IN RE: MODAFINIL ANTITRUST LITIGATION
No. 15-3475
United States Court of Appeals, Third Circuit.
September 29, 2016
Argued July 12, 2016. (Filed: September 13, 2016). Amended September 29, 2016
837 F.3d 238
V.
For the foregoing reasons, we will affirm in part and reverse in part the judgment of the District Court, and remand for further proceedings consistent with this opinion.
Mylan Laboratories, Inc.; Mylan Pharmaceuticals Inc.; Ranbaxy Laboratories, Ltd; Ranbaxy Pharmaceuticals, Inc., Appellants
Evan R. Chesler, David R. Marriott, Rowan D. Wilson [ARGUED], Cravath Swaine & Moore, 825 Eighth Avenue, Worldwide Plaza, New York, NY 10019, David L. Comerford, Katherine M. Katchen, Akin Gump Strauss Hauer & Feld, 2001 Market Street, Two Commerce Square, Suite 4100, Philadelphia, PA 19103, Paul B. Hewitt, C. Fairley Spillman, Catherine E. Creely, Akin Gump Strauss Hauer & Feld, 1333 New Hampshire Avenue, N.W., Suite 400, Washington, DC 20036, J. Douglas Baldridge [ARGUED], Christopher K. Diamond, Danielle R. Foley, Molly Geissenhainer, Venable, 575 7th Street, N.W., Washington, DC 20004, John J. O‘Malley, Anthony S. Volpe, Volpe & Koenig, 30 South 17th Street, Suite 1600, Philadelphia, PA 19103, Erin C. Dougherty, Lathrop B. Nelson, III, Montgomery
Anna T. Neill, Scott E. Perwin, Lauren C. Ravkind, Kenny Nachwalter, 1441 Brickеll Avenue, Four Season Tower, Suite 1100, Miami, FL 33131, Moira E. Cain-Mannix, Bernard D. Marcus, Marcus & Shapira, 301 Grant Street, One Oxford Centre, 35th Floor, Pittsburgh, PA 15219, Monica L. Rebuck, Barry L. Refsin, Hangley Aronchick Segal Pudlin & Schiller, 4400 Deer Path Road, Suite 200, Harrisburg, PA 17110, Eugene P. Endress, Matthew M. Holub, Thomas J. Maas, Brian Sodikoff, Katten Muchin Rosenman, 525 West Monroe Street, Suite 1600, Chicago, IL 60661, James W. Matthews, Foley & Lardner, 111 Huntington Avenue, Boston, MA 02199, Counsel for Amicus Appellee.
Before: SMITH, JORDAN, and RENDELL, Circuit Judges
OPINION
SMITH, Circuit Judge.
“The class action is an ingenious device for economizing on the expense of litigation and enabling small claims to be litigated. The two points are closely related. If every small claim had to be litigated separately, the vindication of small claims would be rare. The fixed costs of litigation make it impossible.” Thorogood v. Sears, Roebuck & Co., 547 F.3d 742, 744 (7th Cir. 2008). But not every group of plaintiffs should be granted class action status, because “[t]he class action is an ‘exception to the usual rule that litigation is conducted by and on behalf of the individual named parties only.‘” Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338, 348, 131 S.Ct. 2541, 180 L.Ed.2d 374 (2011) (quoting Califano v. Yamasaki, 442 U.S. 682, 700-01, 99 S.Ct. 2545, 61 L.Ed.2d 176 (1979)).
When thinking of a class action brought under
I.
A. Regulatory Framework
The 1984 Drug Price Competition and Patent Term Restoration Act (the “Hatch-Waxman Act“), 98 Stat. 1585, as amended, provides a regulatory framework designed in part to (1) ensure that only rigorously tested drugs are marketed, (2) incentivize drug manufacturers to invest in new re-
The FDA will not give final approval to produce a generic version of a drug that is entitled to non-patent exclusivity under the Hatch-Waxman Act, and it “cannot authorize a generic drug that would infringe a patent.” Caraco, 132 S.Ct. at 1676. Thus, among other things, an ANDA‘s approval will depend on “the scope and duration of the patents covering the brand-name drug.” Id. Brand manufacturers are required to include the patent number and expiration date of the patent that covers the drug or that covers a method of using that drug in their NDAs, which are then published by the FDA in the Orange Book, more formally known as the Approved Drug Products with Therapeutic Equivalence Evaluations. Id. (citing
- that such patent information has not been filed,
- that such patent has expired,
- of the date on which such patent will expire, or
- that such patent is invalid or will not be infringed by the manufacture, use, or salе of the new drug for which the application is submitted.
An ANDA with a paragraph IV certification may only be filed after the expiration of the fourth year of the New Chemical Entity (“NCE“) five-year exclusivity period.1
If the brand manufacturer initiates a patent infringement suit, the FDA must withhold approval of the generic for at least 30 months while the parties litigate the validity or infringement of the patent. Actavis, 133 S.Ct. at 2228 (citing
In order to incentivize a generic drug manufacturer to challenge weak patents, the Hatch-Waxman Act provides that the first generic manufacturer to file a paragraph IV certification will enjoy a 180-day exclusivity period.
