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In re Lithium Ion Batteries Antitrust Litigation

United States District Court, N.D. California

April 12, 2017

In re Lithium Ion Batteries Antitrust Litigation This Relates to: All Indirect Purchaser and Direct Purchaser Actions

          ORDER DENYING WITHOUT PREJUDICE MOTIONS FOR CLASS CERTIFICATION; GRANTING IN PART AND DENYING IN PART MOTIONS TO STRIKE EXPERT REPORTS OR PORTIONS THEREOF DKT. NOS. 1036, 1553, 1554, 1565, 1569, 1582__

          YVONNE GONZALEZ ROGERS UNITED STATES DISTRICT COURT JUDGE.

         This antitrust action concerns two putative plaintiff classes, indirect and direct purchasers, who allege a multi-year, international price-fixing conspiracy among Japanese and Korean manufacturers of lithium ion battery cells, as well as their American subsidiaries.[1] The putative class representatives are denominated the Indirect Purchaser Plaintiffs (“IPPs”) and the Direct Purchaser Plaintiffs (“DPPs, ” and collectively with the IPPs, “Plaintiffs”). Both putative classes have filed motions for class certification. (Dkt. Nos. 1036, 1582.) In connection with those motions, defendants have moved to strike or exclude certain expert reports. (Dkt. Nos. 1553, 1554, 1565, 1569.)

         The Court, having considered the admissible evidence, the papers in support and in opposition to the motion, the pleadings, and the oral arguments of the parties, and for the reasons stated herein, Orders as follows:

1. The IPP Plaintiffs' Motion for Class Certification (Dkt No. 1036) is Denied without Prejudice on the grounds that they have failed to establish typicality and their ability to prove antitrust impact on a class-wide basis;
2. The DPP Plaintiffs' Motion for Class Certification (Dkt. No. 1582 is Denied without Prejudice on the grounds that they have failed to establish typicality, adequacy, and their ability to prove antitrust impact on a class-wide basis;
3. The Motion of Panasonic and Sanyo to Strike the Proposed Expert Testimony of Dr. Edward E. Leamer (Dkt. No. 1553) is Granted In Part on the grounds that his analyses rely on too narrow a range of data;
4. The Motion of Panasonic and Sanyo to Strike the Proposed Expert Testimony of Dr. Rosa M. Abrantes-Metz (Dkt. No. 1554) is Denied on the grounds identified in the motion;
5. The Motion of Toshiba to Strike Certain Testimony of DPP Expert Dr. Roger Noll (Dkt. No. 1565) is Denied on the grounds identified in the motion; and
6. The Motion of Toshiba to Strike Certain Proposed Testimony of DPP Expert Mr. James L. Kaschmitter (Dkt. No. 1569) is Granted In Part as stated herein.

         I. Background

         These actions arise out of an alleged price-fixing conspiracy for lithium ion battery (LIB) cells. The Court has previously outlined the allegations but summarizes the essential background, based on the allegations of the operative complaints, here.

         LIBs serve as the predominant form of rechargeable batteries used in portable consumer electronics today, powering devices ranging from smartphones to laptop computers to cameras to cordless power tools. An LIB cell stores and releases electricity through chemical means. The cell consists of four basic components: a cathode, an anode, electrolyte, and separators. After manufacture, one or more cells are “packed” inside a casing, sometimes with protective circuitry. The casing makes the cell usable as a battery, or, in the case of multiple cells in a single casing, as a battery pack. Batteries and their cells exist in one of three general formats: (i) cylindrical, (ii) prismatic, and (iii) polymer.

         In 1991, defendant Sony Corporation invented lithium ion batteries and dominated the market until 1999 and 2000, when Korean manufacturers LG and Samsung entered the scene. Both the DPPs and IPPs allege that, sometime in 2000, defendants here stopped competing and began sharing information through high-level executive meetings in Asia. These meetings began no later than March 2002 and continued in rough, semi-annual intervals for approximately two years. Beginning in 2004 and continuing through 2006, defendants are alleged to have met with increased frequency. Both complaints allege that, in this period, defendants determined that price competition would diminish the “health” of the entire lithium ion battery industry and agreed to refrain from such competition. Plaintiffs further allege that in February 2007, the price of cobalt, an important component for manufacture of lithium ion battery cells, increased sharply. Defendants allegedly agreed on a formula for collectively raising the price of lithium ion batteries in response, allegedly using the cobalt price increase as a pretext for this coordinated price increase. Thereafter, in mid-to-late 2008, despite a drop in cobalt prices and a global economic downturn and reduction in demand for lithium ion batteries, defendants allegedly collaborated on strategies for stabilizing and maintaining artificially high prices. Plaintiffs allege that from 2009 to 2011, defendants continued to exchange sensitive, non-public information to coordinate prices.[2]

