     06-2143-cv
     Cordes & Co. v. A.G. Edwards & Sons, Inc.

1                         UNITED STATES COURT OF APPEALS

2                             FOR THE SECOND CIRCUIT

3                                August Term, 2006

4    (Argued: March 19, 2007                     Decided: September 11, 2007)

5                              Docket No. 06-2143-cv

6                    -------------------------------------

7          CORDES & COMPANY FINANCIAL SERVICES, INC. and EQUALNET
8       COMMUNICATIONS CORPORATION, on behalf of themselves and all
9                        others similarly situated,

10                            Plaintiffs-Appellants,

11                                       - v -

12       A.G. EDWARDS & SONS, INC., BANCBOSTON ROBERTSON STEPHENS &
13   COMPANY, BEAR STEARNS & CO., CHASE HAMBRECHT & QUIST, INC., CIBC
14       OPPENHEIMER CORP., COWEN & CO., CREDIT SUISSE FIRST BOSTON
15    CORPORATION, DB ALEX. BROWN LLC formerly known as BT ALEX BROWN
16      INC., DONALDSON, LUFKIN & JENRETTE, INC., EVEREN SECURITIES,
17     INC., THE GOLDMAN SACHS GROUP, INC., HANIFEN INHOFF INC., ING
18    BARINGS LLC, J.C. BRADFORD & CO., J.P. MORGAN SECURITIES, INC.,
19     JEFFERIES & COMPANY, INC., JOHNSON RICE & COMPANY, LEGG MASON
20      WOOD WALKER INC., LEHMAN BROTHERS INC., MERRILL LYNCH & CO.,
21        MORGAN STANLEY DEAN WITTER & CO., NATIONSBANC MONTGOMERY
22   SECURITIES, PAINE WEBBER GROUP, INC., PIPER JAFFRAY & CO., INC.,
23    PRUDENTIAL SECURITIES INCORPORATED, RAYMOND JAMES & ASSOCIATES,
24         INC., SALOMON SMITH BARNEY, INC. and UBS WARBURG LLC,

25                             Defendants-Appellees.

26                   -------------------------------------

27   Before:     SACK, B.D. PARKER, and HALL, Circuit Judges.

28               Appeal from a Memorandum and Order of the United States

29   District Court for the Southern District of New York (Lawrence M.

30   McKenna, Judge) denying the plaintiffs' motion for class

31   certification pursuant to Federal Rule of Civil Procedure 23.        We

32   conclude that although the plaintiffs do not fall within the
1    definition of the class as set forth in the complaint, as

2    assignees of class members who brought the suit, they are not

3    categorically excluded from acting as class representatives.    We

4    also conclude that the district court erred with respect to the

5    basis on which it concluded that individual questions predominate

6    over common ones.

7              Reversed and remanded.

 8                            ROGER W. KIRBY, Kirby McInerney & Squire
 9                            LLP (Randall K. Berger, Henry P.
10                            Monaghan, of counsel), New York, NY, for
11                            Plaintiffs-Appellants.

12                            ROBERT F. WISE, JR., Davis Polk &
13                            Wardwell (Edmund Polubinski III,
14                            Christopher Withers, Kavita Kumar, of
15                            counsel), New York, NY, for Defendant-
16                            Appellee Morgan Stanley (sued as Morgan
17                            Stanley Dean Witter & Co.).

18                            James B. Weidner, Clifford Chance US LLP
19                            (Jon R. Roelke, Jeffrey H. Drichta, of
20                            counsel), New York, NY, for Defendants-
21                            Appellees Merrill Lynch, Pierce Fenner &
22                            Smith Incorporated, and Merrill Lynch &
23                            Co.

24                            Gandolfo V. DiBlasi, Sullivan & Cromwell
25                            LLP (Steven L. Holley, Penny Shane,
26                            David Rein, of counsel), New York, NY,
27                            for Defendant-Appellee Goldman, Sachs &
28                            Co. (sued as The Goldman Sachs Group,
29                            Inc.).

30                            Robert B. McCaw, Wilmer Cutler Pickering
31                            Hale and Dorr LLP (Ali M. Stoeppelwerth,
32                            Fraser L. Hunter, Jr., of counsel), New
33                            York, NY, for Defendant-Appellee
34                            Citigroup Global Markets, Inc. (sued as
35                            Salomon Smith Barney, Inc.).

36                            Jay B. Kasner, Skadden, Arps, Slate,
37                            Meagher & Flom LLP (Shepard Goldfein,
38                            Gary A. MacDonald, of counsel), New
39                            York, NY, for Defendants-Appellees CIBC

                                        2
1    World Markets Corp. (sued as CIBC
2    Oppenheimer Corp.), ABN AMRO Inc. (as
3    successor-in-interest to ING Barings
4    LLC) and Cowen and Company, LLC (f/k/a
5    SG Cowen & Co., LLC and SG Cowen
6    Securities Corp.; sued as Cowen & Co.).

 7   Gregory A. Markel, Cadwalader,
 8   Wickersham & Taft LLP (Ronit Setton,
 9   Amanda Kosowsky, of counsel), New York,
10   NY, for Defendants-Appellees Banc of
11   America Securities LLC (sued as
12   NationsBanc Montgomery Securities) and
13   Robertson Stephens, Inc. (sued as
14   BancBoston Robertson, Stephens &
15   Company).

16   Bradley J. Butwin, O'Melveny & Myers
17   LLP, New York, NY, for Defendants-
18   Appellees UBS Securities LLC f/k/a UBS
19   Warburg, LLC (sued as UBS Warburg LLC),
20   J.C. Bradford & Co. and UBS Financial
21   Services Inc. f/k/a UBS PaineWebber Inc.
22   (sued as Paine Webber Group, Inc.).

23   A. Robert Pietrzak, Sidley Austin LLP
24   (Joel M. Mitnick, Benjamin R. Nagin, of
25   counsel), New York, NY, for Defendant-
26   Appellee Bear, Stearns & Co. Inc.

27   Thomas J. Kavaler, Cahill Gordon &
28   Reindel LLP (Elai Katz, of counsel), New
29   York, NY, for Defendant-Appellee
30   Prudential Equity Group, LLC (sued as
31   Prudential Securities Incorporated).

32   Joseph Ingrisano, Kutak Rock LLP (Robert
33   A. Jaffe, of counsel), Washington, D.C.,
34   for Defendant-Appellee A.G. Edwards &
35   Sons, Inc.

36   Charles E. Koob, Simpson Thacher &
37   Bartlett LLP (Joseph F. Tringali, of
38   counsel), New York, NY, for Defendants-
39   Appellees Lehman Brothers Inc. and J.P.
40   Morgan Securities Inc. (sued as Chase
41   Hambrecht & Quist).

