United States Court of Appeals
Fifth Circuit
F I L E D
Revised August 4, 2003
July 16, 2003
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
Charles R. Fulbruge III
Clerk
No. 02-40656
BELL ATLANTIC CORPORATION; ET AL,
Plaintiffs,
ROCHELLE COMMUNICATIONS INC;
ADROIT MEDICAL SYSTEMS INC,
a Tennessee Corporation,
Plaintiffs-Appellants,
versus
AT&T CORPORATION; ET AL,
Defendants,
AT&T CORPORATION,
Defendant.
Appeal from the United States District Court
for the Eastern District of Texas
Before GARWOOD, SMITH and BARKSDALE, Circuit Judges.
GARWOOD, Circuit Judge:
In this Rule 23(f) interlocutory appeal, the
plaintiffs–appellants, Rochelle Communications, Inc. (Rochelle) and
Adroit Medical Systems, Inc. (Adroit), challenge the district
court's denial of their motion to certify two classes of plaintiffs
allegedly injured by the refusal of the defendant, AT&T Corp.
(AT&T), to permit the passage of caller identification (caller ID)
data across its long-distance telephone network. Because we
conclude that the appellants cannot satisfy the predominance
requirement of Rule 23(b), we affirm.
Facts and Proceedings Below
In 1996, Bell Atlantic Corp. (Bell) brought suit under section
4 of the Clayton Act1 against AT&T and its subsidiary Lucent
Technologies, Inc., seeking treble damages and injunctive relief
for alleged violations of the antitrust laws. According to Bell,
AT&T attempted to monopolize the market for caller-ID service in
violation of section 2 of the Sherman Act2 when, for approximately
four years beginning in 1992, AT&T blocked the free passage of
caller-ID data over its long-distance network. Shortly after Bell
brought suit, the named class plaintiffs, Rochelle and Adroit,
intervened and moved to certify two classes of plaintiffs who
allegedly suffered antitrust injury because of AT&T's conduct
during the class period, a period running between March 19, 1992,
1
15 U.S.C. § 15.
2
15 U.S.C. § 2.
2
and November 30, 1995.3
A. Caller ID
The decision to certify a class may often necessitate a highly
factual inquiry, see Alabama v. Blue Bird Body Co., Inc., 573 F.2d
309, 316 (5th Cir. 1978), and the propriety of class certification
here hinges in part upon evidence introduced below concerning the
nature and operation of caller ID.
The record reflects that caller ID is a service marketed and
provided by local telephone companies that permits the display, on
a device either attached to or incorporated into the telephone of
the recipient of a call, of the telephone number, and occasionally
the name, of the calling party. The service operates by
transmitting data containing, at a minimum, a calling party's
telephone number (CPN) over the telephone networks until it
ultimately reaches, and is displayed on, the call recipient's
caller-ID display unit.4
3
March 19, 1992, represents that date on which AT&T began
blocking the free passage of caller ID data over its long-
distance telephone network. AT&T ultimately ceased blocking the
free transmission of caller ID data on December 1, 1995, the
effective date of the Federal Communications Commission's (FCC)
regulation ordering all long-distance carriers to pass such data
over their networks free of charge. See Miscellaneous Rules
Relating to Common Carriers, 60 Fed. Reg. 29490, 29491 (June 5,
1995) (codified at 47 C.F.R. § 64.1604 (2002)).
4
For at least the early portion of the class period,
caller ID was advertised primarily as a local service. The
parties do not dispute this fact, nor do they allege that caller
ID was ever advertised, during the class period and on a class-
wide basis, as providing any utility with respect to long-
3
There is no dispute that access to caller ID information may
be of benefit to a number of businesses and may, for certain
businesses, produce substantial efficiency gains and accompanying
cost savings. Businesses, for example, may use caller ID data to
return calls received after hours where the caller left an
incomplete message or no message at all. And because the display
units also are sometimes able to record information for later
recall, the caller ID display units may also be used to track call
volume. In addition, businesses that maintain reverse-charge,
long-distance telephone numbers benefit from caller ID by using the
calling party number to screen out unwanted calls, thereby reducing
long-distance calling expenses.
At a more sophisticated level, the caller-ID data transmitted
to a call recipient may be linked, through the use of computer
telephony integration (CTI) equipment and software, to a business's
computerized database. CTI equipment thus allows a business to use
a caller ID signal to rapidly retrieve information related to a
particular caller, permitting a business, for example, to route a
call to a specific employee, or to provide faster and more
efficient service to a customer, resulting in reduced telephone
bills and labor costs, and in some circumstances, increased
distance calls, or that the class members purchased caller ID
service from their local telephone companies with the expectation
that caller ID service would be available on long-distance calls.
