnierieseneceseaeeenaaeaeanaes 15

iil

TABLE OF AUTHORITIES—Continued

In re Rhone-Poulenc Rorer Inc., 51 F.3d 1293

(7th Cir.), cert. denied, 516 U.S. 867 (1995) ......

In re Terazosin Hydrochloride Antitrust Litig.,

BUS EBD. DS 1 GED. FUR. BOOT) oc cserecvcsvessesececsees

In re Visa Check/Mastermoney Antitrust Litig.,

280 F.3d 124 (2d Cir. 2001), cert. denied,

See Geek SEPUE CIID oninsicnetencnsisesnietassendisanesinnne

In re Vitamins Antitrust Litig., 209 F.R.D. 251

isl sei ie dssitanacinstaeandnieensnstnvanscohoee

Kline v. Coldwell, Banker & Co., 508 F.2d 226

(9th Cir. 1974), cert. denied, 421 U.S. 963

a duets

Newton v. Merrill Lynch, Pierce, Fenner &

Smith, 259 F.3d 154 (3d Cir. 2001)...

Ortiz v.. Fibreboard Corp., 527 U.S. 815

Ser isiaiuha sera nianiasonenbidacntehnanrinnensanvacteteseeiiis

Paper Sys. Inc. v. Mitsubishi Corp., 193 F.R.D.

I Os A acctssdisnsnerersercitannsnicsenisdanesds

Rutstein v. Avis Rent-A-Car Systems, Inc.,

211 F.3d 1228 (11th Cir. 2000), cert. denied,

Be tS iicsicvescussemsaesantiasnnciensnnsunccerns

Sandwich Chef of Texas, Inc. v. Reliance Nat'l

Indem. Ins. Co., 319 F.3d 205 (Sth Cir. 2003) ....

Shumate & Co. v. National Ass'n of Sec. Deal-

ers, Inc., 509 F.2d 147 (Sth Cir.), cert. de-

Rs rae WN IE veskisvinenshervcsatiensnnsacareaes

Szabo v. Bridgeport Mach., Inc., 249 F.3d 672

(7th Cir.), cert. denied, 534 U.S. 951 (2001) ......

Walsh v. Ford Motor Co., 807 F.2d 1000 (D.C.

Cir. 1986), cert. denied, 482 U.S. 915 (1987).....

Waste Mgmt. Holdings, Inc. v. Mowbray,

BP Fe Be CER CO, FID) wivnssssevsssicnceverssscesinesse

TABLE OF AUTHORITIES—Continued

Weisfeld v. Sun Chem. Corp., 210 F.R.D. 136

LN I siiciaesanenstinnnassananscarsaminesiineteisiniiediionadbin 14

Windham v. American Brands, Ine., 565 F.2d

59 (4th Cir. 1977), cert. denied, 435 U.S. 968

SITET isiatiececcsinsea siaisendiguaannnatcoaeniinatlecdieleclanmudiaeunide 10, 12, 13

Zenith Radio Corp. v. Hazeltine Research, Inc.,

Fe Ch I E vitinevitencaunieviboniaintacentininsencss 12

STATUTES:

Bee a ilies eB ceinciietncncteatinceitnnennianadainmedmnaieinens 12, 13

Be hs OE ces insttnkivlasaininiivcsnnndimesamianatnnents passim

RULES:

Be, aes MY AE OP nccs sn eden vadecenrpiodieanveneencaramaaannaeens ]

es ie ey Mee sehen veaservmniaresicsenieniainnindl passim

OTHER AUTHORITIES:

Janet Cooper Alexander, Do the Merits Mat-

ter? A Study of Settlements in Securities

Class Actions, 43 Stanford L. Rev. 497

Se ED ccinsksscesnibernnneneciesailiaiaatalcsiabiasnidlianintb dacldabulipsiciateitticains 7

Robert G. Bones & David S. Evans, Class

Certification and the Substantive Merits, 51

SO Ride. Be GE Dincnescaiicnnsnislesitalalinbireneitinins 7,8

Geoffrey C. Hazard, Jr., Class Certification

Based on Merits of the Claims, 69 Tenn. L.

SU; IIS coi scic ss aa ieacasnieaiaeaucn de nisoandiaenns 7

IN THE

Supreme Court of the Anited States

No. 02-1070

GAYLORD CONTAINER CorpP., et al.,

Petitioners, -

Vv.

GARRETT PAPER, INC., et al.,

Respondents.

