United States District Court, S.D. New York
OPINION AND ORDER
LORETTA A. PRESKA, Senior United States District Judge
the Court is a motion for class certification pursuant to
Federal Rules of Civil Procedure 23(b)(2) and 23(b)(3), (Mot.
Class Cert., Mar. 19, 2014, ECF No. 227), and an accompanying
memorandum of law. (Mem. Class Cert., Mar. 19, 2014, ECF No.
228). Several individual plaintiffs seek to represent a
putative nationwide class of Digital Music purchasers. The
operative complaint before the Court is the Fourth
Consolidated Amended Complaint ("FCAC"), filed
September 25, 2015 (FCAC Sept. 25, 2015, ECF. No 319)
Defendants include Sony BMG Music Entertainment ("Sony
BMG"), UMG Recordings Inc. ("UMG") Warner
Music Group Corp WMG")
Records, Inc., d/b/a EMI Music North America
("Capitol"), Capitol-EMI Music, Inc. ("Capitol
EMI"), EMI Group North America, Inc. ("EMI North
America"), and Virgin Records America, Inc.
("Virgin"), who have filed an opposition to the
motion for class certification. (Def. Opp. Class Cert., June
16, 2016, ECF No. 353). Plaintiffs have in turn replied. (Pl.
Reply Class Cert., Nov. 7, 2016, ECF No. 367).
parties have also filed motions and accompanying memoranda of
law to exclude the opinions rendered by each other's
experts. (See Pl. Mot. Exclude Aaron Read, Dec. 19,
2016, ECF No. 372; Def. Mot. Exclude Roger Noll, Dec. 19,
2016, ECF No. 375; Pl. Mot. Exclude Janusz Ordover, Dec. 19,
2016, ECF No. 376; Pl. Mot. Exclude Supp. Decl. Janusz
Ordover, Jan. 19, 2017, ECF No. 388). Additionally,
Plaintiffs have moved to strike the supplemental declaration
of Janusz Ordover attached to Defendants' motion to
exclude the opinion of Roger Noll. (Letter from Alexandra
Bernay, Dec. 23, 2016, ECF No. 384). For reasons explained in
detail below, (1) Plaintiffs' motion to exclude the
opinion of Aaron Read is denied, (2) Defendants' motion
to exclude the opinion of Professor Noll is denied, (3)
Plaintiffs' motion to exclude Professor Ordover's
opinion is denied except insofar as it relates to price
variability for digital downloads and albums, (4)
Plaintiffs' motion to exclude the supplemental
declaration of Professor Ordover is granted, and (5)
Plaintiffs' motion to strike the supplemental declaration
of Professor Ordover is denied.
Court also finds that Plaintiffs have failed to satisfy Rule
23(a)'s typicality requirement for the reason that the
proposed class members would be subject to unique unclean
hands defenses, while the Proposed Class Representatives
to satisfy the threshold criteria of Rule 23(a) precludes
class certification pursuant to Rule 23(b).
seek to certify two separate classes. Pursuant to Federal
Rule of Civil Procedure 23(b)(2), Plaintiffs move to certify
a nationwide injunctive relief class consisting of all
purchasers of music downloads sold by Defendants indirectly
to persons and entities residing in the United States.
Plaintiffs seek to "enjoin Defendants' collusive
practices and policies that violate Section 1 of the Sherman
Act (15 U.S.C. § 1), and operate to artificially
maintain/inflate Digital Music prices in the U.S." (Pl.
Mem. Class Cert, at 17-18). Because (1) there is no basis to
Plaintiffs' claim that there is a threat of future harm
to the proposed class and (2) Plaintiffs have failed to show
that injunctive relief would inure to the benefit of all
members of the class, the motion for class certification
pursuant to Rule 23(b)(2) is denied.
to Federal Rule of Civil Procedure 23(b)(3), Plaintiffs also
move to certify nine separate damages classes under the
antitrust and/or consumer protection laws of California, the
District of Columbia, Arizona, Florida, Iowa, Michigan,
Minnesota, Nevada, and South Dakota, for persons and entities
who, while residents or within those states, purchased
Digital Music indirectly from the Defendants. (Pl. Mem. Class
Cert, at 1). For reasons explained below, Plaintiffs have
failed to satisfy Rule 23(b) (3)'s predominance and
superiority requirements. Accordingly, the motion for class
certification pursuant to Rule 23(b)(3) is denied.
allegations in this long-lived litigation as set forth in the
FCAC are well-known to the Court. See In re Digital Music
Antitrust Litig., 812 F.Supp.2d 390 (S.D.N.Y. 2011)
("In re Digital Music II"); Starr v.
