In re: Nexium Antitrust v.

United States Court of Appeals
For the First Circuit
Nos. 14-1521, 14-1522
IN RE NEXIUM ANTITRUST LITIGATION
ASTRAZENECA AB, et al.,
Defendants-Appellants,
v.
UNITED FOOD AND COMMERCIAL WORKERS UNIONS AND EMPLOYERS MIDWEST
HEALTH BENEFITS FUND, et al.,
Plaintiffs-Appellees.
APPEALS FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. William G. Young, U.S. District Judge]
Before
Torruella, Dyk,* and Kayatta,
Circuit Judges.
Kannon K. Shanmugam, with whom Dane H. Butswinkas, Paul B.
Gaffney, John E. Schmidtlein, Williams & Connolly LLP, Laurence A.
Schoen, Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C., Jay P.
Lefkowitz, Karen N. Walker, Kirkland & Ellis LLP, Kevin D.
McDonald, Jonathan Berman, Jones Day, Timothy C. Hester, Covington
& Burling LLP, Michael P. Kelly, William A. Zucker, McCarter &
English, LLP, Leslie F. Su, Minerva Law, P.C., J. Douglas
Baldridge, Lisa Jose Fales, Danielle R. Foley, Sarah Choi, and
Venable LLP were on brief, for defendants-appellants.
Kenneth A. Wexler, with whom Wexler Wallace LLP, Steve D.
*
Of the Federal Circuit, sitting by designation.
Shadowen, Hillard & Shadowen LLC, J. Douglas Richards, Cohen
Milstein Sellers & Toll, PLLC, Jayne A. Goldstein, Pomerantz
Grossman Hufford, Dahlstrom & Gross LLP, Glen DeValerio, and Berman
DeValerio were on brief, for plaintiffs-appellees.
Kathryn Comerfold Todd, Tyler R. Green, National Chamber
Litigation Center, Inc., Jeffrey S. Bucholtz, Ashley C. Parrish,
Karen F. Grohman, and King & Spaulding LLP, on brief for Chamber of
Commerce of the United States of America, as amicus curiae in
support of defendants-appellants.
Daniel E. Gustafson, Gustafson Gluek PLLC, Prof. Joshua P.
Davis, Albert A. Foer, Richard Brunell, and Randy M. Stutz, on
brief for American Antitrust Institute, as amicus curiae in support
of plaintiffs-appellees.
Ellen Meriwether, Cafferty Clobes Meriwether & Sprengel, LLP,
and David A. Balto, on brief for Community Catalyst, Inc., National
Legislative Association for Prescription Drug Prices, United States
Public Interest Research Group, and American Independent Business
Alliance, as amici curiae in support of plaintiffs-appellees.
Scott L. Nelson and Julie A. Murray, on brief for Public
Citizen Litigation Group, as amicus curiae in support of
plaintiffs-appellees.
January 21, 2015
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DYK, Circuit Judge.
AstraZeneca1 sells a heartburn drug called Nexium and
owns several patents related to the Nexium compound, a method of
using Nexium, and the process for manufacturing Nexium ("the Nexium
patents"). Nexium is a proton-pump inhibitor, a type of drug that
decreases the symptoms of heartburn by reducing gastric acid
production.
Three generic drug companies, Ranbaxy,2 Teva,3 and DRL4
(collectively, the "generic defendants"), sought to market generic
forms of Nexium. AstraZeneca sued these generic companies for
infringement of some of the Nexium patents. AstraZeneca eventually
settled with each generic manufacturer. Under the settlement
agreements, AstraZeneca paid the generic defendants significant
sums in the form of cash or debt forgiveness (so-called "reverse
payments") in exchange for not challenging the validity of the
Nexium patents and for delaying the launch of their respective
generic products until the two main patents covering the drug
1
AstraZeneca AB, Aktiebolaget Hassle, and AstraZeneca LP.
2
Ranbaxy Pharmaceuticals, Inc., Ranbaxy Inc., and Ranbaxy
Laboratories Ltd.
3
Teva Pharmaceutical Industries, Ltd. and Teva
Pharmaceuticals USA Inc.
4
Dr. Reddy’s Laboratories, Ltd. and Dr. Reddy’s
Laboratories, Inc.
-3-
product itself expired on May 27, 2014.5 As of the date of this
opinion, no generic substitute has been launched.
The named plaintiffs are union health and welfare funds
that reimburse plan members for prescription drugs including
Nexium. Plaintiffs alleged that the Nexium patents are invalid
because they would have been obvious in light of earlier
AstraZeneca patents and other references. The European Patent
Office and the Canadian courts have held that the European and
Canadian Nexium patents are invalid.
Plaintiffs alleged that the settlement agreements between
AstraZeneca and the generic defendants (collectively, the
"defendants") constituted unlawful agreements not to compete
because of the likely invalidity of the Nexium patents, the size of
AstraZeneca’s payments to the generic defendants, and the fact that
generic defendants provided nothing to AstraZeneca other than an
agreement not to compete. Plaintiffs contend that but for
defendants’ anti-competitive conduct, a generic version of Nexium
would have been available as early as April 2008, thereby lowering
the price through competition. They asserted that AstraZeneca
overcharged for Nexium from April 14, 2008, to at least May 27,
2014 ("the class period"). They claim damages under the antitrust
and consumer protection laws of 24 states and the District of
5
Five of the Nexium patents expired on or before this
date.
-4-
Columbia.6 The plaintiffs sought class certification for a class
of third-party payors ("TPPs") (i.e., insurance plans), such as the
named plaintiffs, and individual consumers.7
On November 14, 2013, the district court certified a
class consisting of:
All persons or entities in the United States and its
territories who purchased or paid for some or all of the
purchase price for Nexium or its AB-rated generic
equivalents . . . in capsule form, for consumption by
themselves, their families, or their members, employees,
insureds, participants or beneficiaries, during the
period April 14, 2008[,] through and until the
anticompetitive effects of Defendants’ unlawful conduct
cease.
Add. 40a. The certified class also included certain exceptions
discussed below. The defendants sought to appeal the class
certification. We granted this interlocutory appeal under Federal
Rule of Civil Procedure 23(f) to review the class certification.8
6
The plaintiffs did not assert federal antitrust claims.
In Illinois Brick Co. v. Illinois, 431 U.S. 720, 746—48 (1977), the
Supreme Court held that indirect purchasers of goods produced by
firms engaged in anti-competitive conduct were too remote from that
conduct to have suffered an injury under the Clayton Act. As a
result, plaintiffs bring their suits under state law in states with
"Illinois Brick" repealer laws which have granted indirect
purchasers the right to sue for antitrust violations.
7
Plaintiffs filed this suit on August 24, 2012, in the
Eastern District of Pennsylvania. The United States Judicial Panel
on Multidistrict Litigation transferred the case to the District of
Massachusetts in December 2012.
8
The district court has since granted various summary
judgment motions that narrow the claims against certain generic
defendants. In particular, the district court granted summary
judgment to Teva and DRL finding that plaintiffs have not shown the
existence of a "large, unjustified reverse payment" to these
-5-
We conclude that class certification is permissible even
if the class includes a de minimis number of uninjured parties. We
hold that the district court did not abuse its discretion by
certifying the class here and determining that at the certification
stage, it had not been shown that future proceedings would not be
manageable consistent with defendants’ Seventh Amendment and due
process rights.
I.
A.
Both the Supreme Court in FTC v. Actavis, 133 S. Ct. 2223,
2227–29 (2013), and the district court below, In re Nexium
(Esomeprazole) Antitrust Litigation, 968 F. Supp. 2d 367 (D. Mass.
2013), have discussed extensively the regulatory and patent
framework of this suit. We discuss it briefly here.
The Food, Drug, and Cosmetic Act ("FDCA") requires drug
manufacturers to secure approval from the Food and Drug
Administration ("FDA") to market a new drug. 21 U.S.C.
§ 355(b)(1), (d). To obtain approval, a new drug application
defendants. However, the district court found that there was
"sufficient circumstantial evidence" to "infer a conspiracy among
the Defendants." J.A. 636 ¶ 3. The district court also concluded
that Ranbaxy was not likely to launch "at-risk." However, the
defendants make no contention that these various rulings affect the
proper composition of the class. In the interim after trial, the
jury returned a verdict in favor of defendants. See In re Nexium
Antitrust Litig., No. 12-md-02409 (D. Mass. Dec. 8, 2014), ECF No.
1374. This, of course, does not moot the case here given the
possibility of further proceedings.
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("NDA") must include scientific data showing that the drug is safe
and effective for its proposed purpose, requiring that the
manufacturer conduct long and costly clinical trials. Caraco
Pharm. Labs., Ltd. v. Novo Nordisk A/S, 132 S. Ct. 1670, 1676
(2012).
The Hatch-Waxman Amendments9 introduced two mechanisms to
the FDCA to enable early marketing of generic substitutes. First,
to market a generic drug, the manufacturer need only file an
abbreviated new drug application ("ANDA") showing that the generic
product has the same active ingredients as, and is biologically
equivalent to, the brand name drug. Id. Second, Hatch-Waxman
protects the original NDA-filer by barring FDA approval of an ANDA
that is alleged to infringe a patent until the patent cases have
been resolved (or 30 months have elapsed) and provides a means for
early resolution of patent disputes. Eli Lilly & Co. v. Medtronic,
Inc., 496 U.S. 661, 676–78 (1990).
To this end, the NDA-filer must list the number and
expiration date of any patent which claims the drug that is the
subject of the NDA or a method of manufacture or use of that drug
in the FDA’s so-called "Orange Book." 21 C.F.R. § 314.53. Upon
filing, the ANDA applicant must notify the NDA-filer if it is
asserting that some or all of these listed (and unexpired) patents
9
Also known as the Drug Price Competition and Patent Term
Restoration Act of 1984. 98 Stat. 1585.
