KING DRUG COMPANY OF FLORENCE, INC vs. CEPHALON, INC., ET AL
MEMORANDUM AND/OR OPINION. SIGNED BY HONORABLE MITCHELL S. GOLDBERG ON 8/28/17. 8/28/17 ENTERED AND COPIES MAILED, E-MAILED.(rf, )
IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF PENNSYLVANIA
KING DRUG COMPANY OF FLORENCE, INC., :
CEPHALON, INC., et al.,
August 28, 2017
This case involves class action antitrust allegations stemming from several reverse
payment patent settlements under the Hatch-Waxman Act, now commonly referred to as an
Actavis claim. On remand from the United States Court of Appeals for the Third Circuit, I again
address the numerosity analysis under Federal Rule of Civil Procedure 23(a)(1).
Direct Purchaser Class Plaintiffs initially brought this antitrust lawsuit against the
manufacturer of Provigil, Cephalon, Inc., as well as four generic pharmaceutical companies
(collectively “Generic Defendants”).1 The four Hatch-Waxman reverse-payment settlements at
issue, executed in 2005 and 2006, were between Cephalon and each of the Generic Defendants,
and were alleged to be anticompetitive for delaying the market entry of generic Provigil.
The Generic Defendants are Teva Pharmaceutical Industries, Ltd. and Teva Pharmaceuticals
USA, Inc. (“Teva”); Ranbaxy Laboratories, Ltd. and Ranbaxy Pharmaceuticals, Inc.
(“Ranbaxy”); Mylan Pharmaceuticals, Inc. and Mylan Laboratories, Inc. (“Mylan”), and Barr
Laboratories, Inc. (“Barr”).
Direct Purchasers settled with Cephalon, Teva and Barr on April 17, 2015 and Mylan on
January 17, 2017. (See Pls.’ Mot. for Class Cert. p. 1, n.1) In connection with the settlement
reached with Mylan, Direct Purchasers have also moved for certification of a settlement class.
Mylan does not oppose that motion and it will be resolved in a forthcoming order.
Direct Purchaser Class Plaintiffs have filed a supplemental motion for class certification.
The prospective class again includes drug wholesalers that purchased the brand-name drug,
Provigil, directly from Cephalon, Inc. at any time between June 24, 2006 and August 31, 2012.
This motion follows the Third Circuit’s Opinion vacating my initial grant of class
certification. See In re Modafinil Antitrust Litig., 837 F.3d 238 (3d Cir. 2016). Noting that it had
“not had occasion to list relevant factors that are appropriate for district court judges to consider
when determining whether joinder would be impracticable,” the Third Circuit provided “a
framework for district courts to apply when conducting their numerosity analyses.” Id. at 252–
Based on the scope of the remand, the only question before me is whether the proposed
class satisfies the numerosity requirement under Federal Rule of Civil Procedure 23(a)(1). For
the reasons that follow, and applying the framework set out by the Third Circuit, I conclude that
the numerosity requirement is not satisfied and, as a result, Direct Purchasers’ supplemental
motion for class certification will be denied.
On July 27, 2015, I granted Direct Purchasers’ initial motion for class certification.
Subsequently, Mylan and Ranbaxy sought and obtained appellate review of that decision
pursuant to Federal Rule of Civil Procedure 23(f).
On September 13, 2016, the United States Court of Appeals for the Third Circuit issued
its opinion vacating my July 27, 2015 class certification ruling and remanding for further
consideration of whether joinder of all class members is impracticable – i.e. the numerosity
requirement under Federal Rule of Civil Procedure 23(a)(1).2
The Third Circuit affirmed my ruling on the predominance prong – the only other issue
considered on appeal.
Direct Purchasers have filed a supplemental motion for certification of a litigation class,
proposing the same class definition as was proposed in their initial motion. They continue to seek
certification of the following class:
All persons or entities in the United States and its territories and/or
their assignees (partial or otherwise) who purchased Provigil in
any form directly from Cephalon at any time during the period
from June 24, 2006 through August 31, 2012 (the “Class”).
Excluded from the Class are Defendants, and their officers,
directors, management, employees, subsidiaries, or affiliates, and
all federal governmental entities.