Sony BMG Music Entm't, 592 F.3d 314 (2d Cir. 2010);
In re Digital Music Antitrust Litig., 592 F.Supp.2d
435 (S.D.N.Y. 2008) ("In re Digital Music
I") ■ The Court assumes familiarity with the
alleged facts at issue, but in order to situate the
discussion a brief summary follows. Defendants produce,
license, and distribute music sold online ("Digital
Music" or "Internet Music") and on compact
discs ("CDs"). (FCAC ¶ 47). Together, they
control eighty percent of the market for Digital Music in the
United States. (FCAC ¶ 108). Plaintiffs allege that
Defendants have conspired to restrain trade in and fix prices
of Digital Music in order to sell CDs at supracompetitive
prices. (FCAC ¶ 56).
initial stages of the alleged conspiracy, Defendants
Bertlesmann, Inc., Warner Music Group Corp., and EMI launched
an online service called MusicNet, a joint venture entity
owned and controlled by various Defendants. (FCAC ¶ 57).
Defendants UMG and Sony Corporation of America launched a
similar online music service called Duet, later renamed
pressplay. (FCAC ¶ 57). It too was a joint venture. All
Defendants signed distribution agreements with MusicNet and
pressplay. (FCAC ¶ 57). These joint ventures, along with
the Recording Industry Association of America, allowed
Defendants to "maintain prices at artificially high
levels, eliminate competition among the Defendants in the
pricing and terms of Internet Music sales, and provide one
of several forums in which the Defendants could discuss their
general desires to restrain trade in Internet Music and come
to agreement on the specifics." (FCAC % 57).
Defendants also allegedly used these joint ventures to share
licensing terms and pricing information and to police the
alleged agreements, among other things. (FCAC ¶ 87).
also allege that Defendants used Most Favored Nation
("MFN") clauses in Defendants' licensing
agreements in order to guarantee that a licensor would
receive at least equivalent licensing terms as another
licensor. (FCAC ¶¶ 58, 81). The alleged effect of
the MFN agreements was to set a wholesale price floor for
Digital Music of 70 cents per song. (FCAC ¶¶
89-90). Plaintiffs allege that despite the fact that the
price of distributing Digital Music fell to essentially zero,
the wholesale price of Digital Music increased uniformly.
(FCAC ¶¶ 89-90). This was due in material part to
Defendants' enforcement of the MFN clauses, which
Defendants attempted to hide. (FCAC ¶¶ 82, 90-91).
In addition, Defendants allegedly fixed the terms of sale of
Digital Music, including digital rights management terms
("DRM"), which restricted transfer of songs to
portable players, among other things. (FCAC ¶¶ 59,
66). Plaintiffs allege that but for the conspiracy, a
defendant may have removed DRMs to gain market share. (FCAC
¶ 66). Allegedly, both the wholesale price and DRMs
included with Defendants' music was fixed among
Defendants because of Defendants' collusion, even when
they sold to unaffiliated retailers. (FCAC ¶ 59).
core allegation is that Defendants' behavior sustained
high prices for Digital Music, which made it less attractive
to consumers and hampered the growth of Digital Music
services generally. (FCAC ¶¶ 71-72). Plaintiffs
point to eMusic, an independent competitor in the online
music business, as an example of competitive pricing. It was
the second-largest online retailer and charged - at retail -
less than half of Defendants' wholesale price, and
Defendants refused to do business with it. (FCAC ¶¶
94-95). Plaintiffs allege that Defendants' motive to
conspire was to support their ability to charge
supracompetitive prices for CDs; they could do so because
Digital Music was priced, through the alleged conspiracy, so
as to be an unattractive or economically uncompetitive
substitute. (FCAC ¶ 73).
procedural history of this case is also well-described in the
Court's earlier opinions. See Starr, 592 F.3d at
320-21. From December 29, 2005, until July 2006, Plaintiffs
filed various state court actions alleging that Defendants
fixed the prices of Digital Music. Id. at 320. These
actions were consolidated and transferred to this Court by
the Judicial Panel on Multidistrict Litigation. Id.