-7-
are “invalid or will not be infringed by the manufacture, use or
sale of the [generic] drug" (known as a paragraph IV
certification). 21 U.S.C. § 355(j)(2)(A)(vii)(IV). A paragraph IV
certification is treated as an act of infringement, and the branded
drug manufacturer may immediately sue the generic manufacturer for
infringement based on this certification. 35 U.S.C.
§ 271(e)(2)(A). If the branded drug manufacturer sues, the FDA may
not approve the ANDA until 30 months pass or an appellate court
finds the patent invalid or not infringed. 21 U.S.C.
§ 355(j)(5)(B)(iii).
On December 3, 1999, AstraZeneca filed an NDA to market
Nexium. The FDA approved AstraZeneca’s NDA in 2001, and
AstraZeneca listed fourteen patents in the Orange Book. Four years
later, generic manufacturer Ranbaxy filed an ANDA and filed a
paragraph IV certification with its ANDA that the listed
AstraZeneca patents were not infringed or were invalid.
AstraZeneca sued Ranbaxy, alleging that Ranbaxy’s product would
infringe six of its patents, including the patents covering the
drug product itself. In the next few years, Teva and DRL also
filed ANDAs and paragraph IV certifications, and were sued in
separate actions by AstraZeneca for infringement of many of the
same Nexium patents, including the drug product patents.
For first-filer Ranbaxy, the 30 month period triggered by
AstraZeneca’s suit expired on April 14, 2008. As a result, Ranbaxy
-8-
could have begun marketing its product on April 14, 2008, if it
launched "at-risk" — i.e., before the court ruled on patent
invalidity or infringement. However, on the date that Ranbaxy
could have launched a Nexium substitute, Ranbaxy and AstraZeneca
settled their patent litigation, and the district court entered a
consent judgment. Ranbaxy admitted the validity of AstraZeneca’s
asserted patents, admitted that its generic product infringed those
patents, and agreed to delay the launch of its generic product
until May 27, 2014, the date that the main drug product patents
expired. In exchange, AstraZeneca agreed to pay Ranbaxy over a
billion dollars. Subsequently, AstraZeneca entered into separate
settlement agreements with Teva and DRL. The provisions of these
agreements were similar to AstraZeneca’s agreement with Ranbaxy,
and both Teva and DRL also agreed to delay their respective generic
product launches until May 27, 2014, in exchange for substantial
monetary consideration.10 These agreements raised antitrust
concerns because they were agreements between competitors not to
compete.
The agreements between AstraZeneca and the generic
defendants are known as reverse payment settlements. Unlike
traditional settlements, where "a party with a claim . . . for
10
Both Teva and DRL owed AstraZeneca substantial damages
from other patent infringement suits. In exchange for Teva and
DRL’s concessions, AstraZeneca agreed not to collect these
payments.
-9-
damages receives a sum equal to or less than the value of its
claim[,] [i]n reverse payment settlements . . . a party with no
claim for damages . . . walks away with money simply so it will
stay away from the patentee’s market." Actavis, 133 S. Ct. at 2233.
The Supreme Court in Actavis concluded that reverse payment
settlements are properly evaluated under the antitrust laws using
a rule of reason analysis. Id. at 2237. Actavis specified
particular factors indicating that an agreement was an unreasonable
restraint of trade, including whether the reverse payment was
"large and unjustified," measured by "its size, its scale in
relation to the payor’s anticipated future litigation costs, its
independence from other services for which it might represent
payment, and the lack of any other convincing justification." Id.
at 2237.
Plaintiffs here alleged that the Nexium patents were
likely invalid or not infringed by the generic defendants’
products, and the payments were not made in exchange for any
services performed by the generic defendants. As a result,
defendants’ agreements constituted an unlawful horizontal
conspiracy to foreclose generic competition. Plaintiffs claimed
that because drug prices fall significantly with generic entry, the
prices of generic Nexium in the "but-for" market11 would have been
11
"[B]ut for [defendants’] [a]greements, generic versions
of Nexium would have been available to [p]laintiffs and members of
the Class in the United States as early as April 14, 2008." J.A.
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lower than the branded Nexium prices during the class period absent
generic entry. In addition, in the early period, purchasers of
branded Nexium would have paid supracompetitive prices as well. As
a result, the class members were injured by defendants’
overcharges.
The merits of plaintiffs’ antitrust challenge are not
before us.12 The issue is whether the district court properly
certified plaintiffs’ Rule 23(b)(3) damages class.
B.
The district court below concluded that plaintiffs "ha[d]
sufficiently demonstrated a showing of adequacy of representation
and predominance of common questions to the class to meet the
requirements of class certification under Rules 23(a) and
23(b)(3)." Add. 2a.13 Specifically, the district court decided
that plaintiffs had adequately shown that (1) "prices for
esomeprazole [during the class period] continued [to be]
artificially high as a result of the Defendants’ reverse payment
agreements," and (2) "that all class members have been exposed to
127 ¶ 2.
12
In September 2013, the district court concluded that the
plaintiffs had plausibly alleged antitrust injury to survive
defendants’ 12(b)(6) motion, i.e., that defendants’ exercise of
market power generated anti-competitive consequences. In re
Nexium, 968 F. Supp. 2d at 393. See also n.8, supra.
13
Plaintiffs here initially included Pharmacy Benefit
Managers ("PBMs") in the class definition. PBMs bought Nexium
directly from AstraZeneca and sold it to TPPs and consumers.
-11-
purchasing or paying for esomeprazole magnesium at a
supracompetitive price." Add. 19a—20a. The district court
determined that some members of the class did not suffer injury,
perhaps "including more than a de minimis number of TPPs and
consumers." Add. 20a. But despite the presence of uninjured class
members, the court determined that "[defendants’ expert] failed
reliably to quantify the prevalence of his alleged problematic
subgroups and thus fail[ed] to establish that they are sufficiently
extensive to undermine [plaintiffs’ expert’s] conclusion[]" that
the vast majority of class members were injured. Add. 22a.
Finally, in keeping with the Supreme Court’s admonition that "class
certification ought not . . . turn into a ‘free-ranging merits
inquir[y]’ through unnecessary demands for exact calculations of
damages," the district court concluded that "[a]t this stage in
class certification . . . the incidence of uninjured consumers and
TPPs are insufficient to overcome a showing of common antitrust
impact to the putative class, but the Court preserves the
Defendants’ right to challenge individual damage claims at trial."
Add. 12a (citing Amgen, Inc. v. Connecticut Ret. Plans & Trust
Funds, 133 S. Ct. 1184, 1194—95 (2013)); Add. 24a.
We review class certification orders for abuse of
discretion. Smilow v. Sw. Bell Mobile Sys., Inc., 323 F.3d 32, 37
(1st Cir. 2003) (citing Califano v. Yamasaki, 442 U.S. 682, 703
(1979)). "An abuse of discretion also occurs if the court adopts
-12-
an incorrect legal rule." Waste Mgmt. Holdings, Inc. v. Mowbray,
208 F.3d 288, 295 (1st Cir. 2000). A "class certification appeal
‘can pose pure issues of law reviewed de novo.’" In re New Motor
Vehicles Canadian Export Antitrust Litig., 522 F.3d 6, 17 (citing
Tardiff v. Knox County, 365 F.3d 1, 4 (1st Cir. 2004)). Factual
determinations are reviewed for clear error. Id. (citing In re
PolyMedica Corp. Sec. Litig., 432 F.3d 1, 4 (1st Cir. 2005)).
II.
Defendants contend that the class certification is
improper because the class includes members who were not injured by
generic foreclosure — for example, individual consumers who would
have continued to purchase branded Nexium for the same price after
generic entry. Understanding the defendants’ challenge requires
description of the standards for class certification, only one of
which is at issue on appeal.
To certify a 23(b)(3) class, the district court must
undertake a "rigorous analysis" to determine whether plaintiffs met
the four threshold requirements of Rule 23(a) (numerosity,
commonality, typicality, and adequacy of representation) and Rule
23(b)(3)’s two additional prerequisites. Comcast Corp. v. Behrend,
133 S. Ct. 1426, 1432 (2013); Wal-Mart Stores, Inc. v. Dukes, 131
S. Ct. 2541, 2551 (2011); see also Gen. Tel. Co. of Sw. v. Falcon,
457 U.S. 147, 161 (1982). Defendants do not dispute that the four
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Rule 23(a) requirements were met here. In addition, Rule 23(b)(3)
permits certification only if
the court finds that the questions of law or fact common
to class members predominate over any questions affecting
only individual members, and that a class action is
superior to other available methods for fairly and
efficiently adjudicating the controversy.14
Fed. R. Civ. P. 23(b)(3).
To meet the predominance requirement, the party seeking
certification must show that "the fact of antitrust impact can[] be
established through common proof" and that "any resulting damages
would likewise be established by sufficiently common proof." New
Motor Vehicles, 522 F.3d at 20 (emphasis added). The party also
bears the burden of "affirmatively demonstrat[ing] his compliance"
with the Rule 23 requirements. Comcast, 133 S. Ct. at 1432. The
district court concluded that plaintiffs had done so here, despite
finding that the certified class included some number of uninjured
class members.
14
The matters pertinent to these findings include:
(A) the class members’ interests in individually
controlling the prosecution or defense of separate
actions;
(B) the extent and nature of any litigation concerning
the controversy already begun by or against class
members;
(C) the desirability or undesirability of concentrating
the litigation of the claims in the particular
forum; and
(D) the likely difficulties in managing a class action.
-14-
On appeal, defendants ask us to reverse the class-certification
decision, relying on two related arguments. First, defendants
contend that the presence of any uninjured class members (even a de
minimis number) defeats the 23(b)(3) predominance requirement
because the existence of uninjured class members precludes the use
of common proof at trial. Second, defendants contend that even if
a de minimis number of potentially uninjured class members would
not defeat class certification, more than a de minimis number of
class members were uninjured here.