Also excluded from the Class are Rite Aid Corporation, Rite Aid
HDQTRS. Corp., JCG (PJC) USA, LLC, Eckerd Corporation,
Maxi Drug, Inc. d/b/a Brooks Pharmacy, CVS Caremark
Corporation, Walgreen Co., The Kroger Co., Safeway Inc.,
American Sales Co. Inc., HEB Grocery Company, LP, Supervalu,
Inc., and Giant Eagle, Inc. and their officers, directors,
management, employees, subsidiaries, or affiliates in their own
right and as assignees from putative Direct Purchaser Class
members (“Retailer Plaintiffs”). For purposes of clarity, Steven L.
LaFrance Holdings, Inc. and Steven L. LaFrance Pharmacy, Inc.
d/b/a SAJ Distributors (“SAJ”) is not a Retailer Plaintiff and is a
member of the Class; while Retailer Plaintiff Walgreen Co.
acquired SAJ in 2012, SAJ’s case and claim have proceeded
independently of Walgreen Co.
a. Prior Numerosity Ruling
I previously determined that Direct Purchasers class members were so numerous as to
make joinder impracticable. Regarding the number of members in the proposed class, I rejected
Defendants’ arguments that certain class members should be excluded because they (1) were
proceeding by way of partial assignment, (2) ceased operations prior to generic entry and/or
(3) made all purchases of branded Provigil after generic Provigil had already entered the market.
Thus, I determined that the proposed class contained two-twenty members. See King Drug Co.
of Florence v. Cephalon, Inc., 309 F.R.D. 195, 204–06 (E.D. Pa. 2015).
Regarding the impracticability of joinder, I examined the following five factors:
“(1) judicial economy, (2) geographic dispersion, (3) financial resources of class members,
(4) the claimants’ ability to institute individual suits, and (5) requests for injunctive relief that
could affect future class members.” King Drug, 309 F.R.D. at 203-04 (citing In re Wellbutrin XL
Antitrust Litig., 2011 WL 3563385, at *3 (E.D. Pa. Aug. 11, 2011)). In applying those factors, I
Considering the extensive history of this litigation and the
exhaustive discovery that has been conducted, I conclude that
judicial economy is best served by trying this case as a class
action. Joinder of the absent class members would likely require
additional rounds of discovery, which would only further delay a
trial date. Further, if cases were brought within other jurisdictions,
additional discovery is certainly a possibility, and separate trials
could result in inconsistent verdicts. . . .
Plaintiffs have also demonstrated that the class members are
geographically diverse, which has the potential to create problems
if all class members were to join the litigation. It is undisputed that
the prospective class members are spread out over thirteen states
and Puerto Rico. The considerable geographic dispersion of the
parties would certainly present challenges to Plaintiffs in
attempting to coordinate the litigation if all class members were
joined, particularly if additional discovery was required. . . .
Therefore, geographic dispersion weighs in favor of a finding that
joinder is impracticable.
Two factors that may weigh against Plaintiffs are the financial
resources of the class members and the parties’ abilities to bring
individual suits. Plaintiffs do not dispute that the prospective class
members are all sophisticated corporations that have experience
conducting litigation. Additionally, while Plaintiffs argue that the
ongoing business relationships between the class members and
Defendants warrants certifying a class due to fear of retaliation,
there is no evidence to support Plaintiffs’ theory.
Plaintiffs do convincingly respond, however, that some of the
prospective class members' claims are relatively small, such that
there may not be an economic incentive to engage in expensive
antitrust litigation. For example, using data derived from
Defendants’ economic expert, Dr. Ordover, six class members may
have claims below $1 million. (See Ordover Supp. Exp. Rep., Ex.
1; Pls.’ Reply, p. 9 n. 36.) These prospective class members likely
do not have the same incentive to engage in costly antitrust
litigation on their own.
The complexity and extensive history of this case, the expansive
discovery conducted, and the geographic dispersion of the parties
all favor class treatment. While some factors weigh in Defendants'
favor, I find those factors less compelling. Accordingly, Plaintiffs
have demonstrated by a preponderance of the evidence that the
parties are sufficiently numerous so as to make joinder
Id. at 206–07.
b. United States Court of Appeals for the Third Circuit’s Opinion
The Third Circuit concluded that I abused my discretion for two primary reasons: in
certifying the class, my numerosity analysis (1) “improperly emphasiz[ed] the late stage of the
proceeding,” and (2) I did not consider the “ability of individual class members to pursue their
cases through the use of joinder” as opposed to individual cases. In re Modafinil Antitrust Litig.,
837 F.3d at 249.
Regarding the size of the class, the Third Circuit held that Defendants had waived their
arguments regarding the propriety of members proceeding by way of assignment. 3 Even though
the argument was waived, the Third Circuit nonetheless found it “appropriate” to consider the
partial assignment issue because they were remanding on the numerosity issue. Id. at 251. The
Third Circuit agreed with my conclusion that “unless there is evidence that the class plaintiffs are
seeking to artificially inflate the number of claimants, partial assignees may properly be treated
as class members.” Id. at 252. As such, for purposes of conducting the impracticability analysis,
the Third Circuit assumed, as I found, that the class consisted of twenty-two members. Id.
