The Macondo spill also spawned securities fraud claims
The Macondo spill also spawned securities fraud claims

Modest decision

In Comcast Corp. v. Behrend, 133 S. Ct. 1426 (2013), a 5-4 majority — over an extraordinary joint dissent by Justices Ginsburg and Breyer — had to work hard to make a modest ruling. The Court held that plaintiffs seeking class treatment under Rule 23(b)(3) sometimes may have to plausibly link their theory of liability (the misconduct that caused damages) to the theory of class-wide damages (the estimate of the damages flowing from the misconduct) in order to obtain class certification.

I say emphatically that the Court did not hold that any plaintiff class seeking certification under Rule 23(b)(3) must prove damages on a class-wide basis. It said only that if a class cannot obtain class certification without establishing class-wide damages, then by golly it must show that it can establish class-wide damages.

I should know; I briefed and argued the case for the plaintiff class.

It gets worse

As the joint dissenters stressed, the majority actually changed the question it answered. The change occurred, without notice, between the time of oral argument, on November 5, 2012, and the announcement of the decision, on March 27, 2013. The issue on which the Court had granted review concerned whether or not the expert evidence that plaintiffs offer in support of class certification must past muster under Daubert v. Merrell Dow Pharmaceuticals, 509 U.S. 579 (1993).

The switch allowed the majority to sidestep the fundamental problem that, in the trial court and court of appeals, Comcast had never raised a Daubert challenge to the plaintiffs’ damages expert. Comcast had thus forfeited any complaint about admissibility under Daubert.

The majority thus could focus on whether it believed the plaintiffs had linked the theory of liability — that Comcast thwarted competition from a cable company that wanted to “overbuild” parts of Comcast’s large footprint in the Philadelphia area — with the expert’s damages model — which showed that the suppression of competition forced cable subscribers to pay supra-competitive rates.

Plaintiffs’ liability expert linked anti-competitive conduct to damages

The plaintiffs had provided the causal link but had done so not through the damages expert but through the liability expert. Because the entire case had until issuance of the Court’s opinion dealt only with admissibility of the damages expert’s opinions under Daubert, the briefing and argument paid scant attention to the linkage. The majority’s consequently incomplete understanding of the record facilitated, if it did not produce, its failure to locate the causal link.

Comcast doesn’t require class-wide proof of damages

The joint dissent went on to emphasize the limits of the majority’s opinion:

  • The predominance of common questions requirement in Rule 23(b)(3) “scarcely demands commonality as to all questions”. Comcast, 133 S. Ct. at 1436.
  • “[W]hen adjudication of questions of liability common to the class will achieve economies of time and expense, the predominance standard is generally satisfied even if damages are not provable in the aggregate.” Id. at 1437.
  • “Recognition that individual damages calculations do not preclude class certification under Rule 23(b)(3) is well nigh universal.” Id.
  • “In the mine run of cases, it remains the ‘black letter rule’ that a class may obtain certification under Rule 23(b)(3) when liability questions common to the class predominate over damages questions unique to class members.” Id.

And my favorite: “The Court’s ruling is good for this day and case only.” Id. (emphasis added).

Fifth Circuit decision

But the Fifth Circuit thought just the opposite. It said, in reviewing an order certifying a securities fraud class action against British Petroleum, the following:

  • “[I]n order to certify a class, the damages methodology . . . must ‘produce[] commonality of damages.'” Ludlow v. BP, P.L.C., No. 14-20420, slip op. at 11 (5th Cir. Sept. 8, 2015) (emphasis added) (quoting Comcast, 133 S. Ct. at 1434).
  • In Comcast, “the Court emphasized the necessity of establishing, before a class could be certified, congruence between theories of damages and liability.” Id. at 16 (emphasis in original).
  • Comcast requires “a damages model [to be] ‘susceptible of measurement across the entire class for purposes of Rule 23(b)(3),'” id. at 22 (quoting Comcast), and to “be applied uniformly across the class”, id. at 25.

The panel went further, explaining in a footnote that it believed Comcast compelled it to “ask whether in operation the commonality [of liability] is undone by the damages theory”. Id. at 11 n.36 (emphasis in original). But the court did not, in fact, ask that question or venture to answer it.

The panel instead ruled that the district court properly certified a class of people who bought BP stock after the Macondo spill in 2010 and that the court correctly refused to certify a class of people who bought before the spill, in each instance basing its decision on whether or not it believed the damages model adequately meshed with the theory of liability for securities fraud. The court gave no explanation for how or why the problems with the damages model “undid” the predominance of liability issues. Nor of course does the footnote undo the unqualified statements about Comcast‘s holding in the text.