42   Jeremy G. Epstein, Shearman & Sterling
43   LLP (Kenneth M. Kramer, Richard F.
44   Schwed, of counsel), New York, NY, for

            3
1                             Defendants-Appellees Credit Suisse
2                             Securities (USA) LLC, f/k/a Credit
3                             Suisse First Boston LLC (sued as Credit
4                             Suisse First Boston Corporation) and
5                             Donaldson Lufkin & Jenrette, Inc.

 6                            Jay N. Varon, Foley & Lardner LLP
 7                            (Samuel J. Winer, Bryan B. House, of
 8                            counsel), Washington, D.C., for
 9                            Defendants-Appellees EVEREN Securities,
10                            Inc., Raymond James & Associates, Inc.
11                            and Piper Jaffray & Co. (sued as U.S.
12                            Bancorp Piper Jaffray Inc.).

13                            Douglas A. Rappaport, DLA Piper US LLP
14                            (Lewis A. Noonberg, Philip Huynh, of
15                            counsel), New York, NY, for Defendant-
16                            Appellee Deutsche Bank Securities, Inc.
17                            (sued as BT Alex. Brown).

18                            Bernard J. Garbutt III, Morgan Lewis &
19                            Bockius LLP (Leza M. DiBella, of
20                            counsel), New York, NY, for Defendant-
21                            Appellee Jefferies & Company, Inc.

22                            Charles O.   Monk II, Saul Ewing LLP
23                            (Joseph M.   Fairbanks, of counsel),
24                            Baltimore,   MD, for Defendant-Appellee
25                            Legg Mason   Wood Walker, Inc.

26                            David Radlauer, Jones, Walker, Waechter,
27                            Poitevent, Carrere & Denegre, L.L.P.
28                            (Mark A. Cunningham, of counsel), New
29                            Orleans, LA, for Defendant-Appellee
30                            Johnson Rice & Company.

31                            L. Norton Cutler, Perkins Coie, LLP,
32                            Denver, CO, for Defendant-Appellee
33                            Hanifen Imhoff Inc.

34   SACK, Circuit Judge:

35             The first of the named plaintiffs in this lawsuit --

36   Cordes & Company Financial Services, Inc. ("Cordes") -- is the

37   assignee of an antitrust claim against the defendants formerly

38   asserted by Western Pacific Airlines Inc. ("Western Pacific").

39   The interests in this litigation of the second named-plaintiff --

                                     4
1    EqualNet Communications Corporation ("EqualNet") -- are being

2    pursued by the Unsecured Creditors Trust ("Creditors Trust") of a

3    subsidiary of EqualNet: EqualNet Corp. ("EN").   Creditors Trust

4    acquired a two-thirds stake in any proceeds EqualNet obtains

5    through this lawsuit.   The plaintiffs allege in their

6    Consolidated Class Action Complaint (the "Complaint") that the

7    defendants, who are initial public offering ("IPO") underwriters,

8    violated Section 1 of the Sherman Act, 15 U.S.C. § 1, by agreeing

9    to charge all corporations conducting mid-size IPOs who used

10   their services a fee equal to 7% of the proceeds of the offering.

11   Cordes and Creditors Trust sought class certification pursuant to

12   Federal Rule of Civil Procedure 23.

13             The United States District Court for the Southern

14   District of New York (Lawrence M. McKenna, Judge) denied the

15   motion for class certification because, it concluded, two Rule 23

16   requirements -- the adequacy requirement of Rule 23(a)(4) and the

17   predominance requirement of Rule 23(b)(3) -- were not met.

18             Rule 23(a)(4) provides that it is a prerequisite to

19   pursuit of an action as a class that "the representative parties

20   will fairly and adequately protect the interests of the class."

21   Fed. R. Civ. P. 23(a)(4).   The district court reasoned that

22   because Cordes and Creditors Trust are assignees of the entities

23   that instituted this lawsuit and are not themselves members of

24   the putative class, they are not qualified to act as

25   representatives of the class.   For reasons set forth below, we

26   think that the fact that the assignee-plaintiffs do not

                                      5
1    themselves fall within the definition of the class as set forth

2    in the Complaint does not, ipso facto, foreclose their ability to

3    act as class representatives in lieu of the entities that

4    originally brought the claims, both of them members of the class.

5    On remand, the district court should decide whether, on the facts

6    presented in this case, Cordes and Creditors Trust are each

7    adequate representatives of the class.

8              Rule 23(b)(3) requires, inter alia, that for a lawsuit

9    to be pursued as a class action, "the questions of law or fact

10   common to the members of the class [must] predominate over any

11   questions affecting only individual members . . . ."    Fed. R.

12   Civ. P. 23(b)(3).   The district court concluded that the

13   plaintiffs failed to establish that this litigation meets that

14   requirement because they did not offer evidence to establish that

15   antitrust injury -- one of the elements of the antitrust claim

16   alleged in the Complaint -- could be proved by a method common to

17   the class.

18             The antitrust injury element raises both factual

19   questions related to whether the plaintiff has suffered harm and

20   legal questions related to whether that harm is "of the type the

21   antitrust laws were intended to prevent and that flows from that

22   which makes defendants' acts unlawful."   Brunswick Corp. v.

23   Pueblo Bowl-O-Mat, Inc., 429 U.S. 477, 489 (1977).     We think that

24   the district court should have distinguished between antitrust

25   injury's factual questions -- as to which both parties offered

26   evidence -- and its legal questions -- as to which neither party

                                      6
1    offered evidence.   We conclude, for reasons set forth below, that

2    the legal questions raised by the antitrust injury element of

3    this case are common to the class.   On remand, the district court

4    should therefore decide whether the factual questions are common

5    to the class.   And if the court determines that the factual

6    questions relevant to antitrust injury here are individual to

7    each class member, the court should then determine (1) whether

8    common questions nonetheless predominate, and (2) whether

9    certification of a part of the case would be appropriate even if

10   certification of the whole would not be.

11                                BACKGROUND

12             Cordes, the first named-plaintiff, purchased the

13   interest supporting its claim in this lawsuit from the bankruptcy

14   estate of Western Pacific.   In 1995, Western Pacific engaged in

15   an IPO of its capital stock, the proceeds of which were

16   approximately $47 million.   Two years later, Western Pacific

17   filed for Chapter 11 bankruptcy protection in the United States

18   Bankruptcy Court for the District of Colorado.   In 1998, that

19   proceeding was converted to a liquidation proceeding under

20   Chapter 7.   In 2001, the trustee of the estate in bankruptcy

21   filed a complaint in this action in the United States District

22   Court for the Southern District of New York.   The trustee alleged

23   that beginning in the mid-1990s, the defendants, investment banks

24   that had underwritten mid-size IPOs, engaged in a horizontal

25   price-fixing scheme of which Western Pacific was a victim during

26   the course of its IPO.   In 2004, the bankruptcy court entered an

                                      7
1    order permitting Western Pacific's Chapter 7 trustee to sell by

2    auction Western Pacific's claim and interest in the antitrust

3    litigation.   The bankruptcy court required, inter alia, that the

4    winning bidder be willing to act as a named class representative.