4
customer goodwill.5
A number of technological prerequisites, however, must be met
before a call recipient can receive a caller ID signal. Chief
among these is the need for each portion of the telephone network
that the caller ID signal must traverse to be connected to a
telephone network known as the Signaling System 7 (SS7) network.6
Thus, for any given call to carry a caller ID signal to a call
recipient over the AT&T long-distance network, the local telephone
exchange networks of both the caller and call recipient must have
SS7 capability, and the local telephone exchange networks of both
caller and call recipient must be connected to AT&T's long-distance
5
The FCC, for example, in 1994 concluded:
“Service providers who respond to telephone orders,
such as stock brokers or parts and equipment dealers,
could use the calling party's number to direct the call
immediately to the appropriate department for service.
Banks could program data sources to have customer
profile information available as a call is answered.
With interstate delivery of calling party number, calls
to national service centers could be routed
automatically to local service centers closest to the
calling party. Consumers making orders could have
their name, address and billing information verified
instantaneously. Indeed, a significant number and kind
of customized national services can develop as a result
of instant recognition of the calling party.” In re
Rules and Policies Regarding Calling Number
Identification Service—Caller ID, 9 F.C.C. Rcd. 1764
(1994) (hereinafter Rules and Policies).
6
“The term 'Signaling System 7' (SS7) refers to a carrier
to carrier out-of-band signaling network used for call routing,
billing and management.” 47 C.F.R. § 64.1600 (2002). The
district court found, and all the parties concede, that full SS7
connectivity is a prerequisite for a call to carry CPN from the
caller to the call recipient.
5
SS7 network.7
Even where there was complete SS7 connectivity, however, a
number of additional factors, other than AT&T's conduct, may have
prevented the unimpeded passage of a caller ID signal during the
class period. Some states, concerned with the implications of
caller ID for privacy rights and existing wiretapping legislation,
imposed regulations that blocked the transmission of CPN on all
calls, both local and long-distance. In re Rules and Policies
Regarding Calling Number Identification Service—Caller ID, 9 F.C.C.
Rcd. 1764 (1994). Thus AT&T alleged, and the plaintiffs do not
dispute, that Texas prohibited the transmittal of CPN for a
substantial portion of the class period, while California did not
permit the passage of CPN at any time during the class period.
Pennsylvania did not amend its statutes to permit caller ID service
until December 1993. See 66 PA. CONS. STAT. § 2906(a) (providing for
caller ID service and overruling Barasch v. Pennsylvania Public
Utilities Commission, 576 A.2d 79 (1990), which held that caller ID
violated state wiretap laws). Other states required, and still
require, that telephone companies provide consumers with the option
of blocking the display of their telephone numbers. See, e.g.,
7
“Because transmission of the calling party number requires
SS7 technology, technical feasibility exists wherever SS7
technology is used.” Rules and Policies, supra note 5.
According to the record, only 65% of business-access lines were
fully SS7 connected as of July 1993; only 72% of local networks
had achieved full SS7 connectivity by the end of the class period
in 1995.
6
CAL. PUB. UTIL. CODE § 2893(a) (West 2003) (requiring, with certain
exceptions, that “every telephone call identification service . .
. shall allow a caller to withhold display of the caller's
telephone number”); 66 PA. CONS. STAT. § 2906(a) (same). Finally,
beyond state regulations and SS7 connectivity, other technological
barriers may have prevented the transmission of caller ID data
during the class period. Thus, the record indicates that CPN does
not accompany a call where the call is placed either from a pay
phone or from a cellular phone. In addition, caller ID service may
be unavailable where either the calling party or the call recipient
employs a private branch exchange (PBX) telephone system, a type of
telephone system widely used by businesses during the class period.
Assuming, however, that none of these various barriers would
have impeded the receipt of caller ID, there is no question but
that caller ID was unavailable on certain calls during the class
period because of AT&T's decision to block the free transmission of
caller ID signals over its long-distance network. Moreover, for
purposes of deciding class certification, we shall simply assume
without deciding, as did the district court, that such conduct
amounted to an attempt to monopolize the market for caller ID
service in violation of the Sherman Act. The only question
remaining before this court, therefore, is the propriety of the
district court's denial of class certification.
