Opinion
Petitioners Bayer Corporation, Barr Laboratories, Inc., The Rugby Group, Inc., Watson Pharmaceutics, Inc., and Hoechst Marion Roussel, Inc., seek a writ of mandate directing the superior court to vacate its order granting class certification in a coordinated proceeding against them for alleged violations of the Cartwright Act (Bus. & Prof. Code, § 16720 et seq.), the Unfair Competition Law (Bus. & Prof. Code, § 17200 et seq.), and the common law. We conclude that the trial court did not abuse its discretion in certifying the class. We nevertheless grant relief because the class as defined by the trial court is overbroad to the extent it includes purchasers of Cipro who paid a flat copayment when they would have paid for a generic substitute under their health insurance.
I
FACTUAL AND PROCEDURAL BACKGROUND
A. Allegations of Class Action Complaint
This matter arises out of a series of cases filed in various counties in California,
Cipro is the brand name for ciprofloxacin hydrochloride (ciprofloxacin), an antibiotic prescribed for the treatment of various infections. Cipro is manufactured and marketed by Bayer AG and its subsidiary Bayer Corporation (collectively referred to as Bayer). In 1987, Bayer obtained a patent on ciprofloxacin known as the “444 patent.” Cipro is the best selling antibiotic in the world. Cipro was the first Bayer product to post over $1 billion in annual sales in the United States.
In 1991, Barr Laboratories, Inc. (Barr) applied for approval from the federal Food and Drug Administration (FDA) to market a generic version of Cipro. As authorized by the federal Hatch-Waxman Act (21 U.S.C. § 355), Barr challenged the validity of Bayer’s 444 patent. In January 1992, Bayer brought a patent infringement suit against Barr in federal court, which triggered a 30-month waiting period for FDA approval of Barr’s application under the Hatch-Waxman Act. In its answer to Bayer’s complaint, Barr asserted that the 444 patent was invalid and unenforceable.
According to the complaint, Bayer’s internal studies estimated that a generic version of Cipro could capture 70 percent of the market within the first six months of marketing and 90 percent within the first full year of generic competition. Based on Barr’s predictions, Bayer stood to lose at least $750 million in annual revenues within a few years after the introduction of generic competition.
Bayer settled the patent litigation in January 1997 and entered into several interrelated agreements (the Cipro Agreements) with Barr and two other entities affiliated with Barr-Hoechst Marion Roussel, Inc. (HMR) and The Rugby Group, Inc. (Rugby). Under the terms of these agreements, Barr acknowledged the validity of the 444 patent. Barr, HMR, and Rugby agreed to refrain from selling or marketing a generic version of Cipro. In exchange, Bayer paid Barr and HMR a lump sum of $49.1 million and agreed that it would either license and supply Cipro to Barr and HMR for resale, or make additional quarterly payments to Barr and HMR. As of the filing of the complaint, Bayer had opted to pay a total of $398 million in quarterly payments to Barr and HMR.
The complaint alleges that, in the absence of the Cipro Agreements, Barr would have begun manufacturing, marketing, and selling generic ciprofloxacin in the United States market no later than January 1997. According to the complaint, the purpose of the Cipro Agreements was to allocate the entire United States market for ciprofloxacin to Bayer for at least six years, to restrain competition in the market, and to grant Bayer an unlawful monopoly with the concomitant ability to charge supracompetitive prices for Cipro.
The complaint alleges causes of action for per se violation of the Cartwright Act (Bus. & Prof. Code, § 16720 et seq.), unfair competition in violation of the Unfair Competition Law (Bus. & Prof. Code, § 17200 et seq.), and the common law tort of monopolization.
The named plaintiffs are individual residents and not-for-profit entities in California, each of whom allegedly purchased Cipro indirectly from Bayer. The complaint alleges that the named plaintiffs are suing on behalf of themselves and a class of California individuals and entities “who indirectly purchased, paid and/or reimbursed for Cipro intended for consumption by
B. Class Certification Motion
In December 2002, plaintiffs filed a motion for certification of the class described in the complaint. The motion was supported by a declaration of economist Raymond S. Hartman, as well as declarations of the named plaintiffs. According to Hartman, he had “analyzed whether the indirect end-payer purchasers of Cipro in California were impacted as a Class and damaged economically as a result of the alleged antitrust violations and other unlawful conduct among Defendants.” Based on his economic analysis, Hartman concluded that the purchasers of Cipro had been damaged economically, for two reasons: “First, all scientific evidence indicates that over time consumers switch in large numbers from a branded drug to its lower-priced bioequivalent generic once that generic becomes available. Second, existing evidence suggests that branded prices would have been lower once the generic entered.”