Plaintiffs filed a First Consolidated Amended Complaint in
April 2007 and a Second Consolidated Amended Complaint in
June 2007. Id.
moved to dismiss pursuant to Federal Rule of Civil Procedure
12(b)(6), which the Court granted by Memorandum and Order
dated October 8, 2008, finding that Plaintiffs had failed to
state a plausible claim under Twombly. See In re
Digital Music I, 592 F.Supp.2d at 447. The Court of
Appeals vacated the Court's Order and remanded for
further proceedings consistent with its opinion.
Starr, 592 F.3d at 317. The Defendants again moved
to dismiss the action, which the Court granted in part and
denied in part by Opinion and Order dated July 18, 2011.
See In re Digital Music II, 812 F.Supp.2d at 420.
Plaintiffs then filed the Third Consolidated Amended
Complaint in August 2011. (ECF No. 159).
the Court's 2011 Order, the parties proceeded to conduct
discovery in advance of the instant motion for class
certification. During that time, the parties have engaged in
extensive discovery disputes -- most recently,
Plaintiffs' motion to compel production of highly
detailed transactional data, (Oct. 12, 2016, ECF No. 362) -
resulting in a delay in resolving these proceedings of over
five years. Plaintiffs filed the Fourth Consolidated Amended
Complaint in September 2015. (Sept. 25, 2015, ECF No. 319).
Court turns first to the parties' motions to exclude the
opinions of each other's experts.
Motions to Exclude
admissibility of expert testimony is governed by Federal Rule
of Evidence 702, which provides:
If scientific, technical, or other specialized knowledge will
assist the trieroffact to understand the evidence or to
determine a fact in issue, a witness qualified as an expert
by knowledge, skill, experience, training, or education, may
testify thereto in the form of an opinion or otherwise, if
(1) the testimony is based upon sufficient facts or data, (2)
the testimony is the product of reliable principles and
methods, and (3) the witness has applied the principles and
methods reliably to the facts of the case.
Fed. R. Evid. 702.
order for the expert opinion to be admissible, the witness
"must be qualified as an expert, the testimony must be
reliable, and the testimony must assist the trier of
fact." In re Fosamax Prods. Liab.
Litig., 645 F.Supp.2d 164, 172 (S.D.N.Y. 2009).
within the Second Circuit have liberally construed expert
qualification requirements." In re Methyl Tertiary
Butyl Ether ("MTBE") Prods. Liab. Litig., 2008
WL 1971538, at *5 (S.D.N.Y. May 7, 2008)(internal quotation
marks omitted). "A witness's qualifications 'can
only be determined by comparing the area in which the witness
has superior knowledge, skill, experience, or education with
the subject matter of the witness's testimony.'"
In re Fosamax, 645 F, Supp. 2d at 172
Carroll v. Otis Elevator Co., 896 F.2d 210, 212 (7th
Advisory Committee's note to Rule 702 explains that the
Rule was amended to include the three reliability-based
requirements in response to Daubert v. Merrell Dow
Pharmaceuticals, Inc., 509 U.S. 579 (1993) and its
progeny, Kumho Tire Co. v. Carmichael, 526 U.S. 137
(1999), and General Elec. Co. v. Joiner, 522 U.S.
136, 146 (1997). See Fed.R.Evid. 702 advisory committee's
note. In Daubert, the Supreme Court interpreted Rule
702 to require district courts to act as gatekeepers by
ensuring that expert scientific testimony "both rests on
a reliable foundation and is relevant to the task at
hand." 509 U.S. at 597. This requires "a
preliminary assessment of whether the reasoning or
methodology underlying the testimony is scientifically valid
and of whether that reasoning or methodology properly can be
applied to the facts in issue."
