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Second Circuit

In re American Express Merchants’ Litigation, 667 F.3d 204 (2d Cir. 2012)

Background:  Plaintiffs, merchants that accepted American Express credit card products, alleged that American Express had leveraged its power in the market for high-end charge cards to compel merchants to accept and pay supracompetitive fees for all American Express card products, including lower-end revolving credit cards.

The relationship between merchants who accepted American Express card products and American Express was governed by a contract, which among other things, provided that any dispute or controversy between the parties arising from the agreement would be subject to mandatory binding arbitration.  The contract further contained a class action waiver provision, which prohibited the signatory from arbitrating any claim on a class basis. 

Following the Supreme Court’s decision in AT&T Mobility LLC v. Concepcion, ___ U.S. ___, 131 S.Ct. 1740, 179 L.Ed.2d 742 (2011), the Second Circuit Court of Appeals considered for the third time whether a mandatory arbitration clause containing a class action waiver in a commercial contract was enforceable where enforcement of the class action waiver would preclude plaintiffs from vindicating their federal statutory rights under Section 1 of the Sherman Act.

Outcome:  For the third time, the Court of Appeals held that the mandatory arbitration clause was invalid because enforcement of the class action waiver would “bar plaintiffs from pursuing their statutory claims.”  The Second Circuit concluded that “the record evidence before us establish[ed], as a matter of law, that the cost of plaintiffs’ individually arbitrating their dispute with Amex would be prohibitive, effectively depriving plaintiffs of the statutory protections of the antitrust laws.”  Id. at 6 (internal quotations omitted).  In so holding, the Second Circuit relied on the affidavit of plaintiffs’ expert economist, who opined that it would be cost prohibitive for an individual plaintiff to pursue individual arbitration or litigation because the costs for the necessary economic study and services alone would be at least several hundred thousand dollars while the largest named plaintiff might only expect four-year damages to be $12,850 or $38,549 when trebled.

Third Circuit

Sullivan v. DB Investments, Inc., 667 F.3d 273 (3d Cir. 2011) (en banc)

Background:  The district court approved settlement classes and settlements among direct and indirect purchasers of diamonds based on federal and state antitrust laws and state consumer protection and unjust enrichment laws.  A panel of the Third Circuit reversed and remanded, with one judge agreeing to remand but disagreeing with the majority’s analysis.  Upon approval for en banc review, the panel’s decision was vacated.

Outcome:  A seven judge majority of the Third Circuit affirmed the district court’s certification of the settlement classes and approval of the settlements.  The primary contention of the objectors, endorsed by the vacated panel decision, was that certification was inappropriate because some indirect purchaser class members resident in non-Illinois Brick-repealer states lacked valid legal claims, thereby failing to satisfy the commonality and predominance elements of Fed. R. Civ. P. 23.  The en banc majority rejected the rationale that certification of either litigation or settlement classes depends on whether all class members possess valid legal claims, and in particular state law claims dependent on a choice of law analysis.  Rather, the majority held that classes are appropriately certified if any question of law or fact, based on the defendant’s conduct, is common and predominates for all class members.  The court also reiterated that variations in state law claims held by class members will not generally defeat predominance. 

Judge Scirica wrote a concurring decision, emphasizing that the settlement posture of the case further endorsed the majority decision.  The author of the vacated panel decision was joined by one other judge dissenting to the en banc decision.  A petition for writ of certiorari was denied.  Murray v. Sullivan, 2012 U.S. LEXIS 2656 (Apr. 2, 2012). 

Seventh Circuit

Messner v. Northshore Univ. HealthSystem, 669 F.3d 802 (7th Cir. 2012)

Background:  Plaintiffs alleged that a merger between defendant Northshore University HealthSystem and Highland Park Hospital violated federal antitrust law (as previously found by the Federal Trade Commission).  Plaintiffs sought to certify a class of individual patients and third-party payors who paid higher prices for hospital care as a result of the unlawful merger.

The district court denied plaintiffs’ motion for class certification, holding that the plaintiffs’ proposed methodology required proof that the defendant raised its prices at uniform rates affecting all class members to the same degree.  Because the district court found a lack of uniformity in the price increases and the plaintiffs’ expert had conceded that the common methodological framework proposed to demonstrate impact to members of the class was invalid absent uniform price increases, it held that plaintiffs could not show predominance for certification.  Plaintiffs sought interlocutory appeal.

Outcome: Interlocutory appeal granted and district court order vacated and remanded.  The Seventh Circuit held that the degree of uniformity the district court demanded was not required for class certification.  The court stated that “it is important not to let a quest for perfect evidence become the enemy of good evidence.”  It also found as a factual error that plaintiffs’ expert had indeed explained how his common methodology could show impact to the class despite the fact that Northshore did not increase its prices uniformly across all services.