Zetia (Ezetimibe) Antitrust v. Merck & Company, Inc. ( 2021 )

PUBLISHED
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.
ARGUED: Theodore J. Boutrous, Jr., GIBSON, DUNN & CRUTCHER LLP, Los
Angeles, California, for Appellants. Thomas M. Sobol, HAGENS BERMAN SOBOL
SHAPIRO LLP, Cambridge, Massachusetts, for Appellee. ON BRIEF: Eric J. Stock,
New York, New York, Veronica S. Lewis, Ashley Johnson, Dallas, Texas, Samuel J.
Liversidge, Christopher D. Dusseault, Bradley J. Hamburger, Daniel R. Adler, GIBSON,
DUNN & CRUTCHER LLP, Los Angeles, California; Stephen E. Noona, KAUFMAN &
CANOLES, P.C., Norfolk, Virginia, for Appellants Merck & Co., Inc.; Merck Sharp &
Dohme Corp.; Schering-Plough Corp.; Schering Corp.; and MSP Singapore Co. LLC.
Steven A. Reed, R. Brendan Fee, Zachary M. Johns, Jessica J. Taticchi, Philadelphia,
Pennsylvania, Stacey Anne Mahoney, MORGAN, LEWIS & BOCKIUS LLP, New York,
New York; Richard H. Ottinger, Dustin M. Paul, Jennifer L. Eaton, VANDEVENTER
BLACK LLP, Norfolk, Virginia, for Appellants Glenmark Pharmaceuticals Ltd. and
Glenmark Pharmaceuticals Inc., USA. Erin C. Burns, Hannah Schwarzchild, Bradley J.
Vettraino, HAGENS BERMAN SOBOL SHAPIRO LLP, Cambridge, Massachusetts, for
Appellee FWK Holdings, LLC and the Direct Purchaser Class. William H. Monroe, Jr.,
Marc C. Greco, Kip A. Harbison, Michael A. Glasser, GLASSER & GLASSER, P.L.C.,
Norfolk, Virginia, for Appellees FWK Holdings, LLC; César Castillo, Inc.; and Rochester
Drug Co-Operative, Inc. John D. Radice, RADICE LAW FIRM, P.C., Princeton, New
Jersey; Paul E. Slater, Joseph M. Vanek, David P. Germaine, Alberto Rodriguez,
SPERLING & SLATER, P.C., Chicago, Illinois; Michael Roberts, Stephanie Smith, Karen
Halbert, Will Wilson, ROBERTS LAW FIRM, P.A., Little Rock, Arkansas; Sharon K.
Robertson, Donna M. Evans, COHEN MILSTEIN SELLERS & TOLL PLLC, New York,
New York; Steve D. Shadowen, Matthew C. Weiner, HILLIARD & SHADOWEN LLP,
Austin, Texas; Joseph H. Meltzer, Terence S. Ziegler, KESSLER TOPAZ MELTZER &
CHECK LLP, Radnor, Pennsylvania, for Appellee FWK Holdings, LLC and the Direct
Purchaser Class. Linda P. Nussbaum, NUSSBAUM LAW GROUP, P.C., New York, New
York; Jayne A. Goldstein, SHEPHERD, FINKELMAN, MILLER & SHAH, LLP, Fort
Lauderdale, Florida, for Appellee César Castillo and the Direct Purchaser Class. David F.
Sorensen, Ellen T. Noteware, Nicholas Urban, BERGER MONTAGUE PC, Philadelphia,
Pennsylvania; Barry Taus, Archana Tamoschunas, Kevin Landau, TAUS, CEBULASH &
LANDAU, LLC, New York, New York; Peter R. Kohn, Joseph T. Lukens, Philadelphia,
Pennsylvania, Bradley J. Demuth, FARUQI & FARUQI, LLP, New York, New York, for
Appellee Rochester Drug Co-Coperative, Inc. and the Direct Purchaser Class.
