Lead Opinion
OPINION
“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 and Co.,
When thinking of a class action brought under Rule 23(b)(3), we typically think of a large aggregation of individuals (hundreds or even thousands), each with small claims. This case is quite different from that. Here, we are faced with a putative class of twenty-two large and sophisticated corporations, most of which have multi-million dollar claims, who wish to take advantage of the class action device. While we do not foreclose the possibility of class status in this case, or where the putative class is of similar composition, Plaintiffs have not met their burden of showing that the nu-merosity requirement of Rule 23(a)(1) has been satisfied. We now provide a framework for district courts to apply when conducting their numerosity analyses, and we will remand to the District Court to allow such an analysis in this case.
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,
(I) that such patent information has not been filed,
(II) that such patent has expired,-
(III) of the date on which such patent will expire, or
(IV) that such patent is invalid or will not be infringed by the manufacture, use, or sale 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.
'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,
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. 21 U.S.C. § 355(j)(5)(B)(iv). This means that during this exclusivity period, “no other generic can compete with the brand-name drug,” Actavis,
B. Facts
In April 1997, the United States Patent and Trademark Office issued U.S. Patent No. 5,618,845 (“the '845 patent”) to Cephal-on, Inc. (“Cephalon”), a pharmaceutical company. The '845 patent claimed a specific particle-size distribution of modafinil, a wakefulness-promoting agеnt 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.
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,
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 15 U.S.C. § 1; four separate conspiracies between Ce-phalon and each generic defendant under the same statute; and a monopolization claim against Cephalon under 15 U.S.C. § 2. The DPP class is made up of wholesalers who purchased Provigil directly from Cephalon.
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 Rule 23(a)(1) and its predominance analysis under Rule 23(b)(3).
The District Court next considered whether joinder of these twenty-two class members was impracticable such that class certification was appropriate under Rule 23(a)(1). While the District Court acknowledged' that a class of twenty-two members was small compared to most class actions, the District Court found persuasive several district court cases in the reverse-payment settlement context with similarly-situated classes where the numerosity requirement was found to be satisfied. Id. at 204 (collecting cases)
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,
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 jurisdictiоns instead of seeking to be joined in the suit before him.- Id. at 207 (“Further, if cases were brought within other jurisdictions, 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 Rule 23(b)(3). Id. at 209. Defendants argued that the damages model of Plaintiffs’ expert, Dr. Leitzinger, no longer matched Plaintiffs’ theory of liability because it did not isolate the harm caused by each individual reverse-payment settlement. Defendants claimed that this mismatch is analogous to the problem at issue in the Supreme Court’s decision in Comcast Corp. v. Behrend, — U.S. -,
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,
(1) the class must be “so numerous that joinder of all members is impracticable” (numerosity); (2) there must be “questions of law or fact common to the class” (commonality); (3) “the claims or defenses of the representative parties” must be “typical of the claims or defenses of the class” - (typicality); and (4) the named plaintiffs ihust “fairly and adequately protect the interests of the class” (adequacy of representation, or simply adequacy).
In re Cmty. Bank of N. Va.,
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 Rule 23
Thus, while a district court “possesses broad discretion to control proceedings and frame issues for consideration under Rule 23,” such discretion “does not soften the rule [that] a class may not be certified without a finding that each Rule 23 requirement is met.” Hydrogen Peroxide, 5
“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,
A. Numerosity
Rule 23(a)(1) sets forth what is commonly known as the numerosity requirement. The text is, however, conspicuously devoid of any numerical minimum required for class certification. Instead, the rule, simply states that the numerosity requirement is satisfied when “the class is so numerous that joinder of all members is impracticable.” Fed R. Civ. P. 23(a)(1). “Impracticable does not- mean impossible,” Robidoux v. Celani,
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 Cоurt’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 numer-osity 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 twenty-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.
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 Rule 23(a)(1) says nothing about the number of claims; instead, it refers to the number of class members. Fed. R. Civ. P. 23(a)(1) (requiring an inquiry into whether “the class is so numerous that joinder of all members is impracticable” (emphasis added)).
Moreover, as the District Court recognized, there is persuasive cirсuit precedent establishing that partial assignees are appropriately considered to be members of a class. In In re Fine Paper Litigation,
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 lаwsuit, 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.
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 longer 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, Rule 23(a)(1) creates greater access to judicial relief,' particularly for those persons with claims that would be uneconomical to litigate individually. Finally, the rule prevents putative class representatives and their counsel, when join-der can be easily accomplished, from unnecessarily depriving members of a small class of their right to a day in court to adjudicate their own claims.