Id. at 592-93; see also Kumho
Tire, 526 U.S. 137 (holding that the gatekeeping
function applies to all expert testimony, whether based on
scientific, technical or other specialized knowledge).
scientifically valid, the subject of expert testimony must
rest on "good grounds, based on what is known."
Daubert, 509 U.S. at 590 (internal guotation marks
omitted). In Daubert, the Court set forth a
non-exclusive list of factors that district courts might
consider in gauging the reliability of scientific testimony.
Id. at 593-95. These factors include: (1) whether
the theory has been tested; (2) whether the theory has been
subjected to peer review and publication; (3) the known or
potential rate of error and whether standards and controls
exist and have been maintained with respect to the technique;
and (4) the general acceptance of the methodology in the
scientific community. Id. "Whether some or all
of these factors apply in a particular case depends on the
facts, the expert's particular expertise, and the subject
of his testimony." In re Fosamax, 645 F.Supp.2d
at 173 (citing Kumho Tire, 526 U.S. at 138), A
district court has broad discretion both in determining the
relevant factors to be employed in assessing reliability and
in determining whether that testimony is in fact reliable.
Kumho Tire, 526 U.S. at 153; Zuchowicz v. United
States, 140 F.3d 381, 386 (2d Cir. 1998).
whether the expert testimony assists the trier of fact goes
primarily to relevance. Daubert, 509 U.S. at 591. Relevance
can be expressed as a question of "fit" --
"whether expert testimony proffered in the case is
sufficiently tied to the facts of the case that it will aid
the jury in resolving a factual dispute." Id.
(citing United States v. Downing, 753 F.2d 1224,
1242 (3d Cir. 1985)). In addition, expert testimony is not
helpful if it simply addresses "lay matters which a jury
is capable of understanding and deciding without the
expert's help." United States v. Mulder,
273 F.3d 91, 101 (2d Cir. 2001)(internal citation and
quotation omitted). Finally, the testimony is not helpful if
it "usurp[s] either the role of the trial judge in
instructing the jury as to the applicable law or the role of
the jury in applying that law to the facts before it."
United States v. Duncan, 42 F.3d 97, 101 (2d Cir.
1994)(internal citation and quotation omitted).
deciding whether a step in an expert's analysis is
unreliable, the district court should undertake a rigorous
examination of the facts on which the expert relies, the
method by which the expert draws an opinion from those facts,
and how the expert applies the facts and methods to the case
at hand." Amorgianos v. Nat'l R.R. Passenger
Corp., 303 F.3d 256, 267 (2d Cir. 2002). However, in
accordance with the liberal admissibility standards of the
Federal Rules of Evidence, only serious flaws in reasoning or
methodology will warrant exclusion. Id. "As
long as an expert's scientific testimony rests upon
'good grounds, based on what is known, ' it should be
tested by the adversary process -- competing expert testimony
and active cross-examination -- rather than excluded from
jurors' scrutiny for fear that they will not grasp its
complexities or satisfactorily weigh its inadequacies."
Ruiz-Troche v. Pepsi Cola of Puerto Rico Bottling
Co., 161 F.3d 77, 85 (1st Cir. 1998)(quoting Daubert,
509 U.S. at 596); see also Amorgianos, 303 F.3d at
267. If an expert's testimony lies within "the range
where experts might reasonably differ, " the jury, and
not the trial court, should "decide among the
conflicting views of different experts." Kumho
Tire, 526 U.S. at 153.
Professor Roger G. Noll
Roger Noll is a Professor Emeritus of Economics at Stanford
University and a Senior Fellow at the Stanford Institute for
Economic Policy Research, where he is the Director of the
Program on Regulatory Policy. (Noll Report at 1, Mar. 19,
2014, ECF No. 231). He has a Ph.D. in economics from Harvard
University and has served as a consultant to the Antitrust
Division of the U.S. Department of Justice, the U.S.
