In antitrust class actions, litigation over a plaintiff's standing under Article III of the U.S. Constitution creates an inflection point that may lead to the disposal of certain, or all, claims.
To litigate an individual antitrust suit (or any other suit), Article III of the U.S. Constitution requires that the named plaintiff have standing, i.e., some proof that she was injured by the defendant's allegedly anticompetitive conduct, and her injury would be redressed if she proves her case on the merits. But when a named plaintiff files a class action rather than an individual suit, many courts disagree about how to apply Article III's "case or controversy" requirement. In a four-part series published by Law360, White & Case partner Michael Hamburger and senior associate Holly Tao discuss four common standing issues that can give defendants an edge when litigating against class-action plaintiffs, including by (1) challenging whether the named plaintiffs have sufficient proof of injury; (2) contesting the named plaintiffs' ability to bring claims under the laws of states where they were not injured; (3) ensuring that standing issues are addressed at the appropriate stage in the case; and (4) avoiding certification of any class by showing that enough proposed class members likely suffered no injury.
In antitrust class actions, litigation over a plaintiff's standing under Article III of the U.S. Constitution creates an inflection point that may lead to the disposal of certain, or all, claims.
Most recent antitrust class actions are brought by a small number of named plaintiffs, who allege that a vast conspiracy or monopolistic scheme raised the prices of a given product bought by indirect purchasers across the country.
Antitrust class actions are often sprawling litigations, so the early resolution of Article III standing disputes can result in sizable efficiencies for parties and courts.
In virtually every antitrust class action, at the class certification phase the parties disagree about whether the proposed class includes uninjured members.
In antitrust class actions, litigation over a plaintiff's standing under Article III of the U.S. Constitution creates an inflection point that may lead to the disposal of certain, or all, claims. As a result, defendants in many antitrust class actions challenge whether proposed class representatives or class members have standing.
However, despite numerous U.S. Supreme Court cases addressing Article III standing — including TransUnion LLC v. Ramirez1— recent decisions by the lower federal courts diverge with one another regarding four standing issues that commonly arise:
In this article, we will focus on the type and concreteness of harm plaintiffs must present to establish their standing.
Article III standing stems from the Constitution's division of power among the three branches of government, which permits the judicial branch to resolve only "actual cases and controversies."2
Article III standing consists of three elements: The plaintiff must have suffered an injury-in-fact; there must be a causal connection between the injury and the conduct; and it must be likely that a favorable decision on the merits will redress the injury.3
In the 2016 Spokeo Inc. v. Robins decision4 and the 2021 TransUnion decision, the Supreme Court focused on the injury-in-fact prong.5 To satisfy this first element, the injury must be concrete — "real" rather than "abstract" or speculative6 — and have a "'close relationship' to a harm 'traditionally' recognized as providing a basis for a lawsuit in American courts."7
In Adamson v. Volkswagen Group of America Inc., an Audi lessee filed a class action in the U.S. District Court for the District of Colorado alleging that Audi of America Inc. and its affiliated dealers forced lessees to sell their cars back to the dealers at below market value. Specifically, Audi allegedly prohibited lessees from using third-party financing to exercise an option in their leases to purchase their leased vehicles, which prevented the plaintiff from taking advantage of higher-than-usual used car prices to buy her vehicle at the option price and resell it for a profit.8
The plaintiff asserted that the purchase option restriction forced her to sell her car back to the dealership for about $3,000 less than the average market price.9
The court held in March that the plaintiff lacked Article III standing, however, and dismissed her claim that the defendants violated the Sherman Act by conspiring to deprive lessees of vehicle price appreciation.
While the plaintiff argued her injury was concrete because she bought the purchase option and tried to exercise it — but was told that she could not use third-party funds to do so — the court disagreed.10
Instead, it called her alleged harm speculative because she "had not pleaded concrete plans to realize the fair market value of her leased vehicle," such as trying to secure third-party financing to purchase the vehicle.11
By contrast, in O.E.M. Glass Network Inc. v. Mygrant Glass Co. Inc., the U.S. District Court for the Eastern District of New York in March rejected an Article III standing challenge in a case brought by an auto parts wholesaler against its competitors and a manufacturer, which allegedly agreed to cut off the plaintiff's supply of glass automotive parts.12
The defendants moved for summary judgment on Article III grounds, asserting that certain damages claims relating to the plaintiff's inability to open two warehouses due to the conspiracy were too speculative.13
The court disagreed, reasoning that the plaintiff suffered other monetary damages and was not required to establish standing for each "revenue stream contributing to a compensatory damage sum"; nevertheless, the plaintiff could not recover damages for the warehouses if it failed to prove at trial that it would have opened them but-for the conspiracy.14
In In re: HIV Antitrust Litigation, the U.S. District Court for the Northern District of California certified an injunctive-relief class of indirect purchasers last year based on assurances the plaintiffs would prove how one defendant's introduction of new products constituted "product-hopping" — the launch of insufficiently innovative new products shortly before existing products lose patent protection, combined with coercion that forced the plaintiffs to use these new products rather than less-expensive alternatives.15
But the court then granted summary judgment against the plaintiffs on all product-hopping claims because the plaintiffs failed to show they were coerced into using the new products and suffered any injury from doing so.16
The U.S. District Court for the Southern District of New York in In re: Namenda Antitrust Litigation also confronted an alleged product hop — from the instant-release Alzheimer's drug, Namenda IR, to an extended-release version, Namenda XR, before generic versions of Namenda IR launched — but rejected the indirect purchaser class's product-hop claims during class certification, rather than at summary judgment, in 2021.