On Petition for a Writ of Certiorari to the

United States Court of Appeals

for the Third Circuit

BRIEF FOR AMICUS CURIAE

THE BUSINESS ROUNDTABLE

IN SUPPORT OF PETITIONERS

STATEMENT OF INTEREST

OF AMICUS CURIAE

Amicus curiae The Business Roundtable is an association

of approximately 150 chief executive officers of leading

corporations with a combined workforce of more than ten

million employees in the United States and about $3.7 trillion

in revenues.!_ The executives who created The Business

1 No counsel for any party authored this brief in whole or in

part, and no person or entity, other than the amicus curiae and its

members, made a monetary contribution to the preparation or

submission of this brief. S. Ct. Rule 37.6. Three of the petitioners,

Georgia-Pacific Corporation, International Paper Company and

Pactiv Corporation (formerly Tenneco Packaging, Inc.), are

Roundtable believed that the U.S. economy would be health-

ier and the interest of the public would be better served if

there were more cooperation and less antagonism among

various sectors of society. They concluded that one way

business could be a more constructive force and have a

greater impact on policymaking was to bring the chief

executive officers more directly into public debate. There-

fore, The Business Roundtable’s members examine public

policy issues that affect the economy and develop positions

that seek to reflect sound economic and social principles.

Among other things, The Business Roundtable’s member

chief executives have taken an active interest in the operation

and administration of the country’s civil justice system, and

have advocated on behalf of efforts to reform the system in

order to assure more fair, equitable and efficient treatment of

all of its participants, including members of the Nation’s

business community.

The questions presented in this petition have tremendous

practical importance for The Business Roundtable’s mem-

bers, many of whom are involved in antitrust litigation, both

as plaintiffs and defendants, or other types of class action

litigation in the federal courts. Because of the enormous

stakes at issue in class actions seeking monetary damages—

particularly in antitrust cases—and the substantial likelihood

that erroneously certified class actions will settle without any

adjudication on the merits, The Business Roundtable believes

that courts must rigorously enforce the requirements for class

certification to ensure that it is used only where classwide,

rather than individual, issues are truly at stake.

The Third Circuit’s opinion, by contrast, paves the way for

privace piattiffs to pursue antitrust class actions on behalf of

tens of thousands of unnamed class members who made

members of The Business Roundtable. Letters of consent from all

parties have been filed with the Clerk of the Court.

millions of individual purchases, even where it would require

an individualized inquiry to determine whether each class

member suffered injury-in-fact—an essential element for any

private antitrust claim. More generally, the approach en-

dorsed by the Third Circuit poses a significant risk to class

action defendants because it would permit class certification

even where individualized issues central to a finding of

liability permeate an action. The court’s decision conflicts

with the approach taken by other circuits, thereby creating an

uncertainty in the law that is harmful to the business commu-

nity. The Business Roundtable is concerned that if the Third

Circuit’s decision remains in place, it will threaten businesses

with exposure to sprawling class action lawsuits against

which they could not effectively defend themselves, thereby

creating an inexorable pressure to abandon meritorious

defenses and settle frivolous lawsuits. Given the extraordi-

nary confusion in the lower courts on these issues, and the

elusiveness of appellate review in this area, this case presents

an ideal vehicle to resolve that confusion.

STATEMENT OF THE CASE

This case concerns allegations that petitioners—vertically

integrated manufacturers and sellers of linerboard and of

corrugated boxes and sheets made from that material—

conspired, over a two-year period in the early 1990s, to

reduce the output of linerboard in order to raise the price of

boxes and sheets. See Pet. 4. Respondents are small pur-

chasers of corrugated boxes and sheets seeking to represent a

class comprised of all entities and individuals who purchased

corrugated boxes or sheets during the time of the alleged

conspiracy. Jd. at 6. This class would include some of the

largest corporations in the world, as well as tens of thousands

of other consumers who buy boxes. /d.

Respondents sought class certification, and petitioners

argued, among other things, that certification was inappropri-

ate because the fact of antitrust injury to each class member

was not susceptible to classwide proof, and because indi-

vidualized issues would predominate given respondents’

reliance on the fraudulent concealment doctrine to overcome

the applicable statute of limitations. Petitioners presented

evidence concerning variations in the arrangements by which

purchasers buy boxes and sheets, which variations could

plainly affect the existence of injury-in-fact. Likewise,

petitioners explained the individualized determinations that

would be required for each class member to make the requi-

site showing of “due diligence” in order to benefit from the

fraudulent concealment doctrine. The district court rejected

both of these arguments and certified both classes.

The Third Circuit agreed to consider the district court’s

certification order pursuant to Fed. R. Civ. P. 23(f), see id.

35a-36a, but affirmed that order. /d. at 3a-34a. The court

noted that respondents might be able to prove the fact of

injury to each class member based, in part, on respondents’

experts opinion that all class members would have been

injured. Jd. at 15a. Although these experts did not commit

to any particular method of proving classwide injury, the

court concluded that the experts’ opinions were significant

because they were “supported by charts and studies.” /d.

The Third Circuit also rejected petitioners’ argument on the

fraudulent concealment issue, and held that the required

showing of “due diligence” on the part of each class member

would not result in individual issues predominating in the

case. Jd. at 32a. Despite a Fourth Circuit opinion to the

contrary, the court concluded that “common issues of con-

cealment predominate here because the inquiry necessarily

focuses on defendants’ conduct, that is, what defendants did

rather than what the plaintiffs did.” Jd. (quoting /n re Flat

Glass Antitrust Litig., 191 F.R.D. 472, 488 (W.D. Pa. 1999)).

