Cordes & Co. v. A.G. Edwards & Sons, Inc.

06-2143-cv Cordes & Co. v. A.G. Edwards & Sons, Inc. 1 UNITED STATES COURT OF APPEALS 2 FOR THE SECOND CIRCUIT 3 August Term, 2006 4 (Argued: March 19, 2007 Decided: September 11, 2007 5 Errata Filed: September 27, 2007) 6 Docket No. 06-2143-cv 7 ------------------------------------- 8 CORDES & COMPANY FINANCIAL SERVICES, INC. and EQUALNET 9 COMMUNICATIONS CORPORATION, on behalf of themselves and all 10 others similarly situated, 11 Plaintiffs-Appellants, 12 - v - 13 A.G. EDWARDS & SONS, INC., BANCBOSTON ROBERTSON STEPHENS & 14 COMPANY, BEAR STEARNS & CO., CHASE HAMBRECHT & QUIST, INC., CIBC 15 OPPENHEIMER CORP., COWEN & CO., CREDIT SUISSE FIRST BOSTON 16 CORPORATION, DB ALEX. BROWN LLC formerly known as BT ALEX BROWN 17 INC., DONALDSON, LUFKIN & JENRETTE, INC., EVEREN SECURITIES, 18 INC., THE GOLDMAN SACHS GROUP, INC., HANIFEN INHOFF INC., ING 19 BARINGS LLC, J.C. BRADFORD & CO., J.P. MORGAN SECURITIES, INC., 20 JEFFERIES & COMPANY, INC., JOHNSON RICE & COMPANY, LEGG MASON 21 WOOD WALKER INC., LEHMAN BROTHERS INC., MERRILL LYNCH & CO., 22 MORGAN STANLEY DEAN WITTER & CO., NATIONSBANC MONTGOMERY 23 SECURITIES, PAINE WEBBER GROUP, INC., PIPER JAFFRAY & CO., INC., 24 PRUDENTIAL SECURITIES INCORPORATED, RAYMOND JAMES & ASSOCIATES, 25 INC., SALOMON SMITH BARNEY, INC. and UBS WARBURG LLC, 26 Defendants-Appellees. 27 ------------------------------------- 28 Before: SACK, B.D. PARKER, and HALL, Circuit Judges. 29 Appeal from a Memorandum and Order of the United States 30 District Court for the Southern District of New York (Lawrence M. 31 McKenna, Judge) denying the plaintiffs' motion for class 32 certification pursuant to Federal Rule of Civil Procedure 23. We 33 conclude that although the plaintiffs do not fall within the 1 definition of the class as set forth in the complaint, as 2 assignees of class members who brought the suit, they are not 3 categorically excluded from acting as class representatives. We 4 also conclude that the district court erred with respect to the 5 basis on which it concluded that individual questions predominate 6 over common ones. 7 Vacated and remanded. 8 ROGER W. KIRBY, Kirby McInerney & Squire 9 LLP (Randall K. Berger, Henry P. 10 Monaghan, of counsel), New York, NY, for 11 Plaintiffs-Appellants. 12 ROBERT F. WISE, JR., Davis Polk & 13 Wardwell (Edmund Polubinski III, 14 Christopher Withers, Kavita Kumar, of 15 counsel), New York, NY, for Defendant- 16 Appellee Morgan Stanley (sued as Morgan 17 Stanley Dean Witter & Co.). 18 James B. Weidner, Clifford Chance US LLP 19 (Jon R. Roelke, Jeffrey H. Drichta, of 20 counsel), New York, NY, for Defendants- 21 Appellees Merrill Lynch, Pierce Fenner & 22 Smith Incorporated, and Merrill Lynch & 23 Co. 24 Gandolfo V. DiBlasi, Sullivan & Cromwell 25 LLP (Steven L. Holley, Penny Shane, 26 David Rein, of counsel), New York, NY, 27 for Defendant-Appellee Goldman, Sachs & 28 Co. (sued as The Goldman Sachs Group, 29 Inc.). 30 Robert B. McCaw, Wilmer Cutler Pickering 31 Hale and Dorr LLP (Ali M. Stoeppelwerth, 32 Fraser L. Hunter, Jr., of counsel), New 33 York, NY, for Defendant-Appellee 34 Citigroup Global Markets, Inc. (sued as 35 Salomon Smith Barney, Inc.). 36 Jay B. Kasner, Skadden, Arps, Slate, 37 Meagher & Flom LLP (Shepard Goldfein, 38 Gary A. MacDonald, of counsel), New 39 York, NY, for Defendants-Appellees CIBC 2 1 World Markets Corp. (sued as CIBC 2 Oppenheimer Corp.), ABN AMRO Inc. (as 3 successor-in-interest to ING Barings 4 LLC) and Cowen and Company, LLC (f/k/a 5 SG Cowen & Co., LLC and SG Cowen 6 Securities Corp.; sued as Cowen & Co.). 7 Gregory A. Markel, Cadwalader, 8 Wickersham & Taft LLP (Ronit Setton, 9 Amanda Kosowsky, of counsel), New York, 10 NY, for Defendants-Appellees Banc of 11 America Securities LLC (sued as 12 NationsBanc Montgomery Securities) and 13 Robertson Stephens, Inc. (sued as 14 BancBoston Robertson, Stephens & 15 Company). 16 Bradley J. Butwin, O'Melveny & Myers 17 LLP, New York, NY, for Defendants- 18 Appellees UBS Securities LLC f/k/a UBS 19 Warburg, LLC (sued as UBS Warburg LLC), 20 J.C. Bradford & Co. and UBS Financial 21 Services Inc. f/k/a UBS PaineWebber Inc. 22 (sued as Paine Webber Group, Inc.). 23 A. Robert Pietrzak, Sidley Austin LLP 24 (Joel M. Mitnick, Benjamin R. Nagin, of 25 counsel), New York, NY, for Defendant- 26 Appellee Bear, Stearns & Co. Inc. 27 Thomas J. Kavaler, Cahill Gordon & 28 Reindel LLP (Elai Katz, of counsel), New 29 York, NY, for Defendant-Appellee 30 Prudential Equity Group, LLC (sued as 31 Prudential Securities Incorporated). 32 Joseph Ingrisano, Kutak Rock LLP (Robert 33 A. Jaffe, of counsel), Washington, D.C., 34 for Defendant-Appellee A.G. Edwards & 35 Sons, Inc. 36 Charles E. Koob, Simpson Thacher & 37 Bartlett LLP (Joseph F. Tringali, of 38 counsel), New York, NY, for Defendants- 39 Appellees Lehman Brothers Inc. and J.P. 40 Morgan Securities Inc. (sued as Chase 41 Hambrecht & Quist). 42 Jeremy G. Epstein, Shearman & Sterling 43 LLP (Kenneth M. Kramer, Richard F. 44 Schwed, of counsel), New York, NY, for 3 1 Defendants-Appellees Credit Suisse 2 Securities (USA) LLC, f/k/a Credit 3 Suisse First Boston LLC (sued as Credit 4 Suisse First Boston Corporation) and 5 Donaldson Lufkin & Jenrette, Inc. 6 Jay N. Varon, Foley & Lardner LLP 7 (Samuel J. Winer, Bryan B. House, of 8 counsel), Washington, D.C., for 9 Defendants-Appellees EVEREN Securities, 10 Inc., Raymond James & Associates, Inc. 11 and Piper Jaffray & Co. (sued as U.S. 12 Bancorp Piper Jaffray Inc.). 13 Douglas A. Rappaport, DLA Piper US LLP 14 (Lewis A. Noonberg, Philip Huynh, of 15 counsel), New York, NY, for Defendant- 16 Appellee Deutsche Bank Securities, Inc. 17 (sued as BT Alex. Brown). 18 Bernard J. Garbutt III, Morgan Lewis & 19 Bockius LLP (Leza M. DiBella, of 20 counsel), New York, NY, for Defendant- 21 Appellee Jefferies & Company, Inc. 22 Charles O. Monk II, Saul Ewing LLP 23 (Joseph M. Fairbanks, of counsel), 24 Baltimore, MD, for Defendant-Appellee 25 Legg Mason Wood Walker, Inc. 26 David Radlauer, Jones, Walker, Waechter, 27 Poitevent, Carrere & Denegre, L.L.P. 28 (Mark A. Cunningham, of counsel), New 29 Orleans, LA, for Defendant-Appellee 30 Johnson Rice & Company. 31 L. Norton Cutler, Perkins Coie, LLP, 32 Denver, CO, for Defendant-Appellee 33 Hanifen Imhoff Inc. 34 SACK, Circuit Judge: 35 The first of the named plaintiffs in this lawsuit -- 36 Cordes & Company Financial Services, Inc. ("Cordes") -- is the 37 assignee of an antitrust claim against the defendants formerly 38 asserted by Western Pacific Airlines Inc. ("Western Pacific"). 39 The interests in this litigation of the second named-plaintiff -- 4 1 EqualNet Communications Corporation ("EqualNet") -- are being 2 pursued by the Unsecured Creditors Trust ("Creditors Trust") of a 3 subsidiary of EqualNet: EqualNet Corp. ("EN"). Creditors Trust 4 acquired a two-thirds stake in any proceeds EqualNet obtains 5 through this lawsuit. The plaintiffs allege in their 6 Consolidated Class Action Complaint (the "Complaint") that the 7 defendants, who are initial public offering ("IPO") underwriters, 8 violated Section 1 of the Sherman Act, 15 U.S.C. § 1, by agreeing 9 to charge all corporations conducting mid-size IPOs who used 10 their services a fee equal to seven percent of the proceeds of 11 the offering. Cordes and Creditors Trust sought class 12 certification pursuant to Federal Rule of Civil Procedure 23. 13 The United States District Court for the Southern 14 District of New York (Lawrence M. McKenna, Judge) denied the 15 motion for class certification because, it concluded, two Rule 23 16 requirements -- the adequacy requirement of Rule 23(a)(4) and the 17 predominance requirement of Rule 23(b)(3) -- were not met. 18 Rule 23(a)(4) provides that it is a prerequisite to 19 pursuit of an action as a class that "the representative parties 20 will fairly and adequately protect the interests of the class." 