5    Cordes acquired Western Pacific's claim and interest, with the

6    approval of the bankruptcy court, for $11,000.   The instrument

7    memorializing Western Pacific's assignment of its claim stated

8    that Cordes agreed to pursue the litigation in good faith as a

9    named class representative.

10             In 1995, EqualNet, the second named-plaintiff, held an

11   IPO of its capital stock.   It, too, subsequently filed for

12   bankruptcy protection under Chapter 11.   The United States

13   Bankruptcy Court for the Southern District of Texas converted the

14   Chapter 11 proceeding to Chapter 7.   EN, EqualNet's subsidiary,

15   also filed for bankruptcy, which resulted in the formation of

16   Creditors Trust.   Creditors Trust, which is pursuing EqualNet's

17   former claims, acquired a two-thirds interest in EqualNet's

18   potential recovery in this case by foreclosing on security

19   interests that EN held in certain assets of EqualNet.

20             The plaintiffs allege in the Complaint that the

21   defendants, IPO underwriters, fixed their underwriting fees at

22   seven percent of the IPO proceeds for all corporations conducting

23   mid-size IPOs -- i.e., IPOs generating between $20,000,000 and

24   $80,000,000 in proceeds.    They assert that the defendants thereby




                                       8
1    violated Section 1 of the Sherman Act, 15 U.S.C. § 1.1   More than

2    ninety percent of issuers of mid-size IPOs since 1994 were,

3    according to the Complaint, charged such a fee in that amount.

4    The plaintiffs further allege that IPOs are managed by a

5    syndicate of underwriters, each of which has a lead manager and

6    several co-managers.    Because each defendant participated as lead

7    manager for some IPOs and as co-manager for others, each was

8    allegedly able to monitor the fees charged by other defendant

9    underwriters.    The plaintiffs also submitted expert testimony to

10   support their allegations that the defendants entered into a

11   horizontal price-fixing agreement and have been able to enforce

12   it.

13             Western Pacific and EqualNet brought the lawsuit

14             pursuant to Rule 23 of the Federal Rules of
15             Civil Procedure, on their own behalf and as
16             representatives of a class . . . of all
17             corporations and other entities (excluding
18             defendants and their respective parents,
19             subsidiaries and affiliates and issuers of
20             government securities) who, during the
21             [period from at least January 1994 through
22             the present], issued an initial public
23             offering of securities with an aggregate
24             value between $20 million and $80 million
25             using the services of any defendant.
26   Compl. ¶ 50.    After the assignment of Western Pacific's and

27   EqualNet's claims and interests in this litigation, Cordes and




           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
1    Creditors Trust filed a motion to certify a class of plaintiffs

2    pursuant to Rule 23.

3                Cordes and Creditors Trust submitted a declaration of

4    their expert, Gustavo Bamberger, in an attempt to establish that

5    they could prove the elements of their claim by common proof and

6    that those elements are predominant, as required for

7    certification under Rule 23(b)(3).      Bamberger reported that he

8    had been asked whether he could measure the damages suffered by

9    each class member "by the use of a formula common to all class

10   members."    Bamberger Decl. ¶ 3, Sept. 16, 2004.    He responded in

11   the affirmative.    Id.   Damages in this case were, he said, the

12   difference between the fee actually paid and the "but-for fee" --

13   the fee that would have been charged to the putative class

14   members in connection with the IPO in the absence of the alleged

15   conspiracy.    Id. at ¶ 8.    Bamberger asserted that he could devise

16   a common formula for deriving the but-for fee by (1) establishing

17   a benchmark fee from a set of prices paid in temporal or

18   geographic isolation from the conspiracy, and (2) applying a

19   multiple regression analysis to isolate the "explanatory

20   variables" that influence the benchmark fee.      Id. ¶¶ 9, 16.   The

21   but-for fee for each class member could then be determined by

22   substituting the appropriate values for the explanatory

23   variables.    Id. ¶¶ 20-24.

24               The defendants countered with an expert report prepared

25   by Robert D. Willig (the "Willig Report").      The defendants asked

26   Willig "whether the plaintiffs' allegations that members of the

                                        10
1    proposed issuer class have been injured by the alleged price-

2    fixing conspiracy are capable of being proved on a common basis

3    for the purported class members."      Willig Report at 2.   Willig

4    asserted in response that in order to determine whether a class

5    member was injured, one must first determine the "but-for gross

6    spread" -- that is, the fee that the underwriter would have

7    charged but for the conspiracy.     Id. at 11-12.   But, according to

8    Willig, calculating the but-for gross spread requires an

9    individualized, plaintiff-by-plaintiff analysis of ten factors,

10   including underwriter costs, price stabilization, and the risk of

11   the offering.

12             The district court denied certification.      The court

13   first determined that neither Cordes nor Creditors Trust

14   satisfied the adequacy prerequisite of Rule 23(a)(4).        The court

15   noted that "a class representative must be a member of the class"

16   and that both Cordes and Creditors Trust were assigned their

17   interests in the litigation.   In re Pub. Offering Fee Antitrust

18   Litig., 2006 WL 1026653, at *2-3, 2006 U.S. Dist. LEXIS 21076, at

19   *9, *11-13 (S.D.N.Y. Apr. 18, 2006) (the "District Court

20   Opinion"), amended by 2006 WL 1120498, 2006 U.S. Dist. LEXIS

21   24321 (S.D.N.Y. Apr. 26, 2006).    Assuming for purposes of its

22   analysis that Cordes and Creditors Trust met the other class

23   certification qualifications, it ruled that they were not members

24   of the proposed class and thus could not represent it.         Id. at

25   *4, 2006 U.S. Dist. LEXIS 21076, at *13.      Treating class

26   membership as a transferable asset could, in the words of the

                                       11
1    court, "lead to a very serious problem indeed in the class action

2    field."   Id. at *4, 2006 U.S. Dist. LEXIS 21076, at *13-14.

3              The district court concluded further that Rule

4    23(b)(3)'s predominance requirement also had not been met.

5    Cordes and Creditors Trust argued that because their expert had

6    provided a formula for assessing damages for all class members,

7    they had also established that they would be "able to prove

8    antitrust impact by common proof."     Id. at *8, 2006 U.S. Dist.