SUMMARY OF ARGUMENT

Class certification decisions are of great significance in this

country’s civil justice system. By allowing an exception to

the rule that cases are litigated only by actual parties, class

actions expose defendants to enormous and highly unpredict-

able liability. As many courts and commentators have

recognized, the practical effect of a decision to certify a class

is often settlement, regardless of the merits of the claims or

the viability of available defenses. It is therefore of overrid-

ing importance that courts rigorously enforce the require-

ments of Rule 23 to ensure that classwide issues in fact

predominate over individual ones and that class adjudication

is in fact a superior method.

The court below, parting ways with other circuits, ignored

these concerns and upheld certification of an antitrust class

even though two key liability issues—the existence of

antitrust injury-in-fact and fraudulent concealment—each

depend on individualized inquiries that cannot be adjudicated

on a Classwide basis. The Third Circuit brushed away these

concerns by stating that plaintiffs’ experts had presented

“charts and studies” supporting their view that antitrust

injury might be susceptible of classwide proof, and that the

question of fraudulent concealment involved some common

issues in addition to individual ones. The court’s conclusory

holdings not only conflict with those of other circuits but, if

allowed to stand, would markedly lower the bar to class

certification in antitrust and other actions, in a manner that

will have deleterious effects on businesses attempting to

defend against baseless claims.

There is no cause for the Court to delay in resolving the

widespread confusion in the law. Given the general lack of

opportunity for appellate review of decisions to certify

classes, the lower courts are hopelessly divided on the issue.

And given the discretionary nature of circuit court review

under Rule 23(f) and the effective lack of post-judgment

review of erroneous certification decisions, the opportunities

for this Court’s intervention, if not exercised here, will

continue to dwindle. That is because once an issue becomes

settled law in a circuit, as these issues have now become in

the Third Circuit, it is highly unlikely that that court would

aaa

certify the same issue for appellate review, denying this

Court an opportunity to correct errors in the future.

REASONS FOR GRANTING THE WRIT

I. THE COURT SHOULD ENSURE THAT CERTIFI-

CATION DECISIONS ARE CAREFULLY SCRU-

TINIZED GIVEN THEIR POTENTIAL TO DE-

PRIVE DEFENDANTS OF THE ABILITY TO PRE-

SENT MERITORIOUS DEFENSES

1. This Court has long recognized that the “class-action

device was designed as an exception to the usual rule that

litigation is conducted by and on behalf of the individual

named parties only.” General Tel. Co. v. Falcon, 457 U.S.

147, 155 (1982) (citation and quotations omitted). Thus, a

class action “may only be certified if the trial court is satis-

fied, after a rigorous analysis,” that certification is justified.

Id. at 161 (emphasis added). And as the Court has empha-

sized more recently, “[t]he Rules Enabling Act underscores

the need for caution,” because “no reading of the [class |

action] Rule can ignore the Act’s mandate that rules of

procedure ‘shall not abridge, enlarge, or modify any substan-

tive right.’ Ortiz v. Fibreboard Corp., 527 U.S. 815, 845

(1999) (quoting 28 U.S.C. § 2072(b)) (citation and quotation

omitted). See also Amchem Products, Inc. v. Windsor, 521

U.S. 591, 613 (1997).

The Court has also recognized another feature of class cert-

ifications that is of particular importance to The Business

Roundtable and its members: namely, that “[clJertification of

a large class may so increase the defendant’s potential dam-

ages liability and litigation costs that he may find it economi-

cally prudent to settle and to abandon a meritorious defense.”

Coopers & Lybrand v. Livesay, 437 U.S. 463, 476 (1978). |

As Judge Posner has elaborated, class certification creates an

“intense pressure to settle” despite the availability of merito-

rious defenses, leading to a legitimate judicial concern over

“blackmail settlements.” Jn re Rhone-Poulenc Rorer Inc.,

ew serene career = = a —

51 F.3d 1293, 1298 (7th Cir.) (citation and quotation omit-

ted), cert. denied, 516 U.S. 867 (1995).

Other courts have sounded the same concern. For example,

as the Fifth Circuit has noted:

In addition to skewing trial outcomes, class certification

creates insurmountable pressure on defendants to settle,

whereas individual trials would not. The risk of facing an

all-or-nothing verdict presents too high a risk, even when

the probability of an adverse judgment is low. [Castano

v. American Tobacco Co., 84F.3d 734, 746 (Sth Cir.

1996) (citations omitted)].