21 Fed. R. Civ. P. 23(a)(4). The district court reasoned that 22 because Cordes and Creditors Trust are assignees of the entities 23 that instituted this lawsuit and are not themselves members of 24 the putative class, they are not qualified to act as 25 representatives of the class. For reasons set forth below, we 26 think that the fact that the assignee-plaintiffs do not 5 1 themselves fall within the definition of the class as set forth 2 in the Complaint does not, ipso facto, foreclose their ability to 3 act as class representatives in lieu of the entities that 4 originally brought the claims, both of them members of the class. 5 On remand, the district court should decide whether, on the facts 6 presented in this case, Cordes and Creditors Trust are each 7 adequate representatives of the class. 8 Rule 23(b)(3) requires, inter alia, that for a lawsuit 9 to be pursued as a class action, "the questions of law or fact 10 common to the members of the class [must] predominate over any 11 questions affecting only individual members . . . ." Fed. R. 12 Civ. P. 23(b)(3). The district court concluded that the 13 plaintiffs failed to establish that this litigation meets that 14 requirement because they did not offer evidence to establish that 15 antitrust injury -- one of the elements of the antitrust claim 16 alleged in the Complaint -- could be proved by a method common to 17 the class. 18 The antitrust injury element raises both factual 19 questions related to whether the plaintiff has suffered harm and 20 legal questions related to whether that harm is "of the type the 21 antitrust laws were intended to prevent and that flows from that 22 which makes defendants' acts unlawful." Brunswick Corp. v. 23 Pueblo Bowl-O-Mat, Inc., 429 U.S. 477, 489 (1977). We think that 24 the district court should have distinguished between antitrust 25 injury's factual questions -- as to which both parties offered 26 evidence -- and its legal questions -- as to which neither party 6 1 offered evidence. We conclude, for reasons set forth below, that 2 the legal questions raised by the antitrust injury element of 3 this case are common to the class. On remand, the district court 4 should therefore decide whether the factual questions are common 5 to the class. And if the court determines that the factual 6 questions relevant to antitrust injury here are individual to 7 each class member, the court should then determine (1) whether 8 common questions nonetheless predominate, and (2) whether 9 certification of a part of the case would be appropriate even if 10 certification of the whole would not be. 11 BACKGROUND 12 Cordes, the first named-plaintiff, purchased the 13 interest supporting its claim in this lawsuit from the bankruptcy 14 estate of Western Pacific. In 1995, Western Pacific engaged in 15 an IPO of its capital stock, the proceeds of which were 16 approximately $47 million. Two years later, Western Pacific 17 filed for Chapter 11 bankruptcy protection in the United States 18 Bankruptcy Court for the District of Colorado. In 1998, that 19 proceeding was converted to a liquidation proceeding under 20 Chapter 7. In 2001, the trustee of the estate in bankruptcy 21 filed a complaint in this action in the United States District 22 Court for the Southern District of New York. The trustee alleged 23 that beginning in the mid-1990s, the defendants, investment banks 24 that had underwritten mid-size IPOs, engaged in a horizontal 25 price-fixing scheme of which Western Pacific was a victim during 26 the course of its IPO. In 2004, the bankruptcy court entered an 7 1 order permitting Western Pacific's Chapter 7 trustee to sell by 2 auction Western Pacific's claim and interest in the antitrust 3 litigation. The bankruptcy court required, inter alia, that the 4 winning bidder be willing to act as a named class representative. 5 Cordes acquired Western Pacific's claim and interest, with the 6 approval of the bankruptcy court, for $11,000. The instrument 7 memorializing Western Pacific's assignment of its claim stated 8 that Cordes agreed to pursue the litigation in good faith as a 9 named class representative. 10 In 1995, EqualNet, the second named-plaintiff, held an 11 IPO of its capital stock. It, too, subsequently filed for 12 bankruptcy protection under Chapter 11. The United States 13 Bankruptcy Court for the Southern District of Texas converted the 14 Chapter 11 proceeding to Chapter 7. EN, EqualNet's subsidiary, 15 also filed for bankruptcy, which resulted in the formation of 16 Creditors Trust. Creditors Trust, which is pursuing EqualNet's 17 former claims, acquired a two-thirds interest in EqualNet's 18 potential recovery in this case by foreclosing on security 19 interests that EN held in certain assets of EqualNet. 20 The plaintiffs allege in the Complaint that the 21 defendants, IPO underwriters, fixed their underwriting fees at 22 seven percent of the IPO proceeds for all corporations conducting 23 mid-size IPOs -- i.e., IPOs generating between $20,000,000 and 24 $80,000,000 in proceeds. They assert that the defendants thereby 8 1 violated Section 1 of the Sherman Act, 15 U.S.C. § 1.1 More than 2 ninety percent of issuers of mid-size IPOs since 1994 were, 3 according to the Complaint, charged such a fee in that amount. 4 The plaintiffs further allege that IPOs are managed by a 5 syndicate of underwriters, each of which has a lead manager and 6 several co-managers. Because each defendant participated as lead 7 manager for some IPOs and as co-manager for others, each was 8 allegedly able to monitor the fees charged by other defendant 9 underwriters. The plaintiffs also submitted expert testimony to 10 support their allegations that the defendants entered into a 11 horizontal price-fixing agreement and have been able to enforce 12 it. 13 Western Pacific and EqualNet brought the lawsuit 14 pursuant to Rule 23 of the Federal Rules of 15 Civil Procedure, on their own behalf and as 16 representatives of a class . . . of all 17 corporations and other entities (excluding 18 defendants and their respective parents, 19 subsidiaries and affiliates and issuers of 20 government securities) who, during the 21 [period from at least January 1994 through 22 the present], issued an initial public 23 offering of securities with an aggregate 24 value between $20 million and $80 million 25 using the services of any defendant. 26 Compl. ¶ 50. After the assignment of Western Pacific's and 27 EqualNet's claims and interests in this litigation, Cordes and 1 Section 1 of the Sherman Act makes illegal any "contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations . . . ." 15 U.S.C. § 1. 9 1 Creditors Trust filed a motion to certify a class of plaintiffs 2 pursuant to Rule 23. 3 Cordes and Creditors Trust submitted a declaration of 4 their expert, Gustavo Bamberger, in an attempt to establish that 5 they could prove the elements of their claim by common proof and 6 that those elements are predominant, as required for 7 certification under Rule 23(b)(3). Bamberger reported that he 8 had been asked whether he could measure the damages suffered by 9 each class member "by the use of a formula common to all class 10 members." Bamberger Decl. ¶ 3, Sept. 16, 2004. He responded in 11 the affirmative. Id. Damages in this case were, he said, the 12 difference between the fee actually paid and the "but-for fee" -- 13 the fee that would have been charged to the putative class 14 members in connection with the IPO in the absence of the alleged 15 conspiracy. Id. at ¶ 8. Bamberger asserted that he could devise 16 a common formula for deriving the but-for fee by (1) establishing 17 a benchmark fee from a set of prices paid in temporal or 18 geographic isolation from the conspiracy, and (2) applying a 19 multiple regression analysis to isolate the "explanatory 20 variables" that influence the benchmark fee. Id. ¶¶ 9, 16. The 21 but-for fee for each class member could then be determined by 22 substituting the appropriate values for the explanatory 23 variables. Id. ¶¶ 20-24. 