Trade Commission, the Federal Communications Commission, and
the Senate Subcommittee on Antitrust and Monopoly.
(Id.) Professor Noll has published widely in the
field of antitrust economics and has taught the subject to
undergraduate and graduate students for over 50 years.
seek to exclude the opinion of Professor Noll on the grounds
that it is "implausible as a matter of economics and
antitrust theory and inconsistent with both the record and
evidence and Prof. Noll's own data and analysis."
(Def. Mem. Exclude Noll at 1, Dec. 19, 2016, ECF No. 380).
Defendants' argument centers on the contention that
Professor Noll has materially changed his theory of liability
in the course of this litigation. In particular, Professor
Noll has "always alleged that the Defendants conspired
to fix wholesale prices for music downloads, " whereas
Professor Noll's reply declaration "opines that
Defendants conspired to fix the profit margins that
Defendants would make on each sale of music downloads sold to
online music distribution services." (Id.)
Defendants claim that Professor Noll changed his analysis as
a result of making a series of admissions during his
deposition that allegedly exposed flaws in his methodology.
staked their Daubert motion entirely on the argument that
Professor Noll has changed his antitrust theory from one of
price-fixing to margin-fixing, Defendants' support for
this assertion is remarkably thin. Defendants cite Professor
Noll's reply declaration, where he states that
"nearly all download products . . . have approximately
the same profit margin at both wholesale and retail."
(Def. Mem. Exclude Noll at 5 (citing Noll Reply at 38, Nov.
7, 2016, ECF No. 368)). Defendants also cite Professor
Noll's assertion that the "validity of [his] method
 depends on whether different download products (with
different prices) have approximately the same profit
margin." (Id. (citing Noll Reply at 27))
readily apparent, however, that none of the statements cited
by Defendants aver that the conspiracy took the form of
collusion on profit margins. The Court is not surprised that
Professor Noll would cite profit margins as a
measure of price collusion because prices and profit
margins are inherently related. As Professor Noll explains in
his supplemental declaration, "the percentage unit
profit margin is the Lerner Index: L = (P - m)/P, where P is
price and m is the marginal cost. Hence, if defendants agree
to fix the price and if m is a constant, the price-fixing
agreement also fixes the profit margin." (Noll Supp.
Decl. at 5, Jan. 23, 2017, ECF No. 393). Accordingly, the
mere mention of using differences in profit margins to
measure the impact and damages of a price-fixing conspiracy
between the Defendants does not imply that Professor Noll
changed his theory of the liability between the Noll Report
and the Noll Reply.
Defendants have ignored the many statements made by Professor
Noll that are consistent with Plaintiffs' theory of a
price-fixing conspiracy. (See, e.g., Noll Reply at
30 ("[I]f the goal of the defendants was in part to keep
download prices high to reduce cannibalization of CD album
sales. . . . More generally, because the purpose of collusion
is to raise prices, members of a price-fixing cartel who
charge some customers more than the collusive price are
hardly guilty of violating the cartel agreement."); 37
("The appropriate model for a market with heterogeneous
products is that each product enjoys some market power. ...
If download products compete in this way, collusively raising
the prices of some products will cause an increase in the
demand for and the prices of products."); 16 ("[I]f
CDs are competitively priced and are perfect substitutes for
downloads, then competition from CDs will force the price of
downloads to the competitive level. Consequently, an attempt
to engage in collusion to increase download prices above the
competitive level would be unprofitable unless . . .")).
Professor Noll has provided a single method to show common
proof of the alleged price-fixing conspiracy and one formula
for calculating damages, namely, "us[ing] the difference
in the percentage mark-up of price over marginal cost between
digital downloads and the competitive benchmark products
(CDs) to measure the anticompetitive effect of collusion on
the prices of downloads and to generate a common formula for
calculating damages for all digital downloads." (Noll
Supp. Decl. at 2).
cite four reasons why Professor Noll's opinion is
inadmissible, three of which rest on the predicate assumption
that Professor Noll changed his theory of liability. First,
Defendants argue that a margin-fixing theory is implausible
because antitrust conspiracies generally require that the
conspirators be able to observe, and thereby adhere to, each
other's behavior. (Def. Mem. Exclude Noll at 1, 7-10).
