OnPoint Analytics

Leading a Series of Class Certification Victories

This year, four important decisions came down certifying plaintiff classes of 1) rail freight shippers who were subjected to fuel surcharges, 2) indirect purchasers of nasal spray fluticasone propionate (brand name Flonase) who were forced to pay higher prices because of delayed generic entry, 3) Southeastern dairy farmers who received suppressed prices for their raw milk production, and 4) Northeastern dairy farmers who received suppressed prices for their raw milk production.  In all four cases, the plaintiffs’ economic expert was Gordon Rausser and he was supported by the staff of OnPoint Analytics, Inc.

Rail Freight
In a long-awaited decision, on June 21, 2012 Judge Paul Friedman of the United States District Court for the District of Columbia certified a class consisting of all direct purchasers of rail freight services who had been subjected by four defendants to fuel surcharges over the period July 1, 2003 through December 31, 2008. Plaintiffs contend that the four largest rail freight carriers in the United States colluded to administer fuel surcharges on their customers’ freight shipments that far exceeded the amount necessary to recover rising fuel costs.  Instead, the fuel surcharge program allegedly represented a convenient pretext for the railroads collectively to raise their rates without triggering price competition. The Opinion was unsealed on July 13 with redactions requested by defendants to protect confidential information.  Judge Friedman’s 148-page opinion is notable for its thorough treatment of the economic and statistical analyses offered by each side.  The Court carefully distinguished between the common factors regression Dr. Rausser employed to investigate common impact and predominance, and the damage regression he thereafter applied to quantify class-wide losses.  Judge Friedman concluded that “Dr. Rausser’s common factor and damage models together set forth persuasive, workable multivariate regressions that give rise to an inference of causation (the most any regression analysis can be expected to do)….”  The Court explicitly recognized that no regression model can explain 100% of price variation, and found that Dr. Rausser’s two models, with R-Squared statistics ranging from 76% to 89%, “provide high levels of explanatory power.”  The Court also rebuffed speculation by defendants’ economist, Robert Willig, that some shippers may have been able to escape the effects of the conspiracy, instead agreeing with Dr. Rausser’s determination that “there was no evidence of systematic discounting” and that “any examples of such discounting are outliers, insufficient to defeat a finding of predominance.”  The Court also concluded that “the five structural characteristics of the rail freight industry identified by Dr. Rausser, and the evidence that he marshals regarding those characteristics, provide strong support for plaintiffs’ contention that injury in fact is capable of proof at trial with evidence common to the class.” In its breadth and detail the Opinion comprehensively addresses many of the most vexing empirical challenges related to certification under Hydrogen Peroxide, Wal-Mart and their progeny, and offers sound guidance about the professional standards applicable to expert testimony in this area.  To view Judge Friedman’s Opinion, click here.

Just three days before the Rail Freight Opinion, on June 18, 2012 the Honorable Anita Brody of the United States District Court for the Eastern District of Pennsylvania certified a 4-state class of indirect purchasers of fluticasone propionate, which is also sold by GlaxoSmithKline under the brand name Flonase. Plaintiffs allege that GSK filed sham citizen petitions with the Food and Drug Administration to delay the introduction of a cheaper, generic version of Flonase, and that consumers and insurers were consequently forced to pay higher prices.  Relying on Dr. Rausser’s analysis, the Court’s opinion clearly describes how incumbent brands rapidly lose market share to generic equivalents and how generic competition drives prices down to the benefit of consumers and third party payers. GSK’s economic experts argued that differences in transaction prices by location, payment method and insurance type meant that many proposed class members would not have been injured.  Rather than merely accepting this argument, Judge Brody carefully considered the proffered evidence and found it unconvincing.   Instead, she concluded that the price data analyzed by Dr. Rausser demonstrated uniformity across states and transaction types, once various characteristics were properly controlled for.  As she explained, “Rausser did much more than simply compare a monthly average FP price in the actual and ‘but-for’ worlds to demonstrate common impact.  He conducted a sensitivity analysis to test whether his methodology was robust in assessing impact for all three types of class members.  He also showed that each named plaintiff TPP [third party payer] was injured during the Class Period, applying the available common data and his yardstick methodology.  I am satisfied that the data variation in this case is not so extreme as to mask the absence of injury for a significant number of class members.”  Consequently, she concluded that Plaintiffs “have demonstrated that they can establish impact to this class … through class-wide evidence.”  The Court approved Dr. Rausser’s benchmark approach to quantifying class-wide damages and found it to be workable given the available data. As Judge Brody reported, “it is clear that the expert opinion of Rausser… [was a] reliable, relevant, and significant contribution to the issues raised by Indirect Purchasers’ class certification…”  To view Judge Brody’s Opinion, click here.

Southeast Milk
The month began with a decision on June 1, 2012 from Judge Ronnie Greer of the United States District Court for the Eastern District of Tennessee certifying a sub-class of Southeastern dairy farmers who are also members of the country’s largest dairy cooperative, Dairy Farmers of America. Plaintiffs allege that dairy processors conspired to drive down the price of their most important input, raw milk, and that some cooperatives participated in the scheme. Dr. Rausser identified the unique supply and demand characteristics of the region and analyzed data for millions of raw milk purchases both in the Southeast and in two benchmark regions. The Court originally certified a class consisting of both DFA and non-DFA dairy farmers. Because of plaintiffs’ claim for injunctive relief in addition to damages, the Court subsequently decertified the DFA sub-class based on defendants’ argument that DFA members may have benefitted from some of the trade practices sought to be enjoined. However, in the June 1, 2012 ruling, the Court recertified the DFA subclass, relying in part on Dr. Rausser’s opinion that “Defendants’ actions to fix and suppress the prices paid to dairy farmers… reduce prices that all members of the class received for their milk below competitive levels.” The case has already produced settlements with Dean Foods, Southern Marketing Agency and one individual defendant totaling $145 million. Trial is set for November 6, 2012. To view Judge Greer’s Order, click here.

Northeast Milk
On November 19, 2012, the U.S. District Court for the District of Vermont granted Plaintiffs’ Renewed Motion for Class Certification. Plaintiffs contend that “the Defendants engaged in a wide-ranging conspiracy at both the processor and cooperative levels to fix, stabilize, and artificially depress prices for raw Grade A milk and to allocate markets within Federal Milk Market Order 1 among the co-conspirators.” Relying heavily on the report prepared by Dr. Rausser and his staff at OnPoint, Judge Reiss found that Plaintiffs have successfully established the existence of all four Rule 23(a) requirements necessary for class certification: numerosity, commonality, typicality, and adequacy. Furthermore, when addressing the issue of “antitrust impact”, a central tenet upon which this renewed motion succeeded, Judge Reiss specifically addresses the strength in Dr. Rausser’s revised multivariate regression model in comparison to the model proposed by the defendant’s expert. In light of the “complex nature of the case” among other factors, the Court found that “a class action is the most fair, efficient, and effective vehicle for the presentation of Plaintiffs’ claims and Defendants’ defenses to them.” To view Judge Reiss’ Order, click here.