Hartman also analyzed “whether class-wide analysis is feasible and is the most efficient and effective way of analyzing impact and measuring damages.” He concluded that it was. According to Hartman, there exists a “standard formulaic methodology” to calculate both the amount of overcharges to the class as a whole and the monetary remedies available under Business and Professions Code section 17200. Hartman described the formula in detail in his declaration and explained that the formula was widely used and accepted in scientific analysis of the penetration of generic drugs into the market.
Defendants opposed the motion for class certification and submitted evidence in opposition to the Hartman declaration, including expert declarations from economists Gregory K. Bell and James Hughes. The defense experts asserted that there was no method for determining the impact on the class or for measuring damages to its individual members through common proof. In the opinions of the defense experts, the individual circumstances of the putative class members were too varied to permit an assessment of their claims on a classwide basis.
Hartman submitted a rebuttal declaration in opposition to the defense experts. In his rebuttal declaration, Hartman reaffirmed the opinions set forth in his initial declaration, and explained why he believed Bell’s and Hughes’s objections to class certification were invalid.
C. The Trial Court’s Ruling
After issuing a tentative ruling and hearing oral argument, the trial court entered, a written order granting the motion for class certification. The court found that the proposed class was an easily ascertainable group of “hundreds of thousands” of individuals and entities who had purchased Cipro. The court further concluded that there was a community of interest among the class members because there was a predominance of common issues, the claims of the class representatives were typical of the class as a whole, and the class representatives could adequately represent the class. Finally, the court found that a class action was the most efficient and fair means for adjudication of the claims.
On January 9, 2004, Bayer, Rugby, HMR, and Watson filed a petition for writ of mandate or other appropriate relief seeking review of the class certification order. We issued an order to show cause.
n
DISCUSSION
A. Appellate Review of Class Certification Orders
An order certifying a class is not appealable except on appeal from the final judgment. (See
Shelley
v.
City of Los Angeles
(1995)
A trial court’s order granting or denying class certification is subject to review for abuse of discretion.
(Neecke
v.
City of Mill Valley
(1995)
B. The Trial Court Did Not Abuse Its Discretion in Certifying a Class
Code of Civil Procedure section 382 authorizes class actions when “the question is one of a common or general interest, of many persons, or when the parties are numerous, and it is impracticable to bring them all before the court . . . .” “To obtain certification, a party must establish the existence of both an ascertainable class and a well-defined community of interest among
the class members.”
(Linder, supra,
Petitioners do not contest the trial court’s findings as to the existence of an ascertainable class, the typicality of the class representatives’ claims, or the adequacy of representation by the class representatives. Rather, they focus exclusively on the trial court’s finding that there are predominant common questions of law or fact. Specifically, petitioners contend that there are numerous individual issues pertaining to liability and to damages that preclude class certification, and that the trial court erred in ruling that injury to all class members may be assumed where a horizontal market-wide restraint of trade is alleged. We reject these contentions.
1. There Are Substantial Questions of Law and Fact Common to All Class Members
The predominance factor requires a showing “that questions of law or fact common to the class predominate over the
The trial court here properly concluded that there are substantial issues of law and fact common to all of the proposed class members. Determining whether the Cipro Agreements violate the Cartwright Act (Bus. & Prof. Code, § 16720 et seq.), the Unfair Competition Law (Bus. & Prof. Code, § 17200 et seq.), or the common law requires the resolution of potentially complex issues that do not vary among the individual class members. The nature and circumstances of the Cipro Agreements—and their legality under California law—raise identical factual and legal issues as to every member of the class. For every single class member to litigate these common issues separately would impose a substantial burden on the courts and the litigants.