Even the Third Circuit earlier recognized this fact. See

Newton v. Merrill Lynch, Pierce, Fenner & Smith, 259 F.3d

154, 167-168 (3d Cir. 2001) (“Irrespective of the merits,

certification may have a decisive effect on litigation [be-

cause] granting certification may generate unwarranted pres-

sure to settle nonmeritorious or marginal claims.’).2

Commentators have likewise reached the same conclusions.3

2 See also Rutstein v. Avis Rent-A-Car Systems, Inc., 211 F.3d

1228, 1241 n.21 (11th Cir. 2000) (only thing gained from certifi-

cation was “the blackmail value of a class certification that can aid

the plaintiffs in coercing the defendant into a settlement”), cert.

denied, 532 U.S. 919 (2001); Kline v. Coldwell, Banker & Co.,

508 F.2d 226, 238 (9th Cir. 1974) (Duniway, J., concurring) (“I

doubt that plaintiffs’ counsel expect the immense and unmanage-

able case that they seek to create to be tried. What they seek to

create will become (whether they intend this result or not) an over-

whelmingly costly and potent engine for the compulsion of settle-

ments, whether just or unjust.””), cert. denied, 421 U.S. 963 (1975).

3 See, e.g., Robert G. Bones & David S. Evans, Class Certifica-

tion and the Substantive Merits, 51 Duke L.J. 1251 (2001);

Geoffrey C. Hazard, Jr., Class Certification Based on Merits of the

Claims, 69 Tenn. L. Rev. 1 (2001); Janet Cooper Alexander, Do

the Merits Matter? A Study of Settlements in Securities Class

Actions, 43 Stanford L. Rev. 497, 499 (1991) (in securities class

These concerns are particularly acute to The Business

Roundtable and its member CEOs because “[m]any corporate

executives are unwilling to bet their company that they are in

the right in big-stakes litigation, and a grant of class status

can propel the stakes of a case into the stratosphere.” Blair v.

Equifax Check Servs., Inc., 181 F.3d 832, 834 (7th Cir.

1999). Thus, “some plaintiffs or even some district judges

may be tempted to use the class device to wring settlements

from defendants whose legal positions are justified but

unpopular.” Jd. See Bones & Evans, supra, at 1301 (“{IJt

sometimes seems as if the high probability of class settlement

is the cause of a liberal judicial attitude toward certification:

certification followed by settlement removes many cases

from the court docket without the need for trial and with

minimal risk of reversal on appeal.””) And as commentators

have noted, there is “a correlation between class action

settlement and frivolous litigation.” /d. at 1291-94. That is

because the class action “magnifies the stakes through

aggregation,” “increases the defendant’s risk bearing, litiga-

tion, and reputation costs,” and “enlists the trial judge in the

settlement process.” Jd. at 1294-95.

2. The Third Circuit’s ruling, if allowed to stand, will

engender precisely the type of unfair, coercive pressures this

Court and other courts have warned against. The cavalier

manner in which the courts below permitted the class in this

case to be certified is the antithesis of the “rigorous analysis,”

Falcon, 457 U.S. at 161, required by this Court’s precedents.

Rather than requiring plaintiffs to demonstrate that liability

can, in fact, be adjudicated on a classwide basis, the court

simply accepted the conclusory representations of plaintiffs’

experts, supported by unspecified “charts and studies,” that

actions, “settlements are not voluntary in that trial is not regarded

by the parties as a practically available alternative for resolving the

dispute, and they are not accurate in that the strength of the case on

the merits has little or nothing to do with determining the amount

of the settlement’).

the requisite antitrust injury might be susceptible to classwide

proof. Likewise, the court simply ignored the individual

issues that must be proven by each class member in order to

sustain a claim of fraudulent concealment sufficient to toll

the statute of limitations.

Other courts have rejected this casual “certify now and find

out later” approach. Indeed, while still sitting on the D.C.

Circuit, then-Judge Ginsburg (with Judge Edwards) recog-

nized the dangers of accepting, without close scrutiny, the

allegations of putative class action plaintiffs made in support

of a certification motion. In Walsh v. Ford Motor Co.,

807 F.2d 1000, 1016 (D.C. Cir. 1986), cert. denied, 482 U.S.

915 (1987), plaintiffs argued that variations in state law were

“academic” and immaterial, and therefore did not defeat Rule

23(b)’s predominance requirement. /d. The D.C. Circuit

aptly concluded that “[a] court cannot accept such an asser-

tion ‘on faith.””’ Jd. Instead, a district court must make a

“considered predomination determination” in order to justify

certifying a class. Jd. at 1017. Moreover, the court reiterated

that the burden is on the class proponents to prove that the

requirements of Rule 23 are satisfied. Jd. See also Castano,

84 F.3d at 742 (“Given the plaintiffs’ burden, a court cannot

rely on assurances of counsel that any problems with pre-

dominance or superiority can be overcome.”); Szabo v.

Bridgeport Mach., Inc., 249 F.3d 672, 677 (7th Cir.) (“simi-

larity of claims and situations must be demonstrated rather

than assumed”), cert. denied, 534 U.S. 951 (2001).

