Class Containing De Minimis Number of Uninjured Members Can Be Certified: First Circuit | Practical Law

Class Containing De Minimis Number of Uninjured Members Can Be Certified: First Circuit | Practical Law

In In re Nexium Antitrust Litigation, the US Court of Appeals for the First Circuit held that a district court may certify a class containing a de minimis number of people who suffered no injury, provided that those people can later be identified and kept from recovering damages.

Class Containing De Minimis Number of Uninjured Members Can Be Certified: First Circuit

by Practical Law Litigation
Published on 27 Jan 2015 • USA (National/Federal)
In In re Nexium Antitrust Litigation, the US Court of Appeals for the First Circuit held that a district court may certify a class containing a de minimis number of people who suffered no injury, provided that those people can later be identified and kept from recovering damages.
On January 21, 2015, in In re Nexium Antitrust Litigation the US Court of Appeals for the First Circuit held that a district court may certify a class containing a de minimis number of people who suffered no injury, provided that those people can later be identified and kept from recovering damages (Nos. 14–1521, 14–1522, (1st Cir. Jan. 21, 2015)).
AstraZeneca, which produces the heartburn drug Nexium and owns several patents related to the drug, sued three generic drug companies alleging they had infringed several of the Nexium patents. AstraZeneca settled with each of the three generic drug companies, agreeing to pay significant sums of money in exchange for the generic drug companies agreeing to refrain from challenging the validity of the Nexium patents. The generic drug companies also agreed to delay the launch of their respective generic products until the two main patents covering the drug expired in May, 2014.
A group of union health and welfare funds that reimburse plan members for prescription drugs, including Nexium, sued AstraZeneca and the generic drug companies ("the defendants") alleging, among other things, that the settlement agreements constituted unlawful agreements not to compete. The plaintiffs also alleged that but for the defendants' anti-competitive conduct, a generic version of Nexium would have been available as early as April 2008, resulting in lower prices through competition. The plaintiffs sought class certification for a class of third-party payors (insurance companies) and individual customers. The district court granted certification, subject to certain exceptions, finding that the plaintiffs had met their burden of demonstrating compliance with the Federal Rule of Procedure (FRCP) 23 requirements, despite the fact that the certified class included some number of uninjured class members. The defendants appealed arguing that:
  • The presence of any uninjured class members defeated the FRCP 23(b)(3) predominance requirement because the existence of uninjured class members precludes the use of common proof at trial.
  • Even if a de minimis number of potentially uninjured class members would not defeat class certification, more than a de minimis number of class members were uninjured here.
The First Circuit granted an interlocutory appeal under FRCP23(f).
The First Circuit found no basis for overturning the district court’s conclusion. The court identified three requirements relevant to the question of whether a class can include uninjured members:
  • The class must be definite and ascertainable.
  • Aggregate recovery must be limited to the amount of the injury.
  • Only injured parties may recover.
Here, the court found that a mechanism would exist for establishing injury at the liability stage of the proceedings, in the form of customer affidavit or declaration, and that this mechanism would comply with Seventh Amendment and due process requirements. Moreover, the need for individualized liability determinations did not defeat class certification under relevant Supreme Court and other precedent. The court supported its conclusion by noting that, among other things:
  • Although inclusion of some uninjured class members might be inefficient, the overall efficiency of the class action mechanism counterbalanced this concern.
  • It likely would not be possible to entirely separate the injured from the uninjured at the class certification stage.
  • The plaintiff class members in this case appeared to be the very group that FRCP 23(b)(3) was meant to protect, as the actual overcharge to each class member was generally too small to warrant individual litigation.
  • The US Supreme Court’s decision in Halliburton Co. v. Erica P. John Fund, Inc. contemplated, in the securities context, that a class with uninjured members could be certified if the presence of a de minimis number of uninjured members did not overwhelm the common issues for the class (134 S. Ct. 2398, 2412 (2014)).
Class action practitioners in the First Circuit should be aware that a class containing a de minimis number of uninjured parties may be certified, provided these members can be later identified and prevented from recovering damages.