B. Facts
In April 1997, the United States Patent and Trademark Office issued U.S. Patent No. 5,618,845 (“the ‘845 patent“) to Ceрhalon, Inc. (“Cephalon“), a pharmaceutical company. The ‘845 patent claimed a specific particle-size distribution of modafinil, a wakefulness-promoting agent used to treat narcolepsy and other sleep disorders, and Cephalon later applied for a reissue of the patent, resulting in the issuance of U.S. Reissue Patent No. 37,516 (“the ‘516 patent“) in January 2002. Thus, Cephalon‘s use of modafinil was protected by a patent until October 6, 2014, to be later extended until April 6, 2015.
In December 1998, the FDA approved Cephalon‘s NDA for the brand-name drug Provigil and granted it NCE exclusivity. This five-year period of exclusivity was extended until December 24, 2005, due to Cephalon‘s status as an orphan drug.3 In
On December 24, 2002, the first day that an ANDA for modafinil could be filed, four generic drug manufacturers—Teva Pharmaceutical Industries, Ltd. and Teva Pharmaceuticals, USA, Inc. (collectively “Teva“); Ranbaxy Laboratories, Ltd. and Ranbaxy Pharmaceuticals, Inc. (collectively “Ranbaxy“); Mylan Pharmaceuticals, Inc. and Mylan Inc. (collectively “Mylan“); and Barr Laboratories, Inc. (“Barr“)—each independently filed an ANDA with paragraph IV certifications seeking to sell generic modafinil products. Due to FDA guidance promulgated after the paragraph IV certifications in this case were filed, all four generic manufacturers were treated as being the first filer, and thus all four would have shared in the 180-day exclusivity period, making it less valuable to each individual generic manufacturer. See Guidance for Industry on 180-Day Exclusivity when Multiple Abbreviated New Drug Applications are Submitted on the Same Day, 68 Fed. Reg. 45252, 45255 (Aug. 1, 2003).
Because the filing of the paragraph IV certification “automatically counts as patent infringement,” Actavis, 133 S.Ct. at 2228 (citing
Almost two weeks later, on December 22, 2005, Ranbaxy entered into a similar reverse-payment settlement agreement with Cephalon on slightly less favorable terms, but also with a contingent launch provision. Again, the contingent launch provision was publicized via press release. Two weeks after the Ranbaxy settlement, on January 9, 2006, Mylan entered into a similar agreement—on less favorable terms than Ranbaxy—but also with a publicized contingent launch provision. The final remaining paragraph IV filer, Barr, settled on the least favorable terms on
The Direct Purchaser Plaintiff (“DPP“) putative class, appellees in this case, filed suit on April 27, 2006, alleging a global conspiracy involving Cephalon and all four generic defendants under
The District Court, with the full support of the parties, ordered that motions regarding class certification were not to be filed until after fact and expert discovery and the motions for summary judgment had been filed. Thus, the DPP class did not file its motion for class certification until May 12, 2014, after more than eight years of litigation. Approximately one month later, on June 23, 2014, the District Court granted summary judgment in favor of all of the defendants on the DPP class’ global antitrust conspiracy claim. Over the next 13 months, several letter motions and hearings were held on the class certification issue, and the District Court certified the DPP class on July 27, 2015. During this period, Cephalon, Teva, and Barr settled with the DPP class for $512 million on April 17, 2015. A settlement class, which has the exact same composition as the putative DPP class at issue here, was also certified on July 27, 2015, and the settlement itself was approved by the District Court on October 15, 2015. Thus, the only defendants remaining at the time of the DPP certification decision being appealed were Ranbaxy and Mylan (collectively “Defendants“).
II.
Defendants challenge two aspects of the District Court‘s class certification decision—numerosity and predominance. Thus, even though other issues were contested at the District Court level, we focus only on the District Court‘s numerosity analysis under
The District Court next considered whether joinder of these twenty-two class members was impracticable such that class certification was appropriate under
In analyzing whether joinder was impracticable, the District Court examined five factors: “(1) judicial economy, (2) geographic dispersion, (3) financial resources of class members, (4) the claimant‘s ability to institute individual suits, and (5) requests for injunctive relief that could affect future class members.” Id. at 203-04 (quoting In re Wellbutrin XL Antitrust Litig., No. 08-2431, 2011 WL 3563385, at *3 (E.D. Pa. Aug. 11, 2011)). The District Court placed great weight on the judicial economy factor, with particular emphasis on the late stage of the litigation. Specifically, the Court stated: “Considering the extensive history of this litigation and the exhaustive discovery that has been conducted, ... judicial economy is best served by trying this case as a class action. Joinder of the absent class members would likely require additional rounds of discovery, which would only further delay a trial date.” Id. at 206-07.
Relatedly, the District Court also expressed the concern that if the class was not certified at this late date, unnamed class members would bring individual suits in other jurisdictions instead of seeking to be joined in the suit before him. Id. at 207 (“Further, if cases were brought within other jurisdiсtions, additional discovery is certainly a possibility, and separate trials could result in inconsistent verdicts.“). The other primary factor that the District Court found to weigh in favor of numerosity was the geographic dispersion of the class members, who were spread out over thirteen states and Puerto Rico. Id.
On the other hand, the Court noted that some factors weighed against class certification. First, the class members’ vast financial resources weighed against certification, as each was a sophisticated corporation. Id. The District Court also looked to their incentive to bring individual claims, stating that the class members’
The District Court next addressed Defendants’ predominance argument that, after the District Court‘s grant of summary judgment on the global conspiracy claim, common issues of law and fact did not predominate over individualized inquiries under
III.
