Elizabeth T. CastilloCotchett, Pitre & McCarthy, LLP
On January 23, 2018, in a 2-1 decision, the U.S. Court of Appeals for the Ninth Circuit concluded that the district court abused its discretion in certifying a nationwide settlement class by failing to perform a “rigorous predominance analysis” pursuant to Federal Rule of Civil Procedure (“Rule”) 23(b)(3) to “determine whether variations in state consumer protection laws, or individual factual questions regarding exposure to the misleading statements, precluded certification.” In re Hyundai and Kia Fuel Economy Litigation, __ F.3d __, 2018 WL 505343, at *2, 16 (9th Cir. Jan. 23, 2018).
Circuit Judge Sandra Ikuta’s decision overturned U.S. District Judge George Wu’s ruling certifying a settlement class of vehicle owners who resolved claims with Hyundai Motor America, Inc. (Hyundai) and its affiliate, Kia Motors America, Inc. (Kia), over the fuel efficiency of their vehicles—effectively undoing a nine-figure settlement reached In re Hyundai and Kia Fuel Economy Litigation. The decision follows five consolidated appeals by objectors raising challenges to class certification, the settlement amount, and attorneys’ fees.
The nationwide class action is based on allegations that Hyundai and Kia misrepresented fuel economy ratings for certain vehicles before November 2, 2012. As a result of the alleged misrepresentation, plaintiffs purchased certain vehicles that they otherwise would not have purchased or paid more for certain vehicles than they otherwise would have paid. On November 2, 2012, Hyundai issued a statement informing the public that it was voluntarily decreasing the fuel economy ratings of certain vehicles. 2018 WL 505343, at *2
The Ninth Circuit heavily relied on Mazza v. Am. Honda Motor Co., 666 F.3d 581 (9th Cir. 2012), in vacating certification of the settlement class and remanding the case despite that Mazza involved a class certification decision—not a decision for approval of a settlement. The appeals court explained the trial court should have engaged in a choice-of-law analysis—to consider potential differences in various state consumer protection laws—before concluding that common issues predominated over individual issues and certifying a nationwide settlement class under Rule 23(b)(3). The majority reasoned that the lower court could not “avoid considering the potential applicability of the laws of multiple states on the ground that the proposed settlement was fair.” 2018 WL 505343, at *12.
The Ninth Circuit also relied on Amchem Prods., Inc. v. Windsor, 521 U.S. 591 (1997), which held that although district courts are not required to consider litigation management issues in determining whether to certify a class, they must satisfy the predominance inquiry. The appeals court stated that district should give “undiluted, even heightened, attention” to scrutinizing proposed settlement classes. 2018 WL 505343, at *13.
The majority noted that its ruling does not foreclose the district court from certifying a class (or subclasses) on remand. Indeed, the district court may reevaluate the settlement in light of differences in state laws within the nationwide settlement class and reach the same conclusion. 2018 WL 505343, at *14-16.
The majority decision held that the lower court failed to define a relevant class by including owners of used vehicles who were not subject to Hyundai and Kia’s fuel economy misrepresentations. The appeals court also stated that because the trial court failed to calculate the value of the settlement, it could not ensure that the attorneys’ fees and costs of $9 million were reasonable in proportion to the benefit conferred on the class. 2018 WL 505343, at *15.
Circuit Judge Jacqueline Nguyen dissented, remarking, “[T]he majority relies on arguments never raised by the objectors, contravenes precedent, and disregards reasonable factual findings made by the district court after years of extensive litigation.” 2018 WL 505343, at *16. “The majority also deals a major blow to multistate class actions,” she writes. Id.
“Contrary to our case law and that of our sister circuits, the majority shifts the burden of proving whether foreign law governs class claims from the foreign law proponent—here, the objectors—to the district court or class counsel. This newly invented standard significantly burdens our overloaded district courts, creates a circuit split, and runs afoul of the doctrine established long ago in Erie R.R. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938).” 2018 WL 505343, at *16.
The majority ruling also “deprives thousands of consumers of any chance to recover what is, conservatively speaking, a more than $159 million settlement,” Judge Nguyen noted. 2018 WL 505343, at *16.
