In Re Namenda Direct Purchaser Antitrust Litigation

REPLY MEMORANDUM OF LAW IN SUPPORT OF DIRECT PURCHASER CLASS PLAINTIFFS' MOTION FOR CLASS CERTIFICATION. This document was previously

S.D.N.Y.January 22, 2019

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK IN RE NAMENDA DIRECT PURCHASER ANTITRUST LITIGATION Case No. 1:15-CV-07488-CM-JCF REPLY MEMORANDUM OF LAW IN SUPPORT OF DIRECT PURCHASER CLASS PLAINTIFFS’ MOTION FOR CLASS CERTIFICATION SUBMITTED FOR FILING UNDER SEAL Case 1:15-cv-07488-CM-RWL Document 620 Filed 01/22/19 Page 1 of 29 i TABLE OF CONTENTS I. INTRODUCTION ............................................................................................................................. 1 II. ARGUMENT ....................................................................................................................................... 2 A. The Class Here is So Numerous that Joinder is Impractical ............................................ 2 1. Defendants’ Attempts to Lower the Class Size Must Be Rejected .................... 2 2. Joining All Class Members, Many With Small Claims, Is Impracticable ........ . 6 B. Plaintiffs’ Claims are Typical of Those of the Class .......................................................... 9 C. Common Issues Predominate ............................................................................................. 10 1. The Proper Measure of Damages is Overcharges, Not Lost Profits .............. 10 2. Plaintiffs Do Not Assume Classwide Injury; They Prove It ............................ 11 3. Defendants’ Attack on Dr. Lamb’s Structural Break Test is Misplaced ......... 18 D. RDC and Smith Drug Will Adequately Represent the Class ......................................... 19 III. CONCLUSION ................................................................................................................................. 20 Case 1:15-cv-07488-CM-RWL Document 620 Filed 01/22/19 Page 2 of 29 ii TABLE OF AUTHORITIES Cases Page(s) Abraham v. WPX Energy Prod., LLC, CIV 12-0917 JB/CG, 2017 WL 4402398 (D.N.M. Sept. 30, 2017) .............................................................................................. 5 Air Cargo Shipping Servs. Antitrust Litig., 2014 WL 7882100 (E.D.N.Y. Nov. 24, 2010) ........................................................................................ 17 Am. Express Co. v. Italian Colors Rest., 133 S. Ct. 2304 (2013) .................................................................................................................................... 9 Am. Protein Corp. v. AB Volvo, 844 F.2d 56 (2d Cir. 1988) ........................................................................................................................... 6 Am. Sales Co., LLC v. Pfizer, Inc. 2017 WL 3669604 (E.D. Va. July 28, 2017) .......................................................................... 6, 7, 8, 9, 19 Amgen Inc. v. Conn. Ret. Plans & Trust Funds, 568 U.S. 455 (2013) .............................................................................................................................. 11, 13 Anderson Living Trust v. WPX Energy Prod., LLC, 306 F.R.D. 312 (D.N.M. 2014) .................................................................................................................... 8 Baker's Aid. v. Hussmann Foodservice Co., 730 F. Supp. 1209 (E.D.N.Y. 1990) ........................................................................................................... 6 Barnes Grp., Inc. v. Int'l Union United Auto. Aerospace & Agric. Implement Workers of Am., 2017 WL 1407638 (D. Conn. Apr. 19, 2017) ............................................................................................ 8 Bigelow v. RKO Radio Pictures, 327 U.S. 251 (1946) ..................................................................................................................................... 10 Boucher v. United States Suzuki Motor Corp., 73 F.3d 18 (2d Cir. 1996) ............................................................................................................................ 17 Braintree Labs., Inc. v. McKesson Corp., 2011 WL 5025096 (N.D. Cal. Oct. 20, 2011) .......................................................................................... 19 Burka v. New York Transit Auth., 110 F.R.D. 595 (S.D.N.Y. 1986) ................................................................................................................. 9 Freedland v. AT&T Corp., 238 F.R.D. 130 (S.D.N.Y. 2006) ............................................................................................................... 15 Griffin v. GK Intelligent Sys., Inc., 196 F.R.D. 298 (S.D. Tex. 2000) ............................................................................................................... 20 Case 1:15-cv-07488-CM-RWL Document 620 Filed 01/22/19 Page 3 of 29 iii Gulino v. Bd. of Educ. of City Sch. Dist. of City of New York, 201 F.R.D. 326 (S.D.N.Y. 2001) ................................................................................................................. 5 Halliburton Co. v. Erica P. John Fund, Inc., 134 S. Ct. 2398 (2014) ................................................................................................................................... 4 Hanover Shoe, Inc. v. United Shoe Mach. Corp., 392 U.S. 481 (1968) ..................................................................................................................................... 10 Howard Hess Dental Labs., Inc. v. Dentsply Int'l Inc., 424 F.3d 363 (3d Cir. 2005) ....................................................................................................................... 10 Ill. Brick Co. v. Illinois, 431 U.S. 720 (1977) ................................................................................................................................ 7, 10 In re Aggrenox Antitrust Litig., 2017 WL 4278788 (D. Conn. Sept. 19, 2017) ........................................................................................... 8 In re Air Cargo Shipping Servs. Antitrust Litig., No., 2010 WL 4916723 (E.D.N.Y. Nov. 24, 2010) ........................................................................................ 10 In re Aluminum Warehousing Antitrust Litig., 2016 U.S. Dist. LEXIS 54643 (S.D.N.Y. Apr. 25, 2016) ........................................................................ 5 In re Beef Indus. Antitrust Litig., 600 F.2d 1148 (5th Cir.1979) ....................................................................................................................... 5 In re Buspirone Patent Litig., 210 F.R.D. 43 (S.D.N.Y. 2002) ................................................................................................................. 19 In re Class 8 Transmission Indirect Purchaser Antitrust Litig., 140 F. Supp. 3d 339 (D. Del. 2015) .......................................................................................................... 16 In re DDAVP Direct Purchaser Antitrust Litig., 585 F.3d 677 (2d Cir. 2009) ....................................................................................................................... 10 In re Flag Telecom Holdings, Ltd. Secs. Litig., 574 F.3d 29 (2d Cir. 2009) ......................................................................................................................... 20 In re Graphics Processing Units Antitrust Litig., 253 F.R.D. 478 (N.D. Cal. 2008) ................................................................................................................ 9 In re K-Dur Antitrust Litig., 686 F.3d 197 (2012) ....................................................................................................................... 10, 11, 19 In re Lower Lake Erie Iron Ore Antitrust Litig., 998 F.2d 1144 (3d Cir. 1993) ....................................................................................................................... 5 Case 1:15-cv-07488-CM-RWL Document 620 Filed 01/22/19 Page 4 of 29 iv In re Modafinil Antitrust Litig., 837 F.3d 238 (3d Cir. 2016) .................................................................................................................... 