9    LEXIS 21076, at *26-27.    The district court rejected this

10   argument because the "plaintiffs [were] ignoring the distinction

11   between antitrust injury or impact, on the one hand, and damages,

12   on the other."   Id., 2006 U.S. Dist. LEXIS 21076, at *26.     Each

13   expert had "been asked, and ha[d] answered, meaningfully

14   different questions."     Id., 2006 U.S. Dist. LEXIS 21076, at *27.

15   Although the court "[a]ccept[ed] both opinions as 'not fatally

16   flawed' and 'sufficiently reliable,'" only the defendants'

17   expert's analysis, the court concluded, "addresses the question

18   before the Court -- which is whether antitrust injury or impact

19   can be proved by evidence common to the class."     Id., 2006 U.S.

20   Dist. LEXIS 21076, at *27-28 (quoting In re Visa

21   Check/MasterMoney Antitrust Litig., 280 F.3d 124, 135 (2d Cir.

22   2001) ("Visa Check")).2    "The questions are different," the court


          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
1    continued, "because there is considerabl[y more] leeway allowed

2    in proving damages, once antitrust liability is established, than

3    is permitted in proving antitrust liability."   Id., 2006 U.S.

4    Dist. LEXIS 21076, at *28.

5              Cordes and Creditors Trust, relying on Visa Check, also

6    argued that certification was appropriate because common

7    questions regarding the nature of the conspiracy in a price-

8    fixing case predominate over all other questions, including those

9    regarding injury.   The court concluded, however, that Visa Check

10   supported only the proposition that the need for individualized

11   inquiry into damages should not prevent certification of a class

12   with common questions on liability.3   Based on its conclusion

13   that Cordes and Creditors Trust did not establish that in this

14   case there are common questions on liability, the district court

15   rejected this argument, too.

16             Cordes and Creditors Trust petitioned this Court,

17   pursuant to Fed. R. Civ. P. 23(f), to hear an interlocutory

18   appeal of the denial of class certification under Rule 23(f).    On

19   August 1, 2006, a panel of this Court granted the petition.



     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
1                                  DISCUSSION

2               I.    Standard of Review

3               We review a district court's denial of class

4    certification for abuse of discretion.     In re Initial Pub.

5    Offering Sec. Litig., 471 F.3d 24, 31 (2d Cir. 2006) ("IPO

6    Securities").     We also apply abuse of discretion review to a

7    district court's "subsidiary rulings on each of the six

8    requirements for a Rule 23(b)(3) class."     Id. at 31-32.   "A

9    district court by definition abuses its discretion when it makes

10   an error of law."     Koon v. United States, 518 U.S. 81, 100

11   (1996).   Findings of fact upon which the district court bases a

12   Rule 23 determination are reviewed for clear error, legal

13   conclusions de novo.     See IPO Securities, 471 F.3d at 40-41.

14              II.    Denial of Class Certification

15              Two questions are presented to us on this interlocutory

16   appeal: (A) whether the district court misconstrued Rule 23(a)'s

17   adequacy requirement, and (B) whether it misconstrued Rule

18   23(b)(3)'s predominance requirement, adversely in each case to

19   Cordes and Creditors Trust.

20   A.   Prerequisites to a Class Action -- Adequacy of Representation

21              Rule 23(a) sets forth four "[p]rerequisites to a

22   [c]lass [a]ction":

23              (1) numerosity (a "class [so large] that
24              joinder of all members is impracticable");
25              (2) commonality ("questions of law or fact
26              common to the class"); (3) typicality (named
27              parties' claims or defenses "are
28              typical . . . of the class"); and (4)
29              adequacy of representation (representatives

                                       14
1              "will fairly and adequately protect the
2              interests of the class").

3    Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 613 (1997) (quoting

4    Fed. R. Civ. P. 23(a)).   The defendants do not contest that the

5    first three prerequisites are met here.   We therefore confine our

6    consideration to the fourth -- adequacy of representation.

7    Determination of adequacy typically "entails inquiry as to

8    whether: 1) plaintiff's interests are antagonistic to the

9    interest of other members of the class and 2) plaintiff's

10   attorneys are qualified, experienced and able to conduct the

11   litigation."   Baffa v. Donaldson, Lufkin & Jenrette Sec. Corp.,

12   222 F.3d 52, 60 (2d Cir. 2000).    This process "serves to uncover

13   conflicts of interest between named parties and the class they

14   seek to represent."   Amchem, 521 U.S. at 625.

15             The district court did not find it necessary to engage

16   in either part of the typical inquiry.    The court decided that,

17   irrespective of whether Cordes and Creditors Trust could satisfy

18   the Baffa factors, they cannot be representatives of the class

19   because they do not themselves fit within the definition of the

20   class as set forth in the Complaint.

21             It is plain that Cordes and the Creditors
22             Trust are not members of the proposed issuer
23             class and that, as a consequence -- and
24             assuming arguendo that they meet the other
25             qualifications for class representation --
26             they cannot represent the issuer class.
                    Plaintiffs in response cite the
27
28             undisputed proposition that antitrust claims
29             are assignable. That is beside the point.
30             To allow Cordes or the Creditors Trust to
31             represent the proposed class would, in


                                       15
1              effect, treat class membership as a
2              transferable asset, and that could plainly
3              lead to very serious problems indeed in the
4              class action field.

5    District Court Opinion, 2006 WL 1026653, at *4, 2006 U.S. Dist.

6    LEXIS 21076, at *13-14 (footnote omitted).

7              The defendants urge us to adopt the district court's

8    conclusion, arguing (1) that Cordes and Creditors Trust are not

9    themselves members of the defined class; (2) in light of the

10   general principle that only a class member can adequately

11   represent the class, Cordes and Creditors Trust cannot represent

12   the class; and (3) "to allow the class action device to become a

13   mechanism for trafficking in litigation would fundamentally

14   undermine the administration of justice in federal courts."    Def.

15   Br. at 18.   We disagree.

16             1.   The Ability of Assignees to Serve as Class

17   Representatives.   "To have standing to sue as a class

18   representative it is essential that a plaintiff . . . be a part

19   of that class, that is, he must possess the same interest and

20   suffer the same injury shared by all members of the class he

21   represents."   Schlesinger v. Reservists Comm. to Stop the War,

22   418 U.S. 208, 216 (1974) (citations omitted); see also Gen. Tel.

23   Co. of Sw. v. Falcon, 457 U.S. 147, 156 (1982) (quoting

24   Schlesinger, 418 U.S. at 216).   When Western Pacific and EqualNet

25   brought this lawsuit as putative class representatives, see

26   Complaint ¶ 50, they were indisputably members of the class they

27   sought to represent.   We conclude that the subsequent assignment


                                      16
1    of their claims and interests in this litigation to Cordes and

2    Creditors Trust, respectively, did not deprive Cordes and

3    Creditors Trust of the ability, as assignees, to continue to seek

4    recognition as representatives of the class.

