OnPoint Expert Analysis Reaffirmed in Denial of Decertification Motion in Eggs Case
August 17, 2017
District Court Judge Gene Pratter denied Defendants’ motion to decertify a class of direct purchasers of shell eggs who allegedly suffered damages from anticompetitive behavior by egg producers. The case involves allegations that egg producers inflated the prices of eggs by reducing their supply. Among other acts, the Defendants’ alleged scheme involved the adoption of cage space requirements for egg laying hens under the United Egg Producers (UEP) Certified Program. Ostensibly for animal welfare, it is alleged that the true purpose of such requirements was to reduce the number of hens per cage and thus the number of eggs supplied to the market.
Over the course of this case, OnPoint expert Dr. Gordon Rausser submitted six expert reports, provided three days of deposition testimony, and testified at both a class certification hearing and a Daubert hearing. In Dr. Rausser’s report in support of Plaintiffs’ motion for class certification, he concluded that the egg industry was conducive to price-fixing and that the Defendants engaged in collusive behavior during the class period, resulting in widespread damages to class members. Using a regression analysis to isolate and quantify the effects of the Defendants’ alleged price-fixing behavior, Dr. Rausser determined that such behavior resulted in substantial overcharges and class-wide damages.
Based on Dr. Rausser’s testimony, on September 18, 2015, Judge Pratter certified a class of direct purchasers of shell eggs. She found that “Dr. Rausser has measured whether that conspiracy was successful in increasing the price of eggs. His model fits the theory of liability and satisfies Comcast.” However, the Judge requested further briefing on when the class period should end; the Plaintiffs originally sought a class period from September 24, 2004 through the present. On February 2, 2016, the Judge decided that the proper cut-off date for the class period would be December 31, 2008. The Judge described how, in the period after 2008, animal welfare regulations implemented by a handful of U.S. states actually mandated increased cage space requirements, rendering the adoption of such requirements legal. Judge Pratter reasoned that, because of these regulations, the price elevation Dr. Rausser’s model “attributes to the conspiracy intermingles lawful and unlawful behavior between 2008 and 2013.” For these reasons, Judge Pratter ruled that, although damages could be quantified on a class-wide basis for the years 2004 through 2008, they could not be for the post-2008 years.
Defendants seized on this decision to argue that all data post-2008 should be removed from Dr. Rausser’s overcharge regression model. They also argued that when such data was removed, the results of the model no longer fit the Plaintiffs’ theory and thus the class should be decertified. Judge Pratter has now dismissed Defendants’ argument. She agrees with the Plaintiffs that Dr. Rausser’s model should use all of the available data, including post-2008 data, to estimate the class-wide overcharge, even if damages would no longer be claimed on a class-wide basis post-2008. She writes:
Plaintiffs argue, and the Court agrees, that removing all post-2008 data from Dr. Rausser’s model is unnecessary. When it set the cutoff date, the Court recognized that ‘the UEP Certification program continued through 2013 and included the same types of instrumentalities as are alleged to have characterized the conspiracy pre-2008’…The Court again recognized at summary judgement, that ‘it is undisputed that the defendants continued to operate as members of the UEP Certified Program after the lawsuits were filed [in 2008]… [and] the plaintiffs have put forward evidence that allows them to argue that the effects of this conspiracy continued through at least 2012.’
The Judge also distinguished the issues in this case from those in Comcast. In Comcast, the Supreme Court found that plaintiffs’ expert’s regression model was not appropriate because it was designed to measure the combined effect of four alleged acts, but three of those acts were subsequently ruled unsuitable for certification because they were not susceptible to class-wide proof. Judge Pratter finds the current situation to be quite different:
The Supreme Court in Comcast focused on the rigidity of the model given the viable theories in the case, not the underlying data itself. It did not conclude that particular data was tainted, but rather that the model itself failed to ‘bridge the differences between supracompetitive prices in general and supracompetitive prices attributable to [the one theory viable for class treatment].’ …That the Court here has recognized a similar rigidity for Dr. Rausser’s model after 2008 does not command taking the next step of stripping post-2008 data from the model itself. The Court’s holding [in its decision to cut-off the class period at December 31, 2008] was simply a recognition and application of the model’s limit on measuring damages in light of the circumstances. Accordingly, the Court rejects this attempt to, yet again, invalidate Dr. Rausser’s model under Comcast.
The Judge also rejected Defendants’ argument that a supposed “structural break” in 2008 resulted in “a divergence between the effects of the explanatory variables [on egg prices, in Dr. Rausser’s model] in different time periods,” and required post-2008 data to be removed from the model. Judge Pratter “conclude[d] that removal of post-2008 data is not analytically required under Comcast, but further, removal of the data could be problematic because, for instance, removing all post-2008 would involve excluding 52% of the available data.”
Judge Pratter concluded: “For the foregoing reasons, the Court will deny the Defendants’ Motion to Decertify the Direct Purchaser Plaintiffs’ Class.” To read the opinion, Click here.