Expert Analysis Guides Decision to Certify Class of Automotive Part Purchasers
Certifying a class of direct purchasers of sheet metal parts alleging claims under section 1 of the Sherman Act, Judge Lynn Adelman of the United States District Court for the Eastern District of Wisconsin focused on what it means for common questions to predominate in an antitrust class action. Relying on the analysis of plaintiffs’ expert, the decision echoes the Supreme Court’s observation in Amchem Products v. Windsor, 521 U.S. 591, 625 (1997), that “[p]redominance is a test readily met in certain cases alleging . . . violations of the antitrust laws.”
In Fond Du Lac Bumper Exchange v. Jui Li Enterprise et al., plaintiffs allege that defendants—manufacturers of aftermarket automotive sheet metal parts—violated the Sherman Act by conspiring to fix, raise, maintain, and stabilize prices of these automotive parts. Three of the five original defendants have reached class-wide settlements with the plaintiffs, and the court approved these agreements last year.
Aftermarket automotive sheet metal parts are replacement parts for cars that are not manufactured by the original manufacturers and distributed through auto manufacturers’ service channels, but rather are manufactured by other companies and sold without the auto manufacturers’ certification. The aftermarket parts at issue in this case include sheet metal hoods, doors, and fenders.
Judge Adelman found that plaintiffs satisfied the class certification requirements of commonality and predominance for all three elements of a Sherman Act claim. That is, the answers to common questions would resolve the issues of whether (1) defendants had a contract, combination, or conspiracy; (2) the market was impacted by the conspiracy; and (3) plaintiffs were injured.
The court easily found that plaintiffs satisfied the commonality and predominance requirements for the first element of a section 1 claim: that defendants conspired to restrain trade. Although Judge Adelman considered defendants’ arguments that plaintiffs had not met their burden of proof as to the conspiracy element, the court labeled this a merits question to be considered at a later stage. It is sufficient at the class certification stage, the court held, to show that “the existence of a conspiracy among defendants to restrain trade is a question common to the class.”
Much of the court’s ruling is devoted to considering defendant manufacturers’ objections to the second and third prongs—antitrust impact and damages—and, in particular, the pricing structure and regression analyses offered by plaintiffs’ expert. The court found that whether the methodology employed by plaintiffs’ or defendants’ experts was more persuasive is a question for the factfinder. The Court concluded that plaintiffs here had met their burden of showing “they have a way to measure damages class-wide.”
Judge Adelman found convincing the pricing structure analysis presented by plaintiffs’ expert because it showed that prices “tend[ed] to move together over time,” even though the analysis did not control for factors other than conspiratorial conduct that might have affected prices. Furthermore, it did not matter that, as defendants’ expert pointed out, prices of different products moved in opposite directions at times. Even if the price of a given auto part fell, Judge Adelman concluded, plaintiffs’ pricing structure demonstrated that the price would have been even lower in the absence of anti-competitive conduct. Plaintiffs’ expert also conducted a regression analysis that the court found realistic. The regressions generated a “but-for” price that class members would have paid in the absence of anti-competitive conduct.
Additionally, with regard to other Rule 23 requirements, Judge Adelman rejected defendants’ argument that the typicality and adequacy requirements were not satisfied because of disparities in bargaining power among class members. But the court found that “there is no sub-set of class members who had no bargaining power,” and highlighted that defendants “offer[ed] no reason to believe that some difference in bargaining power” would raise adequacy issues. The court concluded that differences in bargaining power alone do not render class representatives atypical or inadequate.
And what are the lessons learned for defendants challenging motions for class certification? First, that courts appear to be less willing to make class certification decisions that implicate the merits. Second, that defendants’ experts must directly take on plaintiffs’ regression analyses generating a “but for” price that class members would have paid in the absence of anti-competitive conduct. As the Second Circuit’s decision in In re Payment Card Interchange Fee and Merchant Discount Antitrust Litigation yesterday demonstrates, courts continue to be willing to overturn class action settlements on the grounds that certain subclasses were not adequately represented; inadequacy may prove a reliable ground for defendants challenging class certification motions before the district court.