The court also noted that Direct Purchasers argued, for the first time on appeal, that three
additional assignees of claims had recently been discovered and that the class actually consists of
twenty-five members. The Third Circuit directed that, on remand, I consider whether the three
new assignees should be included as class members. This issue is discussed below.
In light of the relatively small class, the Third Circuit noted that “inquiry into
impracticability should be particularly rigorous when the putative class consists of fewer than
forty members.” Id. at 250. The Third Circuit then articulated, for the first time, the following
non-exhaustive list of factors relevant to the impracticability analysis: “judicial economy, the
claimants’ ability and motivation to litigate as joined plaintiffs, the financial resources of class
members, the geographic dispersion of class members, the ability to identify future claimants,
and whether the claims are for injunctive relief or for damages.” Id. at 253. The Third Circuit
stressed that judicial economy and ability to litigate as joined parties are of primary importance.
Id. The court emphasized that it is improper to consider the possibility that plaintiffs may bring
individual lawsuits as the relevant choice is a binary one: between a class and joinder of all
interested parties. Id.
i. Judicial Economy
Applying this new impracticability standard, the Third Circuit concluded that my judicial
economy analysis was incorrect because it placed “great weight” on the late stage of the
proceedings. The Court held that “the late stage of litigation” – including sunk costs, the need for
additional discovery and the risk of postponing trial – “is not by itself an appropriate
consideration to take into account as part of a numerosity analysis.” Id. at 254. The court
reasoned that if the late stage of litigation were an appropriate consideration it “would place a
thumb on the scale in favor of a numerosity finding for no reason other than the fact that the
complex nature of a case resulted in the class certification decision being deferred for years.” Id.
at 255. The Third Circuit instructed that the judicial economy analysis is primarily concerned
with “docket control, taking into account practicalities as simple as that of every attorney making
an appearance on the record.” Id. at 256-257.
ii. Ability and Motivation to be Joined as Plaintiffs
The Third Circuit also concluded that I did not fully explore the ability and motivation of
class members to be joined as plaintiffs because I improperly focused on whether class members
could have brought their own, individual suits. The court instructed that this factor “primarily
involves an examination of the stakes at issue for the individual claims and the complexity of the
litigation, which will typically correlate with the costs of pursuing these claims.” Id. at 257.
The Third Circuit then recounted the record regarding the ability and motivation of the
twenty-two putative class members to litigate as joined parties. The court first stressed that “the
class members, based on the record before us, appear likely to have the ability and incentive to
bring suit as joined parties, thus preventing the alleged wrongdoers from escaping liability.” Id.
at 258 (emphasis added). To amplify this point, the Court noted that three class members have
claims estimated at over $1 billion and that those claims make up over 97% of the total value of
the class claims. The court further stated that while this factor could nonetheless weigh in favor
of class certification if the other class members had very small claims, that was “simply not the
case.” Id. The court reasoned that thirteen of the remaining class members had claims in excess
of $1 million, the figure that the parties “seem to agree is the appropriate figure at which point
bringing one’s own suit become economical” and there was no showing that it would in fact be
uneconomical for the other six class members to be joined as parties. Id. at 258-259.
After concluding that remand was warranted for further consideration of the numerosity
requirement, the Third Circuit stated “the judges in the majority have never seen a class action
where three class members, each with billions of dollars at stake and close to 100% of the total
value of class claims between them, have been allowed to sit on the sidelines as unnamed class
members.” Id. at 259.
The class certification issue is before me via remand and consideration of whether the
putative class members have “the ability and incentive to bring suit as joined parties,” id. at 258.
However, the conclusions by the Third Circuit set forth above, leave little room for
“consideration” and create an uphill battle for the Direct Purchasers to now convince me that
certification is appropriate.
“The class action is an exception to the usual rule that litigation is conducted by and on
behalf of the individual named parties only.” Wal-Mart Stores v. Dukes, 131 S. Ct. 2541, 2550
(2011) (quoting Califano v. Yamasaki, 442 U.S. 682, 700-01 (1979)) (quotation marks omitted).