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 Rule 23(a)(1) refers to whether “the class is so numerous that joinder of all members is impracticable,”
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 Rule 23(a)(1) and class actions in general. Marcus,
a. Mdicial Economy
Judicial economy, a primary factor frequently cited, looks to the administrative burden that multiple or aggregate claims place upon the courts. Marcus,
Here, the District Court “conclude[d] that judicial economy [was] best served by trying this case as a class action.” King Drug Co.,
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 Rule 23(c)(1)(A) which state that the class certification decision should be made “a[t] an early practicable time after a person sues or is sued as a clаss representative” as opposed to the previous rule which said that the decision be made “as soon as practicable after commencement of an action.” See Fed. R. Civ. P. 23 advisory committee’s notes to 2003 amendment (noting that the “as soon as practicable” designation does not “capture[ ] the many valid reasons that mayjufetify deferring the initial certification decision”). We have recognized that the rule was modified in order to discourage “premature certification determinations.” Richardson v. Bledsoe,
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.” Fed. R. Civ. P. 23 advisory committee’s notes to 2003 amendment. Thus, while Rule 23(c)(1)(A) now encourages further discovery so that all of the information, and evidence relevant to certification is before a district judge before she makes the certi
Moreover, while the District Court expressed concern that “[j]oinder of the absent class members would likely require additional rounds of discovery,” King Drug,
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.
b. Ability and Motivation to be Joined as Plaintiffs
The second purpose behind the numer-osity 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,
This primarily
The District Court abused its discretion in analyzing the two most important nu-merosity 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 roadblocks that do not exist.” Although the dissent suggests that Defendants have not yet shown why join-der is practicable, that suggestion is beside the point.' The burden is on Plaintiffs to show why joinder is impracticable. Marcus,
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,
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, — U.S. -,
Under Rule 23(b)(3), “questions of law or fact common to class members [must] predominate over any questions affecting only individual members.”
The predominance requirement applies to damages as well, because the efficiencies of the class action mechanism would be negated if “[questions of individual damage calculations ... overwhelm questions common to the class.” Comcast,
Defendants contend that Plaintiffs cannot satisfy the predominance requirement of Rule 23(b)(3). They make two interrelated arguments: (1) Plaintiffs’ theory of liability runs afoul of Comcast because, after the grant of summary judg
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.”
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 Rule 23(b)(3).” Comcast,
In the cáse' 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 рrices 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.
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 Com-cast. 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 liable
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,
In an antitrust class action, “impact 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.” Id. at 311. A district court must thus undertake a “rigorous assessment of the available evidence and the method or methods by which plaintiffs propose to use the evidence to prove impact at trial.” Id. at 312. The class should only be certified
Defendants argue that, in the absence of the global conspiracy claim, Plaintiffs must prove which class members suffered ah injury under a specific bilateral agreement. They state that under the doctrine of antitrust standing, á 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 Ran-baxy 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.,
(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 plaintiffs 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 dupli-cative recovery or complex apportionment of damages. ,
Ethypharm S.A. France v. Abbott Labs.,
Defendants rely solely on a pre-AGC case of ours, Mid-West Paper Products Co. v. Continental Group, Inc.,
In reaching this conclusion in Mid-West Paper, we took several factors into consideration. First, we rioted 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 anticom-petitive conduct would be speculative and “would transform this antitrust litigation into the sort of complex еconomic proceeding” that the direct-purchaser rule
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,
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 modafi-nil. 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.
iy.
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.
Notes
. This exclusivity period is granted via the Hatch-Waxman Act, and has nothing to do with whether the drug is covered by a patent.
. It is a common practice for a brand manufacturer to market its own generic version of . the drug when generic entiy occurs, Unlike . an ANDA filer, the brand manufacturer is not barred from entering the generic market during the 180-day exclusivity period to which the Erst paragraph IV filer is entitled. See Teva Pharm. Indus. Ltd. v. Crawford, 410 F,3d 51, 54 (D.C. Cir. 2005) (holding that 21 U.S.C. § 355(j)(5)(B)(iv) did not prevent the filer of the original NDA from launching its own generic during the 180-day exclusivity period).