Implications for Class Action Settlements
Choice-of-law issues, while common in class actions involving more than one state, are typically addressed at the class certification stage as opposed to in settlements. The majority decision is the first of its kind in the Ninth Circuit to reject a class settlement on choice of law grounds.
The ultimate effect of the majority opinion is unclear. For defendants, who frequently raise choice-of-law in opposition to certification, the ruling could complicate their arguments for nationwide settlement approval in cases where the court grants certification, but on something less than a nationwide basis. For plaintiffs, the opinion may create new risks in both framing and litigating nationwide class actions.
The parties have until February 6, 2018 to seek rehearing en banc.
Harrison (Buzz) Frahn, Jennifer S. Palmer, Alexander
& Bartlett LLP
On January 2, 2018, Judge
William H. Orrick of the Northern District of California turned up the heat on
In re Korean Ramen
, denying their motions for summary judgment and ruling
in favor of plaintiffs on several evidentiary questions. Defendants Nongshim Co., Ltd., Nongshim
America, Inc. (collectively Nongshim), Ottogi Co., Ltd., and Ottogi America,
Inc. (collectively Ottogi) moved for summary judgment on both procedural and
factual grounds. They argued that the
statute of limitations barred plaintiffs’ Sherman Act and state unfair
competition claims. Nongshim also argued
that the court should grant summary judgment as a matter of international
comity, given the Korean Supreme Court’s overturning of the Korea Fair Trade
Commission’s (“KFTC’s”) finding of a conspiracy. Substantively, both defendants
argued there was no evidence of a conspiracy to fix prices, and that even if
there were evidence of such a conspiracy in Korea, it could not be linked to
antitrust harm in the United States.
Judge Orrick ruled against defendants on all grounds.
Plaintiffs filed this class
action in 2013, alleging a price fixing conspiracy among the four dominant
manufacturers of Korean ramen noodles: Nongshim, Ottogi, Samyang Foods Co. Ltd.
(Samyang), and Korea Yakult Co. Ltd.
Together, these four manufacturers control virtually the entire market
for Korean ramen noodles in Korea.
According to plaintiffs, Korean ramen noodles “have a unique flavor
profile” and therefore do not compete with Japanese or Chinese ramen noodle
products in the United States.
Plaintiffs are U.S. consumers,
food retailers, and distributors. They
allege that the four manufacturers entered a conspiracy to fix wholesale ramen
prices in Korea in late 2000 or early 2001.
The conspiracy allegedly continued until 2010, when Samyang decreased
its prices to “apologize to [its] customers” for the previous price
increases. While plaintiffs allege that
the conspiracy occurred in Korea, they filed suit for its effects in the United
The alleged conspiracy’s
effects in Korea were the subject of an investigation by the KFTC. Based on testimony from several Samyang
employees and copies of communications between the companies found on a
portable hard drive kept by Samyang, the KFTC found that the companies had
conspired to increase prices and levied significant fines against them. However, in 2015 the Korean Supreme Court
overturned the KFTC’s findings and fines, holding there was insufficient
evidence of an express price fixing agreement based on a lack of direct,
non-hearsay evidence. The Korean Supreme
Court’s holding underlies several of the arguments in defendants’ motions for
The court’s January 2 order
presents three issues of interest to antitrust practitioners. First, it raises the question of whether
Sherman Act claims are subject to a pure injury rule or discovery rule for
statute of limitations purposes. Second,
the order addresses questions of international comity, an area of concern
whenever there are allegations of anticompetitive behavior that crosses
international borders. Finally, the
order examines the evidence of a conspiracy in Korea, and whether that evidence
supports an inference of conspiracy under the antitrust summary judgment
Statute of Limitations
The Sherman Act includes a
four-year statute of limitations. The
clock starts ticking when the injury occurs (under the “injury rule”) or when
plaintiffs reasonably should have discovered the injury (under the “discovery
rule”). Here, the alleged conspiracy ran
from 2000 until 2010, and plaintiffs did not file suit until 2013, making the
start date of the statute of limitations very important.
