19-06-03 Qualcomm Opening Brief in 9th Cir. Appeal of Consumer Class Cert

Case: 19-15159, 06/03/2019, ID: 11318082, DktEntry: 12, Page 1 of 83
No. 19-15159
UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT
STROMBERG ET AL. v. QUALCOMM INCORPORATED
Appeal from Order of the United States District Court for the
Northern District of California, No. 17-md-02773-LHK,
The Honorable Lucy H. Koh, District Judge
OPENING BRIEF OF DEFENDANT-APPELLANT

QUALCOMM INCORPORATED
ROBERT A. VAN NEST

EUGENE M. PAIGE
STEVEN A. HIRSCH
CODY S. HARRIS
JUSTINA SESSIONS Additional counsel listed on
KEKER, VAN NEST & PETERS LLP signature page
633 Battery Street
San Francisco, CA 94111-1809
Telephone: 415 391 5400
Facsimile: 415 397 7188
Attorneys for Defendant-Appellant

Qualcomm Incorporated
CORPORATE DISCLOSURE STATEMENT
Pursuant to Federal Rule of Appellate Procedure 26.1, Defendant-
Appellant Qualcomm Incorporated states that it does not have a parent
corporation and that no publicly held corporation owns 10% or more of
its stock.
Dated: June 3, 2019 KEKER, VAN NEST & PETERS LLP
s/Robert A. Van Nest

ROBERT A. VAN NEST
633 Battery Street
San Francisco, CA 94111
Tel: (415) 391-5400
Fax: (415) 397-7188
rvannest@keker.com
i
TABLE OF CONTENTS
Page

CORPORATE DISCLOSURE STATEMENT......................................... I
TABLE OF CONTENTS ........................................................................II
TABLE OF AUTHORITIES ................................................................... V
INTRODUCTION ........................................................................1
STATEMENT OF JURISDICTION ............................................4
ISSUES PRESENTED.................................................................5
STATEMENT OF THE FACTS AND CASE ..............................6
General background ...........................................................6
The district court’s class-certification order ....................13
SUMMARY OF ARGUMENT ...................................................16
STANDARD OF REVIEW.............................................................18
ARGUMENT ..............................................................................19
The district court abused its discretion in ruling

that plaintiffs had demonstrated predominance
and cohesiveness on the question of antitrust
impact. ...............................................................................19
1. Plaintiffs’ model impermissibly sought to

show through assumptions and theory
rather than actual evidence that all or
nearly all class members suffered antitrust
impact...................................................................... 22
2. The class includes nearly 100 million
ii
consumers who, under plaintiffs’ model,

experienced no antitrust impact. ........................... 35
3. Individualized issues regarding impact and

uninjured class members also made class
certification improper under Rule 23(b)(2). .......... 40
The class is unmanageable and therefore not a

“superior” method for adjudicating the
controversy. .......................................................................43
1. This Court’s opinion in In re Hotel

Telephone Charges is controlling and
requires reversal. .................................................... 44
2. Other circuits have likewise held that

antitrust class actions this sprawling
cannot be certified. ................................................. 51
3. The district court abused its discretion by

failing to conduct a meaningful
manageability analysis. ......................................... 53
The district court erred in applying California

law to this nationwide class action despite
dispositive differences in state antitrust laws. ...............57
1. In nationwide consumer class actions filed

in California, each class member’s claim is
governed by the law of the state of
purchase. ................................................................. 59
2. The district court’s choice-of-law ruling

disregarded or misconstrued Mazza’s
holding and reasoning. ........................................... 65
CONCLUSION AND SUMMARY OF RELIEF

SOUGHT ....................................................................................69
CERTIFICATE OF COMPLIANCE……………………………. .............71
iii
STATEMENT OF RELATED CASES ..................................................72
CERTIFICATE OF SERVICE...............................................................73
iv
TABLE OF AUTHORITIES
Page(s)
Cases
Abrams v. Interco Inc.,

719 F.2d 23 (2d Cir. 1983) ............................................................. 51, 56
In re Allstate Ins. Co.,

400 F.3d 505 (7th Cir. 2005) ................................................................ 41
Amchem Prods., Inc. v. Windsor,

521 U.S 591 (1997) ......................................................................... 54, 55
Amgen Inc. v. Conn. Retirement Plans and Trust Funds,

568 U.S. 455 (2013) .............................................................................. 54
Apple Inc. v. Pepper,

139 S. Ct. 1514 (2019) .......................................................................... 25
California v. ARC Am. Corp.,

490 U.S. 93 (1989) ................................................................................ 58
Arnold v. United Artists Theatre Circuit, Inc.,

158 F.R.D. 439 (N.D. Cal. 1994) .......................................................... 41
In re Asacol Antitrust Litig.,

907 F.3d 42 (1st Cir. 2018) .......................................... 17, 35, 52, 53, 68
Barber v. Hawaii,
42 F.3d 1185 (9th Cir. 1994) ................................................................ 18
Barnes v. Am. Tobacco Co.,

161 F.3d 127 (3d Cir. 1998) ................................................................. 41
Berger v. Home Depot USA, Inc.,

741 F.3d 1061 (9th Cir. 2014), abrogated on other grounds
by Microsoft Corp. v. Baker, 137 S. Ct. 1702 (2017) ........................... 35
In re Bluetooth Headset Products Liability Litigation,

654 F.3d 935 (9th Cir. 2011) ................................................................ 55
v
Briseno v. ConAgra Foods, Inc.,

844 F.3d 1121 (9th Cir.), cert. denied, 138 S. Ct. 313
(2017) .................................................................................................... 43
Cargill, Inc. v. Monfort of Colo., Inc.,

479 U.S. 104 (1986) .............................................................................. 41
In re Cathode Ray Tube (CRT) Antitrust Litig.,

2013 WL 5391159 (N.D. Cal. Sept. 19, 2013) ..................................... 68
Chamberlan v. Ford Motor Co.,

402 F.3d 952 (9th Cir. 2005) ................................................................ 18
In re Class 8 Transmission Indirect Purchaser Antitrust

Litig.,
679 F. App’x 135 (3d Cir. 2017) ..................................................... 20, 34
Comcast Corp. v. Behrend,

569 U.S. 27 (2013) ........................................................................ passim
In re DDAVP Indirect Purchaser Antitrust Litig.,

903 F. Supp. 2d 198 (S.D.N.Y. 2012)................................................... 68
Dukes v. Wal-Mart Stores, Inc.,

603 F.3d 571 (9th Cir. 2010) (en banc), rev’d on other
grounds, 564 U.S. 338 (2011) ........................................................ 18, 44
Eisen v. Carlisle & Jacquelin,

417 U.S. 156 (1974) .............................................................................. 56
In re Flash Memory Antitrust Litig.,

2010 WL 2332081 (N.D. Cal. June 9, 2010)........................................ 22
Fosmire v. Progressive Max Ins. Co.,

277 F.R.D. 625 (W.D. Wash. 2011) ...................................................... 41
In re Grand Theft Auto Video Game Consumer Litig.,

251 F.R.D. 139 (S.D.N.Y. 2008) ........................................................... 68
In re Graphics Processing Units Antitrust Litig.

527 F. Supp. 2d 1011 (N.D. Cal. 2007) ............................................... 68
vi
In re Graphics Processing Units Antitrust Litigation,

253 F.R.D. 478 (N.D. Cal. 2008) .................................................... 23, 24
Hanlon v. Chrysler Corp.,

150 F.3d 1011 (9th Cir. 1998) .............................................................. 55
In re Hotel Telephone Charges,

500 F.2d 86 (9th Cir. 1974) .......................................................... passim
Illinois Brick Co. v. Illinois,

431 U.S. 720 (1977) ........................................................................ 58, 68
Lakeland Regional Med. Ctr., Inc. v. Astellas US, LLC,

763 F.3d 1280 (11th Cir. 2014) ............................................................ 43
Langbecker v. Electronic Data Sys. Corp.,

476 F.3d 299 (5th Cir. 2007) ................................................................ 41
Lewallen v. Medtronic USA, Inc.,

2002 WL 31300899 (N.D. Cal. Aug. 28, 2002) .................................... 41
Leyva v. Medline Indus., Inc.,

716 F.3d 510 (9th Cir. 2013) ................................................................ 48
In re Lithium Ion Batteries Antitrust Litig.,

2017 WL 1391491 (N.D. Cal. Apr. 12, 2017)....................................... 23
Marlo v. United Parcel Serv., Inc.,

639 F.3d 942 (9th Cir. 2011) ................................................................ 34
Mazza v. Am. Honda Motor Co.

666 F.3d 581 (9th Cir. 2012) ........................................................ passim
Morrison v. Viacom, Inc.,

66 Cal. App. 4th 534 (1998) ................................................................. 20
O’Connor v. Uber Techs., Inc.,

904 F.3d 1087 (9th Cir. 2018) .......................................................... 5, 18
In re Packaged Seafood Prod. Antitrust Litig.

242 F. Supp. 3d 1033 (S.D. Cal. 2017) .......................................... 65, 68
vii
In re Paxil Litig.,
212 F.R.D. 539 (C.D. Cal. 2003) .......................................................... 41
FTC v. Qualcomm,
No. 17-cv-220 (N.D. Cal. filed Jan. 17, 2017)...................................... 53
In re Rail Freight Fuel Surcharge Antitrust Litig.,

292 F. Supp. 3d 14 (D.D.C. 2017) ........................................................ 36
Senne v. Kansas City Royals Baseball Corp.,

2017 WL 897338 (N.D. Cal. March 7, 2017) ....................................... 41
Six Mexican Workers v. Ariz. Citrus Growers,

904 F.2d 1301 (9th Cir. 1990) ............................................ 18, 43, 54, 55
Sweet v. Pfizer,
232 F.R.D. 360 (C.D. Cal. 2005) .......................................................... 41
Torres v. Mercer Canyons Inc.,

835 F.3d 1125 (9th Cir. 2016) ........................................................ 35, 37
Tyson Foods, Inc. v. Bouaphakeo,

136 S. Ct. 1036 (2016) .................................................................. passim
Wal-Mart Stores, Inc. v. Dukes,

564 U.S. 338 (2011) ............................................................ 40, 44, 46, 54
In re Wellbutrin XL Antitrust Litig.,

260 F.R.D. 143 (E.D. Pa. 2009)............................................................ 68
Statutes
15 U.S.C. § 4 ......................................................................................... 4, 58
28 U.S.C. § 1292(e) ..................................................................................... 5
28 U.S.C. § 1331.......................................................................................... 4
28 U.S.C. § 1332(d), Class Action Fairness Act ........................................ 5
28 U.S.C. § 1367.......................................................................................... 4
28 U.S.C. § 2072(b) ................................................................................... 44
viii
California Business & Professions Code §16700, California’s

