Assessing the Third Circuit's class action decision in Sullivan v. DB Investments through the lens of typicality

Federal law does not allow indirect purchasers to pursue damages under the antitrust laws. Many states follow this rule, and many do not. The Third Circuit’s en banc decision in Sullivan v. DB Investments affirms the certification of an indirect purchaser settlement class that treats indirect purchasers who can pursue damages claims under state antitrust law identically with indirect purchasers who cannot pursue damages claims under state antitrust law. Objectors to certification and settlement challenged certification based on commonality and predominance grounds, and challenged the pro rata distribution aspect of the settlement as unfair under Rule 23(e). I agree with the dissent that there are Rule 23 problems with the certification and the settlement. The best way to think about those problems, in my view, is as a failure of typicality.

Apart from the majority opinion by Judge Rendell and the dissent by Judge Jordan, there is also a concurring opinion by Judge Scirica, a leader among federal judges in analyzing class actions. Yet there is virtually no analysis of the typicality requirement in any of the opinions. This is an important omission from the analysis, because it is the typicality requirement that specifically calls for a claim to claim comparison. See Rule 23(a)(3) (requiring an assessment whether ”the claims or defenses of the representative parties are typical of the claims or defenses of the class”).

Consider the following key paragraphs from the en banc majority’s opinion:

At bottom, we can find no persuasive authority for  deeming the certification of a class for settlement purposes improper based on differences in state law. The objectors and our dissenting colleagues nevertheless insist that, despite the prevalence of the shared issues of fact and law stemming from the defendant‘s conduct common as to all class members and each class member‘s resulting injury, states‘ inconsistent treatment of indirect purchaser damages claims overwhelms the commonalities. They advocate this because approximately twenty-five states have not extended antitrust standing to indirect purchasers through Illinois Brick repealer statutes or judicial edict; likewise, some uncertain number of states do not permit an end-run around antitrust standing through claims based on consumer protection and/or unjust enrichment statutes. (See Quinn Supp. Br. on Reh‘g En Banc 21-22.) It follows then, they argue, that a large proportion of the Indirect Purchaser Class lacks any valid claims under applicable state substantive law, and, therefore, cannot “predominantly” share common issues of law or fact with those Indirect Purchasers actually possessing valid claims.

In turn, they insist that a district court must undertake a thorough review of applicable substantive law to assure itself that each class member has “at least some colorable legal claim” (Dissenting Op. at 10) or “has a valid claim” (Quinn  Supp. Br. at 16) before certifying a settlement. But this focus is misdirected. The question is not what valid claims can plaintiffs assert; rather, it is simply whether common issues of fact or law predominate. See Fed. R. Civ. P. 23(b)(3). Contrary to what the dissent and objectors principally contend, there is no “claims” or “merits” litmus test incorporated into the predominance inquiry beyond what is necessary to determine preliminarily whether certain elements will necessitate individual or common proof. Such a view misreads Rule 23 and our jurisprudence as to the inquiry a district court must conduct at the class certification stage. An analysis into the legal viability of asserted claims is properly considered through a motion to dismiss under Rule 12(b) or summary judgment pursuant to Rule 56, not as part of a Rule 23 certification process.

The problem with the majority’s analysis would have been evident if the clear divergence among the claims possessed by class members who have antitrust standing to seek damages and the claims possessed by class members who do not have antitrust standing to seek damages had been viewed through the lens of the typicality requirement.

By comparison, consider the following discussion of typicality in a Fourth Circuit opinion about a putative antitrust class action, Dieter v. Microsoft, 436 F.3d 461 (4th Cir. 2006):

The class action device, which is “designed as an exception to the usual rule that litigation is conducted by and on behalf of the individual named parties only,” Gen. Tel. Co. of Southwest v. Falcon, 457 U.S. 147, 155, 102 S.Ct. 2364, 72 L.Ed.2d 740 (1982) (internal quotation marks omitted), allows named parties to represent absent class members when, inter alia, the representative parties’ claims are typical of the claims of every class member. To be given the trust responsibility imposed by Rule 23, “a class representative must be part of the class and possess the same interest and suffer the same injury as the class members.” Id. at 156, 102 S.Ct. 2364 (internal quotation marks omitted). That is, “the named plaintiff’s claim and the class claims [must be] so interrelated that the interests of the class members will be fairly and adequately protected in their absence.” Id. at 157 n. 13, 102 S.Ct. 2364. The essence of the typicality requirement is captured by the notion that “as goes the claim of the named plaintiff, so go the claims of the class.” Broussard v. Meineke Discount Muffler Shops, Inc., 155 F.3d 331, 340 (4th Cir.1998) (quoting Sprague v. Gen. Motors Corp., 133 F.3d 388, 399 (6th Cir.1998) (internal quotation marks omitted)).

The typicality requirement goes to the heart of a representative parties’ ability to represent a class, particularly as it tends to merge with the commonality and adequacy-of-representation requirements. See Amchem, 521 U.S. at 626 n. 20, 117 S.Ct. 2231; Gen. Tel., 457 U.S. at 157 n. 13, 102 S.Ct. 2364. The representative party’s interest in prosecuting his own case must simultaneously tend to advance the interests of the absent class members. For that essential reason, plaintiff’s claim cannot be so different from the claims of 467*467 absent class members that their claims will not be advanced by plaintiff’s proof of his own individual claim. That is not to say that typicality requires that the plaintiff’s claim and the claims of class members be perfectly identical or perfectly aligned. But when the variation in claims strikes at the heart of the respective causes of actions, we have readily denied class certification. See, e.g.,Broussard, 155 F.3d at 340-44 (holding that plaintiffs could not sustain a class action based on a theory of collective breach of contract because variations in the claims undermined typicality); Boley v. Brown, 10 F.3d 218, 223 (4th Cir.1993) (affirming the district court’s denial of class certification when the resulting harm was dependent on considerations of each class member’s unique circumstances). In the language of the Rule, therefore, the representative party may proceed to represent the class only if the plaintiff establishes that his claims or defenses are “typical of the claims or defenses of the class.” Fed.R.Civ.P. 23(a)(3) (emphasis added).

Thus, it follows that the appropriate analysis of typicality must involve a comparison of the plaintiffs’ claims or defenses with those of the absent class members. To conduct that analysis, we begin with a review of the elements of plaintiffs’ prima facie case and the facts on which the plaintiff would necessarily rely to prove it. We then determine the extent to which those facts would also prove the claims of the absent class members.

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