Defendants, favoring the
injury rule, highlighted a recent holding by Judge Lucy Koh that “clear U.S.
Supreme Court authority and the overwhelming majority of Circuits have
explicitly held that antitrust claims are subject to a pure injury rule, not a
In re Animation Workers Antitrust Litig., 87 F. Supp. 3d 1195, 1210
(N.D. Cal. 2015). Defendants argued
that, under this rule, the statute of limitations bars all sales made more than
four years before the suit was filed. As
such, defendants asked that—if the court did not grant summary judgment
outright—it limit damages to those resulting from sales within this four-year
window. This request recognizes Ninth
Circuit precedent, under which each sale of a price fixed product “constitutes
a new overt act causing injury to the purchaser and the statute of limitations
runs from the date of the act.”
, 751 F.3d 1081, 1086 (9th Cir. 2014).
Plaintiffs responded by
pointing to Judge Orrick’s earlier decision on defendants’ motion to dismiss,
where he applied the discovery rule instead of the injury rule. Plaintiffs argued that this earlier decision
is “law of the case,” and the court should therefore not revisit whether the
injury rule or the discovery rule applies.
While Judge Orrick
acknowledged the apparent conflict between his earlier opinion and decisions in
other courts, he sidestepped the issue using the fraudulent concealment
doctrine. Fraudulent concealment tolls a
statute of limitations “where (i) affirmative acts by defendants conceal their
wrongful conduct from plaintiffs, (ii) plaintiffs are actually ignorant of the
wrongful conduct, and (iii) there was reasonable diligence by the plaintiff to
discover the misconduct in response to any information it may have about that
Fenerjian v. Nongshim Co., Ltd,
72 F. Supp. 3d 1058, 1078 (N.D. Cal. 2014).
Judge Orrick then explored a
long list of defendants’ acts that allegedly show affirmative concealment,
including: (1) staggering price increases to avoid detection of their
anticompetitive cooperation; (2) conducting inter-company communication by
phone, rather than email, to conceal the frequency and content of the
communication; (3) Ottogi destroying and altering pricing memos referring to
competitor contacts after the KFTC investigation began; (4) a Nongshim employee
using his personal email address to communicate with competitors after the KFTC
investigation began; and (5) using pretextual reasons, like rising costs of
fuel and inputs, to justify price increases.
Judge Orrick found this evidence sufficient to toll the statute of
limitations, despite defendants’ objections that the evidence does not clearly
show affirmative acts of concealment, and that any such acts were not directed
towards plaintiffs or the current litigation.
Nongshim’s motion for summary
judgment urged the court to dismiss the suit as a matter of international
comity, because the Korean Supreme Court found the evidence of conspiracy
insufficient. International comity, or
more specifically adjudicatory comity (“comity among courts”), is “a
discretionary act of deference by a national court to decline to exercise
jurisdiction in a case properly adjudicated in a foreign state.”
v. AirScan Inc.
, 771 F.3d 580, 599 (9th Cir. 2014).
But Judge Orrick found that
the question before his court and that decided by the Korean Supreme Court were
different. The Korean Supreme Court
determined whether the KFTC’s finding of a conspiracy was adequately supported
by Korean law, while the question in this case is whether “defendants’ conduct
as it impacted sales of products
violate[d] federal and state antitrust and unfair competition
laws.” Opinion at 15 (emphasis in
original). Moreover, the Supreme Court
has said that “application of our antitrust laws to foreign anticompetitive
conduct is nonetheless reasonable, and hence consistent with principles of
prescriptive comity, insofar as they reflect a legislative effort to redress
domestic antitrust injury that foreign anticompetitive conduct has caused.”
Roche Ltd. v. Empagran S.A.
, 542 U.S. 155, 165 (2004). Judge Orrick therefore rejected defendants’
call for summary judgment on comity grounds.
