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District Court Erroneously Refused To Apply Daubert Analysis To Exclude Defendant’s Expert Unreliable Testimony In Denying Certification Of Class Of Hospital Payers Challenging Merger On Antitrust Grounds

April 2, 2012 10:00 AM | Posted by D. Matthew Allen | Print this page

Messner v. Northshore University Healthsystem, -- F.3d --, 2012 WL 129991 (7th Cir. Jan. 13, 2012) involved a class challenge to a hospital merger. The Federal Trade Commission had already ruled that the merger of two Illinois hospitals violated the FTC Act. In a follow-on action, the plaintiffs sought to certify a class of payers, alleging that, as a result of the merger, all patients and their insurers paid higher prices for hospital services.

At the class certification stage, the central issue was whether the plaintiffs could show antitrust impact on a classwide basis. The plaintiffs moved to strike the hospital’s expert’s testimony on Daubert grounds. The district court agreed that the expert’s testimony contained some “misleading” information and analysis, but denied the motion on the ground that it would give the testimony “the weight it believes it is due.” The court went on to deny class certification, finding that the plaintiff’s expert had insufficiently shown that all class members received price increases.

The court of appeals reversed both rulings. It first held that the district court had erred in refusing to conduct a Daubert analysis with respect to the hospital’s expert testimony. When an expert’s report or testimony is “critical” to the certification question, the district court “must make a conclusive ruling on any challenge to that expert’s qualifications or submissions before it may rule on a motion for class certification.” Moreover, this rule applies irrespective of whether the expert being challenged is a plaintiff’s or defense expert. “The ruling is just as important to the plaintiffs as it is to the defendants.”

The court then held that the district court erred in denying class treatment. The plaintiff’s expert had demonstrated that all or substantially all class members had paid higher prices, even in the presence of market imperfections and fixed contracts that covered complex bundles of services. The expert was not required to show uniformity of price increases. Moreover, to the extent the class was overbroad because it included some members who had not suffered price increases, the solution would be to redefine the class, not deny certification.

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