4, 6 In re Monster Worldwide, Inc. Secs. Litig., 251 F.R.D 132 (S.D.N.Y. 2008) ................................................................................................................ 20 In re Mushroom Direct Purchaser Antitrust Litig., 2015 WL 5767415 (E.D. Pa. July 29, 2015) ............................................................................................. 16 In re Namenda Direct Purchaser Antitrust Litig., 2017 WL 4358244 (S.D.N.Y. May 23, 2017) ........................................................................................... 13 In re Namenda Direct Purchaser Antitrust Litig., 2017 WL 2693713 (S.D.N.Y. June 21, 2017) ................................................................................... 11, 12 In re NASDAQ Mkt.-Makers Antitrust Litig., 169 F.R.D. 493 (S.D.N.Y. 1996) ............................................................................................................... 18 In re Nexium (Esomeprazole) Antitrust Litigation, 296 F.R.D. 47 (D. Mass. 2013) ............................................................................................................... 6, 9 In re Nexium Antitrust Litig., 777 F.3d 9 (1st Cir. 2015) ........................................................................................................................ 4, 6 In re Niaspan Antitrust Litig., 2015 WL 4197590, at *1 (E.D. Pa. July 9, 2015) ............................................................................... 19 In re Skelaxin (Metaxalone) Antitrust Litig., 292 F.R.D. 544 (E.D. Tenn. 2013) ........................................................................................................... 19 In re Skelaxin (Metaxalone) Antitrust Litig., 2014 WL 2002887 (E.D. Tenn. May 15, 2014) ......................................................................................... 4 In re Solodyn (Minocycline Hydrochloride) Antitrust Litig., 2017 WL 4621777 (D. Mass. Oct. 16, 2017) ................................................................................... passim In re Veeco Instruments, Inc. Secs. Litig., 235 F.R.D. 220 (S.D.N.Y. 2006) ............................................................................................................... 20 In re Vitamin C Antitrust Litig., 279 F.R.D. 90 (E.D.N.Y. 2012) ................................................................................................................ 19 In re Warfarin Sodium Antitrust Litig., 391 F.3d 516 (3d Cir. 2004) ....................................................................................................................... 15 In re Warfarin Sodium Antitrust Litigation, 214 F.3d 395 (3d Cir. 2000) ....................................................................................................................... 14 Case 1:15-cv-07488-CM-RWL Document 620 Filed 01/22/19 Page 5 of 29 v In re Wellbutrin XL Antitrust Litig., 2011 WL 3563385 (E.D. Pa. Aug. 11, 2011) ............................................................................................. 3 Intel Corp. Microprocessor Antitrust Litig. MDL No. 05-1717, 2014 U.S. Dist. LEXIS 165261, at *33 (D. Del. Aug, 6, 2014)............................................................... 9 King Drug Co. of Florence v. Cephalon, Inc., 309 F.R.D. 195 (E.D. Pa. 2015) ................................................................................................................ 12 Kline v. First W. Govt. Secs. Inc., 1996 WL 153641 (E.D. Pa. Jan. 24, 1996) ............................................................................................... 20 LePage’s, Inc. v. 3M, 324 F.3d 141 (3d Cir. 2003) ....................................................................................................................... 17 Lexecon Inc. v. Milberg Weiss Bershad Hynes & Lerach, 523 U.S. 26 (1998) ......................................................................................................................................... 9 McCarthy v. Paine Webber Grp., Inc., 164 F.R.D. 309 (D. Conn. 1995) ................................................................................................................. 5 McLaughlin v. Am. Tobacco Co., 522 F.3d 215 (2d Cir. 2008) ....................................................................................................................... 15 Meijer, Inc. v. Warner Chilcott Holdings Co. III, 246 F.R.D. 293 (D.D.C. 2007) .................................................................................................................... 9 Menking ex rel. Menking v. Daines, 287 F.R.D. 174 (S.D.N.Y. 2012) ................................................................................................................. 5 Mid–West Paper Products Co. v. Continental Group Inc., 596 F.2d 573 (3d Cir. 1979) ......................................................................................................................... 4 New Jersey Carpenters Health Fund v. Royal Bank of Scotland Group, 2016 WL 7409840 (S.D.N.Y. Nov. 4, 2016) ........................................................................................... 19 Oscar v. BMW of N. Am., LLC, 2011 U.S. Dist. LEXIS 146395 (S.D.N.Y. Dec. 20, 2011) ...................................................................... 6 Pollock v. Citrus Assocs., 512 F. Supp. 711 (S.D.N.Y. 1981) .............................................................................................................. 5 Robidoux v. Celani, 987 F.2d 931 (2d Cir. 1993) ................................................................................................................ 5, 6, 7 Roton Barrier, Inc. v. Stanley Works, 79 F.3d 1112 (Fed. Cir. 1996) .................................................................................................................... 12 Case 1:15-cv-07488-CM-RWL Document 620 Filed 01/22/19 Page 6 of 29 vi Savanna Group, Inc. v. Trynex, Inc., 2013 WL 66181 (N.D. Ill. Jan. 4, 2013) ..................................................................................................... 5 Sergeants Benevolent Ass’n Health & Welfare Fund v. Actavis, PLC, 2016 WL 4992690 (S.D.N.Y. Sep. 13, 2016) ........................................................................................... 13 Strax v. Commodity Exch., Inc., 524 F. Supp. 936 (S.D.N.Y. 1981) .............................................................................................................. 5 Teva Pharm. USA, Inc. v. Abbott Labs., 252 F.R.D. 213 (D. Del. 2008) ........................................................................................................... 15, 19 U.S. Gypsum Co. v. Ind. Gas Co., 350 F.3d 623 (7th Cir. 2003) ........................................................................................................................ 5 Valley Drug Co. v. Geneva Pharm., Inc., 350 F.3d 1181 (11th Cir. 2003) .................................................................................................................. 19 Velez v. 111 Atlas Rest. Corp., 2016 WL 9307471 (E.D.N.Y. Aug. 11, 2016) ........................................................................................... 6 W. Va. Univ. Hosps. v. Casey, 499 U.S. 83 (1991) ......................................................................................................................................... 8 Rules Fed. R. Civ. P. 23 ........................................................................................................................................ 6, 13 Fed. R. Civ. P. 23(a)(1) ...................................................................................................................................... 6 Fed. R. Civ. P. 23(b)(3)............................................................................................................................. 11, 18 Fed. R. Civ. P. 23(c)(1)(C) ............................................................................................................................... 5 Other Authority American Bar Association, PROVING ANTITRUST DAMAGES (3d ed. 2017) ................................ 