In re: Class 8 Transmission

Filing

NOT PRECEDENTIAL OPINION Coram: CHAGARES, GREENAWAY JR. and RESTREPO, Circuit Judges. Total Pages: 11. Judge: GREENAWAY JR. Authoring.

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NOT PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
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No. 15-3791
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IN RE: CLASS 8 TRANSMISSION INDIRECT PURCHASER
ANTITRUST LITIGATION
RYAN AVENARIUS, on behalf of themselves and all others similarly situated;
BIG GAIN, INC.; CARLETON TRANSPORT SERVICE; JAMES CORDES, on
behalf of Cordes Inc.; MEUNIER ENTERPRISES LLC; PAUL PROSPER;
RODNEY E. JAEGAR; PURDY BROTHERS TRUCKING CO. INC.;
TC CONSTRUCTION CO. INC.; PHILLIP E. NIX,
Appellants
_____________
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF DELAWARE
(D. Del. No. 1-11-cv-00009)
District Judge: Honorable Sue L. Robinson
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Submitted Under Third Circuit L.A.R. 34.1(a)
September 13, 2016
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Before: CHAGARES, GREENAWAY, JR., and RESTREPO, Circuit Judges.
(Filed: February 9, 2017)
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OPINION*
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*

This disposition is not an opinion of the full Court and pursuant to I.O.P. 5.7 does not
constitute binding precedent.

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GREENAWAY, JR., Circuit Judge.
This appeal arises from a putative antitrust class action alleging a conspiracy
among manufacturers of heavy-duty trucks and a supplier of transmissions to maintain
the supplier’s monopoly in the heavy-duty truck transmissions market. Appellants allege
that this conspiracy resulted in their paying artificially inflated prices for trucks that
contained the transmissions at issue. After Appellants moved for class certification, the
District Court found, inter alia, that they failed to meet the requirement in Rule 23(b)(3)
of the Federal Rules of Civil Procedure that common questions predominate over
individual questions in order for the class to be certified. We agree with the District
Court that Appellants have failed to demonstrate that class-wide evidence could prove
antitrust impact, and therefore Appellants have not established that common questions
will predominate. However, we conclude that the District Court erred in dismissing
Appellants’ individual claims and will therefore vacate that dismissal and remand to the
District Court.
I.

BACKGROUND

This action is driven by Class 8 heavy-duty truck transmissions. Class 8 is the
heaviest truck class. Class 8 trucks can be divided into subcategories, including linehaul
vehicles (e.g., tractor-trailers and long-haul trucks) and performance vehicles (e.g., heavy
construction trucks such as dump and cement trucks).
Manufacturers of Class 8 trucks take orders from customers to build trucks
customized to the customers’ needs and then purchase component parts from suppliers.
Here, Appellees are four manufacturers of Class 8 trucks and Eaton Corporation, the
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primary supplier of Class 8 transmissions.1 Purchasers of Class 8 trucks consult
“databooks,” which list the truck manufacturer’s standard and non-standard component
offerings, to choose the specific component parts they desire. Appellants are “indirect”
purchasers of Class 8 transmissions insofar as they purchased trucks containing Eaton
transmissions from authorized agents or dealers of the truck manufacturers.2
In their Third Amended Complaint, Appellants allege violations of various state
antitrust and unfair competition laws in a total of twenty-one different states. Appellants
allege that the truck manufacturers conspired among themselves and with Eaton to secure
Eaton’s monopoly in the Class 8 truck transmission market by entering individually into
long-term agreements with Eaton in the early 2000s. Under these “de facto exclusive
dealing” agreements, the truck manufacturers received lucrative loyalty rebates from
Eaton if they purchased a certain percentage—over ninety percent—of Eaton
transmissions for their Class 8 manufacturing needs. App. 137 ¶ 68; 139 ¶ 73.
Appellants allege that these agreements were part of a conspiracy that was intended to,
and did in fact, foreclose a transmissions manufacturer competitor, ZF Meritor, from over
1