“The class action is an exception to the usual rule that litigation is conducted by and on behalf of the individual named parties only.” Wal-Mart, 564 U.S. at 348, 131 S.Ct. 2541 (internal quotation marks omitted). In order to justify this exception to the rule, “every putative class action must satisfy the four requirements of
- the class must be “so numerous that joinder of all members is impracticable” (numerosity);
- there must be “questions of law or fact common to the class” (commonality);
- “the claims or defenses of the representative parties” must be “typical of the claims or defenses of the class” (typicality); and
- the named plaintiffs must “fairly and adequately protect the interests of the class” (adequacy of representation, or simply adequacy).
In re Cmty. Bank of N. Va., 622 F.3d 275, 291 (3d Cir. 2010) (quoting
We have held that “the decision to certify a class calls for findings by the court, not merely a ‘threshold showing’ by a party, that each requirement of
Thus, while a district court “possesses broad discretion to control proceedings and frame issues for consideration under
“We review a class certification order for abuse of discretion, which occurs if the district court‘s decision rests upon a clearly erroneous finding of fact, an errant conclusion of law or an improper application of law to fact.” Hydrogen Peroxide, 552 F.3d at 312 (internal quotation marks omitted). Although Defendants raise the issue of predominance first, the requirements of
A. Numerosity
While “[n]o minimum number of plaintiffs is required to maintain a suit as a class action,” our Court has said that “gen-
At this point, we need not specify a “floor” at which a putative class will fail to satisfy the numerosity requirement. Instead, we simply note that the number of class members is the starting point of our numerosity analysis. Although district courts are always under an obligation to ensure that joinder is impracticable, their inquiry into impracticability should be particularly rigorous when the putative class consists of fewer than forty members. Because the District Court certified a class of twenty-two members, which is only slightly above the twenty-member floor suggested by the leading treatises, we first address Defendants’ challenge to the size of the putative class concerning the partial assignment of some claims. After determining that the class is comprised of twenty-two members, we scrutinize the District Court‘s numerosity reasoning in this case. Because the District Court erred in its analysis of the two most important factors applicable here, we see no need to examine the other factors and will remand for the District Court to again engage in a numerosity inquiry consistent with the reasoning in this opinion.
1. The Size of the Class
The District Court rejected Defendants’ argument that two class members should not be included in the class for numerosity purposes because they were partial assignees of two other class members. If Defendants were correct, the class would be comprised of only twenty class members, not twenty-two. On the other hand, for the first time on appeal, Plaintiffs argue that they have uncovered three more assignees of claims, and that the class consists of twеnty-five members.
Defendants appear to have abandoned their partial assignment argument on appeal, arguing in one sentence that “four of the 22 potential class members were improperly included in the class.” Appellant Br. at 48.8 Defendants make no reference
Initially, Defendants’ partial assignment argument makes intuitive sense. Why should Plaintiffs be able to take one claim and turn it into two for numerosity purposes? How is this not a form of “double dipping“? Nevertheless, no matter how intuitively appealing this argument may be, it lacks legal support. The text of
Moreover, as the District Court recognized, there is persuasive circuit precedent establishing that partial assignees are appropriately considered to be members of a class. In In re Fine Paper Antitrust Litig., 632 F.2d 1081, 1089 (3d Cir. 1980), the state of Washington was the recipient of partial assignments of antitrust claims. It sought to be excluded from the settlement class, and the district court held, among other reasons for denying the right to opt out, that “the state‘s assertion of the assigned claims would result in an impermissible fragmentation of the ... causes of action.” Id. We reversed and “reject[ed] the defendant‘s position that the partial assignments improperly fragment the claim.” Id. at 1090. We looked to section 156 of the Restatement of Contracts for guidance and concluded that “[a]n assignment of a fractional part of a single and entire right against an obligor is oрerative as if the part had been a separate right.” Id. at 1091; Restatement (First) of Contracts § 156 (“An assignment of either a fractional part of a single and entire right against an obligor ... is operative as to that part or amount to the same extent and in the same manner as if the part had been a separate right.“).9
At the same time, we held that when the “collective right to the entire claim” is split, “the partial assignee may not maintain the original suit” unless the obligor has consented in order to protect the “right[] of the obligor to be free of successive and repeated suits growing out of the
While Fine Paper Litigation did not address numerosity, we consider its reasoning instructive. Crucially, we held there that a partial assignment “is operative as if the part had been a separate right.” Id. at 1091. Moreover, Fine Paper Litigation envisioned the class action mechanism as a proper tool for partial assignees to participate in the lawsuit, albeit with fewer individual rights than other claimants. We agree with the District Court that, unless there is evidence that the class plaintiffs are seeking to artificially inflate the number of claimants, partial assignees may properly be treated as class members. On remand, the District Court will need to consider whether the three new assignees that Plaintiffs first mention on appeal should be considered as class members.10 Thus, at this point, we assume that the class consists of twenty-two members.