24 The defendants countered with an expert report prepared 25 by Robert D. Willig (the "Willig Report"). The defendants asked 26 Willig "whether the plaintiffs' allegations that members of the 10 1 proposed issuer class have been injured by the alleged price- 2 fixing conspiracy are capable of being proved on a common basis 3 for the purported class members." Willig Report at 2. Willig 4 asserted in response that in order to determine whether a class 5 member was injured, one must first determine the "but-for gross 6 spread" -- that is, the fee that the underwriter would have 7 charged but for the conspiracy. Id. at 11-12. But, according to 8 Willig, calculating the but-for gross spread requires an 9 individualized, plaintiff-by-plaintiff analysis of ten factors, 10 including underwriter costs, price stabilization, and the risk of 11 the offering. 12 The district court denied certification. The court 13 first determined that neither Cordes nor Creditors Trust 14 satisfied the adequacy prerequisite of Rule 23(a)(4). The court 15 noted that "a class representative must be a member of the class" 16 and that both Cordes and Creditors Trust were assigned their 17 interests in the litigation. In re Pub. Offering Fee Antitrust 18 Litig., 2006 WL 1026653, at *2-*3, 2006 U.S. Dist. LEXIS 21076, 19 at *9, *11-*13 (S.D.N.Y. Apr. 18, 2006) (the "District Court 20 Opinion"), amended by 2006 WL 1120498, 2006 U.S. Dist. LEXIS 21 24321 (S.D.N.Y. Apr. 26, 2006). Assuming for purposes of its 22 analysis that Cordes and Creditors Trust met the other class 23 certification qualifications, it ruled that they were not members 24 of the proposed class and thus could not represent it. Id. at 25 *4, 2006 U.S. Dist. LEXIS 21076, at *13. Treating class 26 membership as a transferable asset could, in the words of the 11 1 court, "lead to a very serious problem indeed in the class action 2 field." Id. at *4, 2006 U.S. Dist. LEXIS 21076, at *13-*14. 3 The district court concluded further that Rule 4 23(b)(3)'s predominance requirement also had not been met. 5 Cordes and Creditors Trust argued that because their expert had 6 provided a formula for assessing damages for all class members, 7 they had also established that they would be "able to prove 8 antitrust impact by common proof." Id. at *8, 2006 U.S. Dist. 9 LEXIS 21076, at *26-*27. The district court rejected this 10 argument because the "plaintiffs [were] ignoring the distinction 11 between antitrust injury or impact, on the one hand, and damages, 12 on the other." Id., 2006 U.S. Dist. LEXIS 21076, at *26. Each 13 expert had "been asked, and ha[d] answered, meaningfully 14 different questions." Id., 2006 U.S. Dist. LEXIS 21076, at *27. 15 Although the court "[a]ccept[ed] both opinions as 'not fatally 16 flawed' and 'sufficiently reliable,'" only the defendants' 17 expert's analysis, the court concluded, "addresses the question 18 before the Court -- which is whether antitrust injury or impact 19 can be proved by evidence common to the class." Id., 2006 U.S. 20 Dist. LEXIS 21076, at *27-*28 (quoting In re Visa 21 Check/MasterMoney Antitrust Litig., 280 F.3d 124, 135 (2d Cir. 22 2001) ("Visa Check")).2 "The questions are different," the court 2 In In re Initial Pub. Offering Sec. Litig., 471 F.3d 24 (2d Cir. 2006), decided after the district court's ruling, we perceived "a major shift away from the . . . 'not fatally flawed' language of . . . Visa Check." Id. at 37. "[W]e can no longer continue to advise district courts that . . . an expert's report will sustain a plaintiff's burden so long as it is not 'fatally 12 1 continued, "because there is considerabl[y more] leeway allowed 2 in proving damages, once antitrust liability is established, than 3 is permitted in proving antitrust liability." Id., 2006 U.S. 4 Dist. LEXIS 21076, at *28. 5 Cordes and Creditors Trust, relying on Visa Check, also 6 argued that certification was appropriate because common 7 questions regarding the nature of the conspiracy in a price- 8 fixing case predominate over all other questions, including those 9 regarding injury. The court concluded, however, that Visa Check 10 supported only the proposition that the need for individualized 11 inquiry into damages should not prevent certification of a class 12 with common questions on liability.3 Based on its conclusion 13 that Cordes and Creditors Trust did not establish that in this 14 case there are common questions on liability, the district court 15 rejected this argument, too. 16 Cordes and Creditors Trust petitioned this Court, 17 pursuant to Fed. R. Civ. P. 23(f), to hear an interlocutory 18 appeal of the denial of class certification. On August 1, 2006, 19 a panel of this Court granted the petition. 20 DISCUSSION flawed . . . .'" Id. at 40. The use of the phrase by the district court does not affect our analysis, however, and we therefore do not address it further. 3 Cordes and Creditors Trust contended, as they do on appeal, that when faced with allegations of a horizontal price- fixing conspiracy, we should presume that the entire class suffered antitrust injury. We need not evaluate that argument in order to resolve the merits of this appeal, and therefore express no view as to it. 13 1 I. Standard of Review 2 We review a district court's denial of class 3 certification for abuse of discretion. In re Initial Pub. 4 Offering Sec. Litig., 471 F.3d 24, 31 (2d Cir. 2006) ("IPO 5 Securities"). We also apply abuse of discretion review to a 6 district court's "subsidiary rulings on each of the six 7 requirements for a Rule 23(b)(3) class." Id. at 31-32. "A 8 district court by definition abuses its discretion when it makes 9 an error of law." Koon v. United States, 518 U.S. 81, 100 10 (1996). Findings of fact upon which the district court bases a 11 Rule 23 determination are reviewed for clear error; legal 12 conclusions de novo. See IPO Securities, 471 F.3d at 40-41. 13 II. Denial of Class Certification 14 Two questions are presented to us on this interlocutory 15 appeal: (A) whether the district court misconstrued Rule 23(a)'s 16 adequacy requirement, and (B) whether it misconstrued Rule 17 23(b)(3)'s predominance requirement, adversely in each case to 18 Cordes and Creditors Trust. 19 A. Prerequisites to a Class Action -- Adequacy of Representation 20 Rule 23(a) sets forth four "[p]rerequisites to a 21 [c]lass [a]ction": 22 (1) numerosity (a "class [so large] that 23 joinder of all members is impracticable"); 24 (2) commonality ("questions of law or fact 25 common to the class"); (3) typicality (named 26 parties' claims or defenses "are 27 typical . . . of the class"); and (4) 28 adequacy of representation (representatives 29 "will fairly and adequately protect the 30 interests of the class"). 14 1 Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 613 (1997) (quoting 2 Fed. R. Civ. P. 23(a)). The defendants do not contest that the 3 first three prerequisites are met here. We therefore confine our 4 consideration to the fourth -- adequacy of representation. 5 Determination of adequacy typically "entails inquiry as to 6 whether: 1) plaintiff's interests are antagonistic to the 7 interest of other members of the class and 2) plaintiff's 8 attorneys are qualified, experienced and able to conduct the 9 litigation." Baffa v. Donaldson, Lufkin & Jenrette Sec. Corp., 10 222 F.3d 52, 60 (2d Cir. 2000). This process "serves to uncover 11 conflicts of interest between named parties and the class they 12 seek to represent." Amchem, 521 U.S. at 625. 