10, 17 Case 1:15-cv-07488-CM-RWL Document 620 Filed 01/22/19 Page 7 of 29 I. INTRODUCTION Recognizing that a class of over 60 entities is too numerous to be joined practicably, defendants1 try to dismember the class, but their efforts are futile. Just as in numerous similar prior antitrust class actions, common evidence, if credited by the jury, shows that all or nearly all class members were injured by defendants’ unlawful conduct, and damages can be calculated on an aggregate, classwide basis. Defendants wrongly claim that plaintiffs’ expert economist – Dr. Russell Lamb – “assumes” classwide injury. He does not. Dr. Lamb relies on the same types of common evidence – scholarly studies, defendants’ internal analyses, and actual market data – that numerous courts have held can prove antitrust injury on a classwide basis in similar cases. The class here was injured both by Forest’s unlawful reverse payment to Mylan, and its illegal “hard switch.” The reverse payment delayed entry of generic Namenda IR by years, while the “hard switch” undermined the benefits of generic competition when it finally began in July 2015. Forest’s own analyses concluded that generic IR would rapidly replace the brand, and that its (illegal) “hard switch” – accompanied by a massive communications campaign to convince the entire healthcare market that IR would soon be withdrawn2 – would increase the market’s switch from IR to XR. Dr. Lamb relies on Forest’s own analyses (combined with other information and data) to conclude (not “assume”) that all or nearly all class members were overcharged. Dr. Ernst Berndt (whose opinions were favorably cited by Judge Sweet in the New York Attorney General action) concludes that “the [internal] forecasts reviewed by Dr. Lamb were reliable,” as they were based on Forest’s own study of the market and analogous experiences of other drugs. Ex. 4, Berndt Exp. Rep. ¶40. See also Ex. 5, Berndt Reply ¶¶4-20. 1 Actavis plc, Forest Laboratories, LLC, Forest Laboratories, Inc., and Forest Laboratories Holdings Ltd. (“Forest” or “defendants”). 2 See, e.g., Namenda I ¶¶77-80 (attached as Ex. 1 to Sept. 15, 2017 Litvin Decl.); Declaration of Joseph Opper (“Opper Decl.”) Ex. 2, Lamb Reply ¶¶71. Unless otherwise noted, all exhibit cites are to the Opper Decl. Case 1:15-cv-07488-CM-RWL Document 620 Filed 01/22/19 Page 8 of 29 2 Forest claims that overcharges stopped with the December 2014 injunction, but the evidence (and common sense) shows otherwise. The injunction did not magically erase the continuing anticompetitive effects of Forest’s media campaign telling customers, doctors, caregivers, and the entire healthcare system that they needed to switch to XR because IR was being withdrawn. Even before the injunction entered, Forest announced it would appeal, then announced it was “optimistic” the injunction would be overturned.3 Forest eventually sent communications in January 2015 mentioning the injunction but often simultaneously announcing that Forest was appealing (challenging) it. See Lamb Reply ¶¶17, 71-75, 91; Exs. 17, 21-22, Cremieux Tr. Exs. 4, 8-9; Exs. 36-39, Snyder Tr. Exs. 7- 10; Berndy Reply ¶¶21-24. Forest lost in the Second Circuit in May 2015, but filed for rehearing and certiorari and didn’t drop its legal fight until settling with the NYAG in November 2015. See Exs. 25- 26. Moreover, there is no record of Forest ever sending a second communication telling the healthcare market that it had lost its appeal (which would have been too late regardless). Finally, this Court has made no ruling that the injunction stopped overcharges from the hard switch, and determining when damages end is a merits issue for the jury, and is no basis to deny certification. II. ARGUMENT A. The Class Here is So Numerous that Joinder is Impractical 1. Defendants’ Attempts to Lower the Class Size Must Be Rejected Purchasers Injured by Forest’s Reverse Payment. The vast bulk of the Class (58 out of 62) purchased brand Namenda and the cheaper generic after it belatedly entered in July 2015, or bought at least the generic (Lamb Reply ¶12), and just as in numerous prior cases, such evidence shows that these class members would have purchased the generic earlier had it been available sooner and so paid less, and/or would have purchased the generic at lower prices had generic competition started years 3 Cremieux Tr. Ex. 1 (press release) (Dec. 11, 2014); Ex. 3 (press release) (Jan. 6, 2015), stating that Forest was “optimistic that the Court will overturn the lower court’s unprecedented ruling.” Case 1:15-cv-07488-CM-RWL Document 620 Filed 01/22/19 Page 9 of 29 3 earlier, and therefore the unlawful delay in generic competition caused them to be overcharged. Lamb Reply ¶¶12, 17-18, 107-08. Forest argues that a few class members were not injured because they were “brand only” buyers who (according to available data) have not bought generic IR.4 But Forest not only delayed generic competition, it crippled it via the illegal hard switch. Generics typically rapidly replace 90% of brand sales – precisely what happened here after July 2015 (Litvin Sept. 15, 2017 Decl. Ex. 3, Lamb Rep. ¶¶81, 84) – but the hard switch had already suppressed the base of branded IR sales. Fewer brand IR sales as of July 2015 meant lower generic IR sales (even while the percentage of generic substitution was high). Had generic entry occurred in 2012, as plaintiffs allege it would have, and without the illegal hard switch, the 90% generic substitution would have affected a substantially larger base of branded IR sales, and therefore generic sales would have been higher. See Lamb Reply ¶¶17, 27. Hence, merely because a class member has not yet shown up as having purchased generic IR does not mean it was not injured. The opposite is true. As Dr. Lamb concludes, the same common evidence shows that these class members, too, would have purchased generic IR had been it been available, and so were injured by Forest’s pay- for-delay deal with Mylan. See id. Another court in a very similar reverse payment/product hop case recently certified a similar class and rejected the same “no injury” argument Forest makes here. See In re Solodyn (Minocycline Hydrochloride) Antitrust Litig., No. CV 14-MD-02503, 2017 WL 4621777, at *10 (D. Mass. Oct. 16, 2017) (purchasers who bought no generic were still injured).5 Thus even if arguendo Forest 4 Opp. at 13 (naming Bartell, Dik, Drogueria Central, First Vet., Kerr Drug, and Kroger). First, plaintiffs are now parenting Dik with Cardinal Health, which purchased branded IR, XR and generic IR; and First Vet. with The Harvard Group, which purchased branded and generic IR. See Lamb Reply at ¶15. The remaining four likely would have purchased generic had it been available since 2012. Lamb Reply ¶¶17, 27. (Another generic seller, Macleods, was recently ordered to produce sales data, see Order (ECF No. 416), and plaintiffs may supplement as appropriate). Forest also discusses Publix and H.E. Butt (Opp. at 12) but each purchased brand and generic, and so each would have purchased generic sooner at lower prices. Lamb Reply ¶47. Finally, DMS (see Opp. at 12-13) was overcharged on, at least, its generic purchases because of the reverse payment. Lamb Reply ¶11 n.22. 