2. Impracticability of Joinder
In Marcus, we recognized the three core purposes of the numerosity requirement: First, it ensures judicial economy. It does so by freeing federal courts from the onerous rule of compulsory joinder inherited from the English Courts of Chancery and the law of equity. Courts no lоnger have to conduct a single, administratively burdensome action with all interested parties compelled to join and be present. The impracticability of joinder, or numerosity, requirement also promotes judicial economy by sparing courts the burden of having to decide numerous, sufficiently similar individual actions seriatim. As for its second objective,
We have not had occasion to list relevant factors that are appropriate for
These factors are only relevant to a binary choice at the certification stage: a class action versus joinder of all interested parties. At this point, we do not consider the possibility that plaintiffs may bring individual suits. After all, the text of
While all factors are relevant, we note at the outset that not all are created equal. Instead, both judicial economy and the ability to litigate as joined parties are of primary importance. As we have held, judicial economy is one of the purposes behind
a. Judicial Economy
Judicial economy, a primary factor frequently cited, looks to the administrative burden that multiple or aggregate claims place upon the courts. Marcus, 687 F.3d at 594 (stating that the numerosity requirement “also promotes judicial economy; by sparing the courts the burden of having to decide numerous, sufficiently similar individual actions seriatim“); id. (“Courts no longer have to conduct a single, administratively burdensome action with all interested parties compelled to join and be present.“). This factor takes into account any еfficiency considerations regarding the joinder of all interested parties that the district court deems relevant, including the number of parties and the nature of the action. See 5 Moore‘s Federal Practice § 23.22 (instructing a court to consider “the actual, practical difficulties of joining all of the potential class members” by inquiring whether joinder “would be expensive, time-consuming, and logistically unfeasible“). In analyzing judicial economy, we focus on whether the class action mechanism is substantially more efficient than joinder of all parties.
Here, the District Court “conclude[d] that judicial economy [was] best served by trying this case as a class action.” King Drug, 309 F.R.D. at 206. It made this decision by looking to “the extensive history of the litigation and the exhaustive discovery that ha[d] been conducted.” Id. It expressed concern that further discovery would delay the case even more, or that unnamed class members would opt to file suit elsewhere, resulting in other civil actions with additional discovery and the potential for inconsistent verdicts. Id. at 206-07 (“Joinder of the absent class members would likely require additional rounds of discovery, which would only further delay a trial date. Further, if cases were brought within other jurisdictions, additional discovery is certainly a possibility.“).13 While these predictions may come true, the late stage of litigation is not by itself an appropriate consideration to take into account as part of a numerosity analysis.14
In complex cases such as this antitrust suit, the class certification decision is often delayed until after years of fact and expert discovery have been conducted and dispositive motions have been litigated. See Hydrogen Peroxide, 552 F.3d at 324 (“But even with some limits on discovery and the extent of the hearing, the district judge must receive enough evidence, by affidavits, documents, or testimony, to be satisfied that each
Conversely, a rule that would allow courts to consider the late stage of litigation and the sunk costs already incurred in their numerosity analyses would place a thumb on the scale in favor of a numerosity finding for no reason other than the fact that the complex nature of a case resulted in the class certification decision being deferred for years. Our view is consistent with the 2003 amendments to
As the Advisory Committee noted, there are “many valid reasons that may justify deferring the initial certification decision,” including the need to conduct discovery, a determination of what issues would be presented at trial, and the defendant‘s desire to “win dismissal or summary judgment as to the individual plaintiffs without certification and without binding the class that might have been certified.”
Moreover, while the District Court expressed concern that “[j]oinder of the absent class members would likely require additional rounds of discovery,” King Drug, 309 F.R.D. at 206, this does not mean that the litigation would have to begin anew for the unnamed class members. If the members all opted to join the case as individual plaintiffs, the District Court could, in its discretion, limit discovery where “is unreasonably cumulative or duplicative, or can be obtained from some other source that is more convenient, less burdensome, or less expensive.”
On remand, when considering the judicial economy factor of the numerosity analysis, the District Court should not take into account the sunk costs of the litigation or the need to further delay trial were the class not to be certified.18 In other words,
b. Ability and Motivation to be Joined as Plaintiffs
The second purpose behind the numerosity requirement is to further the broader class action goal of providing those with small claims reasonable access to a judicial forum for the resolution of those claims. Thus, the ability and motivation of Plaintiffs to pursue their litigation via joinder is the second factor upon which we focus. See Marcus, 687 F.3d at 594 (stating that the numerosity requirement “creates greater access to judicial relief, particularly for those persons with claims that would be uneconomical to litigate individually“).19
This primarily20 involves an examination of the stakes at issue for the individual claims and the complexity of the litigation, which will typically correlate with the costs of pursuing these claims. Though joinder is certainly more economical for most plaintiffs than pursuing the case alone, it is often still uneconomical for an individual with a negative value claim to join a lawsuit.21 After all, each plaintiff may need to hire his own counsel to protect his individual interests—although total litigation costs would still likely be lower due to joint litigation agreements. Similarly, each plaintiff would be subject to discovery, whereas the defendants would have to show a greater need for discovery from unnamed plaintiffs in a class action.22 See Clark v. Universal Builders, Inc., 501 F.2d 324, 340-41 (7th Cir. 1974) (placing the burden on defendants to show the need for discovery from unnamed class members to ensure that the discovery is not requested “as a tactic to take undue advantage of the class members or as a stratagem to reduce the number of claimants” (internal quotation marks omitted)).
The District Court abused its discretion in analyzing the two most important numerosity factors when it considered the late stage of the litigation as relevant to the judicial economy factor and failed to properly consider the ability and motivation of the plaintiffs to proceed as joined, as opposed to individual, parties. We therefore remand for the District Court to conduct a rigorous numerosity analysis for this class of twenty-two (or twenty-five) members. In conducting this rigorous analysis, factors that the District Court may consider include the financial resources of the class members, the geographic dispersion of the class members, the ability to identify future claimants, together with the fact that these claims are for damages, and not injunctive relief.
