CHAPTER § 10.05 Defenses to Class Certification in TPP Cases

• Jurisdiction: United States

§ 10.05 Defenses to Class Certification in TPP Cases

Many of the same defenses and strategies discussed above apply to the class-certification context. For example, when TPPs bring a case as a putative class action, they may face significant hurdles in terms of proving causation. Several of the recent court of appeals cases addressing proximate causation for RICO claims involved class actions.³⁰⁷ Furthermore, a defendant in a TPP action must analyze the complaint to ensure it satisfies requirements such as compliance with the applicable statute of limitations.³⁰⁸

This section addresses issues that are unique to the class-certification context: namely, the four requirements under Federal Rule of Civil Procedure 23(a) and 23(b). After a brief overview of those requirements, this section analyzes recent decisions discussing those requirements.

[1] Overview of Rule 23's Class-Action Requirements

In deciding whether to certify a class, a court must engage in a two-tiered analysis. First, a court must find that the class meets each of the four prongs of FRCP Rule 23(a) (numerosity, commonality, typicality, and adequacy) and that the class can be objectively defined (i.e., that the class is ascertainable). If (and only if) all the requirements of Rule 23(a) are met, a court can then consider whether the plaintiff has satisfied one of the three subdivisions of Rule 23(b).³⁰⁹ The proponent of class certification bears the burden of demonstrating the elements of Rule 23 are met³¹⁰ by a preponderance of the evidence.³¹¹

A court considering class certification must conduct a "rigorous analysis" to determine whether the elements of Rule 23 have been satisfied.³¹² This inquiry often necessitates consideration of the merits of the named plaintiff's claims. As the United States Supreme Court held, "Rule 23 does not set forth a mere pleading standard. A party must affirmatively demonstrate his compliance with the Rule-that is, he must be prepared to prove that there are in fact sufficiently numerous parties, common questions of law or fact, etc."³¹³ In rejecting class certification for Section a group of prescription-drug purchasers, for example, the Eastern District Court of Pennsylvania noted:

Though the plaintiffs need not establish the merits of their case at the class certification stage and the substantive allegations of the complaint must be taken as true, the court must conduct a rigorous analysis to determine the suitability of resolving the issues in a class action. Because certification and the merits are intertwined, this analysis necessitates a factual inquiry.³¹⁴

Quoting from a Supreme Court decision,³¹⁵ the court continued:

Evaluation of many of the questions entering into determination of class action questions is intimately involved with the merits of the claims. The typicality of the representative's claims or defenses, the adequacy of the representative, and the presence of common questions of law or fact are obvious examples. The more complex determinations required in Rule 23(b)(3) class actions entail even greater entanglement with the merits.³¹⁶

In short, determining whether a proposed class should be certified requires a "rigorous" analysis of both the individual elements of Rule 23 and the merits of the named plaintiff's claims. This requirement has taken on even more significance since the Supreme Court's Dukes opinion. Federal courts have demonstrated an increased willingness to engage in this rigorous analysis, even allowing an in-depth look at the merits of the case when evaluating whether the requirements of Rule 23 have been satisfied.³¹⁷

[2] Methods of Raising the Class-Certification Question

The rigorous analysis required by Rule 23 most often applies in evaluating a plaintiff's motion for class certification. Any defenses or objections to class certification are raised only in response to plaintiff's filing. Plaintiff's class-certification motions are usually filed well after the lawsuit is initiated and only after some period of time for discovery, at least discovery related to class-certification issues. Even limited discovery on class certification can be costly and time-consuming, however. To limit or perhaps even avoid this discovery and otherwise raise defenses to class certification as early as possible, defendants can affirmatively move for a determination that a class should not be certified. For example, defendants can file a motion requesting that the court review, under Rule 23(c)(l), whether the claims are appropriate for class treatment.³¹⁸ Defendants may also either move to dismiss class allegations, pursuant to Rule 12(b)(6), or move to strike class allegations, pursuant to Rules 12(f) and 23(d)(l)(D). Because they offer an opportunity for an early resolution on what is often the most critical issue in a case, motions to dismiss or strike class allegations have become increasingly common defense tactics.³¹⁹ These motions have proven successful in a wide variety of contexts, including cases where individual issues associated with choice-of-law determinations swamped any potential common issues and cases where plaintiffs had defined the proposed class too broadly.³²⁰

