Antitrust Law Daily Wrap Up, ANTITRUST—E.D. Tenn.: Class certification denied in action over delayed generic competition of muscle relaxant, (Jan 31, 2014)

By Linda O’Brien, J.D., LL.M.

The federal district court in Chattanooga, Tennessee has denied class certification to a putative class of end-payors and a class of indirect purchasers against pharmaceutical manufacturers of a prescription muscle relaxant (In re Skelaxin (Metaxalone) Antitrust Litigation, January 30, 2014, Collier, C.). Thus, the plaintiffs’ proposed classes failed to satisfy the prerequisites of Federal Rule of Civil Procedure 23(a) and (b).

Purchasers of metaxalone, a prescription muscle relaxant sold under the brand name Skelaxin, filed a series of class action suits against Skelaxin’s manufacturer, King Pharmaceuticals LLC and Mutual Pharmaceutical Company, Inc. for alleged conspiring to delay and obstruct generic competition for Skelaxin. The plaintiffs sought compensation for the amount they were charged for Skelaxin in excess of the amount they would not been charged for a generic alternative had such an alternative been developed and marketed. The suits were consolidated and the defendants moved to dismiss the complaints. After the defendants’ motion to dismiss was denied, the plaintiffs moved for class certification. The end-payor class is comprised primarily of health and welfare benefit funds, trust funds, and insurance companies that purchased and/or provided reimbursement for Skelaxin or its generic equivalents. The indirect purchaser class consists of retail pharmacies that purchased Skelaxin for resale to consumers.

End-Payor class. The court found that the plaintiffs failed to demonstrate that the proposed classes were ascertainable. The end-payor plaintiffs proposed two separate classes: a damages class and an injunction class. The damages class was defined as all persons or entities who paid for or were reimbursed for some or all of the purchase price of Skelaxin or its generic equivalent for consumption, other than resale, during the period November 4, 2005 to the present. The injunction class was defined as all persons or entities who paid for or were reimbursed for some or all of the purchase price of Skelaxin or its generic equivalent for their members, during the period November 4, 2005 to the present.

The defendants argued that the identification of the persons or entities who purchased and/or paid for Skelaxin for consumption other than resale would require inquiry into millions of transactions to determine which entities paid or were reimbursed for the purchase price of Skelaxin. The plaintiffs submitted a number of expert reports regarding the proposed class. Due to the discrepancy in the plaintiffs’ expert testimony and their class definition, particularly regarding what it means to “pa[y] or reimburse some or all of the purchase price,” the court could not determine which individuals or entities were members of the class. The determination of the classes would require an individual inquiry into contracts covering millions of purchases, which would inconsistent with a class action. The plaintiffs’ reliance on a claims administration procedure for making the determination post-liability did not rectify the issue, according to the court.

Moreover, because individualized assessments were necessary to determine liability, the end-payors proposed class also did not meet the typically requirement. Also, the proposed class representatives may not fairly and adequately represent the interests of the other class members since their interests were antagonistic.

The court also denied the end-payors’ motion for class certification with respect to the proposed injunction class. Rule 23(b)(2) applied only when a single injunction would provide relief to each individual class member and is “designed to permit only classes with homogenous interests.” Since individualized inquiry was needed to determine which entities were members of the class, the question of class membership counseled against certification. Further, the certification of an injunction-only class action would have a preclusive effect on class members’ ability to bring subsequent damages claims.

Indirect purchasers. The plaintiffs failed to make an adequate choice-of-law showing regarding the proposed class of indirect purchasers, according to the court. The indirect purchaser class was defined as all persons or entities in the United States and its territories that operate a business outside of Tennessee and indirectly purchased Skelaxin for resale at any time during the period of November 4, 2005 to the present. Under this definition, the plaintiffs sought to certify the class with respect to violations of the Tennessee Trade Practices Act (TTPA) and unjust enrichment. In the alternative, the plaintiffs sought certification of four single-state subclasses consisting of indirect purchasers for resale in California, Michigan, Mississippi, and New York. For the subclasses, the plaintiffs sought to certify the subclasses with respect to antitrust and unjust enrichment violations of each state’s respective laws.

The court noted that a choice-of-law inquiry was required before certifying a class. Tennessee law applies the “most significant relationship” test to choice-of-law issues. Although not dispositive, the state of where the injury occurred is fortuitous. In this case, the place of injury was where the plaintiffs were overcharged. Only one of the alleged conspirators was headquartered in Tennessee. However, the plaintiffs complained of the conduct of companies located in different states and alleged only state law causes of action for the nationwide class. Accordingly, the court concluded that it must apply the law of the state where in the injury occurred and not Tennessee law.

The case is No. 1:12-md-2343.

Attorneys: Gordon Ball (W. Gordon Ball, Attorney at Law) and Gregory B. Linkh (Glancy Binkow & Goldberg LLP) for Knight Pharmacy. Andrew K. Solow (Kaye Scholer LLP) for King Pharmaceuticals, Inc. Amber M. Nesbitt (Wexler Wallace LLP) for United Food and Commercial Workers Union and Midwest Health Benefits Fund. Caroline M McKay (Munger, Tolles & Olson, LLP) for Mutual Pharmaceutical Co., Inc. Arthur N. Bailey (Arthur N. Bailey & Associates) for Johnson’s Village Pharmacy, Inc. John P. Bjork (Vanek, Vickers & Masini, PC) for Meijer, Inc. Barry L. Refsin (Hangley, Aronchick, Segal, Pudlin & Schiller) for Supervalu Inc., HEB Grocery Co. LP, Safeway Inc., Walgreen Co., and Rite Aid Corp.

Companies: Knight Pharmacy; King Pharmaceuticals, Inc.; United Food and Commercial Workers Union and Midwest Health Benefits Fund; Mutual Pharmaceutical Co., Inc.; Johnson’s Village Pharmacy, Inc.; Meijer, Inc.; Supervalu Inc.; HEB Grocery Co. LP; Safeway Inc.; Rite Aid Corp.

Cases: Antitrust TennesseeNews