United States District Court, E.D. Pennsylvania
case involves class action antitrust allegations stemming
from several reverse payment patent settlements under the
Hatch-Waxman Act, now commonly referred to as an
Actavis claim. On remand from the United States
Court of Appeals for the Third Circuit, I again address the
numerosity analysis under Federal Rule of Civil Procedure
Purchaser Class Plaintiffs initially brought this antitrust
lawsuit against the manufacturer of Provigil, Cephalon, Inc.,
as well as four generic pharmaceutical companies
Defendants”). The four Hatch-Waxman reverse-payment
settlements at issue, executed in 2005 and 2006, were between
Cephalon and each of the Generic Defendants, and were alleged
to be anticompetitive for delaying the market entry of
Purchaser Class Plaintiffs have filed a supplemental motion
for class certification. The prospective class again includes
drug wholesalers that purchased the brand-name drug,
Provigil, directly from Cephalon, Inc. at any time between
June 24, 2006 and August 31, 2012.
motion follows the Third Circuit's Opinion vacating my
initial grant of class certification. See In re Modafinil
Antitrust Litig., 837 F.3d 238 (3d Cir. 2016). Noting
that it had “not had occasion to list relevant factors
that are appropriate for district court judges to consider
when determining whether joinder would be impracticable,
” the Third Circuit provided “a framework for
district courts to apply when conducting their numerosity
analyses.” Id. at 252- 53, 242.
on the scope of the remand, the only question before me is
whether the proposed class satisfies the numerosity
requirement under Federal Rule of Civil Procedure 23(a)(1).
For the reasons that follow, and applying the framework set
out by the Third Circuit, I conclude that the numerosity
requirement is not satisfied and, as a result, Direct
Purchasers' supplemental motion for class certification
will be denied.
27, 2015, I granted Direct Purchasers' initial motion for
class certification. Subsequently, Mylan and Ranbaxy sought
and obtained appellate review of that decision pursuant to
Federal Rule of Civil Procedure 23(f).
September 13, 2016, the United States Court of Appeals for
the Third Circuit issued its opinion vacating my July 27,
2015 class certification ruling and remanding for further
consideration of whether joinder of all class members is
impracticable - i.e. the numerosity requirement under Federal
Rule of Civil Procedure 23(a)(1).
Purchasers have filed a supplemental motion for certification
of a litigation class, proposing the same class definition as
was proposed in their initial motion. They continue to seek
certification of the following class:
All persons or entities in the United States and its
territories and/or their assignees (partial or otherwise) who
purchased Provigil in any form directly from Cephalon at any
time during the period from June 24, 2006 through August 31,
2012 (the “Class”).
Excluded from the Class are Defendants, and their officers,
directors, management, employees, subsidiaries, or
affiliates, and all federal governmental entities.
Also excluded from the Class are Rite Aid Corporation, Rite
Aid HDQTRS. Corp., JCG (PJC) USA, LLC, Eckerd Corporation,
Maxi Drug, Inc. d/b/a Brooks Pharmacy, CVS Caremark
Corporation, Walgreen Co., The Kroger Co., Safeway Inc.,
American Sales Co. Inc., HEB Grocery Company, LP, Supervalu,
Inc., and Giant Eagle, Inc. and their officers, directors,
management, employees, subsidiaries, or affiliates in their
own right and as assignees from putative Direct Purchaser
Class members (“Retailer Plaintiffs”). For
purposes of clarity, Steven L. LaFrance Holdings, Inc. and
Steven L. LaFrance Pharmacy, Inc. d/b/a SAJ Distributors
(“SAJ”) is not a Retailer Plaintiff and is a
member of the Class; while Retailer Plaintiff Walgreen Co.
acquired SAJ in 2012, SAJ's case and claim have proceeded
independently of Walgreen Co.
Prior Numerosity Ruling
previously determined that Direct Purchasers class members
were so numerous as to make joinder impracticable. Regarding
the number of members in the proposed class, I rejected
Defendants' arguments that certain class members should
be excluded because they (1) were proceeding by way of
partial assignment, (2) ceased operations prior to generic
entry and/or (3) made all purchases of branded Provigil after
generic Provigil had already entered the market. Thus, I
determined that the proposed class contained two-twenty
members. See King Drug Co. of Florence v. Cephalon,
Inc., 309 F.R.D. 195, 204-06 (E.D. Pa. 2015).
the impracticability of joinder, I examined the following
five factors: “(1) judicial economy, (2) geographic
dispersion, (3) financial resources of class members, (4) the
claimants' ability to institute individual suits, and (5)
requests for injunctive relief that could affect future class
members.” King Drug, 309 F.R.D. at 203-04
(citing In re Wellbutrin XL Antitrust
Litig., 2011 WL 3563385, at *3 (E.D. Pa. Aug. 11,
2011)). In applying those factors, I stated:
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. . . .
Plaintiffs have also demonstrated that the class members are
geographically diverse, which has the potential to create
problems if all class members were to join the litigation. It
is undisputed that the prospective class members are spread
out over thirteen states and Puerto Rico. 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. . . . Therefore,
geographic dispersion weighs in favor of a finding that
joinder is impracticable.
