Cordes & Co. v. A.G. Edwards & Sons, Inc.

06-2143-cv
Cordes & Co. v. A.G. Edwards & Sons, Inc.
UNITED STATES COURT OF APPEALS 1
FOR THE SECOND CIRCUIT 2
August Term, 2006 3
(Argued: March 19, 2007 Decided: September 11, 2007) 4
Docket No. 06-2143-cv 5
------------------------------------- 6
CORDES & COMPANY FINANCIAL SERVICES, INC. and EQUALNET 7
COMMUNICATIONS CORPORATION, on behalf of themselves and all 8
others similarly situated, 9
Plaintiffs-Appellants, 10
- v - 11
A.G. EDWARDS & SONS, INC., BANCBOSTON ROBERTSON STEPHENS & 12
COMPANY, BEAR STEARNS & CO., CHASE HAMBRECHT & QUIST, INC., CIBC 13
OPPENHEIMER CORP., COWEN & CO., CREDIT SUISSE FIRST BOSTON 14
CORPORATION, DB ALEX. BROWN LLC formerly known as BT ALEX BROWN 15
INC., DONALDSON, LUFKIN & JENRETTE, INC., EVEREN SECURITIES, 16
INC., THE GOLDMAN SACHS GROUP, INC., HANIFEN INHOFF INC., ING 17
BARINGS LLC, J.C. BRADFORD & CO., J.P. MORGAN SECURITIES, INC., 18
JEFFERIES & COMPANY, INC., JOHNSON RICE & COMPANY, LEGG MASON 19
WOOD WALKER INC., LEHMAN BROTHERS INC., MERRILL LYNCH & CO., 20
MORGAN STANLEY DEAN WITTER & CO., NATIONSBANC MONTGOMERY 21
SECURITIES, PAINE WEBBER GROUP, INC., PIPER JAFFRAY & CO., INC., 22
PRUDENTIAL SECURITIES INCORPORATED, RAYMOND JAMES & ASSOCIATES, 23
INC., SALOMON SMITH BARNEY, INC. and UBS WARBURG LLC, 24
Defendants-Appellees. 25
------------------------------------- 26
Before: SACK, B.D. PARKER, and HALL, Circuit Judges. 27
Appeal from a Memorandum and Order of the United States 28
District Court for the Southern District of New York (Lawrence M. 29
McKenna, Judge) denying the plaintiffs' motion for class 30
certification pursuant to Federal Rule of Civil Procedure 23. We 31
conclude that although the plaintiffs do not fall within the 32

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2
definition of the class as set forth in the complaint, as 1
assignees of class members who brought the suit, they are not 2
categorically excluded from acting as class representatives. We 3
also conclude that the district court erred with respect to the 4
basis on which it concluded that individual questions predominate 5
over common ones. 6
Reversed and remanded. 7
ROGER W. KIRBY, Kirby McInerney & Squire 8
LLP (Randall K. Berger, Henry P. 9
Monaghan, of counsel), New York, NY, for 10
Plaintiffs-Appellants. 11
ROBERT F. WISE, JR., Davis Polk & 12
Wardwell (Edmund Polubinski III, 13
Christopher Withers, Kavita Kumar, of 14
counsel), New York, NY, for Defendant- 15
Appellee Morgan Stanley (sued as Morgan 16
Stanley Dean Witter & Co.). 17
James B. Weidner, Clifford Chance US LLP 18
(Jon R. Roelke, Jeffrey H. Drichta, of 19
counsel), New York, NY, for Defendants- 20
Appellees Merrill Lynch, Pierce Fenner & 21
Smith Incorporated, and Merrill Lynch & 22
Co. 23
Gandolfo V. DiBlasi, Sullivan & Cromwell 24
LLP (Steven L. Holley, Penny Shane, 25
David Rein, of counsel), New York, NY, 26
for Defendant-Appellee Goldman, Sachs & 27
Co. (sued as The Goldman Sachs Group, 28
Inc.). 29
Robert B. McCaw, Wilmer Cutler Pickering 30
Hale and Dorr LLP (Ali M. Stoeppelwerth, 31
Fraser L. Hunter, Jr., of counsel), New 32
York, NY, for Defendant-Appellee 33
Citigroup Global Markets, Inc. (sued as 34
Salomon Smith Barney, Inc.). 35
Jay B. Kasner, Skadden, Arps, Slate, 36
Meagher & Flom LLP (Shepard Goldfein, 37
Gary A. MacDonald, of counsel), New 38
York, NY, for Defendants-Appellees CIBC 39

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3
World Markets Corp. (sued as CIBC 1
Oppenheimer Corp.), ABN AMRO Inc. (as 2
successor-in-interest to ING Barings 3
LLC) and Cowen and Company, LLC (f/k/a 4
SG Cowen & Co., LLC and SG Cowen 5
Securities Corp.; sued as Cowen & Co.). 6
Gregory A. Markel, Cadwalader, 7
Wickersham & Taft LLP (Ronit Setton, 8
Amanda Kosowsky, of counsel), New York, 9
NY, for Defendants-Appellees Banc of 10
America Securities LLC (sued as 11
NationsBanc Montgomery Securities) and 12
Robertson Stephens, Inc. (sued as 13
BancBoston Robertson, Stephens & 14
Company). 15
Bradley J. Butwin, O'Melveny & Myers 16
LLP, New York, NY, for Defendants- 17
Appellees UBS Securities LLC f/k/a UBS 18
Warburg, LLC (sued as UBS Warburg LLC), 19
J.C. Bradford & Co. and UBS Financial 20
Services Inc. f/k/a UBS PaineWebber Inc. 21
(sued as Paine Webber Group, Inc.). 22
A. Robert Pietrzak, Sidley Austin LLP 23
(Joel M. Mitnick, Benjamin R. Nagin, of 24
counsel), New York, NY, for Defendant- 25
Appellee Bear, Stearns & Co. Inc. 26
Thomas J. Kavaler, Cahill Gordon & 27
Reindel LLP (Elai Katz, of counsel), New 28
York, NY, for Defendant-Appellee 29
Prudential Equity Group, LLC (sued as 30
Prudential Securities Incorporated). 31
Joseph Ingrisano, Kutak Rock LLP (Robert 32
A. Jaffe, of counsel), Washington, D.C., 33
for Defendant-Appellee A.G. Edwards & 34
Sons, Inc. 35
Charles E. Koob, Simpson Thacher & 36
Bartlett LLP (Joseph F. Tringali, of 37
counsel), New York, NY, for Defendants- 38
Appellees Lehman Brothers Inc. and J.P. 39
Morgan Securities Inc. (sued as Chase 40
Hambrecht & Quist). 41
Jeremy G. Epstein, Shearman & Sterling 42
LLP (Kenneth M. Kramer, Richard F. 43
Schwed, of counsel), New York, NY, for 44

