DocketNumber： MDL No. 3:08-md-1960 (DRD)
Citation Numbers： 269 F.R.D. 125, 2010 U.S. Dist. LEXIS 90338, 2010 WL 3033807
Judges： Dominguez
Filed Date： 7/12/2010
Status： Precedential
Modified Date： 11/5/2024
I. PROCEDURAL HISTORY
The instant case is an antitrust action brought under the Sherman Act, 15 U.S.C. §§ 1 and 3, and is comprised of a compilation of cases sent to this District Court to be handled as a multi-district litigation. The Fourth Amended Complaint (Docket No. 501) remains sealed to present day, so the Court shall only briefly outline the relevant facts, and shall restrict itself to those facts which appear in both the original unsealed Complaint (Docket No. 1) and the Fourth Amended Complaint, as well as information ascertainable from the public docket.
Plaintiffs in the instant ease purport to represent a potential class comprised of direct purchasers of waterborne cabotage between Puerto Rico and the United States, its territories and possessions. Plaintiffs purchased the cabotage from Defendants, who are eight
On December 11, 2009, Plaintiffs and Defendant Alexander Chisholm (hereinafter “Defendant Chisholm”) filed a joint motion for preliminary approval of a settlement agreement reached between these parties (Docket No. 597). Under this agreement, Plaintiffs agree to dismiss the claims against Defendant Chisholm in exchange for his cooperation in the ongoing litigation.
Additionally, on February 5, 2010, Plaintiffs and Defendants Crowley Maritime Corporation and Crowley Liner Services (collectively “Crowley Defendants”) filed a motion for preliminary approval of a settlement agreement reached between those parties (Docket No. 680). The terms of the settlement agreement reached between these parties is substantially identical to that reached between Plaintiffs and Horizon Defendants, except that the Crowley Defendants’ liability for cash payments shall total $13,750,000 rather than the $20,000,000 figure named in the Horizon Settlement Agreement.
The only remaining party who has filed objections to the Court’s preliminary approval of the aforementioned settlement agreements is Defendant Sea Star Lines (hereinafter “Sea Star”).
II. THE SETTLEMENT CLASS
Federal Rule of Civil Procedure 23 governs antitrust class action suits. See Fed. R.Civ.P. 23; see also ABA Section of Antitrust Law, Antitrust Law Developments vol. I 886 (6th ed.2007). Under both Rule 23(a) and Rule 23(b), Plaintiffs bear the burden of establishing the prerequisites for class certification. In Re Relafen Antitrust Litig., 231 F.R.D. 52, 67 (D.Mass.2005). Under Rule 23(a), Plaintiffs must establish numerosity, commonality, typicality and adequacy of representation. Fed.R.Civ.P. 23(a). Further, under Rule 23(b)(3), Plaintiffs must establish “that the questions of law or fact eommon to class members predominate over any questions affecting only individual members” and that “a class action is superior to other available methods for fairly and efficiently adjudicating the controversy.” Fed.R.Civ.P. 23(b)(3). These two requirements are commonly known as “predominance” and “superiority.” In Re New Motor Vehicles Canadian Export Antitrust Litig., 522 F.3d 6, 18 (1st Cir.2008).
Although, in the past, courts typically determined whether the aforementioned requirements of Rules 23(a) and (b) were met via a reading of the pleadings, recently, the First Circuit has expressed a strong preference that the Court move beyond the pleadings when certifying a class. See College of Dental Surgeons of Puerto Rico v. Connecticut General Life Ins. Co., 585 F.3d 33, 41 (1st Cir.2009); see also In Re PolyMedica Corp.
In each of the settlement agreements, the Settlement Class is defined as follows:
All persons (excluding governmental entities, Defendants, co-conspirators, and the present and former parents, predecessors, subsidiaries and affiliates of the foregoing) who purchased Puerto Rican Cabotage directly from any of the Defendants or their co-conspirators, or any present or former parent, subsidiary or affiliate thereof, at any time during the period from May 1, 2002, until April 17, 2008.
Thus, the Court shall analyze the certification of the Settlement Class as it pertains to all the proposed settlement agreements collectively rather than treating each settlement’s Settlement Classes as distinct entities.
A. RULE 23(A) REQUIREMENTS
The Court therefore proceeds first to review the sufficiency of the material presented by Plaintiffs in favor of certification of a settlement class at this preliminary stage under the criteria set forth under Federal Rule of Civil Procedure 23(a).
1. NUMEROSITY
The numerosity requirement of Rule 23(a) specifically mandates that “the class [be] so numerous that joinder of all members is impracticable.” Fed.R.Civ.P. 23(a)(1). The Court finds that this numerosity requirement is easily met here. As noted by Plaintiffs’ expert, Dr. Lamb, at least 3,000 customers were affected by Defendants’ alleged conspiracy. See Affidavit of Dr. Russell Lamb, ¶ 4. Joinder of such a multitudinous group of Plaintiffs would clearly be impracticable. Accordingly, the Court finds that the numerosity requirement is met in the instant case.
