In re: ZETIA (EZETIMIBE) ANTITRUST LITIGATION. FWK HOLDINGS, LLC; CESAR CASTILLO, INC., individually and on behalf of all those similarly situated; ROCHESTER DRUG COOPERATIVE, INC. v. MERCK & COMPANY, INC.; MERCK SHARP & DOHME CORPORATION; SCHERING PLOUGH CORPORATION; SCHERING CORPORATION; MSP SINGAPORE CO. LLC; GLENMARK PHARMACEUTICALS, LTD.; GLENMARK GENERICS INC., USA
No. 20-2184
United States Court of Appeals for the Fourth Circuit
August 4, 2021
NIEMEYER, FLOYD, and RUSHING, Circuit Judges.
PUBLISHED. Argued: May 6, 2021. Vacated and remanded by published opinion. Judge Floyd wrote the opinion, in which Judge Niemeyer and Judge Rushing joined. Judge Niemeyer wrote a separate concurring opinion.
UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT
No. 20-2184
In re: ZETIA (EZETIMIBE) ANTITRUST LITIGATION.
FWK HOLDINGS, LLC; CESAR CASTILLO, INC., individually and on behalf of all those similarly situated; ROCHESTER DRUG COOPERATIVE, INC., Plaintiffs - Appellees, v. MERCK & COMPANY, INC.; MERCK SHARP & DOHME CORPORATION; SCHERING PLOUGH CORPORATION; SCHERING CORPORATION; MSP SINGAPORE CO. LLC; GLENMARK PHARMACEUTICALS, LTD.; GLENMARK GENERICS INC., USA, Defendants - Appellants.
Appeal from the United States District Court for the Eastern District of Virginia, at Norfolk. Rebecca Beach Smith, Senior District Judge. (2:18-md-02836-RBS-DEM)
Argued: May 6, 2021 Decided: August 4, 2021
Before NIEMEYER, FLOYD, and RUSHING, Circuit Judges.
Vacated and remanded by published opinion. Judge Floyd wrote the opinion, in which Judge Niemeyer and Judge Rushing joined. Judge Niemeyer wrote a separate concurring opinion.
A group of pharmaceutical buyers brought this class action against two manufacturers who allegedly reached an anticompetitive settlement in a patent dispute. Defendants-Appellants Merck1 and Glenmark2 challenge the district court‘s class certification order. Plaintiffs-Appellees are a class of direct purchasers of Merck‘s brand-name drug and Glenmark‘s generic version of that drug. The district court determined that the putative class of thirty-five purchasers satisfied the class certification requirements set forth in
I.
In the 1980s, Merck began developing a cholesterol-lowering drug. Eventually, Merck invented ezetimibe, patented and marketed under the name Zetia. Merck‘s patent was exclusive through April 2017, meaning that Merck had the exclusive right to develop ezetimibe through that date. In 2006, Glenmark sought FDA approval to market a generic version of Zetia, claiming that Merck‘s Zetia patent was “invalid or w[ould] not be infringed by the manufacture, use, or sale of” Glenmark‘s generic. See
Plaintiffs, on behalf of a small group of drug wholesalers that purchased Zetia directly from Merck, sued Merck and Glenmark under federal antitrust law, alleging that the two companies conspired to inflate the drug‘s price. Plaintiffs’ case drew parallels to the Supreme Court‘s decision in FTC v. Actavis, Inc., 570 U.S. 136 (2013), which concerned the anticompetitive settlement of a patent case. In Actavis, a brand-name manufacturer sued generic manufacturers for patent infringement. Under the parties’ settlement agreement, the brand-name manufacturer agreed to a reverse payment in which it agreed to pay the generic manufacturers between $240 and $342 million to delay the launch of their generic products. Id. at 144-45. The FTC then sued both parties, alleging that the reverse payment was anticompetitive and therefore in violation of federal antitrust law. Id. at 145. The Supreme Court agreed, holding that a “large and unjustified” reverse payment made “in return for staying out of the market” may give rise to antitrust liability. Id. at 154, 158.
In this case, Plaintiffs allege that Merck made a “reverse payment” by giving up its right to sell a generic version of ezetimibe for the six-month period after Glenmark
Here, Merck chose to discount its branded drug rather than launch an authorized generic. Based on that decision, Plaintiffs allege that Merck must have agreed not to launch any authorized generic in exchange for ending the patent litigation between Merck and Glenmark. According to Plaintiffs, this agreement constitutes an anticompetitive “reverse payment.” Without such an agreement, Merck and Glenmark would have settled the case by allowing Glenmark to launch its generic at least two years earlier than it actually did in December 2016. Had Glenmark‘s less expensive generic been available for those two years, the class would have spent billions less acquiring the generic ezetimibe instead of Merck‘s brand-name version.