2
FLOYD, Circuit Judge:
A group of pharmaceutical buyers brought this class action against two
manufacturers who allegedly reached an anticompetitive settlement in a patent dispute.
Defendants-Appellants Merck 1 and Glenmark 2 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 Federal Rule of Civil Procedure 23. We hold that the district court’s numerosity
analysis fell short in several respects, so we vacate the district court’s order and remand for
further proceedings.
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 21 U.S.C.
“Merck” refers to Defendants-Appellants Merck & Co., Inc.; Merck Sharp &
1
Dohme Corp.; Schering-Plough Corp.; Schering Corp.; and MSP Singapore Co. LLC.
“Glenmark” refers to Defendants-Appellants Glenmark Pharmaceuticals Ltd. and
2
Glenmark Pharmaceuticals Inc., USA.
3
§ 355(j)(2)(A)(vii)(IV). 3 As required by law, Glenmark notified Merck of its generic drug
application. Merck promptly sued Glenmark for patent infringement. Glenmark did not
contest that its proposed generic infringed on Merck’s patent. Instead, Glenmark argued
that Merck’s patent was invalid. In 2010, Merck and Glenmark settled the patent dispute.
The settlement agreement allowed Glenmark to launch its generic in December 2016—
over four months before the expiration of Merck’s exclusivity period.
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.
3
Federal law gives competing drug manufacturers the opportunity to introduce
generic versions of branded drugs. Generic manufacturers may obtain FDA approval
through an abbreviated review process so long as the generic is a bioequivalent of the
approved, brand-name drug.
4
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
introduced its own generic. Because Glenmark was the first to seek FDA approval for a
generic ezetimibe, it had the near-exclusive right to sell a generic for 180 days after
launching it. 21 U.S.C. § 355(j)(5)(B)(iv). The right is near-exclusive because the brand-
name manufacturer can market a competing generic, called an “authorized generic,” by
essentially rebranding its brand-name drug and selling it at a lower price point. In re
Lamictal Direct Purchaser Antitrust Litig., 957 F.3d 184, 189 (3d Cir. 2020).
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—
5
McKesson, AmerisourceBergen, and Cardinal Health—“who account for 97 percent of all
class purchases.” J.A. 1088.
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
Federal Rule of Civil Procedure 23. A magistrate judge issued a report and
recommendation to certify the class in June 2020, to which Merck and Glenmark objected.
In August 2020, the district court adopted the report, overruled all objections, and certified
the class. Merck and Glenmark timely appealed.
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, Rule 23(a) requires a district court to make the
following determinations:
(1) the class is so numerous that joinder of all members is impracticable;
(2) there are questions of law or fact common to the class;
(3) the claims or defenses of the representative parties are typical of the
claims or defenses of the class; and
(4) the representative parties will fairly and adequately protect the interests
of the class.
6
Fed. R. Civ. P. 23(a). “A party seeking class certification must affirmatively demonstrate
his compliance with the Rule,” Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338, 350 (2011),
and must do so with “evidentiary proof,” Comcast Corp. v. Behrend, 569 U.S. 27, 33
(2013). And classes certified under Rule 23(b)(3)—as is the case here—are only
appropriate when (1) “all of the prerequisites of Rule 23(a) are satisfied,” (2) “common
questions of law or fact . . . predominate over any questions affecting only individual class
members,” and (3) “proceeding as a class [is] superior to other available methods of
litigation.” EQT Prod., 764 F.3d at 357. Merck and Glenmark argue that the district
court’s decision to certify the class ran afoul of several of these requirements. We consider
each in turn.
A.