B. Class Definitions
7
The named plaintiffs, Rochelle and Adroit, initially sought to
certify two classes of plaintiffs who they maintained suffered
antitrust injury as a result of AT&T's blocking of caller ID data:
(1) a reverse charge class comprising business and organizations
who purchased AT&T's reverse-billed (“1-800") long-distance
service; and (2) a call recipient class comprising businesses and
organizations that were actual or potential purchasers of caller-ID
service for long-distance calls.8
After a hearing during which the district court received
evidence concerning the operation of caller ID service and the
nature of the antitrust injury alleged, the plaintiffs moved to
redefine the putative classes.9 The plaintiffs' amended motion for
class certification, the denial of which is before us, removed
certain problematic aspects of the initial definitions, and defined
8
The plaintiffs’ first motion defined the reverse charge
class as
“a class of all businesses and organizations that, at
any time between March 19, 1992 and November 30, 1995,
have been actual purchasers from AT&T of reverse-billed
(typically “800") switched-access, long-distance
service, and who have been actual or potential
purchasers of Caller-ID service for the processing of
incoming switched-access long distance telephone
calls.”
The call recipient class was defined as
“a class of all businesses and organizations that, at
any time between March 19, 1992 and November 30, 1995,
have been actual or potential purchasers of Caller-ID
service for the processing of incoming switched-access
long distance telephone calls.”
9
Between the plaintiffs' initial motion to certify the two
classes and the subsequent hearing on that motion, Bell Atlantic
settled its claim against AT&T.
8
the reverse charge class as
“All businesses and organizations that, at any time
between March 19, 1992 and November 30, 1995, were actual
purchasers from AT&T of reverse-billed (typically “800")
switched-access, long distance service, and were actual
purchasers of Caller-ID service for the processing of
incoming switched-access telephone calls.”
The call recipient class, whose members who were not necessarily
all AT&T subscribers, was defined as
“All business and organizations that, at any time between
March 19, 1992 and November 30, 1995 (a) were actual
purchasers of Caller-ID service for the processing of
incoming switched-access telephone calls; and (b)
received at least one AT&T long-distance call carried
over the SS7 signaling network each month during which
such purchaser was a subscriber to the switched-access
Caller-ID service.”
In addition to defining the proposed classes, the plaintiffs'
motion for certification also included a formula for calculating
the amount of damages to which the plaintiffs claimed the class
members were entitled. Specifically, the plaintiffs proposed to
calculate damages for individual class members in both classes
based upon the national “average number of seconds saved per call”
[both long-distance and local] through the use of caller ID, an
average wage rate for the typical employee answering and processing
telephone calls, and the total number of AT&T calls to class
members made during the class period.10 For the reverse charge
10
With respect to the reverse charge class, the plaintiffs'
expert presented the following proposal for measuring damages:
“Measure the number of AT&T switched access 800 calls
that were completed to class members over the damages
period. This amount, multiplied by the average net
cost savings per call that is typical for users of
9
class, the plaintiffs also proposed to adjust the damages calculus,
using AT&T's billing records, to include recovery of any long-
distance charges assessed against class members that might have
otherwise been avoided through the use of caller ID.
AT&T opposed class certification arguing, inter alia, that the
plaintiffs had failed to carry their burden of establishing
predominance and numerosity. Specifically, AT&T contended that the
plaintiffs' motion for certification failed the predominance bar on
two grounds. First, AT&T maintained that the plaintiffs could not
prove antitrust injury with regard to each class member absent an
individualized inquiry into issues of causation. Second, even
assuming the plaintiffs could establish liability on a classwide
basis, AT&T argued that the plaintiffs still could not clear the
predominance hurdle since the variegated nature of the class member
businesses and organizations precluded a formulaic calculation of
damages.
The district court, after holding a second hearing on the
long-distance Caller-ID, results in the net amount of
the potential savings that class members would have
realized if not for the alleged actions of AT&T.”
With respect to the damages owed members of the call recipient
class, the plaintiffs' expert testified that
“it is only necessary to determine the number of
inbound AT&T long-distance calls to the class during
the damages period and multiply that by the average net
cost savings per call that is typical for users of
long-distance Caller-ID. That product reflects the net
amount of the potential savings that class members
would have realized if not for the alleged actions of
AT&T.”
10
issue, denied class certification. Seizing on the first of AT&T's
two above objections and relying on Alabama v. Blue Bird Body Co.,
Inc., 573 F.2d 309 (5th Cir. 1978), the district court found that
difficulties in establishing that AT&T had actually caused an
antitrust injury to any given class member defeated predominance.11
Following the district court's ruling, the plaintiffs
petitioned for, and were granted leave to file this interlocutory
appeal under Rule 23(f). Because we also conclude that the
plaintiffs clearly failed to surmount the predominance hurdle of
Rule 23(b)(3), albeit on different grounds from those relied upon
by the district court, we affirm.
Discussion
A. Standard of Review
11
With respect to the reverse charge class, the court
concluded that the plaintiffs could not demonstrate a viable
method of establishing, through proof common to the class, that
any individual class member was both connected to the SS7 network
and received a telephone call from a calling party also connected
to the SS7 network. Absent such proof, the court concluded that
the plaintiffs could not establish that, but for AT&T's refusal
to transmit CPN over its network, any class member would have
received caller ID data with any given call.