Appellee truck manufacturers are: Daimler Trucks North America LLC (f/k/a
Freightliner LLC); Navistar International Corporation, Inc. (f/k/a International Truck &
Engine Corp.); PACCAR Inc., through its Kenworth Truck Company and Peterbilt
Motors Company divisions; and Volvo Trucks North America and its sister company
Mack Trucks, Inc.
A separate putative class action was filed on behalf of “direct purchasers”—i.e., those
who purchased trucks directly from truck manufacturers. The District Court dismissed
the direct purchasers’ motion for class certification for lack of Article III standing; we
recently reversed. Wallach v. Eaton Corp., 837 F.3d 356, 2016 WL 4791849 (3d Cir.
Sept. 14, 2016).
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ninety percent of sales in the Class 8 linehaul transmissions market and from even
entering the Class 8 performance transmissions market.3 According to Appellants, as a
result of the agreements and market competition foreclosure, they paid supra-competitive
prices for Class 8 trucks and therefore the transmissions.
Appellants moved for class certification pursuant to Rule 23 of the Federal Rules
of Civil Procedure. The District Court concluded, inter alia, that Appellants failed to
establish the threshold Rule 23(b)(3) predominance requirement that common evidence
could prove that all or nearly all of the proposed class members (i.e., indirect purchasers)
paid a higher price than they would have absent the alleged conspiracy. The District
Court then dismissed the action for lack of a case or controversy as required by Article
III. Appellants timely appealed.
II.

JURISDICTION AND STANDARD OF REVIEW

The District Court had jurisdiction pursuant to 15 U.S.C. §§ 4 and 15, and 28
U.S.C. §§ 1331 and 1337. We have jurisdiction pursuant to 28 U.S.C. § 1291.
“We review a class certification order for abuse of discretion, which occurs if the
district court’s decision rests upon a clearly erroneous finding of fact, an errant
conclusion of law[,] or an improper application of law to fact.” Neale v. Volvo Cars of N.
Am., LLC, 794 F.3d 353, 358 (3d Cir. 2015) (quoting Grandalski v. Quest Diagnostics

3

In 2006, ZF Meritor sued Eaton for antitrust violations and prevailed. See ZF Meritor,
LLC v. Eaton Corp., 696 F.3d 254 (3d Cir. 2012) (affirming the jury’s verdict against
Eaton).

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Inc., 767 F.3d 175, 179 (3d Cir. 2014)). We review de novo the legal standard applied by
a district court. Id.
III.
A.

ANALYSIS

The District Court’s Denial of Class Certification on Predominance
Grounds

Appellants argue that the District Court abused its discretion by failing to conduct
a “rigorous analysis” of their arguments and evidence supporting their motion for class
certification. Appellants’ Br. at 28; see In re Hydrogen Peroxide Antitrust Litig., 552
F.3d 305, 309 (3d Cir. 2008) (“Class certification is proper only ‘if the trial court is
satisfied, after a rigorous analysis, that the prerequisites’ of Rule 23 are met.” (quoting
Gen. Tel. Co. of Sw. v. Falcon, 457 U.S. 147, 161 (1982))). “[T]o certify a class under
Rule 23(b)(3), a plaintiff must satisfy both the general class action prerequisites [of Rule
23(a)] . . . and the additional requirements of predominance and superiority [of Rule
23(b)(3)].” In re K-Dur Antitrust Litig., 686 F.3d 197, 219 (3d Cir. 2012), cert. granted
and judgment vacated on other grounds by Upsher-Smith Labs. v. Louisiana Wholesale
Drug Co., 133 S. Ct. 2849 (mem.) (2013). Here, because the Rule 23(a) and Rule
23(b)(3) requirements are conjunctive, we need only review the District Court’s
predominance analysis to conclude that the District Court properly denied Appellants’
motion for class certification.
“[B]efore a class is certified under [Rule 23(b)(3)], a district court must find that
‘questions of law or fact common to class members predominate over any questions
affecting only individual members.’” Tyson Foods, Inc. v. Bouaphakeo, 136 S. Ct. 1036,