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4
Defendants-Appellees Credit Suisse 1
Securities (USA) LLC, f/k/a Credit 2
Suisse First Boston LLC (sued as Credit 3
Suisse First Boston Corporation) and 4
Donaldson Lufkin & Jenrette, Inc. 5
Jay N. Varon, Foley & Lardner LLP 6
(Samuel J. Winer, Bryan B. House, of 7
counsel), Washington, D.C., for 8
Defendants-Appellees EVEREN Securities, 9
Inc., Raymond James & Associates, Inc. 10
and Piper Jaffray & Co. (sued as U.S. 11
Bancorp Piper Jaffray Inc.). 12
Douglas A. Rappaport, DLA Piper US LLP 13
(Lewis A. Noonberg, Philip Huynh, of 14
counsel), New York, NY, for Defendant- 15
Appellee Deutsche Bank Securities, Inc. 16
(sued as BT Alex. Brown). 17
Bernard J. Garbutt III, Morgan Lewis & 18
Bockius LLP (Leza M. DiBella, of 19
counsel), New York, NY, for Defendant- 20
Appellee Jefferies & Company, Inc. 21
Charles O. Monk II, Saul Ewing LLP 22
(Joseph M. Fairbanks, of counsel), 23
Baltimore, MD, for Defendant-Appellee 24
Legg Mason Wood Walker, Inc. 25
David Radlauer, Jones, Walker, Waechter, 26
Poitevent, Carrere & Denegre, L.L.P. 27
(Mark A. Cunningham, of counsel), New 28
Orleans, LA, for Defendant-Appellee 29
Johnson Rice & Company. 30
L. Norton Cutler, Perkins Coie, LLP, 31
Denver, CO, for Defendant-Appellee 32
Hanifen Imhoff Inc. 33
SACK, Circuit Judge: 34
The first of the named plaintiffs in this lawsuit -- 35
Cordes & Company Financial Services, Inc. ("Cordes") -- is the 36
assignee of an antitrust claim against the defendants formerly 37
asserted by Western Pacific Airlines Inc. ("Western Pacific"). 38
The interests in this litigation of the second named-plaintiff -- 39

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5
EqualNet Communications Corporation ("EqualNet") -- are being 1
pursued by the Unsecured Creditors Trust ("Creditors Trust") of a 2
subsidiary of EqualNet: EqualNet Corp. ("EN"). Creditors Trust 3
acquired a two-thirds stake in any proceeds EqualNet obtains 4
through this lawsuit. The plaintiffs allege in their 5
Consolidated Class Action Complaint (the "Complaint") that the 6
defendants, who are initial public offering ("IPO") underwriters, 7
violated Section 1 of the Sherman Act, 15 U.S.C. § 1, by agreeing 8
to charge all corporations conducting mid-size IPOs who used 9
their services a fee equal to 7% of the proceeds of the offering. 10
Cordes and Creditors Trust sought class certification pursuant to 11
Federal Rule of Civil Procedure 23. 12
The United States District Court for the Southern 13
District of New York (Lawrence M. McKenna, Judge) denied the 14
motion for class certification because, it concluded, two Rule 23 15
requirements -- the adequacy requirement of Rule 23(a)(4) and the 16
predominance requirement of Rule 23(b)(3) -- were not met. 17
Rule 23(a)(4) provides that it is a prerequisite to 18
pursuit of an action as a class that "the representative parties 19
will fairly and adequately protect the interests of the class." 20
Fed. R. Civ. P. 23(a)(4). The district court reasoned that 21
because Cordes and Creditors Trust are assignees of the entities 22
that instituted this lawsuit and are not themselves members of 23
the putative class, they are not qualified to act as 24
representatives of the class. For reasons set forth below, we 25
think that the fact that the assignee-plaintiffs do not 26

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6
themselves fall within the definition of the class as set forth 1
in the Complaint does not, ipso facto, foreclose their ability to 2
act as class representatives in lieu of the entities that 3
originally brought the claims, both of them members of the class. 4
On remand, the district court should decide whether, on the facts 5
presented in this case, Cordes and Creditors Trust are each 6
adequate representatives of the class. 7
Rule 23(b)(3) requires, inter alia, that for a lawsuit 8
to be pursued as a class action, "the questions of law or fact 9
common to the members of the class [must] predominate over any 10
questions affecting only individual members . . . ." Fed. R. 11
Civ. P. 23(b)(3). The district court concluded that the 12
plaintiffs failed to establish that this litigation meets that 13
requirement because they did not offer evidence to establish that 14
antitrust injury -- one of the elements of the antitrust claim 15
alleged in the Complaint -- could be proved by a method common to 16
the class. 17
The antitrust injury element raises both factual 18
questions related to whether the plaintiff has suffered harm and 19
legal questions related to whether that harm is "of the type the 20
antitrust laws were intended to prevent and that flows from that 21
which makes defendants' acts unlawful." Brunswick Corp. v. 22
Pueblo Bowl-O-Mat, Inc., 429 U.S. 477, 489 (1977). We think that 23
the district court should have distinguished between antitrust 24
injury's factual questions -- as to which both parties offered 25
evidence -- and its legal questions -- as to which neither party 26

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7
offered evidence. We conclude, for reasons set forth below, that 1
the legal questions raised by the antitrust injury element of 2
this case are common to the class. On remand, the district court 3
should therefore decide whether the factual questions are common 4
to the class. And if the court determines that the factual 5
questions relevant to antitrust injury here are individual to 6
each class member, the court should then determine (1) whether 7
common questions nonetheless predominate, and (2) whether 8
certification of a part of the case would be appropriate even if 9
certification of the whole would not be. 10
BACKGROUND 11
Cordes, the first named-plaintiff, purchased the 12
interest supporting its claim in this lawsuit from the bankruptcy 13
estate of Western Pacific. In 1995, Western Pacific engaged in 14
an IPO of its capital stock, the proceeds of which were 15
approximately $47 million. Two years later, Western Pacific 16
filed for Chapter 11 bankruptcy protection in the United States 17
Bankruptcy Court for the District of Colorado. In 1998, that 18
proceeding was converted to a liquidation proceeding under 19
Chapter 7. In 2001, the trustee of the estate in bankruptcy 20
filed a complaint in this action in the United States District 21
Court for the Southern District of New York. The trustee alleged 22
that beginning in the mid-1990s, the defendants, investment banks 23
that had underwritten mid-size IPOs, engaged in a horizontal 24
price-fixing scheme of which Western Pacific was a victim during 25
the course of its IPO. In 2004, the bankruptcy court entered an 26

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8
order permitting Western Pacific's Chapter 7 trustee to sell by 1
auction Western Pacific's claim and interest in the antitrust 2
litigation. The bankruptcy court required, inter alia, that the 3
winning bidder be willing to act as a named class representative. 4
Cordes acquired Western Pacific's claim and interest, with the 5
approval of the bankruptcy court, for $11,000. The instrument 6
memorializing Western Pacific's assignment of its claim stated 7
that Cordes agreed to pursue the litigation in good faith as a 8
named class representative. 9
In 1995, EqualNet, the second named-plaintiff, held an 10
IPO of its capital stock. It, too, subsequently filed for 11
bankruptcy protection under Chapter 11. The United States 12
Bankruptcy Court for the Southern District of Texas converted the 13
Chapter 11 proceeding to Chapter 7. EN, EqualNet's subsidiary, 14
also filed for bankruptcy, which resulted in the formation of 15
Creditors Trust. Creditors Trust, which is pursuing EqualNet's 16
former claims, acquired a two-thirds interest in EqualNet's 17
potential recovery in this case by foreclosing on security 18
interests that EN held in certain assets of EqualNet. 19
The plaintiffs allege in the Complaint that the 20
defendants, IPO underwriters, fixed their underwriting fees at 21
seven percent of the IPO proceeds for all corporations conducting 22
mid-size IPOs -- i.e., IPOs generating between $20,000,000 and 23
$80,000,000 in proceeds. They assert that the defendants thereby 24