         II. Applicable Standards

         A. Class Certification

         Federal Rule of Civil Procedure 23, which governs class certification, has two distinct sets of requirements that plaintiffs must meet before the Court may certify a class. Plaintiffs must meet all of the requirements of Rule 23(a) and must satisfy at least one of the prongs of Rule 23(b), depending upon the nature of the class they seek to certify. See also Shady Grove Orthopedic Assocs., P.A. v. Allstate Ins. Co., 559 U.S. 393, 394 (2010) (setting forth requirements of Rule 23). Under Rule 23(a), the Court may certify a class only where:

(1) the class is so numerous that joinder of all members is impracticable;
(2) there are questions of law or fact common to the class;
(3) the claims or defenses of the representative parties are typical of the claims or defenses of the class; and
(4) the representative parties will fairly and adequately protect the interests of the class.

Fed. R. Civ. P. 23(a). Courts refer to these four requirements as “numerosity, commonality, typicality[, ] and adequacy of representation.” Mazza v. Am. Honda Motor Co., 666 F.3d 581, 588 (9th Cir. 2012).[3]

         While some inquiry into the substance of a case may be necessary to determine whether these requirements are satisfied, the court must not advance a decision on the merits to the class certification stage. As the United States Supreme Court has stated:

Although we have cautioned that a court's class-certification analysis must be “rigorous” and may “entail some overlap with the merits of the plaintiff's underlying claim, ” Rule 23 grants courts no license to engage in free-ranging merits inquiries at the certification stage. Merits questions may be considered to the extent - but only to the extent -that they are relevant to determining whether the Rule 23 prerequisites for class certification are satisfied.

Amgen Inc. v. Connecticut Ret. Plans & Trust Funds, 133 S.Ct. 1184, 1194-95 (2013). Within the framework of Rule 23, the Court ultimately has broad discretion over whether to certify a class. Zinser v. Accufix Research Inst., Inc., 253 F.3d 1180, 1186 (9th Cir.) opinion amended on denial of reh'g, 273 F.3d 1266 (9th Cir. 2001).

         Rule 23(a)(1)'s numerosity requirement means that a class be so numerous that joinder of all class members is “impracticable.” Fed.R.Civ.P. 23(a)(1). Where the precise size of the class is unknown, but “‘general knowledge and common sense indicate that it is large, the numerosity requirement is satisfied.'” In re Static Random Access Memory (SRAM) Antitrust Litig., No. C 07-01819 CW, 2008 WL 4447592, at *7 (N.D. Cal., Sept. 29, 2008) (quoting 1 Alba Conte & Herbert B. Newberg, Newberg on Class Actions § 3:3 (4th ed. 2002)).

         Rule 23(a)(2) requires the party seeking certification to show that “there are questions of law or fact common to the class.” Fed.R.Civ.P. 23(a)(2). To satisfy this requirement, the common question “must be of such a nature that it is capable of class[-]wide resolution - which means that the determination of its truth or falsity will resolve an issue that is central to the validity of each of the claims in one stroke.” Dukes, 564 U.S. at 350. “[F]or purposes of Rule 23(a)(2), even a single common question will do.” Id. at 359. “‘[T]he very nature of a conspiracy antitrust action compels a finding that common questions of law and fact exist.'” In re Dynamic Random Access Memory (DRAM) Antitrust Litig., No. M 02-1486 PJH, 2006 WL 1530166, at *3 (N.D. Cal. June 5, 2006); see also In re Online DVD Rental Antitrust Litig., No. 09-2029 PJH, 2010 WL 5396064, at *3 (N.D. Cal. Dec. 23, 2010) (“Online DVD”).

         Typicality, as defined in Rule 23(a)(3), requires that the “claims or defenses of the representative parties are typical of the claims or defenses of the class.” Fed.R.Civ.P. 23(a)(3). That is, the named plaintiffs must “suffer the same injury as the class members.” Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338, 348 (2011). “The purpose of the typicality requirement is to assure that the interest of the named representative aligns with the interests of the class.” Wolin v. Jaguar Land Rover N. Am., LLC, 617 F.3d 1168, 1175 (9th Cir. 2010) (quoting Hanon v. Dataproducts Corp., 976 F.2d 497, 508 (9th Cir.1992)). “The test of typicality is whether other members have the same or similar injury, whether the action is based on conduct which is not unique to the named plaintiffs, and whether other class members have been injured by the same course of conduct.” Id. (internal quotation marks omitted). Class representatives' claims “need not be substantially identical” to those of absent class members, as “[s]ome degree of individuality is to be expected in all cases.” Cifuentes v. Red Robin Int'l, Inc., No. C-11-5635-EMC, 2012 WL 693930, at *5 (N.D. Cal. Mar. 1, 2012).