Cartwright Act ......................................................................... 10, 20, 52
California Business & Professions Code § 16750(a) ............................... 11
Other Authorities
Federal Rule of Civil Procedure 12(b)(6) ................................................. 12
Federal Rule of Civil Procedure 23 .................................................. passim
https://www.americanbar.org/content/dam/aba/publishing/
antitrust_source/lindsay_chart.authcheckdam.pd ............................. 58
ix
INTRODUCTION1
Without holding a hearing or allowing Qualcomm to address the
new theories and evidence that plaintiffs raised on reply, the district
court certified a nationwide class comprising an estimated 250 million
persons and entities, encompassing approximately 1.2 billion individual
cellphone purchases. Plaintiffs’ theory is that every person or entity
who bought a cellphone since February 11, 2011 for their own use and
not for resale suffered an antitrust injury because cellphone
manufacturers, distributors, carriers, and retailers passed on to them
allegedly inflated patent royalties associated with licensing Qualcomm’s
technologies.
But plaintiffs simply disregard the widely disparate terms under
which consumers purchased cellphones through various channels, the
corresponding lack of any common “pass-through” harm, the substantial
share of class members who would not have suffered any antitrust
harm under plaintiffs’ own model, and the differences in governing
1
Throughout this brief, “Order” refers to the district court’s September
27, 2018 Order Granting Plaintiffs’ Motion for Class Certification
(1ER1-66); in quotations, emphases were added unless otherwise
stated, and internal punctuation, footnotes, and citations were omitted.
state laws, 22 of which preclude recovery of damages by indirect
purchasers.
The certified class is unprecedented in both size and diversity, and
includes all 250 million members regardless of:
 the cellphone’s brand and model;
 whether or not the cellphone contained a chip over which
Qualcomm allegedly had monopoly power;
 the distribution channel, i.e., whether the consumer purchased the
cellphone from a carrier (e.g., AT&T, T-Mobile), a retailer (e.g.,
BestBuy, Amazon), the manufacturer (e.g., Apple, Samsung), or
some other channel;
 the price, if any, that the consumer paid for the cellphone;
 which other ancillary services, discounts, devices, or benefits, if
any, came bundled with the cellphone;
 whether or not patent royalties were being paid to Qualcomm on
the cellphone at the time of the purchase; and
 whether or not the consumer lives in a state that grants her
standing to sue for antitrust damages as an indirect purchaser.
As plaintiffs see it, these substantial differences do not matter: all
consumers were harmed in exactly the same way, because, according to
2
them, economic theory holds that any elevated royalty must have been
passed through to the consumer by every single participant in the chain
of commerce, every single time.
Plaintiffs are mistaken. Because this is—by far—the largest and
most heterogeneous class ever certified in this Circuit (or anywhere else
in the United States), the district court should have engaged in the
rigorous class-certification analysis required by law. The court should
have demanded a showing that plaintiffs can establish the key element
of antitrust impact as to all or nearly all class members through
common proof. That showing has not been made, given the involvement
in the sales at issue of multitudes of original equipment manufacturers
(“OEMs”), four different contract manufacturers, three intermediate
distributors, half a dozen wireless carriers, and hundreds of different
retailers and authorized dealers, each with their own pricing strategies.
The court also should have required plaintiffs to provide a trial plan
that would safeguard Qualcomm’s due-process right to challenge the
alleged antitrust impact, if any, on class members—another
impossibility given the class’s extreme heterogeneity. The court should
have further required a workable plan for notifying class members,
calculating damages, and processing claims. And the court should have
3
deferred to the policy judgments of states that have declined to allow
indirect purchasers to sue for damages under their state antitrust laws.
The Order under review did none of these things. Instead, it
contained three fundamental errors, any one of which would require
reversal. The Order: (1) erroneously found predominance regarding
antitrust impact based on a “pass-through” theory that lacks
evidentiary support and cannot be established through common proof;
(2) summarily dismissed the due-process and manageability concerns
that a class action of this unprecedented magnitude inevitably will
entail; and (3) improperly applied California antitrust law to a
nationwide class despite directly contrary precedent in this Circuit.
For all of these reasons and others set forth below, this Court
should reverse the Order certifying the putative class.
STATEMENT OF JURISDICTION
The district court had subject-matter jurisdiction under 15 U.S.C.
§§ 4 and 16, as well as under 28 U.S.C. §§ 1331 (federal question) and
1337 (commerce and antitrust regulation). The district court had
supplemental jurisdiction over plaintiffs’ state-law claims under 28
U.S.C. § 1367, because the matters forming the subject of those claims
4
allegedly form part of the same case or controversy. The district court
also had jurisdiction under the Class Action Fairness Act, 28 U.S.C.
§ 1332(d), because (1) the matter in controversy allegedly exceeds $5
million, exclusive of interest and costs; and (2) certain members of the
plaintiff class allegedly are citizens of states different from Qualcomm.
This Court has jurisdiction under 28 U.S.C. § 1292(e) and Federal
Rule of Civil Procedure 23(f) to review the district court’s class-
certification order. See O’Connor v. Uber Techs., Inc., 904 F.3d 1087,
1094 (9th Cir. 2018). The Order was entered on September 27, 2018.
Qualcomm timely filed its Rule 23(f) petition within 14 days, on October
11, 2018. This Court granted that petition on January 23, 2019.
ISSUES PRESENTED
1. Did the district court abuse its discretion in finding Rule
23(b)(3) predominance and Rule 23(b)(2) cohesiveness with respect to
antitrust impact, when plaintiffs’ “pass-through” model relied upon
assumptions and theory about pricing instead of evidence, and the class
includes tens of millions of consumers for whom no harm was calculated
under plaintiffs’ own model?
5
2. Is the nationwide class certified by the district court—
encompassing as many as 250 million members and presenting roughly
1.2 billion claims—so large, heterogeneous, and unwieldy to manage
that it violates Qualcomm’s due-process right to vigorously contest
plaintiffs’ claims?
3. Did the district court contravene Mazza v. American Honda
Motor Co., Inc., 666 F.3d 581 (9th Cir. 2012), by applying California’s
antitrust laws to a nationwide damages class that includes indirect
purchasers residing in 22 states that deny them standing to sue, when
those states have a strong policy interest in increasing commerce and
jobs by striking what they deem to be the proper balance between
protecting consumers and encouraging an attractive business climate?
STATEMENT OF THE FACTS AND CASE
General background
As a global leader in cellular technology, Qualcomm holds
thousands of patents crucial to key aspects of cellular functionality.
2ER134, ¶ 55. Some of Qualcomm’s patents are cellular standard-
6
essential patents (“SEPs”).2 Id. Because the technologies embodied in
Qualcomm’s SEPs are woven into the fabric of cellular products and
networks, any mobile device using a cellular standard such as 3G
WCDMA or 4G LTE necessarily infringes Qualcomm’s SEPs. Id.
Qualcomm also holds numerous non-standard-essential patents
(“NSEPs”) that cover features ubiquitous in mobile devices, including
technologies related to battery life, graphics, displays, cameras, and
other functionality.
Qualcomm is a systems-solution company with two primary
businesses: licensing technology and selling chips. 2ER127, ¶ 25. The
objective of the former is to license Qualcomm’s patents (both SEPs and
NSEPs) by executing license agreements with OEMs whose cellphones
or other mobile devices use and benefit from Qualcomm’s technologies.
Like other cellular SEP-holders, Qualcomm licenses its patent portfolio
2
Standards-development organizations composed of cellular-technology
developers, manufacturers, and users from around the globe decide
which technologies are best suited to be incorporated into cellular
standards. A patent is “essential” if it is not possible for technical
reasons to fully practice a standard without infringing the patent.
Participating SEP holders typically agree to offer to license their SEPs
for certain purposes on fair, reasonable, and non-discriminatory
(“FRAND”) terms.
7
at the handset level, i.e., through licenses for the manufacture, sale and
use of complete devices such as cellphones; Qualcomm does not license
its patents at the individual-component level. 1ER8. In other words,
OEMs such as LG, Motorola, and Huawei license Qualcomm’s patent
portfolio at the level of a completed cellphone rather than at the level of
any given component. The royalty rate for Qualcomm’s portfolio of both
SEPs and NSEPs is typically 5% of the device’s wholesale net selling
price. 3ER422-23, ¶ 12. The base upon which the royalty is charged is
subject to a cap; before January 2018, the cap was $500, and after that
the cap was $400.
Qualcomm’s second business involves the design and sale of highly
sophisticated semiconductor chips. 2ER134, ¶ 54. Qualcomm designs
and sells what are sometimes referred to as modem chips, which enable
cellphones and other mobile devices to connect with cellular networks.
2ER133, ¶ 33. Modem chips also may provide graphics and multimedia
support enabled by a state-of-the-art applications processor, as well as
other functionalities—all with extreme power efficiency allowing for
long battery life and sustained performance. Because Qualcomm began
licensing its intellectual property before it began selling chips, it priced
its chips separately from any intellectual property that the chips may
8
practice, and instead continued to recover the value of its intellectual
property through royalties paid under its license agreements. Thus,
Qualcomm’s chip pricing (and its competitors’ chip pricing) does not
take account of the Qualcomm patents practiced by the cellular devices
into which those chips are incorporated.
Plaintiffs in this multi-district litigation are cellphone purchasers
who allege that Qualcomm improperly maintained a monopoly in chips
compatible with the CDMA standard and in “premium tier” chips
compatible with the LTE standard. 2ER153, ¶ 119. Plaintiffs allege that
Qualcomm maintained these monopolies through three practices: (1)
selling modem chips only to OEMs that have entered into license
agreements for Qualcomm’s SEPs, a practice that allegedly forces
OEMs to pay patent royalties that exceed the supposed “FRAND rate”
for those SEPs; (2) licensing its patents only at the handset level rather
than the chip level; and (3) entering into now-expired arrangements
with Apple that allegedly constituted impermissible exclusive dealing.
2ER122-23, ¶ 8. Plaintiffs do not claim that Qualcomm overcharged for
the allegedly monopolized chips. Instead, plaintiffs assert that these
practices harmed consumers because some amount attributable to the
allegedly excessive royalty (i.e., the part above the FRAND royalty) was
9
“passed through” the entire distribution chain to those consumers—who
are indirect purchasers—and was included in the price they paid for
their devices. 2ER145, ¶ 96. Plaintiffs did not present alleged
“overcharges” on a cellphone-by-cellphone basis; instead, their reported
“overcharges,” which were averaged across devices, ranged from less
than three-quarters of a percent to slightly more than four percent of
the wholesale cellphone price. 3ER437-38. The amount of the alleged
supra-FRAND portion depends on many factors, including (1) the type
of cellular connectivity (as plaintiffs claim that there is a different
FRAND rate for each wireless standard that a cellphone might use) and
(2) the amount the licensee paid to Qualcomm in royalties (as plaintiffs
claim that various licensees paid different so-called “effective royalty
rates”). 3ER423 at Fig. 1, 3ER431 at Fig. 7. Because the class is so
massive, plaintiffs’ damages claim is approximately $5 billion before
any statutory trebling. 3ER414, ¶ 291. There is no dispute that
plaintiffs are not direct purchasers.
Federal antitrust law (as well as the antitrust laws of 22 states)
bars damages claims by indirect purchasers. Plaintiffs therefore allege
violations of California’s Cartwright Act, which grants indirect
purchasers standing to sue for damages for overcharges that they can
10
show were “passed on” to them through the entire distribution chain.3
2ER166-67, ¶ 165. Plaintiffs moved on July 5, 2018 to certify a class
comprising (with certain exceptions not relevant here):
[a]ll natural persons and entities in the United States who