III.
A.
Relevant to the question of whether a class can include
uninjured members, three principles are established. First, a
class action is improper unless the theory of liability is limited
to the injury caused by the defendants. In other words, the
defendants cannot be held liable for damages beyond the injury they
caused. The Supreme Court emphasized this principle in Comcast.
The plaintiffs in that case had initially relied on four theories
of liability and had calculated aggregate damages based on all four
theories. 133 S. Ct. at 1434. But the district court certified the
class based on only one theory, and plaintiffs did not provide a
damages calculation for that one theory standing alone. Id.
Because the plaintiffs relied on "a methodology that identifies
damages that are not the result of the wrong[,]" they did not
-15-
establish that "damages are capable of measurement on a classwide
basis," failing to meet the Rule 23(b)(3) requirement. Id. at
1434, 1433.15 Here, in contrast, the plaintiffs’ theory of
liability is appropriately limited. As defendants concede, the
plaintiffs’ theory and model for damages would only require that
the defendants pay aggregate damages equivalent to the injury that
they caused.
Second, the definition of the class must be "definite,"
that is, the standards must allow the class members to be
ascertainable. See William B. Rubenstein, Newberg on Class Actions
§§ 3:1, 3:3 (5th ed. 2013) (explaining that an "implied"
requirement for certification is that "a putative class [is]
ascertainable with reference to objective criteria"); Matamoros v.
Starbucks Corp., 699 F.3d 129, 139 (1st Cir. 2012) (holding that a
class was not "unascertainable and overbroad" where it was defined
15
Other circuits have also adopted this understanding of
Comcast. See In re Urethane Antitrust Litig., 768 F.3d 1245,
1258–59 (10th Cir. 2014) (explaining the expert’s benchmarks in
Comcast became "useless" upon a ruling that three of the liability
theories could not be used); In re Deepwater Horizon, 739 F.3d 790,
815 (5th Cir. 2014) (explaining that Comcast stands for the
proposition that formulas for classwide measurement of damages
should not be "incompatible" with liability theories); Butler v.
Sears, 727 F.3d 796, 799 (7th Cir. 2013) (A damages model must
"measure only those damages attributable to [the liability] theory.
If the model does not even attempt to do that, it cannot" meet the
requirements of Rule 23(b)(3). (citing Comcast, 133 S. Ct. at
1433)), cert. denied, 134 S. Ct. 1277 (2014); Leyva v. Medline
Indus. Inc., 716 F.3d 510, 514 (9th Cir. 2013) ("[P]laintiffs must
be able to show that their damages stemmed from the defendant’s
actions that created the legal liability." (citing Comcast, 133
S. Ct. at 1435)).
-16-
in terms of an "objective criterion"); Carrera v. Bayer Corp., 727
F.3d 300, 306 (3d Cir. 2013) (As an "essential prerequisite of a
class action," plaintiffs "must show, by a preponderance of the
evidence, that the class is currently and readily ascertainable
based on objective criteria." (citing Marcus v. BMW of North
America, LLC, 687 F.3d 583, 592—93 (3d Cir. 2012) (internal
quotation marks omitted)). The class definition here satisfies
these standards by being defined in terms of purchasers of Nexium
during the class period (with some exceptions that also satisfy
objective standards).
Third, where an individual claims process is conducted at
the liability and damages stage of the litigation, the payout of
the amount for which the defendants were held liable must be
limited to injured parties.16 At the class certification stage, the
16
We do not address here problems that arise where the
distribution of the recovery is not based on an individual claims
process: for example, where the amount of recovery for each
individual class member is so small that it is not practical to
engage in an individual claims process. In such circumstances some
courts have resorted to awarding the recovery from the defendants
to charities whose missions are consistent with the litigation,
under the "cy pres" doctrine, or to a group of individuals that
closely approximates the class, under the "fluid recovery" process.
See, e.g., Comment: Manageability of Notice and Damage Calculation
in Consumer Class Actions, 70 Mich. L. Rev. 338, 366 n.185 (1971)
(describing the settlement of the case Daar v. Yellow Cab, 67 Cal.
2d 695 (1967), in which a taxi company reduced fares to offset
gains it had made with higher rates). There is no suggestion here
that an individual claims process is not feasible.
Nor do we deal here with the problem that arises where the
amounts awarded to individual claimants are less than the aggregate
award. See Newberg, supra, § 12:28 (outlining common ways of
distributing "unclaimed" funds).
-17-
court must be satisfied that, prior to judgment, it will be
possible to establish a mechanism for distinguishing the injured
from the uninjured class members. The court may proceed with
certification so long as this mechanism will be "administratively
feasible," see Carrera, 727 F.3d at 307, and protective of
defendants’ Seventh Amendment and due process rights, see American
Law Institute, Principles of the Law: Aggregate Litigation,
§§ 2.02(a)(3), 2.07(d) cmt. j (2009) (indicating that the court
should exercise discretion to authorize aggregate treatment only if
it would "not compromise the fairness of procedures for resolving
any remaining issues presented by such claims" and that "due
process in aggregation . . . extend[s] to persons opposing the
aggregate group litigating related claims on an aggregate basis").
The defendants here dispute the plaintiffs’ compliance
with the third set of requirements primarily because the class
includes some number of brand-loyal consumers who would continue to
purchase branded Nexium even when a generic becomes available.
Defendants argue that "the [brand-loyalist issue] presents problems
that plaintiffs cannot overcome, for plaintiffs have no methodology
to identify [at a later stage of litigation] those consumers who
would have switched to a generic version." Appellant’s Br. 22.
Defendants assert that the plaintiffs’ expert admitted that her
damages model did not limit recovery to injured parties.
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While it is true that a proper mechanism for exclusion of
brand-loyalist consumers has not yet been proposed, plaintiffs’
expert made no concession that such a mechanism could not be
developed, nor did defendants’ expert say that it could not be
developed.
In order to address whether an appropriate mechanism can
be developed, it is useful to consider how injury would be
established outside of the class action context — that is, in an
individual consumer suit for antitrust damages. In that situation,
as here, by definition there are no records concerning generic
purchases during the class period since no generic was on the
market. Under these circumstances there appear to be at least two
ways that the consumer could establish injury. The first would be
to argue for a presumption that consumers would purchase the
generic if it were available, i.e., a presumption that economically
rational consumers faced with two identical products would purchase
the less expensive alternative. This presumption would be similar
to the presumption of reliance in securities class actions and
would be subject to rebuttal by the defendant. See Halliburton Co.
v. Erica P. John Fund, Inc., 573 U.S. ___, 134 S. Ct. 2398, 2408,
2412 (2013) (presumption of reliance in Basic, Inc. v. Levinson,
485 U.S. 224 (1988), applies to class action, but is subject to
rebuttal by defendants). We do not decide whether applying such a
presumption would be appropriate.
-19-
But even if a presumption were determined not to be
appropriate, another approach exists. This other approach would be
to establish injury through testimony by the consumer that, given
the choice, he or she would have purchased the generic. Such
testimony, if unrebutted, would be sufficient to establish injury
in an individual action. And if such consumer testimony would be
sufficient to establish injury in an individual suit, it follows
that similar testimony in the form of an affidavit or declaration
would be sufficient in a class action. There cannot be a more
stringent burden of proof in class actions than in individual
actions. "Rigorous analysis," Falcon, 457 U.S. at 161, of Rule 23
requirements does not require raising the bar for plaintiffs higher
than they would have to meet in individual suits.17
Thus, we have confidence that a mechanism would exist for
establishing injury at the liability stage of this case, compliant
with the requirements of the Seventh Amendment and due process.
See Madison v. Chalmette Refining, LLC, 637 F.3d 551, 556 (5th Cir.
2011) (approving, in the context of class certification,
consideration of possible “case management tools, including
narrowing the claims and potential plaintiffs through summary
17
The cases relied on by the dissent rejecting the use of
affidavits involved affidavits concerning the past purchase of the
product in question (necessary for class membership), not
affidavits concerning likely future purchases of the consumers, as
to which documents are not available. See Marcus, 687 F.3d at 593;
Carrera, 727 F.3d at 304.
-20-
judgment [or] facilitating the disposition of the remaining
plaintiffs’ claims through issuance of a Lone Pine order [requiring
affidavits from plaintiffs]”).
Defendants have merely speculated that a mechanism for
exclusion cannot be developed later. This is not enough to
overcome plaintiffs’ case for having met the requirements of Rule
23. See Smilow, 323 F.3d at 40 (decertification unnecessary where
existence of individualized issues is "a matter of conjecture");
Gunnells v. Healthplan Servs., Inc., 348 F.3d 417, 430 (4th Cir.
2003) (defeating adequacy requirement of Rule 23 requires a
conflict that is "more than merely speculative or hypothetical").
Defendants also assert that any mechanism of exclusion
that requires determination of the individual circumstances of
class members is improper. But the Supreme Court in Amgen and the
circuits in other cases have made clear that the need for some
individualized determinations at the liability and damages stage
does not defeat class certification. Rule 23(b)(3) "does not
require a plaintiff seeking class certification to prove that each
element of her claim is susceptible to classwide proof." Amgen,
133 S. Ct. at 1196 (alterations and citations omitted). Rather,
the question is whether there is "reason to think that
[individualized] questions will overwhelm common ones and render
class certification inappropriate . . . ." Halliburton, 134 S. Ct.
at 2412 (2014) (emphasis added). For example, damages will not be
-21-
uniform across the class. But it is well-established that "[t]he
individuation of damages in consumer class actions is rarely
determinative under Rule 23(b)(3). Where . . . common questions
predominate regarding liability, then courts generally find the
predominance requirement to be satisfied even if individual damages
issues remain." Smilow, 323 F.3d at 40; Newberg, supra, § 4:54 (It
is a "black letter rule . . . that individual damage calculations
generally do not defeat a finding that common issues predominate
. . . .").