Defendants may well be correct that a margin-fixing
conspiracy is implausible because of the difficulty of
policing any such agreement by the co-conspirators. However,
because Defendants mischaracterize Professor Noll's
theory of the conspiracy, the Court rejects Defendants'
argument as frivolous.
Defendants argue that a margin-fixing theory is not
consistent with evidence in the record, which shows that
Defendants' margins on Digital Music varied dramatically
as a result of variable royalty rates for different artists.
(Id. at 2, 10-14) . Once again, the premise of
Defendants' argument is incorrect: Plaintiffs allege a
price-fixing conspiracy, not a margin-fixing conspiracy.
Further, because Defendants have not produced cost data
broken down by individual artist, (see Opp. Exclude
Roger Noll, Jan. 19, 2017, ECF No. 388) - notwithstanding the
vague assertions by record company executives that royalty
rates differ, (see Def. Mem. Exclude Roger Noll at
12-13) -- the Court will not hold Plaintiffs responsible for
failing to analyze data to which they did not have access.
See In re Zurn Pex Plumbing Prods. Liab. Litig., 644
F.3d 604, 613 (8th Cir. 2011) ("While there is little
doubt that bifurcated discovery may increase efficiency in a
complex case such as this, it also means there may be gaps in
the available evidence. Expert opinions may have to adapt as
such gaps are filled by merits discovery, and the district
court will be able to reexamine its evidentiary
Defendants argue that a margin-fixing theory is unreliable
because it assumes any music download above $0.00 includes an
overcharge and therefore cannot discern between a collusive
and non-collusive price. (Def. Mem. Exclude Noll at 3,
14-16). Again, Defendants' argument depends on a
mischaracterization of Professor Noll's theory of
liability and therefore lacks merit.
Defendants' only argument that does not depend on
assuming a margin-fixing conspiracy contends that Professor
Noll fails to account for relevant data concerning varied
pricing throughout the class period that undermines Professor
Noll's pass-through regression analysis, in particular by
excluding all observations of retail sales at $.99.
(Id. at 3, 16-17). However, Professor Noll explains
that the pass-through regression tests the hypothesis that
retail prices are 1.4 times wholesale prices, which is the
ratio for hundreds of millions of transactions at the most
common prices. (Noll Reply at 42). "Because these ratios
tell us the retail price mark-up on a large fraction of
sales, the point of the regression is to test whether
products that are not at the standard prices also have
essentially the same retail mark-up." (Id. at
44). Defendants fail to respond in their Daubert
motion to Professor Noll's justification for excluding
certain price data from the pass-through regression, and the
Court does not find a flaw in his methodology serious enough
to warrant exclusion. See Amorgianos, 303 F.3d at
citing Comcast Corp. v. Behrend, which held that
"any model supporting a plaintiff's damages must be
consistent with its liability case, " 133 S.Ct. 1426,
1433 (2013), Defendants conclude that Professor Noll's
opinion is inadmissible "because it purports to assess
liability and damages based on a margin-fixing conspiracy,
whereas Plaintiffs' theory is that Defendants injured
them with a wholesale price-floor conspiracy." (Def.
Mem. Exclude Noll at 18). As explained above, Plaintiffs and
Professor Noll have articulated a consistent price-fixing
conspiracy regarding liability and in support of the damages
model. Defendants' reliance on Comcast therefore fails.