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1 Section 1 of the Sherman Act makes illegal any "contract,
combination in the form of trust or otherwise, or conspiracy, in
restraint of trade or commerce among the several States, or with
foreign nations . . . ." 15 U.S.C. § 1.
9
violated Section 1 of the Sherman Act, 15 U.S.C. § 1.1 More than 1
ninety percent of issuers of mid-size IPOs since 1994 were, 2
according to the Complaint, charged such a fee in that amount. 3
The plaintiffs further allege that IPOs are managed by a 4
syndicate of underwriters, each of which has a lead manager and 5
several co-managers. Because each defendant participated as lead 6
manager for some IPOs and as co-manager for others, each was 7
allegedly able to monitor the fees charged by other defendant 8
underwriters. The plaintiffs also submitted expert testimony to 9
support their allegations that the defendants entered into a 10
horizontal price-fixing agreement and have been able to enforce 11
it. 12
Western Pacific and EqualNet brought the lawsuit 13
pursuant to Rule 23 of the Federal Rules of 14
Civil Procedure, on their own behalf and as 15
representatives of a class . . . of all 16
corporations and other entities (excluding 17
defendants and their respective parents, 18
subsidiaries and affiliates and issuers of 19
government securities) who, during the 20
[period from at least January 1994 through 21
the present], issued an initial public 22
offering of securities with an aggregate 23
value between $20 million and $80 million 24
using the services of any defendant. 25
Compl. ¶ 50. After the assignment of Western Pacific's and 26
EqualNet's claims and interests in this litigation, Cordes and 27

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10
Creditors Trust filed a motion to certify a class of plaintiffs 1
pursuant to Rule 23. 2
Cordes and Creditors Trust submitted a declaration of 3
their expert, Gustavo Bamberger, in an attempt to establish that 4
they could prove the elements of their claim by common proof and 5
that those elements are predominant, as required for 6
certification under Rule 23(b)(3). Bamberger reported that he 7
had been asked whether he could measure the damages suffered by 8
each class member "by the use of a formula common to all class 9
members." Bamberger Decl. ¶ 3, Sept. 16, 2004. He responded in 10
the affirmative. Id. Damages in this case were, he said, the 11
difference between the fee actually paid and the "but-for fee" -- 12
the fee that would have been charged to the putative class 13
members in connection with the IPO in the absence of the alleged 14
conspiracy. Id. at ¶ 8. Bamberger asserted that he could devise 15
a common formula for deriving the but-for fee by (1) establishing 16
a benchmark fee from a set of prices paid in temporal or 17
geographic isolation from the conspiracy, and (2) applying a 18
multiple regression analysis to isolate the "explanatory 19
variables" that influence the benchmark fee. Id. ¶¶ 9, 16. The 20
but-for fee for each class member could then be determined by 21
substituting the appropriate values for the explanatory 22
variables. Id. ¶¶ 20-24. 23
The defendants countered with an expert report prepared 24
by Robert D. Willig (the "Willig Report"). The defendants asked 25
Willig "whether the plaintiffs' allegations that members of the 26

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11
proposed issuer class have been injured by the alleged price- 1
fixing conspiracy are capable of being proved on a common basis 2
for the purported class members." Willig Report at 2. Willig 3
asserted in response that in order to determine whether a class 4
member was injured, one must first determine the "but-for gross 5
spread" -- that is, the fee that the underwriter would have 6
charged but for the conspiracy. Id. at 11-12. But, according to 7
Willig, calculating the but-for gross spread requires an 8
individualized, plaintiff-by-plaintiff analysis of ten factors, 9
including underwriter costs, price stabilization, and the risk of 10
the offering. 11
The district court denied certification. The court 12
first determined that neither Cordes nor Creditors Trust 13
satisfied the adequacy prerequisite of Rule 23(a)(4). The court 14
noted that "a class representative must be a member of the class" 15
and that both Cordes and Creditors Trust were assigned their 16
interests in the litigation. In re Pub. Offering Fee Antitrust 17
Litig., 2006 WL 1026653, at *2-3, 2006 U.S. Dist. LEXIS 21076, at 18
*9, *11-13 (S.D.N.Y. Apr. 18, 2006) (the "District Court 19
Opinion"), amended by 2006 WL 1120498, 2006 U.S. Dist. LEXIS 20
24321 (S.D.N.Y. Apr. 26, 2006). Assuming for purposes of its 21
analysis that Cordes and Creditors Trust met the other class 22
certification qualifications, it ruled that they were not members 23
of the proposed class and thus could not represent it. Id. at 24
*4, 2006 U.S. Dist. LEXIS 21076, at *13. Treating class 25
membership as a transferable asset could, in the words of the 26

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2 In In re Initial Pub. Offering Sec. Litig., 471 F.3d 24
(2d Cir. 2006), decided after the district court's ruling, we
perceived "a major shift away from the . . . 'not fatally flawed'
language of . . . Visa Check." Id. at 37. "[W]e can no longer
continue to advise district courts that . . . an expert's report
12
court, "lead to a very serious problem indeed in the class action 1
field." Id. at *4, 2006 U.S. Dist. LEXIS 21076, at *13-14. 2
The district court concluded further that Rule 3
23(b)(3)'s predominance requirement also had not been met. 4
Cordes and Creditors Trust argued that because their expert had 5
provided a formula for assessing damages for all class members, 6
they had also established that they would be "able to prove 7
antitrust impact by common proof." Id. at *8, 2006 U.S. Dist. 8
LEXIS 21076, at *26-27. The district court rejected this 9
argument because the "plaintiffs [were] ignoring the distinction 10
between antitrust injury or impact, on the one hand, and damages, 11
on the other." Id., 2006 U.S. Dist. LEXIS 21076, at *26. Each 12
expert had "been asked, and ha[d] answered, meaningfully 13
different questions." Id., 2006 U.S. Dist. LEXIS 21076, at *27. 14
Although the court "[a]ccept[ed] both opinions as 'not fatally 15
flawed' and 'sufficiently reliable,'" only the defendants' 16
expert's analysis, the court concluded, "addresses the question 17
before the Court -- which is whether antitrust injury or impact 18
can be proved by evidence common to the class." Id., 2006 U.S. 19
Dist. LEXIS 21076, at *27-28 (quoting In re Visa 20
Check/MasterMoney Antitrust Litig., 280 F.3d 124, 135 (2d Cir. 21
2001) ("Visa Check")).2 "The questions are different," the court 22

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will sustain a plaintiff's burden so long as it is not 'fatally
flawed . . . .'" Id. at 40. The use of the phrase by the
district court does not affect our analysis, however, and we
therefore do not address it further below.
3 Cordes and Creditors Trust contended, as they do on
appeal, that when faced with allegations of a horizontal price-
fixing conspiracy, we should presume that the entire class
suffered antitrust injury. We need not evaluate that argument in
order to resolve the merits of this appeal, and therefore express
no view as to it.
13
continued, "because there is considerabl[y more] leeway allowed 1
in proving damages, once antitrust liability is established, than 2
is permitted in proving antitrust liability." Id., 2006 U.S. 3
Dist. LEXIS 21076, at *28. 4
Cordes and Creditors Trust, relying on Visa Check, also 5
argued that certification was appropriate because common 6
questions regarding the nature of the conspiracy in a price- 7
fixing case predominate over all other questions, including those 8
regarding injury. The court concluded, however, that Visa Check 9
supported only the proposition that the need for individualized 10
inquiry into damages should not prevent certification of a class 11
with common questions on liability.3 Based on its conclusion 12
that Cordes and Creditors Trust did not establish that in this 13
case there are common questions on liability, the district court 14
rejected this argument, too. 15
Cordes and Creditors Trust petitioned this Court, 16
pursuant to Fed. R. Civ. P. 23(f), to hear an interlocutory 17
appeal of the denial of class certification under Rule 23(f). On 18
August 1, 2006, a panel of this Court granted the petition. 19

