First Circuit Discusses Potential Split with Ninth Circuit Over Rule 23(b)(3) Predominance Inquiry

Ian L. Papendick 
Jeanifer E. Parsigian
Winston & Strawn LLP

Finding the lower court’s approach to predominance “at odds with both Supreme Court precedent and the law of our circuit,” the First Circuit recently reversed the grant of class certification in a Sherman Act Section 2 case against Warner Chilcott Limited, the manufacturer of two similar drugs: Asacol and Delzicol. In re Asacol Antitrust Litig., 907 F.3d 42, 45 (1st Cir. 2018). Framing the issue as whether “a class [can] be certified … even though injury-in-fact will be an individual issue, the resolution of which will vary among class members,” the First Circuit analyzed its sister circuits’ jurisprudence on the much-litigated issue and found a general consensus, but identified the Ninth Circuit as an outlier.Id. at 51, 56-57 (quoting Amgen, Inc. v. Connecticut Ret. Plans & Tr. Funds, 568 U.S. 455, 469 (2013)).

The case arose out of Defendant Warner’s decision to replace one of its patented, brand-name drugs—Asacol—with another—Delzicol—which had the same active ingredient, dosage, and price, but came in a capsule, a few months prior to the end of Asacol’s patent protection. Plaintiffs, union-sponsored health benefit plans that paid for brand name drug purchases after the expiration of Asacol’s patent protection, sought to represent a class of all similarly situated indirect purchasers, including individual consumers who purchased the drugs from retail pharmacies.Id. at 46.

Plaintiffs alleged that the change to Delzicol was a pretext to extend the drug’s patent protection and prevent generics from entering the market.Id. at 45. Because of state laws governing the way pharmacists substitute generics for prescription drugs, the creation of a new brand name would prevent generics from appearing as a “reference” drug and inhibit adoption of generic alternatives, which allegedly injured Plaintiffs by requiring them to pay the higher costs of the brand-name drug.Id.

The gravamen of Warner’s appeal, and the First Circuit’s opinion, was the issue of the presence of uninjured class members within the certified class. Based on evidence that some consumers would not substitute away from brand name drugs even if generics were available, the U.S. District Court for the District of Massachusetts’s presumed that approximately ten percent of class members would not have switched to a lower-priced generic, and were thus not injured by the unavailability of a generic.323 F.R.D. 451, 482-83 (D. Mass. 2017). The District Court considered the number of uninjured class members “de minimis” and certified a Rule 23(b)(3) class.Id.Quoting the First Circuit’s decision in In re Nexium Antitrust Litigation, 777 F.3d 9, 21 (1st Cir. 2015), the District Court explained “the need for some individualized determinations at the liability and damages stage does not defeat class certification.”Id. at 482. Also based on its interpretation of Nexium, the District Court accepted Plaintiffs’ position that uninjured class members could be removed with the help of a claims administrator.Id.

On appeal, the First Circuit rejected the lower court’s interpretation of Nexium, clarifying that its holding was only that, in theory, class member testimony regarding injury through pre-trial affidavits, if unrebutted, could satisfy Amgen,by “efficiently and fairly removing the issue of injury in fact from the case for trial.”907 F.3d at 52. In this case, however, because Defendants had stated their intention to challenge any class member affidavits, it was not possible to efficiently and fairly establish injury in fact on a class-wide basis.Id. at 53. The court admonished that Nexium did not “sanction[] the use of inadmissible hearsay to prove injury to each class member at or after trial …[as] class certification provides no occasion for jettisoning the rules of evidence and procedure, the Seventh Amendment, or the dictate of the Rules Enabling Act.”Id. (citing Tyson Foods, Inc. v. Bouaphakeo, 136 S. Ct. 1036, 1048 (2016)).

The First Circuit followed with a lengthy analysis of the Supreme Court’s holding in Tyson Foods that plaintiffs must present evidence “sufficient to sustain a reasonable jury finding as to” each class member’s injury, along with an analysis of other circuits’ jurisprudence on the question.Id. at 54-57 (quoting Tyson Foods at 1048). Characterizing its sister circuits’ subsequent interpretation of the Tyson Foods decision as “divergent,” the First Circuit nonetheless described general consensus, which it joined, among the Second, Third, Fifth, Eighth, and D.C. Circuits that plaintiff must be able to prove through common evidence that all class members were injured (although noting that the Second and Eighth Circuits approached the question as one of standing, rather than predominance under Rule 23(b)(3)).Id. (citing Denney v. Deutsche Bank AG, 443 F.3d 253, 264 (2d Cir. 2006); In re Hydrogen Peroxide Antitrust Litig., 552 F.3d 305, 311 (3d Cir. 2009); Bell Atl. Corp. v. AT&T Corp., 339 F.3d 294, 302 (5th Cir. 2003); Halvorson v. Auto-Owners Ins. Co., 718 F.3d 773 (8th Cir. 2013); In re Rail Freight Fuel Surcharge Antitrust Litig., 725 F.3d 244, 252 (D.C. Cir. 2013).

The First Circuit concluded that the Seventh and Ninth Circuits, however, have departed from this consensus approach and allowed class certification under Rule 23(b)(3) despite the presence of uninjured class members.Id. at 57 (citing Messner v. Northshore Univ. HealthSystem, 669 F.3d 802, 825 (7th Cir. 2012) (affirming class certification of a damages class with not “a great many” uninjured members); Torres v. Mercer Canyons Inc., 835 F.3d 1125, 1137 (9th Cir. 2016)).

This conclusion appears to have misinterpreted Torres andoverlooks other significant Ninth Circuit precedent. Torres arose in the employment context, and while the Ninth Circuit acknowledged that “actual damages will hinge on the amount of harm caused [by defendant’s conduct],” such individualized damages do not defeat class certification. Torres at 1136 (emphasis added).In Torres, all class members had been exposed to the defendant’s allegedly misleading omission—thus, the Ninth Circuit concluded that such proof of the common practice itself would also serve as common evidence of injury, with only individual damages varying.Id. at 1138. In reaching this conclusion, the Torres court drew heavily on its earlier decision in Mazza v. American Honda Motor Company, and contrasted the Torres plaintiffs’ class certification showing to the failure to show common proof in Mazza.Id. (citing Mazza, 666 F.3d 581, 596 (9th Cir. 2012). Unlike in Torres, where all class members had been exposed to the defendant’s alleged unlawful conduct, in Mazza there was no evidence that all class members had been exposed to the alleged misleading advertising and, without such common proof, the Ninth Circuit found it “unreasonable to assume that all class members” were injured, which defeated predominance and class certification. Mazza at 596.

Thus, notwithstanding the First Circuit’s discussion, upon further examination, the Rule 23(b)(3) predominance analysis in the Ninth Circuit is consistent with the majority position discussed in Asacol.