Tuesday, May 15, 2012
Posted by D. Daniel Sokol
David Reichenberg (Wilson Sonsini) asks Class Certification in Innovation Rich Spaces - Do 23(b)(3) Classes Need to Get More Innovative?
ABSTRACT: In recent years, the backdrop for antitrust class actions has increasingly been provided by technological innovation. Take the following hypothetical: Plaintiffs allege a conspiracy between providers of cell phone service resulting in the increase of cell phone plan prices over a six-year span, from 2006 to 2012. In 2006, when the conspiracy was alleged to take effect, there were 20 million consumers who had plans with calling and texting features. By 2012, 120 million people had cell phone service with plans that allowed for streaming, social networking, file sharing, internet, video chatting, etc. All 120 million consumers are now intended to be part of a putative 23(b)(3) class, but many of the new 100 million consumers would not have signed up but for the improvements and cost efficiency gains that had been made from 2006 to 2012.
Several conspiracy cases echo this fact pattern, in industries such as flash memory, portable electronics, graphics processing, and home entertainment. In each case, the alleged class period encompasses a time in which a product has gained widespread-acceptance; this usually comes in tandem with improvements in technology and value for the product at issue. There are also cases in which this trend exists with an allegation of unilateral anticompetitive conduct, as opposed to joint conduct. However, it does not appear that any court has delved deeply into one aspect of class certification under 23(b)(3) in this context. Namely: What must a plaintiff show to establish commonality of impact across the entire class, regardless of when an alleged class member became part of the class? Can the 23(b)(3) predominance requirement be met where individualized proof is necessary to assess whether the alleged conduct had a common impact across the entire class? It is generally accepted that in traditional price pricing cases, in which the product at issue remains static over time, predominance is easily met because all of the class members were subject to some overcharge. However, what about cases in which most or many of the purported members of the class would not be in the class at all but for improvements that had been made in the product at issue? In our hypothetical, are there a sizable number of class members who either signed up only for a data plan for internet use, or would not have gotten a cell phone at all but for improvements in service (3G, 4G, etc.)? Or in the case of flash memory, are there class members who would have bought other forms of portable storage had the price per bit for flash memory not declined as it did?