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14
DISCUSSION 1
I. Standard of Review 2
We review a district court's denial of class 3
certification for abuse of discretion. In re Initial Pub. 4
Offering Sec. Litig., 471 F.3d 24, 31 (2d Cir. 2006) ("IPO 5
Securities"). We also apply abuse of discretion review to a 6
district court's "subsidiary rulings on each of the six 7
requirements for a Rule 23(b)(3) class." Id. at 31-32. "A 8
district court by definition abuses its discretion when it makes 9
an error of law." Koon v. United States, 518 U.S. 81, 100 10
(1996). Findings of fact upon which the district court bases a 11
Rule 23 determination are reviewed for clear error, legal 12
conclusions de novo. See IPO Securities, 471 F.3d at 40-41. 13
II. Denial of Class Certification 14
Two questions are presented to us on this interlocutory 15
appeal: (A) whether the district court misconstrued Rule 23(a)'s 16
adequacy requirement, and (B) whether it misconstrued Rule 17
23(b)(3)'s predominance requirement, adversely in each case to 18
Cordes and Creditors Trust. 19
A. Prerequisites to a Class Action -- Adequacy of Representation 20
Rule 23(a) sets forth four "[p]rerequisites to a 21
[c]lass [a]ction": 22
(1) numerosity (a "class [so large] that 23
joinder of all members is impracticable"); 24
(2) commonality ("questions of law or fact 25
common to the class"); (3) typicality (named 26
parties' claims or defenses "are 27
typical . . . of the class"); and (4) 28
adequacy of representation (representatives 29

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15
"will fairly and adequately protect the 1
interests of the class"). 2
Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 613 (1997) (quoting 3
Fed. R. Civ. P. 23(a)). The defendants do not contest that the 4
first three prerequisites are met here. We therefore confine our 5
consideration to the fourth -- adequacy of representation. 6
Determination of adequacy typically "entails inquiry as to 7
whether: 1) plaintiff's interests are antagonistic to the 8
interest of other members of the class and 2) plaintiff's 9
attorneys are qualified, experienced and able to conduct the 10
litigation." Baffa v. Donaldson, Lufkin & Jenrette Sec. Corp., 11
222 F.3d 52, 60 (2d Cir. 2000). This process "serves to uncover 12
conflicts of interest between named parties and the class they 13
seek to represent." Amchem, 521 U.S. at 625. 14
The district court did not find it necessary to engage 15
in either part of the typical inquiry. The court decided that, 16
irrespective of whether Cordes and Creditors Trust could satisfy 17
the Baffa factors, they cannot be representatives of the class 18
because they do not themselves fit within the definition of the 19
class as set forth in the Complaint. 20
It is plain that Cordes and the Creditors 21
Trust are not members of the proposed issuer 22
class and that, as a consequence -- and 23
assuming arguendo that they meet the other 24
qualifications for class representation -- 25
they cannot represent the issuer class. 26
Plaintiffs in response cite the27
undisputed proposition that antitrust claims 28
are assignable. That is beside the point. 29
To allow Cordes or the Creditors Trust to 30
represent the proposed class would, in 31

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16
effect, treat class membership as a 1
transferable asset, and that could plainly 2
lead to very serious problems indeed in the 3
class action field. 4
District Court Opinion, 2006 WL 1026653, at *4, 2006 U.S. Dist. 5
LEXIS 21076, at *13-14 (footnote omitted). 6
The defendants urge us to adopt the district court's 7
conclusion, arguing (1) that Cordes and Creditors Trust are not 8
themselves members of the defined class; (2) in light of the 9
general principle that only a class member can adequately 10
represent the class, Cordes and Creditors Trust cannot represent 11
the class; and (3) "to allow the class action device to become a 12
mechanism for trafficking in litigation would fundamentally 13
undermine the administration of justice in federal courts." Def. 14
Br. at 18. We disagree. 15
1. The Ability of Assignees to Serve as Class 16
Representatives. "To have standing to sue as a class 17
representative it is essential that a plaintiff . . . be a part 18
of that class, that is, he must possess the same interest and 19
suffer the same injury shared by all members of the class he 20
represents." Schlesinger v. Reservists Comm. to Stop the War, 21
418 U.S. 208, 216 (1974) (citations omitted); see also Gen. Tel. 22
Co. of Sw. v. Falcon, 457 U.S. 147, 156 (1982) (quoting 23
Schlesinger, 418 U.S. at 216). When Western Pacific and EqualNet 24
brought this lawsuit as putative class representatives, see 25
Complaint ¶ 50, they were indisputably members of the class they 26
sought to represent. We conclude that the subsequent assignment 27

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4 The trustee of an estate in bankruptcy under Chapter 7 is
required to "collect and reduce to money the property of the
estate . . . and close such estate as expeditiously as is
compatible with the best interests of parties in interest." 11
U.S.C. § 704(a)(1). "Under 11 U.S.C. § 541, the rights of action
of the debtor pass to the estate created by the commencement of
the bankruptcy proceeding . . . ." Mitchell Excavators, Inc. by
Mitchell v. Mitchell, 734 F.2d 129, 131 (2d Cir. 1984). The
trustee may "reduce to money" the "rights of action of the
debtor" by litigating them on behalf of the estate, or, as the
defendants concede, by assigning the rights of action to third
parties. See Def. Br. at 23; see also Integrated Solutions, Inc.
v. Serv. Support Specialties, Inc., 124 F.3d 487, 493-95 (3d Cir.
1997) (recognizing that property in the bankrupt's estate is
alienable insofar as it would have been alienable outside the
bankruptcy context).
17
of their claims and interests in this litigation to Cordes and 1
Creditors Trust, respectively, did not deprive Cordes and 2
Creditors Trust of the ability, as assignees, to continue to seek 3
recognition as representatives of the class. 4
a. Cordes and Creditors Trust's standing to pursue 5
these claims as a class action. 6
The defendants do not contest the validity of the 7
assignments of the bankrupts' antitrust claims to Cordes and 8
Creditors Trust in this instance.4 See Def. Br. at 23; see also 9
D'Ippolito v. Cities Serv. Co., 374 F.2d 643, 647 (2d Cir. 1967) 10
("Antitrust claims have been held assignable."). It is 11
undisputed that Cordes and Creditors Trust acquired through 12
Western Pacific's and EqualNet's bankruptcy proceedings all or a 13
portion of whatever substantive rights Western Pacific and 14
EqualNet held at the time of their respective bankruptcies to 15

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5 As the defendants put it in their brief:
The district court did not suggest that
[Cordes, as] an owner of a claim by
assignment[,] does not possess a right to
bring suit individually to recover the
proceeds of [its] claim. Nor do plaintiffs
contend that the district court's order bars
them from proceeding individually or
receiving the proceeds to which their
assignors would be entitled should there be a
class recovery. Thus, the district court did
not affect any substantive right to recovery
that they acquired by assignment.
Def. Br. at 23 (footnote omitted; emphasis in original).
6 Several doctrines "'cluster about Article III -- not only
standing but mootness, ripeness, political question, and the like
. . . .'" Allen v. Wright, 468 U.S. 737, 750 (1984) (quoting
Vander Jagt v. O'Neill, 699 F.2d 1166, 1178-79 (D.C. Cir. 1983)).
Article III standing, which is "perhaps the most important of
these doctrines," id., requires, at an "irreducible
constitutional minimum," that the plaintiff suffered injury-in-
fact, "fairly traceable" to the defendant's acts, and redressable
by a decision in the plaintiff's favor, in order for a federal
court to address the dispute, Lujan v. Defenders of Wildlife, 504
U.S. 555, 560-61 (1992) (internal quotation marks and brackets
omitted).
18
recover for the injuries alleged in the Complaint.5
1
Nevertheless, the defendants argue, because neither Cordes nor 2
Creditors Trust is itself a member of the class as pleaded, 3
neither has standing to act as a class representative. 4
Standing has both constitutional dimensions rooted in 5
Article III's Case or Controversy Clause6 and prudential 6
dimensions that are "closely related to Art. III concerns but 7
[are] essentially matters of judicial self-governance." Warth v. 8
Seldin, 422 U.S. 490, 498-500 (1975). The rule that "a class 9
representative must be part of the class," Falcon, 457 U.S. at 10
156 (citation and internal quotation marks omitted), is one of 11

