The Third Circuit recently vacated class certification, granted by the Eastern District of Pennsylvania after nearly a decade of litigation, in an antitrust case alleging that a pharmaceutical company entered into agreements with four generic drug makers that, acting together, delayed the sale of generic drugs and prevented the creation of a competitive market.

In the second part of its panel opinion regarding predominance under Federal Rule of Civil Procedure 23(b)(3), the court found that plaintiffs’ damages model, which did not segregate the harm caused by each agreement, satisfied both antitrust standing and the Supreme Court’s mandate in Comcast Corp. v. Behrend that a damages model must comport with the theory of the case, which, here, was that the four anticompetitive agreements acted together to harm consumers.

The predominance inquiry, however, came second to the court’s main focus: the numerosity requirement of Rule 23(a), which requires a class to be “so numerous that joinder of all members is impracticable.” The class at issue consisted of 22 wholesale purchasers of the drug. Though the court refused to set a minimum number of class members that would suffice for certification, it cautioned that a class with fewer than 40 members requires a particularly rigorous analysis. It then went on to set forth a non-exhaustive list of factors for judges to consider in conducting a numerosity inquiry. These include “judicial economy, the claimants’ ability and motivation to litigate as joined plaintiffs, the financial resources of class members, the geographic dispersion of class members, the ability to identify future claimants, and whether the claims are for injunctive relief or for damages.” Moreover, the court noted that some factors are entitled to greater weight; in particular, courts should take special care to consider judicial economy and the ability of individuals to litigate as joined parties, two of the main objectives behind the class action device.

The panel opinion – with one justice dissenting – found that the district court had erred in its numerosity analysis in two ways. First, with regard to judicial economy, the Third Circuit panel found the lower court improperly focused its analysis on the late stage of the current litigation, particularly the fact that the already drawn-out and costly case might be delayed further by additional discovery and lawsuits in other jurisdictions. Explaining that such considerations improperly favor a finding of numerosity based only on the complex nature of a case, the Third Circuit panel emphasized that the inquiry should instead consider the efficiency of a class action versus joinder, with a particular focus on docket control. Secondly, addressing class members’ ability and willingness to be joined, the Third Circuit emphasized that a proper numerosity analysis weighs a class action on the one hand against joinder on the other, but does not contemplate the possibility of individual suits, which the district court had erred in considering. The inquiry should instead focus on the stakes at issue and the complexity of the case, which a court can often evaluate by considering the costs of joinder versus a class action. Here, the court emphasized that this was not “a run-of-the-mill class action,” as it involved sophisticated parties with large claims who had the ability to litigate their dispute as joined parties. The Third Circuit therefore remanded the case for the district court to reconsider numerosity based on this newly-established framework, which is likely to have implications that extend well beyond this particular lawsuit.

In re Modafinil Antitrust Litig., No. 15-3475 (3d Cir. Sept. 13, 2016).