In re Asacol Antitrust Litigation: Article III Standing in Multi-State Class Actions

In his October 17th post, Josh Dunlap describes in detail the First Circuit’s landmark ruling in In re Asacol Antitrust Litigation concerning classes that include uninjured members. As Josh points out, although the district court had referred to ascertainability in its decision certifying the class, the First Circuit opinion reversing class certification did not, and for good reason. The case did not raise an ascertainability issue at all, but rather an issue of an overly broad class definition that encompassed significant numbers of uninjured class members (the court estimated 10 percent of potential class members had not been harmed because they would have purchased the branded drug even had the generic been allowed on the market). The ill-fated class was defined to include all purchasers of the defendant’s product, not just all such persons who would have purchased the generic alternative. Presumably, all purchasers of the drug could have been identified through prescription records, but plaintiffs failed to show that it would have been possible without a highly individualized analysis to determine who among those purchasers would have switched to the generic product absent the alleged anticompetitive behavior. Because the question whether membership in a class is ascertainable depends on how the proposed class is defined, and the class in Asacol was defined to include all purchasers, the issue in the case wasn’t ascertainability, but rather the inclusion within the class definition of uninjured members. The First Circuit had treated those matters separately in In re Nexium, the district court had conflated them in Asacol  (perhaps because the parties had done so), and the First Circuit correctly focused only on the uninjured-class-member (or overbreadth) problem in Asacol.

Josh’s post very ably describes what may be the most important aspect of the First Circuit’s decision, but another important ruling also deserves mention. Before it reached the issue of uninjured class members, the court addressed a matter of Article III standing that applies to nationwide and multi-state class actions in federal court where state laws provide the rules of decision. Specifically, the court held that, with one exception, the named plaintiffs had Article III standing to assert the claims of class members that were based on the substantive laws of states other than those on which the named plaintiffs’ claims were based. The named plaintiffs were from four states, and sought certification of a class of persons seeking recovery under the laws of 25 states and the District of Columbia. In analyzing standing, the court framed the inquiry as whether the differences that exist between the class members and the class representatives are “the type that leave the class representative with an insufficient personal stake in the adjudication of the class members’ claims.” To answer that question, the court considered the laws at issue, which included state antitrust laws which paralleled the federal Sherman Act. Because the laws were “materially the same,” the court found that the fact that judgments would enter for some class member under the laws of states other than the laws governing the class representatives’ claims “has no relevant bearing on the personal stake of the named plaintiffs in litigating the case to secure such judgments.”

The defendant was able to highlight differences in the substantive elements of the laws of a few states.  The court dismissed most of these challenges. It found that plaintiffs had not shown that an effect on intrastate commerce (a required element under the laws of some of the states) would be a disputed issue; that the availability of treble damages in some states was irrelevant where the trebling would be automatic; and that a requirement of “willfulness” under Massachusetts law was not a problem because plaintiffs based their monopolization claim on allegations of a specific intent to monopolize, which was, as a practical matter, no different from an allegation of willfulness. The one claim for which the court found a lack of standing was the claim under New York’s consumer protection statute, because it required proof of deception. Even there, the court’s ruling is limited to a finding that plaintiff had waived any opposition to the defendant’s argument.  It explained: “[W]e put off to another day how to apply Article III standing principles to a case in which a putative class representative has a personal stake in proving most but not all of the elements of a class member’s claim.”

The court’s methodology demonstrates that its decision does not stand for the broad proposition that differences in the laws of states governing the claims of class representatives and other putative class members can never create Article III standing issues that would deprive the court of jurisdiction over the putative class members’ claims. Rather, such a result depends on the specifics of the laws in issue and the nature of the claims the class representatives seek to assert. Here, because many of the state laws were patterned after a single federal law, the potential differences were especially muted, making the court’s decision easier than it might have been in other contexts.

The court also emphasized that this portion of its decision was limited to the issue of Article III standing.  Quoting Sosna v. Iowa, a 1975 Supreme Court precedent, it explained that, “once the named plaintiff establishes injury and membership in the class, the inquiry should shift ‘from the elements of justiciability to the ability of the named representative to “fairly and adequately protect the interests of the class.”‘” It implicitly construed that directive to include consideration of more than just the requirement of adequacy under Rule 23(a)(4), because it used this quote as a segue to its analysis of Rule 23(b)(3) predominance with respect to the inclusion of uninjured class members.

The take-away for practitioners is that the First Circuit is receptive to the argument that a class representative has standing to assert the similar claims of potential class members even though they may be governed by other states’ laws. However, its analysis also makes clear that a finding of standing is not automatic, but will depend on the specific laws and claims in issue. Moreover, even if standing exists, plaintiffs still must establish that the state law differences do not defeat findings of commonality, typicality, adequacy, predominance and superiority under Rule 23. And, as the court expressly stated, whether a named plaintiff has standing to assert claims of others with additional burdens of proof has been left for another day.

Written by former litigation partner, Donald R. Frederico.