13 The district court did not find it necessary to engage 14 in either part of the typical inquiry. The court decided that, 15 irrespective of whether Cordes and Creditors Trust could satisfy 16 the Baffa factors, they cannot be representatives of the class 17 because they do not themselves fit within the definition of the 18 class as set forth in the Complaint. 19 It is plain that Cordes and the Creditors 20 Trust are not members of the proposed issuer 21 class and that, as a consequence -- and 22 assuming arguendo that they meet the other 23 qualifications for class representation -- 24 they cannot represent the issuer class. Plaintiffs in response cite the 25 26 undisputed proposition that antitrust claims 27 are assignable. That is beside the point. 28 To allow Cordes or the Creditors Trust to 29 represent the proposed class would, in 30 effect, treat class membership as a 31 transferable asset, and that could plainly 15 1 lead to very serious problems indeed in the 2 class action field. 3 District Court Opinion, 2006 WL 1026653, at *4, 2006 U.S. Dist. 4 LEXIS 21076, at *13-*14 (footnote omitted). 5 The defendants urge us to adopt the district court's 6 conclusion, arguing (1) that Cordes and Creditors Trust are not 7 themselves members of the defined class; (2) in light of the 8 general principle that only a class member can adequately 9 represent the class, Cordes and Creditors Trust cannot represent 10 the class; and (3) "to allow the class action device to become a 11 mechanism for trafficking in litigation would fundamentally 12 undermine the administration of justice in federal courts." Def. 13 Br. at 18. We disagree. 14 1. The Ability of Assignees to Serve as Class 15 Representatives. "To have standing to sue as a class 16 representative it is essential that a plaintiff . . . be a part 17 of that class, that is, he must possess the same interest and 18 suffer the same injury shared by all members of the class he 19 represents." Schlesinger v. Reservists Comm. to Stop the War, 20 418 U.S. 208, 216 (1974) (citations omitted); see also Gen. Tel. 21 Co. of Sw. v. Falcon, 457 U.S. 147, 156 (1982) (quoting 22 Schlesinger, 418 U.S. at 216). When Western Pacific and EqualNet 23 brought this lawsuit as putative class representatives, see 24 Complaint ¶ 50, they were indisputably members of the class they 25 sought to represent. We conclude that the subsequent assignment 26 of their claims and interests in this litigation to Cordes and 16 1 Creditors Trust, respectively, did not deprive Cordes and 2 Creditors Trust of the ability, as assignees, to continue to seek 3 recognition as representatives of the class. 4 a. Cordes and Creditors Trust's standing to pursue 5 these claims as a class action. 6 The defendants do not contest the validity of the 7 assignments of the bankrupts' antitrust claims to Cordes and 8 Creditors Trust in this instance.4 See Def. Br. at 23; see also 9 D'Ippolito v. Cities Serv. Co., 374 F.2d 643, 647 (2d Cir. 1967) 10 ("Antitrust claims have been held assignable."). It is 11 undisputed that Cordes and Creditors Trust acquired through 12 Western Pacific's and EqualNet's bankruptcy proceedings all or a 13 portion of whatever substantive rights Western Pacific and 14 EqualNet held at the time of their respective bankruptcies to 15 recover for the injuries alleged in the Complaint.5 4 The trustee of an estate in bankruptcy under Chapter 7 is required to "collect and reduce to money the property of the estate . . . and close such estate as expeditiously as is compatible with the best interests of parties in interest." 11 U.S.C. § 704(a)(1). "Under 11 U.S.C. § 541, the rights of action of the debtor pass to the estate created by the commencement of the bankruptcy proceeding . . . ." Mitchell Excavators, Inc. by Mitchell v. Mitchell, 734 F.2d 129, 131 (2d Cir. 1984). The trustee may "reduce to money" the "rights of action of the debtor" by litigating them on behalf of the estate, or, as the defendants concede, by assigning the rights of action to third parties. See Def. Br. at 23; see also Integrated Solutions, Inc. v. Serv. Support Specialties, Inc., 124 F.3d 487, 493-95 (3d Cir. 1997) (recognizing that property in the bankrupt's estate is alienable insofar as it would have been alienable outside the bankruptcy context). 5 As the defendants put it in their brief: The district court did not suggest that [Cordes, as] an owner of a claim by 17 1 Nevertheless, the defendants argue, because neither Cordes nor 2 Creditors Trust is itself a member of the class as pleaded, 3 neither has standing to act as a class representative. 4 Standing has both constitutional dimensions rooted in 5 Article III's Case or Controversy Clause6 and prudential 6 dimensions that are "closely related to Art. III concerns but 7 [are] essentially matters of judicial self-governance." Warth v. 8 Seldin, 422 U.S. 490, 498-500 (1975). The rule that "a class 9 representative must be part of the class," Falcon, 457 U.S. at 10 156 (citation and internal quotation marks omitted), is one of 11 prudential standing, related to the broader principle that "the 12 plaintiff generally must assert his own legal rights and 13 interests, and cannot rest his claim to relief on the legal assignment[,] does not possess a right to bring suit individually to recover the proceeds of [its] claim. Nor do plaintiffs contend that the district court's order bars them from proceeding individually or receiving the proceeds to which their assignors would be entitled should there be a class recovery. Thus, the district court did not affect any substantive right to recovery that they acquired by assignment. Def. Br. at 23 (footnote omitted; emphasis in original). 6 Several doctrines "'cluster about Article III -- not only standing but mootness, ripeness, political question, and the like . . . .'" Allen v. Wright, 468 U.S. 737, 750 (1984) (quoting Vander Jagt v. O'Neill, 699 F.2d 1166, 1178-79 (D.C. Cir. 1983)). Article III standing, which is "perhaps the most important of these doctrines," id., requires, at an "irreducible constitutional minimum," that the plaintiff suffered injury-in- fact, "fairly traceable" to the defendant's acts, and redressable by a decision in the plaintiff's favor, in order for a federal court to address the dispute, Lujan v. Defenders of Wildlife, 504 U.S. 555, 560-61 (1992) (internal quotation marks and brackets omitted). 18 1 rights or interests of third parties," Warth, 422 U.S. at 499; 2 see also Allen v. Wright, 468 U.S. 737, 751 (1984) (recognizing 3 "the general prohibition on a litigant's raising another person's 4 legal rights" as one of "several judicially self-imposed limits 5 on the exercise of federal jurisdiction"). This principle 6 requires in the class action setting that "[a]n individual 7 litigant seeking to maintain a class action . . . meet 'the 8 prerequisites of numerosity, commonality, typicality, and 9 adequacy of representation' specified in Rule 23(a)." Falcon, 10 457 U.S. at 156 (quoting Gen. Tel. Co. of N.W., Inc. v. EEOC, 446 11 U.S. 318, 330 (1980)). "These requirements effectively 'limit 12 the class claims to those fairly encompassed by the named 13 plaintiff's claims.'" Id. (quoting Gen. Tel. Co. of N.W., Inc., 14 446 U.S. at 330); see also id. ("'[A] class representative must 15 be part of the class and "possess the same interest and suffer 16 the same injury" as the class members.'" (quoting East Tex. Motor 17 Freight Sys. v. Rodriguez, 431 U.S. 395, 403 (1977) (quoting 18 Schlesinger, 418 U.S. at 216))).7 7 In some circumstances, requiring class representatives to be members of the class may also ensure that the litigation complies with Article III limits on federal jurisdiction. The Supreme Court referred to a possible connection between standing to represent a class, Rule 23(a), and