         Adequacy of representation under Rule 23(a)(4) requires the Court to consider: “(1) [whether] the representative plaintiffs and their counsel have any conflicts of interest with other class members, and (2) will the representative plaintiffs and their counsel prosecute the action vigorously on behalf of the class?” Staton v. Boeing Co., 327 F.3d 938, 957 (9th Cir. 2003).

         Once the threshold requirements for certification are met, a plaintiff must establish that the class is appropriate for certification under one of the provisions in Rule 23(b). Here, the plaintiff classes seek certification under Rule 23(b)(3). Rule 23(b)(3) requires plaintiffs to establish “that the questions of law or fact common to class members predominate over any questions affecting only individual members, and that a class action is superior to other available methods for fairly and efficiently adjudicating the controversy.” Fed.R.Civ.P. 23(b)(3) (emphasis supplied). Predominance “tests whether proposed classes are sufficiently cohesive to warrant adjudication by representation, ” and is similar to, but more demanding than the commonality analysis under Rule 23(a). Amchem Prod., Inc. v. Windsor, 521 U.S. 591, 623 (1997). Superiority, on the other hand, tests whether the class action mechanism would be preferable to individual actions or would “unnecessarily burden the judiciary . . . [and] prove uneconomic for potential plaintiffs.” Hanlon, 150 F.3d at 1023. Courts consider such factors as: the interest of members of the class in controlling their individual claims or defenses; the extent of any litigation already commenced by or against the class members; the desirability of concentrating the litigation in a particular forum; and the difficulties likely to be encountered in management of the class action, such as difficulty identifying who is bound by the judgment or individualized issues among the class members. Amchem, 521 U.S. at 615-16.

         B. Standards Applicable to Expert Testimony

         Defendants have moved to strike or exclude certain expert reports, or portions thereof, offered in support of the motions for class certification. Defendants rely on Rules 104(a) and 702 of the Federal Rules of Evidence, as well as the principles set forth in Daubert v. Merrell Dow Pharm., Inc., 509 U.S. 579 (1993).

         Federal Rule of Evidence 702 controls expert witness testimony. The admissibility of an expert opinion requires a three-step analysis:

The admissibility of expert testimony, Rule 702, requires that the trial court make several preliminary determinations, Rule 104(a). [1] The trial court must decide whether the witness called is properly qualified to give the testimony sought. A witness may be qualified as an expert on the basis of either knowledge, skill, experience, training, or education or a combination thereof, Rule 702. [2] The trial court must further determine that the testimony of the expert witness, in the form of an opinion or otherwise, will assist the trier of fact, i.e., be helpful, to understand the evidence or to determine a fact in issue, Rule 702(a). [3] Finally the trial court must determine that as actually applied in the matter at hand, Rule 702(d), to facts, data, or opinions sufficiently established to exist, Rule 702(b), including facts, data, or opinions reasonably relied upon under Rule 703, sufficient assurances of trustworthiness are present that the expert witness' explanative theory produced a correct result to warrant jury acceptance, i.e., a product of reliable principles and methods, Rule 702(c).

         Michael H. Graham, 5 Handbook of Fed. Evid. § 702:1 (7th ed.) (footnotes omitted). Under Rule 703, expert opinion may be based on three possible sources: firsthand knowledge; admitted evidence; and facts or data not otherwise admitted, if they are the kind of information on which experts in the particular field reasonably would rely in forming opinions on the subject. See 29 Fed. Prac. & Proc. Evid. (2d ed.) §6274. In the analysis under Rule 701 and Daubert, the court is tasked with determining that the opinion has the objective earmarks of scientific or technical reliability, not making a conclusive determination about whether the opinions ultimately are reliable or correct. Id. Thus, for instance, the Ninth Circuit has held that the district courts should, in the first instance, determine whether statistics offered are sufficiently probative of the ultimate fact in issue, regardless of the statistical significance levels associated with them. See Contreras v. City of Los Angeles, 656 F.2d 1267, 1273 (9th Cir. 1981) (citing Dothard v. Rawlinson, 433 U.S.321, 338 (Rehnquist, J., concurring)); see also In re High-Tech Employee Antitrust Litig.., No. 11-CV-02509-LHK, 2014 WL 1351040, at *15 (N.D. Cal. Apr. 4, 2014) (fact that variables were not statistically significant at the 1%, 5%, and 10% levels goes to the weight, not the admissibility of expert's model, even if those are the “conventional” levels statisticians typically use); Kadas v. MCI Systemhouse Corp., 255 F.3d 359, 362 (7th Cir.2001) (use of five percent test is arbitrary and does not govern admissibility).