In order to certify a class action, the plaintiffs bear the burden of proving by a preponderance of
the evidence that the putative class satisfies all of the prerequisites identified in Federal Rule of
Civil Procedure 23(a) and one of the subcategories of Rule 23(b). Fed. R. Civ. P. 23; In re
Hydrogen Peroxide Antitrust Litig., 552 F.3d 305, 320 (3d Cir. 2008).
“[P]roper analysis under Rule 23 requires rigorous consideration of all the evidence and
arguments offered by the parties.” Hydrogen Peroxide, 552 F.3d at 321. “[T]he court must
resolve all factual or legal disputes relevant to class certification, even if they overlap with the
merits—including disputes touching on elements of the cause of action.” Id. at 307.
Subsection (a) of Rule 23 contains four prerequisites for any class action:
(1) the class is so numerous that joinder of all members is
(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.
Fed. R. Civ. P. 23(a). In light of the Third Circuit’s limited remand, the only perquisite at issue
here is the numerosity requirement set forth in Rule 23(a)(1).
The numerosity prerequisite requires a plaintiff to show by a preponderance of the
evidence that the proposed class is so numerous that joinder of all absent class members would
be impracticable. In re Wellbutrin XL Antitrust Litig., 2011 WL 3563385, at *2-3. This analysis
largely “depends on the circumstances surrounding the case and not merely on the number of
class members.” Jackson v. SEPTA, 260 F.R.D. 168, 185-86 (E.D. Pa. 2009). While there is no
precise number required to satisfy the numerosity requirement, the United States Court of
Appeals for the Third Circuit has made the following observations:
While there are exceptions, numbers under twenty-one have
generally been held to be too few. Numbers between twenty-one
and forty have evoked mixed responses and again, while there are
exceptions, numbers in excess of forty, particularly those
exceeding one hundred or one thousand have sustained the
Weiss v. York Hosp., 745 F.2d 786, 808 n.35 (3d Cir. 1984) (citing 3B J. Moore, Moore’s
Federal Practice ¶ 23.05, at 23-150 (2d ed. 1982)).
In addition to the number of class members, the Third Circuit articulated the other factors
relevant to determining the impracticability of joining all class members in its opinion vacating
my prior ruling certifying the Direct Purchaser class. See In re Modafinil Antitrust Litig., 837
F.3d at 250. Those factors and their application are set forth above.
In response to the Third Circuit’s opinion, the Direct Purchasers have offered additional
arguments and some new evidence in support of their position that the numerosity requirement is
satisfied.4 Ranbaxy vigorously disputes Direct Purchasers’ contentions and relies heavily on
what it contends is a clear message from the Third Circuit that certification of the Direct
Purchaser class is inappropriate.
a. Appropriate Number of Class Members
The number of class members is the starting point of the numerosity analysis. In re
Modafinil Antitrust Litig., 837 F.3d at 250. As noted above, during the original class certification
proceedings, I found that the class consisted of twenty-two members. See King Drug, 309 F.R.D.
at 206. On appeal, Direct Purchasers stated that they had identified three additional class
members, raising the size of the proposed class to twenty-five.
Direct Purchasers explain that Wal-Mart Stores, Inc., Publix Super Markets, Inc., and BiLo Holdings, LLC were identified as additional class members during the claims administration
process that followed the initial certification of the class. Direct Purchasers urge that these three
entities are properly considered as class members by virtue of their partial assignments and the
fact that there is no evidence that Direct Purchasers are trying to artificially inflate the number of
In response, Ranbaxy contends that Bi-Lo’s assignment is limited to the right to submit a
claim for a share of the proceeds from the settlement with the Cephalon Defendants (i.e.
In support of their supplemental motion for class certification, Direct Purchasers rely on the
record from the prior class certification proceedings and have supplemented that record with
declarations from various class members and an expert report from Professor William B.
Rubenstein. As such, I incorporate the discussion of the record from my previous class
certification ruling as it pertains to the numerosity requirement. Additionally, I have considered
all new evidence presented by Direct Purchasers – namely the affidavits from class members and
the Rubenstein report – and note its impact on my analysis where relevant.