Article III standing in Kremens v. Bartley, 431 U.S. 119, 131 n.12 (1977). See also O'Shea v. Littleton, 414 U.S. 488, 494 (1974) ("[I]f none of the named plaintiffs purporting to represent a class establishes the requisite of a case or controversy with the defendants, none may seek relief on behalf of himself or any other member of the class." (citing, inter alia, Bailey v. Patterson, 369 U.S. 31, 32-33 (1962))); Lynch v. Baxley, 744 F.2d 1452, 1456 (11th Cir. 1984) ("If the named plaintiff seeking to represent a class fails to establish the requisite case or controversy, he may not seek 19 1 We return, then, to the basic principle that "[t]o have 2 standing to sue as a class representative it is essential that a 3 plaintiff must be a part of that class, that is, he must possess 4 the same interest and suffer the same injury shared by all 5 members of the class he represents." Schlesinger, 418 U.S. at 6 216 (citations omitted); see also Fed. R. Civ. P. 23(a) 7 (providing that "[o]ne or more members of a class may sue or be 8 sued as representative parties" only if the four prerequisites of 9 subsection (a) are met). Western Pacific and EqualNet were both 10 members of the class. As a result of Western Pacific's and 11 EqualNet's assignments of their respective claims and interests 12 in this litigation to Cordes and Creditors Trust, Cordes and 13 Creditors Trust stood before the district court in the shoes of 14 Western Pacific and EqualNet, for the purposes of this 15 litigation, as assimilated members of the class. By virtue of 16 the assignments, they do, as Western Pacific and EqualNet did, 17 possess the same interest and thus may continue to assert a claim 18 for the same injury shared by all members of the class. 19 The fundamental requirement, in other words, is that 20 the "class claims [be] 'fairly encompassed' within" the 21 representative's claims. Falcon, 457 U.S. at 158. The claims of 22 Cordes and Creditors Trust, premised as they are on the harms relief on his behalf or on that of the class." (citing O'Shea, 414 U.S. at 494)); DuPree v. United States, 559 F.2d 1151, 1153 (9th Cir. 1977) ("When the suit takes the form of a class action, Article III requires that the representative or named plaintiff must share the same injury . . . ." (citing Warth, 422 U.S. at 502)). 20 1 allegedly suffered by Western Pacific and EqualNet, "fairly 2 encompass" the claims of the class. Reasons of efficiency and 3 economy that permit claims to be pursued as part of a class 4 action in the first place do not vanish as a result of the 5 assignments. As assimilated class members by virtue of the 6 assignments, Cordes and Creditors Trust have standing to pursue 7 the assigned claims as class representatives. 8 Finally, we do not think that allowing Cordes and 9 Creditors Trust to serve as class representatives threatens the 10 district court's power under Article III to hear this dispute. 11 The assignment of a claim from a person who suffered an injury to 12 someone who did not does not make the claim any less a "case or 13 controversy" which the courts have the constitutional capacity to 14 resolve. It is indeed commonplace for an assignee to institute 15 or continue an action of his or her assignor on an assigned claim 16 even though he or she, apart from the assignment, is without 17 standing, and the court, apart from the assignment, would be 18 without power to decide the case. See, e.g., Fed. R. Civ. P. 19 25(c) (providing that in the case of "any transfer of interest, 20 the action may be continued by or against the original party" or, 21 upon motion, by or against the transferee); Official Comm. of 22 Unsecured Creditors of Color Tile, Inc. v. Coopers & Lybrand, 23 LLP, 322 F.3d 147, 156 (2d Cir. 2003) ("As assignee of the Color 24 Tile bankruptcy estate, Color Tile Committee 'stands in the shoes 25 of [Color Tile] and has standing to bring any suit that [Color 26 Tile] could have instituted had it not petitioned for 21 1 bankruptcy.'" (citation omitted)). Similarly, an assignment of a 2 class claim by a person who purports to be a class representative 3 does not render the claim less amenable to resolution as a class 4 action, nor class action treatment less beneficial to the 5 litigants, after the transfer of the asserted cause or causes of 6 action than before. 7 b. The perils of permitting assignee- 8 plaintiffs to represent the class. 9 The defendants argue that as assignees, Cordes and 10 Creditors Trust are not "squarely aligned in interest with the 11 represented group." Def. Br. at 20 (quoting Benjamin Kaplan, 12 Continuing Work of the Civil Committee: 1966 Amendments of the 13 Federal Rules of Civil Procedure (I), 81 Harv. L. Rev. 356, 387 14 n.120 (1966)) (internal quotation marks omitted). They 15 characterize Cordes and Creditors Trust as "textbook examples of 16 the 'very serious problems' referenced by the district court that 17 would ensue if the ability to serve as a class representative 18 could be treated 'as a transferrable asset.'" Id. at 25 (quoting 19 District Court Opinion, 2006 WL 1026653, at *4, 2006 U.S. Dist. 20 LEXIS 21076, at *14). They explain in some detail why, in their 21 view, Cordes's and Creditors Trust's interests are antagonistic 22 to interests of the class and why they are otherwise deficient as 23 class representatives. Id. at 25-30. Irrespective of the extent 24 to which Cordes's and Creditors Trust's interests are or are not 25 in fact antagonistic to the interests of other members of the 26 class in this particular case -- a matter on which it is 22 1 premature for us to express a view -- we do not think that they 2 are necessarily antagonistic solely because Cordes and Creditors 3 Trust are assignees of Western Pacific's and EqualNet's interests 4 in the class action that they are pursuing. 5 The asserted unhappy consequences of permitting 6 "trafficking" (to use the defendants' characterization) in causes 7 of action, thereby permitting one person who has suffered no 8 injury to pursue actions in the stead of another solely to 9 maximize his or her personal monetary return, are not fanciful. 10 The aversion to such assignments, because of their potential use 11 by "intermeddle[rs to] stir up litigation for the purpose of 12 making a profit," Accrued Fin. Servs., Inc. v. Prime Retail, 13 Inc., 298 F.3d 291, 298 (4th Cir. 2002), has been reflected from 14 time immemorial in the laws of champerty and its kin.8 See In re 8 Commentators have traced the doctrine of champerty, and its doctrinal near-cousins of maintenance and barratry, back to Greek and Roman law, through the English law of the Middle Ages, and into the statutory or common law of many of the states. See generally, Susan Lorde Martin, Syndicated Lawsuits: Illegal Champerty or New Business Opportunity?, 30 Am. Bus. L.J. 485, 486-89 (1992); Max Radin, Maintenance by Champerty, 24 Cal. L. Rev. 48, 48-66 (1936). Elliott Assocs., L.P. v. Banco de la Nacion, 194 F.3d 363, 372 (2d Cir. 1999). Champerty, a tort governed largely by state law, has been narrowed to focus on the prevention of litigation by lawyers for the primary purpose of recovering their costs and fees. See, e.g., id. at 374 (recognizing that the object of New York's champerty statute is "'to prevent attorneys, etc., from purchasing things in action for the purpose of obtaining costs by the prosecution thereof, and it was not intended to prevent a purchase for the purpose of protecting some other right of the assignee'" (quoting Moses v. McDivitt, 88 N.Y. 62, 65 (1882)). 23 1 Primus, 436 U.S. 412, 424 n.15 (1978) ("[P]ut simply, . . . 2 champerty is maintaining a suit in return for a financial 3 interest in the outcome . . . ."). 