Rule 23(a)(1) requires that a class be “so numerous that joinder of all members is
impracticable.” Fed. R. Civ. P. 23(a)(1). Though “[n]o specified number is needed to
maintain a class action,” Cypress v. Newport News Gen. & Nonsectarian Hosp. Ass’n, 374
F.2d 648, 653 (4th Cir. 1967), “[a]s a general guideline, . . . a class that encompasses fewer
than 20 members will likely not be certified . . . while a class of 40 or more members raises
a presumption of impracticability of joinder based on numbers alone,” 1 Newberg on Class
Actions § 3:12 (5th ed. 2021). For the “gray area” cases between twenty and forty
members, J.A. 1916 (quoting J.A. 1081), “all the circumstances of the case should be taken
into consideration” in evaluating the impracticability of joinder, Ballard v. Shield of S.W.
Va., Inc., 543 F.2d 1075, 1080 (4th Cir. 1976).
7
The district court conducted its numerosity analysis using the Third Circuit’s “non-
exhaustive list” of factors, which includes “judicial economy, the claimants’ ability and
motivation to litigate as joined plaintiffs, the financial resources of class members, [and]
the geographic dispersion of class members.” In re Modafinil Antitrust Litig., 837 F.3d
238, 253 (3d Cir. 2016) (vacating class certification in a reverse-payment case under Rule
23(a)’s numerosity requirement). The district court determined that the judicial-economy
and geographic-dispersion factors favored class certification, though the latter “should be
given relatively lower weight than the other factors.” J.A. 1921. The court also explained
that the “financial factor does not significantly inform the practicability assessment.” J.A.
1922 (quoting J.A. 1090 (cleaned up)). Finally, the court concluded that the “ability and
motivations of the class members to proceed via joinder weigh ‘slightly’ in favor of a
finding that joinder is impracticable.” J.A. 1920 (quoting J.A. 1086).
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.
8
First, in the course of analyzing the judicial-economy factor, the district court
adopted the magistrate judge’s reasoning that “multiple individual trials . . . will essentially
involve the same theories of liability and largely the same evidence,” and that “[i]n such
circumstances, proceeding in a class action is preferred as it greatly conserves judicial
resources.” J.A. 1085; see J.A. 1919 (“agree[ing] with the analysis in the [report and
recommendation] on the judicial economy factor”). True, the district court minimized this
aspect of the magistrate judge’s analysis, noting that the magistrate judge “spen[t] just a
single paragraph on the possibility that there could be some separate trials.” J.A. 1918–19.
But given the district court’s conclusion that “judicial economy is the most persuasive of
the numerosity factors,” J.A. 1922, we are left in the dark as to whether this faulty logic
played into the district court’s numerosity analysis. 4
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
4
In a footnote, the district court suggested our precedent permits it to compare the
practicability of a class to that of individual trials, noting that “the Third Circuit’s
statements in Modafinil are contrary to those of other courts, including the Fourth Circuit.”
J.A. 1919 n.9. We disagree. The district court’s conclusion relied on Ballard, which
observed in passing that individual suits could increase the volume of discovery. See 543
F.2d at 1080. This comment, which is dicta, directly conflicts with the language of Rule
23(a)(1). We therefore afford it no weight and do not consider it binding precedent.
9
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. 5
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
5
And in analyzing this factor, district courts should bear in mind Rule 23(a)’s high
standard, which asks whether a variety of factors make joinder not only uneconomical but
also economically impracticable. Fed. R. Civ. P. 23(a)(1).
6
The district court made this finding despite noting that Plaintiffs “offered little
case-specific and member-specific evidence that class members would not join the suit on
their own.” J.A. 1920. But Rule 23 places on Plaintiffs the burden of “present[ing]
evidence that the putative class complies with Rule 23.” See EQT Prod., 764 F.3d at 357.
And in presenting this evidence, Plaintiffs must do more than simply show that litigating
as a class—rather than joinder—would offer marginal economic benefits. True,
“[i]mpracticable does not mean impossible.” Robidoux v. Celani, 987 F.2d 931, 935 (2d
Cir. 1993). But the impracticability standard recognizes that “[t]he class action is ‘an
exception to the usual rule that litigation is conducted by and on behalf of the individual
named parties only.’” Wal-Mart Stores, 564 U.S. at 348 (quoting Califano v. Yamasaki,
442 U.S. 682, 700–01 (1979)). We see little evidence in the record to support this point,
and we expect that the district court will require Plaintiffs to adduce such evidence on
remand to establish impracticability.