. An orphan drug is used to treat a rare disease or ailment. Because pharmaceutical companies may lack the financial incentive to
. In a reverse-payment settlement, "a party with no claim for damages (something that is usually true of a paragraph IV litigation defendant) walks away with money simply so that it will stay away from the patentee’s market.” F.T.C. v. Actavis, Inc. -U.S. -,
. Generic manufacturer Apotex Inc. nonetheless filed a declaratory judgment action in the Eastern District of Pennsylvania in June 2006 alleging non-infringement, invalidity, and un-enforceability of the '516 patent. Apotex Inc. v. Cephalon, Inc., No. 2:06-cv-2768,
. Other parties challenging the reverse-payment settlement agreements are a putative class of end-payors, generic competitor Apo-tex Inc., several retail plaintiffs, and the F.T.C., which originally filed suit in the District Court for the District of Colombia before being transferred to Judge Goldberg’s docket. The FTC sued only Cephalon. Teva purchased Cephalon on October 14, 2011, and on May 18, 2015, the F.T.C. settled with Teva for $1.2 billion. The remaining suits are consolidated for purposes of liability, and they have all been stayed pending our ruling on the DPP class certification issue.
. Despite this conclusion, we recognize the thoughtful work of. the District Court, which was diligently done even though there is a paucity of precedent on the, numerosity issue.
. Defendants raised two other challenges to the size of the class before the District Court and in a cursory manner on appeal. They argue (1) that named plaintiff King Drug Company of Florence; Inc. ("King Drug”) should not be included in the class because it
. Nearly identical language is found in the Second Restatement of Contracts, which was pending approval at the time of In re Fine Paper Litigation. Restatement (Second) of Contracts § 326 ("[A]n assignment of a part of a right ... is operative as to that part to the same extent and in the same manner as if the part had been a separate right.'').
. Although normally "Rule 23(a)(1) does not require a plaintiff to offer direct evidence of the exact number.and identities of the class members,” Marcus v. BMW of N.A., LLC,
. The superiority analysis required under Rule 23(b)(3) similarly calls for an inquiry into judicial economy and places great weight on whether the individual members can bring their own claims. However, superiority, unlike numerosity, considers alternatives to class actions other than joinder. See Fed. R. Civ. P. 23(b)(3) (requiring an inquiry into whether "a class action is superior to other available methods for fairly and efficiently adjudicating the controversy”); In re Warfarin Sodium Antitrust Litig.,
. The third purpose behind class actions mentioned in Marcus, the due process concern of protecting the ability of individual members to bring their own claims, Marcus,
. The dissent does not "read the District Court’s analysis [of the judicial economy factor] as turning upon a consideration of the late stage of the proceeding.” However, this analysis consisted of three sentences in a single paragraph, each of which focused on the late stage of the proceeding. King Drug Co. of Florence, Inc. v. Cephalon, Inc.,
.The dissent cites several, cases that it claims "recognize that it is appropriate for courts to consider the stage of the proceedings when weighing judicial economy.” None of these cases are class actions though, which we again emphasize are the "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,
. Weiss was abrogated on other grounds by Campbell-Ewald Co. v. Gomez, — U.S. —,
. The District Court also considered the effects on judicial economy if individual suits in separate jurisdictions would be filed absent class certification. However, the text of Rule 23(a)(1) envisions only two scenarios: joinder of all class members or a class action. Fed R. Civ. P. 23(a)(1) (inquiring whether “joinder of all members is impracticable”). The possibility of individual suits filed in separate jurisdictions is not a consideration that a district court should entertain in deciding numerosity vel non.
. In the District Court, Defendants never asked for discovery from unnamed class members. Defendants claim that a request for discovery of unnamed class members would have been futile because it is highly circumscribed. However, the citations that they provide in support of this view make clear that this is merely a heightened standard, and if they could show a need for discovery from unnamed class members the District Court would allow it. See 5 Moore's Federal Practice § 33,20 (“Reasonable discovery ... should be permitted from unnamed class members when the special circumstances of the case justify it,"); Clark v. Universal Builders, Inc,,
.The dissent suggests that we proclaim this rule “without any citation to authority.” Of course, our dissenting colleague fails to pro.vide any citation to authority to support a contrary rule.. In fact, the only authorities that we can find to support the dissent’s position are the District Court’s opinion in this case, and another district court opinion from the Eastern" District of Pennsylvania upon which the District Court here relied, In re Wellbutrin XL Antitrust Litig., No. 08-2431,
. We read Marcus's language about the ability "to litigate individually,” Marcus,
. Other considerations may be relevant to a district court in determining class members’ ability and motivation to be joined as named plaintiffs. For example, the District Court here recognized that a fear of. retaliation may hinder the ability and motivation of a party to appear as a named plaintiff. In this case, the District Court noted that there was no proof of any fear of retaliation, and we do not disturb that factual finding on appeal, King Drug Co. of Florence, Inc. v. Cephalon, Inc.,
., A negative value claim is a ”claim[] that could not be brought on an individual basis because the transaction costs of bringing an individual action exceed the potential relief.” In re Baby Prods. Antitrust Litig.,
. While discovery from joined parties is not subject to the heightened discovery standard of unnamed class members, even in a non-class action a district court has the discretion to limit unnecessary discovery pursuant to Rule 26(b)(C).
