Northern District of California Decertifies Class Under Comcast Due to Inadequacy of Damages Model

In Freitas v. Cricket Wireless, LLC, the United States District Court for the Northern District of California recently decertified a class because of a “critical” mistake in Plaintiff’s damages model that rendered it inadequate under the United States Supreme Court’s decision in Comcast v. Behrend.  Although district courts have differed in how strictly they apply the holding from Comcast, Judge Alsup’s decision in Freitas highlights how it is an important consideration for parties defending class actions.

Comcast Holding

The Supreme Court’s decision in Comcast held that district courts must closely scrutinize plaintiffs’ damages models under Rule 23(b)(3)’s predominance requirement to ensure plaintiffs’ damages model measures only the damages attributable to plaintiffs’ particular theory of liability. However, district courts’ application of this standard has varied, with some courts applying a more lenient approach at the certification stage and simply accepting plaintiffs’ assurances and assertions regarding what their damages models will show once completed.

Freitas Case Background and Holding

Plaintiffs in Freitas alleged that Defendant Cricket Wireless deceived consumers with advertisements for 4G capable phones and plans in markets where 4G coverage is unavailable.  They asserted various consumer protection statutory claims on behalf of a putative class. At the class certification stage, the sole-remaining named Plaintiff represented that her “expert [could] use econometric tools to isolate the value of 4G/LTE.”  The district court concluded these assurances were sufficient under Comcast because a “feasible” class-wide method of damages calculation existed and certified a Rule 23(b)(3) class.

After Plaintiff produced her completed damages model to Defendant, the latter moved to exclude the model under FRE 702 and decertify the class.  The court granted the motion for decertification, concluding that both components of Plaintiff’s damages model were critically flawed under Comcast.

(1) Price Premium for 4G-Capable Phones

First, the expert calculated damages incurred by class members who paid higher prices for 4G-capable phones rather than purchasing similar (and cheaper) 3G-capable phones.  The expert compared similar 4G-capable and 3G-capable devices to calculate an average price premium and extrapolated this percentage to determine damages incurred across the entire class.  However, “there were significant differences between the phones that were left unaccounted for,” and the expert erroneously assumed that 100% of the price difference was attributable to the 4G capability.  For example, the damages model did not control for price differences attributable to factors like battery life, memory, storage capacity, or display size.  The model was therefore insufficient under Comcast because it failed to isolate the damages flowing from the Defendant’s allegedly deceptive advertisements regarding 4G capability.

(2) Price Premium for 4G Service Plans

The expert also calculated the purported overcharge of class members attributable to the price premiums paid for 4G service plans in areas without 4G coverage.  This was achieved by calculating a benchmark based on competitors’ service plans with low amounts of 4G data allowance, and comparing the benchmark price to the cost of Defendant’s “4G” service plans.  This model was flawed for similar reasons, as the expert did not account for other differences between Defendant’s plans and those offered by competitors.  Specifically, Defendant’s plan included free access to a music service, international text messaging, mobile hotspot capabilities, data backup, and visual voicemail.  Again, the expert erroneously assumed that 100% of the price difference was attributable to Defendant’s alleged misrepresentations.  The model therefore failed Comcast because “plaintiff’s damages model [did] not even attempt to control for confounding variables.”

Conclusion

The Freitas decision underscores the importance of delivering on promises made at the class certification stage with respect to damages models to meet the requirements of Comcast and sustain certification. As Judge Alsup recognized, plaintiffs in this position should not receive a “second try, for to allow retries on such fundamentals would encourage overreaching.” Freitas demonstrates that the Supreme Court’s Comcast decision remains an important consideration not just at the certification stage, but also afterwards.