Contrary to the dissent‘s assertion, we are not “erecting roadblоcks that do not exist.” Although the dissent suggests that Defendants have not yet shown why joinder is practicable, that suggestion is beside the point. The burden is on Plaintiffs to show why joinder is impracticable. Marcus, 687 F.3d at 591 (“The party seeking certification bears the burden of establishing each element of
Finally, the dissent makes the extravagant claim that “nothing about [this case] cries out for anything but class treatment.” Yet this is not the typical class action where hundreds or thousands of claims are aggregated in order to ensure that the wrongdoer is held accountable and that small claims are vindicated. See Thorogood, 547 F.3d at 744. Putting aside the small number of class members in this case, the judges in the majority have never seen a class action where three class members, each with billions of dollars at stake and close to 100% of the total value of class claims between them, have been allowed to sit on the sidelines as unnamed class members. Plaintiffs must satisfy their burden of showing why we should allow this unique putative class to take advantage of this “exception to the usual rule that litigation is conducted by and on behalf of the individual named parties only.” Wal-Mart, 564 U.S. at 348, 131 S.Ct. 2541 (internal quotation marks omitted). At this point, they have failed to meet that burden, and any suggestion that this is a run-
B. Predominance.
Although we remand for the District Court to reconsider its numerosity analysis, we also see a need to address Defendants’ predominance argument. This argument makes selective use of language from the Supreme Court‘s recent decision in Comcast Corp. v. Behrend, 569 U.S. 27, 133 S.Ct. 1426, 185 L.Ed.2d 515 (2013). The interpretation of Comcast advanced by Defendants is overly broad and simplistic, and, if the class were to meet the numerosity requirement on remand, the predominance argument advanced by Defendants is untenable.
Under
The predominance requirement applies to damages as well, because the efficiencies of the class action mechanism would be negated if “[q]uestions of individual damage calculations overwhelm questions common to the class.” Comcast, 133 S.Ct. at 1433. This does not mean, however, that damages must be “susceptible of measurement across the entire class for purposes of
Defendants contend that Plaintiffs cannot satisfy the predominance requirement of
1. Comcast Argument
Comcast was an antitrust suit brought by a class of Comcast subscribers. The plaintiffs initially had four theories of antitrust impact: (1) “Comcast‘s clustering made it profitable for Comcast to withhold local sports programming from its competitors“; (2) “Comcast‘s activities reduced the level of competition from ‘overbuilders’ “; (3) “Comcast reduced the level of ‘benchmark’ competition on which cable customers rely to compare prices“; and (4) “clustering increased Comcast‘s bargaining power relative to content providers.” 133 S.Ct. at 1430-31. Their damages model “did not isolate damages resulting from any one theory of antitrust impact,” id. at 1431, and simply “assumed the validity of all four theories of antitrust impact,” id. at 1434. The district court limited its certification order to the overbuilding theory because it was the only antitrust theory capable of classwide proof, but found the predominance requirement to be satisfied even though the damages model was not altered to reflect the only theory of harm remaining. Id. at 1431. A divided panel of our Court affirmed, Behrend v. Comcast Corp., 655 F.3d 182 (3d Cir. 2011), with Judge Jordan writing separately to say that he “would vacate the certification order to the extent it provides for a single class as to proof of damages,” id. at 209 (Jordan, J., concurring in the judgment in part and dissenting in part), because the model of plaintiffs’ expert “no longer fits Plaintiffs’ sole theory of antitrust impact, and, instead, produces damages calculations that are not the certain result of the wrong,” id. at 217 (internal quotation marks omitted).
The Supreme Court reversed, holding that while the damages model does not need to be exact, “a model purporting to serve as evidence of damages in [a] class action must measure only those damages attributable to that theory. If the model does not even attempt to do that, it cannot possibly establish that damages are susceptible of measurement across the entire class for purposes of
In the case before us, Plaintiffs’ expert, Dr. Leitzinger, created a damages model that calculated the savings to the class if generic entry had occurred earlier. He noted the prices and overcharges actually paid by the class members and compared that to but-for worlds that included the launch of anywhere between one and five generic competitors. Crucially, this model did not allocate damages amongst the five original defendants (Cephalon and the four generic manufacturers), attribute a certain amount of harm from each individual reverse-payment settlement, or identify which class members were harmed by which reverse-payment settlement. In Defendants’ view, because only individual conspiracies remain, any damages model must reflect the harm caused by each individual conspiracy to each individual class member, and the use of the same damages model that envisioned a global conspiracy “does not even attempt,” id. at 1433, to correspond to this remaining theory of liability.28
However, Plaintiffs’ theory of liability is not that each individual agreement caused an individual harm, such that a new damages model would be required under Comcast. Instead, their theory of liability is that each individual agreement contributed to the market-wide harm, and that all five original defendants are jointly and severally liable29 for this harm as concurrent tortfeasors. This theory may ultimately be proven wrong, but it does match Plaintiffs’ damages theory. Defendants next try to argue that Plaintiffs’ theory of liability must isolate the harm from each individual agreement, and that any reliance on joint and several liability conflicts with the requirements of antitrust standing.
2. Antitrust Impact
Defendants argue that Plaintiffs are attempting to circumvent the doctrine of antitrust standing by asserting the theory of joint and several liability. In essence, they are arguing that the joint and several theory of liability is not “plausible in theory,” Hydrogen Peroxide, 552 F.3d at 325, because under the doctrine of antitrust standing Plaintiffs must show how each individual agreement harmed each individual class member.