Cephalon, Teva and Barr) and the assignment does not mention Ranbaxy let alone a right to
pursue a claim against Ranbaxy as part of the litigation class.5
Based on my review, the Wal-Mart and Publix assignments seem to broadly assign the
rights to all causes of action against Cephalon, Barr, Teva, Mylan and Ranbaxy relating to any
purchases of Provigil the assigning entities made during the relevant time period. (See Pls.’ Mot.,
Gerstein Dec., Exs. 8, 10.)
The Bi-Lo assignment (via Cardinal Health), however, could be considered somewhat
ambiguous. (See id. at Ex. 9.) In a section entitled “Recitals,” the assignment states:
Bi-Lo wishes to submit a claim for recovery of funds from the
settlement of the matter of King Drug. Co. of Florence, Inc., E.D.
Pa. Case No. 06-1797, with the Cephalon Defendants, as defined in
the Settlement Agreement, based upon Bi-Lo’s purchases of
Provigil from Cardinal Health during the relevant time period.
(Id. at ¶ A.) But, consistent with Ranbaxy’s position, this language suggests that Bi-Lo and
Cardinal Health only contemplated an assignment of the right to seek proceeds from the
settlement with Cephalon, Teva and Barr. However, under the section entitled “agreement,” the
assignment more broadly states:
Cardinal Health hereby conveys, assigns and transfers to Bi-Lo all
rights, title and interest in and to all causes of action it may have
against Defendants under the laws of the United States or of any
State arising out of or relating to Cardinal Health’s purchase of
Provigil and/or its generic equivalent that was subsequently resold
to Bi-Lo during the period from June 24, 2006 to August 31, 2012.
This assignment includes Cardinal Health’s status as a direct
purchaser of all Provigil described in the preceding sentence.
Without any real discussion, Ranbaxy notes that if the size of class members is assessed as of
the “onset of litigation,” the class is even smaller because “all of the assignments were made in
the wake of the Direct Purchasers’ April 2015 settlement with Teva/Cephalon/Barr.” (See Def.’s
Resp., p. 4 n.1.) As Ranbaxy did not offer any explanation or elaboration of its argument, I am
unable to resolve this issue.
(Id. at ¶ 1.) Consistent with Direct Purchasers’ position, this language could be read broadly as
assigning all rights Cardinal Health had to pursue any claim relating to its purchase of Provigil.
The use of “Defendants” in the foregoing passage is ambiguous because it is not defined
elsewhere in the agreement but it could be read to include Ranbaxy as well as Cephalon, Teva
All of that aside, at this stage, I find it unnecessary to determine whether Bi-Lo is
properly considered a member of the proposed class by virtue of its assignment with Cardinal
Health because the difference between twenty-four or twenty-five class members does not
impact the rest of my numerosity analysis. Regardless of whether the class consists of twentyfour or twenty-five members, “inquiry into impracticability should be particularly rigorous when
the putative class consists of fewer than forty members.” In re Modafinil Antitrust Litig., 837
F.3d at 250.
b. Impracticability of Joinder
As noted above, the Third Circuit identified the following factors as relevant to, but not
exhaustive of the required impracticability of joinder analysis: “judicial economy, the claimants’
ability and motivation to litigate as joined plaintiffs, the financial resources of class members, the
geographic dispersion of class members, the ability to identify future claimants, and whether the
claims are for injunctive relief or for damages.” Id. at 253.
i. Judicial Economy
Judicial economy looks to the “administrative burden” of multiple or aggregate claims
and takes into account “any efficiency considerations regarding the joinder of all interested
parties that the district court deems relevant, including the number of parties and the nature of
the action.” Id. at 254. The judicial economy analysis must “focus on whether the class action
mechanism is substantially more efficient than joinder of all parties.” Id. This analysis is
primarily concerned with “docket control, taking into account practicalities as simple as that of
every attorney making an appearance on the record.” Id. at 256-257.
Direct Purchasers contend that judicial economy concerns favor class certification and
stress that joinder will render what was an already complex case unmanageable. According to
Direct Purchasers, joinder would mean twenty-five individual plaintiffs represented by twentyfive lawyers, greatly expanded discovery – with document production and depositions from each
class member, more depositions potentially with each joined plaintiff attending and participating
in questioning, a multiplication of experts, additional diverse positions regarding motions
practice, and an extraordinarily difficult to manage trial. In support, Direct Purchasers offer an
affidavit from Professor William B. Rubenstein, author of the Newburg on Class Actions
treatise. Therein, Professor Rubenstein discusses what he contends are the administrative
burdens that could arise if litigation was to proceed by joinder in this case.6
Ranbaxy convincingly responds that throughout this case the various plaintiff groups
have engaged in a multitude of cost and resource sharing tactics. For example, Ranbaxy notes
that the nine opt-out retailer plaintiffs – who are direct competitors – have filed joint motions,
collectively retained experts and adopted the filings of other plaintiff groups. According to
Ranbaxy, this cooperation demonstrates that adding litigants will not create the multiplication
Direct Purchasers fear joinder will create.