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1045 (2016) (quoting Fed. R. Civ. P. 23(b)(3)). “An individual question is one where
‘members of a proposed class will need to present evidence that varies from member to
member,’ while a common question is one where ‘the same evidence will suffice for each
member to make a prima facie showing [or] the issue is susceptible to generalized, classwide proof.’” Id. (quoting 2 W. Rubenstein, Newberg on Class Actions § 4:50, at 196–97
(5th ed. 2012)). Rule 23(b)(3) requires that “the common, aggregation-enabling, issues in
the case are more prevalent or important than the non-common, aggregation-defeating,
individual issues.” Id. (quoting Rubenstein, § 4:49, at 195–96). A court’s Rule 23(b)(3)
analysis “necessarily entails some analysis of whether the proposed class-wide evidence
will actually be sufficient for the class to prevail on the predominant issues in the case.”
Harnish v. Widener Univ. Sch. of Law, 833 F.3d 298, 304-05 (3d Cir. 2016).
“In an antitrust class action, ‘impact’”—i.e., individual injury—“often is critically
important for the purpose of evaluating Rule 23(b)(3)’s predominance requirement
because it is an element of the claim that may call for individual, as opposed to common,
proof.” In re Modafinil Antitrust Litig., 837 F.3d 238, 262 (3d Cir. 2016) (quoting
Hydrogen Peroxide, 552 F.3d at 311). Although plaintiffs need not prove the element of
impact at the certification stage, “[a] district court must thus undertake a ‘rigorous
assessment of the available evidence and the method or methods by which plaintiffs
propose to use the evidence to prove impact at trial.’” Id. (quoting Hydrogen Peroxide,
552 F.3d at 312).
As applied to Appellants’ theory of antitrust impact on their proposed class of
indirect purchasers, Rule 23(b)(3)’s predominance element required that Appellants
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demonstrate that common evidence could prove: (1) Eaton overcharged the truck
manufacturers for Class 8 transmissions; (2) the truck manufacturers passed on this
overcharge to direct purchasers; and (3) direct purchasers passed on the overcharge to
Appellants.
Appellants primarily relied on the expert report and testimony of Dr. Russell
Lamb, an economist, who analyzed each requirement through: (1) an “overcharge”
regression; (2) a “direct pass-through” regression; and (3) an “indirect pass-through”
regression.
Appellants contend that the District Court abused its discretion when it considered
certain “real-world [factors] surrounding th[e] complicated market” of Class 8 trucks,
App. 32, in its predominance analysis because such factors would be the same in both the
actual and but-for-illegal-conduct worlds. Specifically, the District Court noted:
(1) Class 8 trucks are “unique and highly customized for use in different applications,”
App. 29; (2) “the complex distribution chain frustrates the process of determining the
amount of pass-through on a transmission based on the price of a truck,” App. 30; and
(3) eight of the eleven state classes originally proposed by Appellants contained examples
of unique sales incentives, such as increased trade-in value, preferred buy-back terms, or
special financing, which may not be able to be reflected on an invoice or which may
result in benefits exceeding the alleged overcharge.
We conclude the District Court properly considered these factors as to individual
class members, including whether and to what extent they suffered economic loss (i.e.,
antitrust impact) as a result of alleged conspiracy. See Hydrogen Peroxide, 552 F.3d at
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311 (finding in its predominance analysis that a court must “formulate some prediction as
to how specific issues will play out” (internal quotation marks and citations omitted)).
The District Court properly exercised its discretion in undertaking a qualitative
assessment of the characteristics shared by all indirect purchase transactions of Class 8
trucks against the many individual factors in the real-world market. See Neale, 794 F.3d
at 371 (“[P]redominance involves a qualitative assessment of common versus
individualized questions.” (citing Amgen Inc. v. Conn. Ret. Plans & Tr. Funds, 133 S. Ct.
1184, 1196 (2013))).
Appellants next argue that the District Court abused its discretion (1) by faulting
their expert economist’s class-wide impact analysis for excluding certain data and (2) by
failing to consider in its “rigorous analysis” their expert’s revised rebuttal report that
included additional data.
As to Dr. Lamb’s “overcharge” regression, the District Court found that his
original analysis did not test class-wide impact because it: (1) was based solely on a
portion of linehaul transmission sales data, excluding performance transmission sales,
which comprised nearly half of Eaton’s transmissions sold during the relevant time
period; and (2) excluded data from two truck manufacturers, whose sales comprised over
forty percent of the linehaul trucks. Although Appellants offer explanations for Dr.
Lamb’s exclusion of certain sales data, the District Court did not abuse its discretion in
assessing whether the “available evidence and the method or methods by which plaintiffs
propose to use the evidence” could prove class-wide impact. Hydrogen Peroxide, 552
F.3d at 312 (emphasis added); see Harnish, 833 F.3d at 304-05 (providing that the
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predominance analysis “necessarily entails some analysis of whether the proposed classwide evidence will actually be sufficient for the class to prevail on the predominant issues
in the case” (emphasis added)). Moreover, in an attempt to address issues relating to the
adequacy of proposed class representatives, Dr. Lamb in his rebuttal report excluded
sales data from an additional manufacturer—further narrowing the field of data upon
which he relied to show class-wide impact.
As to Dr. Lamb’s indirect pass-through analyses, his original analysis was based
on less than one percent of total truck sales from the putative indirect purchaser class—
and based on data from two dealers in California. Appellants do not dispute this.
Instead, they rely on Dr. Lamb’s revised rebuttal report, which included additional data
from a total of seven states—thereby accounting for approximately two percent of all
transactions. The District Court’s conclusion based on Dr. Lamb’s original report was
not an abuse of discretion: given that Appellants were seeking to certify a class across
several states covering hundreds of thousands of sales, the District Court properly
concluded that Dr. Lamb’s analysis was insufficient to demonstrate class-wide impact.
Nor did the District Court err in not assessing whether the revised report covering
approximately two percent of transactions was sufficient, given the District Court’s
conclusions that Dr. Lamb’s revised report could not cure deficiencies relating to
predominance and adequacy of the proposed class representatives.4