Likewise, in a case involving the same antitrust injury-in-

fact issue presented in this case, the Ninth Circuit also

required a district court to do more than simply trust a

plaintiff concerning the propriety of certification:

The District Court in this case has relied on the “imagina-

tion” of appellees’ counsel to provide solutions that will,

at some point in the future, prevent these individual is-

sues from splintering the action into thousands of indi-

vidual trials requiring years to litigate. Thus far the ap-

pellees have not been able to demonstrate to our satisfac-

tion that the individual questions will not overwhelm the

common questions, unless some of the required elements

or allowed defenses in respect to the alleged claims are

eliminated or impaired. The issues raised by the apparent

existence of numerous individual questions must be re-

solved before a class is certified. [Jn re Hotel Tel.

Charges, 500 F.2d 86, 90 (9th Cir. 1974).4]

As shown above, a decision to certify a class will often

dictate the outcome of a case, forcing settlement and thereby

effectively depriving defendants from the ability to present

meritorious defenses. Accordingly, courts must take particu-

lar care to ensure that claims that are alleged to present

common issues are, in fact, susceptible of classwide treat-

ment. In this case, both the injury-in-fact and the fraudulent

concealment issues would necessarily require a searching

look at each class member—tens of thousands of purchasers

of corrugated boxes and sheets over a two-year period—

before antitrust liability could be established. For example,

each purchaser interacted with the defendants under different

market conditions and on different contractual terms, and

thus some purchasers may have suffered no harm whatsoever

4 See also Sandwich Chef of Texas, Inc. v. Reliance Nat'l

Indem. Ins. Co., 319 F.3d 205, 221 (Sth Cir. 2003) (“Although

expert testimony * * * might convince the trier of fact to find in

[plaintiffs’] favor, such opinion evidence would not justify

excluding proof demonstrating a lack of reliance by individual

plaintiffs.”); Windham v. American Brands, Inc., 565 F.2d 59, 70

(4th Cir. 1977) (en banc) (“where the court finds, on the basis of

substantial evidence as here, that there are serious problems now

appearing, it should not certify the class merely on the assurance

of counsel that some solution will be found”) (emphasis in origi-

nal), cert. denied, 435 U.S. 968 (1978); Kline, 508 F.2d at 236 n.8

(rejecting plaintiffs’ proffer of generalized proof, noting that Rule

23 “does not eliminate the need for individual proof” and does not

“foreclose the right uf each defendant to assert his defenses’’).

from the alleged scheme to decrease output. Yet the Third

Circuit ignored these concerns, concluding on the basis of

unspecified “charts and studies” that antitrust injury could be

proven as to the entire class. Likewise, the court simply

ignored the fact that establishing fraudulent concealment

requires a plaintiff-by-plaintiff factual inquiry into what that

plaintiff knew or did not know about the alleged scheme.

This ruling effectively denies petitioners the ability to

present meritorious defenses and to be confronted with the

requisite individualized proof with regard to purchasers who

have, in fact, suffered no antitrust injury at all, and it permits

those purchasers (and class counsel) to reap undeserved

windfalls. In order to certify a class, the susceptibility of

classwide treatment must be demonstrated by the plaintiffs,

not simply presumed. This Court should grant review to

ensure that the lower courts follow that rule.

Il. THE COURT SHOULD RESOLVE THE WIDE-

SPREAD CONFUSION IN THE LOWER COURTS

AS TO THE PROPRIETY OF CERTIFYING ANTI-

TRUST CLASS ACTIONS DESPITE THE PRES-

ENCE OF INDIVIDUALIZED ISSUES

This case is also of great importance to the Nation’s busi-

ness community because the questions presented have

divided the lower courts for years, creating intolerable

uncertainty and unpredictability in the law. Moreover, the

decision below, by depriving defendants of the ability to

demonstrate that individual plaintiffs have no valid claims,

improperly allows plaintiffs to use the procedural class action

device as a mechanism to alter defendants’ substantive rights.

Accordingly, the Court should grant certiorari to resolve the

conflict and ensure that class certification in antitrust actions

is strictly limited to cases susceptibie to classwide resolution.

1. As this Court has made clear, in order to prove liabil-

ity in a private antitrust action, a plaintiff must prove that it

was injured in fact as a result of the alleged antitrust viola-

tion. See Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc.,

429 U.S. 477, 489 (1977); Zenith Radio Corp. v. Hazeltine

Research, Inc., 395 U.S. 100, 114 n.9 (1969). Antitrust

injury is not simply a question of damages but is rather an

element of a private plaintiffs’ substantive cause of action.

That is because Section 4 of the Clayton Act only permits a

private antitrust plaintiff to recover damages when the

plaintiff “is injured in [its] business or property by reason of

anything forbidden in the antitrust laws.” 15 U.S.C. § 15.

As shown in the petition, the lower courts are hopelessly

divided as to the circumstances under which class certifica-

tion 1s appropriate in antitrust cases. Contrary to the decision

in this case—in which the Third Circuit was quick to rely on

the conclusory and tentative opinions of the plaintiffs’

experts in affirming class certification—other courts have

recognized that the individualized issues of antitrust injury

are not susceptible to classwide treatment.