purchased, paid for, and/or provided reimbursement for
some or all of the purchase price for all UMTS, CDMA
(including CDMAone and cdma2000) and/or LTE cellular
phones (“Relevant Cellular Phones”) for their own use and
not for resale from February 11, 2011, through the present
(the “Class Period”) in the United States.4
Plaintiffs acknowledge that this class would include some 250 million
consumers presenting roughly 1.2 billion claims.
Plaintiffs submitted no trial plan with their class-certification
motion, nor any model or formula for calculating damages and
distributing them to class members. Plaintiffs likewise presented no
declaration from any claims administrator explaining how these 1.2
billion potential claims would be processed or validated. As for
providing notice to this quarter-billion-member class, plaintiffs
submitted on reply an attorney declaration stating that an unidentified
claims administrator could reach 70% of the class by publicizing the
3
CAL. BUS. & PROF. CODE § 16750(a).
4
1ER16.
11
case in People Magazine and/or Better Homes & Gardens and through
banner advertisements on Google, Facebook, and other websites.
2ER76-77, ¶¶ 14-15.
Opposing class certification, Qualcomm argued, inter alia, that (1)
plaintiffs had not provided a model that could prove antitrust impact
using common evidence on a classwide basis; (2) the proposed class’s
size and heterogeneity rendered it violative of due process,
unmanageable, and therefore not “superior”; and (3) indirect purchasers
in 22 states lack standing to seek antitrust damages.5
Three days before the scheduled September 27, 2018 class-
certification hearing, the district court took the hearing off calendar.
2ER67. On the date of the canceled hearing, the court issued its Order
granting plaintiffs’ motion in full, while relying on certain theories and
materials that plaintiffs submitted on reply and that Qualcomm
therefore had no opportunity to rebut.
5
The district court had rejected this third argument when denying
Qualcomm’s Rule 12(b)(6) motion to dismiss. See 2ER215-21. Qualcomm
re-asserted it due to its clear relevance to class certification and to
preserve it for appeal.
12
The district court’s class-certification order
After determining that plaintiffs’ proposed class satisfied the
requirements of Rule 23(a), the district court considered whether the
class could be certified under Rule 23(b)(3). At the outset, it found that
a decision about whether Qualcomm’s alleged conduct violated the
antitrust laws could be reached through the use of common evidence.
1ER23-27.
The district court then turned to the question of antitrust impact
on putative class members. It acknowledged that plaintiffs needed to
offer a model that could demonstrate that an alleged overcharge was
passed down through each successive link in the distribution chain, all
the way to consumers. 1ER31.
“Central to the analysis,” the court wrote, “is the report of one of
Plaintiffs’ experts, Dr. [Kenneth] Flamm.” Id. The court observed that
Dr. Flamm had proffered three types of what it considered to be
common evidence: (1) a description of the “economic consensus” (based
upon studies of the television, gasoline, alcohol, and cigarette
industries) that what he called “industry-wide costs” are passed through
as higher prices to direct purchasers, 1ER33; (2) documents and
testimony allegedly showing that Qualcomm, OEMs, and wireless
13
carriers treated Qualcomm’s royalty as a “known component cost” and
included it in their calculations of the total costs of cellphones, id.; and
(3) a “hedonic regression” that Dr. Flamm performed on a portion of the
sales data6 from various OEMs, carriers, retailers, distributors, and
contract manufacturers, 1ER34. Dr. Flamm’s regression was designed
to predict the relationship of the price of a device to the total costs of the
device, while seeking to hold constant ten particular cellular-device
features that the district court referred to as “quality-control
characteristics.” 1ER 34-35. Dr. Flamm’s model was thus designed to
generate what he called a “quality-adjusted price.” But the model could
not provide predictions about the quality of the device, since it sought to
hold quality characteristics constant.
Qualcomm argued that plaintiffs had failed to produce a
methodology capable of demonstrating that any alleged overcharges
would have been passed from OEMs to distributors, carriers, and
retailers, all the way down to consumers. Disagreeing, the district court
6
Dr. Flamm used as inputs to his regression the prices and costs of
cellphones at the time they were first sold, not data showing how those
prices and costs changed over time. 3ER406, ¶ 257.
14
found that “Dr. Flamm’s analysis, which relies on testimony from OEMs
and basic economic principles regarding pass-through of industry-wide
taxes, answers that question.” 1ER43. The district court found further
reason to credit Dr. Flamm’s model because “both economic theory and
witness descriptions of industry practice confirm that royalty costs
(including Qualcomm’s royalty) are considered with all costs when
making determinations about price and quality.” 1ER43-44.
Having accepted plaintiffs’ pass-through theory of antitrust
impact, the district court summarily dispatched Qualcomm’s concerns
about managing a class action of this magnitude. Regarding how
damages would be calculated and distributed to 250 million claimants,
the district court said only that it “expects that Plaintiffs will be able to
propose efficient means to calculate and distribute damages to class
members.” 1ER63. And the district court reiterated the view, previously
stated when denying Qualcomm’s motion to dismiss, that it could apply
California antitrust law to a nationwide class of indirect purchasers
even though 22 states deny indirect purchasers standing to pursue
claims for antitrust damages. 1ER57.
The district court also certified the class under Rule 23(b)(2).
Although plaintiffs never specifically stated that their Rule 23(b)(2)
15
class would be limited to claims for injunctive relief, the district court
certified a (b)(2) injunctive-relief class “[t]o the extent that plaintiffs
[sought] to certify” it. 1ER63. The court found that the class was
sufficiently cohesive because “[p]laintiffs ha[d] shown that Qualcomm’s
allegedly anticompetitive conduct has market-wide application and
effect.” 1ER65. The court did not specify which claims the Rule 23(b)(2)
class would be entitled to pursue—only that such claims would be for
injunctive relief.
Qualcomm sought interlocutory review under Federal Rule of
Civil Procedure 23(f), which this Court granted.7
SUMMARY OF ARGUMENT
For any of three independent reasons, this Court should reverse
the district court’s class-certification order.
First, plaintiffs have not provided a model capable of showing
through common evidence that small royalty overcharges—which differ
from device to device—would have been passed through the multitudes
of different distribution chains to all, or nearly all, consumers,
7
Additional aspects of the district court’s Order are detailed in the
arguments presented below.
16
regardless of the nature of the transaction. Moreover, the class contains
approximately 95 million iPhone purchasers who, under plaintiffs’ own
model, suffered no antitrust impact as a result of the challenged
practices. Such a class cannot be certified.
Second, no class ever certified approaches this one in size or
scope—yet the district court certified it without even asking for (or
receiving) any plan for managing this unprecedented class action. That
error alone warrants reversal. See In re Asacol Antitrust Litig., 907 F.3d
42, 58 (1st Cir. 2018) (reversing certification decision on Rule 23(f)
review where the district court failed, “at the time of certification,” to
“offer a reasonable and workable plan” for allowing defendants to “press
at trial genuine challenges to allegations of injury-in-fact”).
Third, the district court applied California’s antitrust laws to a
nationwide damages class that includes indirect purchasers residing in
22 states that deny them standing to sue for damages. The district court
thus contravened Mazza, which required it to defer to the strong policy
interest that those states have in increasing commerce and jobs by
striking what they deem to be the optimal balance between protecting
consumers and encouraging an attractive business climate.
17
STANDARD OF REVIEW
This Court “first review[s] a class certification determination for
legal error under a de novo standard, and if no legal error occurred, . . .
proceed[s] to review the decision for abuse of discretion.” O’Connor, 904
F.3d at 1094 (reversing class-certification orders on Rule 23(f) review).8
“A district court that applies the correct legal standard abuses its
discretion only if it (1) relies on an improper factor, (2) omits a
substantial factor, or (3) commits a clear error of judgment in weighing
the correct mix of factors.” Id.
“The district court’s findings of fact are reviewed for clear error,
and will be reversed only if they are (1) illogical, (2) implausible, or (3)
without support in inferences that may be drawn from the record.” Id.9
8
O’Connor demonstrates that the unique standards governing Rule
23(f) petitions (see Chamberlan v. Ford Motor Co., 402 F.3d 952, 959
(9th Cir. 2005)) yield to ordinary review standards when a petition is
granted and a case is reviewed on the merits.
9
See also Dukes v. Wal-Mart Stores, Inc., 603 F.3d 571, 579 (9th Cir.
2010) (en banc), rev’d on other grounds, 564 U.S. 338 (2011); Barber v.
Hawaii, 42 F.3d 1185, 1197 (9th Cir. 1994); Six Mexican Workers v.
Ariz. Citrus Growers, 904 F.2d 1301, 1304 (9th Cir. 1990).
18
ARGUMENT
The district court abused its discretion in ruling that

plaintiffs had demonstrated predominance and
cohesiveness on the question of antitrust impact.
“The class action is an exception to the usual rule that litigation is
conducted by and on behalf of the individual named parties only. To
come within [that] exception, a party seeking to maintain a class action
must affirmatively demonstrate his compliance with Rule 23.” Comcast
Corp. v. Behrend, 569 U.S. 27, 33 (2013).
Rule 23(b)(3) requires that, before certifying a class under that
subsection, a district court must find that “questions of law or fact
common to class members predominate over any questions affecting
only individual members.” Tyson Foods, Inc. v. Bouaphakeo, 136 S. Ct.
1036, 1045 (2016). “The predominance inquiry tests whether proposed
classes are sufficiently cohesive to warrant adjudication by
representation.” Id. This inquiry “calls upon courts to give careful
scrutiny to the relation between common and individual questions in a
case.” Id. “An individual question is one where members of a proposed
class will need to present evidence that varies from member to member,
while a common question is one where the same evidence will suffice for
each member to make a prima facie showing or the issue is susceptible
19
to generalized, class-wide proof.” Id. “In an antitrust class action,
impact—i.e., individual injury—often is critically important for the
purpose of evaluating Rule 23(b)(3)’s predominance requirement
because it is an element of the claim that may call for individual, as
opposed to common, proof.” In re Class 8 Transmission Indirect
Purchaser Antitrust Litig., 679 F. App’x 135, 139 (3d Cir. 2017). In
addition, the plaintiff must satisfy the Rule 23(b) requirements
“through evidentiary proof” and not mere assumptions or theory.
Comcast, 569 U.S. at 33.
Here, the district court committed reversible error when it found
that plaintiffs had shown that common questions predominate with
respect to the Cartwright Act element of antitrust impact.10 For at least
two reasons, the theory that was sponsored by plaintiffs’ expert, Dr.
10
The Cartwright Act requires a plaintiff to “show that an antitrust
violation was the proximate cause of his injuries. An ‘antitrust injury’
must be proved; that is, the type of injury the antitrust laws were
intended to prevent, and which flows from the invidious conduct which
renders defendants’ acts unlawful.” Morrison v. Viacom, Inc., 66 Cal.
App. 4th 534, 548 (1998).
20
Flamm, is incapable of showing by common proof that all or nearly all
members of the class suffered antitrust injury.
First, Dr. Flamm’s model does not account for the diversity of
pricing strategies that entities such as carriers and retailers have used
when selling cellphones to class members. The wide variations in
pricing amount and strategies among individual transactions virtually
guarantee that proof of antitrust injury, if it could be proven at all,
would require the use of evidence that “varies from [class] member to
member” rather than being “susceptible to generalized, class-wide
proof.” Tyson Foods, 136 S. Ct. at 1045.
Second, the class includes nearly 100 million uninjured
consumers who purchased Apple iPhones after Apple’s contract
manufacturers stopped paying royalties to Qualcomm for Apple
products, so that there were no longer any alleged royalty overcharges
to be passed on. Using the methodology that plaintiffs employ for all
other OEMs (and for Apple itself prior to 2017) would result in the
conclusion that such Apple purchasers benefited from the alleged pass-
through of reduced costs.
21
1. Plaintiffs’ model impermissibly sought to show