The district court reached a similar conclusion with respect
to the call recipient class. According to the district court,
with the exception of records covering only one year of the class
period, no records were available from which the class members
could determine the source of any given call during the class
period. Absent records from which a call recipient could
determine that he had been called on a certain date from a
certain number, the court concluded that the plaintiffs could not
identify the origin of a specific call, let alone whether that
call originated from an area that was connected to the SS7
network. Absent that information, no given class member could
establish the requisite element of causation.
11
We review the district court’s decision to certify a class for
an abuse of discretion, see McManus v. Fleetwood Enterprises, Inc.,
320 F.3d 545, 548 (5th Cir. 2003), and note that the district court
must “conduct a ‘rigorous analysis of the Rule 23 prerequisites’
before certifying a class.” O'Sullivan v. Countrywide Home Loans,
Inc., 319 F.3d 732, 738 (5th Cir. 2003). We also note that in
those cases where the plaintiff seeks to certify a class under Rule
23(b)(3), the Rules “invite[] a close look at the case before it is
accepted as a class action.” Amchem Products, Inc. v. Windsor, 117
S.Ct. 2231, 2246 (1997) (quoting Kaplan, Continuing Work of the
Civil Committee: 1966 Amendments of the Federal Rules of Criminal
Procedure (I), 81 HARV. L. REV. 356, 375 (1967)). Finally, we
stress that it is the party seeking certification who bears the
burden of establishing that the requirements of Rule 23 have been
met. O'Sullivan, 319 F.3d at 737–738.
B. Class Certification
There are no “hard and fast rules . . . regarding the
suitability of a particular type of antitrust case for class action
treatment.” Alabama v. Blue Bird Body Co., Inc., 573 F.2d 309, 316
(5th Cir. 1978). Rather, “[t]he unique facts of each case will
generally be the determining factor governing certification.” Id.
Under Rule 23(a), a plaintiff seeking to certify a class must
satisfy four threshold requirements: “(1) numerosity (a 'class [so
large] that joinder of all members is impracticable'); (2)
12
commonality ('questions of law or fact common to the class'); (3)
typicality (named parties' claims or defenses 'are typical . . . of
the class'); and (4) adequacy of representation (representatives
'will fairly and adequately protect the interests of the class').”
Amchem Products, 117 S.Ct. at 2245.
Beyond these four prerequisites of Rule 23(a), Rule 23(b)(3)
demands of a party seeking class certification yet two further
requirements, namely the burden of demonstrating both (1) that
questions common to the class members predominate over questions
affecting only individual members, and (2) that class resolution is
superior to alternative methods for adjudication of the
controversy. Id. at 2246. By inquiring into predominance, Rule
23(b)(3) thus tests “whether the proposed classes are sufficiently
cohesive to warrant adjudication by representation.” Id. at 2249.
The standard for certification imposed by Rule 23(b)(3) is also
more demanding than the commonality requirement of Rule 23(a), and
as such, mandates caution, particularly where “individual stakes
are high and disparities among class members great.” Id. at 2250;
see also FED. R. CIV. P. 23 advisory committee's note (“In the
situations to which this subdivision [Rule 23(b)(3)] relates,
class-action treatment is not as clearly called for as in those
described above, but it may nevertheless be convenient and
desirable depending upon the particular facts.”) (emphasis added).
Determining whether the plaintiffs can clear the predominance
13
hurdle set by Rule 23(b)(3) also requires us to consider “how a
trial on the merits would be conducted if a class were certified.”
Sandwich Chef of Texas, Inc. v. Reliance Nat'l Ins. Indem. Co., 319
F.3d 205, 218 (5th Cir. 2003); Castano v. Am. Tobacco Co., 84 F.3d
734, 740 (5th Cir. 1996). This, in turn, “entails identifying the
substantive issues that will control the outcome, assessing which
issues will predominate, and then determining whether the issues
are common to the class,” a process that ultimately “prevents the
class from degenerating into a series of individual trials.”
O'Sullivan, 319 F.3d at 738.
C. The Antitrust Violation
The offense of attempted monopolization in violation of
section 2 of the Sherman Act has three elements, namely: (1) that
the defendant engaged in predatory or exclusionary conduct, (2)
that the defendant possessed the specific intent to monopolize, and
(3) that there was a dangerous probability that the defendant would
succeed in his attempt. Taylor Pub. Co. v. Jostens, Inc., 216 F.3d
465, 474 (5th Cir. 2000).
Proof of these elements will necessarily be identical for the
members of both proposed classes, and under the facts of the
instant case, these issues, therefore, create no bar to class
certification. Moreover, as indicated above, we assume, for
purposes of addressing the issue of class certification, that
AT&T's alleged conduct constituted a violation of section 2.