Three entities sought to represent a class of all direct Zetia purchasers: FWK Holdings, LLC (FWK), Rochester Drug Co-Operative, Inc. (Rochester), and César Castillo, Inc. (Castillo). The thirty-two absent class members are all sophisticated companies with purportedly large claims, including the “Big Three” wholesalers—
Plaintiffs moved for class certification in November 2019. Merck and Glenmark opposed the motion, contending that the proposed class did not satisfy the requirements of
II.
“We review a district court‘s decision to certify a class for abuse of discretion.” EQT Prod. Co. v. Adair, 764 F.3d 347, 357 (4th Cir. 2014). But “[a] district court per se abuses its discretion when it makes an error of law.” Thorn v. Jefferson-Pilot Life Ins. Co., 445 F.3d 311, 317 (4th Cir. 2006).
III.
Before any class may be certified,
- the class is so numerous that joinder of all members is impracticable;
- there are questions of law or fact common to the class;
- the claims or defenses of the representative parties are typical of the claims or defenses of the class; and
- the representative parties will fairly and adequately protect the interests of the class.
A.
We commend the magistrate judge and district court for their careful and thorough adjudication of the class certification motion. But for the reasons explained below, we are compelled to conclude that the court rested its numerosity analysis on faulty logic.
For starters, the district court appears to have based its numerosity determination on its reasoning that “multiple individual trials” would result if the case proceeded without class status. See J.A. 1085 (emphasis added). But “the text of Rule 23(a)(1) refers to whether ‘the class is so numerous that joinder of all members is impracticable,’ not whether the class is so numerous that failing to certify presents the risk of many separate lawsuits.” Modafinil, 837 F.3d at 253. The district court‘s numerosity analysis ran afoul of this important principle in two critical ways.
When analyzing the judicial-economy factor on remand, the district court should consider whether judicial economy favors either a class action or joinder. See Modafinil, 837 F.3d at 254 (noting that the judicial-economy factor involves weighing “‘the actual, practical difficulties of joining all of the potential class members’ by inquiring whether joinder ‘would be expensive, time-consuming, and logistically unfeasible‘” (emphasis added) (quoting 5 Moore‘s Federal Practice § 23.22)). Otherwise, the judicial-economy
Second, in analyzing the class members’ ability and motivation to litigate, the district court again focused its analysis on the economics of individual suits. See J.A. 1920 (agreeing with the magistrate judge that the motivation factor favored certification, in part, given ”evidence from other cases regarding class members’ motivation to pursue claims on their own” (emphasis added)).6 In considering the feasibility of pursing individual claims, the magistrate judge and district court seem to acknowledge yet adopt Plaintiffs’ “assum[ption], without any evidence, that absent a class action, the[ ] smaller claimants would sue individually and thus bear the entire cost of litigation.” J.A. 1089. This misconstrues the standard. Indeed, “there has been no showing that it would be
To be sure, we give “district courts considerable discretion in making numerosity determinations.” Id. at 249. But district courts must provide a “rigorous analysis” to allow for meaningful appellate review on the numerosity factor. Gen. Tel. Co. of Sw. v. Falcon, 457 U.S. 147, 161 (1982). And that “rigorous analysis” must be premised on a correct understanding of
Merck and Glenmark raise two additional arguments related to class certification, which we can quickly resolve.
1.
First, Merck and Glenmark challenge the district court‘s adequacy determination, arguing that none of the named plaintiffs can adequately represent the class. We see no abuse of discretion here. We recognize that class counsel “is largely responsible for [named plaintiff] FWK‘s formation.” J.A. 1103. But the district court found “no evidence in this case that either FWK or [its owner] have any current or prospective financial dealings with any of class counsel.” J.A. 1106, 1925. The court did not abuse its discretion in finding that “the record in this case satisfactorily demonstrates FWK‘s adequacy to serve as class representative.” J.A. 1105, 1925.