2. COMMONALITY
. The second requirement of Rule 23(a) is that “there are questions of law or fact common to the class.” Fed.R.Civ.P. 23(a)(2). Only a single common question of fact or law is necessary to meet this requirement. See Manual for Complex Litigation § 21.132 (4th ed.2004); see also 1 Herbert B. Newberg & Alba Conte, Newberg on Class Actions § 3.10 (4th ed.2002). Typically, in antitrust cases, “courts have held that the existence of an alleged conspiracy or monopoly is a common issue that will satisfy” the commonality requirement. 1 Herbert B. Newberg & Alba Conte, Newberg on Class Actions § 3.10 (4th ed.2002); see also Natchitoches Parish Hosp. Svc. Dist. v. Tyco Int'l, Ltd., 247 F.R.D. 253, 264 (D.Mass.2008).
There is considerable overlap between this requirement of commonality and the criteria of typicality and predominance as questions, such as common impact and proof of damages, “are relevant to all three.” In Re New Motor Vehicles, 522 F.3d at 19 (internal citations omitted); see also Amchem Prod., Inc. v. Windsor, 521 U.S. 591, 623,117 S.Ct. 2231, 138 L.Ed.2d 689 (1997)(noting that “the pre
In the instant ease, Plaintiffs have identified seven issues which they allege are common to all Plaintiffs. The first of these is whether Defendants engaged in a conspiracy to allocate customers, rig bids and fix prices.
Sea Star makes no claim that Plaintiffs have failed to fulfil the commonality requirement of the class certification analysis. Plaintiffs in the instant case have provided preliminary evidence supporting their allegation that a price-fixing conspiracy existed between Defendants. Even without considering any of the other factors presented by Plaintiffs, the Court finds that the supported allegation regarding the antitrust conspiracy targeting local cabotage purchasers, standing alone, is sufficient to establish commonality. See 1 Herbert B. Newberg & Alba Conte, Newberg on Class Actions § 3.10 (4th ed.2002); see also Natchitoches, 247 F.R.D. at 264; see also In Re Compact Disc Minimum Advertised Price Antitrust Litig., 216 F.R.D. 197, 204 (D.Maine 2003).
3. TYPICALITY
The third requirement of Rule 23(a), typicality, is satisfied where “the claims or defenses of the representative parties are typical of the claims or defenses of the class.” Fed.R.Civ.P. 23(a)(3). In assessing this requirement, the Court is directed to focus “less on the relative strengths of the named and unnamed plaintiffs’ case than on the similarity of the legal and remedial theories behind their claims.” In Re Relafen, 231 F.R.D. at 69 (quoting Jenkins v. Raymark Indus., Inc., 782 F.2d 468, 472 (5th Cir.1986)). The requirement of typicality, like commonality, “does not require that all putative class members share identical claims.” Natchitoches, 247 F.R.D. at 264 (quoting In Re Warfarin Sodium Antitrust Litig., 391 F.3d 516, 531 (3d Cir.2004)). Rather,
[t]ypicality determines whether a sufficient relationship exists between the injury to the named plaintiff and the conduct affecting the class, so that the court may properly attribute a collective nature to the challenged conduct. In other words, where such a relationship is shown, a plaintiffs injury arises from or is directly related to a wrong to the class, and that wrong includes the wrong to the plaintiff. Thus, a plaintiffs claim is typical if it arises from the same event or practice or course of conduct that gives rise to the claims of other class members, and if his or her claims are based on the same legal theory.
Id. (quoting In Re Am. Med. Sys., Inc., 75 F.3d 1069, 1082 (6th Cir.1996)); see also 1 Herbert B. Newberg & Alba Conte, Newberg on Class Actions § 3.13 (4th ed.2002).
Sea Star contests Plaintiffs assertion that they meet the typicality requirement for class certification. Specifically, their arguments rest upon an averment that Plaintiffs have not provided sufficient details regarding the negotiations held between Plaintiffs and Defendants, the volume of goods transported or the type of goods transported. Further, Sea Star notes that Defendants operated between different ports and using different vessels. On the other hand, Plaintiffs emphasize that they all suffered a common injury in the form of the allegedly anti-competitive pricing structures created by Defendants. Plaintiffs also assert that the allegedly collusive actions undertaken by Defendants man
Both parties’ arguments regarding the adequacy requirement rely on expert opinions submitted to the Court. Sea Star’s arguments rest primarily upon affidavits and declarations submitted by now-settling Defendants Crowley Liner Services, Inc. and Crowley Maritime Corporation (Docket No. 593), which were subsequently withdrawn when those Defendants reached a settlement agreement with Plaintiffs (Docket No. 728). The Court, however, acting out of an abundance of caution, will continue to consider these submissions herein in order to avoid any unfairness to Sea Star, who originally objected alongside the Crowley Defendants, but who is the only non-settling business entity Defendant remaining at this time. Thus, the Court is faced with a battle of conflicting experts regarding the typicality and predominance requirements for class certification.
Although Sea Star urges the Court to deny certification for lack of typicality based upon dissimilarities between Plaintiffs, the Court disagrees with the propriety of such an outcome. After all, typicality is not tantamount to identicality, and the Court need not ascertain whether all Plaintiffs are situated in exactly the same manner as each other in order to find typicality. See In Re Carbon Black Antitrust Litig., No. 03-10191, 2005 WL 102966 at *12 (D.Mass.2005)(finding that the claims of representatives of a proposed class were sufficiently typical, even where they paid for diverse products under a variety of agreements involving varied terms or volumes).
