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INSIGHT: Derailing Class Certification in Antitrust Cases—The Hunt for Uninjured Class Members

Nov. 20, 2019, 9:01 AM

Predominance and Antitrust ‘Impact’

To proceed as a class action in federal court, plaintiffs must satisfy the requirements of Federal Rule of Civil Procedure 23. In antitrust cases, the rubber hits the proverbial road most often with Rule 23(b)(3)’s “predominance” requirement. To satisfy Rule 23(b)(3), plaintiffs must demonstrate that “questions of law or fact common to class members predominate over any questions affecting only individual members.” Whether something is a “common question” for purposes of predominance does not depend on the nature of the question, but whether it can be “answered” by common or class-wide evidence at trial.

While certain questions, such as the existence of an alleged conspiracy are often deemed “common questions,” that is usually not enough to show that common questions predominate over questions affecting individual class members.

In practice, class certification in antitrust cases often focuses on questions of “impact”—that is, whether plaintiffs will be able to use evidence common to the class to show at trial that all or almost all proposed class members suffered at least some damage attributable to the allegedly unlawful conduct.

Uninjured Class Members: How Many Is Too Many?

Defendants opposing class certification often try to show that plaintiffs’ purported common evidence of “impact” is deficient and cannot demonstrate that all or virtually all class members have been injured.

In addition to attacking the quality of plaintiffs’ economic models, some defendants have argued why the challenged conduct would not have injured certain categories of class members whose identity cannot be ascertained through common evidence. Showing the presence of such uninjured class members may be enough to defeat class certification—but how many do there need to be?

The D.C. Circuit has been among the most vocal in concluding that the presence of even a few uninjured class members may warrant denying class certification. In a 2013 ruling vacating class certification, the D.C. Circuit framed the impact analysis as whether plaintiffs could “prove, through common evidence, that all class members were in fact injured by the alleged conspiracy.” See In re Rail Freight Surcharge Antitrust Litigation, 725 F.3d 244, 252 (D.C. Cir. 2013) (emphasis added).

On remand, the district court adopted a similarly-strict formulation, noting that plaintiffs’ failure to account for certain categories of uninjured class members made it “impossible for plaintiffs to satisfy the ‘all or virtually all’ standard for predominance.” In re Rail Freight Surcharge Antitrust Litigation, 292 F. Supp. 3d 14 (D.D.C. 2017).

In affirming that decision earlier this year, the D.C. Circuit declined to address whether “virtually all” class members being injured was enough, but emphasized that approximately 13% of the class being uninjured based on plaintiffs’ own models—representing thousands of class members—was too much given the need for individualized inquiry to identify those class members. In re Rail Freight Fuel Surcharge Antitrust Litigation, 934 F.3d 619 (D.C. Cir. 2019).

Courts in other circuits have used similar language, requiring plaintiffs to demonstrate that common evidence can establish that “all, or virtually all” class members suffered injury to satisfy the predominance requirement. See, e.g., In re Processed Egg Prod. Antitrust Litigation, 312 F.R.D. 171 (E.D. Pa. 2015).

‘De Minimis’ Number?

Some courts have asserted that a “de minimis” number of uninjured class members does not necessarily defeat class certification, predictably leading to wrangling over what is de minimis. The First Circuit has grappled with this question twice in the past few years, reaching different conclusions in a pair of pharmaceutical antitrust cases based on the differing circumstances presented in the two cases.

In a case involving the drug Nexium, the First Circuit expressly concluded that a de minimis number of uninjured class members did not warrant denying class certification. The court explained that “de minimis” should be understood in “functional terms,” and found no basis to overturn the district court’s finding that “the number of uninjured members . . . [was] not so large as to render the class impractical or improper.” In re Nexium Antitrust Litigation, 777 F.3d 9, 30 (1st Cir. 2015).

The court emphasized that “the vast majority of class members were probably injured” and that the uninjured class members could be excluded through various mechanisms.

In a case last year involving the drug Asacol, the First Circuit reached a different result, vacating class certification after explaining that there were “apparently thousands who in fact suffered no injury” in the proposed class and that identifying which class members were injured would require significant individualized inquiry and contested evidence. See In re Asacol Antitrust Litigation, 907 F.3d 42, 53 (1st Cir. 2018).

Put simply, the question of how many uninjured class members is too many means something more than a pure percentages game. Indeed, courts may reach different ultimate conclusions even where the number of uninjured class members are similar as a percentage of the total number of class members. In other words, courts may find that five percent of a small direct purchaser class being uninjured is not enough (e.g., In re Lidoderm Antitrust Litigation, 2017 BL 52453, but that 5% of a large indirect purchaser class would be too many (e.g., Vista Healthplan Inc. v. Cephalon Inc., 2015 BL 183169).

It is clear, however, that courts will be most troubled by uninjured class members when there is no way to identify them without individualized inquiry. Rail Freight, 934 F.3d at 625 (noting district court finding that plaintiffs had proposed no way “short of full-blown, individual trials” to “reduce this number and segregate the uninjured from the truly injured”).

Given the fact-intensive nature of class certification, practitioners litigating class action suits should keep these issues in mind early in the case as they develop factual and expert testimony. In our view, antitrust defendants that are able to demonstrate that:

  1. the proposed class contains a large number of uninjured class members; and
  2. there is no feasible way to identify them without resorting to individual inquiries will be better positioned to defeat class certification on that basis.

This column does not necessarily reflect the opinion of The Bureau of National Affairs, Inc. or its owners.

Author Information

Steven E. Bizar is a partner at Dechert LLP and co-leader of the antitrust/competition practice in Philadelphia. He is a first chair trial lawyer well regarded for his success in the defense of antitrust class action and Section 1 Sherman act cases and his trial of complex commercial disputes in court and before arbitrators. He has three decades of experience spanning a diverse range of antitrust and trade regulation, contract and business tort, government investigation, insurance and reinsurance, securities and corporate governance matters.

Shari Ross Lahlou is a partner at Dechert LLP in the Washington, D.C., office and is an experienced trial lawyer who focuses her practice on antitrust and complex litigation matters. Her clients include Fortune 500 companies from the tech, health care and chemicals industries. She has obtained trial court and appellate victories for her clients across a range of antitrust matters, including: cartels, monopolization, tying, exclusive dealing and other anti-competitive conduct.

George G. Gordon is a partner and former co-chair of Dechert’s antitrust practice group and the life sciences practice, and focuses his practice on antitrust litigation, counseling and government investigations. His experience includes substantial antitrust class action litigation and general antitrust litigation including a number of significant antitrust actions involving claims of monopolization, unlawful price discrimination, unlawful group boycotts, predatory pricing, and monopoly leveraging.

Thomas J. Miller is an associate and a member of Dechert’s antitrust and competition group. He has counseled clients on various matters, including antitrust litigation, federal and state investigations, and the antitrust aspects of mergers and acquisitions. His clients are in a variety of industries, including the chemical, airline, energy, advertising, and pharmaceutical industries.