In Windham v. American Brands, Inc., 565 F.2d 59 (4th

Cir. 1977), cert. denied, 435 U.S. 968 (1978), the en banc

Fourth Circuit addressed whether the antitrust injury re-

quirement is susceptible to classwide proof, and concluded

that in a private antitrust action, “the issues of injury and

damage remain the critical issues *** and are always

strictly individualized.” Jd. at 66. Thus, the court held that

“{gleneralized or class-wide proof of damage in a private

antitrust action would, * * * contravene the mandate of the

Rules Enabling Act that the Rules of Civil Procedure ‘shall

not abridge, enlarge, or modify any substantive right.’ ” Jd.

(quoting 28 U.S.C. § 2072) (footnote omitted). As the court

held, the “highly individualized character of the proof of

injury and damages” precluded class certification because

“the claims could not be proved by any set method of math-

ce eRe Cae Renee a —

ematical or formula calculation but would require individual

proof and trial.” /d.9

The Ninth Circuit reached the same conclusion in an anti-

trust class action presenting some of the same issues—

including the individualized antitrust injury issue—as the

instant case. In Jn re Hotel Telephone Charges, 500 F.2d at

89, the Ninth Circuit held that “[u]nless the court is to allow

the procedural device of the class action to wear away the

substantive requirements to maintain a private antitrust cause

of action, this suit raises far too many individual questions to

qualify for class action treatment.” The court also specifi-

cally addressed the plaintiffs’ efforts to concoct methods of

presenting the required proof on a classwide basis, and

concluded that such methods “significantly alter[ ] substan-

tive rights under the antitrust statutes,” in violation of the

Rules Enabling Act. /d. at 90.

Other courts have likewise held that class certification in

antitrust cases is inappropriate without a readily identifiable

method for demonstrating that each class member had in fact

been injured by the alleged antitrust violation—thereby

giving them standing under Section 4 of the Clayton Act.

For example, in Alabama v. Blue Bird Body Co., 573 F.2d

309 (Sth Cir. 1978), the Fifth Circuit held that, in light of the

essential elements of an antitrust claim, antitrust “ ‘impact’ is

a question unique to each particular plaintiff and one that

must be proved with certainty.” Jd. at 327. Because of the

5 The Windham court noted that class certification may be

appropriate for claims involving markets in which the showing of

injury on behalf of class members would be “virtually a

mechanical task, capable of mathematical or formula calculation.”

Id. at 68 (citations and quotations omitted). That is plainly not the

case here. Given the variations in the arrangements by which

purchasers in the box and sheet markets bought products, this case

certainly does not present the type of facts conducive to a

“mechanical” showing of injury.

F 14

“diverse nature” of the market at issue in Blue Bird and the

absence of any “manageable manner’’ for ensuring that each

class member had in fact been injured, the court concluded

that class certification was not appropriate. /d. at 328 (em-

phasis removed). See also Shumate & Co. v. National

Ass'n of Sec. Dealers, Inc., 509 F.2d 147, 155 (Sth Cir.)

(finding no predominance in light of requirement of “proof of

injury” to each putative class member), cert. denied, 423 U.S.

868 (1975); Weisfeld v. Sun Chem. Corp., 210 F.R.D. 136,

142-145 (D.N.J. 2002); Gerber v. Delta Airlines, Inc., 1996-

2 Trade Cas. § 71,538 (N.D. Ga. 1996).

By contrast, other courts—in line with the Third Circuit in

this case—have taken a much more liberal approach towards

the propriety of class certification, accepting bare assertions

that injury can be proven on a classwide basis. For example,

in In re Visa Check/Mastermoney Antitrust Litig., 280 F.3d

124, 136-137 (2d Cir. 2001), cert. denied, 122 S. Ct. 2382

(2002), the Second Circuit recently held—over a vigorous

dissent—that certification was appropriate where the plain-

tiffs’ expert posited that a model could be constructed to

show classwide economic impact, despite considerable

evidence indicating that variations among class members

made such a showing impossible. Some district courts have

likewise concluded that an expert opinion suggesting the

possibility of classwide proof of injury is sufficient to justify

certification of a class—even where the actual evidence

shows individualized variations among class members.®

6 See, e.g., In re Vitamins Antitrust Litig., 209 F.R.D. 251, 266

(D.D.C. 2002) (holding that at the class certification stage, plain-

tiffs “need only demonstrate that they intend te use generalized

evidence which is common to the class and will predominate over

individualized issues with respect to proving impact”); Paper Sys.

Inc. v. Mitsubishi Corp., 193 F.R.D. 601, 612-616 (E.D. Wis.

2000) (concluding that accepting defendants’ arguments concern-

ing the availability of classwide proof in injury was inappropriate

at certification stage because it addressed merits).