5              a.   Cordes and Creditors Trust's standing to pursue
6                   these claims as a class action.

7              The defendants do not contest the validity of the

8    assignments of the bankrupts' antitrust claims to Cordes and

9    Creditors Trust in this instance.4   See Def. Br. at 23; see also

10   D'Ippolito v. Cities Serv. Co., 374 F.2d 643, 647 (2d Cir. 1967)

11   ("Antitrust claims have been held assignable.").   It is

12   undisputed that Cordes and Creditors Trust acquired through

13   Western Pacific's and EqualNet's bankruptcy proceedings all or a

14   portion of whatever substantive rights Western Pacific and

15   EqualNet held at the time of their respective bankruptcies to




          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
1    recover for the injuries alleged in the Complaint.5

2    Nevertheless, the defendants argue, because neither Cordes nor

3    Creditors Trust is itself a member of the class as pleaded,

4    neither has standing to act as a class representative.

5                Standing has both constitutional dimensions rooted in

6    Article III's Case or Controversy Clause6 and prudential

7    dimensions that are "closely related to Art. III concerns but

8    [are] essentially matters of judicial self-governance."     Warth v.

9    Seldin, 422 U.S. 490, 498-500 (1975).    The rule that "a class

10   representative must be part of the class," Falcon, 457 U.S. at

11   156 (citation and internal quotation marks omitted), is one of


          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
1    prudential standing, related to the broader principle that "the

2    plaintiff generally must assert his own legal rights and

3    interests, and cannot rest his claim to relief on the legal

4    rights or interests of third parties," Warth, 422 U.S. at 499;

5    see also Allen v. Wright, 468 U.S. 737, 751 (1984) (recognizing

6    "the general prohibition on a litigant's raising another person's

7    legal rights" as one of "several judicially self-imposed limits

8    on the exercise of federal jurisdiction").   This principle

9    requires in the class action setting that "[a]n individual

10   litigant seeking to maintain a class action . . . meet 'the

11   prerequisites of numerosity, commonality, typicality, and

12   adequacy of representation' specified in Rule 23(a)."   Falcon,

13   457 U.S. at 156 (quoting Gen. Tel. Co. of N.W., Inc. v. EEOC, 446

14   U.S. 318, 330 (1980)).   "These requirements effectively 'limit

15   the class claims to those fairly encompassed by the named

16   plaintiff's claims.'"    Id. (quoting Gen. Tel. Co. of N.W., Inc.,

17   446 U.S. at 330); see also id. ("'[A] class representative must

18   be part of the class and "possess the same interest and suffer

19   the same injury" as the class members.'" (quoting East Tex. Motor

20   Freight Sys. v. Rodriguez, 431 U.S. 395, 403 (1977) (quoting

21   Schlesinger, 418 U.S. at 216))).7


          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
1              We return, then, to the basic principle that "[t]o have

2    standing to sue as a class representative it is essential that a

3    plaintiff must be a part of that class, that is, he must possess

4    the same interest and suffer the same injury shared by all

5    members of the class he represents."   Schlesinger, 418 U.S. at

6    216 (citations omitted); see also Fed. R. Civ. P. 23(a)

7    (providing that "[o]ne or more members of a class may sue or be

8    sued as representative parties" only if the four prerequisites of

9    subsection (a) are met).   Western Pacific and EqualNet were both

10   members of the class.   As a result of Western Pacific's and

11   EqualNet's assignments of their respective claims and interests

12   in this litigation to Cordes and Creditors Trust, Cordes and

13   Creditors Trust stood before the district court in the shoes of

14   Western Pacific and EqualNet, for the purposes of this

15   litigation, as assimilated members of the class.   By virtue of

16   the assignments, they do, as Western Pacific and EqualNet did,

17   possess the same interest and thus may continue to assert a claim

18   for the same injury shared by all members of the class.




     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
1               The fundamental requirement, in other words, is that

2    the "class claims [be] 'fairly encompassed' within" the

3    representative's claims.   Falcon, 457 U.S. at 158.   The claims of

4    Cordes and Creditors Trust, premised as they are on the harms

5    allegedly suffered by Western Pacific and EqualNet, "fairly

6    encompass" the claims of the class.    Reasons of efficiency and

7    economy that permit claims to be pursued as part of a class

8    action in the first place do not vanish as a result of the

9    assignments.   As assimilated class members by virtue of the

10   assignments, Cordes and Creditors Trust have standing to pursue

11   the assigned claims as class representatives.

12              Finally, we do not think that allowing Cordes and

13   Creditors Trust to serve as class representatives threatens the

14   district court's power under Article III to hear this dispute.

15   The assignment of a claim from a person who suffered an injury to

16   someone who did not does not make the claim any less a "case or

17   controversy" which the courts have the constitutional capacity to

18   resolve.   It is indeed commonplace for an assignee to institute

19   or continue an action of his or her assignor on an assigned claim

20   even though he or she, apart from the assignment, is without

21   standing, and the court, apart from the assignment, would be

22   without power to decide the case.     See, e.g., Fed. R. Civ. P.

23   25(c) (providing that in the case of "any transfer of interest,

24   the action may be continued by or against the original party" or,

25   upon motion, by or against the transferee); Official Comm. of

26   Unsecured Creditors of Color Tile, Inc. v. Coopers & Lybrand,

                                     21
1    LLP, 322 F.3d 147, 156 (2d Cir. 2003) ("As assignee of the Color

2    Tile bankruptcy estate, Color Tile Committee 'stands in the shoes

3    of [Color Tile] and has standing to bring any suit that [Color

4    Tile] could have instituted had it not petitioned for

5    bankruptcy.'" (citation omitted)).   Similarly, an assignment of a

6    class claim by a person who purports to be a class representative

7    does not render the claim less amenable to resolution as a class

8    action, nor class action treatment less beneficial to the

9    litigants, after the transfer of the asserted cause or causes of

10   action than before.

11             b.   The perils of permitting assignee-
12                  plaintiffs to represent the class.