. The dissent contends that we misread the District Court’s analysis, and argues that "the focus of the District Court’s opinion is on joinder throughout.” Yet every reference to joinder that the dissent cites comes from portions of the District Court opinion that were not about the ability of the plaintiffs to litigate via joinder. Instead, these references are: "[¡joinder of the absent class members would likely require additional rounds of discovery,” which appears in the judicial economy section; "[tjhe considerable geographic dispersion of the parties would certainly present challenges to plaintiffs in attempting to coordinate the litigation if all class members were joined,” which obviously is in the geographic dispersion section; and "Plaintiffs have demonstrated by a preponderance of the evidence that the parties are sufficiently numerous so as to make joinder impracticable,” which is in the conclusion of the numerosity analysis. Even a cursory look at the section on the ability and incentive of the class members to litigate reveals that the District Court was focused on the alternative of individual suits, not on joinder. See King Drug,
. Most of the dissent’s possible reasons why the class members would not be likely to join as named plaintiffs — "desire to have one’s self and own law firm control the litigation, choice of favorable forum, familiarity with the local jurisdictions laws and procedures, [and] fear of being dragged into settlement” — are equally applicable to the decision of whether to opt out of the class. See Phillips Petroleum Co. v. Shutts,
. The dissent makes the argument that if the class were not certified, then several individual judges would have to address what it terms “the real issues before the Court.” Yet the only other issue before the Court is the Com-cast predominance issue, If the class were not certified because of a failure to satisfy the numerosity requirement, there would be no Comcast argument, as predominance is a question that arises only in the class action context. Additionally, the fact that there is a "key issue" that the parties seek to litigate does not justify class status.
. Rule 23(b)(3) also states that "a class action [must be] superior to other available methods for fairly and efficiently adjudicating the controversy.” This second requirement— superiority — is not' at issue in this appeal.
. Plaintiffs argue that we should exercise our pendent appellate jurisdiction and review the District Court’s grant of summary judgment on the global antitrust conspiracy claim because reversal on this claim would moot the Comcast issue. The use of the pendent appellate jurisdiction doctrine "is an exercise of discretion by a Court of Appeals and should be used sparingly." United States v. Spears,
. Defendants have not challenged the substance of Dr. Leitzinger’s methodology.
. Under the doctrine of joint and several liability, "[i]f the tortious conduct of each of two or more persons is a legal cause of harm that cannot be apportioned, each is subject to liability for' the entire harm, irrespective of whether their conduct is concurring or consecutive,” Restatement (Second) of Torts § 879 (1979); United States v. Alcan Aluminum Corp.,
. Antitrust standing, unlike Article III standing, is not a jurisdictional requirement. Associated Gen. Contractors of Cal. Inc. v. Cal. State Council of Carpenters,
. Because the parties only dispute the relevance of Mid-West Paper and the “directness” factor, and we reject Defendants’ understanding of Mid-West Paper, we will not analyze the other factors of antitrust standing.
