On July 23, 2020, Judge Paul A. Englemayer of the U.S. District Court for the Southern District of New York denied a motion to certify a proposed class of direct purchasers of aluminum in a decision that may signal a trend toward courts rejecting the use of statistical averages to demonstrate a classwide impact of alleged anticompetitive conduct. In re Aluminum Warehousing Antitrust Litig., No. 13-MD-2481 (PAE), 2020 WL 4218329 (S.D.N.Y. July 23, 2020). In so ruling, Judge Englemayer wrote that the use of averaging “flouts the requirement that an expert’s model reliably prove that each putative class member suffered individual injury.”[i]
BACKGROUND
Many of the most significant class actions in the Southern District of New York over the past eight years have been antitrust cases involving alleged manipulation of a financial benchmark or rate by large financial institutions. These lawsuits can generate significant defense costs – a familiar trend that shows no signs of abating in the current climate.[ii] But in their pursuit of strategies to more efficiently plead and litigate rate-manipulation cases, the plaintiffs’ bar has relied extensively on the use of statistical and econometric analyses of market behavior to underpin allegations of classwide impact.
This strategy follows a similar storyline: (1) plaintiffs file a class action complaint using statistical analysis to allege that purported pricing anomalies demonstrate the existence of anticompetitive manipulative conduct that caused antitrust injury to all participants in that market; (2) survive, “albeit barely,” a Rule 12 motion challenging these statistics-driven pleadings, which often lack allegations of misconduct against a specific defendant or particularized harm to the named plaintiff(s);[iii] and (3) secure settlements prior to class certification or summary judgement.
As a result of this pattern, statistics-driven rate-manipulation theories have generally gone untested beyond the pleadings stage, leaving key questions as to whether these theories can support certification of a class unresolved. But in In re: Aluminum Warehousing Antitrust Litigation,[iv] Judge Englemayer noted that “courts have disdained models that have found classwide price impact by means of averaging impact across a class period[,]” and held that plaintiffs’ averaging was not “common proof that conspiratorial conduct caused pricing injury to all purchasers during the more than six-year class period.”[v] This ruling highlights the vulnerability of reliance on statistical averages at the class certification stage.
DENIAL OF CLASS CERTIFICATION IN IN RE: ALUMINUM WAREHOUSING ANTITRUST LITIGATION
In re: Aluminum Warehousing Antitrust Litigation is an expansive multidistrict litigation in which a putative class of plaintiffs alleges they purchased aluminum at inflated prices as a result of a rate-manipulation conspiracy between several major financial institutions and aluminum warehouse operators.[vi] Aluminum in the relevant market is typically purchased by contracts in which one component of the final purchase price is a regional premium associated with the cost of delivery.[vii] Plaintiffs allege that, in order to increase the value of aluminum derivatives tied to the underlying asset prices of the metal, the defendants engaged in a variety of tactics to drive up the...