14
The plaintiffs' task, however, is not limited to establishing
the elements of a completed offense under section 2 of the Sherman
Act. Rather, to establish civil liability under the Clayton Act,
a plaintiff must also establish that he has been injured in his
“business or property by reason of anything forbidden in the
antitrust laws.” 15 U.S.C. § 15. Thus, where a plaintiff seeks a
private civil remedy and treble damages for a violation of section
2, he must not only make out a violation of the antitrust laws, but
also (1) establish that it was the defendant's conduct that
actually caused injury to his business or property,12 and (2)
provide “some indication of the amount of damage.” Blue Bird Body
Co., 573 F.2d at 317.
Establishing causation, or “fact of damage”, requires the
plaintiff to demonstrate a causal connection between the specific
antitrust violation at issue and an injury to the business or
property of the antitrust plaintiff. Id. This requirement is in
no way lessened by reason of being raised in the context of a class
action. Rather, this court has held that the issue of fact of
damage “is a question unique to each particular plaintiff and one
that must be proved with certainty.” Id. at 327. Accordingly, we
have repeatedly held that where fact of damage cannot be
established for every class member through proof common to the
12
This requirement of causation is often referred to as
“impact” or “fact of damage.” Blue Bird Body Co., 573 F.2d at
317 n.18.
15
class, the need to establish antitrust liability for individual
class members defeats Rule 23(b)(3) predominance. See Nichols v.
Mobile Board of Realtors, Inc., 675 F.2d 671 (5th Cir. Unit B
1982); Alabama v. Blue Bird Body Co., 573 F.2d 309 (5th Cir. 1978);
Schumate & Co. v. National Ass'n of Secs. Dealers, 509 F.2d 147
(5th Cir. 1975).
In addition to establishing fact of damage, section 4 of the
Clayton Act also requires a plaintiff to show “some indication of
the amount of damage” suffered. See Blue Bird Body, 573 F.2d at
317. We have recognized, however, that the nature of an antitrust
claim means that “some plaintiffs can only hypothesize about what
the state of their affairs would have been absent the wrong,” H&B
Equipment Co. v. International Harvester Co., 577 F.2d 239, 246
(5th Cir. 1978), and we have, therefore, declined to hold antitrust
plaintiffs to the same burden of proof of damages as demanded of
plaintiffs in other civil cases. See Eleven Line, Inc. v. North
Texas State Soccer Ass'n, 213 F.3d 198, 206–207 (5th Cir. 2000).
Such leniency notwithstanding, an antitrust plaintiff may not
merely rely on “guesswork or speculation” to establish damages.
Id. Rather, our cases indicate that the plaintiff must provide a
“just and reasonable estimate of the damage based on relevant
data.” Id. (quoting Bigelow v. RKO Radio Pictures, 66 S.Ct. 574,
580 (1946); see, e.g., Kestenbaum v. Falstaff Brewing Co., 575 F.2d
564, 569 (5th Cir. 1978)(“When asserting injury from the imposition
16
of price ceilings, the plaintiff must show when prices would have
been raised, by what amount, and approximately what sales would
have been at the higher price.”). And we have accordingly rejected
claims where the plaintiff's proposed method of calculating damages
failed to reasonably approximate actual economic losses. See
Eleven Line, Inc., 213 F.3d at 208–209; Keener v. Sizzler Family
Steak Houses, 597 F.2d 453, 457 (5th Cir. 1979).
D. Damages and Predominance
Having thus identified fact of damage and the amount of
damages as the two elements of the plaintiffs' claim that would be
at issue at trial were the two proposed classes to be certified, we
now address whether, in light of those elements, individual issues
would predominate at trial.
The district court found that the plaintiffs failed to
demonstrate that they could establish antitrust liability through
common proof, and that individual issues concerning fact of damage,
therefore, defeated predominance. The plaintiffs assign this
finding as error and ask us to reverse. We demur, since even if we
were to conclude that the district court's decision as to fact of
damage was in error, we find that the plaintiffs' motion for
certification nevertheless founders on the issue of the amount of
damages.13
13
AT&T argued, both before this court and before the
district court, that the issue of damages precluded class
certification. Specifically, AT&T maintained that the
17
As discussed above, see Part I(B) supra, the plaintiffs
proposed to calculate damages for the members of both classes
according to a formula that utilized a nationwide average cost of
labor and a nationwide average amount of time that the class
members would have saved per call had caller ID been available on
long-distance calls during the class period. Upon reviewing the
plaintiffs' damages formula was inadequate to determine the class
members' damages, and that the need for individual inquiries into
damages defeated rule 23(b)(3) predominance. The record,
consequently, is fully developed on this point, and, although the
district court did not rule on this basis, we see no bar to
basing our decision on this alternative ground.