In an antitrust class action, “impact often is critically important for the purpose of evaluating
Defendants argue that, in the absence of the global conspiracy claim, Plaintiffs must prove which class members suffered an injury under a specific bilateral agreement. They state that under the doctrine of antitrust standing, a class member who would have purchased generic modafinil from Ranbaxy cannot hold Mylan liable; a class member who would have purchased generic modafinil from Mylan cannot hold Ranbaxy liable; and a class member who would have purchased generic modafinil from Teva cannot hold either Ranbaxy or Mylan liable. If correct, such individualized inquiries would defeat predominance, and Plaintiffs’ joint and several liability theory would not be plausible. We agree with the general proposition that an antitrust plaintiff cannot defeat the doctrine of antitrust standing by resort to common-law tort principles untethered to antitrust law. But Defendants’ objection is misplaced in this case because the common law principle of joint and several liability is being invoked by Plaintiffs for the proper purpose of establishing antitrust impact and therefore antitrust standing.
The doctrine of antitrust standing requires a plaintiff to “prove more than injury causally linked to an illegal presence in the market.” Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477, 489, 97 S.Ct. 690, 50 L.Ed.2d 701 (1977).30 This inquiry instead looks to whether the plaintiff suffered an antitrust injury, i.e., an “injury of the type the antitrust laws were intended to prevent and that flows from that which makes defendants’ acts unlawful.” Id. In Associated General Contractors of California, Inc. v. California State Council of Carpenters (AGC), 459 U.S. 519, 537-38, 103 S.Ct. 897, 74 L.Ed.2d 723 (1983), the Supreme Court stated that many factors go into this determination. We have condensed these factors into a multi-part test:
(1) the causal connection between the antitrust violation and the harm to the plaintiff and the intent by the defendant to cause that harm, with neither factor alone conferring standing; (2) whether the plaintiff‘s alleged injury is of the type for which the antitrust laws were intended to provide redress; (3) the directness of the injury, which addresses the concerns that liberal application of standing principles might produce speculative claims; (4) the existence of more direct victims of the alleged antitrust violations; and (5) the potential for duplicative recovery or complex apportionment of damages.
Ethypharm S.A. France v. Abbott Labs., 707 F.3d 223, 232-33 (3d Cir. 2013) (quoting In re Lower Lake Erie Iron Ore Antitrust Litig., 998 F.2d 1144, 1165-66 (3d Cir. 1993)). We have said that the “directness of injury” is “the focal point by which the remainder of the AGC factors are guided.” Lower Lake Erie, 998 F.2d at 1166 n.19 (citing Holmes v. Sec. Investor Prot. Corp., 503 U.S. 258, 269, 112 S.Ct. 1311, 117 L.Ed.2d 532 (1992)).
In reaching this conclusion in Mid-West Paper, we took several factors into consideration. First, we noted that it would be “almost impossible, and at the very least unwieldy” to calculate the harm to the plaintiff from the conspiracy, because so many variables went into the competitor‘s price calculation irrespective of the existence of the monopoly. Id. at 584. The value of any harm caused by the anticompеtitive conduct would be speculative and “would transform this antitrust litigation into the sort of complex economic proceeding” that the direct-purchaser rule32 was adopted in part to prevent. Id. at 585. In addition, the defendants were “not in a direct or immediate relationship” to the plaintiff, and they gained no advantage from the plaintiff‘s injury. Id. at 583. Moreover, there was another group of victims who were more likely to sue the conspiracy members—those who purchased directly from them—and one of the purposes of the antitrust standing doctrine is to “compensate[] those victims who are most likely to assume the mantle of private attorneys general for the injuries that they suffered.” Id. at 585. For that reason, we “concentrate[] the entire award in the hands of the direct purchasers in all but unusual circumstances and thereby giv[e] them an incentive to sue.” Id. If we were to allow the customer of a competitor to sue for treble damages when the “causal link to defendants’ activities is [so] tenuous,” it would “subject antitrust violators to potentially ruinous liabilities, well in excess of their illegally-earned profits, because...[violators] would be held accountable for higher prices that arguably ensued in the entire industry.” Id. at 586.
As is clear from the above description, Defendants’ argument that Mid-West Paper means that a customer of a non-defendant cannot have antitrust standing is an oversimplification. Mid-West Paper reached its result because it wanted to
In fact, in Lower Lake Erie, we addressed market exclusion in the market for the unloading of iron ore from ships. Traditionally, iron ore was shipped across the Great Lakes, unloaded at railroad-owned docks onto a railroad, and then transported to the steel mills. Lower Lake Erie, 998 F.2d at 1153-55. Large cranes called “huletts” were affixed to the docks and were needed to unload the iron ore from the ships, and, because the non-railroad-owned docks were not equipped with huletts, they “were not competitors for this segment of the ore business.” Id. at 1153. A new, less expensive technology was developed that would allow the iron ore to be unloaded without the use of huletts, and thus open the transshipment market to non-railroad-owned docks. Id. The railroad companies suppressed this new technology by threatening non-railroad-owned docks with higher rates, among other measures. Id.