Although Direct Purchasers’ concerns about the multiplication of discovery, depositions,
experts and motion practice are not immaterial, they are less compelling when viewed in the
Consistent with my ruling on Ranbaxy’s Daubert challenge, I have considered Professor
Rubenstein’s discussion of the difficulties that he claims are inherent in application of the joinder
model but have disregarded his opinions as to the weight that should be afforded these
considerations as well as his ultimate conclusion that Rule 23(a)(1) is satisfied here.
context of the relatively small size of the putative class. Furthermore, I agree with Ranbaxy that
cost and resource sharing mechanisms exist and could address the judicial economy concerns
identified by Professor Rubenstein.
For example, to date, plaintiffs in this case as well as various related cases have jointly
retained experts and nothing in the record suggests that continuing to do so would not be feasible
if the case was to proceed via joinder. See In re Modafinil Antitrust Litig., 837 F.3d 238, 256
(“in addition, as a class, Plaintiffs have been using the same experts. It is not clear that there
would be a need for that to change merely because Plaintiffs would be joined as individual
parties instead of moving forward as a class.”)
Also, in proceeding by joinder, Direct Purchasers could join in motions or responses to
motions filed by Ranbaxy. Based on my “understanding of how the case has proceeded to date,”
In re Modafinil Antitrust Litigation, 837 F.3d at 257, use of these mechanisms is both feasible
and likely. In fact, doing so has been the norm in this case as well as the other various related
cases. Concerns about the multiplication of discovery could be addressed through careful
implementation of Federal Rule of Civil Procedure 26(b)(2)(C)(i). See id. (court must limit
discovery sought where it is “unreasonably cumulative or duplicative, or can be obtained from
some other source that is more convenient, less burdensome, or less expensive.”)
Lastly, while I originally concluded that judicial economy concerns could account for the
amount of discovery already conducted and a delay in the trial date, those considerations are no
longer applicable. See In re Modafinil Antitrust Litig., 837 F.3d at 256 (“when considering the
judicial economy factor of the numerosity analysis, the District Court should not take into
account the sunk costs of the litigation or the need to further delay trial were the class not to be
certified.”) In short, given the Third Circuit’s directive, I am constrained to exclude from my
analysis consideration of “sunk costs” or how denying the class certification motion at this stage
of the litigation may further delay this case.
For all of the reasons set forth above, I conclude that judicial economy concerns weigh
against certifying the Direct Purchaser litigation class.
ii. Claimants’ Ability and Motivation to Litigate as Joined Plaintiffs
As noted above, whether the class members have the ability and motivation to litigate as
joined plaintiffs “primarily involves an examination of the stakes at issue for the individual
claims and the complexity of the litigation, which will typically correlate with the costs of
pursuing these claims.” In re Modafinil Antitrust Litig., 837 F.3d at 257. Throughout its opinion,
the Third circuit stressed that this factor was one of the “most important numerosity factors. . . .”
Id. at 259.
Direct Purchasers contend that the class members lack both the ability and motivation to
litigate as joined parties. Noting that the class members are all wholesalers and horizontal
competitors, Direct Purchasers contend that class members would have wary, arms-length
interactions and any joint action would be complicated, and, possibly, made illegal by the
antitrust laws. In support, Direct Purchasers cite to declarations of representatives from putative
class members indicating that they are uncertain whether joint action would be feasible and that
they had not evaluated whether they would bring suit absent certification of the class. (Pls.’ Mot.,
Ex. 11, Perrault Decl. ¶ 5; Ex. 12, Rausch Dec. ¶¶ 3, 5; Ex. 13, Hanks Decl. ¶ 5.) Relatedly,
Direct Purchasers contend that ethical rules may prevent attorneys from jointly representing
multiple wholesalers if litigation proceeds via joinder.