Even in cases where "the issue of injury-in-fact [not
just damages calculation] presents individual questions, . . . it
does not necessarily follow that they predominate over common ones
and that class action treatment is therefore unwarranted." Cordes
& Co. Fin. Servs., Inc. v. A.G. Edwards & Sons, Inc., 502 F.3d 91,
108 (2d Cir. 2007) (emphasis added). We do not think the need for
individual determinations or inquiry for a de minimis number of
uninjured members at later stages of the litigation defeats class
certification. As contemplated by Halliburton, the district court
also explicitly recognized the need to "preserv[e] the Defendants’
right to challenge individual damage claims at trial." Add. 24a.
B.
In light of these three requirements — ensuring the class
is definite, limiting aggregate recovery to the amount of the
injury, and ensuring recovery by only injured parties — it is
-22-
difficult to understand why the presence of uninjured class members
at the preliminary stage should defeat class certification.
Ultimately, the defendants will not pay, and the class members will
not recover, amounts attributable to uninjured class members, and
judgment will not be entered in favor of such members. Some number
of uninjured members will receive a class notice, but the district
court can easily assure that defendants will not pay for notice to
uninjured members.18 At worst the inclusion of some uninjured class
members is inefficient, but this is counterbalanced by the overall
efficiency of the class action mechanism. Moreover, excluding all
uninjured class members at the certification stage is almost
impossible in many cases, given the inappropriateness of certifying
what is known as a "fail-safe class" — a class defined in terms of
the legal injury.19
18
"District courts may order a class action defendant to
pay the cost of class notification after they determine that the
defendant is liable on the merits." Hunt v. Imperial Merch.
Servs., Inc., 560 F.3d 1137, 1144 (9th Cir. 2009). However, fee
shifting is discretionary, and the Supreme Court has cautioned that
"courts must not stray too far from the principle" that plaintiff
"should bear all costs relating to the sending of notice because it
is he who seeks to maintain the suit as a class action."
Oppenheimer Fund, Inc. v. Sanders, 437 U.S. 340, 350 (1978).
19
As the district court noted, a fail-safe class is one in
which "it is virtually impossible for the Defendants to ever ‘win’
the case, with the intended class preclusive effects." Add. 26a
n.5; see Young v. Nationwide Mut. Ins. Co., 693 F.3d 532, 537 (6th
Cir. 2012) (A fail-safe class "is prohibited because it would allow
putative class members to seek a remedy but not be bound by an
adverse judgment—either those class members win or, by virtue of
losing, they are not in the class and are not bound." (citations,
internal quotation marks omitted)).
-23-
In certifying a (b)(3) class there is an almost
inevitable tension between excluding all non-injured parties from
the defined class and including all injured parties in the defined
class. Ideally, that tension should be resolved by adopting a
class definition that includes no uninjured parties and excludes no
injured parties. See Messner v. Northshore Univ. Healthsystem, 669
F.3d 802, 825 (7th Cir. 2012) ("Defining a class so as to avoid, on
one hand, being over-inclusive and, on the other hand, the fail-
safe problem is more of an art than a science."). We doubt that
this will be feasible in many cases. Without the benefit of
further proceedings, it is simply not possible to entirely separate
the injured from the uninjured at the class certification stage.
And as the Supreme Court noted in Amgen, "Rule 23 grants courts no
license to engage in free-ranging merits inquiries at the
certification stage." 133 S. Ct. at 1194–95.
Finally, Defendants' objections to certifying a class
including uninjured members run counter to fundamental class action
policies. As the Supreme Court has repeatedly recognized, while
"[t]he class action device was designed as an exception to the
usual rule that litigation is conducted by and on behalf of the
individual named parties only," it is nonetheless "peculiarly
appropriate when the issues involved are common to the class as a
whole." Falcon, 457 U.S. at 155 (citing Califano, 442 U.S. at 701
(internal quotation marks omitted)). In particular, when amending
-24-
Rule 23 to include section (b)(3), "the Advisory Committee sought
to cover cases in which a class action would achieve economies of
time, effort, and expense, and promote . . . uniformity of decision
as to persons similarly situated." Amchem Prods., Inc. v. Windsor,
521 U.S. 591, 615 (1997) (citing Adv. Comm. Notes, 28 U.S.C. App.,
p. 697) (internal quotation marks omitted). In Amchem, the Supreme
Court recognized what types of cases were best adjudicated under
this amended section — "[w]hile the text of Rule 23(b)(3) does not
exclude from certification cases in which individual damages run
high, the Advisory Committee had dominantly in mind vindication of
the rights of groups of people who individually would be without
effective strength to bring their opponents to court at all." Id.
at 617 (internal quotation marks omitted).
The plaintiff class members in this case appear to be the
very group that Rule 23(b)(3) was intended to protect. As we
discuss later in this opinion, the actual overcharge to each class
member was generally a small amount per prescription and too small
to warrant individual litigation. See Carnegie v. Household Int’l,
Inc., 376 F.3d 656, 661 (7th Cir. 2004) ("The realistic alternative
to a class action is not 17 million individual suits, but zero
individual suits, as only a lunatic or a fanatic sues for $30.").
As this court noted in New Motor Vehicles, 522 F.3d at 8, "an
erroneous failure to certify a class where individual claims are
-25-
small may deprive plaintiffs of the only realistic mechanism to
vindicate meritorious claims."
C.
Despite the obvious utility of allowing the inclusion of
some uninjured class members in the certified class and the lack of
harm in doing so, the defendants rely on authority from the Supreme
Court and from this court for the proposition that plaintiffs must
nonetheless prove that every putative class member suffered injury
to prevail on class certification. But the authority cited by the
defendants do not impose any such requirement.
The defendants cite Wal-Mart, where the Supreme Court
reversed the class certification because plaintiffs could not show
Wal-Mart had a common policy of discriminating against women. 131
S. Ct. at 2553. As a result, plaintiffs did not meet the Rule 23(a)
commonality requirement. Id. But the Wal-Mart Court nowhere
stated that at the class certification stage, every member of the
class must establish that he, she or it was in fact injured by the
common policy of discrimination. Id. at 2550—55.
Defendants’ reliance on Comcast is equally misdirected.
As we explained above, Comcast did not require that plaintiffs show
that all members of the putative class had suffered injury at the
class certification stage — simply that at class certification, the
damages calculation must reflect the liability theory. 133 S. Ct.
at 1434.
-26-
The Supreme Court also addressed the treatment of
potentially uninjured class members last term in Halliburton. In
securities cases like Halliburton, investors can recover damages
only if they can prove that they relied on the defendant’s
misrepresentation in deciding to buy or sell a company’s stock.
134 S. Ct. at 2405. Under Basic, Inc. v. Levinson, 485 U.S. 224
(1988), a plaintiff securities class can satisfy the reliance
requirement at class certification by invoking a presumption of
reliance, rather than proving direct reliance on defendant’s
misrepresentation for each individual class member. Halliburton,
134 S. Ct. at 2408, 2412. Basic permits defendants to rebut this
presumption using individualized evidence "showing that [the class
member] did not rely on the integrity of the market price in
trading stock." Id. at 2412. The Halliburton Court concluded that
"[w]hile [the rebuttal] has the effect of leaving individualized
questions of reliance in the case, there is no reason to think that
these questions will overwhelm common ones and render class
certification inappropriate under Rule 23(b)(3)." Id. (internal
quotation marks omitted). Even if "the defendant might attempt to
pick off the occasional class member here or there through
individualized rebuttal . . . individual questions [did not]
predominate" over common questions. Id. Thus, the Halliburton
Court contemplated that a class with uninjured members could be
-27-
certified if the presence of a de minimis number of uninjured
members did not overwhelm the common issues for the class.
The law in this circuit is not to the contrary.
Defendants argue that this court in New Motor Vehicles held that to
obtain class certification, plaintiffs must establish at class
certification that "each class member was harmed by the defendants’
practice." 522 F.3d at 28 (internal quotation marks and
alterations omitted). To the extent that New Motor Vehicles is
read to impose such a requirement, it has been overruled by the
Supreme Court’s Halliburton decision. But, in fact, New Motor
Vehicles imposes no such requirement. In that case, plaintiffs
alleged that defendant automobile manufacturers illegally colluded
to restrict the flow of Canadian cars into the United States to
maintain higher prices in the United States. Id. at 10. This
court was concerned that even if plaintiffs showed that defendants’
anti-competitive conduct increased the vehicle list price in the
United States, plaintiffs did not have evidence showing that the
list price was actually paid by the class members. Id. at 27—28.
New Motor Vehicles recognized that plaintiffs’ theory "must include
some means of determining that each member of the class was in fact
injured," and that at the liability stage, there must be a showing
"that class members were injured at the consumer level." Id. at
28. There was no basis for concluding that the plaintiffs there
-28-
could separate the injured from the uninjured at the liability
stage.
But New Motor Vehicles did not impose a requirement that
the injury determination must be completed by the class-
certification stage — only that "the district court [have] enough
information to evaluate preliminarily whether the proposed model
will be able to establish . . . which consumers were impacted by
the alleged antitrust violation and which were not." Id. (emphasis
added). Uninjured members of the putative class would be
identified in the liability proceedings later in the case, as
Halliburton contemplates.20
20
New Motor Vehicles does not suggest separation of the
injured from the uninjured must be possible "without need for
individual determination" — only that separating the injured from
the uninjured must be possible using a common test rather than an
individual ad hoc approach. 522 F.3d at 28. The other circuit
cases defendants rely on do not suggest otherwise. For instance, in
In re Hydrogen Peroxide Antitrust Litigation, the Third Circuit,
which cited many of the cases the defendants cite, suggested that
if "fact of [antitrust] damage cannot be established for every
class member through proof common to the class, the need to
establish antitrust liability for individual class members defeats
. . . predominance." 552 F.3d 305, 311 (3d Cir. 2008) (emphasis
added) (citing Bell Atl. Corp. v. AT&T Corp., 339 F.3d 294, 302
(5th Cir. 2003)). However, the court explicitly noted that the
"[p]laintiffs’ burden at the class certification stage is not to
prove the element of antitrust impact" even if "to prevail on the
merits each class member must do so." Id. Rather, at class
certification, plaintiffs must only show that "antitrust impact is
capable of proof at trial through evidence that is common to the
class rather than individual members." Id. (emphasis added).