We also find no abuse of discretion in the decision that named plaintiff Rochester, despite its current Chapter 11 bankruptcy proceedings, still “share[s] common objectives and the same factual and legal positions” as other class members. Ward v. Dixie Nat‘l Life Ins. Co., 595 F.3d 164, 180 (4th Cir. 2010) (quoting Gunnells v. Healthplan Servs., Inc., 348 F.3d 417, 430-31 (4th Cir. 2003)). Indeed, Rochester‘s bankruptcy status gives it a “strong interest” in recovering its “fairly substantial” $40.5 million in treble damages. J.A. 1122. The fact that Merck and Glenmark are two of Rochester‘s creditors does not change that interest.
Accordingly, we reject Merck‘s and Glenmark‘s contention that the district court abused its discretion in finding the named plaintiffs adequate class representatives.
2.
Second, Merck and Glenmark challenge the district court‘s predominance determination. ”
Merck and Glenmark argue that the district court erred in permitting Plaintiffs to use industry- and class-wide averages to prove injury for the purposes of Article III and antitrust standing. They contend that this method of proof swallows the predominance requirement. According to Merck and Glenmark, Plaintiffs predict their “averages-based approach will show that most class members suffered injury, but leave open the possibility that fact-specific inquiries may be necessary to prove that others are injured.” Reply Br. at 21. The district court rejected these arguments, concluding that different forms of common proof could show antitrust injury to the class. The court explained that a reasonable jury could find that all class members would have purchased some generic form of the drug—rather than the more expensive brand—had a generic been available earlier. We agree.
In addition to establishing Article III standing, private antitrust plaintiffs “must also demonstrate ‘antitrust standing.‘” Novell, Inc. v. Microsoft Corp., 505 F.3d 302, 310 (4th Cir. 2007). Antitrust standing “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
C.
Plaintiffs invite us to review the district court‘s dismissal of twenty-three companies.8 But Plaintiffs never filed a cross-petition raising the issue. And “[t]he failure to file [a] petition for permission to cross-appeal . . . is a jurisdictional defect, barring” consideration of any issue that may have been raised. Tranello v. Frey, 962 F.2d 244, 248 (2d Cir. 1992) (citing Myles v. Laffitte, 881 F.2d 125, 126 (4th Cir. 1989)).
Accordingly, Plaintiffs waived any objection to the district court‘s dismissal of these companies. In the magistrate judge‘s recommendation that the district court certify the thirty-five-member class, the magistrate judge advised the parties “that failure to file timely
Resisting this conclusion, Plaintiffs ask us to consider their waived challenge under our “pendant appellate jurisdiction.” Resp. Br. at 46 (citing Scott v. Fam. Dollar Stores, Inc., 733 F.3d 105, 110-11 (4th Cir. 2013)). In Scott, we exercised pendant appellate jurisdiction in a Rule 23(f) appeal where the district court had previously denied leave to amend a complaint, but petitioners had failed to seek interlocutory review of the order denying the motion for leave to amend the complaint. 733 F.3d at 110-11. We concluded that reviewing the leave-to-amend decision was “necessary to ensure meaningful review” and “inextricably intertwined” with an issue on appeal. Id. at 111 (quoting Rux v. Republic of Sudan, 461 F.3d 461, 475 (4th Cir. 2006)). But in Scott, the district court declined to certify the class and denied as futile any amendment to the complaint in the same order. And the two questions were intertwined because they turned on the same legal issue.
By contrast, the Rule 12(b)(6) and class certification orders in this case stemmed from separate motions. Moreover, the questions of class certification did not turn on the question presented in the Rule 12(b)(6) order—namely, whether the twenty-three dismissed companies have antitrust standing. Accordingly, we decline Plaintiffs’ invitation to exercise pendant appellate jurisdiction. See EQT Prod., 764 F.3d at 364 (declining to exercise pendant jurisdiction in similar circumstances).
We afford district courts substantial deference in certifying classes. This opinion does not change that deference. Rather, we simply require that the district court consider only those factors permitted by Rule 23(a)‘s numerosity requirement and that the court conduct the requisite full-throated analysis. The judgment of the district court is
VACATED AND REMANDED WITH INSTRUCTIONS.
