In re Asacol Antitrust Litigation
Why It Made the List
What happens when a plaintiff tries to bring a class action on behalf of “all purchasers” but only some were injured? Despite the obvious hurdles to such a class, plaintiffs across the country have continued to raise the question. Though most courts ultimately reach the same conclusion, they have answered this question in different ways. Some have rejected such a class as lacking Article III standing; others have held that the class cannot meet Rule 23’s “predominance” requirement. Still others — albeit a small minority — have suggested that the class might be certifiable so long as all purchasers were exposed to the alleged misconduct.
The Supreme Court was primed to address this issue in Tyson Foods, Inc. v. Bouaphakeo, 136 S. Ct. 1036 (2016). There, the lower courts certified a class of employees at a Tyson Food (“Tyson”) pork processing plant who alleged that Tyson should have compensated them for time spent donning and doffing protective work gear. On petition to the Supreme Court, Tyson raised the question of whether a class action can be certified under Rule 23(b)(3) when the class contains uninjured members. Id. at 1049. But Tyson abandoned that argument in its merits brief to the Court, and the question went unanswered. The plaintiffs’ bar has tried to exploit the Supreme Court’s relative silence on this issue. Damages, they argue, are distinct from liability and thus class certification is appropriate even when many members of the proposed class are uninjured.
In 2018, the First Circuit stepped into the fray in In re Asacol Antitrust Litigation, 907 F.3d 42 (1st Cir. 2018). In that case, the First Circuit unequivocally affirmed that Rule 23 does not allow plaintiffs to certify a class containing uninjured members when the defendant has plausible defenses to the individual claims. The decision adds to the growing number of circuit court opinions that have rejected the theory of uninjured class members and goes a long way toward closing the door on what should be a dead argument.
Warner Chilcott Limited (“Warner”) manufactured Asacol, a nonsteroidal anti-inflammatory drug that treats mild to moderate ulcerative colitis. In 2013, months before the Asacol patents expired, Warner brought to market Delzicol, a new drug that treats the same condition. Warner pulled Asacol from the market the same day. Id. at 44-45.
A group of union-sponsored benefits plans sued, alleging that Warner intentionally pulled Asacol from the market to prevent entry of cheaper generic alternatives. Id. at 45. The plaintiffs sued under antitrust and unfair competition laws of 25 states and the District of Columbia. They sought a class on behalf of indirect purchasers of branded Delzicol after Asacol was pulled, arguing that Warner had “forced consumers into a ‘hard switch’” from one drug to the other. Id. at 46.
The district court concluded that approximately 10% of the proposed class had not been injured. According to the court, those 10% would have purchased the higher priced branded product even if lower-priced generics had been available. Id. at 46-47. The court nonetheless found that a class could be certified based on an earlier First Circuit case dealing with class issues. Relying on In re Nexium Antitrust Litigation, 777 F.3d 9 (1st Cir. 2015), the court held that the “de minimis” number of uninjured class members could be removed after certification through the assistance of a claims administrator.
Warner challenged the class certification, raising two questions with the First Circuit. First, because the named plaintiffs resided in only four states, did they have standing to assert claims under the laws of any other state? Second, was it proper for the court to certify a class that contained uninjured members?
The First Circuit began with the threshold question: Did the plaintiffs have standing? Although the claims of named plaintiffs do not have to be identical to those of the class members, the court found, they must nonetheless have “the necessary stake in litigating” the claims of the absent class members. Id. at 48-49.
As the plaintiffs’ claims arose under various state laws that “parallel the federal Sherman Act,” the elements of the state laws — with one exception — were substantively identical. Id. at 49. As a result, the First Circuit felt comfortable that adjudication under one state law would generally dictate the outcome under another and thus the named plaintiffs had a sufficient “personal stake” in the claims of the absent class members. Id.
What was left unsaid, however, speaks volumes. The First Circuit limited its holding to those state laws with substantively identical elements. Because New York’s state antitrust law does not cover unilateral anticompetitive conduct, the plaintiffs resorted to New York’s unfair competition law, N.Y. Gen. Bus. Law § 349(a), which requires proof of deception. On appeal, the plaintiffs failed to address the differences with New York law. Finding that the plaintiffs had waived any arguments as to New York, the First Circuit “put off to another day how to apply Article III standing principles” to cases where the claims contain different elements under different states’ laws. Id. at 50.
The First Circuit then turned to the thornier issue: Can a class that includes uninjured members meet the predominance requirement of Rule 23(b)(3)? Id. at 51. The answer: No.
Before diving into the First Circuit’s analysis, some background is necessary. In 2015, the First Circuit addressed a proposed class in In re Nexium. There, a group of union health and welfare funds that reimburse prescription drugs brought a purported class against AstraZeneca, the manufacturer of Nexium. 777 F.3d 9, 14 (1st Cir. 2015). The plaintiffs alleged that the patents for Nexium were invalid, and that AstraZeneca’s settlements with generic companies — who had previously challenged the validity of the patents — constituted illegal anticompetitive conduct. Had AstraZeneca not entered into the settlement agreements, so said the plaintiffs, a cheaper generic version of Nexium would have been available years earlier. Id.
On appeal, defendants argued that certification was improper because the class included uninjured members. “At the class certification stage, the court must be satisfied that, prior to judgement, it will be possible to establish a mechanism for distinguishing the injured from the uninjured class members . . . [that] is ‘administratively feasible’ and protective of defendants’ Seventh Amendment and due process rights.” Id. at 19 (citation omitted). The court disagreed. Despite the fact that the plaintiffs had not yet established such a mechanism, the First Circuit concluded that one might be possible. It sua sponte posited that unrebutted consumer affidavits might be sufficient to establish injury. Id. at 20. But the First Circuit’s theory went untested: in an unusual chain of events, before it issued its opinion on the interlocutory appeal the case had been tried to a defense verdict. In re Asacol, 907 F.3d at 52.