10
uneconomical for [smaller claimants] to be individually joined as parties in a traditional
lawsuit.” Modafinil, 837 F.3d at 259. 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. 7
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 Rule 23(a)(1). Because the district court’s numerosity analysis
improperly looked to the impracticability of individual suits rather than joinder, we are
compelled to conclude that legal error infected the court’s class-certification decision. See
Modafinil, 837 F.3d at 249 (“A district court abuses [its] discretion . . . when it considers
issues that have no place in the numerosity requirement.”). We therefore vacate the district
court’s class-certification order.
7
Notably underscoring the district court’s analysis of this factor is the assumption
that if even one party may be unmotivated to litigate their small-value claims, Rule 23(a)(1)
is satisfied because joinder of “all members” would then be impracticable. See Fed. R.
Civ. P. 23(a)(1) (emphasis added). But—as the Third Circuit stated in Modafinil—some
parties being economically unmotivated to litigate via joinder is only one of many factors
to consider in making an impracticability of joinder consideration. 837 F.3d at 259 (“Even
if it were uneconomical for some . . . of the[ ] individual plaintiffs to join the suit, the
District Court must still determine whether, considering all the other relevant factors, class
status . . . is appropriate here.”).
11
B.
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.
12
Merck and Glenmark further argue that named plaintiff Castillo “lacks standing
under Article III and the antitrust laws—which renders it an atypical class representative”
because Castillo “could not have been injured by the claimed delay in the availability of a
product it would not have bought anyway.” Opening Br. at 47. But Merck’s and
Glenmark’s argument as to Castillo is an injury question for the jury—not a question of
standing. See In re Deepwater Horizon, 739 F.3d 790, 803 (5th Cir. 2014) (noting that to
establish “Article III standing of named plaintiffs during class certification under Rule
23, . . . it [is] ‘sufficient for standing purposes that the plaintiffs seek recovery for an
economic harm that they allege they have suffered’” (quoting Cole v. Gen. Motors Corp.,
484 F.3d 717, 723 (5th Cir. 2007))). Moreover, contesting a class representative’s injury
does not defeat typicality—another argument made by Merck and Glenmark. Beck v.
Maximus, Inc., 457 F.3d 291, 300 (3d Cir. 2006) (“To defeat class certification, a defendant
must show some degree of likelihood a unique defense will play a significant role at trial.”).
Because Castillo will rely on the same common evidence as the class to prove its injury at
trial, we see no abuse of discretion in the district court’s adequacy finding as to Castillo.
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. “Rule 23(b)(3) requires a showing that questions common to the class
predominate . . . .” Amgen Inc. v. Conn. Ret. Plans & Tr. Funds, 568 U.S. 455, 459 (2013).
13
Predominance also applies to damages “because the efficiencies of the class action
mechanism would be negated if ‘[q]uestions of individual damage
calculations . . . overwhelm questions common to the class.’” Modafinil, 837 F.3d at 260
(alterations in original) (quoting Comcast, 569 U.S. at 34). “This does not mean, however,
that damages must be ‘susceptible of measurement across the entire class for purposes of
Rule 23(b)(3).’” Id. (quoting Neale v. Volvo Cars of N. Am., LLC, 794 F.3d 353, 374 (3d
Cir. 2015)).
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
14
call for individual, as opposed to common, proof.” In re Hydrogen Peroxide Antitrust
Litig., 552 F.3d 305, 311–12 (3d Cir. 2008). But we find no issue with the practice of
proving injury by class-wide averages, which the district court correctly characterized as
“common.” J.A. 1927. Moreover, even if some individualized-injury inquiry is ultimately
required at trial for some defendants, common issues will still predominate. We therefore
affirm the district court’s predominance finding.