5 None of Forest’s cited authorities included a product hop allegation. See Opp. 13 (citing, e.g., In re Wellbutrin XL Antitrust Litig., No. 08–2431, 2011 WL 3563385 (E.D. Pa. Aug. 11, 2011)). Case 1:15-cv-07488-CM-RWL Document 620 Filed 01/22/19 Page 10 of 29 4 were correct that a few class members were not injured by the hard switch alone (Opp. at 13), all or nearly all were injured by the reverse payment (both with and without the hard switch; see Lamb Reply ¶¶12, 17-18, 27, 100). Even if a few class members are ultimately found not to have been injured, class certification is still appropriate (Pls’ Mem. at 18), so long as “a methodology can be developed that is capable of excluding uninjured members.” In re Nexium Antitrust Litig., 777 F.3d 9, 32 (1st Cir. 2015). Likewise, that the “defendant might attempt to pick off the occasional class member here or there through individualized rebuttal” does not render certification inappropriate. Halliburton Co. v. Erica P. John Fund, Inc., 134 S. Ct. 2398, 2412 (2014). Purchasers of Generic Memantine Only. First, defendants are incorrect that class members who purchased only generic IR are seeking “umbrella” damages. The overcharges suffered by these class members flow directly from Forest’s unlawful conduct. Generic prices predictably fall over time as generics compete, since all are selling a commodity. Generic IR prices, indeed, fell over time, and therefore had generic competition started three years earlier, generic prices by July 2015 would have been lower. Hence, generic purchasers were overcharged. Lamb Reply ¶¶9-12. These are not “umbrella” damages. Forest relies mainly on In re Skelaxin (Metaxalone) Antitrust Litig., No. 1:12-MD- 2343, 2014 WL 2002887, at *7 (E.D. Tenn. May 15, 2014), which itself relied on Mid–West Paper Products Co. v. Continental Group Inc., 596 F.2d 573 (3d Cir. 1979). But the Third Circuit has distinguished Mid-West Paper, where a third party seller raised prices under the umbrella of an ongoing price-fixing conspiracy, from a case like this one, where defendants allegedly engaged in “market exclusion, as it concerns conduct that prevents a competitive market from forming at all.” In re Modafinil Antitrust Litig., 837 F.3d 238, 264-65 (3d Cir. 2016). In such instances, damages are available to “all market customers” because “all suffer equally from the foreclosure of choice.” Id. at 265 (emphasis added).6 6 In Modafinil, the plaintiffs also proceeded without a “global conspiracy claim.” Id. at 264. Case 1:15-cv-07488-CM-RWL Document 620 Filed 01/22/19 Page 11 of 29 5 See also Solodyn, 2017 WL 4621777, at *10 (in reverse payment/product hop case, purchasers of generic were also injured and therefore included in class); In re Relafen Antitrust Litig., No. 01-12238-WGY, Order at 2 (D. Mass. Dec. 19, 2003) (Ex. 8) (permitting recovery for generic-generic overcharges).7 Second, defendants would deprive plaintiffs of their right to modify the class definition, but Rule 23(c)(1)(C) expressly provides that a class certification order “may be altered or amended before final judgment.” Thus, a “change of class definition will not forestall the Court’s class certification inquiry.” Savanna Group, Inc. v. Trynex, Inc., No. 10 C 7995, 2013 WL 66181, at *3 (N.D. Ill. Jan. 4, 2013) (allowing changed definition). See also Menking ex rel. Menking v. Daines, 287 F.R.D. 174, 181 (S.D.N.Y. 2012) (certifying class as set forth in class certification motion where “[b]ased on evidence obtained in discovery… Plaintiff concluded that a new and expanded statewide definition for the proposed class would be proper”).8 Hence, a court is “not bound by the class definition proposed in the complaint[.]” Robidoux v. Celani, 987 F.2d 931, 937 (2d Cir. 1993).9 Courts recognize that “[c]lass actions are hard work for the Court and the parties; the Court and the parties need to conform the pleadings to the reality of discovery[…] Some flexibility – not more formality – is needed in crafting a class action where one is warranted.” Abraham v. WPX Energy Prod., LLC, CIV 12-0917 JB/CG, 2017 WL 4402398, at *18 (D.N.M. Sept. 30, 2017). Forest cites the discovery deadline, but fails to identify any additional discovery it might have taken. Indeed, many of those who purchased branded Namenda also suffered “generic-generic” damages (Lamb Rep. Ex. 1), 7 Even if generic purchasers’ injuries were called “umbrella damages,” courts have allowed recovery for such injuries, as they are readily traceable to defendants’ wrongdoing. See, e.g., U.S. Gypsum Co. v. Ind. Gas Co., 350 F.3d 623, 627 (7th Cir. 2003); In re Lower Lake Erie Iron Ore Antitrust Litig., 998 F.2d 1144, 1168-69 (3d Cir. 1993); In re Beef Indus. Antitrust Litig., 600 F.2d 1148, 1166 n.24 (5th Cir.1979); Strax v. Commodity Exch., Inc., 524 F. Supp. 936, 940 (S.D.N.Y. 1981); Pollock v. Citrus Assocs., 512 F. Supp. 711, 719 (S.D.N.Y. 1981). 8 See also Gulino v. Bd. of Educ. of City Sch. Dist. of City of New York, 201 F.R.D. 326, 330 n.3 (S.D.N.Y. 2001) (certifying class where the “class definition is found in plaintiffs’ reply brief and amends the class definition in the original brief”). 9 See also McCarthy v. Paine Webber Grp., Inc., 164 F.R.D. 309, 311 (D. Conn. 1995) (certifying broader class than alleged in complaint) (citing Robidoux, 987 F.2d at 937). Case 1:15-cv-07488-CM-RWL Document 620 Filed 01/22/19 Page 12 of 29 6 and plaintiffs specifically pleaded such generic-generic damages in the complaint. ECF No. 26 ¶¶226- 29. This case is thus a stark contrast to In re Aluminum Warehousing Antitrust Litig., No. 13-md-2481, 2016 U.S. Dist. LEXIS 54643 (S.D.N.Y. Apr. 25, 2016), where the plaintiffs sought to add two new defendants and necessitated “significant non-party and overseas discovery” that “defendants could not have anticipated.” Id. at *34.10 Individual Corporate Entities Are Each Cognizable Plaintiffs. Rule 23(a)(1) focuses on the joinder of parties, Modafinil, 837 F.3d at 251, and “[t]here is a presumption of separateness between parent and subsidiary ‘which is entitled to substantial weight. ”11 Therefore, ‘“subsidiaries should be considered as potential class members to vindicate their own antitrust injury.’” Solodyn, 2017 WL 4621777, at *4 (citation omitted).12 Forest attempts to lump class members together (Opp. at 13-14), but each entity is a separately incorporated company,13 separately purchased (and was overcharged) for the product, and is separately listed in the manufacturers’ transactional data. Each Class member – related or not – that bought Namenda “suffered independent injury” and so is a separate Class member. Am. Sales Co. v. Pfizer, Inc., 2017 WL 3669604, at *8 (E.D. Va. July 28, 2017) (“Celebrex”); Solodyn, 2017 WL 4621777, at *4. 2. Joining All Class Members, Many With Small Claims, Is Impracticable. Rule 23 contains no minimum class size, and Forest ignores the Second Circuit’s instruction 10 Defendants’ other citations are unavailing. See, e.g., Oscar v. BMW of N. Am., LLC, No. 09-cv-11, 2011 U.S. Dist. LEXIS 146395 (S.D.N.Y. Dec. 20, 2011) (plaintiffs were aware of issue for two years and only altered definition after certification was denied); Vincent v. Money Store, 304 F.R.D. 446, 453 (S.D.N.Y. 2015) (ignoring express text of Rule 23 that definition may be amended prior to judgment). 11 Baker's Aid. v. Hussmann Foodservice Co., 730 F. Supp. 1209, 1219 (E.D.N.Y. 1990) (quoting Am. Protein Corp. v. AB Volvo, 844 F.2d 56, 60 (2d Cir. 1988)). 12 Defendants cite In re Nexium (Esomeprazole) Antitrust Litigation, 296 F.R.D. 47, 51 (D. Mass. 2013), but there plaintiffs had not disputed whether corporate entities should be handled separately. Whenever the issue has been litigated, courts have counted such entities individually. 13 See Ex. 9 (compendium of certificates of incorporation for the four legal entities that plaintiffs maintain are part of the Class but Forest seeks to exclude). Plaintiffs are now parenting Dik, First Vet., and H.D. Smith Wholesale Drug Company with other class members. Lamb Reply ¶15. Case 1:15-cv-07488-CM-RWL Document 620 Filed 01/22/19 Page 13 of 29 7 that class certification is appropriate for “avoidance of a multiplicity of actions[.]” Robidoux, 987 F.2d at 936.14 Rule 23(a)(1) also requires the class be “so numerous that joinder of all members is impracticable.” Fed. R. Civ. P. 23(a)(1) (emphasis added). “All” does not mean “some[,]” Pls.’ Mem. at 10 n.29 (citing cases), and “[i]mpracticable does not mean impossible.” Robidoux, 987 F.2d at 935. Proceeding with such a large group of plaintiffs creates obvious judicial “diseconomies” as compared to a class action. “The alternative to class certification would be largely duplicative litigation that relied on many of the same witnesses and much of the same evidence[.]” Celebrex, 2017 WL 3669604, at *10. A joint action is also impractical, given the “difficulty of coordinating attorney, scheduling, and docketing” so many parties. Solodyn, 2017 WL 4621777, at *5. Class members here have a competitive relationship (see, e.g., Ex. 10, Matthew Kipp (Dakota Drug) Decl. ¶¶4-5; Ex. 11, Thomas G. Schoen (Prescription Supply) Decl. ¶¶3-4), which serves “‘as a significant business obstacle to joinder.’” Solodyn, 2017 WL 4621777, at *6. That competitive dynamic (and accompanying distrust) is an insuperable hurdle to any joint litigation agreement or coordinated action. Kipp Decl. ¶¶5. How would costs be shared? Pro rata (each party paying according to the size of its claim)? Forest could pick off the larger plaintiffs and leave the smaller plaintiffs holding the bag. See Kipp Decl. ¶5. Per capita (each plaintiff paying the same share of costs)? Smaller plaintiffs then subsidize their larger competitors, an unlikely (and unfair) result. That some Class members join groups to obtain favorable prices from suppliers (tellingly, a group that does not include the National Wholesalers) does not mean these competitors would also join together to file and manage a lawsuit against their supplier. Opp. at 15-16. Quite the opposite. As the Supreme Court has recognized, direct purchasers may decline to sue for fear of lost business or 14 See also Velez v. 111 Atlas Rest. Corp., 2016 WL 9307471, at *21 (E.D.N.Y. Aug. 11, 2016) (“judicial economy is served by a class action in this case where there could be multiple redundant lawsuits filed raising the same or similar issues.”). Case 1:15-cv-07488-CM-RWL Document 620 Filed 01/22/19 Page 14 of 29 Case 1:15-cv-07488-CM-RWL Document 620 Filed 01/22/19 Page 15 of 29 9 see Lamb Reply ¶15 (class member map)) favors a finding of impracticably of joinder,19 even for corporate entities. See Solodyn, 2017 WL 4621777, at *5. Nothing about the alleged wonders of “modern electronic discovery” (Opp. at 18), or the size of the damages claimed here can avoid the need for numerous trials in courts nationwide if class certification were denied. Even if an MDL were established, discovery is practically over, and each case would be returned for trial where it was filed.20 Finally, the “nature of the action” favors finding joinder to be impractical because “it has long been recognized that class actions play an important role in the private enforcement of antitrust actions.”21 B. Plaintiffs’ Claims are Typical of Those of the Class Defendants say not all class members are the same size, but that is irrelevant. All class members share the same incentive (though by no means the same ability) to pursue and recover their overcharges. Courts have certified numerous similar classes that include purchasers both large (the National Wholesalers) and small. See, e.g., Pls’ Mem. at 1 n.1.22 19 See, e.g., Celebrex, 2017 WL 3669604, at *10 (“the class of thirty-two direct purchasers is comprised of companies of varying size, geographically spread across the United States and Puerto Rico. Such geographic dispersion regularly weighs in favor of an impracticability finding”); Barnes Grp., Inc. v. Int'l Union United Auto. Aerospace & Agric. Implement Workers of Am., 2017 WL 1407638, at *3 (D. Conn. Apr. 19, 2017) (that class members “reside in approximately 22 different states” favored certification); In re Aggrenox Antitrust Litig., No. 3:14-MD-02516 (SRU), 2017 WL 4278788, at *1 (D. Conn. Sept. 19, 2017) (certifying settlement class of 36 because class was “numerous and geographically dispersed”). 20 Lexecon Inc. v. Milberg Weiss Bershad Hynes & Lerach, 523 U.S. 26, 40 (1998). 21 Meijer, Inc. v. Warner Chilcott Holdings Co. III, 246 F.R.D. 293, 307 (D.D.C. 2007); see also Nexium, 296 F.R.D. at 53 (“class actions are a particularly appropriate mechanism for achieving such enforcement[.]”). Am. Express Co. v. Italian Colors Rest. simply held antitrust enforcement policy cannot waive a private agreement to arbitrate claims. Am. Express Co. v. Italian Colors Rest.,133 S. Ct. 2304 (2013). That has no application here. 22 Defendants’ cases are inapposite. See Burka v. New York Transit Auth., 110 F.R.D. 595, 602 (S.D.N.Y. 1986) (finding the class representatives’ claims involving a class of New York transit workers challenging employer’s drug policy were atypical because “[t]he conflict arises because . . . some of the claims are best asserted by [marijuana] users, other by non-users”); In re Intel Corp. Microprocessor Antitrust Litig. MDL No. 05-1717, 2014 U.S. Dist. LEXIS 165261, at *33 (D. Del. Aug, 6, 2014) (“Individual customers who purchase PCs have significantly different motivations and concerns than enterprise customers, who purchase larger volumes and different types of computers.”); In re Graphics Processing Units Antitrust Litig. 253 F.R.D. 478, 489 (N.D. Cal. 2008) (finding that because of the vast array of different products purchased by the class representatives and class members there were “overwhelming disparities [that] defeat[ed] typicality [because] [t]he representative plaintiffs simply do Case 1:15-cv-07488-CM-RWL Document 620 Filed 01/22/19 Page 16 of 29 10 C. Common Issues Predominate 1. The Proper Measure of Damages is Overcharges, Not Lost Profits Overcharges are the “standard method of measuring damages in price enhancement cases” for purchasers like the proposed class here. Howard Hess Dental Labs., Inc. v. Dentsply Int’l Inc., 424 F.3d 363, 374-75 (3d Cir. 2005) (cited by Forest). In contrast, impeded competitors often seek their lost profits. See id. at 374. See also In re DDAVP Direct Purchaser Antitrust Litig., 585 F.3d 677, 689 (2d Cir. 2009) (“defendants’ competitors, unlike the [purchaser] plaintiffs, would be seeking lost profits, not overcharges”) (emphasis added).23 Forest’s argument that direct purchasers here should be forced (over their objection) to plead and prove “lost profits” is foreclosed by the Supreme Court’s decisions in Hanover Shoe and Illinois Brick, which together hold that a direct purchaser’s payment of an unlawful overcharge constitutes injury under Section 4 of the Clayton Act equal to the “full amount” of the overcharge, regardless of the overcharge’s effect on the purchaser’s own profits. Ill. Brick, 431 U.S. at 724-25 (emphasis added) (citing Hanover Shoe, Inc. v. United Shoe Mach. Corp., 392 U.S. 481, 494 (1968)). “As long as the seller continues to charge the illegal price, he takes from the buyer more than the law allows.” Hanover Shoe, 392 U.S. at 489. Any inquiry into the purchaser’s own sales and profits is irrelevant. See id. at 489, 493. The Supreme Court was “unwilling[]”to complicate the proof “‘with attempts to trace the effects of the overcharge on the purchaser’s prices, sales, costs, and profits[.]’” In re Air Cargo Shipping Servs. Antitrust Litig., No. 06-MD-1775, 2010 WL 4916723, at *2 (E.D.N.Y. Nov. 24, 2010) (quoting Ill. Brick, 431 U.S. at 725). Defendants’ attempt to force purchasers to prove not have the appropriate incentive to establish antitrust violations with respect to all of the absent class members.”). Defendants’ citation to Celebrex, 2017 WL 3669604 is misplaced because that case did not involve a product hop, and the Class here is not defined as excluding persons or entities who purchased only generic versions of Namenda IR and did not obtain decreasing prices on those generic versions. Furthermore, as explained in Sect. II.A. 1 & C.2, generic purchasers are properly included in the Class definition and their injuries can be proven via common proof. Lamb Reply ¶¶9-11. 23 Cf. Am. Bar Ass’n, PROVING ANTITRUST DAMAGES 90-91 (3d ed. 2017) (“a direct purchaser… would typically seek overcharge damages” and contrasting that to competitors seeking lost profits “as was the case in… Bigelow [v. RKO Radio Pictures, 327 U.S. 251 (1946)]”). Case 1:15-cv-07488-CM-RWL Document 620 Filed 01/22/19 Page 17 of 29 11 lost profits “is unavailing because it is simply a version of the so-called ‘passing-on defense’ that was rejected by the Supreme Court in Hanover Shoe[.]” In re K-Dur Antitrust Litig., 686 F.3d 197, 220 (2012). Class members were injured at the moment of purchase. And, as in K-Dur, defendants have cited no decision limiting Hanover Shoe to instances where the overcharge was for “identical” products rather than different ones. See K-Dur, 686 F.3d at 221. Judge Francis was thus correct that “the proper measure of damages is the full amount of the overcharge, and the purchaser’s actual lost profit is generally irrelevant.” In re Namenda Direct Purchaser Antitrust Litig., No. 15CIV7488CMJCF, 2017 WL 2693713, at *6 (S.D.N.Y. June 21, 2017). Likewise, in a case like this one, featuring both a reverse payment and subsequent product hop, the court confirmed that purchasers’ “antitrust injury occurs the moment the purchaser incurs an