Here, Plaintiffs are the purported representatives of a class of natural persons and business entities who purchased cabotage from Defendants during the time period when Defendants allegedly engaged in an illegal price-fixing scheme. Although Sea Star’s assertion that the terms and events surrounding their individual contracts with Defendants, the type of vessel upon which their cabotage shipped, the port from which the cabotage shipped and the volume of cabotage shipped vary bears some weight, the Court reads this argument as improperly mandating identicality, rather than typicality. See In Re Carbon Black Antitrust Litig., 2005 WL 102966 at *12 (finding typicality even where purchasers did not buy identical volumes of a product or under the same contractual terms).
All Plaintiffs and members of the proposed class are entities who purchased cabotage from Defendants at a price which was allegedly inflated to a supra-competitive level by Defendants’ alleged anti-competitive price-fixing scheme. Although the exact details of the individual contracts and shipping terms vary between Plaintiffs and Defendants, the claims of Plaintiffs and members of the proposed class all involve the same illegally collusive behavior by Defendants which led to Plaintiffs and members of the proposed class paying supra-competitive prices for cabotage. Thus, Plaintiffs and members of the proposed class share the same legal theory as their claims arise out of the same conduct or practice by Defendants. See In Re Insurance Brokerage Antitrust Litig., 579 F.3d 241, 265 (3d Cir.2009); see also In Re Compact Disc Minimum Advertised Price Antitrust Litig., 216 F.R.D. 197, 205 (D.Maine 2003). Specifically, “[t]he course of conduct pled in this case is the agreement to fix prices and the legal theory will be a[n antitrust] violation for all class members.” In Re Carbon Black Antitrust Litig., 2005 WL 102966 at *12. Accordingly, the Court finds that Plaintiffs’ claims are sufficiently typical of those of the Proposed Class to meet this requirement.
4. ADEQUACY OF REPRESENTATION
The fourth and final requirement of Rule 23(a) is adequacy of representation, under which the Court must determine that “the representative parties will fairly and adequately protect the interests of the class.” Fed.R.Civ.P. 23(a)(4). This requirement aims to “uncover conflicts of interest between named parties and the class they seek to represent.” Amchem, 521 U.S. at 625, 117 5. Ct. 2231. Along this vein, it is well established that 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 625-26, 117 S.Ct. 2231
As a preliminary matter, the Court finds that class counsel meet the adequacy requirement. Class counsel are properly experienced, have no known conflicts of interest and, in light of the vigorous nature in which they have already pursued the instant ease on behalf of Plaintiffs, the Court harbors at this stage no doubt that they can competently pursue both Plaintiffs’ claims and those of the entire proposed class. See e.g. In Re Compact Disc, 216 F.R.D. at 205 (finding counsel adequate based, in part, upon “the quality of their pleadings, diligence in investigating and prosecuting the matter, and extensive experience”).
Sea Star hotly contests Plaintiffs’ adequacy as class representatives, however. Plaintiffs have supplemented their assertions regarding adequacy with affidavits of several named Plaintiffs. Sea Star attacks the sufficiency of these affidavits,
As stated above, the adequacy eriterium of Rule 23(a) should be read in tandem with the commonality and typicality criteria. As already discussed, the Court finds that Plaintiffs have met these two criteria, based upon the common injury suffered in the form of illegally inflated prices, and a common legal theory based upon Defendants’ alleged violations of the Sherman Act. Plaintiffs, like other members of the proposed class, have the same incentives to maximize recovery for the wrongs allegedly perpetrated on them by Defendants. Accordingly, the Court finds that Plaintiffs have suffered the same injury and share the same interest as members of the proposed class.
Although Sea Star attacks the sufficiency of Plaintiffs’ showing that they meet the adequacy requirement of 23(a), if the Court were to create precedent by denying the motion for class certification based upon these arguments, it would sanction an untenably heightened standard. In order to rebut Sea Star’s assertions of insufficiency, Plaintiffs would have to present the Court with a near-unreachable level of detail as to the alignment of their interests with those of the members of the proposed class. In order to present
B. RULE 23(B) REQUIREMENTS
As the Court has determined that Plaintiffs meet the requirements for class certification that arise under Rule 23(a), it shall now turn to discuss the predominance and superiority requirements of Rule 23(b).
1. PREDOMINANCE
Rule 23(b)(3) mandates that, in order to certify a class under that section of the Rule, the Court must find “that the questions of law or fact common to class members predominate over any questions affecting only individual members.” Fed.R.Civ.P. 23(b)(3). This “predominance criterion is far more demanding ... than the commonality requirement.” In Re New Motor Vehicles, 522 F.3d at 20 (quoting Amchem, 521 U.S. at 624, 117 S.Ct. 2231)(internal quotations omitted). In antitrust actions, such as the instant action, “common issues do not predominate if the fact of antitrust violation and the fact of antitrust impact cannot be established through common proof.” Id. However, the Supreme Court has noted that “[predominance is a test readily met in certain cases alleging ... violations of the antitrust laws.” Amchem, 521 U.S. at 625, 117 S.Ct. 2231. Ultimately, this requirement “does not require an entire universe of common issues, but does require a sufficient constellation of them.” In Re Relafen, 231 F.R.D. at 70 (quoting Waste Mgt. Holdings, Inc. v. Mowbray, 208 F.3d 288, 298 (1st Cir.2000))(internal quotations omitted). Accordingly, “[e]ven where there are some individualized damage issues [in a proposed antitrust class action], common issues may predominate when liability can be determined on a class-wide basis.” Natchitoches, 247 F.R.D. at 269 (quoting In Re Visa Check/MasterMoney Antitrust Litig., 280 F.3d 124, 139 (2d Cir.2001))(internal quotations omitted).