The court thus misconstrued Comcast as requiring proof of damages on a class-wide basis in all Rule 23(b)(3) cases that seek damages.

The correct outcome

Although the panel got the holding of Comcast wrong and even though the confusion will vex class certification decisions in Louisiana, Mississippi, and Texas for so long as the Ludlow decision stands, the court did at least reach the right conclusion.

The plaintiffs in the post-spill class did present a damages model that linked the inflation of BP share prices to misrepresentations about the severity of the spill (the “flow rate” of hydrocarbons from the well into the Gulf of Mexico). The ones in the pre-spill class, on the other hand, could not distinguish between class members who would have bought BP shares even if BP had not misrepresented the quality of its safety programs and those less adventurous souls who would have spent their money on something else. Plus the theory of liability focused on non-price factors, undercutting the rationale for presuming the reliance element of securities fraud under Basic Inc. v. Levinson, 485 U.S. 224 (1988).

Those flaws relate more to liability than to damages and thus could have doomed certification even if Comcast did not exist.

An ending

The case that produced the Comcast decision reached an important milestone on the day after the Fifth Circuit’s ruling in Ludlow. United States District Judge John Padova, who has presided over the case since its filing in December 2003, granted final approval to a $50 million settlement.

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Photo of Barry Barnett Barry Barnett

Clients and colleagues call Barry Barnett an “incredibly gifted lawyer” (Chambers and Partners) who is “magic in the courtroom” (Who’s Who Legal), “the top antitrust lawyer in Texas” (Chambers and Partners), and “a person of unquestioned integrity” (David J. Beck, founder of Beck…

Clients and colleagues call Barry Barnett an “incredibly gifted lawyer” (Chambers and Partners) who is “magic in the courtroom” (Who’s Who Legal), “the top antitrust lawyer in Texas” (Chambers and Partners), and “a person of unquestioned integrity” (David J. Beck, founder of Beck Redden).

Barnett is a Fellow in the American College of Trial Lawyers, and Lawdragon has named him one of the top 500 lawyers in the United States three years in a row. Best Lawyers in America has honored him as “Lawyer of the Year” for Bet-the-Company Litigation (2019 and 2017) and Patent Litigation (2020) in Houston. Based in Texas and New York, Barnett has tried complex business disputes across the United States.

TRIAL COUNSEL
Barnett’s background, training, and experience make him indispensable to his clients. The small-town son of a Texas roughneck and grandson of a Texas sharecropper, Barnett “developed an unusual common sense about people, their motivations, and their dilemmas,” according to former client Michael Lewis.

Barnett has been historically recognized for his effectiveness and judgment. His peers chose him, for example, to the American College of Trial Lawyers and American Law Institute. His decades of trial and appellate work representing both plaintiffs and defendants have made him a master strategist and nimble tactician in complex disputes.

Barnett focuses on enforcement of antitrust laws, the “Magna Carta of free enterprise,” in Supreme Court Justice Thurgood Marshall’s memorable phrase. “Barry is one of the nation’s outstanding antitrust lawyers,” according to Joseph Goldberg, a member of the Private Antitrust Enforcement Hall of Fame. Named among Texas’s top ten antitrust lawyers of 2023, Business Today calls Barnett a “trailblazer” among the “distinguished legal minds” who “dedicate their skill and expertise to the maintenance of healthy competition in various sectors” of the Lone Star State’s booming economy. Barnett is also adept in energy and intellectual property matters and has battled for clients against a Who’s Who list of corporate behemoths, including Abbott Labs, Alcoa, Apple, AT&T, BlackBerry, Broadcom, Comcast, Dow, JPMorgan Chase, Samsung, and Visa.

Barnett commands a courtroom with calm and credibility and “is the perfect lawyer for bet the company litigation,” said Scott Regan, General Counsel of former client Whiting Petroleum. His performance before the Supreme Court in Comcast Corp. v. Behrend prompted the Court to withdraw the question on which it had granted review. The judge in a trial involving mobile phone technology called Barnett “one of the best” and that his opening statement the finest he had ever seen. Another trial judge told Barnett minutes after a jury returned a favorable verdict against the county’s biggest employer that he was one of the two best trial lawyers he’d ever come across—adding that the other one was dead.

COMPLETE PACKAGE
A versatile trial lawyer, Barnett knows how to handle a case all the way from strategic pre-suit planning to affirmance on appeal. He’s tried cases to verdict and then briefed and argued them when they went before appellate courts, including the Second, Third, Fifth, and Tenth Circuits, the Supreme Court of Louisiana, and (in the case of Comcast Corp. v. Behrend) the Supreme Court of the United States.