The Korean Conspiracy, the United States, and Antitrust Standing
Despite the Korean Supreme
Court’s decision that the KFTC’s finding of a price-fixing conspiracy lacked
adequate support, there is significant evidence that such a conspiracy
existed. Direct evidence of the
conspiracy includes testimony from three Samyang executives and employees
describing the meeting where the conspiracy was formed and how non-public
pricing information was shared between the alleged conspirators. Additional corroborating evidence includes
testimony and documents showing Samyang employees were aware of non-public
pricing information from the other co-conspirators at various points throughout
the conspiracy and communicated their own pricing in turn. Defendants disputed the authenticity,
reliability, and admissibility of much of this evidence, but in the aggregate
Judge Orrick found it sufficiently voluminous and unambiguous. He concluded that there was a genuine dispute
of material fact as to whether there was a price-fixing conspiracy in Korea.
However, to succeed on their
claims, plaintiffs also had to show “some linkage” between the overseas
conspiracy and price-fixed sales in the United States.
See, e.g., In re Elevator
, 502 F.3d 47, 52 (2d Cir. 2007). Judge Orrick acknowledged there is no direct
evidence that the alleged conspiracy expressly aimed its conduct at products
intended for the United States. As such,
plaintiffs relied on various forms of circumstantial evidence, ranging from
expert analyses purporting to show that prices in the United States tracked prices
in Korea, to the secondment of executives from Korean parent companies to
American subsidiaries, to correspondence between the Korean and American
companies discussing price increases.
In the case of Nongshim, the
analysis is complicated by the company’s establishment of a factory in Rancho
Cucamonga, California in 2005. A full
65% of Nongshim products sold in the United States during the alleged
conspiracy were manufactured at that plant.
Arguably, any price-fixing of Korean-manufactured noodles should not
have affected United States-manufactured noodles.
Under the summary judgment
standards in the antitrust context, conduct as consistent with permissible
competition as with illegal conspiracy cannot, standing alone, support an
inference of conspiracy.
Matsushita Elec. Indus. Co. v. Zenith Radio
, 475 U.S. 574, 588 (1986). But
here, Judge Orrick found, the evidence of conspiracy in Korea was direct and
unambiguous. And there was at least a
genuine dispute of material fact over the connection between the alleged Korean
conspiracy and anticompetitive conduct in the United States. This was true even for Nongshim’s noodles
produced and sold entirely within the United States. As such, the court found summary judgment
Now that this case has
survived summary judgment, it heads toward a jury trial scheduled for February
23, 2018. In the meantime, the court’s
opinion shows that the injury rule and international comity may not always
protect antitrust defendants. It also
shows that where there is substantial, unambiguous evidence of wrongdoing, even
if that evidence is “hotly disputed” and does not necessarily prove any effect
in the United States, courts will be reluctant to grant summary judgment for
Elizabeth C. Pritzker
Pritzker Levine LLP
On December 18, 2017, Judge
Richard Seeborg of the Northern District of California issued simultaneous
orders granting summary judgment in favor of the defendant manufacturers of
optical disk drives in the indirect purchaser class proceedings in the
Optical Disk Drive MDL, In re Optical Disk
Drive Antitrust Litig
., No. 10-md-02143-RS, 2017 WL 6503743 (N.D. Cal. Dec.
18, 2017) (“
ODD”). The court found that plaintiffs failed to
demonstrate evidence of injury and causation, as required to proceed on their
antitrust claims. Samsung, Toshiba, BenQ Corporation, Philips and Lite-On IT
Corporation were among the prevailing defendants.
The indirect purchasers were a
class of customers who purchased products containing optical disk drives, or
ODDs, from 2003 to 2008. At issue were
ODDs that were purchased by plaintiffs as stand-alone products for internal use
in a computer, as devices attached externally to a computer, or as a component
of a computer purchase. Plaintiffs alleged that defendants illegally agreed to
fix prices for ODDs in violation of the Sherman Act, as well as California antitrust
and consumer protection laws.
The indirect purchaser
plaintiff class claims were part of a coordinated multi-district proceeding
that included direct purchaser class claims, and individual opt-out or direct
action claims by Acer, an original equipment manufacturer (OEM), and its
subsidiaries and retailers Circuit City and Radio Shack.
Defendants filed motions for
summary judgment in the various plaintiff cases related to Foreign Trade
Antitrust Improvements Act (FTAIA), vicarious liability for corporate parents
and the regarding causation, injury and damages.