Relying on In re Nexium, the district court in In re Asacol concluded that (1) only a de minimis number of uninjured class members existed; and (2) it would be possible to weed them out through a claims administration process prior to judgment.
Judge Kayatta, who had dissented in In re Nexium, wrote for the majority in In re Asacol. Although the First Circuit did not expressly overturn In re Nexium, it rejected the district court’s reading of the case and limited the holding to its peculiar set of facts — namely, to the rare (if not nonexistent) situation in which defendants have no intention of challenging evidence of injury.
The First Circuit explained that whenever a determination of injury turns on an assessment of the individual facts of each plaintiff, “the defendant must be offered the opportunity to challenge each class member’s proof.” Id. at 55 (emphasis added). Unless the defendant can raise such challenges in a “manner that protects the defendant’s rights” and that will be “manageable and superior” to traditional litigation, class certification is not appropriate. Id. at 55. As Judge Kayatta observed, the aim of Rule 23’s predominance test is to ensure that claims can be dealt with in a manner that is not “inefficient or unfair.” Id. at 51. “Inefficiency can be pictured as a line of thousands of class members waiting to offer testimony and evidence on individual issues. Unfairness is equally well pictured as an attempt to eliminate inefficiency by presuming to do away with the rights a party would customarily have to raise plausible individual challenges on those issues.” Id. at 51-52.
Nor can plaintiffs simply rely on an assumption that they would be entitled to use unrebutted testimony to prove injury. Putting aside skepticism of whether there would ever be such a situation, the court in In re Asacol made clear that challenged testimony would never be sufficient. “We  reject any invitation to rewrite Nexium as sanctioning the use of inadmissible hearsay to prove injury to each class member at or after trial. The fact that plaintiffs seek class certification provides no occasion for jettisoning the rules of evidence.” Id. at 53.
As a last ditch attempt, the plaintiffs argued that they could use statistical analysis to prove the class-wide antitrust impact of the conduct and then reduce the total damages by the percentage of uninjured plaintiffs. This would sufficiently protect defendants, the plaintiffs argued, because the total aggregate damages would reflect only those damages to injured class members. Id. at 55. But the First Circuit soundly rejected that approach, finding that a defendant is entitled to challenge each class member’s proof of liability, and there was no basis to believe that the statistical evidence would prove that any given individual class member was injured. “Once one accepts plaintiffs’ ‘no harm no foul’ position there would be no logical reason to prevent a named plaintiff from bringing suit on behalf of a large class of people, forty-nine percent or even ninety-nine percent of whom were not injured, so long as aggregate damages . . . were reduced proportionately.” Id. at 56.
The First Circuit joins a growing number of circuits to hold that plaintiffs cannot certify a class with uninjured class members. The Fifth Circuit, for example, held in Bell Atlantic Corp. v. AT&T Corp., 339 F.3d 294, 306 (5th Cir. 2003), that “the need for  individualized damages inquiries” prevented class certification because those “individual issues . . . predominate over questions common to the proposed classes.” The D.C. Circuit similarly held in In re Rail Freight Fuel Surcharge Antitrust Litigation, 725 F.3d 244, 252 (D.C. Cir. 2013), that plaintiffs must “show that they can prove, through common evidence, that all class members were in fact injured.” See also In re Hydrogen Peroxide Antitrust Litig., 552 F.3d 305, 311 (3d Cir. 2008). The Second and Eighth Circuits, though viewing the issue as one of either standing or a hybrid of standing and predominance, have reached similar conclusions. See Denney v. Deutsch Bank AG, 443 F.3d 253, 264 (2d Cir. 2006) (“no class may be certified that contains members lacking Article III standing”); Halvorson v. Auto-Owners Insurance Co., 718 F.3d 773 (8th Cir. 2013) (grounding its analysis in a hybrid approach).
The Seventh and Ninth Circuits, by contrast, have signaled a willingness to certify classes with uninjured members, but even their holdings have limitations. The Seventh Circuit, for example, has suggested that a class might be appropriate only if it contains a small number of uninjured plaintiffs. Messner v. Northshore Univ. Health System, 669 F.3d 802, 825 (7th Cir. 2012) (a class should not be certified “if it is apparent that it contains a great many persons who have suffered no injury”). And in Torres v. Mercer Canyons Inc., 835 F.3d 1125 (9th Cir. 2016), the Ninth Circuit affirmed certification of a class of domestic farm workers who alleged that the defendant failed to inform them of the availability of higher paid work. In doing so, the Ninth Circuit found that there was a “common failure to disclose information, and not merely a disparate series of affirmative statements.” Id. at 1137-38. Thus, the court apparently equated exposure to misconduct with injury. See In re Asacol, 907 F.3d at 57 (expressing skepticism over whether exposure to representations can serve as a proxy for common injury).
The First Circuit decision in In re Asacol affirms traditional principles of Rule 23 predominance. Plaintiffs — not defendants — bear the burden of proving that a class action is a superior vehicle for litigating claims. As the First Circuit made clear, this includes proving that a defendant’s right to challenge each element of a claim on an individual basis does not predominate over common issues.
 Anand Agneshwar is a partner at Arnold & Porter where he co-chairs the firm’s Product Liability Litigation practice group.
 Jocelyn A. Wiesner is an associate at Arnold & Porter; her practice focuses on complex product liability litigation and corporate governance.
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