overcharge.” See Solodyn, 2017 WL 4621777, at *7 (citation omitted).24 2. Plaintiffs Do Not Assume Classwide Injury; They Prove It Dr. Lamb’s analysis that all (or nearly all) class members suffered antitrust injury and damages is based on evidence, not assumptions, including numerous academic studies of generic competition, Forest’s own analyses, and data reflecting sales and prices before and after generic entry. Pls’ Mem. at 20-22. Damages flowing from the reverse payment include, as they may, purchases made of Namenda XR that would have been generic IR purchases in the but-for world, regardless of the legality of switch. See Solodyn, 2017 WL 4621777, at **9-10. And Dr. Lamb relies on Forest’s own forecasts of the likely effects a “hard switch” strategy would have on increasing switching from IR to XR. Dr. Lamb’s “subtraction” (Opp. at 24) simply revealed the difference in sales that Forest itself expected to gain through its “hard switch.” See Lamb Reply at ¶¶30-43. And even if some individualized questions remain, Rule 23(b)(3) “does not require a plaintiff seeking class certification to prove that each elemen[t] of [her] claim [is] susceptible to classwide proof” but “that common questions predominate 24 In Solodyn, unlike here, the hop was not being challenged as independently unlawful. Id. at *9-10. Case 1:15-cv-07488-CM-RWL Document 620 Filed 01/22/19 Page 18 of 29 12 over any questions affecting only individual [class] members.” Amgen Inc. v. Conn. Ret. Plans & Trust Funds, 568 U.S. 455, 469 (2013) (alterations and emphasis in original; internal quotes omitted). Forest contends that harm to plaintiffs from the hard switch magically disappeared after entry of Judge Sweet’s injunction in December 2014, and that plaintiffs assume harm. Opp. at 1, 24. Both contentions are false. First, Forest did not begin notifying customers of the injunction until January 2015, and even then, told them it was “appealing,” which Forest’s expert agrees told customers that Forest “disagree[d]” with the injunction and was going to try to “convince the higher court that, in fact, the lower court’s decision was in error.”25 Forest offers no evidence that after losing in the Second Circuit in May 2015, it sent letters to customers about the ruling (plaintiffs found no record of any, and even if sent, that was very late), and Forest didn’t drop its legal challenge until November 2015. In short, Forest intentionally sowed doubt about whether the injunction would stand, and so it is not surprising that the effects of the hard switch continued. Lamb Rep. ¶¶115-17; Lamb Reply ¶¶60-75. Moreover, the evidence is that the marketplace, once shifted, would be slow to revert back to IR, if it did at all, regardless of the injunction. Lamb Rep. ¶118 (“Additional evidence I have reviewed demonstrating that the Court’s injunction was unlikely to have eliminated the anticompetitive effects of Forest’s Hard Switch strategy includes evidence that pharmacies and health insurance plans no longer covered Namenda IR following the Court’s injunction, or changed its status to non- preferred.”); Lamb Reply ¶¶60-75; Berndt Reply ¶¶21-27, 30-33.26 Plaintiffs have been alleging 25 Cremieux Tr. 13:18-21. 26 This Court has observed the reluctance to “reverse commute” of patients who had already been forcibly switched from IR to XR. Sergeants Benevolent Ass’n Health & Welfare Fund v. Actavis, PLC, No. 15-CV-6549 (CM), 2016 WL 4992690, at *10 (S.D.N.Y. Sep. 13, 2016) (“MTD Op.”) (observing “Alzheimer’s patients that switch medications infrequently “‘reverse commute’”). Injuries can continue to accrue after anticompetitive conduct ceases. See, e.g., King Drug Co. of Florence v. Cephalon, Inc., 309 F.R.D. 195, 205 (E.D. Pa. 2015) (observing it “takes time for the full effects of generic competition to occur”), rev’d on other grounds, Modafinil., 837 F.3d 238. Cf. Roton Barrier, Inc. v. Stanley Works, 79 F.3d 1112, 1120 (Fed. Cir. 1996) (in a patent infringement case, upholding award of “future price erosion damages” which would be incurred following removal of infringing product from the market). Case 1:15-cv-07488-CM-RWL Document 620 Filed 01/22/19 Page 19 of 29 13 continuing harm all along (see Am. Compl. ¶186) (ECF 29).27 Second, this court never restricted injury to purchases that preceded the injunction.28 Fundamentally, Forest ignores that plaintiffs have also proven injury from Forest’s reverse payment, an injury that does not depend on also proving harm from the hard switch. Lamb Reply ¶12. But for Forest’s reverse payment to Mylan, generic competition would have begun years earlier, and the 90% substitution and sharp price drops that occurred after July 2015, would have occurred years before. Lamb Rep. ¶¶83-84, 139-142. Forest’s dispute about the merits of the pay-for-delay claim provides no basis to deny certification. E.g., Solodyn, 2017 WL 4621777, at *6 (“Rule 23 grants courts no license to engage in free-ranging merits inquiries at the certification stage[.]”) (quoting Amgen, 568 U.S. at 466). In denying Forest’s motion to dismiss, the Court upheld both plaintiffs’ hard switch and reverse payment claims. MTD Op. at *9, *12. The portion that Forest cites, characterizing injuries from the “hard switch” as plausibly alleging harm (id. at *12), does not rule out harm from the pay- for-delay agreements. Indeed, as the Solodyn court observed, a product hop – even a legal one – can compound the harm from generic delay. Third, Forest’s contention (Opp. at 25) that plaintiffs must trace the impact of the “hard switch” on individual patients is incorrect as a matter of law (and economics, Lamb Reply ¶¶76-87). The Court has already determined that Forest’s misconduct disrupted the entire memantine market. In its order granting collateral estoppel in plaintiffs’ favor, this Court held (1) that Forest “possessed monopoly power over the U.S. memantine market up until the entry of generic competition,” and that 27 Economist Dr. Cremieux (Report ¶12 n.10) reads Judge Francis’s downstream discovery order as suggesting that post-injunction injuries did not occur, but that quoted dicta likewise merely requires that plaintiffs’ injuries “stem” from the hard switch. Namenda, 2017 WL 2693713, at *4. That is precisely what plaintiffs have proven, for switching both before and after the injunction. 28 As to the product hop, this Court never limited injury to only purchasers who “switched to Namenda XR prior to the entry of the injunction,” Opp. at 1, 24, but merely concluded that such allegations sufficiently alleged antitrust injury, see MTD Op. at *10, and did not rule out the possibility of ongoing harm. Case 1:15-cv-07488-CM-RWL Document 620 Filed 01/22/19 Page 20 of 29 14 (2) Forest’s hard switch was a “coercive and anticompetitive” act within this market. In re Namenda Direct Purchaser Antitrust Litig., No. 15 Civ. 7488, 2017 WL 4358244, at *16 (S.D.N.Y. May 23, 2017). Thus, the marketwide nature of this disruption has been conclusively established. Id. at *12 (the injunction “was an acknowledgment that Forest had already caused anticompetitive injury to the memantine market that had to be rectified.”) (emphasis in original). Forest’s conduct was directed to the entire market, not to specific purchasers or even to specific benefit plans or physicians; and Forest utterly failed to rectify, and indeed exacerbated that injury after the injunction. The class here consists not of patients, but of wholesalers and other direct purchasers, each of whom serve broad portions of the memantine market. Lamb Rep. ¶42. See also Ex. 3, Lamb Tr. at 87:7-14 (“The analysis I’ve done here is specific to this market… [W]e’re talking about a very large volume of what I have already described as the excess XR sales in the actual versus the but-for world . . . those excess sales are going to be widespread across the class.”); Lamb Reply ¶¶76-78. Forest itself has explained that: “Forest deals with wholesalers, not patients.”29 Tracing the effects of a “hard switch” down to individual patients is unnecessary to establish classwide impact on direct purchasers as a matter of law.30 Two pharmaceutical antitrust cases have addressed – and roundly rejected – Forest’s approach. In In re Warfarin Sodium Antitrust Litigation, 214 F.3d 395 (3d Cir. 2000), a class of purchasers brought monopolization claims against DuPont for suppressing generic competition to Coumadin. The Warfarin plaintiffs alleged that “DuPont, anticipating a loss of market share resulting from the introduction of a cheaper generic substitute for Coumadin, orchestrated a campaign disparaging generic substitutes.” Id. at 397. The net effect (like a product hop) was not to bar generic entry, but “to disable its market penetration,” and as a result “due to DuPont’s effort to 29 Ex. 24 (Cremieux Tr. Ex. 11 at 13, Reply Br. of Defendants-Appellants, State of New York ex rel. Schneiderman v. Actavis PLC, No. 14-4624 (2d Cir.), filed Feb. 23, 2015 (ECF No. 275)). 