         An expert is generally not permitted to opine on an ultimate issue of fact except in limited circumstances, since such opinions may “invade the province of” the jury. See Nationwide Transport Finance v. Cass Information Systems, Inc., 523 F.3d 1051, 1060 (9th Cir. 2008) (“evidence that merely tells the jury what result to reach is not sufficiently helpful to the trier of fact to be admissible”). Nor may an expert opine on questions which are matters of law for the court. See Id. at 1058 (deciding questions of law is the exclusive province of the trial judge); McHugh v. United Service Auto Assoc., 164 F.3d 451, 454 (9th Cir. 1999) (expert testimony cannot be used to provide the legal meaning or interpretation of insurance policy terms); Aguilar v. Int'l Longshoremen's Union Local No. 10, 966 F.2d 443, 447 (9th Cir. 1992) (expert opinion that reliance was reasonable and foreseeable were inappropriate subjects for expert testimony). However, as a practical matter, experts may express opinions based upon hypotheticals and information which would otherwise be inadmissible hearsay on its own. Additionally, experts can rely upon the opinions of other experts. See DataQuill Ltd. v. High Tech Computer Corp., 887 F.Supp.2d 999, 1026 (S.D. Cal. 2011) (“It is routine and proper for a damages expert in a technical patent case to rely on a technical expert for background.”); United States v. 1, 014.16 Acres of Land, More or Less, Situated in Vernon Cnty., State of Mo., 558 F.Supp. 1238, 1242 (W.D. Mo. 1983) aff'd, 739 F.2d 1371 (8th Cir. 1984) (reasonable to expect that experts will rely on the opinion of experts in other fields as background material, as permitted by FRE 703); Interwoven, Inc. v. Vertical Computer Sys., CV 10-04645 RS, 2013 WL 3786633, at *7 (N.D. Cal. July 18, 2013) (“Experts are, however, permitted to rely on hearsay evidence in coming to their conclusions, so long as an expert in the field would reasonably rely on that information”).

         Thus, while expert testimony cannot be used as an end-run around the rules of evidence to admit the underlying evidence, experts in a particular field routinely opine based upon a set of factual assumptions given to them. They need not be experts in all fields. Nor must they have personal knowledge of the factual background in the case. At trial, the proponent of the expert bears the burden of persuading the jury that the expert's opinion is, in fact, based upon a reasonable and convincing set of assumptions, or that the underlying facts upon which the expert's opinion is based exist. Thus, a jury is routinely charged:

[Expert] [o]pinion testimony should be judged just like any other testimony. You may accept it or reject it, and give it as much weight as you think it deserves, considering the witness's education and experience, the reasons given for the opinion, and all the other evidence in the case.

         Ninth Circuit Manual of Model Civil Jury Instructions, 2.11. And, at trial, an expert generally will not be called to opine until the evidence underlying the opinion has actually been admitted.

         Moreover, at the class certification stage, the Court does not make an ultimate determination of the admissibility of an expert's report for purposes of a dispositive motion or trial. Dukes v. Wal-Mart Stores, Inc. (Dukes II), 603 F.3d 571, 602 n. 22 (9th Cir. 2010) rev'd on other grounds by 564 U.S. 338 (2011); Millenkamp v. Davisco Foods Int'l, Inc., 562 F.3d 971, 979 (9th Cir. 2009). Rather, the court considers only whether the expert evidence is “useful in evaluating whether class certification requirements have been met.” Tait v. BSH Home Appliances Corp., 289 F.R.D. 466, 495-96 (C.D. Cal. 2012) (citing Ellis v. Costco Wholesale Corp., 657 F.3d 970, 982 (9th Cir. 2011)); see also Rai v. Santa Clara Valley Trans., 308 F.R.D. 245 (N.D. Cal. 2015). At class certification, “the relevant inquiry is a tailored Daubert analysis which scrutinizes the reliability of the expert testimony in light of the criteria for class certification and the current state of the evidence.” Rai, 308 F.R.D. at 264.

         III. IPP Motion for Class Certification

         IPPs seek to certify a Rule 23(b)(3) class defined as follows:

All persons and entities who, as residents of the United States and during the period from January 1, 2000 through May 31, 2011, indirectly purchased new for their own use and not for resale one of the following products which contained a lithium-ion cylindrical battery manufactured by one or more defendants or their co-conspirators: (i) a portable computer; (ii) a power tool; (iii) a camcorder; or (iv) a replacement battery for any of these products. Excluded from the class are any purchases of Panasonic-branded computers. Also excluded from the class are any federal, state, or local governmental entities, any judicial officers presiding over this action, members of their immediate families and judicial staffs, and any juror assigned to this action.
All non-federal and non-state governmental entities in California that, during the period from January 1, 2000 through May 31, 2011, indirectly purchased new for their own use and not for resale one of the following products which contained a lithium-ion cylindrical battery manufactured by one or more defendants or their co-conspirators: (i) a portable computer; (ii) a power tool; (iii) a camcorder; or (iv) a replacement battery for any of these products. Excluded from the class are any purchases of Panasonic-branded computers. Also excluded from the class are any federal, state, or local governmental ...

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