Commercial – Antitrust pharmaceutical class decertified

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Where a class of pharmaceutical buyers claimed two manufacturers allegedly reached an anticompetitive settlement in a patent dispute, the district court erred in focusing on whether denial of certification would result in “multiple individual trials” when it certified a class. The correct analysis is whether the class is so numerous that joinder of all members is impracticable.

Background

A group of pharmaceutical buyers brought this class action against two manufacturers (Merck and Glenmark) who allegedly reached an anticompetitive settlement in a patent dispute. Plaintiffs 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 35 purchasers satisfied the class certification requirements set forth in Federal Rule of Civil Procedure 23.

Numerosity

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. 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.” 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. Otherwise, the judicial-economy factor would always favor class certification, which is simpler to manage than individual lawsuits. In fact, even compared to joinder, class certification will often be preferable from a judicial economy perspective.

Second, in analyzing the class members’ ability and motivation to litigate, the district court again focused its analysis on the economics of individual suits. In considering the feasibility of pursing individual claims, the magistrate judge and district court seem to acknowledge yet adopt [plaintiffs’ “assumption], without any evidence, that absent a class action, the[ ] smaller claimants would sue individually and thus bear the entire cost of litigation.”

This misconstrues the standard. Indeed, “there has been no showing that it would be uneconomical for [smaller claimants] to be individually joined as parties in a traditional lawsuit.” Plaintiffs must bring to bear some evidence to this effect—and the district court may not consider the economics of individual suits in analyzing this factor.

Remaining arguments

Merck and Glenmark also challenge the district court’s adequacy determination, arguing that none of the named plaintiffs can adequately represent the class. The court sees no abuse of discretion here.

Merck and Glenmark also challenge the district court’s predominance determination. Merck and Glenmark argue that the district court erred in permitting plaintiffs to use industry- and classwide 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.”

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. This court agrees.

Dismissal

Plaintiffs invite this court to review the district court’s dismissal of 23 companies. But plaintiffs never filed a cross-petition raising the issue. Accordingly, plaintiffs waived any objection to the district court’s dismissal of these companies.

Resisting this conclusion, plaintiffs ask this court to consider their waived challenge under its “pendant appellate jurisdiction.” However 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 23 dismissed companies have antitrust standing. Accordingly, plaintiffs’ invitation to exercise pendant appellate jurisdiction is declined.

Vacated and remanded with instructions.

Concurrence

(Niemeyer, J.): 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 Federal Rule of Civil Procedure 23(a)(1).

In re: Zetia (Ezetimibe) Antitrust Litigation (Lawyers Weekly No. 001-158-21, 22 pp.) (Henry Franklin Floyd, J.) (Paul V. Niemeyer, J., concurring) Case No. 20-2184. Aug. 4, 2021. From E.D. Va. (Rebecca Beach Smith, S.J.) Theodore J. Boutrous Jr. for Appellants. Thomas M. Sobol for Appellee.