“Section 1 [of the Sherman Act] forbids agreements ‘in restraint of trade or commerce among the several states’; [and] section 3 forbids agreements ‘in restraint of trade or commerce in any Territory of the United States.’ ” Cordova & Simonpietri Insurance Agency, Inc. v. Chase Manhattan Bank N.A., 649 F.2d 36, 36 (1st Cir.l981)(quoting 15 U.S.C. §§ 1 & 3). Thus, in order to prevail upon their claims, Plaintiffs must show that a conspiracy existed that unreasonably restrained trade and that affected interstate or interterritory commerce. See Lee v. Life Ins. Co. of N. America, 829 F.Supp. 529, 535 (D.R.I.1993), aff'd 23 F.3d 14 (1st Cir.1994). For the purposes of a Sherman Act claim, price fixing is usually considered to be per se
Here, Sea Star bases its arguments against class certification for lack of predominance upon several contentions. First, Sea Star argues that Plaintiffs expert, Dr. Lamb, did not establish a presumption of class-wide impact. Sea Star rests this argument upon the assertions of the Crowley Defendants’ experts,
Thus, as to this criterium, the controversy between Sea Star and Plaintiffs centers around the varying opinions of the experts. The Court may not shirk its duties under Rule 23 by citing the necessity of making determinations based upon the credibility of competing experts at this stage. See In Re Hydrogen Peroxide Antitrust Litig., 552 F.3d 305, 324 (3d Cir.2009). Rather, the Court must act as finder of fact, making such credibility determinations in order to grant or deny class certification under Rule 23. Id. The Court notes that this preliminary credibility determination “does not preclude a different view at the merits stage of the case.” Id.
It is within the Court’s wide discretion to conduct hearings to resolve credibility disputes prior to making its Rule 23 ruling; however, in the instant case, the Court finds that such hearings are unnecessary. See id. The Court has received ample evidence from all parties in the form of “affidavits, documents [and] testimony” and bases its conclusions upon a combination thereof. See id. Accordingly, the Court’s function in determining whether the predominance requirement is fulfilled in the instant ease shall be to review the expert reports in order to resolve the disputes that underlie parties’ respective positions regarding predominance. See In Re Hydrogen Peroxide Antitrust Litig., 552 F.3d at 324 (explaining that “[r]esolving expert disputes in order to determine whether a class certification requirement has been met is always a task for the court,” even where a credibility determination must be made); see also In Re New Motor Vehicles, 522 F.3d at 20. In this manner, the Court shall predict “how specific issues will play out in order to determine whether common or individual issues predominate in a given case.” In Re New Motor Vehicles, 522 F.3d at 20 (quoting Mowbray, 208 F.3d at 298).
a. DR. RUSSELL L. LAMB
In support of their petition for class certification, Plaintiffs offer the expert opinion of Dr. Russell L. Lamb. In Dr. Lamb’s affidavit, he asserts that, due to the highly concentrated nature of the industry, the high barriers to entry into the market, the lack of economically viable substitutes for waterborne cabotage, the stable demand for Puerto Rican cabotage during the class period and the generally substitutable nature of Puerto Rican cabotage between Defendants, the impact on members of the proposed class
Dr. Lamb rests his assertion regarding market concentration upon figures that show that, between 2002 and 2008, 99.9-100% of the Puerto Rican cabotage market share was held by the original Defendants
In support of his assertion that there are high barriers to entry in the Puerto Rican cabotage market, Dr. Lamb notes that the Jones Act itself acts as a primary barrier. Id. at ¶¶ 20-21. Specifically, Dr. Lamb states that the entry barriers created by the Jones Act restrict the possibility of entry into the market by new players due to the necessity of high capital investment and substantial infrastructure investment, as well as long lead times associated with building new containerships. Id. at ¶ 21. Further, Dr. Lamb notes that federal regulation of the Puerto Rican cabotage industry also acts as a barrier to entry. Id. at ¶ 22.
Dr. Lamb next opines that “[djemand for ocean freight shipping services is a derived demand, which depends on the demand for the final goods being purchased by the consumer.” Id. at ¶ 23. Additionally, Dr. Lamb states that there is a large trade imbalance in the Puerto Rican cabotage industry, as imports from the U.S. to Puerto Rico greatly outweigh exports from Puerto Rico to the U.S. Id. at ¶ 25. Dr. Lamb also asserts that “[t]he demand for maritime freight shipping services is [generally] characterized by low price elasticity,” where static elasticity “means that a price fixing conspiracy could profitably raise price above competition levels.” Id. at ¶ 24. Further, Dr. Lamb notes that, during the relevant period, “demand for Puerto Rican shipping was static or declining.” Id. at ¶ 26.
The last assertion upon which Dr. Lamb bases his conclusions is that Defendants’ services are interchangeable, a proposition that Sea Star vehemently contests. Dr. Lamb rests this assertion upon several factors. First, Dr. Lamb notes that, because Defendants “generally serve the entire eastern seaboard of the United States,” providing services along the “limited number of shipping routes between the U.S. and Puerto Rico,” and because each port is served by at least two Defendants, “no single defendant has a monopoly on Cabotage to a geographic market in the U.S. mainland.” Id. at ¶ 28. Additionally, based upon Defendants’ own filings and statements, Dr. Lamb postulates that “[b]ecause defendants offer Cabotage for many different kinds of goods, no defendant has a monopoly in transport of a particular good, and competition occurs on the basis of price rather than some sort of specialized service.” Id. at ¶ 29. Dr. Lamb also hypothesizes that, based upon the available evidence, “but for the alleged misconduct ... more vigorous competition would have served to reduce prices.” Id. at ¶ 29.
