On September 13, 2016, in In re: Modafinil AntiTrust Litigation, the US Court of Appeals for the Third Circuit established a new framework for determining numerosity for class action certification under Federal Rule of Civil Procedure (FRCP) 23(a)(1) ( (3d Cir. Sept. 13, 2016)).

A putative class of 22 large and sophisticated wholesale corporations (plaintiffs) filed suit on April 27, 2006, alleging a global antitrust conspiracy involving Cephalon, a drug manufacturer, and four generic manufacturing companies. Plaintiffs filed a motion for class certification on May 12, 2014. The district court certified the class. Plaintiffs then settled with three of the five drug manufacturing companies, leaving only Ranbaxy and Mylan (defendants). Defendants appealed.

On appeal, the defendants challenged the class certification on the basis of numerosity and predominance, leading the Third Circuit to articulate a framework for analyzing the numerosity prong of FRCP 23(a).

First, the Third Circuit noted that for a putative class to satisfy the numerosity requirement under Rule 23(a)(1), the named plaintiff must show:

The court explained that the starting point of the numerosity analysis is determining the number of potential class members. It noted that it previously held that a named plaintiff generally satisfies the first prong of the analysis under Rule 23(a)(1) if it shows that the potential number of plaintiffs exceeds 40. The court also noted that the Supreme Court has stated in dicta that a class of fifteen was too small, citing Gen. Tel. Co. of the Nw, Inc. v. EEOC, 446 U.S. 318, 331 (1980). However, the court refused to specify a floor number at which a putative class fails, instead holding that a district court must rigorously analyze the second prong of impracticability if a putative class consists of fewer than 40 members.

As to the second prong of the Rule 23(a)(1) analysis, the Third Circuit noted that it had not previously listed relevant factors for district courts to analyze in determining the impracticability of joinder. It therefore enumerated a list of non-exhaustive factors in the opinion, including:

The court emphasized that the analysis should not weigh all factors equally, and that judicial economy and the ability to litigate as joined parties are of primary importance.

The court elaborated that the judicial economy factor should include an analysis of:

However, the court stated that courts should not consider the late stage of litigation and sunken costs already incurred in the litigation as part of the judicial economy analysis.

As to a district court's analysis of the claimants' ability and motivation to be joined as plaintiffs, the Third Circuit held that it should involve an examination of the stakes at issue for the individual claims and the complexity of the litigation, which typically correlates with the costs of pursuing these claims.

Based on this framework, the Third Circuit held that the district court erred by heavily weighing in its decision to grant certification the extensive history of the litigation and exhaustive discovery that the parties had already conducted, and by appearing to grant certification based on its concern that if it did not certify the class, unnamed class members would bring individual suits in other jurisdictions. The Third Circuit found that the district court failed to properly consider the ability and motivation of the plaintiffs to proceed as joined, rather than individual plaintiffs. As a result, the Third Circuit vacated the class certification order and remanded the case to the district court to rigorously analyze the numerosity requirement under the framework it established.