4 The purchasing of claims, whether before or after suit 5 has been brought upon them, for the purpose of turning a profit 6 is nonetheless not categorically forbidden. See Advanced 7 Magnetics, Inc. v. Bayfront Partners, Inc., 106 F.3d 11, 17 (2d 8 Cir. 1997) ("In general, claims or choses in action may be freely 9 transferred or assigned to others."); see also Elliott Assocs., 10 L.P. v. Banco de la Nacion, 194 F.3d 363, 372 (2d Cir. 1999). To 11 the contrary, such assignments are widely permitted, presumably 12 in order to allow holders of claims to transfer the risk of loss 13 to someone better able or more willing to pursue the claim or to 14 undertake the risk. Valid claims otherwise lost may thus be 15 salvaged. 16 The defendants' arguments and the district court's 17 conclusions as to the transferability of the ability to represent 18 a class fail to account for the countervailing value of allowing 19 an assignee to stand in the shoes of the assignor before a court. 20 This case might be termed a "textbook example" of that value in 21 the bankruptcy context inasmuch as the assignments pursuant to 22 which Cordes and Creditors Trust are litigating this case 23 promoted the winding up of complicated estates in bankruptcy to 24 the benefit of creditors. We see nothing about the perils of 25 claim assignment in the context of class membership and class 26 representation that is qualitatively different from similar 24 1 dangers that inhere in permitting the pursuit of assigned legal 2 claims generally, which, as we have noted, is allowed. 3 We conclude that Cordes and Creditors Trust, pursuing 4 their claims and interests as assignees of the claims brought by, 5 and interests in this litigation of, purported members of the 6 class seeking to act as class representatives, are not excluded, 7 for that reason alone. 8 2. The Determination of Adequacy of Representation. 9 That is hardly the end of the matter. As with any class member 10 seeking to act as a class representative, Cordes and Creditors 11 Trust must demonstrate that "1) [their] interests are [not] 12 antagonistic to the interest of other members of the class and 2) 13 [their] attorneys are qualified, experienced and able to conduct 14 the litigation." Baffa, 222 F.3d at 60. In light of its 15 categorical approach to Rule 23(a)(4)'s adequacy requirement, the 16 district court has not addressed these questions. For some of 17 the reasons advanced by the defendants in support of their 18 assertion that assignees can never act as class representatives, 19 Cordes, Creditors Trust, or both, may in fact not be adequate 20 class representatives here. If, for example, either is not 21 sufficiently "'aligned in interest with the represented group,'" 22 Def. Br. at 20 (citation omitted), see also id. at 28-33, or has 23 insufficient knowledge or access to information, id. at 26-28, it 24 may not qualify. But we are in no position, and therefore 25 decline, to make that determination in the first instance. We 25 1 mean to imply no views on the question. We leave the matter to 2 the sound discretion of the district court on remand.9 3 B. Predominance 4 If this lawsuit meets the "prerequisites" of a class 5 action under Rule 23(a), it must then also "qualif[y] under at 6 least one of the categories provided in Rule 23(b)" before it may 7 be certified as a class action. Visa Check, 280 F.3d at 133. 8 Cordes and Creditors Trust assert that this action qualifies 9 under the third Rule 23(b) category, where, although class 10 treatment is not necessary to avoid adjudications mandating 11 inconsistent standards of conduct under Fed. R. Civ. P. 23(b)(1), 12 or to remedy class-based discrimination under Fed. R. Civ. P. 13 23(b)(2), "class suit [is] nevertheless . . . convenient and 14 desirable," Amchem, 521 U.S. at 615 (internal quotation marks and 15 citation omitted). 16 To qualify for class treatment, then, the proposed 17 class must meet the requirement of predominance -- that is, that 18 "the questions of law or fact common to the members of the class 19 predominate over any questions affecting only individual 20 members" -- and the requirement of superiority -- that is, "that 9 Of course, if the district court certifies the class after a determination that either or both of the plaintiffs are adequate class representatives, it can always alter, or indeed revoke, class certification at any time before final judgment is entered should a change in circumstances render the plaintiffs inadequate class representatives. Fed. R. Civ. P. 23(c)(1); see also Visa Check, 280 F.3d at 141 (recognizing a district court's ability to modify a class certification order or decertify a class if it becomes necessary to do so). 26 1 a class action is superior to other available methods for the 2 fair and efficient adjudication of the controversy." Fed. R. 3 Civ. P. 23(b)(3).10 The predominance requirement on which we 4 focus -- together with the requirement of "superiority," which 5 has not been separately challenged on this appeal -- ensures that 6 the class will be certified only when it would "achieve economies 7 of time, effort, and expense, and promote . . . uniformity of 8 decision as to persons similarly situated, without sacrificing 9 procedural fairness or bringing about other undesirable results." 10 Amchem, 521 U.S. at 615 (citation and internal quotation marks 11 omitted). 10 Rule 23(b)(3) provides: An action may be maintained as a class action if the prerequisites of [Rule 23](a) are satisfied, and in addition: . . . (3) the court finds that the questions of law or fact common to the members of the class predominate over any questions affecting only individual members, and that a class action is superior to other available methods for the fair and efficient adjudication of the controversy. The matters pertinent to the findings include: (A) the interest of members of the class in individually controlling the prosecution or defense of separate actions; (B) the extent and nature of any litigation concerning the controversy already commenced by or against members of the class; (C) the desirability or undesirability of concentrating the litigation of the claims in the particular forum; (D) the difficulties likely to be encountered in the management of a class action. Fed. R. Civ. P. 23(b)(3). 27 1 The district court began with the notion that "[i]n 2 order to prevail on their price-fixing claims, plaintiffs must 3 demonstrate: (1) a violation of the antitrust laws by defendants; 4 (2) some injury to plaintiffs' business or property as a result 5 of the violation (causation or impact) and (3) the amount of 6 damages sustained by the plaintiffs." District Court Opinion, 7 2006 WL 1026653, at *5, 2006 U.S. Dist. LEXIS 21076, at *16 8 (quoting In re Indus. Diamonds Antitrust Litig., 167 F.R.D. 374, 9 381 (S.D.N.Y. 1996)) (citation and internal quotation marks 10 omitted). We have stated the point somewhat differently: "[T]he 11 three required elements of an antitrust claim [are] (1) a 12 violation of antitrust law; (2) injury and causation; and (3) 13 damages . . . ." Visa Check, 280 F.3d at 136. 14 There is no controversy here regarding the first Visa 15 Check element. Horizontal price-fixing agreements are per se 16 violations of the Sherman Act. See generally United States v. 17 Socony-Vacuum Oil Co., 310 U.S. 150, 210-28 (1940). Cordes and 18 Creditors Trust's allegations of the existence of a price-fixing 19 conspiracy are susceptible to common proof and, if proven true, 20 would satisfy the first element of the plaintiffs' antitrust 21 cause of action. 22 The second element -- whether termed "antitrust 23 injury," "causation or impact," or "injury and causation" -- is 24 more complicated. 25 1. Does Antitrust Injury Pose Common or Individual 26 Questions? Section 4 of the Clayton Act provides that "any 28 1 person who shall be injured in his business or property by reason 2 of anything forbidden in the antitrust laws may sue 3 therefor . . . ." 