AT&T also asserted, both on appeal and before the district
court, that the plaintiffs had failed to allege a cognizable
antitrust injury. See Bell v. Dow Chemical, 847 F.2d 1179, 1183
(5th Cir. 1988) (holding that a “plaintiff's injury must be the
type that the antitrust laws were intended to prevent”). The
plaintiffs' asserted theory of antitrust injury is admittedly a
novel one, consisting of the claim that by stripping calls of
caller ID data, AT&T injured the class members by “degrading” the
value of their caller ID service. Whether such a general,
unquantifiable degradation in the value of a product, unconnected
to any objective market indicators, amounts to an antitrust
injury, however, is unclear. See H&B Equipment Co. v.
International Harvester Co., 577 F.2d 239, 247 (5th Cir. 1978)
(noting that where a plaintiff relies on lost sales to show fact
of damage, the plaintiff will have to “show a specific monetary
loss”); Kestenbaum v. Falstaff Brewing Co., 575 F.2d 564, 569
(5th Cir. 1978) (holding, in the context of a price fixing claim,
that “the plaintiff must show when prices would have been raised,
by what amount, and approximately what sales would have been at
the higher price”); Midwestern Waffles Inc. v. Waffle House Inc.,
734 F.2d 705, 723 n.3 (11th Cir. 1984) (noting that a showing of
injury to business or property within the meaning of the Clayton
Act requires a plaintiff to “be able to demonstrate that it
suffered economic damages which are quantifiable”). And although
AT&T's argument may have some merit, because we hold that the
plaintiffs cannot establish predominance under Rule 23(b)(3), it
is not necessary to pass on that argument for the purposes of
resolving the instant appeal.
18
record, however, we are not convinced that this proposed damages
calculus represents an adequate approximation of any single class
member's damages, let alone a just and reasonable estimate of the
damages of every class member included in the two putative classes.
The record indicates that rather than merely examining lost
time and average labor costs, any adequate estimation of actual
damages suffered would require consideration of the variegated
nature of the businesses included in both the proposed classes,
together with the range of uses, depending on the size and
technological sophistication of any given business, to which caller
ID could be applied. In light of the need for such individualized
inquiries, we cannot conclude that the plaintiffs have established
that the requirements of Rule 23(b)(3) can be satisfied in the
present case.
In Eleven Line, Inc. v. North Texas State Soccer Ass'n, 213
F.3d 198, 208–209 (5th Cir. 2000), we found inadequate an antitrust
plaintiff's damages formula that, based on an average of the rates
of return of similar businesses, failed to account, among other
things, for differences in location and size between the various
businesses used to calculate the average. We also rejected the
argument that to disallow the plaintiff's damages formula would be
to let anticompetitive conduct go unpunished because of “mere
uncertainty in the amount of loss inflicted,” noting instead that
the lenient standard for proving the amount of damages under the
19
antitrust laws should not be stretched so far as to permit recovery
where there was no evidence that competition had actually been
eroded. Id at 209.
The plaintiffs' formula in the case sub judice suffers from
the same flaws that proved fatal to the plaintiff's formula in
Eleven Line, Inc. v. North Texas State Soccer Ass'n. Numerous
factors that would have affected the amount of damages, if any,
suffered by any given class member denied caller ID are not
accounted for in the proposed formula. It is not contested that
certain class member businesses were denied substantial efficiency
gains because of their inability to receive caller ID with every
call. Not every business included in the class, however, would
have achieved the same per call savings, a fact that the plaintiffs
conceded when during the second hearing on class certification,
counsel for the class representatives agreed that while some class
members may have a claim for substantial damages, others “may not
even get a dollar's worth of damages . . . . They may get
nothing.” Indeed, we fail to see, and the plaintiffs have failed
to demonstrate, how for some businesses within each class, the
absence of caller ID on a handful of calls would have had any
effect whatever on those businesses' bottom lines.