ODD, 2017 WL 6503743, at *1. Summary judgment is proper where there
is no genuine dispute as to any material fact and the movant is entitled to
judgment as a matter of law. Fed. R. Civ. P. 56(a). A material fact is one that
may affect the case’s outcome.
Anderson v. Liberty Lobby, Inc., 477
US 242, 248 (1986).
Foreign Trade Antitrust
Improvements Act (“FTAIA”)
Judge Seeborg separately
issued an omnibus order addressing the applicability of the FTAIA and vicarious
liability for corporate parents—issues common to several of the defendants’ motions
for summary judgment.
ODD, 2017 WL 6503743, at *1; see also In re Optical Disk Drive Antitrust
., Case No.10-md-02143-RS, Dkt. No. 2706 (Slip Opn.), at p.1. Because of its relevance to the court’s order
granting summary judgment of the indirect purchaser case, the court’s FTAIA
analysis as set forth in its omnibus order is summarized below.
The FTAIA excludes from the
antitrust laws conduct that has no domestic effects or does not affect import
US v. Hui Hsiung, 778 F.3d 738, 751 (9th Cir. 2015). In the omnibus motion, defendants argued that
certain ODD sales were excluded from federal and state antitrust laws under the
FTAIA because they involved foreign commerce. The court analyzed defendants’
arguments with respect to three categories of sales: (1) ODDs sold abroad to
customers abroad for incorporation into computers ultimately sold abroad; (2)
ODDs sold abroad to foreign subsidiaries for incorporation into computers that
were subsequently sold in the United States; and (3) domestic sales in the
United States. Only category 1 and category 2 sales were at issue in the
court’s omnibus order. Dkt. NO. 2706, at
With respect to the category 1
sales, the court found that the FTAIA precluded plaintiffs’ claims for these
sales. The court reasoned that although these sales involved the same alleged
price-fixing activity by US employees, the effects were foreign sales of ODD to
foreign customers, because the finished products were sold outside the United
States and there was not a “direct, substantial, and reasonably foreseeable
effect” on US commerce. The court further reasoned that collusive conduct
allegedly aimed at fixing ODD prices around the world was insufficient to
directly affect US commerce. Dkt. 2706,
at pp. 8, 10-11.
With respect to the category 2
sales, the court found that the plaintiffs raised a genuine issue of material
fact as to whether the sales constituted import commerce and that the FTAIA did
not bar the sales under the domestic effects exception. The court reasoned that
because the price-fixed ODDs lacked any use other than as components in the
finished computers, it was sufficient that the finished computers containing
allegedly price-fixed ODDs were imported into the United States. The court also
explained that the defendants “acted with the knowledge that their products
would arrive in the US,” including that the defendants had account managers
based in the United States and knew that ODDs sold abroad would be incorporated
into computers sold in the United States. This knowing and intentional sale of
components to US-based procurement teams also constituted direct, substantial
and reasonably foreseeable effect on US commerce under the domestic effects
exception. The court, therefore, declined to grant the defendants’ motions for
summary judgment on the category 2 sales.
Dkt. 2706, at pp. 8, 10-11.
Lack of Evidence of Causation
and Pass-Through Damages
While the indirect purchaser
plaintiffs achieved some success on the FTAIA commerce issues, they fared less
well on summary judgment. The primary issues
for summary judgment in the indirect purchaser action were: (1) the sufficiency
of evidence supporting the alleged conspiracy, and (2) the sufficiency of
evidence regarding causation, injury and damages.
As to the first issue, the
court found that plaintiffs had presented sufficient evidence to create a
genuine issue of material fact as to the existence of a conspiracy targeting
certain OEM customers. While
acknowledging that the plaintiffs did not have direct evidence of a meeting
among conspirators, “such as the ‘crystal meetings’ in the
TFT-LCD (Flat Panel) case” (ODD,
at 2017 WL 6503743, at *4), the court found that plaintiffs had presented a “coherent
narrative, suggesting a culture of collusion and longstanding relationships”
between both low-level employees and senior executives and managers.
at *6. The court ruled, however, that
this evidence was sufficient only to support an alleged conspiracy targeting
certain OEM customers (Dell and HP), but did not support plaintiffs’ theory as
to an industry-wide conspiracy.