15 U.S.C. § 15(a). This has been read to 4 require that to prevail in an antitrust suit, a plaintiff "must 5 prove [that it has suffered] antitrust injury, which is to say 6 injury of the type the antitrust laws were intended to prevent 7 and that flows from that which makes defendants' acts unlawful." 8 Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477, 489 9 (1977) (emphasis added). 10 In Brunswick, the defendant, Brunswick, had purchased a 11 nearly bankrupt bowling alley, thus keeping the purchased 12 business alive. The plaintiffs, Pueblo Bowl-O-Mat and other 13 rival bowling alleys, sought to challenge the purchase because it 14 kept their competitor in business. See id. at 480-81. 15 Plaintiffs doubtless suffered real harm -- they had lost the 16 "income that would have accrued had the acquired centers gone 17 bankrupt," id. at 487, but this was insufficient to meet the 18 antitrust injury requirement. The damages recovered in such a 19 case would have given Pueblo Bowl-O-Mat and the other plaintiffs 20 the profits they would have realized had 21 competition been reduced. The antitrust 22 laws, however, were enacted for "the 23 protection of competition not competitors," 24 Brown Shoe Co. v. United States, 370 U.S. 25 [294, 320 (1962)]. It is inimical to the 26 purposes of these laws to award damages for 27 the type of injury claimed here. 28 Brunswick, 429 U.S. at 488. 29 1 Similarly, in Atlantic Richfield Co. v. USA Petroleum 2 Co., 495 U.S. 328 (1990), independent gas stations could not 3 recover from a gasoline producer that had allegedly fixed the 4 maximum resale prices its affiliated gas stations could charge. 5 The lower prices that resulted from the scheme had pro- 6 competitive, not anti-competitive, effects in the markets in 7 which the plaintiffs were engaged. See id. at 335-41 (reasoning 8 that non-predatory price competition is pro-competitive with 9 respect to other suppliers of the same goods or services); cf. 10 id. at 345 (noting that even though competitors could not show 11 that they suffered antitrust injury because of their rival's 12 vertical price-fixing scheme, "consumers and the manufacturers' 13 own dealers may bring suit"). 14 Rule 23(b)(3) requires that the district court 15 determine what "questions of law or fact [are] common to the 16 members of the class." Fed. R. Civ. P. 23(b)(3) (emphasis 17 added). Insofar as Rule 23(b)(3) is concerned, and in light of 18 Brunswick and Atlantic Richfield, we think that the second 19 element of an antitrust cause of action -- "antitrust injury" -- 20 poses two distinct questions. One is the familiar factual 21 question whether the plaintiff has indeed suffered harm, or 22 "injury-in-fact." The other is the legal question whether any 23 such injury is "injury of the type the antitrust laws were 24 intended to prevent and that flows from that which makes 25 defendants' acts unlawful." Brunswick, 429 U.S. at 489. 30 1 Rather than relying on the distinction between the 2 legal and factual questions raised by the antitrust injury 3 element of an antitrust suit, the district court focused on the 4 distinction between antitrust injury and damages. See Visa 5 Check, 280 F.3d at 136. It accurately noted that the plaintiffs' 6 expert, Bamberger, was asked to opine as to damages and the 7 defendants' expert, Willig, as to injury. Compare Bamberger 8 Decl. ¶ 3 (stating that the plaintiffs' expert was "asked . . . 9 to determine whether it would be possible to measure damages 10 suffered by members of [the] proposed class . . . by the use of a 11 formula common to all class members" (emphasis added)), with 12 Willig Report at 2 (stating that the defendants' expert was 13 "asked . . . to consider whether the plaintiffs' allegations that 14 members of the proposed issuer class have been injured by the 15 alleged price-fixing conspiracy are capable of being proved on a 16 common basis for the purported class members" (emphasis added)). 17 Reasoning that the plaintiffs' and defendants' experts "have been 18 asked . . . meaningfully different questions," the district court 19 accepted the testimony of the defendants' expert, Willig, because 20 only he had "addresse[d] the question before the Court -- which 21 is whether antitrust injury . . . can be proved by evidence 22 common to the class." District Court Opinion, 2006 WL 1026653, 23 at *8, 2006 U.S. Dist. LEXIS 21076, at *27-28. The district 24 court therefore concluded that the antitrust injury element of 25 Cordes and Creditors Trust's lawsuit presents questions 26 individual to each class member. 31 1 We disagree. Although the questions asked of the 2 experts differed precisely as described by the district court, we 3 think their answers were directed to the same question: whether 4 injury-in-fact is susceptible to common proof in this case. 5 Neither expert offered any views on the legal question of whether 6 common evidence could prove that the injury allegedly suffered 7 was "of the type the antitrust laws were intended to prevent and 8 that flows from that which makes defendants' acts unlawful." 9 Brunswick, 429 U.S. at 489. 10 The defendants' expert, Willig, was of the view 11 that any determination of whether a 12 particular member of the purported issuer 13 class has been injured by the clustering or 14 alleged "standardization" of gross spreads 15 would require an individualized factual 16 analysis about whether, absent such alleged 17 standardization, the issuer would have paid a 18 gross spread of less than 7% for IPO net 19 proceeds, the same or equal to the proceeds 20 the issuer actually received as a result of 21 its offering. 22 Willig Report at 2. And the plaintiffs' expert, Bamberger, 23 opined that "the difference between each proposed class member's 24 but-for fee and the actual fee it was charged measures damages." 25 Bamberger Decl. ¶ 24. Each expert thus evaluated whether it 26 would be possible to measure the but-for fee -- that is, the fee 27 an issuer would have paid absent the conspiracy -- by common 28 proof. The plaintiffs' expert thought that the court could use a 29 single formula to establish the supracompetitive prices a 30 plaintiff had paid; the defendants' expert thought no such 31 formula could be constructed. 32 1 This disagreement goes to a single question -- whether 2 injury-in-fact can be proved by common evidence. Although the 3 plaintiffs' expert would use a single formula while the 4 defendants' expert would conduct many individualized inquiries, 5 both experts would determine injury-in-fact by calculating the 6 but-for fee and comparing it to the fee paid. If the fee paid 7 were higher than the but-for fee, then the plaintiff suffered an 8 injury-in-fact. In this case, the extent of the difference 9 between the but-for fee and the actual fee paid is relevant to 10 the question of damages, but it is from a comparison between the 11 two that the court would be asked to decide the question of 12 injury-in-fact.11 If the plaintiffs' single formula can be 13 employed to make a valid comparison between the but-for fee and 14 the actual fee paid, then it seems to us that the injury-in-fact 15 question is common to the class. Otherwise, it poses individual 16 ones. The district court did not determine which expert is 17 correct. We leave this question for it to resolve on remand. 18 Notwithstanding the existing open question as to 19 injury-in-fact, we think that the legal question raised by the 20 antitrust injury element of Cordes's and Creditors Trust's case 11 It is conceivable that one could create a common formula for determining whether the but-for fee was higher or lower than the fee paid, but would need to conduct individualized inquiries to determine the extent of the spread between the two fees. But the experts before us would each use one approach (the plaintiffs' expert a common one and the defendants' expert an individualized one) to answer both the injury-in-fact question -- that is, whether a plaintiff was harmed -- and the damages question -- that is, by how much a plaintiff was harmed. 