December 16, 2016, Defendants filed a supplemental
declaration by Professor Janusz Ordover in support of their
motion to exclude Professor Noll's opinion. (Ordover
Supp. Decl, Dec. 22, 2016, ECF No. 382). Plaintiffs moved to
strike Professor Ordover's supplemental declaration on
the grounds that it is a rebuttal to Professor Noll's
reply declaration rather than a declaration in support of
Defendants' Daubert motion. (Letter from
Alexandra Bernay, Dec. 23, 2016, ECF No. 384). In their
opposition to Defendants' motion to exclude, Plaintiffs
also move to exclude Professor Ordover's supplemental
declaration on the grounds that it is unreliable under
Defendants' motion to exclude, the entirety of Professor
Ordover's supplemental declaration incorrectly assumes
that Professor Noll changed his theory of liability from a
conspiracy of price-fixing to margin-fixing. As explained
above, Defendants' premise is contradicted by substantial
evidence in the record of this case. The Court of Appeals has
instructed that expert analysis must be "reliable at
every step, " Amorgianos, 303 F.3d at 267, and
that "a trial judge should exclude expert testimony if
it is . . . based on assumptions that are so unrealistic and
contradictory as to suggest bad faith, " Zerega Ave.
Realty Corp. v. Hornbeck Offshore Transp., LLC,
571 F.3d 206, 213-14 (internal citation and quotation marks
omitted). Professor Noll propounds the same theory of
liability on the basis of price-fixing in both the Noll
Report and Noll Reply. Professor Ordover's supplemental
declaration therefore amounts to little more than a frivolous
strawman and is accordingly unreliable under
Daubert. It will play no further role in the
other hand, Plaintiffs cite no authority that would prevent
Defendants from supporting a Daubert motion to
exclude the opposing side's expert with a declaration
from their own expert witness. Professor Ordover writes in
his supplemental declaration that Professor Noll changed his
theory of liability, and Defendants rely upon Professor
Ordover's supplemental declaration to argue that
Professor Noll's opinion is unreliable. Even if the Court
were to consider Professor Ordover's supplemental
declaration an untimely sur-reply, "[u]ntimely expert
submissions should be disregarded unless the proponent of the
evidence can demonstrate that his delay in complying with the
required deadlines was substantially justified or that it was
harmless, that is, that it did not prejudice the other
side." Bickham v. Coca Cola Refreshments USA,
Inc., 2015 U.S. Dist. LEXIS 156066, at *11 (S.D.N.Y. Nov. 18,
2015). As the Court explains above, Professor Ordover's
supplemental declaration is unreliable under Daubert
and is therefore excluded. Accordingly, Plaintiffs have
suffered no prejudice, and the motion to strike is denied.
foregoing reasons, Defendants' motion to exclude the
opinion of Professor Roger Noll is denied, Plaintiffs'
motion to strike Professor Ordover's supplemental
declaration is denied, and Plaintiffs' motion to exclude
Professor Ordover's supplemental declaration is granted.
Professor Janusz Ordover
Janusz Ordover is a Professor Emeritus of Economics and
former Director of the Masters in Economics Program at New
York University, where he taught for 43 years. (Ordover Decl.
¶ 1, June 16, 2016, ECF No. 354). His areas of
specialization include industrial organization, antitrust,
regulation economics, and the intersection between antitrust
and intellectual property. (Id.) Professor Ordover
earned his Ph.D. in economics from Columbia University.
(Id. at Attachment 1). From 1991 to 1992, he served
as Deputy Assistant Attorney General for Economics at the
Antitrust Division of the United States Department of
Justice. (Id. at 1). Professor Ordover has also
served as an advisor on antitrust and regulatory issues to
organizations including the American Bar Association, the
World Bank, the Organization for Economic Cooperation and
Development, the Inter-American Development Bank, and the
governments of Poland, Hungary, Russia, the Czech Republic,
Australia, and others. (Id. ¶ 2).
move to exclude the declaration of Professor Ordover
on a variety of grounds. As an initial matter, the
Court notes that it is incumbent upon Plaintiffs, not
Defendants, to "present a damages model that can be used
on a class-wide basis based on common proof." In re
Fresh Del Monte Pineapples Antitrust Litig.,
2008 WL 5661873, at *9 (S.D.N.Y. Feb. 20, 2008). Rebuttal
experts, on the other hand, have a "less demanding
task" because "they have no burden to produce
models or methods of their own; they need only attack those
of plaintiffs' expert." In re Zyprexa Prods.
Liab. Litig., 489 F.Supp.2d 230, 285 (E.D.N.Y. 2007).