Similarly, the D.C. Circuit has stated that at the class
certification stage, plaintiffs must "show that they can prove" —
not that they have proved — "through common evidence, that all
class members were in fact injured . . . ." In re Rail Freight
Fuel Surcharge Antitrust Litig., 725 F.3d 244, 252 (D.C. Cir.
-29-
"Numerous courts have certified plaintiff classes even
though the plaintiffs have not been able to use common evidence to
show harm to all class members." Davis et al., The Puzzle of Class
Actions with Uninjured Members, 82 G.W.L.Rev. 858, 859 (May 2014).
In addition to Halliburton, cases from our sister circuits21 and
this circuit22 hold that the presence of a de minimis number of
2013). In a case where plaintiffs’ methodology "detects injury
where none could exist[,]" and there is "no reliable means of
proving classwide injury[,]" class certification must be denied.
Id. at 252—53 (emphasis added). But from this it does not follow
that the existence of a de minimis number of uninjured class
members bars certification if those members can be weeded out at a
later stage.
21
See, e.g., Messner, 669 F.3d at 819, 824—25 (vacating
denial of class certification despite presence of potentially
uninjured class members); Cordes & Co. Fin. Servs., 502 F.3d at
107—08 (same); In re Urethane, 768 F.3d at 1254 (affirming class
certification despite the fact that "some [of the plaintiffs]
avoid[ed] injury altogether"); Pella Corp. v. Saltzman, 606 F.3d
391, 394 (7th Cir. 2010) (affirming class certification despite
possibility that class included uninjured members); Kohen v. Pac.
Inv. Mgmt. Co., 571 F.3d 672, 677 (7th Cir. 2009) (same); DG ex
rel. Stricklin v. Devaughn, 594 F.3d 1188, 1198, (10th Cir. 2010)
("[C]ertification requirements neither require all class members to
suffer harm . . . nor Named Plaintiffs to prove class members have
suffered such harm."); Mims v. Stewart Title Guar. Co., 590 F.3d
298, 308 (5th Cir. 2009) ("Class certification is not precluded
simply because a class may include persons who have not been
injured by defendant’s conduct." (citation omitted)).
22
See Gintis v. Bouchard Transp. Co., 596 F.3d 64, 67 (1st
Cir. 2010) (Souter, J.) (vacating and remanding district court’s
denial of class certification and stating that "on remand, the
focus will be on the plaintiffs’ claim that common evidence will
suffice to prove injury, causation and compensatory damages for at
least a very substantial portion of the claims that can be brought
by the putative class members" (emphasis added)); Tardiff, 365 F.3d
at 6 ("[U]ndue complications as to liability [were] limited. . . .
If there was in fact a rule, custom or policy of strip searching
every arrestee or a substantially overlarge category, then it is a
-30-
uninjured class members is permissible at class certification. In
fact, as one court has recognized at certification, "a class will
often include persons who have not been injured by the defendant’s
conduct; indeed, this is almost inevitable because at the outset of
the case many of the members of the class may be unknown, or if
they are known still the facts bearing on their claims may be
unknown." Kohen, 571 F.3d at 677. "Such a possibility or indeed
inevitability does not preclude class certification." Id. (citing
1 Alba Conte & Herbert Newberg, Newberg on Class Actions § 2:4,
pp. 73—75 (4th ed. 2002)).
We think that a certified class may include a de minimis
number of potentially uninjured parties. We need not decide
whether it is ever permissible to define a proper class including
more than a de minimis number of uninjured parties since we
conclude that it has not been shown that the class here includes
more than a de minimis number of uninjured parties.
IV.
Defendants’ alternative argument is that more than a de
minimis number of class members were uninjured here, barring class
fair guess that most arrestees so classed were strip searched on
this basis. (emphasis added)); Mowbray, 208 F.3d at 296 (noting
that "most class members’ claims were unaffected" by
"idiosyncratic" statute of limitations issues, affirming
certification because "the mere fact that such concerns may arise
and may affect different class members differently does not compel
a finding that individual issues predominate over common ones"
(emphasis added)).
-31-
certification. In addressing this argument, we conduct a detailed
inquiry into the parties’ and experts’ economic analyses, keeping
in mind that this is an indirect purchaser action. The Supreme
Court in Illinois Brick, in holding that indirect purchasers may
not bring suit for damages under the Clayton Act, noted the
"uncertainties and difficulties in analyzing price and output
decisions ‘in the real economic world rather than an economist’s
hypothetical model’" and reasoned that actions by indirect
purchasers would often result in "long and complicated" proceedings
when such purchasers attempted to prove that a price increase was
passed on to them. 431 U.S. at 732.
Twenty-four states eventually disagreed, creating private
causes of action for indirect purchasers under state antitrust
laws. That such actions are thus allowed under those laws does not
eliminate the real economic and litigation complexities identified
by the Supreme Court. It should therefore not be surprising that
determining whether and when certification of indirect purchaser
class actions may bear the added complexity entails considerable
thought and effort.
Here, a class member suffered antitrust injury if that
individual or entity was overcharged for Nexium during the class
period. There is no serious dispute that the majority of class
members were injured. It is undisputed that the price that would
have been paid by class members for generic Nexium but-for
-32-
defendants’ conduct ("but-for price") is lower than the actual
price paid by class members during the class period for branded
Nexium ("class period price"). For those class members who were
reimbursed for their purchases by an insurance plan and paid only
a copayment, it is similarly undisputed that the generic copayment
is almost always lower than the brand-name copayment. The dispute
here focuses on various purchasers who were atypical and allegedly
uninjured.
In proving injury, plaintiffs relied on the expert
testimony of Professor Meredith Rosenthal, Professor of Health
Economics and Policy at the Harvard School of Public Health and an
Academic Affiliate of Greylock McKinnon Associates, a consulting
and litigation support firm. Rosenthal assumed that plaintiffs had
proven defendants’ anti-competitive conduct and offered an opinion
on the antitrust impact of the alleged generic foreclosure. To
calculate the class period price — the actual prices paid by class
members for branded Nexium during the class period, Rosenthal used
data from the IMS National Prescription Audit. However, because no
generic forms of Nexium were on the market, there was no data to
show firsthand the prices of branded and generic Nexium after
generic entry. To calculate the but-for prices, Rosenthal relied
on the "yardstick" approach which approximates the but-for market
by using data from similar markets.
-33-
Because Nexium is a proton-pump inhibitor, Rosenthal
examined other drugs in that therapeutic class for their
suitability as a yardstick. She selected Prevacid (lansoprazole)
because it was launched closest in time to Nexium (November 2009),
and had a similar profile of generic entrants as Nexium in terms of
number and size. Rosenthal corroborated her calculations of the
but-for prices using defendants’ documents, which contained
estimates of Nexium prices after generic entry. Rosenthal’s
calculations showed that nearly all class members suffered an
antitrust injury as a result of defendants’ conduct.
Defendants argued that even though injured class members
comprise a majority of the putative class, more than a de minimis
number of class members were not injured, identifying five groups
of class members that likely suffered no injury. Defendants’
arguments were based on the expert testimony of Professor James W.
Hughes, Thomas Sowell Professor of Economics at Bates College.
Plaintiffs bear the burden of an initial showing that a
proposed class satisfies the Rule 23 requirements. Smilow, 323
F.3d at 38; accord Messner, 669 F.3d at 811; In re Hydrogen
Peroxide, 552 F.3d at 311—12. But "[plaintiffs] need not make that
showing to a degree of absolute certainty. It is sufficient if
each disputed requirement has been proven by a preponderance of
evidence." Messner, 669 F.3d at 811 (citing Teamsters Local 445
Freight Div. Pension Fund v. Bombardier Inc., 546 F.3d 196, 202 (2d
-34-
Cir. 2008)); accord Alaska Elec. Pension Fund v. Flowserve Corp.,
572 F.3d 221, 228 (5th Cir. 2009). Once plaintiffs have made their
initial showing, defendants have the burden of producing sufficient
evidence to rebut the plaintiff’s showing.
Here, it is difficult to determine exactly what findings
the district court made with respect to each of the five allegedly
uninjured groups presented by the defendants. However, the
district court generally credited Rosenthal’s calculations. It
pointed out that Rosenthal’s figures showed "approximately 5.8
percent of all class prescriptions were attributable to brand . . .
transactions with no overcharge." Add. 24a (emphasis added)
(internal quotation marks omitted). Neither the parties nor the
district court presented a precise estimate of the number or
percentage of uninjured class members, but on balance, the district
court found defendants’ challenges did not suffice to overcome
predominance.
We consider here defendants’ contentions with respect to
the five allegedly uninjured groups and the record materials. We
conclude that defendants’ argument that no class can be certified
stems in large part from four errors in their analysis of the
"uninjured" groups.
First, defendants incorrectly assume that class members
are shielded from injury by plan arrangements that the district
court found did not exist.
-35-
Second, defendants incorrectly assume that a class member
who is injured for only a part of the class period did not suffer
injury, even though they have now conceded that an injury for part
of the class period is sufficient to establish injury. "Paying an
overcharge caused by the alleged anticompetitive conduct on a
single purchase suffices to show — as a legal and factual matter —
impact or fact of damage." Davis & Cramer, Antitrust, Class
Certification, and the Politics of Procedure, 17 Geo. Mason L. Rev.
