Antitrust and Unfair Competition Law
Eastern District of Virginia Weighs Joinder vs. Class for 35-Member Proposed Class
By Thomas H. Burt and Rourke Donahue
In In re Zetia Ezetimibe Antitrust Litig., 2022 U.S. Dist. LEXIS 69566 (E.D. Va. 2022), the Eastern District of Virginia followed guidance from the Fourth Circuit on remand and denied a class of 35 Direct Purchaser Plaintiffs’ (“DPPs”) renewed motion for class certification on the sole issue of numerosity. The court’s analysis here highlights the various, challenging hurdles 20-40 person proposed classes face during class certification. With the rise of the Direct Action Plaintiffs in recent years, small classes with big claimants are likely going to be even harder to certify as increasing numbers of potential class members opt out.
Facts: The DPPs alleged that Merck and Glenmark (“Defendants”) entered into an unlawful and anticompetitive agreement to resolve their earlier patent dispute concerning the cholesterol-reducing drug ezetimibe. The proposed class consisted largely of prescription drug wholesale purchasers and distributors who allegedly overpaid for Zetia, Merck’s branded version of ezetimibe. DPPs claimed that the unlawful agreement delayed market entry of generic ezetimibe, forcing them to purchase Zetia from Merck at artificially inflated prices. DPPs sought damages for the overpayment caused by Defendants’ allegedly monopolistic behavior. Id. at 13-14.
The Magistrate Judge’s first Report and Recommendation (“R&R”) recommended certifying DPPs’ first motion for class certification, and the district court granted DPPs’ motion. On appeal, the Fourth Circuit vacated and remanded the certification order on the issue of numerosity. The Fourth Circuit concluded that the district court erred by “improperly look[ing] to the impracticability of individual suits rather than joinder,” when assessing whether the class was “so numerous that joinder of all members is impracticable” under FRCP 23(a)(1). The Fourth Circuit explained that “on remand, the district court should consider whether judicial economy favors either a class action or joinder.” It also noted that DPPs made “no showing that it would be uneconomical for [smaller claimants] to be individually joined.” Id. at 14 (citations omitted).
On remand, the Magistrate’s R&R recommended denying DPPs’ renewed motion for class certification. Id. at 16. Ultimately, the district court agreed and denied DPPs’ motion. Id. at 12-13.
Analysis: The first and most important hurdle DPPs failed to overcome was achieving a class size above 40. DPPs argued that the class was technically larger than 35 because DPPs had discovered three more class members since the R&R was issued. Id. at 20. The court rejected this attempt to increase the class size, noting that DPPs did not appeal the earlier 35-member class decision and DPPs had ample opportunity since 2019 to investigate the existence of potential class members. Id. at 20-21.
Next, the court addressed the impracticability standard of Rule 23(a). The court rejected DDPs’ assertion that the R&R conflated “impracticable” with “incapable” of joinder, id. at 23, and explained that DPPs “must bring to bear evidence demonstrating that economic roadblocks would make joinder difficult, though not necessarily impossible, with the resources ordinarily available to proposed class members.” Id. at 24 (quoting In re Modafinil Antitrust Litig., 837 F.3d 238, 259 (3d Cir. 2016)).
Next, the court affirmed the relevance of considering whether denying certification would permit allegedly wrongful conduct to go unpunished. Id. at 28. The court reemphasized the R&R’s observations, against DPPs’ objections, that class members would likely pursue 95% of the total value of putative DPP class claims through joinder and that there are other plaintiff’s groups challenging Defendants’ alleged anticompetitive behavior. Id. at 26-27.
The court spilled the most ink on the fourth topic–the putative class members’ ability and motivation to join–and divided its analysis into four sections. Under the first section, Legitimate Business Considerations, the court noted that “more than fifty percent of the putative class members here that were present in the two analogous earlier cases prosecuted their claims following denial of certification.” Id. at 31 (internal quotation marks omitted). Accordingly, the court found that the R&R assigned the appropriate weight to DPPs’ evidence concerning why business judgment may counsel against joining this litigation following denial of class certification. Id.
In addressing relative claim size, the court agreed with the R&R’s assertion that several potential class members’ failure to examine their employers’ potential recoveries in this case weighed against finding “that putative class members lack economic motivation to litigate Zetia claims” absent class certification. Id. at 32-34.
The court also considered the R&R’s treatment of fear of retaliation, holding that it had little probative value here where DPPs presented no evidence of Defendants retaliating against customers in prior litigation. Id. at 34-35. The court also rejected the contention that the R&R improperly imposed an “unreasonable or unattainable standard” for DPPs to satisfy in proving impracticability of joinder for gray-area direct purchaser classes. Id. at 41-42.
In the final section of the analysis on putative class members’ ability and motivation to join, the court held that docket management and judicial economy concerns would not place an unacceptable burden on the court if joinder were pursued. Id. at 47. The court noted many ways in which the rise of virtual proceedings in the post-Covid era have ameliorated this concern. Id. at 45-47. Accordingly, the judicial economy issue will become increasingly difficult for small plaintiff classes to argue as virtual proceedings become more normalized and efficient.
This case may be distinguishable outside the context of a class of 20 to 40 members. However, it may also indicate a shift in thinking around the calculus of the superiority prong of Rule 23(b)(3) in an era where groups of non-class institutional purchasers increasingly pursue claims joined in groups.