through assumptions and theory rather than actual
evidence that all or nearly all class members suffered
antitrust impact.
Rule 23(b)(3)’s predominance inquiry required plaintiffs to show
that they could establish antitrust injury through common proof. Tyson
Foods, 136 S. Ct. at 1045. Here, plaintiffs claim that injury arises from
pass-through of the allegedly supra-FRAND portion of royalty
payments. Where—as here—an antitrust class action concerns many
“differentiated products” sold at “diverse price points” through
“hundreds of different retail suppliers,” with prices varying “across
retailers, and . . . even for a single retailer at a given point in time,” and
with some retailers “choosing not to pass-through cost changes in the
form of higher prices for the end-user,” plaintiffs’ impact model must
account for such pricing “anomalies” or else be deemed a failure. In re
Flash Memory Antitrust Litig., 2010 WL 2332081, at *11 (N.D. Cal.
June 9, 2010).
Yet Dr. Flamm’s analysis, which the district court accepted in toto,
represents just that kind of failure. Dr. Flamm (and the district court)
relied upon theory and unsupported assumptions to wish away any
complications to the antitrust impact analysis. By contrast, other
22
district courts have rejected as insufficient or unsupported a “pass-
through” model like the one Dr. Flamm put forward here to support
certification.
For example, in In re Graphics Processing Units Antitrust
Litigation, Judge Alsup concluded that indirect-purchaser plaintiffs
must establish pass-through by referencing evidence, and that “market
data and economic theory” are insufficient. 253 F.R.D. 478, 504 (N.D.
Cal. 2008). He further observed—in a holding equally applicable here—
that “the only way to fully assess pass-through in this action would be
to conduct a wholesaler-by-wholesaler and re-seller-by-re-seller
investigation, which would essentially result in thousands of mini-
trials, rendering this case unmanageable and unsuitable for class action
treatment.” Id. at 505.
Likewise, in In re Lithium Ion Batteries Antitrust Litigation,
Judge Gonzalez Rogers concluded that plaintiffs failed to establish pass-
through to indirect purchasers because their expert’s analyses failed to
“demonstrate that any products . . . actually experienced a quality
reduction”—a deficiency also present here, as explained below—
rendering those analyses “pure theory without any factual support.”
2018 WL 1156797, at *4 (N.D. Cal. Mar. 5, 2018). The court added:
23
“While Dr. Leamer offers various kinds of statistical data analyses to
support his economic theory of quality adjusted pricing, these analyses
do not demonstrate that any products (and thus the purchasers of those
products) actually experienced a quality reduction, rather than an
increased cost, as a result of the alleged price-fixing conspiracy.” Id.
Dr. Flamm’s analysis is plagued by the same problem as the
analyses presented in Graphics Processing Units and Lithium Ion
Batteries—reliance on theory and assumptions, not evidence, to show
that plaintiffs can establish antitrust impact with common proof. If
anything, common proof is an even more distant dream here, where
over a billion cellphones were sold during the class period to hundreds
of millions of consumers under widely varying circumstances.
Cellphones are purchased through a huge number of channels.
Indeed, the evidence shows that there were tens of thousands of
distribution points through which cellphones could be purchased during
the class period. 3ER311. The class collectively purchased hundreds of
different cellphone models that were manufactured and priced by
multiple combinations of at least four different contract manufacturers,
multitudes of OEMs, three different intermediate distributors, six
different wireless carriers, and hundreds of different retailers and
24
authorized dealers—each with strategies and profit margins that varied
from company to company and from device to device. 3ER336-341,
¶¶ 27-34.
Plaintiffs’ pass-through model in this case failed to account for
important complexities. At the outset, any method for proving pass-
through immediately encounters the issue of addressing focal-point
pricing, which was prevalent among carriers and retailers during the
class period. 1ER45. Focal-point pricing involves selling goods at prices
ending in a number like “99” because consumers are thought to find
those prices more attractive than others. 3ER354-55, ¶ 118.11 This
strategy may result in a seller’s absorbing small cost changes without
passing them on, so as to preserve that more appealing price. The
evidence showed that hundreds of millions of cellphones were sold at
focal-point prices during the class period. 3ER355-56, ¶¶ 120–21. Here,
the alleged overcharges often amount to a few dollars on a product sold
to consumers for hundreds of dollars. A business selling to consumers at
11
The Supreme Court recently noted that Apple “requires that the retail
sales price [for apps in its App Store] end in $0.99.” Apple Inc. v.
Pepper, 139 S. Ct. 1514, 1519 (2019). This is but one of the many
examples of focal-point pricing in the cellular industry.
25
focal-point prices is unlikely to change its price from one ending in a “9”
to one ending in a “4” or “6,” for example, simply to pass a small
overcharge through to the consumer. See Lithium Ion Batteries, 2018
WL 1156797, at *4. And without a change in price to the consumer,
there can be no pass-through in price of an alleged overcharge.
Acknowledging that focal-point prices in this industry may be
generally insensitive to marginal cost changes, plaintiffs and the
district court countered that sellers faced with an overcharge and
wishing to maintain a focal-point price would have changed a
cellphone’s quality instead of altering its price. 1ER46. But that is no
answer, for three reasons.
First, the carriers and retailers that priced and sold the majority
of cellphones to consumers (and that often employed focal-point pricing)
do not manufacture cellphones and, therefore, can’t alter their quality.
Indeed, the Order acknowledged that OEMs are the industry
participants that can change the quality of cellphones, while failing to
recognize the significance of that fact. Compare 1ER45 (“focal-point
pricing was a dominant strategy employed by the retailers and wireless
carriers in this case”), with 1ER46 (“OEMs would develop higher-
quality phones with improved features”). Just as in the Lithium Ion
26
Batteries case, plaintiffs’ expert here failed to “explain how the quality
adjustments—which logically would occur at the OEM level of the
distribution chain—would affect pass-through rates for points later in
the distribution chain, particularly the retailer level where the pricing
decisions would be most volatile and, seemingly, most likely to be
affected by the focal point pricing strategy.” Lithium Ion Batteries, 2018
WL 1156797, at *5. The district court abused its discretion in holding
that the class could be certified without recognizing the impact of this
difference between OEMs on the one hand, and retailers and carriers on
the other.
Second, plaintiffs offered no actual evidence that any OEM made
any quality reductions due to an alleged overcharge. Dr. Flamm cited
economic theory claiming that, under hypothetical competitive
conditions, any change in cost must be passed through to consumers
either in the form of a changed price or changed quality.12 3ER389, ¶ 87.
12
Dr. Flamm asserted that what he calls industry-wide costs are
generally passed through to consumers. But plaintiffs’ accountant, Mr.
Lasinski, concluded that different OEMs paid different effective
royalties and incurred different alleged overcharges. 3ER423, 431, Figs.
1 and 8. The alleged overcharges varied from OEM to OEM and even
from device to device. Such varying alleged overcharges are nothing like
the costs discussed in Dr. Flamm’s economic papers, which are uniform
27
But this thinnest of threads cannot support the weight of a 250-million-
member class, particularly when Dr. Flamm performed no study
capable of showing that this quality reduction actually happened in the
real world. In fact, the evidence was to the contrary. For example, when
Apple stopped paying Qualcomm royalties to its contract
manufacturers, there was neither a resultant reduction in Apple’s
pricing nor a change in its product quality. 3ER349-50, ¶ 92. Moreover,
Dr. Flamm admitted that competitive conditions that would
hypothetically require pass-through do not exist in the real world, at
least for some of the OEMs that made the cellphones at issue. He
opined that Apple, for instance, “has substantial monopoly power” and
is “able to maintain a price substantially above its average cost (i.e.,
make monopoly profits).” 3ER384, ¶ 75.
Dr. Flamm’s model is based on the total costs of making a
cellphone. He did not purport to study, and his regression does not
analyze, whether small changes in costs would be passed through a
distribution chain in the same way by every industry participant. At
across an industry; thus, the economic literature upon which he relied

and that the district court credited is inapposite.
28
most, Dr. Flamm’s regression only confirmed the unremarkable fact
that, in general, cellphones that cost more to make are sold at higher
prices. See 3ER351, ¶ 94.13 His regression attempted to explain the
effect of a change in the total costs of a cellphone on its price, while
holding ten cellphone characteristics constant. 3ER404-05, ¶¶ 254-55.14
In other words, Dr. Flamm viewed the amount by which a change in
total costs affects price as the pass-through rate. Dr. Flamm did not
attempt to explain the meaning of the coefficients on his “quality”
variable, and never asserted that those coefficients have anything to do
with the effect of differences in cost on quality. And his regression
model cannot show the effect of a change in quality, as it was
concededly designed to measure the effect of cost changes on price, not
on quality. As Dr. Flamm put it, “my pass-through model estimates the
13
The fact that smartphones sold today generally cost more to make
than flip-phones sold in the early 2000s, and for that reason (among
others) are sold at higher prices, says nothing about whether every
change in total cost will result in a change in price.
14
In his regression, price is what is known as the “dependent variable.”
On the other side of the equation, the “independent” (or explanatory)
variables are the total costs to make the cellphone, a variable
representing the ten cellphone characteristics (which he calls a
“quality” variable), and a time variable. In his view, “pass-through is
measured by the coefficient on the cost variable.” 3ER404-05, ¶ 254.
29
effect on price of changes in cost while holding phone characteristics
constant . . . .” 3ER305-06, ¶ 98.15 The fact that Dr. Flamm applied the
same pass-through model to retailers and carriers, which cannot change
the quality of cellphones, confirms that the model is not designed to
measure the effect of change of costs on quality.
Third, the evidence showed that OEMs’ actual responses to cost
changes are highly individualized. Changing a device’s design or quality
is but one of many possible ways that an OEM might respond to cost
increases. For example, an OEM might accept slightly smaller margins
or might pressure other suppliers to make up the difference, neither of
which would impact the cellphone’s price or “quality.” Indeed, and
importantly for purposes of determining whether a class can properly be
certified, various OEMs testified that they had adopted these
alternatives instead of lowering cellphone “quality.” 3ER344-46, ¶¶ 45–
47. For example, one OEM witness testified that even with higher than
expected costs, the OEM would still include features and settle for a
15
See 3ER347, ¶ 78 & n.142 (explaining that price, not quality, is the
dependent variable of study in Flamm’s regression).
30
lower margin. 3ER371-72.16 Relatedly, plaintiffs’ own expert opined that
the royalty “overcharge” for cellphones using certain cellular standards
was much lower than for cellphones using other cellular standards. For
example, plaintiffs’ alleged “exemplary FRAND rate”—the portion of a
royalty rate that they concede is not an “overcharge”—for a cellphone
using LTE/CDMA2000 (the technology used on Verizon’s network) is
more than double that of a cellphone using LTE/WCDMA/GSM (the
technology on AT&T’s network). 3ER434, Fig. 53. But OEMs such as
Apple did not vary the price of their cellphones depending on the type of
network the cellphone used, and thus necessarily did not pass through
any alleged “overcharge” to each consumer to the same degree.
16
The district court wrote that, to the extent that Qualcomm identified
examples such as these in which OEMs chose to accept lower margins
instead of passing costs through, that evidence “raise[d] a merits
question, not [the] basis to deny class certification.” 1ER44. But a class-
certification analysis “will frequently entail overlap with the merits of
the plaintiff’s underlying claim . . . because the class determination
generally involves considerations that are enmeshed in the factual and
legal issues comprising the plaintiff’s cause of action.” Comcast, 569
U.S. at 33–34. “By refusing to entertain arguments against [plaintiffs’]
damages model that bore on the propriety of class certification, simply
because those arguments would also be pertinent to the merits
determination, the [district court] ran afoul of [Supreme Court]
precedents requiring precisely that inquiry.” Id. at 34.
31
In addition to the complications caused by the widespread use of
focal-point pricing, sales of cellular devices during the class period also
were subject to many different types of subsidies, discounts, bundling,
and other pricing practices that reduced the price paid by the
consumer—sometimes to zero. 3ER360-62, ¶¶ 129–130. This means
that, for the same cellphones, class members would have paid prices
that differed by an amount much greater than the small overcharges
alleged here.
Instead of acknowledging the problems caused by industry pricing
practices, the district court embraced plaintiffs’ “simple rebuttal” that
“it is reasonable to assume that the same pricing strategies would have
occurred in the ‘but for’ world”—meaning the world that would have
existed “but for” the allegedly anticompetitive conduct. 1ER48.
But plaintiffs’ assumption begged the question. Having the same
pricing strategies in place will not inevitably lead to identical outcomes.
For example, if a class member paid nothing for a cellphone in the real
world—as many did—it is unreasonable to “assume” that she
nevertheless suffered antitrust impact because she would have paid less
than zero in the “but-for” world. This is true even if the alleged
overcharge is only a small amount; a carrier is no more likely to pay
32
three dollars to a customer to accept a cellphone than it is to pay that
customer fifty dollars in return for doing so. Either scenario is
implausible.
Dr. Flamm responded by speculating—without testing or relying
on any supporting evidence—that a carrier in that situation could have
passed cost savings along by reducing the price of its service plan.
3ER325-26. But service plans also employ focal-point pricing, and their
pricing is therefore unlikely to change in response to small cost
changes, see 3ER362, ¶ 132, much less to change in a way that reflects
the supposed pass-through of the varying amounts of alleged
overcharges associated with different OEMs, cellphones, and
distribution channels.
Qualcomm’s expert economist, Dr. John Johnson, used the
following example to illustrate the problem with Dr. Flamm’s theory. To
accept that theory, Dr. Johnson explained, one must believe that a
proposed class member who purchased “a subsidized Samsung Galaxy
S5 16GB in April 2014, while also signing up for a 24-month service
contract,” paid 26 cents more per month on the contract than he or she
otherwise would have (3ER362, ¶ 131); yet a proposed class member
who bought a cellphone with a different subsidy or no subsidy would
33
have paid a different monthly fee on a 24-month service contract in the
but-for world. But there is no evidence that carriers offered service
contracts that provided for these types of slight variations in price.
Indeed, the evidence cited in Dr. Johnson’s report showed the contrary.
3ER362-63, Ex. 28.
It is simply not the case that “at the class-certification stage any
method” of assessing antitrust injury is acceptable “so long as it can be
applied classwide, no matter how arbitrary . . . . Such a proposition
would reduce Rule 23(b)(3)’s predominance requirement to a nullity.”
Comcast, 569 U.S. at 35-36. The district court therefore abused its
discretion when it relied on Dr. Flamm’s assumptions and theories
instead of evidence to assess whether plaintiffs could show antitrust
impact through common proof. Instead, the district court should have
“undertak[en] a qualitative assessment of the characteristics shared by
all indirect purchase transactions . . . against the many individual
factors in the real-world market.” In re Class 8 Transmission, 679 F.
App’x at 141-42 (affirming denial of class certification); see also Marlo v.
United Parcel Serv., Inc., 639 F.3d 942, 947–49 (9th Cir. 2011) (plaintiff
must use evidence to establish requisites of Rule 23).
34
The common-proof problem in this case is all too real. Solving it
would require real-world evidence of pass-through despite a complex
environment featuring focal-point pricing, hundreds of distribution
channels, diverse pricing schemes (including zero-priced products),
promotional plans, and incentives. In that environment, an academic’s
counterfactual assumptions and ungrounded theories cannot suffice.
2. The class includes nearly 100 million consumers who,