Based upon these assertions, Dr. Lamb reaches several conclusions as to matters which would be shown by common proof as to all class members. First, Dr. Lamb notes that, because the Puerto Rican cabotage industry is highly concentrated, it would have been “impossible for class members to” substitute other services for those provided by Defendants. Id. at ¶ 31. Dr. Lamb also states that the effect of a cartel would have been to raise prices to supra-competitive levels. Id. at ¶ 32. Whereas under other circumstances, this would lead to the entry of new competitors into the marketplace, the high entry barriers present in the Puerto Rican cabotage market prevented such an occurrence here and, accordingly, Defen
In his affidavit, Dr. Lamb also presents the Court with a proposed methodology for measuring damages on a class-wide basis. This methodology encompasses a two-step process, which Dr. Lamb indicates is typical for cases involving price-fixing. Id. at ¶ 39. Under the first step, a model is developed in order to explain the prices to determine which prices were higher as the result of the alleged conspiracy. Id. at ¶ 39. In order to calculate this “overcharge,” Dr. Lamb proposes to utilize a modified benchmark analysis informed by multiple regression analyses to account for other factors which affected prices of the cabotage during the relevant time-period. Id. at ¶ 40-57. Under the second step of the proposed method for measuring damages, the “overcharge” is applied to the dollar value of sales that occurred so that the Court may determine the class-wide overcharge paid by class members. Id. at ¶ 39.
b. DR. MARK A. ISRAEL
In response to Dr. Lamb’s affidavit, Defendants offer the affidavits of two counter-experts. The first of those experts is Dr. Mark A. Israel. His affidavit serves primarily as an attempt to debunk the theories, assertions and opinions set forth by Dr. Lamb in his affidavit, particularly those as to class-wide impact of the alleged conspiracy. See Affidavit of Dr. Mark A. Israel, ¶ 8.
First, Dr. Israel notes that the existence of a cartel does not necessarily indicate that members of the cartel “were successful in raising prices to the entirety of the class.” Id. at ¶ 10. Next, Dr. Israel alleges that Dr. Lamb’s emphasis on the high concentration is, standing alone, insufficient to establish class-wide impact. Id. at ¶ 12. Further, Dr. Israel emphasizes that the differences between routes, vessels and container types are factors that he believes show that Defendants’ services were, in fact, not interchangeable. Id. at ¶ 13.
Specifically, Dr. Israel breaks down the “eastern seaboard” described by Dr. Lamb into its component parts, showing that Defendants’ businesses cater to varying regions. Id. at ¶ 15. Dr. Israel asserts that these variances will require the performance of route-specific analyses in order to determine class-wide impact. Id. at ¶ 16. Dr. Israel also argues that the difference in rates for cabotage imported to Puerto Rico from the U.S. and exported to the U.S. from Puerto Rico also weighs against easily determining class-wide impact. Id. at ¶¶ 18-19.
Next, Dr. Israel notes that, at least in some cases, travel time for the goods being shipped is a factor that informed customers’ decisions when negotiating contracts for Puerto Rican cabotage. Id. at ¶¶ 20-21. Additionally, Dr. Israel emphasizes that the
Dr. Israel then utilizes shipment data provided by the Horizon Defendants to find that such data is “incompatible with class-wide impact.” First, Dr. Israel states that this data shows a heterogeneity in price changes across customers, routes and container types which would preclude demonstration of class-wide impact. Id. at ¶26. Further, upon analysis of the data, Dr. Israel finds that there is no commonality as to rate increases and decreases, either in direction or in magnitude. Id. at ¶¶ 26, 34. Dr. Israel then uses this data to rebuke a portion of the affidavit given by Defendant Chisholm, in which he claimed that the alleged price-fixing “impacted almost all pricing within each shipping category.” Id. at ¶ 32.
Finally, Dr. Israel addresses Dr. Lamb’s methodology for estimating damages in a price-fixing ease. Id. at ¶ 35. Dr. Israel does not contest the properness of the method outlined by Dr. Lamb. Id. Rather, he emphasizes that Dr. Lamb did not actually perform the analysis in order to report on the results in his affidavit. Id.
c. DAYID ST. AMAND
Defendants second expert is David St. Amand.