-- 18 of 38 --

7 In some circumstances, requiring class representatives to
be members of the class may also ensure that the litigation
complies with Article III limits on federal jurisdiction. The
Supreme Court referred to a possible connection between standing
to represent a class, Rule 23(a), and Article III standing in
Kremens v. Bartley, 431 U.S. 119, 131 n.12 (1977). See also
O'Shea v. Littleton, 414 U.S. 488, 494 (1974) ("[I]f none of the
named plaintiffs purporting to represent a class establishes the
19
prudential standing, related to the broader principle that "the 1
plaintiff generally must assert his own legal rights and 2
interests, and cannot rest his claim to relief on the legal 3
rights or interests of third parties," Warth, 422 U.S. at 499; 4
see also Allen v. Wright, 468 U.S. 737, 751 (1984) (recognizing 5
"the general prohibition on a litigant's raising another person's 6
legal rights" as one of "several judicially self-imposed limits 7
on the exercise of federal jurisdiction"). This principle 8
requires in the class action setting that "[a]n individual 9
litigant seeking to maintain a class action . . . meet 'the 10
prerequisites of numerosity, commonality, typicality, and 11
adequacy of representation' specified in Rule 23(a)." Falcon, 12
457 U.S. at 156 (quoting Gen. Tel. Co. of N.W., Inc. v. EEOC, 446 13
U.S. 318, 330 (1980)). "These requirements effectively 'limit 14
the class claims to those fairly encompassed by the named 15
plaintiff's claims.'" Id. (quoting Gen. Tel. Co. of N.W., Inc., 16
446 U.S. at 330); see also id. ("'[A] class representative must 17
be part of the class and "possess the same interest and suffer 18
the same injury" as the class members.'" (quoting East Tex. Motor 19
Freight Sys. v. Rodriguez, 431 U.S. 395, 403 (1977) (quoting 20
Schlesinger, 418 U.S. at 216))).7
21

-- 19 of 38 --

requisite of a case or controversy with the defendants, none may
seek relief on behalf of himself or any other member of the
class." (citing, inter alia, Bailey v. Patterson, 369 U.S. 31,
32-33 (1962))); Lynch v. Baxley, 744 F.2d 1452, 1456 (11th Cir.
1984) ("If the named plaintiff seeking to represent a class fails
to establish the requisite case or controversy, he may not seek
relief on his behalf or on that of the class." (citing O'Shea,
414 U.S. at 494)); DuPree v. United States, 559 F.2d 1151, 1153
(9th Cir. 1977) ("When the suit takes the form of a class action,
Article III requires that the representative or named plaintiff
must share the same injury . . . ." (citing Warth, 422 U.S. at
502)).
20
We return, then, to the basic principle that "[t]o have 1
standing to sue as a class representative it is essential that a 2
plaintiff must be a part of that class, that is, he must possess 3
the same interest and suffer the same injury shared by all 4
members of the class he represents." Schlesinger, 418 U.S. at 5
216 (citations omitted); see also Fed. R. Civ. P. 23(a) 6
(providing that "[o]ne or more members of a class may sue or be 7
sued as representative parties" only if the four prerequisites of 8
subsection (a) are met). Western Pacific and EqualNet were both 9
members of the class. As a result of Western Pacific's and 10
EqualNet's assignments of their respective claims and interests 11
in this litigation to Cordes and Creditors Trust, Cordes and 12
Creditors Trust stood before the district court in the shoes of 13
Western Pacific and EqualNet, for the purposes of this 14
litigation, as assimilated members of the class. By virtue of 15
the assignments, they do, as Western Pacific and EqualNet did, 16
possess the same interest and thus may continue to assert a claim 17
for the same injury shared by all members of the class. 18

-- 20 of 38 --

21
The fundamental requirement, in other words, is that 1
the "class claims [be] 'fairly encompassed' within" the 2
representative's claims. Falcon, 457 U.S. at 158. The claims of 3
Cordes and Creditors Trust, premised as they are on the harms 4
allegedly suffered by Western Pacific and EqualNet, "fairly 5
encompass" the claims of the class. Reasons of efficiency and 6
economy that permit claims to be pursued as part of a class 7
action in the first place do not vanish as a result of the 8
assignments. As assimilated class members by virtue of the 9
assignments, Cordes and Creditors Trust have standing to pursue 10
the assigned claims as class representatives. 11
Finally, we do not think that allowing Cordes and 12
Creditors Trust to serve as class representatives threatens the 13
district court's power under Article III to hear this dispute. 14
The assignment of a claim from a person who suffered an injury to 15
someone who did not does not make the claim any less a "case or 16
controversy" which the courts have the constitutional capacity to 17
resolve. It is indeed commonplace for an assignee to institute 18
or continue an action of his or her assignor on an assigned claim 19
even though he or she, apart from the assignment, is without 20
standing, and the court, apart from the assignment, would be 21
without power to decide the case. See, e.g., Fed. R. Civ. P. 22
25(c) (providing that in the case of "any transfer of interest, 23
the action may be continued by or against the original party" or, 24
upon motion, by or against the transferee); Official Comm. of 25
Unsecured Creditors of Color Tile, Inc. v. Coopers & Lybrand, 26

-- 21 of 38 --

22
LLP, 322 F.3d 147, 156 (2d Cir. 2003) ("As assignee of the Color 1
Tile bankruptcy estate, Color Tile Committee 'stands in the shoes 2
of [Color Tile] and has standing to bring any suit that [Color 3
Tile] could have instituted had it not petitioned for 4
bankruptcy.'" (citation omitted)). Similarly, an assignment of a 5
class claim by a person who purports to be a class representative 6
does not render the claim less amenable to resolution as a class 7
action, nor class action treatment less beneficial to the 8
litigants, after the transfer of the asserted cause or causes of 9
action than before. 10
b. The perils of permitting assignee- 11
plaintiffs to represent the class. 12
The defendants argue that as assignees, Cordes and 13
Creditors Trust are not "squarely aligned in interest with the 14
represented group." Def. Br. at 20 (quoting Benjamin Kaplan, 15
Continuing Work of the Civil Committee: 1966 Amendments of the 16
Federal Rules of Civil Procedure (I), 81 Harv. L. Rev. 356, 387 17
n.120 (1966)) (internal quotation marks omitted). They 18
characterize Cordes and Creditors Trust as "textbook examples of 19
the 'very serious problems' referenced by the district court that 20
would ensue if the ability to serve as a class representative 21
could be treated 'as a transferrable asset.'" Id. at 25 (quoting 22
District Court Opinion, 2006 WL 1026653, at *4, 2006 U.S. Dist. 23
LEXIS 21076, at *14). They explain in some detail why, in their 24
view, Cordes's and Creditors Trust's interests are antagonistic 25
to interests of the class and why they are otherwise deficient as 26

-- 22 of 38 --

8
Commentators have traced the doctrine of
champerty, and its doctrinal near-cousins of
maintenance and barratry, back to Greek and
Roman law, through the English law of the
Middle Ages, and into the statutory or common
law of many of the states. See generally,
Susan Lorde Martin, Syndicated Lawsuits:
Illegal Champerty or New Business
Opportunity?, 30 Am. Bus. L.J. 485, 486-89
(1992); Max Radin, Maintenance by Champerty,
24 Cal. L. Rev. 48, 48-66 (1936).
Elliott Assocs., L.P. v. Banco de la Nacion, 194 F.3d 363, 372
(2d Cir. 1999). Champerty, a tort governed largely by state law,
23
class representatives. Id. at 25-30. Irrespective of the extent 1
to which Cordes's and Creditors Trust's interests are or are not 2
in fact antagonistic to the interests of other members of the 3
class in this particular case -- a matter on which it is 4
premature for us to express a view -- we do not think that they 5
are necessarily antagonistic solely because Cordes and Creditors 6
Trust are assignees of Western Pacific's and EqualNet's interests 7
in the class action that they are pursuing. 8
The unhappy consequences of permitting "trafficking" 9
(to use the defendants' characterization) in causes of action, 10
thereby permitting one person who has suffered no injury to 11
pursue actions in the stead of another solely to maximize his or 12
her personal monetary return, are not fanciful. The aversion to 13
such assignments, because of their potential use by 14
"intermeddle[rs to] stir up litigation for the purpose of making 15
a profit," Accrued Fin. Servs., Inc. v. Prime Retail, Inc., 298 16
F.3d 291, 298 (4th Cir. 2002), has been reflected from time 17
immemorial in the laws of champerty and its kin.8 See In re 18