under plaintiffs’ model, experienced no antitrust
impact.
As a matter of law, it is impermissible to include large numbers of
concededly uninjured persons within a class definition. See, e.g., In re
Asacol, 907 F.3d at 58; Berger v. Home Depot USA, Inc., 741 F.3d 1061,
1069 (9th Cir. 2014), abrogated on other grounds by Microsoft Corp. v.
Baker, 137 S. Ct. 1702 (2017). Such a class cannot meet the
predominance requirement because it lacks “a reasonably close fit
between the class definition and the chosen theory of liability.” Torres v.
Mercer Canyons Inc., 835 F.3d 1125, 1136–37 (9th Cir. 2016); see also
id. at 1138 n.7.
Neither this Court nor the Supreme Court has definitively ruled
on how many uninjured members a class may contain before it becomes
uncertifiable. See Tyson Foods, 136 S. Ct. at 1050 (declining to reach the
35
question); Torres, 835 F.3d at 1138 (stating only that a “great number”
of uninjured class members could defeat certification). But the
prevailing view is that a class may be certified if the plaintiff can show
through common evidence that “all or virtually all” class members were
injured, or, put another way, that the class contains only a “de minimis”
number of uninjured class members. See In re Rail Freight Fuel
Surcharge Antitrust Litig., 292 F. Supp. 3d 14, 135 (D.D.C. 2017)
(collecting cases).
Yet the class certified here includes tens of millions of class
members who purchased Apple iPhones after 2016 and who would have
been found uninjured—indeed, as explained below, who would have
been predicted to have received cellphones at a lower price or of better
quality—under plaintiffs’ own model, had it been applied to them. The
district court never should have certified a class that reflected such a
stark mismatch between class definition and liability theory. See
Comcast, 569 U.S. at 37-38 (reversing class certification where expert
methodology swept in consumers who may not have been harmed under
the asserted theory of antitrust liability).
The district court failed “to ensure that the class is not defined so
broadly as to include a great number of members who . . . could not
36
have been harmed” by Qualcomm’s conduct. Torres, 835 F.3d at 1138.
Plaintiffs assert that Qualcomm’s allegedly excessive patent royalties
were passed through to consumers. But plaintiffs and the district court
recognized that “Apple and its contract manufacturers began
withholding payments of iPhone royalties from Qualcomm in October
2016 and stopped paying altogether in January 2017.” 1ER49. OEMs
that serve as Apple’s contract manufacturers, who paid no royalties at
all, couldn’t have paid excessive royalties—so there was no overcharge
for them to pass through. Knowing this, and at the behest of plaintiffs’
counsel, plaintiffs’ expert refrained from calculating any alleged
overcharge for Apple iPhones after 2016. 3ER422, ¶ 12 n.5. Thus,
plaintiffs’ model showed no impact to the tens of millions of class
members who bought iPhones after 2016.
Plaintiffs appeared to concede this point before abruptly reversing
course. At his deposition, Dr. Flamm testified that he had understood
that post-2016 Apple purchasers fell outside the class. 3ER316.
Notably, he had not yet read the motion for class certification that his
declaration sought to support. 3ER317. Nevertheless, plaintiffs did not
modify the class definition to exclude these uninjured purchasers.
Instead, in their class-certification reply brief and reply declarations,
37
plaintiffs proposed new and different theories of potential harm to these
purchasers. See 1ER50-51 (relying upon reply declarations). And the
district court’s decision to cancel the class-certification hearing
compounded the resulting unfairness by denying Qualcomm an
opportunity to refute those newly asserted theories.
The flaws in plaintiffs’ theories as applied to post-2016 iPhone
purchasers are evident on the Order’s face. Plaintiffs’ theory for all
other cellphones was to rely on one of their experts, Michael Lasinski,
whom they hired to calculate the alleged royalty overcharges that
OEMs supposedly paid. To quantify any alleged overcharges on post-
2016 Apple iPhones, Mr. Lasinski said in his reply declaration that he
“would apply the same methodology” that he used with other OEMs,
although he had been instructed to calculate overcharges for Apple
iPhones only through the third quarter of 2016 in preparing his opening
declaration. 1ER50; 3ER422, ¶ 12 n.5. That methodology was to
“calculate the ‘historical weighted average running royalty rate’” for a
given OEM and then “subtract[] the calculated FRAND rate from” that
historical royalty rate. 1ER32. But applying that methodology to Apple
iPhones yields a nonsensical result: during the time that Apple and its
contract manufacturers were paying zero royalties, the running royalty
38
rate could only have been zero. Subtracting the supposed “FRAND rate”
from zero yields a negative number. Thus, there not only would be no
overcharge to pass through, but plaintiffs’ methodology indicates that
Apple should have passed through savings to all of the purchasers who
bought during that time.
But that never happened; no evidence suggests that Apple
reduced the prices or increased the quality of its cellphones after the
royalty payments stopped. 3ER349-50, ¶ 92. The fact that no price or
quality change occurred when going from an alleged royalty overcharge
to what would have been a royalty undercharge (according to plaintiffs’
methodology) shows that plaintiffs’ pass-through model is inconsistent
with the evidence of what actually transpired in the real world.
Plaintiffs’ reply papers accordingly asserted new theories of injury
to these class members (namely, that Apple may have reserved money
for royalty payments, or that chip prices may have been higher overall
as compared to the but-for world). But these theories found no support
in the factual record or even in the model that plaintiffs claimed to
demonstrate common proof of impact. Plaintiffs’ pass-through model
does not take financial accruals or anticipated costs (whether for Apple
or for any other OEM) as an input, nor does it contain any analysis of
39
chip prices. In fact, Dr. Flamm, the author of the pass-through model,
nowhere mentioned, much less endorsed, these new theories. In an
appendix to his reply declaration, he stated only that he “underst[ood]
from counsel” that Apple’s post-2016 purchasers had “still been
harmed.” 3ER308. That is not evidence of anything. But even if Dr.
Flamm had been willing to sponsor plaintiffs’ new theories, those
theories would not use the same evidence as used for other OEMs, and
therefore would not employ the common proof required for class
treatment.
3. Individualized issues regarding impact and uninjured

class members also made class certification improper
under Rule 23(b)(2).
The district court also certified an injunctive-relief class under
Rule 23(b)(2). Although that rule does not require “predominance,” it
does require plaintiffs to demonstrate that the defendant “has acted or
refused to act on grounds that apply generally to the class, so that final
injunctive relief . . . is appropriate respecting the class as a whole.” FED.
R. CIV. P. 23(b)(2). “The key to the (b)(2) class is the indivisible nature of
the injunctive or declaratory remedy warranted—the notion that the
conduct is such that it can be enjoined or declared unlawful only as to
all of the class members or as to none of them.” Wal-Mart Stores, Inc. v.
40
Dukes, 564 U.S. 338, 360 (2011). A Rule 23(b)(2) class is not appropriate
where, as here, “though the suit is for declaratory relief, the effect of the
declaration on individual class members will vary with their particular
circumstances . . . .” In re Allstate Ins. Co., 400 F.3d 505, 508 (7th Cir.
2005); Langbecker v. Electronic Data Sys. Corp., 476 F.3d 299, 317 (5th
Cir. 2007). For this reason, courts within this Circuit have stated that a
class “must be cohesive,” meaning that individual issues cannot
overwhelm the litigation. See Senne v. Kansas City Royals Baseball
Corp., 2017 WL 897338, at *37 (N.D. Cal. March 7, 2017); Fosmire v.
Progressive Max Ins. Co., 277 F.R.D. 625, 635–36 (W.D. Wash. 2011);
Arnold v. United Artists Theatre Circuit, Inc., 158 F.R.D. 439, 451 (N.D.
Cal. 1994); Sweet v. Pfizer, 232 F.R.D. 360, 374 (C.D. Cal. 2005);
Lewallen v. Medtronic USA, Inc., 2002 WL 31300899, at *3 (N.D. Cal.
Aug. 28, 2002); In re Paxil Litig., 212 F.R.D. 539, 551 (C.D. Cal. 2003).17
Plaintiffs must prove loss or damage, i.e., antitrust impact, as part
of their injunctive-relief claims. Cargill, Inc. v. Monfort of Colo., Inc.,
17
The Third Circuit requires that a Rule 23(b)(2) class be more cohesive
than a Rule 23(b)(3) class. Barnes v. Am. Tobacco Co., 161 F.3d 127,
142–43 (3d Cir. 1998).
41
479 U.S. 104, 110–11 (1986). Plaintiffs’ 23(b)(2) class failed for the same
reasons their 23(b)(3) class failed—inability to prove class-wide
antitrust impact. Nevertheless, the district court certified a Rule
23(b)(2) class because “[p]laintiffs have shown that Qualcomm’s
allegedly anticompetitive conduct has market-wide application and
effect.” 1ER65. This conclusion simply assumes uniformity across the
class; a consumer is not entitled to an injunction where Qualcomm’s
conduct had no effect, i.e., where there was no pass-through. Moreover,
the district court failed to address what “effect” occurred in any
“market-wide” sense. In fact, the alleged effects of Qualcomm’s conduct
were not uniform across the entire modem chip market, as plaintiffs
allege only that Qualcomm has a monopoly in two subsets of chip types.
And in any event, plaintiffs have not produced a model of alleged
antitrust harm based on chip pricing or on distortion of any chip
market.
Plaintiffs submitted no proof that all cellphones would cost less or
be of better quality if Qualcomm stopped its three challenged practices.
Therefore, the injunctive and declaratory relief that plaintiffs sought is
not indivisible and will not affect all class members in the same way. A
Rule 23(b)(2) class is improper where the plaintiff “fail[s] to prove that”
42
the requested injunction “would provide relief to each class member.”
Lakeland Regional Med. Ctr., Inc. v. Astellas US, LLC, 763 F.3d 1280,
1291–92 (11th Cir. 2014) (affirming denial of Rule 23(b)(2) class on an
antitrust tying claim). The district court therefore erred when it
certified a Rule 23(b)(2) class.
The class is unmanageable and therefore not a “superior”