State and federal courts alike have recognized that common issues usually predominate in cases where the defendants are alleged to have engaged in collusive, anticompetitive conduct resulting in artificially high market-wide prices for a product. In such cases, the existence of the conspiracy and its legality generally present common questions of law and fact that predominate over any questions affecting only individual class members. (See, e.g.,
B.W.I. Custom Kitchen v. Owens-Illinois, Inc.
(1987)
In Terazosin, the district court recently concluded that common issues predominated in a case factually similar to ours. Terazosin was an antitrust class action brought against a brand-name drug manufacturer and its generic competitors, arising out of an allegedly anticompetitive settlement of patent litigation, which the plaintiffs claimed had the effect of delaying entry of a generic product and causing artificially inflated prices for the drug. The district court concluded that there were common questions of law and fact applicable to all class members, and that these common questions predominated over individual issues. (Terazosin, supra, 220 F.R.D. at pp. 685-686, 694-699.)
There is also substantial evidence in the record to support the trial court’s finding that the impact of the Cipro Agreements on the class as a whole is subject to common proof at trial. The damages suffered by the class depends primarily on the effect of Bayer’s alleged monopoly on the overall market for ciprofloxacin. This is a matter that is subject to classwide proof by way of expert testimony, without regard to the particular circumstances of each individual class member. As the trial
The use of such a formula is an accepted method of proving aggregate damages to the class. (3 Conte & Newberg, Newberg on Class Actions (4th ed. 2002) § 10:3, pp. 479-480.) “In many cases such an aggregate calculation will be far more accurate than summing all individual claims.”
(Bruno v. Superior Court
(1981)
Expert opinion constitutes substantial evidence to support a class certification order if it is based on relevant, probative facts, as opposed to mere guesswork, surmise, or conjecture. (See Lockheed, supra, 29 Cal.4th at p. 1110.) Hartman’s expert opinion was based on existing data sources, published scientific analyses, the history of other comparable generic drugs, Bayer’s internal strategic planning documents, Bayer’s invoice and accounting data, the economics literature in the field, and a formulaic methodology widely used and accepted in scientific analysis of the market penetration of generic drugs.
We conclude that Hartman’s expert testimony was based on relevant, probative facts and constituted substantial evidence to support the trial court’s finding that proof of aggregate impact on the class as a whole can be shown by common proof. (Cf.
Terazosin, supra,
The fact that petitioners’ experts disagreed with Hartman’s analysis and conclusions regarding proof of common impact “is neither surprising nor relevant at this stage of the litigation.”
(Cardizem, supra,
2. The Individual Issues Pertaining to the Fact of Injury and Damages Do Not Preclude Class Certification
Petitioners nevertheless contend that class certification was improper because the varying circumstances of individual purchasers of Cipro raise numerous individual issues pertaining to the fact of injury and the amount of damages. Specifically, petitioners note that the fact and amount of injury sustained by individual class members depends on many variable factors, such as the exact terms of their medical coverage for prescription drugs, the prescribing practices of their physicians, the retail price of Cipro at the time and place of their purchases, whether they would have switched to a generic product if one had been available, whether they would have purchased a competing antibiotic, and whether price changes would have been passed on to or by class members. According to petitioners, the necessity for individual proof on such issues precludes class certification under the reasoning of
Lockheed, supra,
We disagree. It is settled that “a class action is not inappropriate simply because each member of the class may at some point be required to make an individual showing as to his or her eligibility for recovery or as to the amount of his or her damages.”
(Employment Development Dept. v. Superior Court
(1981)
These basic principles of class certification were not altered by the Supreme Court’s decision in
Lockheed, supra,
In reaching this conclusion, however,
Lockheed
emphasized that the plaintiffs were not required to demonstrate they could establish
each
of the elements of their claims by common proof in order to certify the class. The court reaffirmed the long-standing rule “that ‘the fact that each member of the class must prove his [or her] separate claim to a portion of any recovery by the class is only one factor to be considered in determining whether a class action is proper.’ ”
(Lockheed, supra,
Unlike Lockheed, this case does not involve claims for which each individual’s entitlement to relief will depend predominantly on unique factual issues that vary among all the class members. Here all of the proposed class members paid for exactly the same prescription drug, all assert that they paid an inflated price for the product, and all assert that they were harmed by the same anticompetitive conduct allegedly committed by defendants. Plaintiffs have presented expert testimony that the price of the product was artificially high because of defendants’ allegedly unlawful conduct, and “that overcharges were common to members of the Class who would have switched to generic ciprofloxacin and probable for many members of the Class who would have remained loyal to Cipro.” As we have discussed, such claims of anticompetitive collusion resulting in higher market prices are particularly suitable for class treatment.