As AT&T has repeatedly pointed out, both before this court and
before the district court, it is not difficult to conceive of a
business that would fall within the definition of the call
20
recipient class, but that would nevertheless not have suffered any
economic injury by reason of being denied caller ID on one long-
distance call each month while a caller-ID subscriber during the
class period. Thus AT&T posits the local pizza-delivery business,
that serves a local customer base, and that receives one long-
distance call each month. Such a business falls within the
definition of the reverse charge class, yet it is unlikely that
such a business would ever suffer any actual economic injury by
being denied caller ID data on a single long-distance call each
month. Even assuming that such a pizza-delivery business utilized
a non-local supplier, before concluding that the business suffered
any actual economic injury from the absence of caller ID
information on a call from the supplier, one would have to also
make both of the following dubious and highly speculative
assumptions about each such call, namely that had caller ID been
present, the employee answering the call would have saved some
amount of time and that the employee’s time was otherwise fully
utilized. The conclusion that such a local business would be
actually economically injured from the absence of caller ID
information in such a situation, is therefore equally speculative.14
14
It is also possible to conceive of a member of the reverse
charge class that might not have suffered any actual economic
injury from the denial of caller ID information on one long
distance call each month. Thus, the proposed reverse charge
class would include a local business owner who purchased
switched-access, long-distance service from AT&T, but who only
received calls at that number from an out-of-state relative. It
21
According to the record, most labor and time savings would
only have been realized by those businesses that possessed both CTI
equipment and software that would have enabled them to utilize
caller ID in conjunction with a customer database. The class
definitions, however, do not seek to distinguish between those
businesses that did, and those that did not, possess CTI equipment.
Moreover, even among those businesses that did possess CTI
equipment, the amount of labor savings realized, if any, would have
varied greatly. The record reveals that a wide variety of CTI
equipment, ranging in expense and performance, was available during
the class period, the effectiveness of which apparently depended,
to at least some extent, on the type of database software with
which it was used, a factor that also varied among businesses.
Not only does the plaintiffs' proposed damages formula thus
fail to account for disparities in potential labor savings among
class members due to variations in, or the absence of, CTI
equipment, but it also fails to account for other differences among
class members that would have affected the amount, if any, of
actual economic damages suffered. The damages formula does not
account for those businesses, included in the definitions of both
classes, that employed PBX telephone systems (or received long-
distance calls only or primarily from other business that employed
is difficult to conclude that the denial of caller ID information
on those personal calls would have had any effect whatever on
that business owner’s bottom line.
22
PBX systems) and that, therefore, could never have received caller
ID data regardless of AT&T's conduct. Nor does the formula reflect
that those businesses that served high volumes of repeat customers
stood to gain more from caller ID, both in terms of reduced labor
costs and increased customer satisfaction, than businesses that
served ever-changing customer bases.15 Finally, neither the class
definitions nor the damages formula purports to adjust for the
reduced level of damages that would be due those businesses that
may have served customers primarily residing in states that
required that callers be given the option of blocking caller ID
signals from accompanying their calls.
Where an antitrust plaintiff seeks to project lost profits by
comparing like businesses, it is the plaintiff who must
“demonstrate the reasonable similarity of the business whose
earning experience he would borrow.” Eleven Line, Inc., 213 F.3d
at 208. Similarly, where the injury alleged is measured in terms
of an average of lost labor savings and an average amount of time
saved per phone call, it is the plaintiff who must demonstrate the
reasonable similarity of the businesses used to calculate those
15
This difference arises from the fact that CTI equipment
is most useful where data concerning the caller is already stored
in the call recipient's database. If a business serves repeat
customers, information concerning most of that business's
customers will be stored in that business's database. If,
however, a business deals primarily with one-time customers,
there will be no data stored in a database for most callers.
Caller ID and CTI, therefore, provide less utility for, and its
deprivation less harm to businesses in the latter group.
23
averages. This the plaintiffs have failed to do. The plaintiffs'
proposed damages formula instead attempts to project a measure of
damages, for all the class members, that in no way accounts for the
vast differences among those class members. Any reasonable
approximation of the damages actually suffered by the various class
members would instead require a much tighter inquiry into the
nature of the class member businesses. Given the need for such
individualized damages inquiries, we conclude that individual
issues concerning damages predominate over questions common to the
proposed classes.
We realize that relatively few motions to certify a class fail
because of disparities in the damages suffered by the class
members. Even wide disparity among class members as to the amount
of damages suffered does not necessarily mean that class
certification is inappropriate, see Gold Strike Stamp Co. v.
Christensen, 436 F.2d 791, 798 (10th Cir. 1970),16 and courts,
16
The courts' ability to sever the damages portion of a
class action suit from the liability portion is the principal
reason why variations among class members in the amount of
damages suffered frequently does not defeat predominance. See,
e.g., Bogosian v. Gulf Oil Corp., 561 F.2d 434, 456 (3d Cir.
1977) (noting that “[i]f for any reason the district court were
to conclude that there would be problems involved in proving
damages which would outweigh the advantages of class
certification, it should give appropriate consideration to
certification of a class limited to the determination of
liability.”); 7B CHARLES ALAN WRIGHT, ARTHUR R. MILLER & MARY KAY KANE,
FEDERAL PRACTICE AND PROCEDURE § 1781 (2d ed. 1986) (“[T]he question
of damages can be severed from that of liability and tried on an
individual basis.”). The plaintiffs here, however, never
proposed such a bifurcated trial.