The issue of antitrust standing arose when the steel companies sued the railroad companies for higher rates paid to the vessel companies. Id. at 1167. We held that this injury was sufficiently direct, despite the railroad company‘s reliance on Mid-West Paper. Specifically, we noted that even though the steel companies paid higher rates than it otherwise would have to several ore transportation companies—both defendants and non-defendants—“it was unquestionably the steel companies who bore the brunt of the increased costs attributed to the railroad‘s agreement to thwart development of the less expensive technology.” Id. at 1168; id. (“The steel companies were the sole customers of the industry involved in the transshipment of ore; indeed, the industry existed for them.“). Although there were other victims of the harm, such as the vessel companies, the dock companies, and trucking companies, this did “not diminish the directness of the steel companies’ injury.” Id. at 1168-69.
Unlike in Mid-West Paper, where there was a market for consumer bags and we knew who was buying from whоm, there was no market in this case due to Defendants’ allegedly anticompetitive conduct in delaying the availability of generic modafinil. Just as the railroad docks and their older, more expensive technology were the steel companies’ only choice in Lower Lake Erie, Cephalon‘s brand-name version of modafinil—Provigil—was the only option available to the DPP class. All other options were prevented from entering the
Under Plaintiffs’ theory, each of the four generic manufacturers allegedly entered into separate anticompetitive arrangements with Cephalon.34 If any one of them had refused to enter into this arrangement, there would have been no antitrust injury for anyone, as the market would have worked as envisioned by the
IV.
For the reasons stated above, we will vacate the District Court‘s class certification order, and we will remand to the District Court for further consideration of whether joinder of all class members is impracticable.
RENDELL, Circuit Judge, concurring in part and dissenting in part.
Today, the Majority concludes that the able District Court judge abused his discretion by purportedly focusing on a consideration that we have never—indeed, by my research, no court has ever—stated it should not consider. How can that be? Furthermore, how can it be that the Majority mischaracterizes the late stage of the proceedings as being the focus of Judge Goldberg‘s ruling when his reasoning actually focuses on the considerations that our case law dictates it should? Also how can it be that in analyzing judicial economy district courts are prohibited from considering the stage of the proceedings? I am perplexed. I am similarly per-
The District Court Correctly Applied Rule 23(a)(1)
The text of
Here, the District Court, after making a careful finding that the putative class consisted of 22 members, had to make a close call. Our cases have recognized that “[w]hile there are exceptions, numbers under twenty-one have generally been held to be too few.” Weiss v. York Hosp., 745 F.2d 786, 808 n.35 (3d Cir. 1984) (quoting 3B J. Moore, Moore‘s Federal Practice ¶ 23.05[1], at 23-150 (2d ed. 1982)). This recognition, however, does not stem from any mechanical numerical requirement, but rather from an understanding that the considerations bearing on the practicability of joinder are less likely to be met in classes with fewer than 21 members. See Newberg on Class Actions § 3:11 (“Numerousness—the presence of many class members—provides an obvious situation in which joinder may be impracticable, but it is not the only such situation; thus,
Considering the extensive history of this litigation and the exhaustive discovery that has been conducted, I conclude that judicial economy is best served by trying this case as a class action. Joinder of the absent class members would likely require additional rounds of discovery, which would only further delay a trial date. Further, if cases were brought within other jurisdictions, additional discovery is certainly a possibility, and separate trials could result in inconsistent verdicts.
JA-021. The reasons cited for finding judicial economy to favor certification of the class are entirely appropriate. “Judicial economy” means “[e]fficiency in the operation of the courts and the judicial system; esp., the efficient management of litigation so as to minimize duplication of effort and to avoid wasting the judiciary‘s time and resources.” Judicial Economy, Black‘s Law Dictionary (9th ed. 2009). The District Court here noted that the additional discovery and potential separate trials would further delay litigation that was already near its end stages, wasting the judiciary‘s time and resources and requiring the duplication of efforts.
The District Court next considered the geographic dispersion of the class members, a factor widely recognized as vital in determining whether joinder is practicable. See, e.g., Pa. Pub. Sch. Emps. Ret. Sys. v. Morgan Stanley & Co., 772 F.3d 111, 120 (2d Cir. 2014) (listing “geographic dispersion” as a factor in the numerosity analysis); Newberg on Class Actions § 3:12 (same); 7A Charles Allen Wright & Arthur R. Miller, Federal Practice & Procedure § 1762 (3d ed.) (same); 1 Moore‘s Federal Practice § 23.22 (Matthew Bender 3d ed.) (same). The District Court found this factor to weigh heavily in favor of finding joinder impracticable, noting that the “class members are spread out over thirteen states and Puerto Rico.” JA-021. This, the District Court found, “would certainly present challenges to Plaintiffs in attempting to coordinate the litigation if all class members were joined, particularly if additional discovery was required.” JA-021. Again, this finding is certainly reasonable, is supported by the record, and is in accordance with our instructions as to the relevant considerations in the numerosity calculation.
Against these concerns about judicial economy and, in particular, geographic dispersion, the District Court considered that many of the class members were sophisticated corporations with strong incentives to bring their own lawsuits. But this was not true for every class member, as six had claims below $1 million which might not be enough incentive “to engage in costly antitrust litigation on their own.” JA-022. This wholly appropriate consideration bears upon the objective to provide “greater access to judicial relief, particularly for those persons with claims that would be uneconomical to litigate individually.” Marcus, 687 F.3d at 594.
Ultimately, the District Court found the factors favoring the plaintiffs’ position (judicial economy and geographic dispersion) to be more compelling than the factor favoring the defendants’ position (the financial resources of the class members). In short, the District Court considered the policies we outlined in Marcus and made a thoughtful determination in a close case. Our abuse-of-discretion standard compels us to affirm that thoughtful determination. Moreover, our clearly erroneous standard compels us to not disturb the factual findings on which it was based.