30 Defendants’ criticism of the use of NSP data (Opp. at 25) is similarly flawed, as there is no need to track physician or patient preferences to assess direct purchasers’ injuries. Case 1:15-cv-07488-CM-RWL Document 620 Filed 01/22/19 Page 21 of 29 15 derail generic competition, [individual purchasers] have paid inflated prices for Coumadin.” Id. DuPont, like Forest here, argued that plaintiffs had to show that individual patients were deceived, but the Third Circuit, affirming class certification, disagreed: [P]laintiffs have alleged that DuPont engaged in a broad-based campaign, in violation of federal and state consumer fraud and antitrust laws, to deceive consumers, TPPs, health care professionals, and regulatory bodies into believing that generic warfarin sodium was not an equivalent alternative to Coumadin. These allegations naturally raise several questions of law and fact common to the entire class and which predominate over any issues related to individual class members… [P]roof of liability does not depend on evidence that DuPont made deceptive communications to individual class members or of class members’ reliance on those communications;… the fact that plaintiffs allege purely an economic injury as a result of DuPont’s conduct (i.e., overpayment for warfarin sodium), and not any physical injury, further supports a finding of commonality and predominance because there are little or no individual proof problems in this case. In re Warfarin Sodium Antitrust Litig., 391 F.3d 516, 528-29 (3d Cir. 2004) (emphasis added). In TriCor, another “hard switch” product hop case, the court also rejected the very same impact theory Forest asserts should apply here. The TriCor defendants argued that “even if TriCor prices would have been lower in the ‘but for’ world, it is impossible to determine, through class-wide proof, which class members would have continued to purchase TriCor rather than switching to a still lower priced generic fenofibrate or some other [] therapy.” Teva Pharm. USA, Inc. v. Abbott Labs., 252 F.R.D. 213, 229 (D. Del. 2008) (“TriCor”). The court rejected this theory. “[D]irect purchaser plaintiffs only are required to show that they, in fact, did purchase TriCor at a higher price once an antitrust violation and causal relationship are established.” Id. at 230-31 (footnote and citations omitted).31 Similarly, in Solodyn, a case involving both a reverse payment and a product hop, the court 31 Defendants’ reliance on McLaughlin v. Am. Tobacco Co., 522 F.3d 215 (2d Cir. 2008) is misplaced. McLaughlin was a RICO case by smokers alleging fraud. Id. at 220. The court found that individual reliance on the fraud (an essential element of a fraud claim, not an antitrust claim) could not be demonstrated on a classwide basis. Id. at 225. Likewise, in Freeland v. AT&T Corp., a tying case, plaintiffs showed no contractual provision or other broad-based campaign to prove coercion. See 238 F.R.D. 130, 154 (S.D.N.Y. 2006). Here, the Court has already ruled that Forest’s hard switch conduct was directed marketwide. Case 1:15-cv-07488-CM-RWL Document 620 Filed 01/22/19 Page 22 of 29 16 rejected defense arguments that plaintiffs must “control for underlying supply and demand conditions” that allegedly varied among class members. 2017 WL 4621777, at *10. And even were some individualized damage inquiry needed, that does not defeat certification, because “uncertainty regarding damages is generally the result of the defendants’ alleged wrongdoing.” Id. Fourth, Dr. Lamb does not assume injury from the hard switch, but utilizes data from Forest’s own internal records, and models a but-for world using record evidence regarding what would have happened absent the hard switch. An expert’s opinions are deemed especially reliable where the expert relies on a defendant’s own data and analysis, as Dr. Lamb does here. For example, in In re Mushroom Direct Purchaser Antitrust Litig., No. 06-0620, 2015 WL 5767415 (E.D. Pa. July 29, 2015), the court denied a challenge to Professor Einer Elhague, another of plaintiffs’ experts here. The court explained: Prof. Elhauge relies upon record evidence of defendants’ own contemporaneous internal estimates of the effectiveness of their supply control program. Where a factual issue is disputed and there are reasonable grounds for experts’ contradicting assumptions, it is for the jury to weigh the parties’ respective evidence… Id. at *17 n.10. Here, as the expert did in Mushrooms, Dr. Lamb bases his estimates, where necessary, on Forest’s own forecasts and data concerning actual sales of memantine to all class members.32 Dr. Lamb relies on Forest’s own post-launch forecasts and Forest’s internal adoption of those forecasts in internal discussions among high-level executives (including Forest’s Board) to arrive at an expected 30% or 32.83% conversion rate from IR to XR, in the absence of the wrongful “hard switch.” See Lamb Rep. ¶¶151-154; Lamb Reply ¶30-36, 42, 97. Dr. Lamb focused on “forecast documents that were created after Namenda XR had entered the market and before the Hard Switch was implemented” to compute the but-for conversion rate. Lamb Rep. ¶152 (including table showing soft 32 The scope of memantine data available to Dr. Lamb distinguishes this case from In re Class 8 Transmission Indirect Purchaser Antitrust Litig., 140 F. Supp. 3d 339 (D. Del. 2015), where the court denied class certification because purchaser plaintiffs presented evidence concerning sales of one type of transmission, while ignoring sales of a different type, and examined only a small percentage of class member purchases. Id. at 353. Here there is a single product at issue, memantine, and Dr. Lamb has analyzed all available data on all relevant sales. Forest does not contend otherwise. Case 1:15-cv-07488-CM-RWL Document 620 Filed 01/22/19 Page 23 of 29 17 switch conversion rates in eight separate Forest forecasts). Essentially, Dr. Lamb calculated direct purchasers’ aggregate expenditures on Namenda XR and generic memantine IR based on transactional sales data from Forest and the generic manufacturers; then calculated direct purchasers’ but-for expenditures based on the lower but-for amounts of Namenda XR (and thus the correspondingly higher but-for amounts of less-expensive generic memantine IR) that class members would have purchased absent the hard switch. Those lower but-for amounts of Namenda XR absent the hard switch were determined using Forest’s own forecasts, which showed repeatedly that Forest expected XR to secure no more than 32.83% of branded Namenda IR unit sales absent the hard switch. With the hard switch, in contrast, Namenda XR obtained more than 50% of branded Namenda IR unit sales. Lamb Rep. ¶87; Lamb Reply ¶¶30-36, 42; Berndt Reply ¶4. The difference between (i) direct purchasers’ aggregate actual expenditures for Namenda XR and generic memantine IR, and (ii) direct purchasers’ aggregate but-for expenditures, comprise the overcharge from the hard switch paid by direct purchasers. Lamb Rep. ¶¶145-146. In this analysis, Dr. Lamb relied upon the same forecasts Forest itself relied on immediately before Forest embarked on the wrongful conduct. Forest’s own numerous forecasts of a world without the anticompetitive hard switch are a reasonable basis upon which Dr. Lamb may base his own model of that world. See LePage’s, Inc. v. 3M, 324 F.3d 141, 165 (3d Cir. 2003) (expert calculations deemed reasonable because grounded in defendants’ own internal projections); PROVING ANTITRUST