Seventh Circuit Court of Appeals Commentary : In Their Opinion : Lawyer & Attorney Michael E. Rigney : Kelley Drye & Warren Law Firm

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MESSNER v. NORTHSHORE UNIVERSITY HEALTHSYSTEM (January 13, 2012)

Northshore University HealthSystem merged with Highland Park Hospital in 2000. In 2004, the FTC challenged the merger as a violation of the Clayton Act. An ALJ agreed and ordered Northshore to divest Highland Park. The FTC affirmed on the merits but reversed on the remedy. Instead of requiring a divestment, it ordered the two hospitals to use separate negotiating teams for their contracts. Steven Messner filed a class-action lawsuit in 2008 against Northshore, alleging monopolization, attempted monopolization, and a violation of the Clayton Act. In support of their motion for class certification, plaintiffs relied on Dr. Dranove. Dranove proposed to use the "difference in differences" method of estimating the antitrust impact on the class. The method compares Northshore's price changes to a control group both before and after the merger. Northshore argued that there was no class-wide antitrust impact and that, in fact, there were class members who were not affected by the alleged price increases at all. Judge Lefkow (N.D. Ill.) denied class certification on the grounds that the individual questions regarding the antitrust impact predominated over common questions. Messner appeals.

In their opinion, Seventh Circuit Judges Sykes, Tinder, and Hamilton vacated and remanded. A Rule 23(b)(3) class must satisfy, in addition to the standard certification requirements, that common questions of law and fact predominate over individual questions. The class raises two issues on appeal. First, they allege error when the district court failed to decide the admissibility of defendant’s expert report. Instead of conducting a Daubert analysis, the court indicated that the class could raise any shortcoming’s it thought the report presented and the court would give the report the weight it deserved. The Court disagreed. A district court should make an explicit Daubert finding when an expert report is critical to class certification, as it was here. The Court rejected Northshore's argument that the American Honda rule should only apply when a district court grants certification, not when it denies it. The class also alleges that the district court erred in applying the predominance test. The predominance test is not a rigid, mechanical test. It is satisfied when common questions make up the bulk of the case and can be resolved for all class members at one time. It does not require the absence of an individual question. Here, the elements of the underlying claim are that Northshore violated the Clayton Act and that the members of the class suffered injury. It is clear that common questions predominate with respect to the first element, the violation. Dr. Dranove contended that he could use common evidence and a common methodology to prove the antitrust impact on the class members, even when that impact was not necessarily the same for each member. The district court's requirement that the impact be the same for each class member was error. The Court also concluded that Dranove did not concede that uniform price increases were necessary for his analysis. Finally, the Court rejected Northshore's argument that the class could not be certified because it contained class members who were not or could not be harmed. The fact that some class members were not harmed and may not prevail on the merits is not a reason for denial of class certification. Of course, if a class contains a number of members who could not have been harmed, the class may have been defined too broadly. The Court rejected the argument that this class was defined too broadly but invited the district court to revisit the issue if additional discovery so indicated.