-- 23 of 38 --

has been narrowed to focus on the prevention of litigation by
lawyers for the primary purpose of recovering their costs and
fees. See, e.g., id. at 374 (recognizing that the object of New
York's champerty statute is "'to prevent attorneys, etc., from
purchasing things in action for the purpose of obtaining costs by
the prosecution thereof, and it was not intended to prevent a
purchase for the purpose of protecting some other right of the
assignee'" (quoting Moses v. McDivitt, 88 N.Y. 62, 65 (1882)).
24
Primus, 436 U.S. 412, 424 n.15 (1978) ("[P]ut simply, . . . 1
champerty is maintaining a suit in return for a financial 2
interest in the outcome . . . ."). 3
The purchasing of claims, whether before or after suit 4
has been brought upon them, for the purpose of turning a profit 5
is nonetheless not categorically forbidden. See Advanced 6
Magnetics, Inc. v. Bayfront Partners, Inc., 106 F.3d 11, 17 (2d 7
Cir. 1997) ("In general, claims or choses in action may be freely 8
transferred or assigned to others."); see also Elliott Assocs., 9
L.P. v. Banco de la Nacion, 194 F.3d 363, 372 (2d Cir. 1999). To 10
the contrary, such assignments are widely permitted, presumably 11
in order to allow holders of claims to transfer the risk of loss 12
to someone better able or more willing to pursue the claim or to 13
undertake the risk. Valid claims otherwise lost may thus be 14
salvaged. 15
The defendants' arguments and the district court's 16
conclusions as to the transferability of the ability to represent 17
a class fail to account for the countervailing value of allowing 18
an assignee to stand in the shoes of the assignor before a court. 19
This case might be termed a "textbook example" of that value in 20
the bankruptcy context inasmuch as the assignments pursuant to 21

-- 24 of 38 --

25
which Cordes and Creditors Trust are litigating this case 1
promoted the winding up of complicated estates in bankruptcy to 2
the benefit of creditors. We see nothing about the perils of 3
claim assignment in the context of class membership and class 4
representation that is qualitatively different from similar 5
dangers that inhere in permitting the pursuit of assigned legal 6
claims generally, which, as we have noted, is allowed. 7
We conclude that Cordes and Creditors Trust, pursuing 8
their claims and interests as assignees of the claims brought by, 9
and interests in this litigation of, purported members of the 10
class seeking to act as class representatives, are not excluded, 11
for that reason alone. 12
2. The Determination of Adequacy of Representation. 13
That is hardly the end of the matter. As with any class member 14
seeking to act as a class representative, Cordes and Creditors 15
Trust must demonstrate that "1) [their] interests are [not] 16
antagonistic to the interest of other members of the class and 2) 17
[their] attorneys are qualified, experienced and able to conduct 18
the litigation." Baffa, 222 F.3d at 60. In light of its 19
categorical approach to Rule 23(a)(4)'s adequacy requirement, the 20
district court has not addressed these questions. For some of 21
the reasons advanced by the defendants in support of their 22
assertion that assignees can never act as class representatives, 23
Cordes, Creditors Trust, or both, may in fact not be an adequate 24
class representative here. If, for example, either is not 25
sufficiently "'aligned in interest with the represented group,'" 26

-- 25 of 38 --

9 Of course, if the district court certifies the class
after a determination that either or both of the plaintiffs are
adequate class representatives, it can always alter, or indeed
revoke, class certification at any time before final judgment is
entered should a change in circumstances render the plaintiffs
inadequate class representatives. Fed. R. Civ. P. 23(c)(1); see
also Visa Check, 280 F.3d at 141 (recognizing a district court's
ability to modify a class certification order or decertify a
class if it becomes necessary to do so).
26
Def. Br. at 20 (citation omitted), see also id. at 28-33, or has 1
insufficient knowledge or access to information, id. at 26-28, it 2
may not qualify. But we are in no position, and therefore 3
decline, to make that determination in the first instance. We 4
mean to imply no views on the question. We leave the matter to 5
the sound discretion of the district court on remand.9
6
B. Predominance 7
If this lawsuit meets the "prerequisites" of a class 8
action under Rule 23(a), it must then also "qualif[y] under at 9
least one of the categories provided in Rule 23(b)" before it may 10
be certified as a class action. Visa Check, 280 F.3d at 133. 11
Cordes and Creditors Trust assert that this action qualifies 12
under the third Rule 23(b) category, where, although class 13
treatment is not necessary to avoid adjudications mandating 14
inconsistent standards of conduct under Fed. R. Civ. P. 23(b)(1), 15
or to remedy class-based discrimination under Fed. R. Civ. P. 16
23(b)(2), "class suit [is] nevertheless . . . convenient and 17
desirable." Amchem, 521 U.S. at 615 (internal quotation marks 18
and citation omitted). 19

-- 26 of 38 --

10 Rule 23(b)(3) provides:
An action may be maintained as a class action
if the prerequisites of [Rule 23](a) are
satisfied, and in addition:
. . .
(3) the court finds that the questions of law
or fact common to the members of the class
predominate over any questions affecting only
individual members, and that a class action
is superior to other available methods for
the fair and efficient adjudication of the
controversy. The matters pertinent to the
findings include: (A) the interest of members
of the class in individually controlling the
prosecution or defense of separate actions;
(B) the extent and nature of any litigation
concerning the controversy already commenced
by or against members of the class; (C) the
desirability or undesirability of
concentrating the litigation of the claims in
the particular forum; (D) the difficulties
likely to be encountered in the management of
a class action.
Fed. R. Civ. P. 23(b)(3).
27
To qualify for class treatment, then, the proposed 1
class must meet the requirement of predominance -- that is, that 2
"the questions of law or fact common to the members of the class 3
predominate over any questions affecting only individual 4
members" -- and the requirement of superiority -- that is, "that 5
a class action is superior to other available methods for the 6
fair and efficient adjudication of the controversy." Fed. R. 7
Civ. P. 23(b)(3).10 The predominance requirement on which we 8
focus -- together with the requirement of "superiority," which 9
has not been separately raised on this appeal -- ensures that the 10
class will be certified only when it would "achieve economies of 11
time, effort, and expense, and promote . . . uniformity of 12

-- 27 of 38 --

28
decision as to persons similarly situated, without sacrificing 1
procedural fairness or bringing about other undesirable results." 2
Amchem, 521 U.S. at 615 (citation and internal quotation marks 3
omitted). 4
The district court began with the notion that "[i]n 5
order to prevail on their price-fixing claims, plaintiffs must 6
demonstrate: (1) a violation of the antitrust laws by defendants; 7
(2) some injury to plaintiffs' business or property as a result 8
of the violation (causation or impact) and (3) the amount of 9
damages sustained by the plaintiffs." District Court Opinion, 10
2006 WL 1026653, at *5, 2006 U.S. Dist. LEXIS 21076, at *16 11
(quoting In re Indus. Diamonds Antitrust Litig., 167 F.R.D. 374, 12
381 (S.D.N.Y. 1996)) (citation and internal quotation marks 13
omitted). We have stated the point somewhat differently: "[T]he 14
three required elements of an antitrust claim [are] (1) a 15
violation of antitrust law; (2) injury and causation; and (3) 16
damages . . . ." Visa Check, 280 F.3d at 136. 17
There is no controversy here regarding the first Visa 18
Check element. Horizontal price-fixing agreements are per se 19
violations of the Sherman Act. See generally United States v. 20
Socony-Vacuum Oil Co., 310 U.S. 150, 210-28 (1940). Cordes and 21
Creditors Trust's allegations of the existence of a price-fixing 22
conspiracy are susceptible to common proof and, if proven true, 23
would satisfy the first element of the plaintiffs' antitrust 24
cause of action. 25