Id, at *5-6. Thus, while summary judgment could not be
granted in defendants’ favor to the extent it is based on insufficiency of the
evidence of a conspiracy,” the court held that any indirect purchaser “recovery
[must] be limited to downstream purchasers of only Dell and HP products.”
The court then turned to the
second issue—the sufficiency of evidence of causation, injury and damages. “As purchasers of the allegedly price-fixed
goods, ‘indirect-purchaser plaintiffs must demonstrate that defendants
overcharged their direct purchasers for [ ] products and that those direct
purchasers passed on the overcharges to the plaintiffs.’”
2017 WL 6503743, at *8 (citing
Graphics Processing Units Antitrust Litig
., 233 F.R.D. 478, 499 (N.D. Cal.
July 18, 2008).
Plaintiffs presented a damages
methodology that posited “100% pass-through of inflated pricing from direct
action purchasers down to retail customers” (the indirect purchaser plaintiffs
ODD, 2017 WL 6503743, at
*8. This damages theory, the court held,
required the indirect purchaser plaintiffs to account for the decision-making
of resellers, distributors and manufacturers at every stage of the supply
Id. Plaintiffs “must proffer
evidence not only as to the calculation of the overcharge on ODDs,” the court found,
but also “that this overcharge resulted in offsetting with other lower quality
component parts, and that the offsetting would have occurred at 100% of the
value of the overcharge, meaning that no link in the supply chain would have
swallowed any portion of the overcharge.”
Id, at *9. “This theory is of pass-through is not only
crucial to the elements of injury and damages,” the court held, “but also to
causation, as it establishes the necessary link between Defendants’ conduct and
IPPs injury as alleged.”
The indirect purchasers’
damages theory posited that the alleged conspiracy slowed the otherwise natural
decline in prices in the industry and that the overcharge was passed on in the
form of lower quality finished products or component parts rather than higher
prices for the finished goods.
See ODD, 2017 WL 6503743, at *8-9. Although
the court certified a class of indirect purchasers on this theory (
id, at *8), the court found that the
indirect purchasers’ theory was not supported by the record evidence at summary
Notably, according to the
court, the plaintiffs could not produce any evidence showing that a
manufacturer had ever reduced the quality of a finished product to offset
higher ODD prices. To the contrary, the court credited declarations from Dell
and HP representatives (the only OEMs for whom plaintiffs had produced evidence
of a plausible conspiracy) that indicated that these OEMs “in fact did not pass
on” ODD prices “with any consistency or uniformity.”
ODD, 2017 WL 6503743, at *10.
Therefore, without actual
evidence of decision-making that demonstrated that the alleged higher prices
were 100% passed on to downstream customers, Judge Seeborg concluded the indirect
purchaser class plaintiffs “were unable to meet their burden of showing a
genuine issue of material fact as to pass-through, which underlies their theory
of causation, injury and damages.”
ODD, 2017 WL 6503743, at *10. The court granted summary judgment to
Samsung, Toshiba and others, ending the indirect purchaser plaintiff class
Plaintiffs filed an appeal
with the Ninth Circuit Court of Appeals on January 5, 2018.
Gibson Dunn & Crutcher LLP
On November 9, 2017, U.S. District Judge Denise J. Casper granted certification to a group of end payors who allege that they paid higher prices for ulcerative colitis drug Asacol due to a product hop employed by Warner Chilcott and parent company Allergan. In re Asacol Antitrust Litig., No. 15-cv-12730-DJC, 2017 WL 5196381 (D. Mass. Nov. 9, 2017) (“Asacol”).
The lawsuit revolves around 400-milligram Asacol. At the suit’s core, plaintiffs allege that Warner Chilcott, knowing that the Asacol patents were expiring shortly, pulled the original Asacol from the market and forced patients to switch to new drugs, Asacol HD and Delzicol. The plaintiffs also allege that Warner Chilcott later agreed to pay the company that filed the first abbreviated new drug application (“ANDA”) for a generic alternative to Asacol HD to further delay generic market entry.