[3] Rule 23(a) Prerequisites

[a] Implicit Requirements

[i] Ascertainable

While not an explicit requirement of Rule 23, "[a] prerequisite to a Rule 23 action is the actual existence of a 'class.'"³²¹ Indeed, it is "elementary" that "to maintain a class action, the class sought to be represented must be adequately defined and clearly ascertainable,"³²² allowing the court to determine class membership "without a prolonged and individualized analytical struggle."³²³ The proposed class may not be "amorphous, vague, or indeterminate and it must be 'administratively feasible to determine whether a given individual is a member of the class.'"³²⁴ "'A class definition is inadequate if a court must make a determination of the merits of the individual claims to determine whether a particular person is a member of the class.'"³²⁵ Similarly, a class definition is inadequate if it "sweeps in more parties than are entitled to recovery."³²⁶ In short, the class definition "'must be precise, objective, and presently ascertainable."'³²⁷

Disputes over ascertainability often focus on the use of purchase data and other information to identify the putative class members, including TPPs and individual consumers. For example, in In re Wellbutrin XL Antitrust Litigation, the court initially certified a class of "end-purchasers and [TPPs]" who alleged that the defendants illegally conspired to prevent generic versions of a drug from entering the market, in violation of federal antitrust law and state consumer-protection laws.³²⁸ The court did not consider ascertainability at that juncture. But after the Third Circuit issued several decisions addressing the ascertainability requirement,³²⁹ one of the defendants filed a motion to decertify the class for lack of ascertainability.³³⁰ The court granted that motion. It stated that "[t]o satisfy the ascertainability requirement, a putative class must show that there is a reliable, administratively feasible mechanism that can identify which potential class members fall within the class definition."³³¹ There was no dispute that the TPPs who paid for some or all of the drugs could be ascertained, but the parties did contest whether PBMs (who sometimes offered price guarantees for the drugs, which effectively made them payors) and individual consumers could be identified.³³² The court found that the plaintiffs did not show that there was an "administratively feasible mechanism for determining which PBMs and individual consumers [were] members of the class."³³³ The court noted that the plaintiffs' "evidence on ascertainability barely [went] further than repeated assurances that showing ascertainability in pharmaceutical cases is not difficult and that there are extensive purchase records in the pharmaceutical industry that could be used to" identify the PBMs and consumers.³³⁴ Plaintiffs failed to present any evidence that purchase records could be used to determine the class members, and even if they had done so it was not clear that the records could be synthesized in such a way to identify the PBMs and consumers.³³⁵ As a result, the court decertified the class.

One court has agreed with the Wellbutrin ruling that a plaintiff cannot satisfy the ascertainability requirement based on assurances that prescription records exist which could be used to identify the class members.³³⁶ Other courts have rejected ascertainability arguments on the ground that the concern over identifying class members relates to proof of damages and can be addressed at that point.³³⁷

[b] Explicit Requirements: Numerosity, Commonality, Typicality, and Adequacy

[i] Numerosity

Under Rule 23(a), "[o]ne or more members of a class may sue or be sued as representative parties on behalf of all members only if: (1) the class is so numerous that joinder of all members is impracticable. . . ."³³⁸ This element does not require a set number of class members.³³⁹ While the numerosity element is rarely litigated, "a plaintiff still bears the burden of making some showing, affording the district court the means to make a supported factual finding, that the class actually certified meets the numeros-ity requirement."³⁴⁰ TPP plaintiffs can easily satisfy this element.³⁴¹

[ii] Commonality

To satisfy the commonality requirement, a plaintiff must demonstrate that "there are questions of law or fact common to the class."³⁴² Generally, the threshold for commonality is not high; identifying a single common question may be sufficient.³⁴³ Although the number of common questions need not be significant, "not every common question . . . will suffice. . . ."³⁴⁴ This is, in part, because "at a sufficiently abstract level of generalization, almost any set of claims can be said to display commonality."³⁴⁵ To satisfy the commonality requirement, Plaintiffs must...