Subscribers to a cable television service instituted a class action suit in federal court against the service, alleging violations of antitrust law based on the service's practice of "clustering." (Clustering involves concentrating operations within a particular area by "swapping" the service's own systems outside the area for a competitor's system inside the area.) The plaintiffs alleged that clustering reduced competition for cable television services, resulting in higher prices.
Certifying the plaintiffs as a "class" under Federal Rule of Civil Procedure 23(b)(3) required the district court to find "that the questions of law or fact common to class members predominate over any questions affecting only individual members," meaning that the plaintiffs "had to show (1) that the existence of individual injury resulting from the alleged antitrust violation (referred to as 'antitrust impact') was 'capable of proof at trial through evidence that was common to the class rather than individual to its members' and (2) that the damages resulting from that injury were measurable 'on a classwide basis' through use of a 'common methodology.'" The plaintiffs presented four theories of clustering's antitrust impact: (1) clustering made it profitable for the service to withhold local sports programming from competitors, resulting in decreased market penetration by direct broadcast satellite providers; (2) clustering reduced competition from "overbuilders" (competitors who market their services in areas where another cable service already operates); (3) clustering reduced "benchmark competition" (meaning that the subscribers had fewer options to compare prices); and (4) clustering increased the service's bargaining power relative to content providers. The district court accepted only the "overbuilder" theory.
Using a regression model prepared by an expert witness, the plaintiffs alleged that the anticompetitive activities (in aggregate, under the four theories above) resulted in more than $875 million of damages "for the entire class." The model did not, however, segregate damages by theory. Based on this information, the district court certified the class. The service provider appealed, arguing that the class was improperly certified because the plaintiffs did not show damages attributable only to the overbuilder theory.
What is the level of exactitude that should be required in a damages estimate when the certification of a class is at issue? At what point does the time and effort required by the plaintiffs to produce such an estimate, as well as the cost, become too burdensome? If the plaintiffs had produced an estimate showing damages resulting only from the overbuilding, what type of analysis should a court employ to determine whether the estimate is valid and represents the damages of an entire class? Finally, does this scenario mean, in practice, that the plaintiffs must prove their case before the trial begins?