In a November 30, 2013 post, we wrote about the District of Massachusetts’ class certification decision in the antitrust case, In re Nexium. There, the district court certified a class of consumers and other payors who alleged that they paid supracompetitive prices for the heartburn drug Nexium as a result of an unlawful antitrust conspiracy among the branded manufacturer of the drug and its generic drug competitors. District Judge William Young certified the class even though it included uninjured class members. Based on plaintiffs’ expert testimony, Judge Young concluded that the number of uninjured class members was small enough that their presence did not defeat a showing of common antitrust impact, and that defendants would be permitted to challenge individual damages claims at trial. We criticized the decision because the expectation that a case management device would be identified later to handle individual damages claims (and separate the injured from the uninjured class members) would only delay, not avoid, the need to resolve individual issues. As we also said in an earlier post: “[t]oo often, courts simply recite the variety of mechanisms available for determining damages without determining how or even whether those mechanism can work in the case before them. . . . While such approaches may seem responsible and pragmatic, they more closely resemble wishful thinking than rigorous analysis.”
On January 21, 2015, a divided First Circuit panel affirmed the district court’s class certification decision. It held:
We conclude that class certification is permissible even if the class includes a de minimis number of uninjured parties. We hold that the district court did not abuse its discretion by certifying the class here and determining that at the certification stage, it had not been shown that future proceedings would not be manageable consistent with defendants’ Seventh Amendment and due process rights.
We will explore the First Circuit decision in greater depth in subsequent postings. For now, let it suffice that, whatever one may think about inclusion of a de minimis number of uninjured class members in a proposed class, we have several concerns with the majority’s analysis. Not the least of these concerns are 1) the court’s willingness to affirm a class certification decision where the district court had not specified a mechanism for identifying uninjured class members and assessing individualized damages; 2) its receptivity to allowing merits proof by affidavit; and 3) its shifting of the burden of proof to defendants to establish why the over-inclusive class should not be certified.
Defendants may take some solace in the dissenting opinion of Judge Kayatta, who expressed the same concerns with the majority’s decision (authored by Judge Dyk, sitting by designation, and joined by Judge Torruella). The dissent was critical of the majority for fashioning its own method of culling uninjured class members from injured class members “that no party has proposed–limiting recovery to consumers who file affidavits–and then announcing itself quite satisfied with that method.” The dissent also expressed concern with the concept of proof by affidavit, and with the majority’s placement of the burden of proof on defendants to show that there is no feasible method to remove uninjured members from the class post-certification.
As dissatisfying as the First Circuit’s decision may be to defendants, it was in large measure based on case-specific evidence presented in the district court. Its holding, therefore, should have limited applicability to cases involving materially different facts. For example, it should not foreclose objections to class certification in cases involving more than a de minimis number of uninjured class members, or where culling uninjured members from the class or determining each class member’s damages would involve a more individualized analysis than would have been required in the Nexium antitrust setting.
Written by former litigation partner, Donald R. Frederico.