Barnett is a sought-after public speaker, often serving on panels and talking about topics like the trials of antitrust class actions and techniques for streamlining complex litigation. He also comments on trends in commercial litigation and the implications of major rulings for outlets such as NPR, Reuters, Law360, Corporate Counsel, and The Dallas Morning News. He’s even appeared in a Frontline program about underfunding of state pensions, authored chapters on “Fee Arrangements” and “Techniques for Expediting and Streamlining Litigation” (the latter with Steve Susman) in the ABA’s definitive treatise on Business and Commercial Litigation in Federal Courts, 5th, and commented on How Antitrust Enforcers Might Think Like Plaintiffs’ Lawyers.

HARD GRADERS
Clients and other hard graders have praised Barnett for his courtroom skills and legal acumen.

A client in a $100 million oil and gas case, which Barnett’s team won at trial and held on appeal, said Barnett and his team “presented a rare combination of strong legal intellect, common sense about right and wrong, and credibility in the courtroom.” David McCombs at Haynes and Boone said Barnett “has a natural presence that goes over well with juries and judges.”

Even former adversaries give Barnett high marks. Lead opposing counsel in a decade-long antitrust slugfest said “Barry is a highly skilled advocate. He understands what really matters in telling a narrative and does so in a very compelling manner.”

CIVIC ENGAGEMENT
Barnett relishes opportunities to collaborate with all kinds of people. At the Center for American and International Law (CAIL), founded by a former prosecutor at Nuremberg in 1947 and headquartered in the Dallas area, he has served on the Executive Committee, co-chaired the committee that produced CAIL’s first-ever strategic plan, supported CAIL’s Institute for Law Enforcement Administration and other development efforts, and proposed formation of a new Institute for Social Justice Law. CAIL’s former President David Beck said “Barry is extremely bright” and is “very well prepared in every lawsuit or professional task he undertakes.”

Barnett is also a Trustee of the New-York Historical Society, a Sterling Fellow at Yale, a member of the Yale University Art Gallery’s Governing Board, a winner of the Class Award for his work on behalf of his college class, and a proud contributor to the Yellow Ribbon Program at Harvard Law. Barnett’s pro bono work includes leading the trial team representing people who are at greatest risk of severe illness and death as a result of being exposed to the novel coronavirus SARS-CoV-2 while being detained in the Dallas County jail—work for which he received the NGAN Legal Advocacy Fund RBG Award.

At Susman Godfrey, Barnett has served on the firm’s Executive Committee, Employment Committee, and ad hoc committees on partner compensation, succession of leadership, and revision of the firm’s partnership agreement. He also twice chaired the Practice Development Committee.

KEEPING PERSPECTIVE
Barnett understands that clients face many pressures. Managing the stress is important, especially in matters that take years to resolve. He encourages clients to call him whenever they have a question or concern and to keep the inevitable ups and downs in perspective. He wants them to know that he will do his level best to help them achieve their goals. He also strives to foster trust and to make working with him a pleasure.

Cyrus “Skip” Marter, the General Counsel of Bonanza Creek in Denver and a former Susman Godfrey partner and client, said Barnett is “excellent about communicating with clients in a full and honest manner” and can “negotiate for his clients from a position of strength, because he is not afraid to take a case through a full trial on the merits.” Stacey Doré, the President of Hunt Utility Services and a former client, said that Barnett is “an excellent trial lawyer and the person you want to hire for your bet-the-company cases. He is client focused, responsive, and uniquely savvy about trial and settlement strategy.” A New York colleague said, “Barry is a joy to work with as co-counsel. He tackles complex procedural and factual hurdles capably, efficiently, and without drama.”

PERSONAL
Barnett’s wide-ranging experience and calm, down-to-earth approach enable him to connect with clients, judges, jurors, witnesses, and even opposing counsel. He grew up in Nacogdoches, Texas. He co-captained his high school varsity football team as an All-East Texas middle linebacker while also serving as the Editor of Key Club’s Texas-Oklahoma District, won the Best Typist award, took the History Team to glory, and sang in the East Texas All Region Choir. As Dan Kelly of client Vistra Corp. put it, Barnett is “a great person to be around.”

Barnett is steady and loyal. He has practiced at Susman Godfrey his entire career. He and his wife Nancy live in Dallas and enjoy spending time in Houston and New York. Their daughter works for H-E-B in Houston, and their son is a Haynes and Boone transactions lawyer in Dallas.

As a member of Ivy League championship football teams in his junior and senior years at Yale and a parent of two Yalies, Barnett has no trouble choosing sides for “The Game” in November. And he knows how important fighting all the way to the end is. On his last play from scrimmage, in the waning minutes of The Game on Nov. 22, 1980, he recovered a Crimson fumble.

Yale won, 14-0.