United States: District Court Denies Class Certification Under Third Circuit's New Impracticability Framework

Last Updated: March 19 2018
Article by Lisa A. Peterson and William Diaz

A district court denied class certification for a relatively small class of plaintiffs after applying the US Court of Appeals for the Third Circuit's impracticability framework as part of a Rule 23(a) numerosity analysis. King Drug Co. of Florence, Inc. v. Cephalon, Inc., Case No. 2:06-cv-1797 (ED Pa., Aug. 8, 2017) (Goldberg, J).

Direct purchaser plaintiffs filed a case against Cephalon, Inc., (the branded manufacturer of Provigil) and four generic pharmaceutical companies, alleging that Cephalon executed anticompetitive reverse-payment settlements with each of the generic pharmaceutical companies. In 2015, the US District Court for the Eastern District of Pennsylvania certified a class of direct purchasers, which consisted of 22 entities (i.e., drug wholesalers) that purchased Provigil directly from Cephalon during a six-year period. Retailers of pharmaceuticals were excluded from the class. To certify a class action, a plaintiff must demonstrate that the proposed class satisfies all of the requirements of Rule 23(a) and one of the subcategories in Rule 23(b) of the Federal Rules of Civil Procedure.

On appeal, the Third Circuit vacated the decision, noting that it had "not had occasion to list relevant factors that are appropriate for district court judges to consider" when analyzing whether a proposed class satisfies the numerosity requirement under Rule 23(a)(1) (i.e., determining whether joinder of all class members would be impracticable). The Third Circuit provided a framework for the numerosity analysis and remanded the decision to the district court.

In light of the small class, the Third Circuit instructed that "inquiry into impracticability should be particularly rigorous when the putative class consists of fewer than forty members." The Third Circuit then set forth a non-exhaustive list of factors relevant to the impracticability analysis:

  • Judicial economy
  • The claimants' ability and motivation to litigate as joined plaintiffs
  • The financial resources of the class
  • The geographic dispersion of class members
  • The ability to identify future claimants
  • Whether the claims are for injunctive relief or damages

Of primary importance to the analysis are judicial economy and the ability to litigate as joined parties.

After applying the Third Circuit's impracticability framework, the district court determined that the direct purchasers' proposed class did not satisfy the numerosity requirement and denied their supplemental motion for class certification. The district court found that the first four factors weighed against class certification, including the two most important factors.

As to the judicial economy factor, the court reasoned that the plaintiffs could easily engage in cost- and resource-sharing mechanisms, as well as joint motions practice, if the case proceeded by joinder. The court emphasized that judicial economy is concerned with docket control and should not account for the sunk costs of litigation or a potential delay in trial proceedings.

The second factor—class members' ability and motivation to litigate as joint plaintiffs—considers the stakes at issue for individual claims and the complexity of litigation. This factor weighed against certification because members would likely share litigation costs, and plaintiffs' legal representation was likely on a contingency basis. Citing a lack of evidence, the court refused to credit the plaintiffs' argument that generic suppliers would retaliate against any customers that chose to litigate.

The third factor, financial resources of class members, weighed against certification because all but six members had annual revenues in excess of $100 million, and more than one-third had revenues between $2 billion and $482.1 billion. The fourth factor, geographic dispersion, also weighed against certification. While the class members were located in 13 states and Puerto Rico, the court reasoned that the members were sophisticated parties and many had litigated previously in Pennsylvania.

The fifth factor, ability to identify future claimants, was determined to have no effect on the ultimate conclusion. The sixth factor, type of claims, weighed in favor of class certification because the plaintiffs sought injunctive relief rather than damages.

Practice Note: Parties facing class certification should carefully consider the potential impact of the Third Circuit's impracticability framework, especially where a proposed class consists of fewer than 40 members. Courts in the Third Circuit are likely to place significant weight on judicial economy and claimants' ability and motivation to litigate as joined plaintiffs. Parties can expect less weight to be afforded to the litigation stage, including sunk costs, the risk of additional discovery or delay in trial.

District Court Denies Class Certification under Third Circuit's New Impracticability Framework

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