NEWS

By Perry Cooper

Sept. 26 — It’s rare that defendants challenging class status get to stop at step one of the analysis: whether there are enough potential members in the class to make it impractical for them to join together in a non-class proceeding.

And yet the U.S. Court of Appeals for the Third Circuit found recently that two drugmakers didn’t need to go any further than Fed. R. Civ. P. 23(a)'s numerosity requirement to evade certification of an antitrust class, in In re Modafinil Antitrust Litig. , 2016 BL 297787, 3d Cir., No. 15-3475, 9/13/16 ( 17 CLASS 966, 9/23/16 ).

The court didn’t just vacate certification because not enough class members were involved and leave it at that. Instead it laid out a roadmap of factors courts should analyze before checking off the numerosity prong.

But if class size doesn’t come up frequently in class certification challenges—which it doesn’t—why did the Third Circuit bother?

Some defense attorneys say it was to put a check on plaintiffs’ lawyers who are sometimes the real impetus behind litigation, rather than the class members themselves.

But a professor who’s studied the class system takes a different view, finding fault with some of the “artificial” requirements the appeals court details. He also says the criteria may make plaintiff’s uphill climb for class status even more difficult.

Non-Exhaustive List

The Third Circuit said it has never “had occasion to list relevant factors that are appropriate for district court judges to consider when determining whether joinder would be impracticable” under the class-size requirement.

It gave the following, “non-exhaustive” list:

•  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.

‘Potential for Abuse.’

Some defense attorneys’ say addressing concerns about plaintiffs’ attorneys was the motivation behind the court’s ruling.

“I think there was a concern in the court about the potential for abuse of the class action mechanism where you have litigation driven by interests that on their face do not necessarily seem to be those of the class,” Robin P. Sumner, partner at Pepper Hamilton LLP in Philadelphia, told Bloomberg BNA. Sumner specializes in antitrust, securities and complex litigation.

In this case, two dozen drug wholesalers alleged Ranbaxy Pharmaceuticals Inc. and Mylan Pharmaceuticals Inc. conspired to keep generic competition out of the market for Cephalon Inc.'s narcolepsy drug Provigil.

Sumner said the court was troubled by the fact that three unnamed class members accounted for more than 97 percent of the drug purchases. “This case was proceeding really without any sort of say-so by them,” she said.

That struck a chord with the court and prompted it to take a fresh look at Rule 23, she said. The court used the numerosity prong to address the issue of who’s really driving these cases—the class members or the plaintiffs’ attorneys.

‘Artificial Restrictions.’

But civil procedure professor Adam Steinman of the University of Alabama School of Law in Tuscaloosa finds fault with some of the new criteria for class size that the Third Circuit detailed.

For example, he said, the majority’s “artificial” restrictions on how to assess whether judicial economy favors class litigation are “potentially problematic.”

The Third Circuit instructed the district court on remand not to take into account the sunk costs of the litigation or the need to further delay trial were the class not to be certified. Instead it should decide “whether a class action would have been a substantially more efficient mechanism of litigating this suit than joinder of all parties.”

Steinman said this could create unnecessary obstacles to class certification in certain kinds of cases.

He pointed to Judge Marjorie O. Rendell’s dissent as making some very powerful points, especially about judicial economy.

Rendell said a district judge’s prediction of how the options before him will play out “becomes nonsensical” if he can’t take the amount of effort already expended into consideration. “The Majority’s directive as to what a district court should consider turns the issue into an exercise in abstraction,” she said.

‘Uphill Battle.’

The Third Circuit’s new numerosity guidelines will only come into play in certain types of cases, Sumner and Steinman agreed.

It’s hard to imagine a numerosity challenge in a consumer class action with thousands of potential plaintiffs, Sumner said. But in other direct purchaser antitrust actions or Racketeer Influenced and Corrupt Organizations Act cases, for instance, it could provide defendants with some new ammunition.

Sumner and Steinman also agreed that the district court might decide on remand that the numerosity requirement is still satisfied in this case.

The district court could try to adapt its conclusions to the Third Circuit’s framework, Sumner said. But she thinks it will be an uphill battle.

It could be a while before the district court gets to take another look: the plaintiffs have made it clear they plan to seek rehearing or rehearing en banc.

To contact the reporter on this story: Perry Cooper in Washington at pcooper@bna.com

To contact the editors responsible for this story: Steven Patrick at spatrick@bna.com; Jeffrey D. Koelemay at jkoelemay@bna.com

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