-- 28 of 38 --

29
The second element -- whether termed "antitrust 1
injury," "causation or impact," or "injury and causation" -- is 2
more complicated. 3
1. Does Antitrust Injury Pose Common or Individual 4
Questions? Section 4 of the Clayton Act provides that "any 5
person who shall be injured in his business or property by reason 6
of anything forbidden in the antitrust laws may sue 7
therefor . . . ." 15 U.S.C. § 15(a). This has been read to 8
require that to prevail in an antitrust suit, a plaintiff "must 9
prove [that it has suffered] antitrust injury, which is to say 10
injury of the type the antitrust laws were intended to prevent 11
and that flows from that which makes defendants' acts unlawful." 12
Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477, 489 13
(1977) (emphasis added). 14
In Brunswick, the defendant, Brunswick, had purchased a 15
nearly bankrupt bowling alley, thus keeping the purchased 16
business alive. The plaintiffs, Pueblo Bowl-O-Mat and other 17
rival bowling alleys, sought to challenge the purchase because it 18
kept their competitor in business. See id. at 480-81. 19
Plaintiffs doubtless suffered real harm -- they had lost the 20
"income that would have accrued had the acquired centers gone 21
bankrupt," id. at 487, but this was insufficient to meet the 22
antitrust injury requirement. The damages recovered in such a 23
case would have given Pueblo Bowl-O-Mat and the other plaintiffs 24
the profits they would have realized had 25
competition been reduced. The antitrust 26
laws, however, were enacted for "the 27

-- 29 of 38 --

30
protection of competition not competitors," 1
Brown Shoe Co. v. United States, 370 U.S. 2
[294, 320 (1962)]. It is inimical to the 3
purposes of these laws to award damages for 4
the type of injury claimed here. 5
Brunswick, 429 U.S. at 488. 6
Similarly, in Atlantic Richfield Co. v. USA Petroleum 7
Co., 495 U.S. 328 (1990), independent gas stations could not 8
recover from a gasoline producer that had allegedly fixed the 9
maximum resale prices its affiliated gas stations could charge. 10
The lower prices that resulted from the scheme had pro- 11
competitive, not anti-competitive, effects in the markets in 12
which the plaintiffs were engaged. See id. at 335-41 (reasoning 13
that non-predatory price competition is pro-competitive with 14
respect to other suppliers of the same goods or services); cf. 15
id. at 345 (noting that even though competitors could not show 16
that they suffered antitrust injury because of their rival's 17
vertical price-fixing scheme, "consumers and the manufacturers' 18
own dealers may bring suit"). 19
Rule 23(b)(3) requires that the district court 20
determine what "questions of law or fact [are] common to the 21
members of the class." Fed. R. Civ. P. 23(b)(3) (emphasis 22
added). Insofar as Rule 23(b)(3) is concerned, and in light of 23
Brunswick and Atlantic Richfield, we think that the second 24
element of an antitrust cause of action -- "antitrust injury" -- 25
poses two distinct questions. One is the familiar factual 26
question whether the plaintiff has indeed suffered harm, or 27
"injury-in-fact." The other is the legal question whether any 28

-- 30 of 38 --

31
such injury is "injury of the type the antitrust laws were 1
intended to prevent and that flows from that which makes 2
defendants' acts unlawful." Brunswick, 429 U.S. at 489. 3
Rather than relying on the distinction between the 4
legal and factual questions raised by the antitrust injury 5
element of an antitrust suit, the district court focused on the 6
distinction between antitrust injury and damages. See Visa 7
Check, 280 F.3d at 136. It accurately noted that the plaintiffs' 8
expert, Bamberger, was asked to opine as to damages and the 9
defendants' expert, Willig, as to injury. Compare Bamberger 10
Decl. ¶ 3 (stating that the plaintiffs' expert was "asked . . . 11
to determine whether it would be possible to measure damages 12
suffered by members of [the] proposed class . . . by the use of a 13
formula common to all class members" (emphasis added)), with 14
Willig Report at 2 (stating that the defendants' expert was 15
"asked . . . to consider whether the plaintiffs' allegations that 16
members of the proposed issuer class have been injured by the 17
alleged price-fixing conspiracy are capable of being proved on a 18
common basis for the purported class members" (emphasis added)). 19
Reasoning that the plaintiffs' and defendants' experts "have been 20
asked . . . meaningfully different questions," the district court 21
accepted the testimony of the defendants' expert, Willig, because 22
only he had "addresse[d] the question before the Court -- which 23
is whether antitrust injury . . . can be proved by evidence 24
common to the class." District Court Opinion, 2006 WL 1026653, 25
at *8, 2006 U.S. Dist. LEXIS 21076, at *27-28. The district 26

-- 31 of 38 --

32
court therefore concluded that the antitrust injury element of 1
Cordes and Creditors Trust's lawsuit presents questions 2
individual to each class member. 3
We disagree. Although the questions asked of the 4
experts differed precisely as described by the district court, we 5
think their answers were directed to the same question: whether 6
injury-in-fact is susceptible to common proof in this case. 7
Neither expert offered any views on the legal question of whether 8
common evidence could prove that the injury allegedly suffered 9
was "of the type the antitrust laws were intended to prevent and 10
that flows from that which makes defendants' acts unlawful." 11
Brunswick, 429 U.S. at 489. 12
The defendants' expert, Willig, was of the view 13
that any determination of whether a 14
particular member of the purported issuer 15
class has been injured by the clustering or 16
alleged "standardization" of gross spreads 17
would require an individualized factual 18
analysis about whether, absent such alleged 19
standardization, the issuer would have paid a 20
gross spread of less than 7% for IPO net 21
proceeds, the same or equal to the proceeds 22
the issuer actually received as a result of 23
its offering. 24
Willig Report at 2. And the plaintiffs' expert, Bamberger, 25
opined that "the difference between each proposed class member's 26
but-for fee and the actual fee it was charged measures damages." 27
Bamberger Decl. ¶ 24. Each expert thus evaluated whether it 28
would be possible to measure the but-for fee -- that is, the fee 29
an issuer would have paid absent the conspiracy -- by common 30
proof. The plaintiffs' expert thought that the court could use a 31

-- 32 of 38 --

11 It is conceivable that one could create a common formula
for determining whether the but-for fee was higher or lower than
the fee paid, but would need to conduct individualized inquiries
to determine the extent of the spread between the two fees. But
the experts before us would each use one approach (the
plaintiffs' expert a common one and the defendants' expert an
individualized one) to answer both the injury-in-fact question --
that is, whether a plaintiff was harmed -- and the damages
question -- that is, by how much a plaintiff was harmed.
33
single formula to establish the supracompetitive prices a 1
plaintiff had paid; the defendants' expert thought no such 2
formula could be constructed. 3
This disagreement goes to a single question -- whether 4
injury-in-fact can be proved by common evidence. Although the 5
plaintiffs' expert would use a single formula while the 6
defendants' expert would conduct many individualized inquiries, 7
both experts would determine injury-in-fact by calculating the 8
but-for fee and comparing it to the fee paid. If the fee paid 9
were higher than the but-for fee, then the plaintiff suffered an 10
injury-in-fact. In this case, the extent of the difference 11
between the but-for fee and the actual fee paid is relevant to 12
the question of damages, but it is from a comparison between the 13
two that the court would be asked to decide the question of 14
injury-in-fact.11 If the plaintiffs' single formula can be 15
employed to make a valid comparison between the but-for fee and 16
the actual fee paid, then it seems to us that the injury-in-fact 17
question is common to the class. Otherwise, it poses individual 18
ones. The district court did not determine which expert is 19
correct. We leave this question for it to resolve on remand. 20