According to Direct Purchasers, at the onset of litigation, the likely expenses would also
have exceeded reasonable expectations of recovery for a “substantial” number of class members
and, as such, those class members would have “negative value” claims.7 Direct Purchasers also
urge that, at the time litigation was commenced, damages were uncertain and, in fact, later
discovery revealed that potential damages only began to accrue several months after the cases
were filed. Direct Purchasers claim that many of the individual claims of class members are
lower than the $5.3 million in litigation costs expected to be incurred through trial.
Direct Purchasers point out that a joint litigation agreement, even if feasible, would not
solve the foregoing “negative value” issues. According to Direct Purchasers, a small wholesaler
would be unlikely to join the law suit absent some assurance from the larger claimants that they
would stay joined throughout the litigation, would not settle early and would agree to fund
litigation costs pro rata regardless of outcome. Direct Purchasers contend that a larger claimant
would have no incentive to enter into such an arrangement with its competitors.
Lastly, Direct Purchasers urge that fear of retaliation also reduces class members’
motivation to litigate via joinder. In support, Direct Purchasers offer the declarations of putative
class members asserting that they have concerns that litigation through joinder would negatively
impact their relationships with Ranbaxy – one of their suppliers. Recognizing that there is no real
evidence to support the fear of retaliation, Direct Purchasers admit that these concerns are
Ranbaxy responds that the Third Circuit indicated that the class members likely have the
ability and motivation to litigate as joined parties. Ranbaxy urges that nothing has changed about
the ability and motivation of the class since the appeal was submitted.
A negative value claim is a “claim[ ] that could not be brought on an individual basis because
the transaction costs of bringing an individual action exceed the potential relief.” In re Modafinil
Antitrust Litig., 837 F.3d at 257 n.21 (quoting In re Baby Prods. Antitrust Litig., 708 F.3d 163,
179 (3d Cir. 2013)).
Ranbaxy disputes Direct Purchasers’ characterization of some of the class members as
“small” noting that the class members’ estimated annual revenue ranges from $41.8 million to
$482.1 billion. Ranbaxy rejects Direct Purchasers’ contention that it would be uneconomical for
smaller claimants to pursue litigation via joinder, noting that the “vast majority” of class
members have trebled claims in excess of $1 million with the largest three wholesalers having
claims in the range of $200 million to $1 billion. Ranbaxy also notes that one of the class
members with a relatively small claim – King Drug – is already a named Plaintiff and three other
members with smaller claims have been plaintiffs in other patent or Hatch-Waxman antitrust
Ranbaxy contends that the claims here are commonly and typically pursued on a
contingency fee basis minimizing any financial disincentive to pursue this litigation via joinder.
Direct Purchasers do not dispute this representation. Lastly, Ranbaxy points out that the prior
litigation demonstrates that the wholesalers can and have cooperated with each other to reduce
the costs of joined litigation.
In considering these respective arguments, I first observe that the Third Circuit has
spoken very clearly and directly about the ability and motivation of the proposed class members,
stating that the class members “appear likely to have the ability and incentive to bring suit as
joined parties.” In re Modafinil Antitrust Litig., 837 F.3d at 258. The Third Circuit further
amplified this point, stressing that:
In fact, three class members, none of whom are named plaintiffs,
each have claims estimated at over $1 billion—even before the
trebling of damages. These three make up over 97% of the total
value of the class claims, and can hardly be considered as
candidates who need the aggregative advantages of the class
device. While this factor could weigh in favor of class status if the
remaining class members had very small claims, that is simply not
the case here.
In re Modafinil Antitrust Litig., 837 F.3d at 258.
Keeping these directives in mind, for several reasons, I conclude that the record on this
factor has largely remained unchanged and continues to demonstrate that the absent class
members have both the ability and motivation to litigate via joinder.
First, the evidence of record simply does not support Direct Purchasers’ argument that
litigation costs exceed many of the class members’ potential damages, thus rendering joinder an
uneconomical option. According to the low end estimates offered by Direct Purchasers’ expert,
eight class members have trebled damages claims below $1 million, many class members have
trebled damages claims in excess of $5 million and three have trebled damages claims in excess
of $200 million. (Pls.’ Mot., Ex. 4, Leitzinger Decl., Ex. 4.)
Direct Purchasers argue that class members with trebled damages below $5 million have
negative value claims because the cost of joining in the lawsuit would exceed their potential
recovery. But this conclusion is untenable for several reasons. Direct Purchasers assume, if
litigation were to proceed via joinder, that each putative class member would spend the entire
$5.3 million that the Direct Purchasers estimate they will spend through trial. There is simply no
basis in the record to make such an assumption.