24
therefore, have certified classes even in light of the need for
individualized calculations of damages.17 Class treatment, however,
may not be suitable where the calculation of damages is not
susceptible to a mathematical or formulaic calculation, or where
the formula by which the parties propose to calculate individual
damages is clearly inadequate. Thus the Fourth Circuit held in
Windham v. American Brands, Inc. that where the issue of damages
“does not lend itself to . . . mechanical calculation, but requires
'separate “mini-trial[s]”’ of an overwhelmingly large number of
individual claims,” the need to calculate individual damages will
defeat predominance, 565 F.2d 59, 68 (4th Cir. 1977) (internal
quotations and alterations omitted), a holding reiterated in
Broussard v. Meineke Discount Muffler Shops, Inc., 155 F.3d 331,
342–343 (4th Cir. 1998), in which the Fourth Circuit again noted
that where the claims of the members of a putative class of
17
“[I]t uniformly has been held that differences among the
members [of a class] as to the amount of damages incurred does
not mean that a class action would be inappropriate.” 7B CHARLES
ALAN WRIGHT, ARTHUR R. MILLER & MARY KAY KANE, FEDERAL PRACTICE AND PROCEDURE
§ 1781 (2d ed. 1986) (collecting cases); see Bogosian, 561 F.2d
at 456 (noting that where proving damages is a mechanical task,
“the necessity for calculation of damages on an individual basis
should not preclude class determination when the common issues
which determine liability predominate”); Brown v. Pro Football,
Inc., 146 F.R.D. 1 (D.D.C. 1992) (finding a proposed damages
formula, based on individual contracts entered into by various
plaintiff, adequate to calculate antitrust damages); In re
Polypropylene Carpet Antitrust Litig., 996 F.Supp. 18, (N.D. Ga.
1997) (permitting class certification in an antitrust price-
fixing case where the plaintiffs proposed to use regression
analysis to estimate class members' damages).
25
antitrust plaintiffs are “inherently individualized,” “the need for
individual proof of damages” will bar class certification.
Although we have not, before the instant case, directly
addressed the relationship between proof of antitrust damages and
Rule 23(b)(3) predominance, this court quoted Windham v. American
Brands with approval in Alabama v. Blue Bird Body Co., when we
expressed “serious reservations about the manageability of a class”
in an antitrust action where the determination of individual
damages cannot be made by mathematical or formulaic computation.
573 F.2d 309, 329 (5th Cir. 1978). More recently, we held in the
context of a claim brought under Texas law, that “[w]here the
plaintiffs' damage claims 'focus almost entirely on facts and
issues specific to individuals rather than the class as a whole,'
the potential . . . that the class action may 'degenerate in
practice into multiple lawsuits separately tried,” renders class
treatment inappropriate. See O'Sullivan v. Countrywide Home Loans,
319 F.3d 732, 744 (5th Cir. 2003).
Upon reviewing the record in light of O'Sullivan, Blue Bird
Body Co., and Windham, we cannot conclude that the plaintiffs' two
proposed classes are appropriate for certification. As discussed
above, there are vast differences among the numerous businesses
that compose the two classes. The businesses that fall within
those classes range from sole proprietorships, with customer bases
comprising almost exclusively local consumers, that received a
26
minimum of long-distance calls and for whom caller ID would have
provided minimal, if any, labor savings, to large, interstate
catalogue companies that maintained large call centers, possessed
CTI equipment, and for whom caller ID might have produced
substantial benefits in both labor savings and customer
satisfaction. When applied to all the members included in the two
proposed classes, however, the plaintiffs' damages formula—a
formula based on nationwide averages that makes no effort to adjust
for the variegated nature of the businesses included in the
classes—cannot reasonably approximate the actual damages suffered
by the class members by reason of AT&T's blocking of caller ID
signals. In light of the requirements of Rule 23(b)(3), therefore,
we hold that the plaintiffs have clearly failed to demonstrate that
common issues of fact predominate over those individual issues of
fact that are plainly necessary for any just estimate of the
antitrust damages suffered by the class members.
Conclusion
Because we conclude that the issue of damages defeats
predominance, we decline to address the district court's holding
that the plaintiffs failed to demonstrate that they would be able
to establish antitrust impact, through common proof, for either
proposed class. Even assuming that the plaintiffs can establish
antitrust liability with respect to all the class members, we
conclude that the plaintiffs, having had a fully adequate
27
opportunity to address the issue of damages below, clearly failed
to demonstrate that the calculation of individualized actual
economic damages, if any, suffered by the class members can be
performed in accordance with the predominance requirement of Rule
23(b)(3). We conclude, therefore, that class certification is not
appropriate; the district court's order denying certification is
therefore
AFFIRMED.
28