Appellants argue that the District Court overlooked Dr. Lamb’s revised expert
report, which was submitted with Appellants’ Reply Brief in support of their Motion for
Class Certification. Whether or not the District Court considered the revised report, our
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In sum, we are satisfied that the District Court procedurally and substantively
conducted a “rigorous analysis” of Appellants’ theory of class-wide impact and available
evidence, and that the District Court did not abuse its discretion in its analysis. Because
we affirm the District Court’s denial of Appellants’ motion for class certification on
predominance grounds, we need not reach Appellants’ challenges to the District Court’s
findings as to the adequacy of the proposed class representatives or the substitution of
proposed class representatives.
B.

The District Court’s Dismissal of the Entire Action

Although we agree with the District Court that the Rule 23(b)(3) predominance
inquiry was a sufficient ground to deny Appellants’ motion for class certification, we
conclude the District Court erred by dismissing Appellants’ individual claims.
The District Court reasoned that “because the proposed class lacks representation,
the case does not present a case or controversy under Article III.” App. 34. However,
“[t]here is [] no case or controversy, and a suit becomes moot, ‘when . . . the parties lack
a legally cognizable interest in the outcome.’” Chafin v. Chafin, 133 S. Ct. 1017, 1023
(2013) (quoting Already, LLC v. Nike, Inc., 133 S. Ct. 721, 726 (2013)).
Here, in each of their complaints, Appellants explicitly brought their claims “on
behalf of themselves,” and on behalf of the putative indirect purchaser class. (D.C. Civ.
No. 1-11-cv-00009, Dkt. No. 1 at 1, Dkt. No. 34 at 1, Dkt. No. 68 at 1); App. 122. Prior
to the District Court’s addressing Appellants’ motion for class certification, the Court
conclusion that the revised report does not cure deficiencies in Appellants’ predominance
showing remains unchanged.
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concluded that Appellants’ individual state antitrust claims should not be subject to
dismissal. Then, as a result of, inter alia, predominance issues, the District Court
improperly ruled that the entire action should be dismissed despite its earlier ruling that
Appellants’ individual claims survived. Therefore, we will vacate the portion of the
District Court’s order dismissing Appellants’ individual claims and remand to the District
Court for further proceedings on these claims.5
IV.

CONCLUSION

For the foregoing reasons, we will affirm in part and vacate in part the District
Court’s order and remand for proceedings consistent with this opinion.

Appellants also challenge the District Court’s decision made in a discovery hearing to
not compel production of sales data for sales made after Appellants’ original complaint
was filed in March 2010. We review discovery decisions for abuse of discretion, which
requires a showing of “actual and substantial prejudice.” Eisai, Inc. v. Sanofi Aventis
U.S., LLC, 821 F.3d 394, 409 (3d Cir. 2016) (quoting Cyberworld Enter. Tech., Inc. v.
Napolitano, 602 F.3d 189, 200 (3d Cir. 2010)). Appellants have not shown how data for
post-March 2010 sales would have cured the deficiencies identified by the District Court
in Dr. Lamb’s analysis. Therefore, Appellants have not demonstrated that the District
Court abused its discretion.
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