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
8
Generally, “only direct purchasers from an antitrust violator can sue for damages.”
Dickson v. Microsoft Corp., 309 F.3d 193 (4th Cir. 2002). When Glenmark began making
the generic drug in December 2016, it sold the generic to its exclusive dealer Par at cost-
plus-shipping. Plaintiffs allege that Par is therefore a co-conspirator, so the district court
erred in dismissing the claims of the twenty-three companies who purchased generic
ezetimibe from Par rather than from Glenmark. See Apple Inc. v. Pepper, 139 S. Ct. 1514,
1521 (2019) (noting that “immediate buyers from the alleged antitrust violators” can be
construed as direct purchasers under the Clayton Act (cleaned up)). But see Ill. Brick Co.
v. Illinois, 431 U.S. 720, 730–33 (1977) (prohibiting an indirect purchaser from suing for
overcharges passed on to it from an upstream dealer).
15
objections” would “result in waiver of appeal from a judgment of this Court based on such
findings and recommendations.” J.A. 1142–43. Plaintiffs did not appeal the thirty-five-
member class or argue the class should be a fifty-eight-person class that included the
twenty-three dismissed companies. Failure to do so constitutes waiver.
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).
16
IV.
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.
17
NIEMEYER, Circuit Judge, concurring:
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). See Anderson v. Weinert Enters., Inc., 986 F.3d 773, 775 (7th Cir.
2021) (“Ample ink has been spilled discussing class action litigation and Federal Rule of
Civil Procedure 23. Rare are the cases analyzing the Rule’s numerosity requirement”).
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,”
Fed. R. Civ. P. 23(a)(1) (emphasis added), we have recognized that a definitive test has not
been articulated to assist in the exercise of that discretion, see Kelley v. Norfolk & W. Ry.
Co., 584 F.2d 34, 35 (4th Cir. 1978) (per curiam) (noting that “[t]here is no mechanical test
for determining whether in a particular case the requirement of numerosity has been
satisfied”). Nonetheless, I believe we can point to a few nonexclusive factors that a district
court might consider.
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
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much more willing to certify a class if it has more than 40 members” (citations omitted)).
For me, a class fewer than even 30 members should be exceptional.
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
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the primary rationales behind the class action mechanism are judicial economy and
efficiency”). One aspect of judicial economy is docket management. See Modafinil, 837
F.3d at 257 (“[Judicial economy] primarily involves considerations of docket control,
taking into account practicalities as simple as that of every attorney making an appearance
on the record”). All members of a putative class suing on their own — even if joined under
Rule 20 — will naturally place a greater strain on a district court than having just two or
three class members represent the whole. See Robidoux v. Celani, 987 F.2d 931, 936 (2d
Cir. 1993); see also Rubenstein, supra, § 3.11 (“Where many individuals have similar
claims, there may be a flood of litigation. With so many litigants proceeding individually,
the courts would be overrun with claims. Yet the vast quantity of individual litigants makes
joinder impracticable”).
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
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with their respective attorneys, attempt to go through the formal motions required for
entrance into and participation in the suit” (cleaned up)).
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
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specifically identifiable,” joinder might become more impracticable. Doe v. Charleston
Area Med. Ctr., Inc., 529 F.2d 638, 645 (4th Cir. 1975).
These factors are, to be sure, not exhaustive. But they exemplify the nature of what
should be considered in determining the numerosity requirement of Rule 23(a)(1). At
bottom, “all the circumstances of the case should be taken into consideration” in a district
court’s numerosity analysis. Ballard, 543 F.2d at 1080 (emphasis added). Moreover, an
appellate court’s review of a certification order should remain mindful that certification is
ultimately determined by the district court — not the appellate court — and that it is the
district court which will be saddled with the burdens that flow from a decision. Cf. Brown
v. Nucor, 785 F.3d 895, 922 (4th Cir. 2015) (Agee, J., dissenting) (noting that this court
“typically tread[s] lightly when reviewing a class certification decision”).
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