13             The defendants argue that as assignees, Cordes and

14   Creditors Trust are not "squarely aligned in interest with the

15   represented group."   Def. Br. at 20 (quoting Benjamin Kaplan,

16   Continuing Work of the Civil Committee: 1966 Amendments of the

17   Federal Rules of Civil Procedure (I), 81 Harv. L. Rev. 356, 387

18   n.120 (1966)) (internal quotation marks omitted).   They

19   characterize Cordes and Creditors Trust as "textbook examples of

20   the 'very serious problems' referenced by the district court that

21   would ensue if the ability to serve as a class representative

22   could be treated 'as a transferrable asset.'"   Id. at 25 (quoting

23   District Court Opinion, 2006 WL 1026653, at *4, 2006 U.S. Dist.

24   LEXIS 21076, at *14).   They explain in some detail why, in their

25   view, Cordes's and Creditors Trust's interests are antagonistic

26   to interests of the class and why they are otherwise deficient as


                                     22
1    class representatives.   Id. at 25-30.   Irrespective of the extent

2    to which Cordes's and Creditors Trust's interests are or are not

3    in fact antagonistic to the interests of other members of the

4    class in this particular case -- a matter on which it is

5    premature for us to express a view -- we do not think that they

6    are necessarily antagonistic solely because Cordes and Creditors

7    Trust are assignees of Western Pacific's and EqualNet's interests

8    in the class action that they are pursuing.

9              The unhappy consequences of permitting "trafficking"

10   (to use the defendants' characterization) in causes of action,

11   thereby permitting one person who has suffered no injury to

12   pursue actions in the stead of another solely to maximize his or

13   her personal monetary return, are not fanciful.     The aversion to

14   such assignments, because of their potential use by

15   "intermeddle[rs to] stir up litigation for the purpose of making

16   a profit," Accrued Fin. Servs., Inc. v. Prime Retail, Inc., 298

17   F.3d 291, 298 (4th Cir. 2002), has been reflected from time

18   immemorial in the laws of champerty and its kin.8    See In re

          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
1    Primus, 436 U.S. 412, 424 n.15 (1978) ("[P]ut simply, . . .

2    champerty is maintaining a suit in return for a financial

3    interest in the outcome . . . .").

4                The purchasing of claims, whether before or after suit

5    has been brought upon them, for the purpose of turning a profit

6    is nonetheless not categorically forbidden.    See Advanced

7    Magnetics, Inc. v. Bayfront Partners, Inc., 106 F.3d 11, 17 (2d

8    Cir. 1997) ("In general, claims or choses in action may be freely

9    transferred or assigned to others."); see also Elliott Assocs.,

10   L.P. v. Banco de la Nacion, 194 F.3d 363, 372 (2d Cir. 1999).     To

11   the contrary, such assignments are widely permitted, presumably

12   in order to allow holders of claims to transfer the risk of loss

13   to someone better able or more willing to pursue the claim or to

14   undertake the risk.    Valid claims otherwise lost may thus be

15   salvaged.

16               The defendants' arguments and the district court's

17   conclusions as to the transferability of the ability to represent

18   a class fail to account for the countervailing value of allowing

19   an assignee to stand in the shoes of the assignor before a court.

20   This case might be termed a "textbook example" of that value in

21   the bankruptcy context inasmuch as the assignments pursuant to


     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
1    which Cordes and Creditors Trust are litigating this case

2    promoted the winding up of complicated estates in bankruptcy to

3    the benefit of creditors.    We see nothing about the perils of

4    claim assignment in the context of class membership and class

5    representation that is qualitatively different from similar

6    dangers that inhere in permitting the pursuit of assigned legal

7    claims generally, which, as we have noted, is allowed.

8              We conclude that Cordes and Creditors Trust, pursuing

9    their claims and interests as assignees of the claims brought by,

10   and interests in this litigation of, purported members of the

11   class seeking to act as class representatives, are not excluded,

12   for that reason alone.

13             2.   The Determination of Adequacy of Representation.

14   That is hardly the end of the matter.    As with any class member

15   seeking to act as a class representative, Cordes and Creditors

16   Trust must demonstrate that "1) [their] interests are [not]

17   antagonistic to the interest of other members of the class and 2)

18   [their] attorneys are qualified, experienced and able to conduct

19   the litigation."   Baffa, 222 F.3d at 60.   In light of its

20   categorical approach to Rule 23(a)(4)'s adequacy requirement, the

21   district court has not addressed these questions.    For some of

22   the reasons advanced by the defendants in support of their

23   assertion that assignees can never act as class representatives,

24   Cordes, Creditors Trust, or both, may in fact not be an adequate

25   class representative here.    If, for example, either is not

26   sufficiently "'aligned in interest with the represented group,'"

                                      25
1    Def. Br. at 20 (citation omitted), see also id. at 28-33, or has

2    insufficient knowledge or access to information, id. at 26-28, it

3    may not qualify.    But we are in no position, and therefore

4    decline, to make that determination in the first instance.     We

5    mean to imply no views on the question.    We leave the matter to

6    the sound discretion of the district court on remand.9

7    B.   Predominance

8               If this lawsuit meets the "prerequisites" of a class

9    action under Rule 23(a), it must then also "qualif[y] under at

10   least one of the categories provided in Rule 23(b)" before it may

11   be certified as a class action.    Visa Check, 280 F.3d at 133.

12   Cordes and Creditors Trust assert that this action qualifies

13   under the third Rule 23(b) category, where, although class

14   treatment is not necessary to avoid adjudications mandating

15   inconsistent standards of conduct under Fed. R. Civ. P. 23(b)(1),

16   or to remedy class-based discrimination under Fed. R. Civ. P.

17   23(b)(2), "class suit [is] nevertheless . . . convenient and

18   desirable."   Amchem, 521 U.S. at 615 (internal quotation marks

19   and citation omitted).




          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
1              To qualify for class treatment, then, the proposed

2    class must meet the requirement of predominance -- that is, that

3    "the questions of law or fact common to the members of the class

4    predominate over any questions affecting only individual

5    members" -- and the requirement of superiority -- that is, "that

6    a class action is superior to other available methods for the

7    fair and efficient adjudication of the controversy."   Fed. R.

8    Civ. P. 23(b)(3).10   The predominance requirement on which we

9    focus -- together with the requirement of "superiority," which

10   has not been separately raised on this appeal -- ensures that the

11   class will be certified only when it would "achieve economies of

12   time, effort, and expense, and promote . . . uniformity of


          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
1    decision as to persons similarly situated, without sacrificing

2    procedural fairness or bringing about other undesirable results."

3    Amchem, 521 U.S. at 615 (citation and internal quotation marks

4    omitted).

5                The district court began with the notion that "[i]n

6    order to prevail on their price-fixing claims, plaintiffs must

7    demonstrate: (1) a violation of the antitrust laws by defendants;

8    (2) some injury to plaintiffs' business or property as a result

9    of the violation (causation or impact) and (3) the amount of

10   damages sustained by the plaintiffs."    District Court Opinion,

11   2006 WL 1026653, at *5, 2006 U.S. Dist. LEXIS 21076, at *16

12   (quoting In re Indus. Diamonds Antitrust Litig., 167 F.R.D. 374,

13   381 (S.D.N.Y. 1996)) (citation and internal quotation marks

14   omitted).    We have stated the point somewhat differently:   "[T]he

15   three required elements of an antitrust claim [are] (1) a

16   violation of antitrust law; (2) injury and causation; and (3)

17   damages . . . ."    Visa Check, 280 F.3d at 136.

