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Third Circuit’s Suboxone Class Certification Affirmance Clarifies Commonality and Predominance Requirements

Related Lawyers: Swathi Bojedla
Related Practice Areas: Antitrust / Competition
Authors: By Swathi Bojedla and Kevin Wang*

On July 28, 2020, a Third Circuit Court of Appeals panel unanimously upheld a lower court ruling certifying a class of Suboxone purchasers who alleged that the defendant Indivior Inc. engaged in anticompetitive behavior to maintain its monopoly over the drug.[1] The Third Circuit panel rejected defendant’s challenges based on commonality and predominance, finding instead that the class presented common evidence that class members paid more for Suboxone due to Indivior’s suppression of generic alternatives.[2] Most notably, the Third Circuit panel agreed with the district court’s finding that antitrust plaintiffs satisfy a showing of predominance with a model that estimates damages attributable to antitrust injury, even where individualized determinations are later needed to allocate damages among class members.[3] The court also rejected a challenge to the adequacy of a class representative.[4]

Facts

Indivior (formerly Reckitt Benckiser Pharmaceuticals, Inc.) manufactures Suboxone, a prescription drug used to treat opioid addictions. Indivior originally developed Suboxone tablets and received its requisite seven years of exclusivity from the FDA. As the exclusivity period was ending, Indivior developed an under-the-tongue film version of Suboxone which, under the law, would enjoy its own exclusivity period.[5] According to the Plaintiffs, who are direct purchasers of Suboxone, Indivior instituted a scheme to coerce prescribers of the Suboxone tablets to transition from the tablet version of Suboxone, for which exclusivity was ending and thus generic competition would begin, into the Suboxone films. [6]

Specifically, Indivior allegedly: “(1) engaged in a widespread campaign falsely disparaging Suboxone tablets as more dangerous to children and more prone to abuse; (2) publicly announced that it would withdraw Suboxone tablets from the market due to these safety concerns; (3) ended its Suboxone tablet rebate contracts with managed care organizations in favor of Suboxone film rebate contracts; (4) increased tablet prices above film prices; (5) withdrew brand Suboxone tablets from the market; and (6) impeded and delayed the market entry of generic Suboxone tablets by manipulating the FDA’s Risk Evaluation and Mitigation Strategy (“REMS”) process and filed a baseless citizen petition.”[7] Through these actions, Indivior allegedly succeeded in shifting the market from Suboxone tablets, which would be subject to competition, to Suboxone films, thereby continuing its market dominance.[8]

Plaintiffs brought suit in the Eastern District of Pennsylvania, alleging that Indivior’s efforts to suppress generic competition in order to maintain its monopoly on Suboxone violated Section 2 of the Sherman Act.[9] Plaintiffs moved to certify a class of “[a]ll persons or entities . . . who purchased branded Suboxone tablets directly from [Indivior]” during a specified time frame, and appointed Burlington Drug Company and two other purchasers as class representatives.”[10]

The district court certified the class, holding that: (1) common evidence of injury and damages showed the purchasers paid more for brand Suboxone products than they would have for generics due to Indivior’s actions to promote film, disparage tablets, and suppress the generics market; (2) although the Purchasers’ aggregate damages model did not allocate damages among class members, “[i]ssues regarding allocation of individual damages [were] insufficient to defeat class certification,”; and (3) Burlington was an adequate class representative because it had the requisite knowledge of the litigation, including “the basis for the claimed injury,” and its interests aligned with the class.[11] Indivior appealed the class certification.[12]

Common Evidence

Plaintiffs allege that they paid more for brand-name Suboxone products when less expensive generic tablets should have been available but were not because of Indivior’s actions. While Indivior does not dispute that common evidence supports Plaintiffs’ allegations of higher prices, it did argue that there was no common evidence of antitrust injury, because it could lawfully raise its prices and change its rebate program without running afoul of the antitrust laws.[13] The Third Circuit rejected Indivior’s framing of Plaintiffs’ argument, determining that Plaintiffs did not allege only that Indivior’s pricing caused harm in the form of higher prices, but rather that the totality of its actions suppressed competition and caused anticompetitive harm. The challenged conduct taken together, the court ruled, could be proven by common evidence sufficient to support Plaintiffs’ theory of antirust injury.[14]

Indivior also argued that Plaintiffs had no viable theory of liability that matched its damages model, in violation of the Supreme Court’s holding in Comcast Corp. v. Behrend.[15] Indivior pointed to the separate actions alleged by Plaintiffs, arguing that Plaintiffs’ damages model did not distinguish between each. The Third Circuit panel rejected this argument, ruling that Plaintiffs alleged a single theory of liability, supported by six different actions. The court went on to distinguish Comcast, where four different theories of liability were proposed and only one was accepted. There, the damages model did not fit the single remaining theory of liability, but rather encompassed both the rejected and accepted theories, so commonality was not established.[16] Here, Plaintiffs alleged one antitrust theory of liability: that Indivior developed a scheme consisting of several different actions to move the Suboxone market from tablet to film to subdue generic.[17] Plaintiffs’ damage model supported this single theory of liability, so commonality was satisfied and Comcast was inapplicable.[18]