33 1 is common to the class. There is only one type of injury alleged 2 in the Complaint -- overcharges paid to a horizontal price-fixing 3 conspiracy. Because each class member allegedly suffered the 4 same type of injury, the legal question of whether such an injury 5 is "of the type the antitrust laws were intended to prevent and 6 that flows from that which makes defendants' acts unlawful," 7 Brunswick, 429 U.S. at 489, is a common one.12 8 2. Do Common Questions Predominate? The predominance 9 requirement is met if the plaintiff can "establish that the 10 issues in the class action that are subject to generalized proof, 11 and thus applicable to the class as a whole, . . . predominate 12 over those issues that are subject only to individualized proof." 13 Visa Check, 280 F.3d at 136 (internal quotation marks and 14 citation omitted; ellipsis in original). It is "a test readily 15 met in certain cases alleging . . . violations of the antitrust 12 The issue is not only common, but appears to be readily resolved. The defendants were asked at oral argument: "[I]f there is injury, assuming the conspiracy, . . . it is antitrust injury. Isn't that right?" The defendants responded, "It's of the type that's antitrust injury. That's correct, your Honor." Oral Arg. Tr. at 19:16-20 (Mar. 19, 2007). As far as we can tell, the concession was warranted. See New York v. Hendrickson Bros., Inc., 840 F.2d 1065, 1079 (2d Cir. 1988) (recognizing that "[i]n general, the person who has purchased directly from those who have fixed prices at an artificially high level in violation of the antitrust laws is deemed to have suffered . . . antitrust injury"). Of course, not every injury caused by a per se violation of the antitrust laws is antitrust injury and even a plaintiff alleging a per se violation must demonstrate that his injury amounts to antitrust injury. See Atl. Richfield, 495 U.S. at 341 (rejecting "respondent's suggestion that no antitrust injury need be shown where a per se violation is involved"). But the defendants have never contended that overcharges paid to a horizontal price-fixing cartel are not antitrust injuries; nor would any such contention be persuasive in this case. 34 1 laws." Amchem, 521 U.S. at 625. In deciding whether it is met, 2 the district court must make a "definitive assessment of Rule 23 3 requirements, notwithstanding their overlap with merits issues." 4 IPO Securities, 471 F.3d at 41.13 5 As we have explained, the legal question raised by the 6 antitrust injury element here is common to the class. If the 7 factual question -- injury-in-fact -- is also common, then the 8 predominance requirement of Rule 23(b)(3) is likely met. 9 Even if the district court concludes that the issue of 10 injury-in-fact presents individual questions, however, it does 11 not necessarily follow that they predominate over common ones and 12 that class action treatment is therefore unwarranted. To be 13 sure, the defendants concede that any plaintiff who has suffered 14 the type of injury alleged in the Complaint has suffered 15 antitrust injury. Oral Arg. Tr. at 19:16-20 (Mar. 19, 2007). 16 But "a concession does not eliminate a common issue from the 17 predominance calculus." In re Nassau County Strip Search Cases, 18 461 F.3d 219, 227 (2d Cir. 2006) ("Nassau County"); see id. at 19 227-29. 20 These questions, at least, are common: (1) all factual 21 and legal questions that must be resolved to determine whether 22 the defendants violated Section 1 of the Sherman Act; and (2) all 23 factual and legal questions that must be resolved to decide 13 "[T]he determination as to a Rule 23 requirement is made only for purposes of class certification and is not binding on the trier of facts, even if that trier is the class certification judge." IPO Securities, 471 F.3d at 41. 35 1 whether, assuming a plaintiff paid supracompetitive prices, that 2 payment was caused by the defendants' antitrust violation and 3 constitutes the kind of injury with which the antitrust laws are 4 concerned. The question of injury-in-fact, which in this case is 5 equivalent to whether a particular plaintiff would have paid more 6 in the but-for world,14 may not be common. We do not discount 7 the possibility that the individual questions raised by injury- 8 in-fact might then predominate over the several common questions. 9 Perhaps a trial would focus largely on what particular plaintiffs 10 would have paid in the but-for world. But that is not 11 necessarily so. Under these circumstances, the predominance 12 question, too, is best left to the sound discretion of the 13 district court on remand. 14 3. Certification as to Particular Issues. Subsequent 15 to the district court's denial of class certification and our 16 grant of the motion to certify this appeal, we issued our opinion 17 in Nassau County. The plaintiffs in that case sought 18 certification of a class of individuals who were subject to the 19 Nassau County Correctional Center's allegedly unconstitutional 20 blanket strip-search policy. Nassau County, 461 F.3d at 222. 21 Recognizing that individual questions concerning damages and 22 defenses might defeat certification of the entire case, the 23 plaintiffs also sought certification as to liability pursuant to 24 Rule 23(c)(4)(A). Id. at 223; see also Fed. R. Civ. P. 14 The related damages question is: if so, how much more. 36 1 23(c)(4)(A) (providing that "[w]hen appropriate . . . an action 2 may be brought or maintained as a class action with respect to 3 particular issues"). The Fifth Circuit had held that Rule 4 23(c)(4)(A) certification "as to a specific issue" is available 5 only if common questions predominate in the claim as a whole. 6 Nassau County, 461 F.3d at 226 (citing Castano v. Am. Tobacco 7 Co., 84 F.3d 734, 745 n.21 (5th Cir. 1996)). We adopted, 8 instead, the Ninth Circuit's view that Rule 23(c)(4)(A) is 9 available to certify particular issues "regardless of whether the 10 claim as a whole satisfies Rule 23(b)(3)'s predominance 11 requirement." Id. at 227; see Valentino v. Carter-Wallace, Inc., 12 97 F.3d 1227, 1234 (9th Cir. 1996) (deciding that "[e]ven if the 13 common questions do not predominate over the individual questions 14 so that class certification of the entire action is warranted, 15 Rule 23 authorizes the district court in appropriate cases to 16 isolate the common issues under Rule 23(c)(4)(A) and proceed with 17 class treatment of these particular issues"). 18 On remand, if the district court concludes that the 19 action ought not to be certified in its entirety because it does 20 not meet the predominance requirement of Rule 23(b)(3), Cordes 21 and Creditors Trust may seek certification of a class to litigate 22 the first element of their antitrust claim -- the existence of a 23 Sherman Act violation -- pursuant to Rule 23(c)(4)(A) and Nassau 24 County.15 We do not, of course, express a view as to whether it 15 We also leave to the district court to determine whether the issue of damages -- which here may be resolved using the same 37 1 would lie within the district court's sound discretion to certify 2 such a class under either Rule 23(b)(3) or Rule 23(c)(4)(A). 3 CONCLUSION 4 For the foregoing reasons, the order is vacated and the 5 case remanded to the district court for further proceedings. evidence as that presented for injury-in-fact -- is a common question or requires individual determinations, and whether class certification is appropriate on the question of damages. 38