method for adjudicating the controversy.
Rule 23(b)(3) demands that the proposed class action be “superior
to other available methods for fairly and efficiently adjudicating the
controversy,” taking into account “the likely difficulties in managing a
class action.” FED. R. CIV. P. 23(b)(3). As this Court has held, “the
manageability criterion of the superiority requirement” performs a vital
function, ensuring that a class action remains administratively feasible.
Briseno v. ConAgra Foods, Inc., 844 F.3d 1121, 1127–28 (9th Cir.), cert.
denied, 138 S. Ct. 313 (2017). To determine whether a class action is
manageable, a district court must consider “the potential difficulties in
notifying class members of the suit, calculation of individual damages,
and distribution of damages.” Six Mexican Workers, 904 F.2d at 1304.
A 250-million-member class encompassing more than a billion
individual claims—and concerning a plethora of cellphones purchased
43
through a dizzying array of distribution channels, at prices ranging
from zero to full retail—is inherently unmanageable, unfair, and
inferior to alternative forms of adjudication. The class mechanism
cannot deprive a defendant of its rights to adequately present its
defenses or litigate claims. See Wal-Mart, 564 U.S. at 367; 28 U.S.C.
§ 2072(b) (providing that Rule 23 cannot “abridge, enlarge, or modify
any substantive right”). No defendant can fairly defend itself against a
class as large and diverse as the entire adult U.S. population. No form
of notice to a quarter-billion people comports with Rule 23 or due
process. No claims administrator will be able to accurately or reliably
determine which claims are valid or how much each is worth. Such a
class stretches Rule 23 well past the breaking point.
1. This Court’s opinion in In re Hotel Telephone Charges

is controlling and requires reversal.
Class actions of this magnitude and complexity are rarely
attempted, and when they are, courts reject them. In Wal-Mart, the
Supreme Court called a class comprising about one and a half million
plaintiffs “one of the most expansive class actions ever.” 564 U.S. at
342. This class is roughly 166 times the size of the one in Wal-Mart.
Indeed, the last time this Court considered an antitrust class action
44
even remotely near this one in size and scope was 45 years ago in In re
Hotel Telephone Charges, 500 F.2d 86 (9th Cir. 1974). The
manageability concerns that proved fatal in Hotel Telephone are
magnified many times over in this case.
Hotel Telephone concerned an MDL antitrust class action with
flaws similar to those present here. It alleged a nationwide conspiracy
among numerous hotels and hotel chains to improperly add telephone
surcharges to room rates. Id. at 88. The proposed class included roughly
40 million hotel guests, each of whom allegedly suffered an overcharge
of a few dollars. Id. The district court had certified the class under Rule
23(b)(3). This Court reversed, concluding that the plaintiffs’ antitrust
claims raised “individual questions that could require decades of
litigation.” Id. at 89.
In four respects, the Hotel Telephone court’s reasoning applies
directly here.
First, the court explained that, “since the surcharges varied from
hotel to hotel, the amount of each defendant’s surcharge would
necessarily require individual treatment.” Id. The same is true here; the
alleged royalty surcharges (or hypothesized quality reductions) vary by
OEM and cellular standard used. 3ER431-32, Figs. 7, 8. Moreover, the
45
amount of any surcharges allegedly passed through to consumers would
vary based on the identity of the companies in the distribution chain,
including whether the cellphone passed through a distributor between
the OEM and retailer.
Second, Hotel Telephone held that “while the amount of each
hotel’s surcharge might constitute prima facie evidence of the amount of
damage, the [defendants] might rebut that evidence by showing [w]hat
the cost of each hotel’s telephone service charge would have been in a
competitive market.” 500 F.2d at 89. The same is true here. The class
mechanism cannot lump together more than a billion cellphone
purchases in a giant, undifferentiated mass so as to deny Qualcomm its
right to contest or rebut the alleged price increases or quality reductions
on anything more than an aggregate level. See Dukes, 564 U.S. at 367.
In other words, Qualcomm must retain the opportunity to contest, for
each relevant cellphone model sold through each relevant distribution
channel, plaintiffs’ contention that the price paid by the consumer or
the quality of the cellphone would have differed absent the alleged
anticompetitive conduct. That is especially true with respect to class
members who paid nothing for their cellphones or bought them at a
focal point price. But neither the plaintiffs nor the district court has
46
proposed a means of affording Qualcomm that opportunity; and as far
as Qualcomm knows, no such means exists given the certified class’s
scale and diversity.
Third, Hotel Telephone held that, even if the plaintiffs could have
computed damages for each hotel, each class member still would be
“required to prove that he patronized the hotel while the surcharge was
in effect and that he absorbed the cost of the surcharge.” 500 F.2d at 89.
The same is true here. Each class member would need to know and
provide evidence regarding the cellphone’s journey through the
distribution chain to its point of purchase. But proving an eligible
purchase would hardly end the inquiry: “[I]t would then be necessary to
compute the amount of damages due the class member.” Id. Again, the
same is true here; and it would be a hopelessly complex and
individualized task, since class members paid wildly different prices for
cellphones under different pricing, discount, and bundling schemes, and
because plaintiffs’ pass-through model yields a different pass-through
percentage depending on whether, for example, a cellphone went
through a distributor on its way from the OEM to the carrier that then
47
sold it to a class member.18 3ER408-09, 413-14, ¶¶ 283 & 290, tables 21
& 23.
Moreover, in a 250-million-person class, the mere act of
confirming a class member’s right to relief and adjudicating his or her
damages award would strain judicial resources beyond reason. As this
Court explained in Hotel Telephone:
In a class of forty million, assuming only ten percent of these

unknown class members came forward with claims, and
assuming the proof of each claim required only ten minutes,
approximately one hundred years would yet be required to
adjudicate the claims. Unless the court is to allow the
procedural device of the class action to wear away the
substantive requirements to maintain a private antitrust
cause of action, this suit raises far too many individual
questions to qualify for class action treatment.
18
To be sure, the Supreme Court has stated in dicta that, in some
instances, a class may be certified under Rule 23(b)(3) “even though
other important matters will have to be tried separately, such as
damages.” Tyson Foods, 136 S. Ct. at 1045. Similarly, this Court has
held that “damage calculations alone cannot defeat certification.” Leyva
v. Medline Indus., Inc., 716 F.3d 510, 513 (9th Cir. 2013). But neither
this Court nor the Supreme Court has confronted a case in which
calculating damages for each class member would, in and of itself,
render the class unmanageable (the Tyson Foods class had fewer than
3,500 members). Indeed, the Supreme Court has held that
predominance may be defeated where, as here, “[q]uestions of
individual damage calculations will inevitably overwhelm questions
common to the class.” Comcast, 569 U.S. at 34.
48
Id. Here, with a 250-million-member class, the same calculation yields
475 years to adjudicate the claims. And even if modern technology could
reduce the time spent per claim to a mere minute, the same calculation
still yields 47.5 years, which is hardly an improvement.
Fourth and finally, the Hotel Telephone court chided the district
court for relying on the plaintiffs’ counsel’s “imagination . . . to provide
solutions that will, at some point in the future, prevent these individual
issues from splintering the action into thousands of individual trials
requiring years to litigate.” Id. at 90. The court emphasized that issues
of damages and administrability “must be resolved before a class is
certified”—the district court cannot “brush aside” questions arising
from “the magnitude or complexity of the litigation.” Id. Here, as
explained below, the district court “brush[ed] aside” all issues related to
administrability, notice, damages, and manageability in three brief
paragraphs, relying on plaintiffs’ counsel’s “imagination” to do so. Id.
But imagination cannot resolve important manageability
concerns, particularly when those concerns implicate due-process
rights. Like plaintiffs here, the Hotel Telephone plaintiffs argued that—
despite the manageability problems—the class mechanism was
necessary to vindicate the rights of plaintiffs who allegedly suffered
49
small individual injuries, and to “punish and deter antitrust violations.”
Id. at 90–92. This Court rejected both contentions, holding that “the
desirability of allowing small claimants a forum to recover for large
scale antitrust violations does not eclipse the problem of
manageability.” Id. at 90. The court noted that some class actions
involving large numbers of class members had been “dismissed on the
basis of manageability problems alone.” Id. And the court further noted
that class actions are not designed to punish wrongdoing by allowing
“private attorneys” to “act as prosecutors to force antitrust violators to
disgorge their illegal profits in the general interest of society at large.”
Id. at 92. Rather, the focus is on compensating actual, provable,
individual injuries—and if a proposed class action is too sprawling,
unwieldy, or unmanageable to accomplish that objective without
sacrificing the defendants’ rights, then the case cannot proceed as a
class action. Id.
Hotel Telephone’s holdings and reasoning are sound, applicable,
and binding. This incoherent, unwieldy class should be rejected like the
one in Hotel Telephone.
50
2. Other circuits have likewise held that antitrust class

actions this sprawling cannot be certified.
This Court’s approach to massive antitrust class actions in Hotel
Telephone was no outlier. In another closely analogous case, Abrams v.
Interco Inc., 719 F.2d 23 (2d Cir. 1983), the Second Circuit affirmed the
denial of class certification for a nationwide class consisting of all
consumers who had purchased any Interco product—shoes, raincoats, or
other apparel—over the previous four years. Id. at 25. Echoing one of
plaintiffs’ claims here, the Abrams suit alleged an anticompetitive
scheme in which the defendant offered rebates to dealers willing to sell
its products at certain prices and threatened to terminate supply to
dealers unwilling to do so. Id. The Abrams class totaled only 3.2 million
consumers, about one percent of the size of this class. Id. at 30.
Judge Friendly explained that “the case would be unmanageable
as a class action” for “apparent” reasons. Id. After observing that
providing the required notice under Rule 23(c)(2) would prove extremely
problematic, the court held that the “more serious problem of
manageability relate[d] to damages.” Id. at 31. Because each class
member would be entitled not to a simple refund of the amount paid,
but rather to three times the amount of his or her overpayment as
51
compared to but-for prices, determining damages “would be complicated
by the scores of different products involved, varying local market
conditions, fluctuations over time, and the difficulties of proving
consumer purchasers after a lapse of five or ten years.” Id. In the end,
Judge Friendly wrote, “plaintiffs [we]re the victims of their own
ambitions” in having sought too large and diverse a class. Id.
The same result should obtain here. This action concerns
hundreds of different products, divergent market conditions and pricing
schemes, and a billion or so separate purchases over eight years.
The First Circuit’s recent In re Asacol opinion is also instructive.
There, the plaintiffs alleged that a drug manufacturer violated the
antitrust laws by withdrawing a branded drug from the market just
before patent expiration and replacing it with a slightly different drug
with longer patent protection. In re Asacol, 907 F.3d at 45–46. The
plaintiffs were indirect purchasers of the new drug who resided in
states that allow indirect-purchaser suits for damages.19 Reversing a
19
Unlike plaintiffs here, the Asacol plaintiffs recognized that they could
not simply sue under California’s Cartwright Act and apply it to every
indirect purchaser nationwide. See infra Part VII.C.
52
grant of class certification, the First Circuit found that no clear plan
existed for identifying which individual class members were injured,
what their damages might be, or how damages would be fairly and
efficiently distributed. Id. at 52. Allowing a claims administrator to
review and approve class-member forms or declarations attesting to an
alleged injury was no solution, since that process would violate the
defendants’ Seventh Amendment and due-process rights to litigate their
defenses. Id. at 53. The First Circuit also rejected the notion that the
existence of many low-value claims justifies class-action treatment,
noting that “other tools,” including regulatory actions by the FTC,20
remained available to address “the problem of low-value, high-volume
claims that pose individual issues of causation.” Id. at 56.
3. The district court abused its discretion by failing to