Others have gone even further, holding that in order to satisfy

the injury-in-fact requirement, “[p]laintiffs are not required to

show that the fact of injury actually exists for each class

member.” Jn re Cardizem CD Antitrust Litig., 200 F.R.D.

297, 307 (E.D. Mich. 2001). Accord, In re Terazosin Hydro-

chloride Antitrust Litig., 203 F.R.D. 551, 558 (S.D. Fla.

2001). And only recently, one district court, relying on the

Third Circuit’s decision in this case, concluded that, in order

have a class certified, the plaintiff “need not establish now

that there is class-wide antitrust impact.” Jn re Mercedes-

Benz Antitrust Litig., _ F. Supp. 2d _, 2003 WL 556359, at

*10 (D.N.J. Feb. 19, 2003). |

~ Likewise, the courts that have addressed the amenability of

the fraudulent concealment doctrine to classwide treatment

have reached conflicting conclusions. In Broussard v. Mein-

eke Discount Muffler Shops, Inc., 155 F.3d 331, 342 (4th Cir.

1998), the Fourth Circuit held that the individual inquiries

required by the application of that doctrine—including the

necessity of a showing of due diligence by any plaintiff

seeking to toll an applicable statute of limitations—preclude

class certification. On the other hand, the First Circuit

rejected such a rule and concluded that common issues could

predominate, even where fraudulent concealment is an issue.

See Waste Mgmt. Holdings, Inc. v. Mowbray, 208 F.3d 288,

296 n.4 (2000). Moreover, as the petition points out, a raft of

district court decisions going each way also highlights the

recurring nature of the fraudulent concealment doctrine in

class action litigation and the significantly different ap-

proaches courts have taken in addressing it. See Pet. 20-21.

The differences in approach between the courts addressing

the susceptibility of the antitrust injury requirement and the

fraudulent concealment doctrine to class treatment are real

and significant. In particular with respect to the antitrust

injury issue, most circuits recognize that certification is only

appropriate where classwide evidence would be able to prove

injury to each class member and not in cases, like this one,

where variations in the positions of the putative class mem-

bers make such classwide proof impossible. By contrast, a

minority of courts, including the Third and Second Circuits,

ignore such individualized variations and allow plaintiffs to

theorize about, rather than demonstrate, the existence of

classwide issues. The court should grant certiorari to ensure

that the standards for certification in antitrust cases do not

vary based solely upon where a plaintiff chooses to sue.

2. | The questions presented in this case are not academic

inquiries, but rather have widespread impact on businesses.

As evidenced by the numerous cases cited above and in the

petition, the issues raised here are recurring ones over which

the courts have differed sharply. The decision below,

moreover, has profound consequences for businesses facing

antitrust claims brought on behalf of a putative class. For if

the Third Circuit’s decision is allowed to stand unreviewed,

it will eliminate the ability of businesses to defend key

elements of such cases.

As this Court has held, “Rule 23’s requirements must be

interpreted in keeping with * * * the Rules Enabling Act,

which instructs that rules of procedure ‘shall not abridge,

enlarge or modify any substantive right.’ Amchem, 521

U.S. at 613 (quoting 28 U.S.C. § 2072(b)); see also Ortiz,

527 U.S. at 845. To allow the purely procedural device of

class certification to abridge, enlarge, or modify substantive

rights would, in essence, contravene parties’ right to due

process by determining substantive rights not yet litigated on

their merits. Yet that is precisely what the decision below

does. By permitting certification based on generalized expert

testimony regarding classwide antitrust injury, and by

ignoring differences among class members as to elements of

fraudulent concealment, the decision effectively eliminates

the ability of antitrust defendants to demonstrate that indi-

vidual class members fail to satisfy these elements.

In Broussard, the Fourth Circuit faced a case involving the

same issues as this case: the “inherently individualized”

proof of actual injury and individualized issues concerning

the fraudulent concealment doctrine. 155 F.3d at 342-343.

As in this case, the plaintiffs in Broussard sought to over-

come these problems with experts who attempted to supply

the requisite proof with averages and samples but without

considering actual procf as to any particular class member.

Id. at 343. Unlike the Third Circuit here, however, the

Fourth Circuit held that this use of “hypothetical or specula-

tive” evidence was an improper “shortcut” that “should have

been a caution signal to the district court that class-wide

proof of damages was impermissible.” /d.

The Broussard court further recognized that under the

approach permitted by the district court, “plaintiffs enjoyed

the advantage of litigating not on behalf of themselves but on

behalf of a ‘perfect plaintiff pieced together for litigation,”

id. at 344, while the defendant was “often forced to defend

itself against a fictional composite without the benefit of

deposing or cross-examining the disparate individuals behind

the composite creation.” Jd. at 345. The court appropriately

concluded that this all-too-common method of class action

litigation ran afoul of the Rules Enabling Act.