Two factors that may weigh against Plaintiffs are the
financial resources of the class members and the parties'
abilities to bring individual suits. Plaintiffs do not
dispute that the prospective class members are all
sophisticated corporations that have experience conducting
litigation. Additionally, while Plaintiffs argue that the
ongoing business relationships between the class members and
Defendants warrants certifying a class due to fear of
retaliation, there is no evidence to support Plaintiffs'
Plaintiffs do convincingly respond, however, that some of the
prospective class members' claims are relatively small,
such that there may not be an economic incentive to engage in
expensive antitrust litigation. For example, using data
derived from Defendants' economic expert, Dr. Ordover,
six class members may have claims below $1 million.
(See Ordover Supp. Exp. Rep., Ex. 1; Pls.'
Reply, p. 9 n. 36.) These prospective class members likely do
not have the same incentive to engage in costly antitrust
litigation on their own.
The complexity and extensive history of this case, the
expansive discovery conducted, and the geographic dispersion
of the parties all favor class treatment. While some factors
weigh in Defendants' favor, I find those factors less
compelling. Accordingly, Plaintiffs have demonstrated by a
preponderance of the evidence that the parties are
sufficiently numerous so as to make joinder impracticable.
Id. at 206-07.
United States Court of Appeals for the Third Circuit's
Third Circuit concluded that I abused my discretion for two
primary reasons: in certifying the class, my numerosity
analysis (1) “improperly emphasiz[ed] the late stage of
the proceeding, ” and (2) I did not consider the
“ability of individual class members to pursue their
cases through the use of joinder” as opposed to
individual cases. In re Modafinil Antitrust Litig.,
837 F.3d at 249.
the size of the class, the Third Circuit held that Defendants
had waived their arguments regarding the propriety of members
proceeding by way of assignment. Even though the argument was
waived, the Third Circuit nonetheless found it
“appropriate” to consider the partial assignment
issue because they were remanding on the numerosity issue.
Id. at 251. The Third Circuit agreed with my
conclusion 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.” Id. at 252. As
such, for purposes of conducting the impracticability
analysis, the Third Circuit assumed, as I found, that the
class consisted of twenty-two members. Id.
light of the relatively small class, the Third Circuit noted
that “inquiry into impracticability should be
particularly rigorous when the putative class consists of
fewer than forty members.” Id. at 250. The
Third Circuit then articulated, for the first time, the
following non-exhaustive list of factors relevant to the
impracticability analysis: “judicial economy, the
claimants' ability and motivation to litigate as joined
plaintiffs, the financial resources of class members, the
geographic dispersion of class members, the ability to
identify future claimants, and whether the claims are for
injunctive relief or for damages.” Id. at 253.
The Third Circuit stressed that judicial economy and ability
to litigate as joined parties are of primary importance.
Id. The court emphasized that it is improper to
consider the possibility that plaintiffs may bring individual
lawsuits as the relevant choice is a binary one: between a
class and joinder of all interested parties.
this new impracticability standard, the Third Circuit
concluded that my judicial economy analysis was incorrect
because it placed “great weight” on the late
stage of the proceedings. The Court held that “the late
stage of litigation” - including sunk costs, the need
for additional discovery and the risk of postponing trial -
“is not by itself an appropriate consideration to take
into account as part of a numerosity analysis.”
Id. at 254. The court reasoned that if the late
stage of litigation were an appropriate consideration it
“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.” Id. at
255. The Third Circuit instructed that the judicial economy
analysis is primarily concerned with “docket control,
taking into account practicalities as simple as that of every
attorney making an appearance on the record.”
Id. at 256-257.
Ability and Motivation to be Joined as Plaintiffs
Third Circuit also concluded that I did not fully explore the
ability and motivation of class members to be joined as
plaintiffs because I improperly focused on whether class
members could have brought their own, individual suits. The
court instructed that this factor “primarily 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.” Id. at 257.
Third Circuit then recounted the record regarding the ability
and motivation of the twenty-two putative class members to
litigate as joined parties. The court first stressed that
“the class members, based on the record before us,
appear likely to have the ability and incentive to bring
suit as joined parties, thus preventing the alleged
wrongdoers from escaping liability.” Id. at
258 (emphasis added). To amplify this point, the Court noted
that three class members have claims estimated at over $1
billion and that those claims make up over 97% of the total
value of the class claims. The court further stated that
while this factor could nonetheless weigh in favor of class
certification if the other class members had very small
claims, that was “simply not the case.”
Id. The court reasoned that thirteen of the
remaining class members had claims in excess of $1 million,
the figure that the parties “seem to agree is the
appropriate figure at which point bringing one's own suit
become economical” and there was no showing that it
would in fact be uneconomical for the other six class members
to be joined as parties. Id. at 258-259.
concluding that remand was warranted for further
consideration of the numerosity requirement, the Third
Circuit stated “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.”
Id. at 259.
class certification issue is before me via remand and
consideration of whether the putative class members have
“the ability and incentive to bring suit as joined
parties, ” id. at 258. However, the
conclusions by the Third Circuit set forth above, leave
little room for “consideration” and create an
uphill battle for the Direct Purchasers to now convince me
that certification is appropriate.
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 v. Dukes,
131 S.Ct. 2541, 2550 (2011) (quoting Califano v.
Yamasaki, 442 U.S. 682, 700-01 (1979)) (quotation marks
omitted). In order to certify a class action, the plaintiffs
bear the burden of proving by a preponderance of the evidence
that the putative class satisfies all of the prerequisites
identified in Federal Rule of Civil Procedure 23(a) ...