, The direct-purchaser rule states that only immediate customers of a supplier have antitrust standing to sue for damages as customers even if the direct purchaser passes the entirety of the higher price down the supply chain. Illinois Brick Co. v. Illinois,
. Preventing a market from forming differs from an attempt to suppress competition in an established market. See Blue Shield of Va. v. McCready,
. Defendants argue that either Teva — as the first company to settle with Cephalon — or Barr — as the last to do so — caused all of the injury, and that Mylan or Ranbaxy cannot be held liable. While we have delved deep into the merits in order to opine on the predominance question, this argument by Defendants is inappropriate at the class certification stage. It has nothing to do with whether common questions of law and fact predominate, and instead goes to the issue of liability. See Tyson Foods, Inc. v. Bouaphakeo, — U.S. -,
Concurrence Opinion
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. Hоw 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 Rule 23(a)(1) provides the standard by which a district court determines if a putative class is numerous enough to be certified — the district court must determine if “joinder of all members is impracticable.” See also Newberg on Class Actions § 3:11 (5th ed.) (“[Rule 23(a)(1)’s] core requirement is that joinder be impracticable.”). Because the focus of Rule 23(a)(1) is on the practicability of joinder, it is well-established that “[t]he numerosity requirement requires examination of the specific facts of' each case and imposes no absolute limitations.” Gen. Tel. Co. of the Nw. v. EEOC,
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 “[wjhile there are exceptions, numbers under twenty-one have generally been held to be too few.” Weiss v. York Hosp.,
The District Court first considered whether judicial economy weighs in favor of finding joinder to be impracticable:
Considering the extensive history of this litigation and the exhaustive discovery that has been conducted, I conclude that judicial economy ⅛ 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 “[ejfficiency 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 thаt 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.,
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,
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.
The District Court Did Not Err in Considering the Stage of the Proceedings
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 class-wide 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?
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,
The Majority asserts, however, without citation to any authority, that a district court cannot consider “the fact that the complex nature of a case respited 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 join-der 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.
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 the 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,
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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 hás 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.
. As the Majority notes, the third underpinning, to “prevent!] putative class representatives and their counsel, when joinder can be easily accomplished, from unnecessarily depriving members of a small class of their right to a day in court to adjudicate their own claims,” id. is not relevant to 23(b)(3) actions. See Majority Op. 254 n.12.
. ' The Majority, asserts that the factors we should consider have not been previously set forth. But Marcus's recitation of the policies that animate numerosity provides a helpful standard from which the factors to consider are readily discernible. .
. The Majority’s references to "sunk costs” are inapt. See Majority Op. 255, 256, 256. Sunk costs are costs that have already incurred and cannot be recovered. See Verizon Commc’ns, Inc. v. FCC,
. The Majority instructs district courts to consider whether, in a hypothetical world, join-der would have been more efficient than the class mechanism. Cf. Majority Op. 257 ("In other words, without considering the late stage of the litigation, it should determine whether a class action would have been a substantially more efficient mechanism of litigating this suit than joinder of all parties.... At the same time, the District Court is free to rely on its superior understanding of how the case has proceeded to date for the purpose of determining whether the class mechanism would have actually been a substantially more efficient use of judicial resources than joinder of the parties at the onset of the litigation.”).
. The Majority, citing references to "individual suits” in the District Court's opinion, posits that "[e]ven a cursory look at the section on the ability and incentive of the class members to litigate reveals that the District Court was focused on the alternative of individual suits, not on joinder.” See Majority Op. 258 n.23. But the two concepts are not exclusive of each other, as the Majority itself recognizes in footnote 19, when it "read[s] Marcus's language about the ability 'to litigate individually,’ to refer to each plaintiff appearing on the record as a joined party, and not whether each individual plaintiff can litigate his or her own claim as the sole plaintiff.” See Majority Op. 257 n.19 (citation omitted). Litigation not pursued on a classwide basis is individual litigation, even if pursued via joinder, and the parties joined in a proceeding remain responsible for the individual litigation of their claims. See 7 Wright & Miller, supra, § 1652 ("Consequently, rights that are separate and distinct under the governing law are not transformed into joint rights when plaintiffs join under Rule 20 in a federal court action; each plaintiff's right of action remains distinct, as if it had been brought separately.”).
. This assertion stems from the defendants’ argument that “[e]ach of the 16 absent class .members has the ability and the financial .incentive to file its own claim.” See Appellants’ Br. 45. The Majority adopts this speculation as fact, but it is mere argument and speculation.
. An audio recording of the oral argument is available online at http://www2.ca3.uscourts. gov/oralargument/audio/15-3475InRe Modafinil.mp3
. This case would not be appropriate for an MDL as it is ready for trial and pre-trial proceedings are largely completed. •
. See, e.g., In re: Sci. Drilling Int'l, Inc., FLSA Litig.,
. The Majority contends that this is no "run-of-the-mill class action” given the top-heavy distribution of the claims among the class members. See Majority Op, 259-60. But whether the class looks like other classes is not controlling as to whether the requirements of Rule 23 have been met. Rule 23 was "designed to allow an exception to the usual rule that litigation is conducted by and on behalf of the individual named parties only.” Califano,