18               There is no controversy here regarding the first Visa

19   Check element.   Horizontal price-fixing agreements are per se

20   violations of the Sherman Act.    See generally United States v.

21   Socony-Vacuum Oil Co., 310 U.S. 150, 210-28 (1940).    Cordes and

22   Creditors Trust's allegations of the existence of a price-fixing

23   conspiracy are susceptible to common proof and, if proven true,

24   would satisfy the first element of the plaintiffs' antitrust

25   cause of action.



                                      28
1              The second element -- whether termed "antitrust

2    injury," "causation or impact," or "injury and causation" -- is

3    more complicated.

4              1.   Does Antitrust Injury Pose Common or Individual

5    Questions?   Section 4 of the Clayton Act provides that "any

6    person who shall be injured in his business or property by reason

7    of anything forbidden in the antitrust laws may sue

8    therefor . . . ."   15 U.S.C. § 15(a).   This has been read to

9    require that to prevail in an antitrust suit, a plaintiff "must

10   prove [that it has suffered] antitrust injury, which is to say

11   injury of the type the antitrust laws were intended to prevent

12   and that flows from that which makes defendants' acts unlawful."

13   Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477, 489

14   (1977) (emphasis added).

15             In Brunswick, the defendant, Brunswick, had purchased a

16   nearly bankrupt bowling alley, thus keeping the purchased

17   business alive.   The plaintiffs, Pueblo Bowl-O-Mat and other

18   rival bowling alleys, sought to challenge the purchase because it

19   kept their competitor in business.   See id. at 480-81.

20   Plaintiffs doubtless suffered real harm -- they had lost the

21   "income that would have accrued had the acquired centers gone

22   bankrupt," id. at 487, but this was insufficient to meet the

23   antitrust injury requirement.   The damages recovered in such a

24   case would have given Pueblo Bowl-O-Mat and the other plaintiffs

25             the profits they would have realized had
26             competition been reduced. The antitrust
27             laws, however, were enacted for "the

                                     29
1               protection of competition not competitors,"
2               Brown Shoe Co. v. United States, 370 U.S.
3               [294, 320 (1962)]. It is inimical to the
4               purposes of these laws to award damages for
5               the type of injury claimed here.
6    Brunswick, 429 U.S. at 488.

7               Similarly, in Atlantic Richfield Co. v. USA Petroleum

8    Co., 495 U.S. 328 (1990), independent gas stations could not

9    recover from a gasoline producer that had allegedly fixed the

10   maximum resale prices its affiliated gas stations could charge.

11   The lower prices that resulted from the scheme had pro-

12   competitive, not anti-competitive, effects in the markets in

13   which the plaintiffs were engaged.   See id. at 335-41 (reasoning

14   that non-predatory price competition is pro-competitive with

15   respect to other suppliers of the same goods or services); cf.

16   id. at 345 (noting that even though competitors could not show

17   that they suffered antitrust injury because of their rival's

18   vertical price-fixing scheme, "consumers and the manufacturers'

19   own dealers may bring suit").

20              Rule 23(b)(3) requires that the district court

21   determine what "questions of law or fact [are] common to the

22   members of the class."   Fed. R. Civ. P. 23(b)(3) (emphasis

23   added).   Insofar as Rule 23(b)(3) is concerned, and in light of

24   Brunswick and Atlantic Richfield, we think that the second

25   element of an antitrust cause of action -- "antitrust injury" --

26   poses two distinct questions.   One is the familiar factual

27   question whether the plaintiff has indeed suffered harm, or

28   "injury-in-fact."   The other is the legal question whether any

                                     30
1    such injury is "injury of the type the antitrust laws were

2    intended to prevent and that flows from that which makes

3    defendants' acts unlawful."     Brunswick, 429 U.S. at 489.

4              Rather than relying on the distinction between the

5    legal and factual questions raised by the antitrust injury

6    element of an antitrust suit, the district court focused on the

7    distinction between antitrust injury and damages.     See Visa

8    Check, 280 F.3d at 136.    It accurately noted that the plaintiffs'

9    expert, Bamberger, was asked to opine as to damages and the

10   defendants' expert, Willig, as to injury.     Compare Bamberger

11   Decl. ¶ 3 (stating that the plaintiffs' expert was "asked . . .

12   to determine whether it would be possible to measure damages

13   suffered by members of [the] proposed class . . . by the use of a

14   formula common to all class members" (emphasis added)), with

15   Willig Report at 2 (stating that the defendants' expert was

16   "asked . . . to consider whether the plaintiffs' allegations that

17   members of the proposed issuer class have been injured by the

18   alleged price-fixing conspiracy are capable of being proved on a

19   common basis for the purported class members" (emphasis added)).

20   Reasoning that the plaintiffs' and defendants' experts "have been

21   asked . . . meaningfully different questions," the district court

22   accepted the testimony of the defendants' expert, Willig, because

23   only he had "addresse[d] the question before the Court -- which

24   is whether antitrust injury . . . can be proved by evidence

25   common to the class."     District Court Opinion, 2006 WL 1026653,

26   at *8, 2006 U.S. Dist. LEXIS 21076, at *27-28.    The district

                                       31
1    court therefore concluded that the antitrust injury element of

2    Cordes and Creditors Trust's lawsuit presents questions

3    individual to each class member.

4              We disagree.    Although the questions asked of the

5    experts differed precisely as described by the district court, we

6    think their answers were directed to the same question: whether

7    injury-in-fact is susceptible to common proof in this case.

8    Neither expert offered any views on the legal question of whether

9    common evidence could prove that the injury allegedly suffered

10   was "of the type the antitrust laws were intended to prevent and

11   that flows from that which makes defendants' acts unlawful."

12   Brunswick, 429 U.S. at 489.

13             The defendants' expert, Willig, was of the view

14             that any determination of whether a
15             particular member of the purported issuer
16             class has been injured by the clustering or
17             alleged "standardization" of gross spreads
18             would require an individualized factual
19             analysis about whether, absent such alleged
20             standardization, the issuer would have paid a
21             gross spread of less than 7% for IPO net
22             proceeds, the same or equal to the proceeds
23             the issuer actually received as a result of
24             its offering.

25   Willig Report at 2.   And the plaintiffs' expert, Bamberger,

26   opined that "the difference between each proposed class member's

27   but-for fee and the actual fee it was charged measures damages."

28   Bamberger Decl. ¶ 24.    Each expert thus evaluated whether it

29   would be possible to measure the but-for fee -- that is, the fee

30   an issuer would have paid absent the conspiracy -- by common

31   proof.   The plaintiffs' expert thought that the court could use a

                                      32
1    single formula to establish the supracompetitive prices a

2    plaintiff had paid; the defendants' expert thought no such

3    formula could be constructed.