The Majority, however, concludes that the District Court erred in its analysis of the “judicial economy” factor by taking into consideration the stage of the proceedings. As an initial note, I do not read the District Court‘s analysis as turning solely upon a consideration of the late stage of the proceedings. Rather, the District Court examined many factors, most notably the additional discovery and judicial resources that would have to be expended were the cases to be litigated outside of the class action mechanism, regardless of how far advanced the classwide proceedings were.
At any rate, it is appropriate—indeed, necessary—for a district court to consider the stage of the proceedings when examining whether judicial economy favors class litigation or individual litigation. In considering judicial economy, a district judge must predict how the options before him will play out. This prediction becomes nonsensical, however, if the district judge cannot take into consideration the amount of effort already expended. If you want to determine whether the path you are following is the most economical, is it not important to consider how far along that path you have already traveled?3
Unsurprisingly, then, courts widely—if not universally—recognize that it is appropriate for courts to consider the stage of the proceedings when weighing judicial economy. See, e.g., Carnegie-Mellon Univ. v. Cohill, 484 U.S. 343, 350, 108 S.Ct. 614, 98 L.Ed.2d 720 (1988) (“[A] federal court should consider and weigh in each case, and at every stage of the litigation, the values of judicial economy, convenience, fairness, and comity in order to decide whether to exercise jurisdiction over a case brought in that court involving pendent state-law claims.” (emphasis added)); Zambelli Fireworks Mfg. Co. v. Wood, 592 F.3d 412, 420-21 (3d Cir. 2010) (“However, considerations of efficiency, fairness, and judicial economy weigh against a wholesale dismissal of the action at this stage.” (emphasis added)); Parker & Parsley Petroleum Co. v. Dresser Indus., 972 F.2d 580, 587 (5th Cir. 1992) (“At the stage of the proceedings when the motion was filed, judicial economy would have been better served by dismissal.” (emphasis added)); Park S. Hotel Corp. v. N.Y. Hotel Trades Council, 851 F.2d 578, 582 (2d Cir. 1988) (“[J]udicial economy would not be served by remanding the case at this late stage for arbitration, which almost certainly would be followed by further judicial proceedings.” (emphasis added)); United States v. Timmons, 672 F.2d 1373, 1380 (11th Cir. 1982) (“The district judge appropriately considered that joinder would not serve the interests of judicial economy in view of the late stage of the proceedings....” (emphasis added)).
The Majority asserts, however, without citation to any authority, that a district court cannot consider “the fact that the complex nature of a case resulted in the class certification decision being deferred for years,” see Majority Op. 255, or “the need to further delay trial were the class
The District Court Properly Considered the Ability of Plaintiffs to Litigate via Joinder
The Majority also characterizes the District Court‘s ruling as focusing not on the ability of the plaintiffs to litigate via joinder but “focus[ing] instead on whether the individual plaintiffs could have brought their own, individual suits.” See Majority Op. 258. I disagree. To the contrary, the focus of the District Court‘s opinion is on joinder throughout.5 See, e.g., JA-020-22 (“Joinder of the absent class members would likely require additional rounds of discovery, which would only further delay a trial date.“); (“The considerable geographic dispersion of the parties would certainly present challenges to plaintiffs in attempting to coordinate the litigation if all class members were joined, particularly if additional discovery was required.” (emphasis added)); (“Accordingly, Plaintiffs have demonstrated by a preponderance of the evidence that the parties are sufficiently numerous so as to make joinder impracticable.“).
The Majority makes its own contrary finding, surmising that the class members “appear likely to have the ability and incentive to bring suit as joined parties.” See
Moreover, if one were to speculate as to the likelihood of these plaintiffs, many competitors in a relatively small market, agreeing to come together—for surely they couldn‘t be forced to do so—the speculation would be to the contrary. Experience would dictate that many obvious practical reasons stand in thе way of joinder: desire to have one‘s self and own law firm control the litigation, choice of favorable forum, familiarity with the local jurisdiction‘s laws and procedures, fear of being dragged into settlement, and concerns about the costs of litigating in a far-flung locale. Further, the larger plaintiffs could clearly afford to go their own way. Even in cases that come before the Judicial Panel on Multidistrict Litigation for joinder, where the issue involves only pre-trial proceedings, plaintiffs invariably raise reasons for opposing joinder.9 How can we possibly assume that the plaintiffs would have the “ability and incentive” to bring suit as joined parties? If the defendants had supported such a notion, that would be another matter. But the Majority asks the District Court to make its own record as to practicability. That is not our role, nor the role of the District Court.
***
Lastly, I am struck by the inescapable fact that this case has proceeded as a class action for years and nothing about it cries
This should not happen because Judge Goldberg has ably managed this case for a decade and properly considered every factor we have ever held to be relevant in determining whether a class is so numerous that joinder would be impracticable. He has not abused his discretion in so doing or made clearly erroneous findings of fact. I would therefore affirm the judgment of the District Court in its entirety. Accordingly, I respectfully dissent from Part III.A of the Majority‘s opinion.
Harold M. HOFFMAN, individually and on behalf of those similarly situated, Appellant
v.
NORDIC NATURALS, INC.
No. 15-1362
United States Court of Appeals, Third Circuit.
Submitted Under Third Circuit L.A.R. 34.1(a) February 9, 2016
(Filed: September 14, 2016)