-- 33 of 38 --

12 The issue is not only common, but appears to be readily
resolved. The defendants were asked at oral argument: "[I]f
there is injury, assuming the conspiracy, . . . it is antitrust
injury. Isn't that right?" The defendants responded, "It's of
the type that's antitrust injury. That's correct, your Honor."
Oral Arg. Tr. at 19:16-20 (Mar. 19, 2007). As far as we can
tell, the concession was warranted. See New York v. Hendrickson
Bros., Inc., 840 F.2d 1065, 1079 (2d Cir. 1988) (recognizing that
"[i]n general, the person who has purchased directly from those
who have fixed prices at an artificially high level in violation
of the antitrust laws is deemed to have suffered . . . antitrust
injury"). Of course, not every injury caused by a per se
violation of the antitrust laws is antitrust injury and even a
plaintiff alleging a per se violation must demonstrate that his
injury amounts to antitrust injury. See Atl. Richfield, 495 U.S.
at 341 (rejecting "respondent's suggestion that no antitrust
injury need be shown where a per se violation is involved"). But
the defendants have never contended that overcharges paid to a
horizontal price-fixing cartel are not antitrust injuries; nor
would any such contention be persuasive in this case.
34
Notwithstanding the existing open question as to 1
injury-in-fact, we think that the legal question raised by the 2
antitrust injury element of Cordes's and Creditors Trust's case 3
is common to the class. There is only one type of injury alleged 4
in the Complaint -- overcharges paid to a horizontal price-fixing 5
conspiracy. Because each class member allegedly suffered the 6
same type of injury, the legal question of whether such an injury 7
is "of the type the antitrust laws were intended to prevent and 8
that flows from that which makes defendants' acts unlawful," 9
Brunswick, 429 U.S. at 489, is a common one.12
10
2. Do Common Questions Predominate? The predominance 11
requirement is met if the plaintiff can "establish that the 12
issues in the class action that are subject to generalized proof, 13
and thus applicable to the class as a whole, . . . predominate 14
over those issues that are subject only to individualized proof." 15

-- 34 of 38 --

13 "[T]he determination as to a Rule 23 requirement is made
only for purposes of class certification and is not binding on
the trier of facts, even if that trier is the class certification
judge." IPO Securities, 471 F.3d at 41.
35
Visa Check, 280 F.3d at 136 (internal quotation marks and 1
citation omitted; ellipsis in original). It is "a test readily 2
met in certain cases alleging . . . violations of the antitrust 3
laws." Amchem, 521 U.S. at 625. In deciding whether it is met, 4
the district court must make a "definitive assessment of Rule 23 5
requirements, notwithstanding their overlap with merits issues." 6
IPO Securities, 471 F.3d at 41.13
7
As we have explained, the legal question raised by the 8
antitrust injury element here is common to the class. If the 9
factual question -- injury-in-fact -- is also common, then the 10
predominance requirement of Rule 23(b)(3) is likely met. 11
Even if the district court concludes that the issue of 12
injury-in-fact presents individual questions, however, it does 13
not necessarily follow that they predominate over common ones and 14
that class action treatment is therefore unwarranted. To be 15
sure, the defendants concede that any plaintiff who has suffered 16
the type of injury alleged in the Complaint has suffered 17
antitrust injury. Oral Arg. Tr. at 19:16-20 (Mar. 19, 2007). 18
But "a concession does not eliminate a common issue from the 19
predominance calculus." In re Nassau County Strip Search Cases, 20
461 F.3d 219, 227 (2d Cir. 2006) ("Nassau County"); see id. at 21
227-29. 22

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14 The related damages question is: if so, how much more.
36
These questions, at least, are common: (1) all factual 1
and legal questions that must be resolved to determine whether 2
the defendants violated Section 1 of the Sherman Act; and (2) all 3
factual and legal questions that must be resolved to decide 4
whether, assuming a plaintiff paid supracompetitive prices, that 5
payment was caused by the defendants' antitrust violation and 6
constitutes the kind of injury with which the antitrust laws are 7
concerned. The question of injury-in-fact, which in this case is 8
equivalent to whether a particular plaintiff would have paid more 9
in the but-for world,14 may not be common. We do not discount 10
the possibility that the individual questions raised by injury- 11
in-fact might then predominate over the several common questions. 12
Perhaps a trial would focus largely on what particular plaintiffs 13
would have paid in the but-for world. But that is not 14
necessarily so. Under these circumstances, the predominance 15
question, too, is best left to the sound discretion of the 16
district court on remand. 17
3. Certification of Particular Issues. Subsequent to 18
the district court's denial of class certification and our grant 19
of the motion to certify this appeal, we issued our opinion in 20
Nassau County. The plaintiffs in that case sought certification 21
of a class of individuals who were subject to the Nassau County 22
Correctional Center's allegedly unconstitutional blanket strip- 23
search policy. Nassau County, 461 F.3d at 222. Recognizing that 24

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37
individual questions concerning damages and defenses might defeat 1
certification of the entire case, the plaintiffs also sought 2
certification as to liability pursuant to Rule 23(c)(4)(A). Id. 3
at 223; see also Fed. R. Civ. P. 23(c)(4)(A) (providing that 4
"[w]hen appropriate . . . an action may be brought or maintained 5
as a class action with respect to particular issues"). The Fifth 6
Circuit had held that Rule 23(c)(4)(A) certification "as to a 7
specific issue" is available only if common questions predominate 8
in the claim as a whole. Nassau County, 461 F.3d at 226 (citing 9
Castano v. Am. Tobacco Co., 84 F.3d 734, 745 n.21 (5th Cir. 10
1996)). We adopted, instead, the Ninth Circuit's view that Rule 11
23(c)(4)(A) is available to certify particular issues "regardless 12
of whether the claim as a whole satisfies Rule 23(b)(3)'s 13
predominance requirement." Id. at 227; see also Valentino v. 14
Carter-Wallace, Inc., 97 F.3d 1227, 1234 (9th Cir. 1996) 15
(recognizing that "[e]ven if the common questions do not 16
predominate over the individual questions so that class 17
certification of the entire action is warranted, Rule 23 18
authorizes the district court in appropriate cases to isolate the 19
common issues under Rule 23(c)(4)(A) and proceed with class 20
treatment of these particular issues"). 21
On remand, if the district court concludes that the 22
action ought not to be certified in its entirety because it does 23
not meet the predominance requirement of Rule 23(b)(3), Cordes 24
and Creditors Trust may seek certification of a class to litigate 25
the first element of their antitrust claim -- the existence of a 26

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15 We also leave to the district court to determine whether
the issue of damages -- which here may be resolved using the same
evidence as that presented for injury-in-fact -- is a common
question or requires individual determinations, and whether class
certification is appropriate on the question of damages.
38
Sherman Act violation -- pursuant to Rule 23(c)(4)(A) and Nassau 1
County.15 We do not, of course, express a view as to whether it 2
would lie within the district court's sound discretion to certify 3
such a class under either Rule 23(b)(3) or Rule 23(c)(4)(A). 4
CONCLUSION 5
For the foregoing reasons, the order is vacated and the 6
case remanded to the district court for further proceedings. 7

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