In re Hydrogen Peroxide was an antitrust class action. Hydrogen peroxide is a chemical that is often used a bleach for pulp and paper. In this case, the plaintiffs, all purchasers of hydrogen peroxide and other chemicals, sued their suppliers, alleging that the defendants had sold them more expensive chemical grades when less expensive ones would have been sufficient.
Following extensive discovery, 3 plaintiffs moved to certify a class of direct purchasers of hydrogen peroxide, sodium perborate, and sodium percarbonate, over an eleven-year class period. In support of class certification, plaintiffs offered the opinion of an economist. Defendants, opposing class certification, offered the opinion of a different economist. Defendants separately moved to exclude the opinion of plaintiffs’ economist as unreliable under Daubert v. Merrell Dow Pharmaceuticals, Inc. Concluding plaintiffs’ expert’s opinion was admissible and supported plaintiffs’ motion for class certification, the District Court certified a class of direct purchasers of hydrogen peroxide, sodium perborate, and sodium percarbonate under Fed. R. Civ. P. 23(b)(3).
The defendants appealed, claiming that the district court had erred when it found that common issues predominated over individualized issues. The Third Circuit found that the trial court had committed three errors:
First, it had wrongly held that it could not inquire into the merits of plaintiffs’ claims where they affected the certification inquiry.
An overlap between a class certification requirement and the merits of a claim is no reason to decline to resolve relevant disputes when necessary to determine whether a class certification requirement is met. Some uncertainty ensued when the Supreme Court declared in Eisen v. Carlisle & Jacquelin, that there is "nothing in either the language or history of Rule 23 that gives a court any authority to conduct a preliminary inquiry into the merits of a suit in order to determine whether it may be maintained as a class action." Only a few years later, in addressing whether a party may bring an interlocutory appeal when a district court denies class certification, the Supreme Court pointed out that "the class determination generally involves considerations that are ‘enmeshed in the factual and legal issues comprising the plaintiff’s cause of action.’" As we explained in Newton, Eisen is best understood to preclude only a merits inquiry that is not necessary to determine a Rule 23 requirement.
(Internal citations omitted.)
Second, the district court had wrongly presumed that-when in doubt–it should err in favor of certifying an antitrust class action:
the District Court reasoned, "it is well recognized that private enforcement of antitrust laws is a necessary supplement to government action. With that in mind, in an alleged horizontal price-fixing conspiracy case when a court is in doubt as to whether or not to certify a class action, the court should err in favor of allowing the class." These statements invite error.
(Internal citations omitted.)
And finally, the district court had wrongly put off resolving the "battle of the experts" until trial, even though the experts disagreed about whether a class should be certified in the first place.
Expert opinion with respect to class certification, like any matter relevant to a Rule 23 requirement, calls for rigorous analysis. It follows that opinion testimony should not be uncritically accepted as establishing a Rule 23 requirement merely because the court holds the testimony should not be excluded, under Daubert or for any other reason. Under Rule 23 the district court must be "satisfied" or "persuaded" that each requirement is met before certifying a class. Like any evidence, admissible expert opinion may persuade its audience, or it may not. This point is especially important to bear in mind when a party opposing certification offers expert opinion. The district court may be persuaded by the testimony of either (or neither) party’s expert with respect to whether a certification requirement is met. Weighing conflicting expert testimony at the certification stage is not only permissible; it may be integral to the rigorous analysis Rule 23 demands.
(Internal citations omitted.)
The Third Circuit was not the only (or even the first) court to find that the "rigorous analysis" required for class certification might require an inquiry into the merits. But it was the one to explain most clearly how various courts had misread Eisen to prohibit any merits inquiry whatsoever. And it also explained in very succinct terms why a court must look into the merits of an expert’s testimony if that will bear on whether it is appropriate to certify a class. Because of the clear way in which it describes how each of these factual inquiries is necessary to certification, In re Hydrogen Peroxide has earned the designation of Classic Case.