4                 This disagreement goes to a single question -- whether

5    injury-in-fact can be proved by common evidence.      Although the

6    plaintiffs' expert would use a single formula while the

7    defendants' expert would conduct many individualized inquiries,

8    both experts would determine injury-in-fact by calculating the

9    but-for fee and comparing it to the fee paid.      If the fee paid

10   were higher than the but-for fee, then the plaintiff suffered an

11   injury-in-fact.     In this case, the extent of the difference

12   between the but-for fee and the actual fee paid is relevant to

13   the question of damages, but it is from a comparison between the

14   two that the court would be asked to decide the question of

15   injury-in-fact.11    If the plaintiffs' single formula can be

16   employed to make a valid comparison between the but-for fee and

17   the actual fee paid, then it seems to us that the injury-in-fact

18   question is common to the class.       Otherwise, it poses individual

19   ones.     The district court did not determine which expert is

20   correct.     We leave this question for it to resolve on remand.



          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
1              Notwithstanding the existing open question as to

2    injury-in-fact, we think that the legal question raised by the

3    antitrust injury element of Cordes's and Creditors Trust's case

4    is common to the class.    There is only one type of injury alleged

5    in the Complaint -- overcharges paid to a horizontal price-fixing

6    conspiracy.    Because each class member allegedly suffered the

7    same type of injury, the legal question of whether such an injury

8    is "of the type the antitrust laws were intended to prevent and

9    that flows from that which makes defendants' acts unlawful,"

10   Brunswick, 429 U.S. at 489, is a common one.12

11             2.    Do Common Questions Predominate?   The predominance

12   requirement is met if the plaintiff can "establish that the

13   issues in the class action that are subject to generalized proof,

14   and thus applicable to the class as a whole, . . . predominate

15   over those issues that are subject only to individualized proof."


          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
1    Visa Check, 280 F.3d at 136 (internal quotation marks and

2    citation omitted; ellipsis in original).     It is "a test readily

3    met in certain cases alleging . . . violations of the antitrust

4    laws."    Amchem, 521 U.S. at 625.    In deciding whether it is met,

5    the district court must make a "definitive assessment of Rule 23

6    requirements, notwithstanding their overlap with merits issues."

7    IPO Securities, 471 F.3d at 41.13

8                As we have explained, the legal question raised by the

9    antitrust injury element here is common to the class.     If the

10   factual question -- injury-in-fact -- is also common, then the

11   predominance requirement of Rule 23(b)(3) is likely met.

12               Even if the district court concludes that the issue of

13   injury-in-fact presents individual questions, however, it does

14   not necessarily follow that they predominate over common ones and

15   that class action treatment is therefore unwarranted.     To be

16   sure, the defendants concede that any plaintiff who has suffered

17   the type of injury alleged in the Complaint has suffered

18   antitrust injury.   Oral Arg. Tr. at 19:16-20 (Mar. 19, 2007).

19   But "a concession does not eliminate a common issue from the

20   predominance calculus."    In re Nassau County Strip Search Cases,

21   461 F.3d 219, 227 (2d Cir. 2006) ("Nassau County"); see id. at

22   227-29.




          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
1                These questions, at least, are common: (1) all factual

2    and legal questions that must be resolved to determine whether

3    the defendants violated Section 1 of the Sherman Act; and (2) all

4    factual and legal questions that must be resolved to decide

5    whether, assuming a plaintiff paid supracompetitive prices, that

6    payment was caused by the defendants' antitrust violation and

7    constitutes the kind of injury with which the antitrust laws are

8    concerned.    The question of injury-in-fact, which in this case is

9    equivalent to whether a particular plaintiff would have paid more

10   in the but-for world,14 may not be common.    We do not discount

11   the possibility that the individual questions raised by injury-

12   in-fact might then predominate over the several common questions.

13   Perhaps a trial would focus largely on what particular plaintiffs

14   would have paid in the but-for world.     But that is not

15   necessarily so.     Under these circumstances, the predominance

16   question, too, is best left to the sound discretion of the

17   district court on remand.

18               3.   Certification of Particular Issues.     Subsequent to

19   the district court's denial of class certification and our grant

20   of the motion to certify this appeal, we issued our opinion in

21   Nassau County.     The plaintiffs in that case sought certification

22   of a class of individuals who were subject to the Nassau County

23   Correctional Center's allegedly unconstitutional blanket strip-

24   search policy.     Nassau County, 461 F.3d at 222.     Recognizing that



          14
               The related damages question is: if so, how much more.

                                       36
1    individual questions concerning damages and defenses might defeat

2    certification of the entire case, the plaintiffs also sought

3    certification as to liability pursuant to Rule 23(c)(4)(A).        Id.

4    at 223; see also Fed. R. Civ. P. 23(c)(4)(A) (providing that

5    "[w]hen appropriate . . . an action may be brought or maintained

6    as a class action with respect to particular issues").    The Fifth

7    Circuit had held that Rule 23(c)(4)(A) certification "as to a

8    specific issue" is available only if common questions predominate

9    in the claim as a whole.     Nassau County, 461 F.3d at 226 (citing

10   Castano v. Am. Tobacco Co., 84 F.3d 734, 745 n.21 (5th Cir.

11   1996)).   We adopted, instead, the Ninth Circuit's view that Rule

12   23(c)(4)(A) is available to certify particular issues "regardless

13   of whether the claim as a whole satisfies Rule 23(b)(3)'s

14   predominance requirement."     Id. at 227; see also Valentino v.

15   Carter-Wallace, Inc., 97 F.3d 1227, 1234 (9th Cir. 1996)

16   (recognizing that "[e]ven if the common questions do not

17   predominate over the individual questions so that class

18   certification of the entire action is warranted, Rule 23

19   authorizes the district court in appropriate cases to isolate the

20   common issues under Rule 23(c)(4)(A) and proceed with class

21   treatment of these particular issues").

22             On remand, if the district court concludes that the

23   action ought not to be certified in its entirety because it does

24   not meet the predominance requirement of Rule 23(b)(3), Cordes

25   and Creditors Trust may seek certification of a class to litigate

26   the first element of their antitrust claim -- the existence of a

                                       37
1   Sherman Act violation -- pursuant to Rule 23(c)(4)(A) and Nassau

2   County.15   We do not, of course, express a view as to whether it

3   would lie within the district court's sound discretion to certify

4   such a class under either Rule 23(b)(3) or Rule 23(c)(4)(A).

5                                CONCLUSION

6               For the foregoing reasons, the order is vacated and the

7   case remanded to the district court for further proceedings.




         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