969, 984—85 (2010) (internal quotation marks omitted) (citing Paper
Sys., Inc. v. Nippon Paper Indus. Co., 281 F.3d 629, 633 (7th Cir.
2002)).
Third, defendants incorrectly assume that if a class
member offsets an overcharge through later savings attributable to
the same or related transaction, there is no injury. But antitrust
injury occurs the moment the purchaser incurs an overcharge,
whether or not that injury is later offset. See Adams v. Mills,
286 U.S. 397, 407 (1932) (“In contemplation of law the claim for
damages arose at the time the extra charge was paid. Neither the
fact of subsequent reimbursement by the plaintiffs from funds of
the shippers nor the disposition which may hereafter be made of the
damages recovered is of any concern to the wrongdoers.” (citations
omitted)); see also Hawaii v. Standard Oil Co. of Cal., 405 U.S.
251, 262 n.14 (1972) ("[C]ourts will not go beyond the fact of this
injury to determine whether the victim of the overcharge has
-36-
partially recouped . . . ."). Here, if a class member is
overcharged, there is an injury, even if that class member suffers
no damages.
Fourth, defendants incorrectly treat individual
prescriptions of Nexium as a proxy for individual consumers. For
example, defendants mistakenly cite the district court’s findings
that "only approximately 5.8 percent of all class
prescriptions . . . [had] no overcharge" and that "Nexium co-pay
coupons were only used in 2-4 percent of prescriptions," Add. 24a
(emphases added), to support the conclusion that "at least 7.8 to
9.8% of the consumers — more than 100,000 consumers in all —
suffered no injury." Appellant’s Br. 20 (emphasis added).
However, there is no necessary relationship between the percentage
of prescriptions and the percentage of consumers since a class
member may fill one prescription with an overcharge and another
with no overcharge.
In light of the correct standards, we discuss each of the
five allegedly uninjured groups in turn — Groups 1 to 5. The
question in each instance is whether the but-for price absent
generic foreclosure would have been lower than the actual class
period price of Nexium.
Group 1. This group consists of TPPs that would have
allegedly paid a higher but-for price for generic Nexium than they
actually paid for branded Nexium during the class period.
-37-
Defendants contend that they were not injured because they
benefitted from rebates that reduced the actual class period price
for branded Nexium.23 Defendants argue that Group 1 members were
not injured because with the rebates, the actual class period
Nexium price was lower than the but-for generic price. However,
defendants have not shown that this is the case. Using Hughes’
calculations, after accounting for the rebates, the average actual
class period branded Nexium price was $121, while the but-for
generic price would have been $113.24 Therefore, Group 1 TPPs who
23
These rebates were negotiated between PBMs and
AstraZeneca. Both Rosenthal and Hughes agree that AstraZeneca paid
approximately $12.9 billion in rebates to PBMs from 2008 to 2012.
Because PBMs are not part of the class, the rebates only affect the
class to the extent that they are "passed-through" from PBMs to
TPPs. There is some disagreement as to whether the rebates are
passed-through as a discounted price when the PBMs bill the TPPs or
whether TPPs are charged the list price and then refunded a portion
based on the rebate amount. If the latter, then all Group 1 TPPs
were injured because the rebates are only a damages setoff and do
not affect the fact of injury.
Rosenthal calculated that approximately $10.3 billion in
rebates was passed through to TPPs (an average discount of 39%),
although Hughes alleges that the entire $12.9 billion was passed
through (an average discount of 49%). For the purposes of these
calculations, we assume that Hughes is correct — that all of the
rebates were passed through.
24
Defendants also argue that Rosenthal improperly relied on
averages to determine the fact of injury, with the result that some
class members at the extreme would not suffer injury even though
the average consumer did. We think that the defendants cannot
simply speculate that a more than de minimis number of class
members departed from the average. They have failed to submit
evidence that this is the case. Nor is it the case that
plaintiffs’ average but-for price is so close to the average class
period price that any deviation with either figure would eliminate
the overcharge.
-38-
would have purchased generic Nexium during the class period were
injured.
Group 2. TPPs usually pay for the prescription drug
directly and then charge plan members a copayment (a flat payment)
or a coinsurance (a percentage of the drug price). Sometimes TPPs
incentivize generic drug purchases by plan members by charging a
lower copayment for a generic drug than for its brand-name
counterpart. Defendants allege that under such plan arrangements,
"the decrease in the co-payment is more than the total net price
drop," Add. 21a (citing Def.’ Mem. Opp. Class Certification) —
i.e., the difference between the actual branded Nexium price paid
for by the TPP during the class period (absent generic entry) and
the but-for generic price is less than the difference between the
branded Nexium copayment (absent generic entry) and the but-for
generic copayment. As a result, defendants argue that Group 2
members — TPPs that offered such plan arrangements — suffered no
injury because the decreased revenue from copayments offset the
increased savings from the lower generic price. But as discussed
above, that erroneous inference assumes that the decrease in
copayment revenue should offset the increased actual savings in
determining injury when it should not.
In any event, defendants have presented no evidence to
support this prediction. Rosenthal’s projections show that the
price difference between the branded Nexium price absent generic
-39-
entry and the but-for generic price would have been $47 at the
beginning of the class period and $196 at the end. Plaintiffs’
deposition testimony and other evidence established that a typical
plan offered by TPPs has only a $10 or $20 spread between the
generic and brand-name copayments. The defendants provided no
evidence of any plans with a greater spread. The record shows that
there are likely no Group 2 members who were uninjured by
defendants’ conduct.
Group 3. Some TPPs, according to Hughes, had fixed price
agreements to pay PBMs the same amount for every drug in a given
therapeutic class, regardless of the actual drug price.25 As a
result, defendants claim that Group 3 TPPs suffered no injury
because they would have paid the same for generic Nexium in the
but-for world as they actually paid for branded Nexium during the
class period. But the defendants did not provide any evidence that
such agreements existed. Rosenthal stated that she has never
encountered such an agreement in her research. The district court
found that "[Hughes] does not establish the actual existence of
[such] uninjured TPP groups." Add. 23a. The district court did
not err in finding insufficient evidence that Group 3 actually
exists.
25
These hypothetical agreements are presumably with PBMs
whereby the TPPs reimburse pharmacies the same amount for every
drug in a particular therapeutic class.
-40-
Group 4. This group comprises consumers who used coupons
that reduced the copayment that they paid for branded Nexium during
the class period. The assumption is that the coupons would not
have been available in the but-for world and that the consumers
would have switched to generic Nexium. These coupons were offered
by AstraZeneca starting in August 2011. Eligible patients could
use a "Nexium Savings Card" to pay only an $18 copayment for their
prescription (with a maximum discount of $50). Defendants assert
that Group 4 members were not injured because with coupons, the
actual branded Nexium copayment during the class period was lower
than the but-for generic copayment would have been. But the
average branded Nexium copayment with the coupon was $18 (before
generic entry), while the average but-for generic copayment would
have been only $10-11. Thus these consumers were likely injured as
well.
Group 5. This group comprises consumers who would
continue to purchase only brand-name Nexium even after generic
entry, known as brand-loyalists. There are Group 5 members who
paid the actual cost of the drug (i.e., uninsured consumers) or a
percentage thereof (i.e., consumers with a coinsurance plan).
Defendants argue that these class members would have suffered no
injury because, after generic entry, the price of branded Nexium
would have increased over the class period. Defendants also
contend that some plans charged a higher copayment for branded
-41-
drugs than for their generic substitutes with the result that
brand-loyalist members of such plans would suffer no injury from
the foreclosure of generic entry.26 In other plans, the copayment
for the branded drug increased with generic entry. As a result,
defendants contend that Group 5 consumers are not injured because
they would pay more with generic entry.
We agree that some Group 5 consumers were likely not
injured by defendants’ conduct. The question is whether that is
more than a de minimis number. The district court found, based on
Rosenthal’s projections, that 5.8% of all prescriptions during the
entire six-year class period would have been for branded Nexium.
Defendants argue that this shows that 5.8% "of the consumers" were
uninjured. Appellant’s Br. 20. This does not follow for at least
the following reasons:
First, the number of prescriptions is not a necessary
surrogate for the number of consumers.
26
Consumers who are members of plans with flat copayment
structures (i.e., that charge the same copayment for both brand-
name drugs and generic substitutes) were also uninjured whether
they would have switched to the generic or were brand-loyalists.
But these consumers are already excluded by the class definition —
"‘flat co-pay’ ‘Cadillac Plan’ consumers who made purchases only
via fixed dollar co-payments that do not vary between Nexium and
its AB-rated generic equivalent." Add. 41a(f).
One minor change to the class definition is required to
exclude members of plans where the generic copayment after generic
entry would be the same as the branded copayment before generic
entry.
-42-
Second, consumers who purchased Nexium using cash or a
coinsurance at the beginning of the class period were injured (even
if they made later purchases that did not reflect injury) because
in the early period the but-for branded Nexium price would have
been lower than the actual branded Nexium price in the early
period.
Third, a consumer was injured if he or she would have
purchased generic Nexium even once during the class period. Because
Nexium is a maintenance drug, there is a high likelihood that a
generic purchase would occur. Indeed, only 2% of prescriptions
three years after generic entry would have been for branded Nexium.
Significantly, state laws allow pharmacists to substitute generic
products (some mandate substitution unless a physician prevents
substitution).
As Rosenthal explained, defendants are relying on the
mere hope that there is a "likelihood of there being a substantial
number of consumers whose only purchases during the entire Class
Period were brand purchases . . . ." J.A. 203. While on this
record it is impossible to precisely quantify the uninjured members
in Group 5, we conclude that plaintiffs have provided more than
enough evidence to meet their Rule 23 burden.
What counts as a "de minimis" deviation "from a
prescribed standard must, of course, be determined with reference
to the purpose of the standard." Wisconsin Dept. of Revenue v.