By allowing plaintiffs to establish classwide liability on the

basis of generalized, theoretical assertions of antitrust injury,

the Third Circuit put the defendants in the same precarious

position discussed in Broussard of being forced to defend

against abstraci, generalized proof. In doing so, the Third

Circuit allowed class certification to abridge defendants’

substantive rights in violation of the Enabling Act. Because

antitrust injury is a substantive element of any antitrust

plaintiffs’ cause of action, the Third Circuit’s decision allow-

ing injury to be proven on a classwide basis through general-

ized testimony abridges defendants’ substantive rights.

The same is true for the court’s holding that plaintiffs can

litigate the applicability of the statute of limitations on a

classwide basis notwithstanding individualized issues on the

question of fraudulent concealment. As the Fourth Circuit

also recognized in Broussard, the fraudulent concealment

doctrine—complete with its requirement of proof of due

diligence by plaintiffs seeking to overcome a statute of

limitations—does not lend itself to class treatment. 155 F.3d

at 342; see also Pet. 16-22. Rather than taking seriously the

individual issues that would necessarily accompany that

doctrine, the Third Circuit simply accepted the plaintiffs’

argument that common issues would predominate because

the focus would be on the defendants’ acts of concealment.

See Pet. App. 26a-34a. This type of conclusory analysis fails

to honor the instruction of the Enabling Act that substantive

rights not be abridged by Rule 23. The approach of the lower

courts in this case ran afoul of that Act and effectively

deprived petitioners of their substantive right to be free of

time-barred claims.

For these reasons, the Court should grant review to ensure

that the procedural mechanism of Rule 23 is not improperly

used as a means of depriving antitrust defendants of their

ability to assert and litigate their substantive rights.

Ill. THIS CASE PRESENTS AN IDEAL VEHICLE TO

RESOLVE THE CONFUSION IN THE LAW

There is no cause for the Court to delay reaching the im-

portant issues presented in the petition. The issues were

squarely presented below, and the circumstances of class

certification decisions—the difficulty in obtaining interlocu-

tory review combined with the effective lack of post-

judgment review—counsel strongly in favor of certiorari.

Considering the importance of class certification decisions,

it is remarkable how little guidance is available from this

Court’s previous decisions. Since the Court’s seminal

decision more than 20 years ago in Falcon, supra, the Court

has directly considered the application of Rule 23’s standards

only twice, in Amchem, supra, and Ortiz, supra—and in all

three of these cases the Court reversed decisions to certify

classes. The scarcity of appellate case law is largely attribut-

able to two factors: (1) the general absence of interlocutory

review before the 1998 enactment of Rule 23(f), which

allows such review on a wholly discretionary basis; and (2)

the fact that cases generally settle following certification

thereby precluding post-judgment review. As a result, the

authority relied on by most district courts when making

certification decisions often is limited to “decisions by other

district judges, most in cases later settled and thus not subject

to appellate consideration.” Szabo, 249 F.3d at 675.

Now that numerous courts of appeal have weighed in on

the questions presented by this petition, and substantially

different approaches have emerged, the time has come for

this Court to intervene. If the Court does not, the issues will

increasingly evade review, leaving the lower courts hope-

lessly mired in confusion. For once a circuit has decided an

issue, as the Third Circuit has done here, that circuit will

likely not grant discretionary review under Rule 23(f) in

future cases raising the same issue. See, e.g., Jn re Loraze-

pam & Clorazepate Antitrust Litig., 289 F.3d 98, 105 (D.C.

Cir. 2002) (Rule 23(f) review appropriate only where certifi-

cation decision “is questionable, taking into account the

district court’s discretion,” “presents an unsettled and funda-

mental issue of law,” or is “manifestly erroneous”); Newton,

259 F.3d at 163-165 (3d Cir. 2001); Blair, 181 F.3d at 834-

835. Thus, because class certification decisions—particular-

ly in large-scale antitrust cases—are effectively unreviewable

after judgment given the pressures to settle, once a circuit

decides an issue and this Court denies certiorari, the issue

may never again make its way to this Court from that circuit.

And given that plaintiffs often have a choice of circuits in

which to file nationwide class actions, such actions will

increasingly concentrate in those circuits with lenient certifi-

LS TN REET MEMES ee

cation rules that are effectively insulated from further review.

Therefore, this Court’s failure to review this case would

encourage forum shopping by plaintiffs.

The Court should not let this opportunity pass to provide

needed clarity and certainty to both the lower courts and the

business community. Additional certainty in this tremen-

dously important area of the law would benefit the Nation’s

business community and would help do away with the lottery

system that currently prevails, where the level of scrutiny

applied by a particular court to a class certification motion

often makes the difference between a case being dismissed

and a multimillion dollar settlement. Given the importance

of these recurring issues, this Court should step in and

require the lower courts to ngorously analyze requests for

class certification to ensure strict compliance with the

requirements of Rule 23 and the Rules Enabling Act.

CONCLUSION

For the foregoing reasons, as well as those presented in the

petition, the petition should be granted and the judgment

below reversed.

Respectfully submitted,