A month after the U.S. Supreme Court heard arguments over the role of Daubert review at the class certification stage, a federal judge in the Middle District of Pennsylvania has granted class status to direct purchasers of chocolate candies from major manufacturers after conducting an unabridged Daubert analysis of their two expert witnesses.
The purchasers allege the chocolate manufacturers engaged in price fixing.
Since the U.S. Court of Appeals for the Third Circuit hasn’t squarely addressed the extent to which expert testimony proffered by parties seeking class status should be analyzed and other circuits are split on the question, U.S. District Judge Christopher Conner of the Middle District of Pennsylvania had little guidance.
The direct purchasers’ proof of predominance to satisfy the class certification standard was based wholly on the testimony of its witnesses, Conner said. So, he decided that he had to examine the reliability of that testimony before deciding on the class certification.
“Despite the paucity of relevant precedent in the Third Circuit and the discordant views percolating in the circuits, the court finds that a thorough Daubert analysis is appropriate at the class certification stage of this MDL in light of the court’s responsibility to apply a ‘rigorous analysis’ to determine if the putative class has satisfied the requirements of Rule 23,” Conner said in In re Chocolate Confectionary Antitrust Litigation.
The multidistrict litigation consolidates 91 actions filed by various purchasers — including distributors, convenience stores and grocery stores — against the Hershey Co., Mars and Nestle USA that allege the three companies, which produce about 75 percent of the country’s chocolate candies, conspired for five years to increase the prices for their products, according to the opinion.
Conner held that the testimony of both Dr. Robert Tollison and Dr. James McClave satisfied the standard of the Federal Rule of Evidence 702 and Daubert, which was first laid out with regard to scientific testimony in the U.S. Supreme Court’s 1993 opinion in Daubert v. Merrell Dow Pharmaceuticals and was later expanded to apply to all expert testimony.
“The crux of Dr. Tollison’s testimony is his opinion that various features of the chocolate confectionary industry create an environment which is conducive to price-fixing,” Conner said. “In addition, Dr. Tollison utilizes the econometric analyses undertaken by Dr. McClave to assert classwide antitrust injury.”
The models offered by McClave “demonstrate inflated prices during the class period which cannot be explained by non-collusive conduct,” according to the opinion.
McClave told the court that the class was overcharged by 7 percent to 8.6 percent for regular-sized candy bars and 9.5 percent to 11 percent for king-sized. That amounts to approximately $524 million and $202 million, respectively, according to the opinion.
After Conner dismissed the defendants’ Daubert motions regarding the two experts, he went on to hold that the class had met the standard for certification under Federal Rule of Civil Procedure 23(b)(3) — meeting the bar for predominance and superiority.
Regarding the more onerous standard of predominance, Conner said, the “direct purchasers have thoroughly satisfied this burden.”
“Based upon the direct purchasers’ expert testimony, the court finds that proof of antitrust injury may be accomplished with evidence common to the class despite the facts that: (1) chocolate confectionary products are heavily branded and (2) many class members paid different net prices for these products,” Conner said.
Likewise, Conner held that having the direct purchasers proceed as a class is superior to handling their suits separately.
Conner’s opinion is a “pretty good example of how one would comply” if the U.S. Supreme Court rules that Daubert review is appropriate at the class certification stage, said H. Laddie Montague Jr., of Berger & Montague in Philadelphia. Montague is on the team representing the class.
“I thought he handled it very well,” he said of Conner’s treatment of the Daubert issue.
If Daubert review of expert witnesses at the class certification stage definitively becomes law as the result of a Supreme Court ruling in Comcast v. Behrend, then Conner’s opinion in this case would comply, Montague said. The Comcast case originated in the Eastern District of Pennsylvania.
A Hershey spokesman said the company would continue to fight the plaintiffs’ allegations.
“We believe the allegations in this case are without merit,” said Jeff Beckman, a spokesman for Hershey. “Hershey will vigorously defend itself as the legal process unfolds,” he said.
Jonathan Brightbill and Thomas Yannucci, of Kirkland & Ellis in Washington, D.C., are representing Hershey.
(Copies of the 58-page opinion in In re Chocolate Confectionary Antitrust Litigation, PICS No. 12-2317, are available from The Legal Intelligencer. Please call the Pennsylvania Instant Case Service at 800-276-PICS to order or for information.) •