Mr. St. Amand proceeds to note that the impact of the alleged conspiracy would affect north-bound shippers differently than southbound shippers. Id. at ¶ 30. Additionally, Mr. St. Amand notes that some purchasers of cabotage were Non Vessel Operating Common Carriers (“NVOCCs”), who act as brokers for other customers. Id. at ¶ 33. Finally, Mr. St. Amand opines that the use of filed tariffs for some shipments impacts pricing, as do surcharges, and claims that Dr. Lamb fails to address these issues in his affidavit. Id. at ¶¶ 34-42.
d. THE COURT’S ANALYSIS
As the Court was presented with a battle of the experts as to predominance in the instant case, it has resolved the disputes between the experts, making credibility determinations where necessary in order to determine whether the predominance criterium has been met. See e.g. In Re Hydrogen Peroxide, 552 F.3d at 324. As an initial matter, the Court notes that it is presented with a horizontal price-fixing claim, which is considered per se illegal if, as in the instant case, the conspiracy is between competitors for competing services and serves no legitimate goal. Augusta News, 269 F.3d at 47. Defendants in the instant case are providers of Puerto Rican cabotage who allegedly engaged in a price-fixing conspiracy related to the shipment of goods between the U.S. and Puerto Rico. Although Defendants arguably provide a number of distinct yet related services, utilizing several varieties of containers and vessels, under the umbrella of “Puerto Rican cabotage,” the Court finds that, under the terms of the alleged conspiracy, the intent was to fix prices generally for Puerto
In their affidavits, the experts disagreed as to class members’ ability to prove antitrust impact through common proof. The primary disagreements as to impact arise in the affidavits of Dr. Israel and Dr. Lamb. Upon a careful review of the affidavits, the Court finds that Plaintiffs have sufficiently shown by the preponderance of the evidence that the predominance requirement is met here. The Court explains below.
First, it is apparent from the materials submitted that the Puerto Rican cabotage industry is highly concentrated, a state which results in a lack of true competition among market participants. Further, high entry barriers make it difficult for new participants to enter the market. Additionally, the static elasticity during the relevant time-period indicates that a conspiracy, such as that alleged here, could impose supra-competitive
Additionally, Defendants service the eastern seaboard, and no Defendant holds a true monopoly in any one city. Thus, competition is based largely upon price for various cabotage services. Although there are some mixed variables, such as vessel type and container type, the Court will not hold that these variables are sufficient to defeat a finding of predominance here. Plaintiffs and other class members have alleged and shown through circumstantial evidence that, because they had no economically viable substitute for the various Puerto Rican cabotage services provided by Defendants, they paid supra-competitive prices for the services purchased.
At trial, Defendants might submit evidence that not every Plaintiff or class member suffered identically the impact of these supra-competitive prices, as those pertaining to various sub-groups of cabotage services may have borne a lesser or greater impact from the conspiracy. However, once again, the Court’s inquiry here is not whether all potential class members are identically situated, but, rather, whether the issues, particularly those pertaining to the violation and to impact, which are common to all class members predominate over those which are not. See e.g. Kohen v. Pacific Invest. Mgt. Co. LLC, 571 F.3d 672, 678 (7th Cir.2009)(upholding the grant of class certification even where “some of the class members probably were net gainers”). Although class members may have purchased slightly varying forms of cabotage from Defendants, the Court holds that common issues predominate here. Although Sea Star appears to argue that the Court must find a galaxy, or even a universe, of common issues in order to find that the predominance requirement is satisfied, the Court need only find a constellation. See In Re Relafen, 231 F.R.D. at 70. Accordingly, the Court finds that both an antitrust violation and an antitrust impact may be shown through common proof as to the class; thus, the predominance requirement is met.
Further, Dr. Lamb has set forth a reputable and workable model for determining damages as to individual class members in his affidavit. The Court emphasizes that there is no requirement that Plaintiffs present the Court with a detailed accounting of the damages suffered by each class member at this phase. Thus, the Court finds that Plaintiffs have set forth a damages assessment model which takes into account the individualized damage issues that pertain to class members. Therefore, at this initial stage and despite Defendants’ expert’s assertions to the contrary, the Court will not find that Plaintiffs have failed to establish predominance based upon Dr. Lamb’s damages model.
Rule 23(b) also sets forth a requirement that “a class action [be] superior to other available methods for fairly and efficiently adjudicating the controversy.” Fed. R.Civ.P. 23(b)(3). This superiority requirement is designed to ensure that the class action will “achieve economies of time, effort, and expense, and promote ... uniformity of decision as to persons similarly situated, without sacrificing procedural fairness or bringing about other undesirable results.” Amchem, 521 U.S. at 615,117 S.Ct. 2231. In this manner, the Rule aims to provide for the “vindication of the rights of groups of people who individually would be without effective strength to bring their opponents into court.” Id. at 617, 117 S.Ct. 2231 (internal quotation omitted). Further, the Rule itself provides a non-exhaustive list of factors which the Court may consider in determining whether the requirement of superiority is fulfilled:
(A) the class members’ interests in individually controlling the prosecution or defense of separate actions; (B) the extent and nature of any litigation concerning the controversy already begun by or against class members; (C) the desirability or undesirability of concentrating the litigation of the claims in the particular forum; and (D) the likely difficulties in managing a class action.
Fed.R.Civ.P. 23(b)(3).
Sea Star does not object to a finding that Plaintiffs have met the second prong of the Rule 23(b)(3) inquiry. The proposed settlements in the instant case will present a solution to the claims of a sizeable group of direct purchasers of Puerto Rican cabotage against the majority of the Defendants in the instant case. Because the case is being settled at an early phase, this will save class members large sums in litigation expenses and also represents an exercise in judicial economy. Further, the use of a class for settlement purposes here allows smaller purchasers to pursue complex antitrust claims which they otherwise might not have the resources to pursue. Accordingly, the Court finds that the superiority requirement of Rule 23(b)(3) is met. Thus, having determined that all the requirements for certification of a settlement class have been met, the Court hereby GRANTS Plaintiffs’ motion to certify a settlement class as defined above.