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William Wrigley, Jr., Co., 505 U.S. 214, 232 (1992). We thus
define "de minimis" in functional terms. Here, if common issues
"truly predominate over individualized issues in a lawsuit, then
the addition or subtraction of any of the plaintiffs to or from the
class [should not] have a substantial effect on the substance or
quantity of evidence offered." Vega v. T-Mobile USA, Inc., 564
F.3d 1256, 1270 (11th Cir. 2009) (alteration in original, citation
omitted). Upon examination of the record, we see no basis for
overturning the district court’s ultimate conclusion that the
number of uninjured members here is not so large as to render the
class impractical or improper, or to cause non-common issues to
predominate. Nor do we see a basis for concluding the number of
uninjured class members here is so large as to violate defendants’
7th Amendment or due process rights, in light of the fact that
uninjured members can be excluded and the district court expressly
"preserve[d] the Defendants’ rights to challenge individual damage
claims at trial." Add. 24a.
Plaintiffs’ evidence has shown that the vast majority of
class members were probably injured. "Rigorous analysis" of the
evidence does not show that the number of uninjured class members
is more than de minimis. The district court was well within its
discretion to have found that the plaintiffs’ "rebuttal to
[defendants’] challenges [was] persuasive" and sufficient for a
"showing of common antitrust impact to the putative class." Add.
-44-
24a. The defendants’ speculation cannot defeat the plaintiffs’
showing. See In re Urethane, 768 F.3d at 1254 (no abuse of
discretion in not decertifying where plaintiffs had evidence of
artificially inflated baseline for price negotiations, and
defendants alleged plaintiffs "could have avoided the announced
price increases, such as [by] negotiating for a lower price or
switching to a substitute" (emphasis added)); Messner, 669 F.3d at
825 (once plaintiffs had shown broad antitrust impact,
certification could not be denied just because defendants pointed
to a class of uninjured members but "[gave] no indication how many
such individuals actually exist"); Kohen, 571 F.3d at 676—79 (where
evidence did not show "great many" uninjured persons, defendants’
pointing to "possibility" that unidentified number of class members
were uninjured is insufficient to defeat certification, especially
since defendants could depose a "random sample of class members to
determine how many were [uninjured] and . . . could urge the
district court to revisit its decision to certify"); see also In re
Whirlpool Corp. Front-Loading Washer Products Liability Litig., 722
F.3d 838, 854—55 (6th Cir. 2013) (commonality not defeated simply
because, though plaintiffs’ evidence showed washer models were
nearly identical, defendants merely contended the class included
owners who are "pleased with the performance of their" machines and
are thus dissimilar to consumers who complained of a mold problem),
cert. denied Whirlpool Corp. v. Glazer, 134 S. Ct. 1277 (2014).
-45-
In the context of the plaintiffs’ having shown that the
class does not "consist[] largely . . . of members who are
ultimately shown to have suffered no harm," Messner, 669 F.3d at
824, the number of uninjured members here seems comparable to the
"2.4 percent decrease in the size of the class [due to removal of
uninjured members]" that the Seventh Circuit concluded was
"certainly not significant enough to justify denial of
certification." Id. at 826 (emphasis added).
V.
Defendants also raise the separate but related argument
that because each putative class member has not suffered injury,
the class does not have standing.
Article III standing is an "indispensable part" of any
case that must be present at every stage of the case. See Lujan v.
Defenders of Wildlife, 504 U.S. 555, 561 (1992) (noting that
standing must be "supported . . . at the successive stages of
litigation"). Injury is a prerequisite to standing, and named
plaintiffs need to satisfy this standing requirement throughout the
stages of the litigation. See Stearns v. Ticketmaster Corp., 655
F.3d 1013, 1021 (9th Cir. 2011) ("At least one named plaintiff must
satisfy the actual injury component of standing in order to seek
relief on behalf of himself or the class."), cert. denied, 132
S. Ct. 1970 (2012); Kohen, 571 F.3d at 676 ("[A]s long as one member
of a certified class has a plausible claim to have suffered
-46-
damages, the requirement of standing is satisfied."); see also DG
ex rel. Stricklin, 594 F.3d at 1197—98; In re Prudential Ins. Co.
Am. Sales Practices Litig. Agent Actions, 148 F.3d 283, 306—7 (3d
Cir. 1998). It is undisputed that the named plaintiffs have shown
that they were overcharged for at least one Nexium transaction
during the class period, establishing standing. See Baker v. Carr,
369 U.S. 186, 204—06 (1962). The named plaintiffs thus have
standing to sue for their injuries and to request, under Rule
23(b)(3), that the court allow them to represent and secure a
judgment on behalf of a class.
To the extent that it is necessary that each and every
member of the class who secures a recovery also has standing,27 the
requirement will be satisfied — only injured class members will
recover.28
27
Some circuits have suggested that this is a requirement.
See Denney v. Deutsche Bank AG, 443 F.3d 253, 263—64 (2d Cir. 2006)
("[While] [w]e do not require that each member of a class submit
evidence of personal standing [at the class certification stage,]
. . . [t]he class must . . . be defined in such a way that anyone
within it would have standing."); Halvorson v. Auto-Owners Ins.
Co., 718 F.3d 773, 778 (8th Cir. 2013).
28
Defendants' Rules Enabling Act argument is similarly
inapposite. While the Act would preclude recovery for uninjured
class members, it imposes no requirement at the class certification
stage beyond ensuring that a methodology can be developed that is
capable of excluding uninjured members.
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VI.
In summary, we conclude that plaintiffs have met their
burden in showing that the 23(b)(3) requirements are met with
respect to the TPPs in the certified class because all TPPs would
have suffered injury. We also conclude that defendants have not
established that more than a de minimis number of uninjured
consumers are included in the certified class.
In large part, the remaining difference between
plaintiffs and defendants is that the defendants would require a
determination at the class certification stage as to which parties
were injured and which not, whereas the plaintiffs would leave to
later stages of litigation such sorting of injured and uninjured
parties. We conclude that so long as it is established that such
a mechanism can be identified, the presence of a de minimis number
of uninjured members at the class certification stage does not
defeat a class action. We conclude that such a mechanism can be
identified here. The district court did not abuse its discretion
in certifying the class.
Costs to appellees.
AFFIRMED
-Dissenting Opinion Follows-
-48-
KAYATTA, Circuit Judge, dissenting.
The chief difficulty we confront in this case arises from
the fact that some of the members of the class have not suffered
the antitrust injury upon which this entire case is predicated.
This percentage, while small, could constitute as many as 24,000
consumers29 who would have no valid claim against the defendants
under the state antitrust laws even if the named plaintiffs win on
the merits.
The majority correctly recognizes that certification of
a class that includes uninjured consumers hinges on there being a
method of identifying and removing those consumers prior to entry
of judgment, and that any such method must be both administratively
feasible and protective of the defendants' Seventh Amendment and
due process rights. Slip Op. at 17-18. The majority also
correctly recognizes that the district court has not identified--
much less rigorously analyzed--any method for identifying and
excluding these thousands of consumers prior to entry of judgment.
Slip Op. at 18-19. Rather, the district court certified the class
29
Neither side has precisely defined the size of the class,
but the defendants, without challenge, suggest that it includes
over a million consumers. Appellants' Br. at 20 (noting that 7.8%
to 9.8% of the consumers in the class would constitute a group of
over 100,000, meaning that the class would number more than a
million). The majority's careful analysis suggests, in turn, that
the percentage of uninjured consumers may be comparable to the 2.4%
in Messner v. Northshore University Healthsystem, 669 F.3d 802, 826
(7th Cir. 2012). In a putative class including over a million
consumers, that's at least 24,000 people.
-49-
because it considered the Rule 23 predominance inquiry satisfied by
the fact that the vast majority of consumers in the class had been
injured. As for the uninjured, the court simply kicked the can
down the road by noting that the court "preserve[d] the Defendants'
right to challenge individual damage claims at trial." In re
Nexium (Esomeprazole) Antitrust Litig., 297 F.R.D. 168, 179 (2013).
The path thus marked for our court is clear. We should
vacate the order certifying a class that includes uninjured
consumers, and remand to the district court to proceed in
accordance with the principles set forth in the majority's opinion.
To the extent that certification remains relevant, given the
posture of the case, the possibility would remain that the
plaintiffs might yet propose and the district court approve some
method of culling uninjured consumers from the class in an
administratively feasible manner that protects defendants' rights.
Instead, the majority dons the hats of both plaintiffs' counsel and
the district court by first proposing, sua sponte, a culling method
that no party has proposed--limiting recovery to consumers who file
affidavits--and then announcing itself quite satisfied with that
method. Slip Op. at 20. I therefore respectfully dissent. By
upholding the district court on the basis of a culling method that
it itself has fashioned, the majority errs both on the merits and
as a matter of appellate procedure.
-50-
First, on the merits of the majority's proposed culling
method, at least one sister circuit has twice noted the limitations
of using affidavits in the manner proposed by the majority. See
Carrera v. Bayer Corp., 727 F.3d 300, 304, 307 (3d Cir. 2013)
(remanding an order certifying a class of all purchasers of a
weight-loss supplement in Florida where documentary proof of
purchase was "unlikely" and noting that the method of ascertaining
whether someone is in the class must be "administratively feasible"
and that affidavits of purchase are not sufficient); Marcus v. BMW
of N. Am., LLC, 687 F.3d 583, 594 (3d Cir. 2012) (remanding a class
certification order on the grounds that a class of original
purchasers of BMWs with run-flat tires during the class period was
not readily ascertainable via a "reliable, administratively
feasible" method, and cautioning against including class members
based on mere affidavits that their tires had gone flat).