Predominance

The Third Circuit panel also rejected Indivior’s argument that the Plaintiffs did not satisfy the predominance requirement[19] because their damages model only calculated aggregate damages, and that the eventual need for individualized damages inquiries defeated predominance.[20] Relying on its prior decision in In re Modafinil Antitrust Litigation and the Supreme Court’s landmark ruling in Tyson Foods, Inc. v. Bouaphakeo, the Third Circuit held that antitrust plaintiffs may satisfy the predominance requirement by using a model that estimates aggregate antitrust damages on a class wide basis, even if more individualized determinations are needed at a later date.[21] The court stated that, at class certification, the Plaintiffs’ model does not need to measure each individual plaintiff's harm, and further declared that individualized determinations of damages are of no substantive consequence when there are common questions concerning liability.[22] So long as Plaintiffs’ “theory of injury and damages is provable and measurable by an aggregate model relying on class-wide data,” predominance is met.[23]

Inadequate Class Representatives

Finally, Indivior argued that Burlington was not an adequate class representative. Under Rule 23(a)(4), representative parties are required to fairly and adequately protect the interests of the class.[24] A class representative: (1) cannot have a conflict of interest with the rest of the class (2) needs a minimal degree of knowledge about the case, and (3) has no conflict with class counsel.[25]

First, Indivior argued that Burlington had a risk of conflict with class counsel based on pure speculation that it might have conflicting views on (1) what allegations should be made, (2) who should be named as a defendant, (3) whether to accept a settlement, (4) whether to go to trial and (5) whether litigation decisions will have effects on other cases. [26] The Third Circuit rejected these hypothetical conflicts, finding that they would apply to most class actions.[27] Second, Indivior claimed that Burlington has ceded control of the litigation to class counsel and that this also created a risk of conflict.[28] The Third Circuit rejected this argument as well, noting that it was not supported by any case law and was contradicted by Burlington’s actions as a diligent class representative in the case.[29]

Takeaways

The Third Circuit’s Suboxone ruling is helpful to class action practitioners for its continued refinement of the Supreme Court’s decisions in Comcast and Tyson Foods. First, Suboxone clarifies application of the Supreme Court’s decision in Comcast, distinguishing between a permissible single theory of liability supported by multiple separate anticompetitive actions as opposed to an impermissible damages claim based on multiple different theories of liability when only one of the theories has gone forward. Second, it reinforces that antitrust plaintiffs need only provide proof of aggregate damages at the class certification stage, and that the necessity of later conducting individualized calculations of damages does not defeat predominance. Both of these holdings provide additional support for plaintiffs seeking class certification.

Footnotes

[1] In re Suboxone (Buprenorphine Hydrochlorine & Naloxone) Antitrust Litig., No. 19-3640, 2020 WL 4331523 (3d Cir. July 28, 2020). All citations will be to the slip opinion.

[2] Slip Op., pp. 12-13.

[3] Id. at 14-15.

[4] Id. at 16-17.

[5] Id. at 5-6.

[6] Id. at 4, 6-7.

[7] Id. at 6-7.

[8] Id.

[9] Id. at 7.

[10] Id.

[11] Id. at 8-9.

[12] Id.

[13] Id. at 11.

[14] Id. at 11-12.

[15] Id. at 10-11 (citing Comcast Corp. v. Behrend, 569 U.S. 27 (2013)).

[16] Id. at 11-13 n.11 (citing Comcast, 569 U.S. at 36-37).

[17] Id. at 11-12.

[18] Id. at 12-13.

[19] See Id. at 10 (citing Fed. R. Civ. P. Rule 23(b)(3) (class actions require “questions of law or fact common to class members predominate over any questions affecting only individual members.”)

[20] Id. at 13-14

[21] Id. at 14-15 (citing In re Modafinil Antitrust Litig., 837 F.3d 238, 262 (3d Cir. 2016), as amended (Sept. 29, 2016) and (Tyson Foods, Inc. v. Bouaphakeo, 136 S. Ct. 1036, 1045 (2016)).

[22] Slip Op., at 14-15.

[23] Id. at 15-16.

[24] Fed. R. Civ. P. 23(a)(4).

[25] Slip Op., at 16.

[26]Id. at 17.

[27]Id. at 17 n.15.

[28] Id. at 18.

[29] Id.

*Swathi Bojedla is a partner in Hausfeld LLP’s Washington, D.C. office. Kevin Wang is a summer associate and aw student at George Mason University’s Antonin Scalia Law School.

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