conduct a meaningful manageability analysis.
Qualcomm brought these manageability and due-process concerns
to the district court’s attention before class certification. But the district
court brushed them all aside in three brief paragraphs. That was error.
20
The FTC has sued Qualcomm for the conduct at issue in this action.
See FTC v. Qualcomm, No. 17-cv-220 (N.D. Cal. filed Jan. 17, 2017).
53
Precisely because Rule 23(b)(3) has been termed the “most
adventuresome” innovation of the 1966 amendments, and one “[f]ramed
for situations in which class-action treatment is not as clearly called
for,” the Rule permits certification only “where class suit ‘may
nevertheless be convenient and desirable.’” Amchem Prods., Inc. v.
Windsor, 521 U.S 591, 614–15 (1997) (quoting Adv. Comm. Notes, 28
U.S.C.App., p. 697). Rule 23(b)(3) allows class certification in a wider
set of circumstances than other provisions, “but with greater procedural
protections.” Wal-Mart, 564 U.S. at 362. Thus, “the office of a Rule
23(b)(3) certification ruling . . . is to select the ‘method’ best suited to
adjudication of the controversy ‘fairly and efficiently.’” Amgen Inc. v.
Conn. Retirement Plans and Trust Funds, 568 U.S. 455, 460 (2013).
In view of the pragmatic considerations governing a Rule 23(b)(3)
certification, it’s unsurprising that this Court has held that “monolithic
class actions raising mind-boggling manageability problems should be
rejected,” Hotel Tel., 500 F.2d at 92, and that “[w]hen a class action
involves a large number of class members but only a small individual
recovery, the cost of separately proving and distributing each class
member’s damages may so outweigh the potential recovery that the
54
class action becomes unfeasible.” Six Mexican Workers, 904 F.2d at
1305.
Rather than grappling with the administrative complexity
inherent in managing a class of this magnitude, the district court
instead pointed to cases supposedly involving “similarly high numbers
of potential class members.” 1ER63. Without analyzing (or even citing)
any such cases, the district court obliquely referenced two Ninth Circuit
cases that plaintiffs claimed involved “more than 100 million class
members.” Id. In fact, both cases were settlement classes—a crucial
distinction because settlement classes need not satisfy Rule 23’s
manageability requirement. See Amchem Prods., 521 U.S. at 620.21
Neither of the two cases on which the district court ostensibly relied
involved a monetary award to any class member, and neither
approached 100 million class members. In re Bluetooth Headset
Products Liability Litigation, 654 F.3d 935 (9th Cir. 2011), was a
settlement class involving 100 million devices, not class members. The
other case, Hanlon v. Chrysler Corp., 150 F.3d 1011 (9th Cir. 1998),
21
Rule 23 also sets forth a lower standard for settlement class notice
than it does for litigation classes. See FED. R. CIV. P. 23(e)(1).
55
involved only 3.3 million Chrysler minivan purchasers. Neither case
supports certifying a class this vast and heterogeneous.
The district court next dismissed concerns about providing
effective notice of this lawsuit to the entire adult population of the
United States. The court relied on an attorney declaration, submitted
on reply, claiming that unidentified administrators could provide
effective notice to 70% of the class, or some 175 million people, by
publication alone. 2ER76, ¶ 14; 1ER63. As the Supreme Court has held,
“individual notice to identifiable class members is not a discretionary
consideration to be waived in a particular case.” Eisen v. Carlisle &
Jacquelin, 417 U.S. 156, 173 (1974). Plaintiffs cannot argue that
practically every consumer in the United States is a class member, yet
not a single unnamed class member can be identified through
reasonable effort. See FED. R. CIV. P. 23(c)(2). The class’s voluminous
size does not excuse plaintiffs from their obligation to provide
individualized notice. See Eisen, 417 U.S. at 177; Hotel Tel., 500 F.2d at
91; Abrams, 719 F.2d at 30.
Finally, the district court disclaimed any responsibility for
determining how it would manage the complex damages issues inherent
in the class that it was certifying. The entirety of the district court’s
56
analysis follows: “The Court also expects that Plaintiffs will be able to
propose efficient means to calculate and distribute damages to class
members.” 1ER63. The district court nowhere stated the basis for that
expectation, or what those “efficient means” might entail. Asking
plaintiffs is pointless; they provided no plan whatsoever to calculate,
allocate, or distribute damages, or to verify, process, and administer
more than one billion claims—a Herculean task for any claims
administrator. Thus, on this crucial point, the Order rests on an
imaginary, hypothetical solution reduced to a single sentence. That was
reversible error.
The district court’s “certify first, manage later” approach to class
certification finds no support in Rule 23, which demands that
manageability be proven ex ante, not ex post. See FED. R. CIV. P.
23(b)(3)(D). It also represents a clear abuse of discretion, and ample
reason to vacate the class-certification order.
The district court erred in applying California law to this

nationwide class action despite dispositive differences in
state antitrust laws.
A class may be certified under Rule 23(b)(3) only if the court finds
that questions of law or fact common to class members predominate
over individual issues. But “variances in state law” may “overwhelm
57
common issues and preclude predominance for a single nationwide
class.” Mazza, 666 F.3d at 596; see also Castano v. Am. Tobacco Co., 84
F.3d 734, 741 (5th Cir. 1996).
Here, the state-law variation that defeats predominance concerns
the ability of indirect purchasers to recover overcharges allegedly
passed on to them through the distribution chain. Decades ago, the U.S.
Supreme Court held that an indirect purchaser seeking damages under
§ 4 of the Clayton Act22 lacks standing to seek damages based on a
direct purchaser’s having “passed on” an overcharge. Illinois Brick Co.
v. Illinois, 431 U.S. 720 (1977). Twenty-six states, including California,
reacted by promulgating so-called “Illinois Brick-repealer laws”
authorizing indirect purchasers to bring damages suits under state
antitrust law. The U.S. Supreme Court subsequently held that federal
law did not preempt those measures. See California v. ARC Am. Corp.,
490 U.S. 93, 101–06 (1989). But 22 states adhere to Illinois Brick and
thus forbid indirect purchasers from recovering money damages in suits
like this one.23
22
15 U.S.C. § 15.
23
See https://www.americanbar.org/content/dam/aba/publishing/
58
Nevertheless, the district court applied California antitrust law to
this nationwide class, thereby allowing millions of indirect purchasers
in non-repealer states to recover damages in contravention of their
states’ laws. The district court’s decision to federalize California
antitrust law was error and, as explained below, violated this Court’s
holding in Mazza.
1. In nationwide consumer class actions filed in

California, each class member’s claim is governed by
the law of the state of purchase.
Mazza held that, in a nationwide consumer class action filed in
California, each class member’s claim is governed by the law of the
state of purchase. 666 F.3d at 594. Disregarding that holding, the
district court held that California law governs the claims of all 250
million consumer class members spread across all 50 states—even
though nearly half of those states bar indirect-purchaser claims for
damages.
As the district court noted, a federal court sitting in diversity must
look to the forum state’s choice-of-law rules to determine which state’s
substantive law controls. See Mazza, 666 F.3d at 589–90. Under
antitrust_source/lindsay_chart.authcheckdam.pdf.
59
California’s choice-of-law rules, after the class-action proponent shows
that California has significant contacts with the claims of each class
member, the burden then shifts to the defendant to demonstrate that
non-California law should apply to class claims. Id. at 590. California
law may be applied on a classwide basis if the interests of other states
do not outweigh California’s interest in having its law applied. Id. The
court conducts this weighing of interests by applying California’s three-
pronged “governmental interest test.” Id.
Mazza instructed federal district courts on how to apply that test
to a proposed nationwide consumer class action. The named plaintiffs
had sued American Honda in California under California’s unfair-
competition and false-advertising statutes, alleging that misleading
advertising had induced them to buy an optional feature. Id. at 585,
587. American Honda argued that differences among the consumer-
protection laws of the 44 affected states with respect to scienter,
reliance, and remedies precluded a finding of Rule 23(b)(3)
predominance. Id. at 590–91. But the district court found those
differences immaterial and certified a nationwide class action under
California law. Id. at 588, 591.
60
This Court granted interlocutory Rule 23(f) review and reversed.
Applying the first governmental-interest prong (existence of a material
conflict between relevant state laws), the court found the legal
differences concerning scienter, reliance, and remedies material because
they could “spell the difference between the success and failure of a
claim.” Id. at 591.
Applying the second prong (identification of the competing state
interests), the court reasoned that “[t]he automobile sales at issue in
this case took place within 44 different jurisdictions, and each state has
a strong interest in applying its own consumer protection laws to those
transactions.” Id. at 592. Specifically, each state is “entitled to set the
proper balance and boundaries between maintaining consumer
protection, on the one hand, and encouraging an attractive business
climate, on the other hand.” Id. “In our federal system,” the court
observed, “states may permissibly differ on the extent to which they will
tolerate a degree of lessened protection for consumers to create a more
favorable business climate for the companies that the state seeks to
attract to do business in the state.” Id.
To achieve the desired balance, a state must be “able to assure
individuals and commercial entities operating within its territory that
61
applicable limitations on liability set forth in the jurisdiction’s law will
be available to those individuals and businesses in the event they are
faced with litigation in the future.” Id. at 592–93. Federal courts should
not undermine that assurance by applying California law to claims by
consumers who purchased the product in a state that strikes the
consumer-business balance differently than California does. Id. at 591–
93.
The court then proceeded to the third and final governmental-
interest prong (identifying the state whose interests would be most
impaired if its law were not applied). The court observed that “each
foreign state has an interest in applying its law to transactions within
its borders” and that “if California law were applied to the entire class,
foreign states would be impaired in their ability to calibrate liability to
foster commerce.” Id. at 593. California conflicts law supported this
conclusion, as it “recognizes that with respect to regulating or affecting
conduct within its borders, the place of the wrong has the predominant
interest.” Id. And “California considers the ‘place of the wrong’ to be the
state where the last event necessary to make the actor liable occurred.”
Id.
62
Applying these rules, the Mazza court concluded that the “last
event necessary” for liability was communication of the advertisements
to the plaintiffs and their reliance thereon in purchasing vehicles. Id. at
594. Accordingly, the court held that each class member’s claim was
governed by the law of the state of purchase—a finding that defeated
Rule 23(b)(3) predominance. The court therefore vacated the
certification order. Id. at 596–97.
Here, the district court agreed that California’s antitrust law
differs materially from other states’ laws. 1ER54. But the court
concluded that no non-repealer state has an interest in seeing its laws
applied in this case. 1ER55. That was error: the state interest in
“balancing” consumer protection against business promotion is just as
relevant and worthy of respect here as it was in Mazza. When a state
chooses to permit indirect-purchaser antitrust suits for damages, it
strikes the protection/promotion balance more in favor of protecting
consumers. Likewise, when a state bars such suits, it strikes that
balance more in favor of fostering a favorable business climate. Each
type of state has a strong interest in its policy judgments’ being
respected; and each obtains adequate protection for those policy
63
judgments only if the district court applies the law of the state where
the consumer purchased the cellphone.
Had the district court reached the third governmental-interest
prong in this case, it would have become plain that the rationale for
applying the law of the state of purchase is even stronger here than in
Mazza. The state-law conflict in Mazza merely concerned elements of
causes of action (reliance, scienter) that could cause some class
members’ claims to fail, depending on the specific facts of the case. See
666 F.3d at 591. By contrast, the state-law conflict here concerns the
fundamental threshold issue of standing. For a state to continue
barring indirect-purchaser suits for damages after many others have
authorized them sends an especially strong message about how that
state intends to balance consumer protection against business
promotion. By the same token, applying California law nationwide in
this case would have the radical effect of conferring an otherwise
nonexistent cause of action for damages on the residents of non-repealer
states whose policymakers sought to foreclose such liability altogether.
Mazza teaches that courts in our federal system should be wary of
overriding such forceful and deliberate policy judgments. See id. at 593.
Citing Mazza, at least four California federal district-court opinions
64
have now recognized in antitrust cases: “[G]iven that the action simply
could not go forward in non-repealer states, it is too much of a stretch to
employ California law as an end run around the limitations those states
have elected to impose on standing.”24
2. The district court’s choice-of-law ruling disregarded