The majority's response to the persuasive force of this
precedent is fashioned out of a vacuum. The majority cites Madison
v. Chalmette Refining, LLC, 637 F.3d 551, 556 (5th Cir. 2011), a
case that both makes no mention of affidavits and actually reverses
a class certification order because the district court failed to
analyze in detail how individual issues would be resolved at trial,
and instead took a "figure-it-out-as-we-go-along approach."30 637
30
The majority gleans a potential blessing of affidavits from
Chalmette by noting that among the criticisms of the district court
by the Fifth Circuit was the failure to consider use of a so-called
-51-
F.3d at 557 (quoting Robinson v. Texas Auto. Dealers Ass'n, 387
F.3d 416, 426 (5th Cir. 2004)).
But regardless of whether or not affidavits may have a
role to play in this or any class action, the larger issue is that
a court of appeals should not assume that Rule 23 has been
satisfied on the basis of a culling method that it itself has
proposed. Many circuit court judges have little to no substantial
experience with the nuts and bolts of class litigation, so
fashioning litigation management devices is not in our
institutional wheelhouse. Many of the facts relevant to assessing
whether a certain management procedure will achieve a certain
objective will not be discernible by a court until one party
proposes it, and the other has a chance to critique it. At that
"Lone Pine" order, a device used in mass accident litigation to
streamline a case. Lore v. Lone Pine Corp., No. L-33606-85, 1986
WL 637507 (N.J. Super. Ct. Law Div. Nov. 18, 1986). A Lone Pine
order, in turn, can include a requirement that those willing to sue
first produce "some evidence to support a credible claim," which
may include affidavits from a physician or real estate appraiser as
evidence of injury. See Steering Comm. v. Exxon Mobil Corp., 461
F.3d 598, 604 n.2 (5th Cir. 2006). Lone Pine orders are for mass
accident cases, which the drafters of Rule 23(b)(3) recognized are
generally not certifiable. Fed. R. Civ. P. 23 advisory committee's
note to subdiv. (b)(3) (1966) ("A 'mass accident' resulting in
injuries to numerous persons is ordinarily not appropriate for a
class action because of the likelihood that significant questions,
not only of damages but of liability and defenses to liability,
would be present, affecting the individuals in different ways.").
So while a court might consider how a trial might be held in a mass
accident case with use of a Lone Pine order, and by potentially
requiring affidavits, nothing in Chalmette remotely suggests that
affidavits would suffice as an administratively feasible tool for
establishing injury in a manner protective of defendant's jury
trial rights.
-52-
point, the district court would usually weigh the pros and cons of
the procedure and make a decision, employing the fair amount of
discretion assigned to it. We, in turn, come along at or near the
end of the process. And we are pretty good at explaining the
principles that cabin the district court's exercise of discretion,
and at analyzing what by that point have usually become stationary
targets presented in competing briefs.
The majority's opinion, in contrast, skips all that. It
simply assumes that the question of how uninjured consumers can be
identified and excluded can be answered with affidavits.31
Untested by the adversary system, unexamined by any trial judge,
and fashioned without awareness of its fit to the parties' needs
and goals, the majority's method raises more questions than it
answers. Will it require two forms of notice to class members--one
to TPPs and one to consumers? What happens to those consumers who
do not return an affidavit (of whom there may be many, given the
low dollar amount of any potential recovery)? Will they be deemed
to have opted out of the class? Or will they be deemed to have
31
The majority also toys with the idea that courts could
create a presumption that a consumer would buy a generic if it was
available. Even assuming we could do so in a federal question
case, but see 28 U.S.C. § 2072(b) (prohibiting the use of any
procedural device to "abridge, enlarge, or modify any substantive
right"), given that indirect purchasers cannot sustain an antitrust
claim under federal law, see Illinois Brick Co. v. Illinois, 431
U.S. 720, 746-48 (1977), the only time such a presumption could be
employed is in a state-law diversity suit where a federal court is
without authority to create such a presumption. See Erie R. Co. v.
Tompkins, 304 U.S. 64, 78 (1938).
-53-
remained in, but lost their claims due to lack of injury? Even
more daunting, what happens if tens or hundreds of thousands of
Nexium purchasers file affidavits? How exactly will defendants
exercise their acknowledged right to "challenge individual damage
claims at trial"? Will the defendants seek to depose everyone who
has returned an affidavit, effectively challenging plaintiffs'
counsel to a discovery game of chicken? The majority simply hedges
on these questions by assuming--without any basis at all, and
likely unreasonably--that the affidavits will be "unrefuted."
Throwing up an idea to see if it might stick is just not
what courts of appeals do best. Rather, it is only after the
adversaries have gone to the mat and the dust has settled that we
can fairly review a district court's assessment of whether a
proposed method would be feasible. For this reason, if the
district court does not identify a culling method to ensure that
the class, by judgment, includes only members who were actually
injured, this court has no business simply hoping that one will
work. See Gen. Tel. Co. of the Sw. v. Falcon, 457 U.S. 147, 160
(1982) (noting that "actual, not presumed, conformance" with the
rule is "indispensable"); In re New Motor Vehicles Can. Exp.
Antitrust Litig., 522 F.3d 6, 28 (1st Cir. 2008) (requiring the
district court to evaluate a proposed model for proving fact of
injury prior to certification). In this important respect, any
attempt to reconcile the majority's holding with the approach taken
-54-
by our circuit in New Motor Vehicles will result in hopeless
confusion unless one concludes that the dissent in New Motor
Vehicles has become the law without en banc review.
On a related note, I must also part company with the
majority's dalliance with a percentage-based rule inspired by the
Seventh Circuit's decision in Messner v. Northshore University
Healthsystem, 669 F.3d 802, 826 (7th Cir. 2012). The majority
quite rightly says that the test for determining whether the
inclusion of uninjured class members should defeat class
certification is "functional." Slip Op. at 44. But then it
backslides: it notes that a 2.4% decrease in the size of the class
due to the removal of uninjured members was not so large as to
defeat certification in Messner, 669 F.3d at 824, and concludes
that the number of uninjured members here "seems comparable" to the
number in Messner. Slip Op. at 46.
If 2.4% is okay, why not 5.7%? Or any number under 50%?
The percentage tells one almost nothing about the functional
sufficiency of the method. The relevant inquiry for a court
considering certifying a class that includes uninjured members is
whether the court will be able to feasibly cull out those members
before entry of judgment. It may be relatively easy to cull 5% out
of a class of 30. Culling out 5% of 1 million is almost certainly
not. Here, "just 2.4%" is likely to be at least 24,000 people.
Moreover, nobody knows who the 24,000 are. So the culling process
-55-
may need to review individually all the affidavits of class members
who return them. How this is feasible, the majority does not
explain.32
I also take issue with the majority's suggestion that
when a proposed class includes some uninjured members who will have
to be removed post-certification, it is the defendants who bear the
burden of demonstrating that it cannot be done. The Supreme Court
has been clear that the party seeking certification bears the
burden of demonstrating that the requirements of Rule 23 are
satisfied. Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541, 2551
(2011). So, too, has this circuit. Smilow v. Sw. Bell Mobile
Systems, Inc., 323 F.3d 32, 38 (1st Cir. 2003).
The majority acknowledges this, Slip Op. at 14, 34, and
yet goes on to suggest the opposite: "Defendants have merely
speculated that a mechanism for exclusion cannot be developed
later. This is not enough to overcome plaintiffs' case for having
met the requirements of Rule 23." Slip Op. at 21. But plaintiffs
have not met their burden because, as the majority acknowledges,
the proposed class includes some number of uninjured members, Slip
Op. at 42, and the plaintiffs have not explained how they will be
32
Oddly, the majority avoids any discussion of how affidavits
will, as a practical matter, affect trial, even while citing Vega
v. T-Mobile USA, Inc., 564 F.3d 1256, 1270 (11th Cir. 2009) for the
proposition that there is no predominance when the addition or
subtraction of class members has a substantial effect on the
quantity of the evidence offered. See Slip Op. at 44.
-56-
removed before judgment, Slip Op. at 18-19. (It is also notable
that the majority felt compelled to propose a culling method sua
sponte--if the plaintiffs had indeed met their burden, this step
would not be necessary.) When the plaintiffs have only shown that
the number of uninjured members is relatively small, the class
still cannot satisfy Rule 23 unless there exists a method for
excluding those uninjured members prior to judgment. In such a
context, it is no more the defendants' burden to prove that this
cannot be done than it is this court's job to come up with a way
that it can. Cf. Wallace B. Roderick Revocable Living Trust v. XTO
Energy, Inc., 725 F.3d 1213, 1218 (10th Cir. 2013) (vacating a
certification order in part because the district court appeared to
shift the burden to the defendant to prove lack of commonality).
Finally, it bears noting that in the time that this
interlocutory appeal was pending, the district court tried most of
the liability issues in this case, leaving the end payors' fact-of-
injury for a future proceeding. That trial concluded with a
defense verdict just as these opinions were about to issue. The
district court solicited no affidavits from consumers, nor does it
appear that there was a plan to do so. So even if the majority's
proposed culling method were tenable, we know that the district
court did not employ it. In short, the majority affirms a
certification order based entirely on a fiction that we know to be
false. And unless one-way intervention is allowed, but see Am.
-57-
Pipe & Constr. Co. v. Utah, 414 U.S. 538, 546-49 (1974) (discussing
the history and application of the one-way intervention rule), it
is likely too late to let class members self-identify after taking
a peek at the verdict.
These changing facts on the ground warrant caution before
affirming a class certification order based on a possibility that
the district court might do something that it did not do, and which
it is likely that it could not do. Will there be an appeal from
the verdict that will succeed? Is there any plan to send notice?33
Is the basis for interlocutory review now eliminated? Although I
agree entirely with the key principle that serves as the predicate
for the majority's opinion--that certification of a class that
includes uninjured members is possible if the district court
identifies a feasible method for culling those members prior to
entry of judgment in a way that protects defendants' rights--I do
not believe that the majority has properly applied that principle
in this case. I respectfully dissent.
33
This is a Rule 23(b)(3) action in which notice to class
members is mandatory. Fed. R. Civ. P. 23(c)(2)(B).
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