Even though the defendants challenged every aspect of class certification, the court found that the class had satisfied the numerosity, commonality, typicality, and adequacy requirements. Judge Casper also found multiple genuine disputes as to material facts, such as market definition, leading her to deny the defendants’ motion for summary judgement.
Judge Casper undertook a typical class certification analysis when certifying the class. Asacol, at *15. The analysis was succinct and clear when discussing whether numerosity was satisfied, there was commonality between plaintiffs, the typicality of the claims or defenses, and the adequacy of the class representatives. Judge Casper stated that the class was clearly numerous given that there were over 446,000 relevant prescriptions filled in one year. Id. at *17. The defendants did not challenge commonality, but rather contended that issues common to the class did “not predominate over individual issues, as is required by 23(b)(3),” an issue that was taken up later by the court. Id. Defendants did however attack typicality, stating that since the named plaintiffs were all unions, they were not sufficiently similar to the individual consumers and health insurers in the class. Id. Judge Casper was not persuaded by the argument countering that “even if the named plaintiffs did not suffer a net injury, the named plaintiffs still experienced an injury—the putative overcharge—and seek to recover on that injury on the basis of an antitrust claim, just like the other class members.” Id. at *17-*18. Due to this, the court also found that there was no conflict created between the named plaintiffs and members of the purported class, satisfying the adequacy requirement. Id. at *18.
Judge Casper next turned to the ascertainability, damages methodology, and common proof of antitrust impact to certify the class. The ascertainability analysis was relatively short, with Judge Casper citing the plaintiffs proposed mechanism for distinguishing injured from uninjured class members—by submitting claims forms alongside data and documentation—as acceptable, citing to In re Nexium Antitrust Litig., 777 F.3d 9, 19 (1st. Cir. 2015). Asacol, at *19. Judge Casper then turned to the damages model that were proposed by Dr. Rena Conti.
Dr. Conti’s model “estimate[d] the damages to end-payors by simulating what the price and quantity sold of Asacol 400mg would have been if the Defendants had not pulled Asacol 400mg from the market, under several potential scenarios of generic entry, based on historical data from other products regarding the effect of generic entry on the price and quantity sold of the brand-name product.” Id. at *19. The defendants argued that Conti’s model did not match up with the liability theory since the doctor’s model relied upon prescription-level data and not patient-level data. Id. That distinction, defendants argued, meant that the model would be unable to calculate the damages based on the plaintiff’s class definition. Id. Furthermore, the defendants contended that the model failed to exclude third-party payors who did not purchase Asacol 400mg prior to July 31, 2013. Id. at *20. The court found that Conti’s model, to an extent, did exclude third-party claims from the data. Finally, the defendants argued that Conti’s model did not take into account the role of PBMs who may reimburse third-party payors for drug expenses. Id. The court reiterated that this did not matter because “antitrust injury occurs the moment the purchaser incurs an overcharge.” Id. at *20 (citing to Nexium, 777 F.3d at 27).
The court then turned to the common proof of antitrust impact. The defendants alleged that the model could not provide common proof of antitrust impact for several reasons, including the model’s inability to estimate damages for injured and uninjured members of the class separately, the model’s inappropriate assumption that the effect of generic entry into the market for Asacol 400mg would mirror historical patterns of other drugs or that it would even occur, and that individual issues would predominate with respect to antitrust impact because Conti’s model includes many uninjured members. Id. at *20-*21. The court was not persuaded by any of these arguments, stating that Conti’s model adjusted for the various claimed deficiencies and that the individualized determinations only appeared to be a de minimis number, thus not defeating class certification. Id. at *21.
Summary Judgement Denial
Defendants also moved for summary judgment on several grounds: 1) the defendants contended that the hard switch from Asacol 400mg to Delzicol was not exclusionary, 2) that the state-law antitrust claims were precluded by federal food and drug law, 3) that the plaintiffs could not prove antitrust standing because there would not have been any generic entry without the hard switch, 4) the defendants had not exercised any monopoly power, and 5) the defendants contended that Delzicol had procompetitive benefits which outweighed any anticompetitive effects of the hard-switch. Id. at *21.