Furthermore, Direct Purchasers have not challenged Ranbaxy’s assertion that any legal
representation in a potential joinder action here would be on a contingent basis. The reality of
contingent representation significantly undercuts Direct Purchasers’ argument regarding
litigation costs to the extent that a significant portion of the $5.3 million figure represents
attorney’s fees. In other words, the fact that all class members, even those with such so-called
“small” claims, would likely be represented on a contingent basis undermines Direct Purchasers’
position that taking on litigate via joinder would necessarily be a losing proposition for such
Second, I agree with Ranbaxy, that it is reasonable to expect that the class members will
share some, if not the majority of, litigation costs as the different groups of plaintiffs have done
throughout the life of this litigation.
Third, contrary to Direct Purchasers’ contentions, the affidavits from the putative class
members do not demonstrate that they lack the ability or motivation to litigate via joinder or that
joint litigation agreements are not feasible. Rather, the affidavits simply establish that the
putative class members have not evaluated the prospect of proceeding by joinder.
And lastly, Direct Purchasers have again failed to offer any concrete evidence to support
their concern about the hypothetical risk of retaliation and, as such, I do not find their
unsupported concerns to be probative.
In light of the foregoing, I conclude that the ability and motivation of the Direct
Purchasers to litigate via joinder weighs in favor of denying class certification.
iii. Financial Resources of Class Members
Direct Purchasers concede that some class members have the financial resources to take
on the massive litigation costs in this case but again urge that it would be a “losing proposition”
for members with smaller claims. Ranbaxy responds that the financial resources of the class
members and the large size of their claims are “inconsistent with class action treatment.” (Def.’s
Resp. p. 20.)
I previously concluded that the financial resources of the class members weigh against
certification. King Drug, 309 F.R.D. at 207. This conclusion remains unchanged. Based on the
supplemental record, it appears that all but six class members report annual revenue in excess of
$100 million and nine class members report annual revenue in the range of $2 billion to $482.1
billion. (Def.’s Mot., Ex. 1.) Given the class members’ significant financial resources, this factor
weighs against certification.
iv. Geographic Dispersion of Class Members
In previously concluding that the geographic dispersion of the class members weighed in
favor of class certification, I noted that the class members were spread out over thirteen states
and Puerto Rico and that this would “present challenges to Plaintiffs in attempting to coordinate
the litigation if all class members were joined, particularly if additional discovery was required.”
King Drug, 309 F.R.D. at 207.
The supplemental record indicates that, even with the addition of Wal-Mart, Publix and
Bi-Lo, the potential class members continue to be spread out over thirteen states and Puerto
Rico. Although the parties are geographically dispersed, the sophistication of the class members,
the fact that many of the class members have previously litigated in Pennsylvania and the
participation of geographically disperse named plaintiffs and counsel in the case to date, all
undercut the weight that should be placed on this factor. In sum, I conclude this factor weighs
slightly in favor of class certification.
v. Ability to Identify Future Claimants
Direct Purchasers offer no argument with respect to this factor. Ranbaxy briefly notes
that all class members have been identified and, therefore, there is no issue posed by the ability
to identify “future claimants.” While the Third Circuit stated that “ability to identify future
claimants” was a relevant factor to consider, the court did not elaborate any further on the
parameters of that analysis.
Regardless of what the Third Circuit intended to capture with this factor, what is clear
from the court’s decision is that the first two factors – judicial economy and ability and
motivation to litigation via joinder – are of primary importance. Even if the ability to identify
future claimants weighs in favor or against class certification, it would have no impact on my
vi. Whether the Claims are for Injunctive Relief or for Damages
Lastly, the Third Circuit instructed that I consider whether the Direct Purchasers’ claims
are for injunctive relief or for damages. This factor weighs in favor of class certification where
the claims are for injunctive relief rather than damages. See Weiss v. York Hosp., 745 F.2d 786,
808 (3d Cir. 1984) (“individual interest in pursuing litigation where the relief sought is primarily
injunctive will be minimal”). As Direct Purchasers are not seeking injunctive relief, this favor
weighs against certification of the Direct Purchaser class.
As the two factors of “primary importance” weigh strongly against class certification, I
conclude that Direct Purchasers have not proven by a preponderance of the evidence that the
class members are so numerous as to render joinder impracticable. As such, Direct Purchasers’
supplemental motion for class certification will be denied.
An appropriate order follows.
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