Our conclusion is consistent with this court’s decisions in
Global Minerals
and
J. P. Morgan.
In those companion cases, the plaintiffs were purchasers of copper products who alleged that the defendants had manipulated the price of copper on the London Metal Exchange, causing an artificial inflation of prices on the American copper futures exchange (COMEX), which in turn allegedly caused an artificial inflation of copper prices in the United States.
(Global Minerals, supra,
113 Cal.App.4th at pp. 842-843;
J. P. Morgan, supra,
Both
Global Minerals
and
J. P. Morgan
recognized the general rule, stated in
Rosack, supra,
However, the court in
Global Minerals
and
J. P. Morgan
declined to apply this assumption to the particular facts of those cases, because of the unique peculiarities of the copper market and the dual roles played by members of the class as both buyers and sellers.
(Global Minerals, supra,
None of the relevant factors that precluded class certification in
Global Minerals
and
J. P. Morgan
are present in this case. The class members here did not act as both buyers and sellers of Cipro; they all paid for Cipro at the end of the distribution line. This is not a case where the product was substantially altered or added to by a middleman, thereby obscuring the effects of any price-fixing. Further, unlike the plaintiffs’ economist in
Global Minerals
and
J. P. Morgan,
who merely “assumed causation of injury for purposes of his analysis”
(Global Minerals, supra,
The trial court is in the best position to weigh the advantages of class treatment
The trial court also acted within its discretion in concluding that individual issues pertaining to injury and damages would be manageable within the context of such a class action. (Cf.
Terazosin, supra,
If the defendant in a class action is found liable, and there is a finding at trial as to the amount of classwide damages, each class member’s individual entitlement to damages may be litigated in a nonadversary administrative claims procedure with a lowered standard of proof.
(State of California v. Levi Strauss & Co.
(1986)
Contrary to petitioners’ contentions, such a claims procedure would not necessarily require burdensome inquiries into matters such as which specific class members would have switched to a generic drug in a hypothetical world, which would have remained brand-loyal, and precisely how much money each individual class member lost as a result of Bayer’s alleged monopoly on ciprofloxacin. Such a requirement of “individualized proof of damages, if accepted, would challenge all class action judgments adopting reasonably expeditious means of distributing the recovery
We therefore conclude that the trial court acted within its discretion in determining that the issues which may be jointly tried, when compared with those requiring separate adjudication, are sufficiently numerous or substantial that the maintenance of a class action would be advantageous to the judicial process and to the litigants.
(Collins
v.
Rocha, supra,
However, the class as defined by the trial court is overbroad, because it includes purchasers of Cipro who paid a flat copayment for the drug and who would have paid the same amount for a generic substitute under the terms of their health insurance coverage. Although “[t]he fact that certain members of the class may not have been injured at all does not defeat class certification”
(Rosack, supra,
Ill
CONCLUSION
The trial court did not abuse its discretion in certifying a class. Substantial evidence supports the trial court’s finding that questions of law or fact common to the class predominate over the questions affecting the individual members. The trial court applied the correct legal criteria in certifying the class, and it did not misapply applicable legal principles. The questions common to the class are sufficiently numerous or substantial in comparison to the individual questions that the maintenance of a class action would be advantageous to the judicial process and to the litigants. However, the class certification order is overbroad because it includes flat copayers who would have paid the same price for a generic substitute.
IV
DISPOSITION
Let a writ of mandate issue directing the superior court to modify its order granting class certification so as to exclude all purchasers of Cipro who paid a flat copayment and who would have paid the same copayment for a generic substitute under the terms of their heath insurance coverage. In all other respects, the petition is denied. The parties are to bear their own costs in this writ proceeding.
Huffman, Acting P. J., and Nares, J., concurred.