Further, contradictory expert testimony does not control
admissibility. So long as the rebuttal expert's testimony
is reliable, it is the role of the factfinder to determine
issues of trustworthiness and credibility through
"conventional devices" of "cross-examination,
presentation of contrary evidence, and careful instruction on
the burden of proof." Daubert, 509 U.S. at 596.
Professor Ordover's opinion that class members illegally
argue that Professor Ordover's assertion that a majority
of the proposed class members illegally downloaded Digital
Music is unreliable. (Pl. Mem. Exclude Ordover at 3, Dec. 20,
2016, ECF No. 378). Plaintiffs take particular issue with a
May 2004 Ipsos Insight study because it was (1) commissioned
by Defendant Sony, (2) conducted early in 2000 and therefore
ignores the later class period, and (3) contradicted by
findings in several other studies. (Id. at 3-4).
argument is meritless. Professor Ordover cites a number of
authorities in addition to the 2004 Ipsos report, including
Plaintiffs' own expert, Professor Noll, that support the
proposition that illegal downloading of Digital Music was
rampant during the class period. (See Ordover Decl.
¶ 103). These studies are consistent with the
Court's prior finding that there was "widespread
unauthorized downloading of Digital Music during the class
period." (Mem. and Op., Oct. 9, 2008, ECF No. Ill) . In
citing these studies, Professor Ordover does not seek to
"establish a reliable connection showing that class
members illegally downloaded, " (Pl. Reply Exclude
Ordover, Feb. 2, 2017, ECF No. 398), as Plaintiffs contend.
Rather, the purpose of Professor Ordover's observation is
to show why individualized inquiries will be necessary to
determine which class members engaged in such illegal
downloading in order to offset their damages. (See
Ordover Decl. SI 104 n. 121 ("I note that there is an
overlap between consumers who downloaded music legally and
consumers who pirated music.")). To the extent that
Plaintiffs wish to dispute the interpretation of this
evidence, a Daubert motion is an inappropriate stage
in the litigation to do so. Campbell v. Metro. Prop.
& Cas. Ins. Co., 239 F.3d 179, 186 (2d Cir. 2001)
("[T]he weight of the evidence is a matter to be argued
to the trier of fact."). Rather, the Supreme Court has
instructed that district courts must focus "solely on
principles and methodology, not on the conclusions that they
generate." Daubert, 509 U.S. at 595. Plaintiffs
have raised no issues with Professor Orover's principles
or methodology that would warrant exclusion of his analysis
of this issue.
Professor Ordover's opinion that CDs are not a valid
benchmark because of the lack of broadband internet
seek to exclude Professor Ordover's opinion that CDs are
not a valid benchmark for Digital Music because of the lack
of broadband internet penetration during the class period.
(Pl. Mem. Exclude Ordover at 5). Plaintiffs dispute Professor
Ordover's finding of low broadband penetration in the
United States applies specifically to music buyers, who may
have had higher adoption rates. However, Plaintiffs ignore
the fact that Professor Ordover is responding to an assertion
made by their own expert, Professor Noll.
Report, Professor Noll states that "for the large
majority of consumers who own computers and high-speed
Internet connections, the two products are functionally
equivalent." (Noll Report at 6). Further, "if a
consumer has the necessary electronic devices, a CD and a
digital download are functionally equivalent in that either
can be converted to the other at a small cost."
(Id., at 20). A finding of functional
equivalency affects Professor Noll's analysis in
determining whether or not CDs and Digital Music are economic
substitutes, thereby helping to define the relevant market.
(Id. at 19, 20). Professor Ordover merely introduces
evidence in the form of FCC and Pew Research reports showing
that there were low levels of broadband penetration during
the early years of the class period, (Ordover Decl. 1 47),
which Professor Noll corroborates in his own declaration.
(See Noll Report at 20 ("Early in the class period, the
penetration of home computers and wireless devices with high
speed Internet access was low . . ."). Plaintiffs may
speculate that broadband penetration for class members is
"likely" to be much higher than the United States
as a whole, (see Pl. Reply Exclude Ordover at 5) -
although the Court notes that Professor Noll has cited no