III. PRELIMINARY APPROVAL OF SETTLEMENT AGREEMENTS
The fundamental duty of the Court when it reviews a settlement agreement for approval is to determine whether the proposed settlement is “fair, reasonable and adequate.” See Fed.R.Civ.P. 23(e)(2); see also In Re Relajen Antitrust Litig., 360 F.Supp.2d 166, 192 (D.Mass.2005). At the preliminary approval stage, the Court need not make a final determination regarding the fairness, reasonableness and adequateness of a proposed settlement; rather, the Court need only determine whether it falls within the range of possible approval. Scott v. First Am. Title Ins. Co., No. 06-286, 2008 WL 4820498 at *3 (D.N.H.2008); see In Re Warfarin Sodium Antitrust Litig., 391 F.3d 516, 534-35 (3d Cir.2004); see also Colella v. Univ. of Pittsburgh, 569 F.Supp.2d 525, 527 (W.D.Pa.2008). An illegal or collusive settlement agreement will not fall within the range of possible approval. See Scott, 2008 WL 4820498 at *3.
For the purposes of assessing the appropriateness of preliminary approval of the settlement agreements reached in the instant case, the Court has adopted the standard set forth by the Third Circuit in In Re General Motors Corp. Pick-Up Truck Fuel Tank Prod. Liab. Litig., 55 F.3d 768, 785 (3d Cir.1995), and applied by the District Court for the District of Massachusetts in In Re Lupron Market. And Sales Prac. Litig., 345 F.Supp.2d 135, 137 (D.Mass.2004). Under the standard set forth in these cases, where the Court makes four findings, “a presumption of fairness attaches to the court’s determination” and preliminary approval is appropriate. In Re Lupron, 345 F.Supp.2d at 137 (quoting In Re General Motors, 55 F.3d at 785)(internal quotations omitted). Those four findings are that: “(1) the negotiations occurred at arm’s length; (2) there was sufficient discovery; (3) the proponents of the settlement are experienced in similar litigation; and (4) only a small fraction of the class objected.” Id.
The fourth factor, however, is not so easily assessed here. At this time, the Court cannot ascertain what percentage of the class objects to the terms of the settlement agreements. Nevertheless, the ability of class members to object rests upon the Court’s certification of a settlement class, preliminary approval of the settlement agreements and approval of notice to be sent to class members. Thus, the Court does not find that the lack of information as to objectors within the class weighs against preliminary approval of the settlement agreements.
The primary disagreement between Sea Star and Plaintiffs at this stage relates to the so-called “base rate freeze” provision included in the Crowley and Horizon settlement agreements. Under the terms of those settlement agreements, class members would be given the choice of opting for either a base rate freeze on contracts with Settling Defendants or a cash payout. Sea Star asserts
Sea Star rests its argument against preliminary approval of the Crowley and Horizon settlement agreements upon the case of In Re Microsoft Corp. Antitrust Litig., 185 F.Supp.2d 519(D.Md.2002). Specifically, in its most recent motion, Sea Star reads this case to require that Plaintiffs show that the settlement agreements do not have a “potential adverse impact upon competition.” In that MDL, the District Court for the District of Maryland was asked to approve a settlement agreement under which Microsoft was released from the claims of a nationwide settlement class in return for making contributions to a foundation that, once established, would provide computer technology to impoverished schools. Id. at 521. Notably, in that case, class members had no right to personally receive any payments from the settlement; thus, class members’ only options were to opt out or to agree to fund the foundation with the proceeds of the settlement agreement. Id. The Court denied preliminary approval, holding first that the record was insufficiently developed for the court to value the class claims to determine the adequacy of the settlement, then holding that the foundation which was to be created under the settlement agreement was critically underfunded. Id. at 528. The Court noted that it had concerns regarding the settlement’s potential adverse impact upon competition, as, because of the foundation’s underfunding, it could well serve to “provide a means for flooding a [market]____in which Microsoft has not traditionally been the strongest player.” Id.
Although Sea Star reads this case to generally forbid preliminary approval of a settlement offer where any negative impact upon competition might hypothetically occur, the Court reads it more narrowly. The Court finds that In Re Microsoft does not forbid approval of any settlement agreement which might affect competition, but, rather, cau
In the instant case, Sea Star retains the option of competing with the prices set by the two-year base rate freeze under the terms of the settlement agreements. Further, purchasers of Puerto Rican cabotage frequently utilize a number of carriers at any given time and are not required to sign exclusive contracts with Settling Defendants in order to opt for the base rate freeze. Further, class members will have the option of electing a cash payout from the funds established by the Crowley and Horizon Defendants’ settlement agreements, entirely foresaking the base rate freeze option. Under these circumstances, the Court does not find that the settlement agreements are outside of the range of possible approval. Thus, the Court GRANTS preliminary approval to the Crowley and Horizon settlement agreements. Both parties, however, are invited to brief the base rate freeze issue further prior to the final hearing regarding settlement approval pursuant to the deadlines set forth below. Further, the Court finds that the negotiation of the Chisholm settlement agreement falls within the range of possible approval, GRANTS preliminary approval and shall hear any further arguments for or against approval of this settlement agreement at the final fairness hearing.
