On October 3, 2014, Judge Richard Seeborg of the U.S. District Court for the Northern District of California issued an order denying class certification in a matter involving alleged price fixing by manufacturers of optical disk drives (“ODDs”), which include CDs, DVDs and Blu-Ray ODDs. Two groups of plaintiffs, direct purchaser plaintiffs (“DPPs”) and indirect purchaser plaintiffs (“IPPs”), submitted economic expert reports in support of their motions for class certification. Compass Lexecon Senior Consultant Professor Janusz Ordover submitted an expert report in support of defendants’ opposition to class certification, which identified several fundamental flaws in the analyses and conclusions of plaintiffs’ experts. Judge Seeborg agreed with Dr. Ordover’s opinions, concluding that neither group of plaintiffs “have presented a viable methodology for establishing class-wide antitrust injury and damages.” Judge Seeborg concluded that the flaws identified by Dr. Ordover fatally undermined the analysis and conclusions of plaintiffs’ experts. For instance:
- Judge Seeborg concluded that the correlation analyses presented by plaintiffs’ experts—which attempted to show that if defendants’ conduct impacted ODD prices for some customers and ODD products, the sale of all ODD products to all members of the purported classes would have been impacted—were unpersuasive, pointing to “defendants’ evidence that such correlations would exist in any event in the steadily declining prices that befell the ODD industry during the relevant period.”
- Judge Seeborg also agreed with Dr. Ordover’s opinion that the regression model offered by DPP’s expert to demonstrate class-wide impact simply “assumes the very proposition that the DPPs are now offering it, in part, to show”—the existence of class-wide impact— because the regression model used a single overcharge “dummy” variable and therefore assumed that the alleged conspiratorial overcharge was the same for all purchasers, all ODD product types, and all relevant time periods. Similarly, Judge Seeborg found that the regression model put forth by IPP’s expert, “is more complex” but his alleged conspiratorial overcharge estimates nevertheless “reflect aggregate estimates for all purchasers purchasing ODDs of particular types in given years.” As a result, the judge concluded that “class-wide impact is still being assumed by the models, rather than demonstrated by the results” and, thus, the regression methodology used by plaintiffs’ experts could not “serve to establish that all (or nearly all) members of the class suffered damage as a result of defendants’ alleged anti-competitive conduct.”
- Judge Seeborg also cited Dr. Ordover’s empirical analysis that contradicted the claim of DPPs’ expert that MFN clauses in Dell and Hewlett Packard (“HP”) procurement contracts would have led to class-wide impact. In particular, the judge found that “among other things, the empirical data shows that prices charged to other customers did not cluster within an especially narrow range above the supposed ‘floor’ of the prices paid by Dell and HP.”
Dr. Ordover was supported by a Compass Lexecon team led by Andres Lerner and Emmett Dacey in Compass Lexecon’s Century City office. The Compass Lexecon team also included Aren Megerdichian, Janin Wimer, Joshua Waller, Joel Moore, and Robert Oandasan. The Compass Lexecon team worked closely with counsel representing the defendants, including Ian Simmons of O’Melveny & Myers LLP and Daniel Wall and Belinda Lee of Latham & Watkins LLP. The defense team also included Mark Popofsky (Ropes & Gray LLP), Jeffrey Kessler, George Mastoris, and Matthew DalSanto (Winston & Strawn LLP), Nathan Eimer (Eimer Stahl LLP), John Cove and Kieran Ringgenberg (Boies, Schiller & Flexner LLP), Charles Loughlin and Evan Werbel (Baker Botts LLP), David Bamberger (DLA Piper LLP), Joel Kleinman (Dickstein Shapiro LLP), and Jason Levine (Vinson & Elkins LLP).