The court first addressed the preemption claim and found that the defendants’ argument failed for two reasons. First, the record before the court did not show that the FDA prohibited the defendants from selling Asacol 400mg, but that the FDA had simply raised issues about the use of the DBP substance in its coating. Id. at *22. The FDA provided a series of recommendations to the defendants suggesting that they stop selling the products, but at no point did they require it. Id. Second, the defendants misinterpreted the plaintiffs point about state antitrust law requiring the defendants to continue selling Asacol 400mg with DBP. The plaintiffs point was more to state that the defendants could have reformulated Asacol 400mg with DBS, rather than DBP, without switching to a new product. Id. There was no suggestion that the FDA would have prohibited this action. Id.
Turning to monopoly power, the plaintiffs argued that they showed direct evidence of monopoly power by pointing to the high gross margins of Asacol 400mg as proof of supracompetitive prices. Id. at *23. The court, deciding between which framework to apply—the Nexium or Remeron framework—decided to follow In re Remeron Direct Purchaser Antitrust Litig., 367 F.Supp.2d 675, 683 (D.N.J. 2005), which found that in a market for a product with high fixed costs, evidence that prices routinely exceed marginal costs may not necessarily be evidence that prices are supracompetitive, because even competitive prices may exceed marginal cost. Id. Even following Remeron, Judge Casper found a genuine dispute of material fact as to whether the prices charged for Asacol 400mg were supracompetitive and additionally stated that the reasonable interchangeability of Asacol 400mg with other drugs would be a factually intensive determination better left for resolution by a jury. Id. at *22.
Third, the court looked at the exclusionary conduct itself, with the defendants arguing that there was no genuine dispute of material fact regarding the exclusionary nature of the decision to pull Asacol 400mg from the market when it launched Delzicol. Id. a *25. Defendants argued that the FDA’s request to remove DBP from Asacol did not require them to reformulate in a manner to aid potential competitors. Id. The court found that the defendants did not have to reformulate in such a manner, but rather the defendants had already reformulated to have a different coating and instead of seeking FDA approval for that product, they needlessly included in the new product a patented capsule that conferred no additional value. Id. Citing to In re Namenda, 787 F.3d. 638 (2d. Cir. 2015), the court determined there was a genuine dispute as to how anticompetitive the effects of the switch were, and what procompetitive justifications came from the switch. Id. at *25-*26. In the court’s review of the procompetitive justifications, the court did not find any persuasive arguments, stating that there was already a reformulation of Asacol 400mg that did not include DBP and did not require the switch, that the defendants did not have any evidence of a benefit from the new product, and that there was no evidence that the defendants needed to produce a different dosage form than before. Id. at *26.
Finally, with regard to causation and antitrust standing, the defendants pressed the court that the plaintiffs did not show generic versions of Asacol 400mg would have been produced had it not been for the decision to pull it from the market. Id. at *26. “The Defendants argue[d] that the Plaintiffs have the burden of showing that a generic manufacturer was ‘ready, willing, and able’ to enter the Asacol 400mg market during the relevant time period.” Id (citing Indium Corp. of Am. v. Semi-Alloys, Inc., 781 F.2d. 879, 882 (Fed. Cir. 1985). The court disagreed, stating that the antitrust law did not require the plaintiffs to identify a specific entrant that had a pending ANDA, and even if there was no entrant with an approved ANDA, the FDA had the authority and interest to fast-track ANDAs for Asacol 400mg, so an ANDA might have been approved during the relevant period. Id. Thus, the court found there existed another genuine dispute of material fact as to the issue of standing. Id. With regard to causation, the court found that in evaluating the record, the defendants’ documents and the industry, generally, had identified Asacol 400mg as likely to face generic entry. Id. at *27. Because of this, and drawing all inferences in favor of the plaintiffs, there was a genuine dispute of material fact over whether a generic manufacturer would have produced a generic version of Asacol 400mg within the relevant timeframe. Id.