The First Circuit recently addressed an issue of broad significance in class action law. It explained how a class cannot be certified when there are more than a small number of uninjured class members, and how a defendant must be allowed to demonstrate on an individual basis that class members were not injured.
United Food & Commer. Workers Unions & Emplrs. Midwest Health Bens. Fund v. Warner Chilcott Ltd. (In re Asacol Antitrust Litig.), No. 18-1065, 2018 U.S. App. LEXIS 28920 (1st Cit. Oct. 15, 2018), is an antitrust class action alleging that a drug manufacturer withdrew a drug from the market shortly before its patent expired, and then introduced a similar substitute, to preclude competitors from effectively introducing generic versions of the drug. The parties’ experts were largely in agreement that roughly 10% of consumers would still purchase the brand-name drug even if a generic version were available, and thus would not be injured by the allegedly unlawful practice. The district court assumed that this was the case, but nevertheless certified the class, adopting the plaintiffs’ proposal that a claims administrator could eventually remove uninjured persons from the class if plaintiffs prevailed. Id. at *8-9.
The First Circuit granted permission to appeal under Rule 23(f) and reversed the class certification order. It noted that proof of injury-in-fact was a required element of a plaintiff’s case on the claims asserted. Id. at *19. The First Circuit noted that one of its prior decisions, In re Nexium Antitrust Litig., 777 F.3d 9 (1st Cir. 2015), had concluded that “unrebutted testimony” in affidavits of class members potentially could be used to segregate injured from uninjured class members. United Food, at *22. Here, however, the defendants planned to challenge such affidavits, and put forth evidence demonstrating a basis to do so (such as that some class members stopped taking the brand-name product during the time period, others would be concerned about a particular ingredient, and those with no co-pay would not be cost sensitive). Judge Kayatta’s opinion explained how the defendants would have the right to challenge any affidavits, and this would destroy predominance of common issues of law and fact:
Our inability to fairly presume that these plaintiffs can rely on unrebutted testimony in affidavits to prove injury-in-fact is fatal to plaintiffs’ motion to certify this case. Testimony that is genuinely challenged, certainly on an element of a party’s affirmative case, cannot secure a favorable summary judgment ruling disposing of the issue. Fed. R. Civ. P. 56(a). And the affidavits would be inadmissible hearsay at trial, leaving a fatal gap in the evidence for all but the few class members who testify in person. Nor have the plaintiffs provided any basis from which we could conclude that the number of affidavits to which the defendants will be able to mount a genuine challenge is so small that it will be administratively feasible to require those challenged affiants to testify at trial.
We also 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 and procedure, the Seventh Amendment, or the dictate of the Rules Enabling Act, 28 U.S.C. § 2072(b). See Tyson Foods, Inc. v. Bouaphakeo, 136 S. Ct. 1036, 1048, 194 L. Ed. 2d 124 (2016) (evidence may not be used in a class action to give “plaintiffs and defendants different rights in a class proceeding than they could have asserted in an individual action”). A “claims administrator’s” review of contested forms completed by consumers concerning an element of their claims would fail to be “protective of defendants’ Seventh Amendment and due process rights.” Nexium, 777 F.3d at 19. Plaintiffs’ proposed claims process provides defendants no meaningful opportunity to contest whether an individual would have, in fact, purchased a generic drug had one been available. A “class cannot be certified on the premise that [the defendant] will not be entitled to litigate its statutory defenses to individual claims.” Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338, 367, 131 S. Ct. 2541, 180 L. Ed. 2d 374 (2011). Here, we have more than a statutory defense; rather, we have a challenge to a plaintiff’s ability to prove an element of liability.
Id. at *24-25.
The First Circuit further concluded that the use of an aggregate classwide damages award would not render class certification appropriate because “here, the aggregate damage amount is the sum of damages suffered by a number of individuals, such that proving that the defendant is not liable to a particular individual because that individual suffered no injury reduces the amount of the possible total damage.” Id. at *30-31. The First Circuit concluded by explaining that “a class cannot be certified based on an expectation that the defendant will have no opportunity to press at trial genuine challenges to allegations of injury-in-fact,” “[a]nd to determine whether a class certified for litigation will be manageable, the district court must at the time of certification offer a reasonable and workable plan for how that opportunity will be provided in a manner that is protective of the defendant’s constitutional rights and does not cause individual inquiries to overwhelm common issues.” Id. at *37.
This opinion thoroughly addresses an important issue that is present in many consumer class action suits. I expect it will be cited and likely followed by other circuits.