DAMAGES at 95 (damage models may be based on “internal business projections by market actors”). Indeed, given Forest’s manipulation of the market through its “hard switch” strategy, “these forecasts serve as a better proxy for unconstrained competition” than actual data and supposed switch-back patterns. See Solodyn, 2017 WL 4621777, at *8. See also Lamb Tr. at 110:8-111:4. Forest accuses Dr. Lamb of “cherry-picking” forecasts, but Forest is wrong. Lamb Reply ¶¶30-36, 42. As in Mushrooms, the appropriate rate to apply is an issue for the factfinder, not an issue Case 1:15-cv-07488-CM-RWL Document 620 Filed 01/22/19 Page 24 of 29 18 to be decided on class certification. See also Air Cargo, 2014 WL 7882100, at *15 (“In this Circuit, most contentions that the assumptions are unfounded go to the weight, not the admissibility, of the testimony”) (quoting Boucher v. United States Suzuki Motor Corp., 73 F.3d 18, 21 (2d Cir. 1996)) (internal quotes omitted).33 And Dr. Lamb, and Prof. Ernst Berndt – an industry expert applying his specialized knowledge of pharmaceutical markets – chose these particular forecasts for good reasons: these were the forecasts closest in time to Forest’s decision to enact the hard switch, after Forest had market experience with Namenda XR and predicted generic entry in July 2015 (when it actually occurred), and thus incorporated the best analysis Forest had at the time. Lamb Rep. ¶152; Lamb Reply ¶30; Berndt Rep. ¶42-51; Berndt Reply ¶4-20. These forecasts are also more consistent with Forest’s actual conversion rate through January 2014, before the switch announcement, than ones highlighted by defense economists. See Berndt Rep. ¶¶52-55. If the but-for rate of Namenda XR adoption is different from that which Dr. Lamb concludes, that is a quantum of damages issue, not one of injury in fact. See, e.g., In re NASDAQ Mkt.-Makers Antitrust Litig., 169 F.R.D. 493, 523 (S.D.N.Y. 1996) (“the predominance requirement of Rule 23(b)(3) is satisfied with respect to proof of injury, even though individualized inquiry may be necessary on the quantum of damages.”). It is certainly not an issue of injury in fact when injury to all Class members is already independently shown by the delayed generic competition brought about by the reverse-payments. 3. Defendants’ Attack on Dr. Lamb’s Structural Break Test is Misplaced Defendants attack Dr. Lamb’s “structural break” test, a regression analysis demonstrating a statistical difference in the rate of conversion to Namenda XR before and after the February 2014 33 Likewise, Forest’s complaint that Dr. Lamb did not account for Namenda XR adoption rates seen in the actual world is of no moment. Those figures are a product of a marketplace already tainted by Forest’s misconduct (and further influenced by Forest’s continued statements that it was appealing the injunction). Dr. Lamb is modeling a marketplace free of such conduct. Lamb Rep. ¶¶110-114; Lamb Tr. at 169:17-170:16; Lamb Reply ¶¶90-93; Berndt Reply ¶2, 21, 30. Dr. Lamb also presents alternative models factoring in Forest’s (unsupported) criticisms. Lamb Reply ¶¶95-106; Table 3. Case 1:15-cv-07488-CM-RWL Document 620 Filed 01/22/19 Page 25 of 29 19 announcement. Lamb Rep. at ¶119-20. As Dr. Lamb testified, the point of test was to reveal changes at the market level, and therefore it is not appropriate as a matter of econometrics to conduct this test at the customer level. Lamb Tr. 84:2-86:21; 88:1-90:7; 91:19-94:5; see also Lamb Reply ¶49. Regardless, Dr. Lamb performed another test showing a statistically significant structural break for nearly all purchasers who bought monthly from June 2013 through June 2015. Lamb Reply ¶¶58-59. D. RDC and Smith Drug Will Adequately Represent the Class There is No Class Conflict. Defendants have identified no class conflict. As noted above, there is no bar to suit by generic-only purchasers. Supra Sec. II.A.1. Defendants cite Valley Drug Co. v. Geneva Pharm., Inc., 350 F.3d 1181 (11th Cir. 2003), which speculated that a phenomenon known as “generic bypass,” in which drug retailers purchase generic drugs directly from manufacturers, rather than from wholesalers, could disparately impact members of a direct purchaser class. But as discussed above, direct purchasers are entitled to recover the “full amount” of the unlawful overcharge, and any inquiry into plaintiffs’ own sales, prices, and profits is irrelevant as a matter of law. Sect. II.C.1. Hence, in K-Dur, the Third Circuit rejected Valley Drug and held that hypothetical conflicts as to damages because some direct purchasers may lose sales volume due to bypass is “simply a version of the so- called ‘passing-on defense’ that was rejected by the Supreme Court in Hanover Shoe[.]” 686 F.3d at 220- 221. Courts repeatedly have rejected the type of conflict defendants assert here.34 The Class Representatives Are More than Adequate. Rochester Drug Co-Operative, Inc. (RDC) has been appointed a class representative in numerous prior similar cases. See, e.g., Celebrex, 34 See, e.g., In re Vitamin C Antitrust Litig., 279 F.R.D. 90, 103-04 (E.D.N.Y. 2012) (“Hanover Shoe’s holding eradicates any possibility that a named plaintiff's downstream sales could create a conflict of interest with other class members”) (collecting cases rejecting Valley Drug); Celebrex, 2017 WL 3669604, at *12; In re Skelaxin (Metaxalone) Antitrust Litig., 292 F.R.D. 544, 546 (E.D. Tenn. 2013); Braintree Labs., Inc. v. McKesson Corp., 2011 WL 5025096, at *2 (N.D. Cal. Oct. 20, 2011) (collecting cases); TriCor, 252 F.R.D. at 227 (rejecting argument that bypass created conflict in product hop case). See also In re Buspirone Patent Litig., 210 F.R.D. 43, 59 (S.D.N.Y. 2002) (rejecting argument that wholesalers could not sue for overcharges due to bypass effects). Also, bypass itself is irrelevant to damages. See, e.g., In re Niaspan Antitrust Litig., No. 13-MD-2460, 2015 WL 4197590, at *1 (E.D. Pa. July 9, 2015). Case 1:15-cv-07488-CM-RWL Document 620 Filed 01/22/19 Page 26 of 29 20 2017 WL 3669604, at *13 (noting RDC was found adequate in similar cases). Such experience “is a factor that tends to support” a finding of adequacy here. New Jersey Carpenters Health Fund v. Royal Bank of Scotland Group, No. 08-CV-5310 (DAB), 2016 WL 7409840, at *5 n.7 (S.D.N.Y. Nov. 4, 2016). Contrary to Forest’s suggestion, “[p]laintiffs are entitled to rely on the expertise of counsel,” In re Veeco Instruments, Inc. Secs. Litig., 235 F.R.D. 220, 240 (S.D.N.Y. 2006) (McMahon, J.) (internal quotes and citations omitted), and need not “have specific knowledge of the claims and issues” or “play a personal role in the direction and management of the action.”35 Both RDC and Smith Drug have demonstrated more than a sufficient grasp of the litigation, their role as class representatives, and have reviewed the complaint (RDC’s CEO had to “sign off” on it before filing). See, e.g., Ex. 40, Benton [Smith Drug] Tr. at 25:5-23; 283:23-284:7; 295:4-13; Ex. 41, Doud [RDC] Tr. at 14:6-16:3; 16:8-14; 185:3-21; 193:16- 24; 206:18-22). Smith Drug explained its role is “to help all the direct purchasers,” that it was in frequent contact with class counsel, and would invest “as much [time] as needed” for the case. Benton Tr. 25:3-12; 297:8-298:15; 283:17-22. III. CONCLUSION Plaintiffs respectfully request that their motion be granted. 35 Kline v. First W. Govt. Secs. Inc., No. 83-1076, 1996 WL 153641, at *10 (E.D. Pa. Jan. 24, 1996) (citation omitted). Cf. In re Flag Telecom Holdings, Ltd. Secs. Litig., 574 F.3d 29, 42 (2d Cir. 2009) (noting Second Circuit’s “general disfavor” of attacks on adequacy based on a representative’s ignorance). Defendants cite extreme examples. In In re Monster Worldwide, Inc. Secs. Litig., 251 F.R.D 132, 135 (S.D.N.Y. 2008), the named plaintiff did not know the names of the stock at issue or of either individual defendant, if his fund ever owned the stock, or if he had ever seen a complaint. The plaintiff in Griffin v. GK Intelligent Sys., Inc., 196 F.R.D. 298, 302 (S.D. Tex. 2000) testified the complaint “was totally new information to me,” that he had “had no idea that was going on[,]” and only wanted to recover his own losses. 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