or misconstrued Mazza’s holding and reasoning.
Mazza notwithstanding, the district court halted its analysis at
the second governmental-interest prong after concluding that states
beyond California “have no interest in applying their laws to the
current dispute.” 1ER54. On the one hand, the court reasoned,
California had a “clear” interest in permitting indirect-purchaser suits
to further the Cartwright Act’s primary purpose of eliminating
restraints of trade and impairments of the free market. Id. On the other
hand, the court asserted, non-repealer states had “no interest in
applying their law to prevent this lawsuit from going forward” because
the bar on indirect-purchaser suits exists to protect a state’s resident
24
In re Korean Ramen Antitrust Litig., 2018 WL 1456618, at *1 (N.D.
Cal. Mar. 23, 2018) (quoting In re Optical Disk Drive Antitrust Litig.,
2016 WL 467444, at *12 (N.D. Cal. Feb. 8, 2016)); see also In re Lithium
Ion Batteries Antitrust Litig., 2017 WL 1391491, at *14 (N.D. Cal. Apr.
12, 2017) (same); In re Packaged Seafood Prods. Antitrust Litig., 242 F.
Supp. 3d 1033, 1068 & n.11 (S.D. Cal. 2017) (making same point).
65
defendants from excessive antitrust recoveries, whereas here there were
“no defendant residents to protect” because “the sole defendant is a
California resident.” 1ER54-55.
This reasoning contravenes Mazza in two important ways.
First, the district court misidentified the pertinent state interest
as one in protecting resident businesses from excessive liability. But
that was not the interest that Mazza identified. Instead, Mazza held
that each state has a valid interest in striking its own balance between
protecting consumers and “shielding out-of-state businesses from what
the state may consider to be excessive litigation.” 666 F.3d at 592.
Mazza’s choice-of-law analysis never discussed the state interest in
protecting resident businesses—even though, just as in this case, the
sole corporate defendant there was a California resident.25 Had the
district court properly applied Mazza’s teachings, it could not have
concluded that other states had “no” interest worthy of being weighed
against California’s.
25
See Mazza v. Am. Honda Motor Co., 254 F.R.D. 610, 620 (C.D. Cal.
2008); Mazza, 666 F.3d at 590.
66
Second, the district court erred by crediting one isolated policy
(protecting resident businesses) over a state’s more comprehensive
interest in fostering an attractive overall business climate through a
variety of legal rules, some more pro-consumer and some more pro-
business.
Instead of following Mazza, the district court tried to distinguish it
on infirm grounds. Having focused exclusively on the state’s putative
interest in protecting resident businesses, the court abruptly shifted
gears to focus on a state’s interest in “having its law applied to its
resident claimants”—a phrase that, unlike “resident businesses,” does
appear in Mazza.26 The district court reasoned that non-repealer states
lack any interest in having their laws applied because their “resident
claimants” derive no “benefit” from a rule that denies them standing.
1ER56-57.
But the court’s narrow focus on whether a state’s residents
specifically “benefit” from its indirect-purchaser bar disregarded
Mazza’s larger point: although a state-law rule like the indirect-
26
1ER56 (quoting Mazza, 666 F.3d at 591–92).
67
purchaser bar, viewed in isolation, may not “benefit” resident
claimants—indeed, may bar certain of their claims altogether—those
residents may yet benefit from the state’s ability to adopt policies that
“calibrate liability to foster commerce,” resulting in an “increase in
commerce and jobs.” 666 F.3d at 592–93. Mazza teaches that district
courts should refrain from using class certification as an occasion to
second-guess or override a state’s efforts to strike an appropriate
balance. See id. at 593.
The district court’s contrary approach renders it an outlier. Across
the nation, when indirect-purchaser plaintiffs file federal antitrust class
actions, they typically limit their proposed classes to consumers
residing in Illinois Brick repealer states.27 Courts in this Circuit and
beyond also routinely dismiss indirect-purchaser claims from
nationwide antitrust class actions where those claims arise from
purchases made in non-repealer states.28 The overwhelming weight of
27See, e.g., In re Asacol, 907 F.3d at 46; In re Cathode Ray Tube (CRT)
Antitrust Litig., 2013 WL 5391159 (N.D. Cal. Sept. 19, 2013); In re
DDAVP Indirect Purchaser Antitrust Litig., 903 F. Supp. 2d 198
(S.D.N.Y. 2012).
28See, e.g., Packaged Seafood, 242 F. Supp. 3d at 1068; In re Packaged
Ice Antitrust Litig., 779 F. Supp. 2d 642, 657 (E.D. Mich. 2011); In re
68
authority therefore reflects the principle—which this Court recognized
in Mazza—that courts cannot stretch a single state’s antitrust law to
create a cause of action for residents of states that bar such claims
entirely. But that is what the district court did here.
For all of these reasons, the district court’s choice-of-law
analysis—and thus its Rule 23(b)(3) predominance analysis—was
erroneous, and the Order should be reversed.
CONCLUSION AND SUMMARY OF RELIEF SOUGHT
For all of the reasons set forth above, the Court should reverse the
Order certifying the class.
Dated: June 3, 2019 Respectfully submitted,

KEKER, VAN NEST & PETERS LLP

ROBERT A. VAN NEST
EUGENE M. PAIGE
STEVEN A. HIRSCH
CODY S. HARRIS
JUSTINA SESSIONS
KEKER, VAN NEST & PETERS LLP
633 Battery Street
Tel: (415) 391-5400
Fax: (415) 397-7188
rvannest@keker.com
Wellbutrin XL Antitrust Litig., 260 F.R.D. 143, 168 (E.D. Pa. 2009); In
re Grand Theft Auto Video Game Consumer Litig., 251 F.R.D. 139
(S.D.N.Y. 2008); In re Graphics Processing Units Antitrust Litig., 527 F.
Supp. 2d 1011, 1028 (N.D. Cal. 2007).
69
Gary A. Bornstein (pro hac vice)

Yonatan Even (pro hac vice)
CRAVATH, SWAINE & MOORE LLP
Worldwide Plaza
825 Eighth Avenue
New York, NY 10019-7475
Tel: (212) 474-1000
Fax: (212) 474-3700
gbornstein@cravath.com
yeven@cravath.com
Richard S. Taffet (pro hac vice)

MORGAN, LEWIS & BOCKIUS LLP
101 Park Avenue
New York, NY 10178-0060
Tel: (212) 309-6000
Fax: (212) 309-6001
richard.taffet@morganlewis.com
Willard K. Tom (pro hac vice)

1111 Pennsylvania Avenue NW
Washington, DC 20004-2541
Tel: (202) 739-3000
Fax: (202) 739 3001
willard.tom@morganlewis.com
Geoffrey T. Holtz (SBN 191370)

One Market, Spear Street Tower
San Francisco, CA 94105-1596
Tel: (415) 442-1000
Fax: (415) 442-1001
gholtz@morganlewis.com
Attorneys for Petitioner-Defendant

QUALCOMM INCORPORATED
70
UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT
Form 8. Certificate of Compliance for Briefs
Instructions for this form: http://www.ca9.uscourts.gov/forms/form08instructions.pdf
9th Cir. Case Number(s) No. 19-15159
I am the attorney or self-represented party.
This brief contains 13,670 words, excluding the items exempted by Fed. R.
App. P. 32(f). The brief’s type size and typeface comply with Fed. R. App. P.
32(a)(5) and (6).
I certify that this brief (select only one):
[ x ] complies with the word limit of Cir. R. 32-1.
[ ] is a cross-appeal brief and complies with the word limit of Cir. R. 28.1-1.
[ ] is an amicus brief and complies with the word limit of Fed. R. App. P. 29(a)(5),
Cir. R. 29-2(c)(2), or Cir. R. 29-2(c)(3).
[ ] is for a death penalty case and complies with the word limit of Cir. R. 32-4.
[ ] complies with the longer length limit permitted by Cir. R. 32-2(b) because (select
only one):
[ ] it is a joint brief submitted by separately represented parties;
[ ] a party or parties are filing a single brief in response to multiple briefs; or
[ ] a party or parties are filing a single brief in response to a longer joint brief.
[ ] complies with the length limit designated by court order dated _____________.
[ ] is accompanied by a motion to file a longer brief pursuant to Cir. R. 32-2(a).
Signature s/Robert A. Van Nest Date June 3, 2019

(use “s/[typed name]” to sign electronically-filed documents)
71
STATEMENT OF RELATED CASES
This case is related to FTC v. Qualcomm Incorporated, No. 19-
16122. The FTC v. Qualcomm case was before the same judge as, and
coordinated in discovery with, the case appealed from in this action, and
the complaints in each underlying case contain similar allegations
regarding Qualcomm’s business practices. Counsel are not aware of any
other related cases pending in this Court.
Dated: June 3, 2019 KEKER, VAN NEST & PETERS LLP

ROBERT A. VAN NEST
633 Battery Street
Tel: (415) 391-5400
Fax: (415) 397-7188
rvannest@keker.com
72
CERTIFICATE OF SERVICE
I hereby certify that on June 3, 2019, I electronically filed the
foregoing with the Clerk of the Court for the United States Court of
Appeals for the Ninth Circuit by using the appellate CM/ECF system.
I certify that service for all participants in the case that are
registered CM/ECF users will be accomplished by the appellate
CM/ECF system.
I certify that I served the foregoing on this date by mail on the
following unregistered case participants:
Gwendolyn Giblin Jeremiah F. Hallisey

BERMAN DeVALERIO Hallisey and Johnson, PC
44 Montgomery Street, Suite 650 465 California Street, Suite 405
San Francisco, CA 94104 San Francisco, CA 94104-1812

ROBERT A. VAN NEST

19-06-03 Qualcomm Opening Brief in 9th Cir. Appeal of Consumer Class Cert

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Case: 19-15159, 06/03/2019, ID: 11318082, DktEntry: 12, Page 1 of 83

UNITED STATES COURT OF APPEALS

STROMBERG ET AL. v. QUALCOMM INCORPORATED

OPENING BRIEF OF DEFENDANT-APPELLANT

ROBERT A. VAN NEST

Attorneys for Defendant-Appellant

CORPORATE DISCLOSURE STATEMENT

Pursuant to Federal Rule of Appellate Procedure 26.1, Defendant-

Appellant Qualcomm Incorporated states that it does not have a parent

corporation and that no publicly held corporation owns 10% or more of

Dated: June 3, 2019 KEKER, VAN NEST & PETERS LLP

s/Robert A. Van Nest

TABLE OF CONTENTS ........................................................................II

TABLE OF AUTHORITIES ................................................................... V

STATEMENT OF JURISDICTION ............................................4

STATEMENT OF THE FACTS AND CASE ..............................6

General background ...........................................................6

The district court’s class-certification order ....................13

SUMMARY OF ARGUMENT ...................................................16

The district court abused its discretion in ruling

1. Plaintiffs’ model impermissibly sought to

2. The class includes nearly 100 million

consumers who, under plaintiffs’ model,

3. Individualized issues regarding impact and

The class is unmanageable and therefore not a

1. This Court’s opinion in In re Hotel

2. Other circuits have likewise held that

3. The district court abused its discretion by

The district court erred in applying California

1. In nationwide consumer class actions filed

2. The district court’s choice-of-law ruling

CONCLUSION AND SUMMARY OF RELIEF

CERTIFICATE OF COMPLIANCE……………………………. .............71

STATEMENT OF RELATED CASES ..................................................72

Abrams v. Interco Inc.,

In re Allstate Ins. Co.,

Amchem Prods., Inc. v. Windsor,

Amgen Inc. v. Conn. Retirement Plans and Trust Funds,

Apple Inc. v. Pepper,

California v. ARC Am. Corp.,

Arnold v. United Artists Theatre Circuit, Inc.,

In re Asacol Antitrust Litig.,

Barnes v. Am. Tobacco Co.,

Berger v. Home Depot USA, Inc.,

In re Bluetooth Headset Products Liability Litigation,

Briseno v. ConAgra Foods, Inc.,

Cargill, Inc. v. Monfort of Colo., Inc.,

In re Cathode Ray Tube (CRT) Antitrust Litig.,

Chamberlan v. Ford Motor Co.,

In re Class 8 Transmission Indirect Purchaser Antitrust

Comcast Corp. v. Behrend,

In re DDAVP Indirect Purchaser Antitrust Litig.,

Dukes v. Wal-Mart Stores, Inc.,

Eisen v. Carlisle & Jacquelin,

In re Flash Memory Antitrust Litig.,

Fosmire v. Progressive Max Ins. Co.,

In re Grand Theft Auto Video Game Consumer Litig.,

In re Graphics Processing Units Antitrust Litig.

In re Graphics Processing Units Antitrust Litigation,

Hanlon v. Chrysler Corp.,

In re Hotel Telephone Charges,

Illinois Brick Co. v. Illinois,

Lakeland Regional Med. Ctr., Inc. v. Astellas US, LLC,

Langbecker v. Electronic Data Sys. Corp.,