IV. NOTICE
The Federal Rules of Civil Procedure dictate that the Court “must direct notice in a reasonable manner to all class members who would be bound by the proposal.” Fed. R.Civ.P. 23(e)(1). Having reviewed the proposed notices to class members submitted by Plaintiffs and Settling Defendants (Docket Nos. 680, 743 & 746), the Court finds that the proposed notices are reasonable.
Thus, the Court adopts by reference the proposed orders submitted at Docket Nos. 680, 743 and 746 regarding the procedure for ensuring that class members receive notice of the settlement agreements, as well as the time and place of the FINAL FAIRNESS HEARING regarding approval of the settlement agreements, which is to be held on OCTOBER 26, 2010 at 9:00 AM.
Class members shall be mailed notice of each settlement agreement within twenty (20) days of entry of this order. Five (5) days after notice is mailed, notice shall be published in the newspapers listed in parties’ proposed orders at Docket Nos. 680, 743 and 746. Thereafter, class members shall be provided sixty (60) days in which to submit notice that they will be opting out of the class, object to the terms of the settlement agreement or to submit a proof of claim form where applicable.
V. CONCLUSION
The Court hereby GRANTS CERTIFICATION OF THE SETTLEMENT CLASS (Docket Nos. 449, 597 & 680) and GRANTS PRELIMINARY APPROVAL to the Chisholm, Crowley and Horizon Settlement Agreements (Docket Nos. 375, 597 & 680). Notice shall be given to class members in the manner described above and in the proposed
IT IS SO ORDERED.
. At the outset of the case, an additional Defendant, Trailer Bridge, Inc., was named. However, the Court has recently granted a motion to dismiss (Docket No. 722) as to this Defendant. Accordingly, the Court shall not consider Trailer Bridge’s filings in the instant Opinion and Order. Likewise, as Defendants Crowley Maritime Corporation and Crowley Liner Services have at this time filed a settlement agreement between themselves and Plaintiffs and have represented to the Court that they will no longer oppose the approval of other settlement agreements in the instant case (Docket No. 667), the Court shall not directly address their filings herein.
. "Prices" in this context include both the negotiated costs of shipping and the various surcharges imposed by cabotage providers.
. Early in the litigation. Defendant Leonard Shapiro moved to join Sea Star’s motion in opposition to the motion for preliminary approval of the settlement agreement with Horizon Defendants (Docket No. 338).
. When evaluating the evidence proffered by the parties in favor of or against certification of a settlement class, the Court has employed the preponderance of the evidence standard. See In Re Hydrogen Peroxide Antitrust Litig., 552 F.3d 305, 320 (3d Cir.2009).
. See supra note 2 regarding the relevant definition of "prices.”
. Sea Star attached to its Motion Submitting Documents Pursuant to Court Orders of November 12 and November 13, 2009 (Docket No. 595) evidentiary objections to the affidavits proffered by Plaintiffs. First, Sea Star objects to the affidavit of Defendant Chisholm, asserting that it is unreliable because his settlement agreement with Plaintiffs was, at that time, undisclosed. As it has since been disclosed, the Court finds this argument MOOT. Sea Star then objects to the statements made by Defendant Chisholm in his affidavit as lacking foundation, lacking personal knowledge and unduly prejudicial. The Court OVERRULES these objections. See e.g. Manual for Complex Litigation § 21.21 (4th ed.2004)("The judge need not decide at the certification stage whether such expert testimony satisfies standards for admissibility at trial.”). Sea Star also objects to the affidavit of Carlos Trigueros, arguing that the affidavit should be stricken in its entirety as it is too vague, and arguing that portions of it should be stricken for lack of foundation and for providing inadmissible opinions on legal issues. The Court OVERRULES these objections. Sea Star also objects to the affidavit of Maria V. Arbelaez, Roberto Medina, Melba J. Jordan, David Klau and Rafael Gonzalez based upon the same grounds. The Court OVERRULES these objections as well for the reasons cited above.
. With respect to the per se illegal nature of a price-fixing conspiracy, the First Circuit has stated: few agreements are deemed so pernicious that they are condemned 'per se ’ and without regard to the power of the parties to accomplish their aims, regardless of justification, and with
Augusta News Co. v. Hudson News Co., 269 F.3d 41, 47 (1st Cir.2001)(internal citations omitted)(emphasis ours).
. As already stated above, although the Crowley Defendants later withdrew their experts' affidavits, due to fairness considerations and acting out of an abundance of caution, the Court has chosen to review these reports as they relate to Sea Star’s arguments against class certification and preliminary approval of the settlement agreements.
. The Court notes that Defendant Trailer Bridge, whose motion to dismiss the Court recently granted, held a market shares between 12.5-15. 6%, leaving the remaining Defendants with an 84.3-87.5% market share during the relevant time-period. Id. at Tables 1 & 2.
. The Court has already stricken portions of Mr. St. Amand’s affidavit under Daubert v. Merrell Dow Pharma., Inc., 509 U.S. 579, 113 S.Ct. 2786, 125 L.Ed.2d 469 (1993), at Docket No. 735. Accordingly, those portions are not discussed herein.
. This is not to say that prices might not have fluctuated both up and down during the relevant time-period. Rather, the Court simply notes that supra-competitive prices were possible during that time, whether those prices increased or decreased from one year to another.
. The Court notes that Sea Star’s assertions regarding the impact of the base-rate freeze were based upon opinions of Mr. David St. Amand which were stricken from the record at Docket No. 735 when the Court found him utterly unqualified to give testimony as to antitrust economics.