I am pleased to join the court‘s opinion. I write separately only to identify some factors that might be considered in determining “numerosity” under
While a district court‘s nuanced discretion is especially important in determining whether a proposed class is “so numerous that joinder of all members is impracticable,”
First and perhaps most important is simply the number of members defined to be in the class. Generally, courts have presumed that a class with more than 40 members is sufficiently numerous while a class that numbers 20 or fewer is presumably too small to certify. See 5 James Wm. Moore et al., Moore‘s Federal Practice § 23.22[1][b] (3d ed. 2020); 1 William B. Rubenstein, Newberg on Class Actions § 3.12 (5th ed. 2021); see also Kennedy v. Va. Polytechnic Inst. & State Univ., No. 7-08-CV-00579, 2010 WL 3743642, at *3 (W.D. Va. Sept. 23, 2010) (“A nationwide survey of federal court decisions signals that it is exceedingly rare to certify classes with less than 25 members. . . . [C]ourts seem
But other factors must be considered to give flesh to the numbers inquiry. Leading treatises have typically summarized the relevant factors as (1) judicial economy resulting from avoidance of joined or independent actions, (2) geographic dispersion of putative class members, and (3) the ability and motivation of class members to bring suit absent class certification. See Moore‘s, supra, § 23.22[1][a]; Rubenstein, supra, §§ 3.11, 3.12; cf. In re Modafinil Antitrust Litig., 837 F.3d 238, 253 (3d Cir. 2016). The weight to be given any relevant factor, however, will be influenced by the particular facts of the case. For example, geographic dispersion, or the lack thereof, may have extra importance when a putative class‘s members are either especially scattered or notably concentrated. See, e.g., Anderson, 986 F.3d at 777 (noting that geographic dispersion cut against certification where “[a]ll but two of the class members lived within a 50-mile radius of the courthouse“). And class members’ motivation gains importance where there is reason to believe that those members would otherwise refrain from a joint suit out of “fear of possible reprisals” by the defendant or for other reasons cutting both for and against certification. Cypress v. Newport News Gen. & Nonsectarian Hosp. Ass‘n, 375 F.2d 648, 653 (4th Cir. 1967) (en banc) (certifying a small class of Black physicians in an employment discrimination suit).
Judicial economy as a broad category appears to be the factor on which courts have relied most heavily. See Modafinil, 837 F.3d at 253-54 (stating that “both judicial economy and the ability to litigate as joined parties are of primary importance“); see also McKenna v. First Horizon Home Loan Corp., 475 F.3d 418, 427 (1st Cir. 2007) (“Among
Another facet of judicial economy is courtroom space and correlated staffing. For example, more parties joined to an action means, in most cases, more attorneys, each of which must be present in court for hearings and conferences. In this case, there may be a substantial gap between the number of attorneys currently needed to represent the 3 named class representatives and the number that would be needed to represent 35 joined parties, if that many were to consent, even if one assumes that each joined party has only 2 or 3 attorneys present. A court could reasonably recognize the demands on physical space and staffing necessary to accommodate so many individuals. See Town of New Castle v. Yonkers Contracting Co., 131 F.R.D. 38, 41 (S.D.N.Y. 1990) (“[T]he impracticability of joinder is best seen by noting the difficulties involved in having thirty-five intervenors, all
As a further aspect of judicial economy, a district court may consider the differential in costs of discovery between a class action and an action with many joined parties. The court could consider whether, in the action of joined parties, “discovery would be repetitive and unduly expensive.” Ballard v. Blue Shield of S.W. Va., Inc., 543 F.2d 1075, 1080 (4th Cir. 1976). But while a district court may give weight to this consideration as to future discovery, it should not succumb to the sunk-cost fallacy and certify a class merely because a great deal of effort has already been expended in discovery. Noteworthy about discovery is the fact that it represents civil litigation‘s largest cost. See generally John S. Beckerman, Confronting Civil Discovery‘s Fatal Flaws, 84 Minn. L. Rev. 505 (2000); Nicholas M. Pace & Laura Zakaras, RAND Inst. for Civ. Just., Where the Money Goes: Understanding Litigant Expenditures for Producing Electronic Discovery (2012).
And an aspect of broader practicality, and also, perhaps, judicial economy, might relate to the ability to identify class members. See Baltimore v. Laborers’ Int‘l Union of N. Am., 67 F.3d 293, at *1 (4th Cir. 1995) (unpublished table decision); Ballard, 543 F.2d at 1080 (noting that “the number of [class members] and knowledge of their identity . . . should be considered“). It has been observed that if a “majority of the members of the proposed class were identified” by the court, and especially if those members “reside within an established jurisdictional boundary,” joinder may be more practicable. Baltimore, 67 F.3d at *1. On the other hand, when absent class members “are not
These factors are, to be sure, not exhaustive. But they exemplify the nature of what should be considered in determining the numerosity requirement of