There, the plaintiffs' reply brief dropped their request to certify a class containing consumers because they had no proof consumers were coerced into taking Namenda XR rather than generic versions of Namenda IR; instead, the plaintiffs sought to certify an insurer-payor class.17
But the court declined to certify that class under a product-hop theory, finding that the plaintiffs did not prove most payors were harmed by the alleged hop because they never reimbursed for Namenda XR, and among those that did, the plaintiffs could not prove which did so because of coercion, rather than because the people they insured preferred Namenda XR.18
Another set of cases address the relationship between alleged overcharges for pharmaceuticals or medical services and insurance premiums.
While district courts have been skeptical that such overcharges affect premiums — with one calling them "a grain of sand on the beach in terms of setting premiums"19 — in Sidibe v. Sutter Health, the Northern District of California certified a consumer class in 2020 based on evidence that Sutter's overcharges for hospital services increased premiums.20
Sutter argued that the plaintiffs' economic methodology inappropriately averaged harm and failed to account for complexities, like differences in how employers and employees share premium increases.21 But the court disagreed, finding that the methodology accounted for specific pass-through rates based on medical cost and premium data, as well as variations between plans.22
However, the court conceded that the plaintiffs' model was novel and their theory of injury was not widely accepted by the courts.23
As in the above cases, the classic injury-in-fact claimed in most antitrust suits is economic harm.24
In Adamson, the plaintiff failed to prove standing not because of the form of her alleged harm — the loss of $3,000 profit from not being permitted to purchase her leased Audi using third-party financing and resell it at a higher price — but because she had not shown she was likely to suffer that harm.25
And in O.E.M., the court allowed the plaintiff to use its standing to pursue some claimed damages to bootstrap more speculative claimed damages, finding that although standing must be shown for each form of relief, plaintiffs need not prove standing for each source of their alleged damages.26
It is possible that this interpretation conflicts with the requirement "that a plaintiff must demonstrate standing for each claim he seeks to press."27
To better illustrate the boundaries of permissible claims for injury-in-fact, we discuss below several cases against pharmaceutical manufacturers by insurers or the consumers they insure.
In suits alleging that anti-competitive conduct raised pharmaceutical prices, courts generally find that insurers and other third-party payors establish Article III standing to sue when they have paid or provided reimbursement for a prescription filled by someone whom they insure.28
Consider Burlington Drug Co. v. Pfizer Inc., where one set of the plaintiffs — consumers — argued in the U.S. District Court for the District of New Jersey that another set, third-party payors, did not have Article III standing to bring claims under California's Cartwright Act because they never "actually received and took possession of the goods that they allegedly 'purchased.'"29
The consumers relied in part on the act necessary to buy a product under Section 2401(2) of the California Commercial Code, which refers to title passing upon "physical delivery."30
But the court concluded in 2021 that the Cartwright Act defined who could bring suit, without requiring a purchase or incorporating definitions from the Commercial Code.31 Thus, the court found that taking the product was unnecessary; rather, payors had standing if they paid for the products and thereby suffered economic injury.32
However, merely paying for a product may be insufficient to avoid dismissal. In Staley v. Gilead Sciences Inc., the Northern District of California addressed an issue of first impression: whether Blue Cross Blue Shield Association, or BCBSA — a carrier that administers benefits to 5 million members through the Federal Employee Program — had standing to bring antitrust claims for payments it made to cover prescription costs.33
While BCBSA alleged that it paid for the products at issue, the defendants disputed whether BCBSA did so using its own funds and thus incurred any injury.34
Contrary to BCBSA's allegations, discovery revealed that all pharmacy benefits were paid with funds from a federal government account, and BCBSA simply transferred those funds to pay for prescriptions.35
Rather than acting like an insurer — which pays medical costs and keeps any remaining premiums as profit — BCBSA never kept unused premiums as profit or used its own funds to pay claims.36
Thus, BCBSA was a mere intermediary, not a payor that suffered economic harm. And while BCBSA argued that being a carrier was sufficient, the court disagreed, in a 2022 decision, that BCBSA had standing to bring antitrust damages claims because all funds that paid for the prescriptions belonged to the federal government and government beneficiaries — not BCBSA.37
The court also dismissed BCBSA's injunctive-relief claims because BCBSA funds had never been used to pay for prescriptions in the 60-year history of the Federal Employee Program, and BCBSA had not shown it was imminently likely that BCBSA funds would pay for prescriptions in the near-term.38
As with payors, consumers who assert that they paid for a product may lack standing if the evidence shows that they did not, or that they were not injured from doing so. In In re: EpiPen (Epinephrine Injection, USP) Marketing, MDL Sales Practices and Antitrust Litigation, for instance, the U.S. District Court for the District of Kansas last year permitted the defendants to present evidence at trial that certain consumer plaintiffs were uninjured because their insurance paid any overcharges for the relevant products.39
In another example, the Staley court held that two consumer plaintiffs lacked standing because they had not taken the products in the proposed damages classes during the class periods; had no plans to take those products in the future; and offered no evidence about how they were injured from taking nonclass products.40
Other courts have also dismissed named plaintiffs after discovery revealed they never purchased the at-issue product.41
While concrete economic harm satisfies Article III's injury-in-fact requirement in antitrust cases, litigants may still be able to challenge whether economic injury has occurred.
Further, where plaintiffs seek injunctive relief based on alleged prospective harm, defendants should use discovery to probe whether evidence establishes that imminent injury is likely to result from the challenged conduct.
And in all cases, counsel should dig into the plaintiff's files to determine whether that plaintiff's theory of injury is supported by the facts.
Disclosure: Both authors were counsel for the Gilead defendants in In re: HIV Antitrust Litigation (f/k/a Staley v. Gilead Sciences), and Mr. Hamburger was counsel for defendants in In re: Namenda Antitrust Litigation.
1 141 S. Ct. 2190 (2021).
2 Simon v. E. Ky. Welfare Rights Org., 426 U.S 26, 37 (1976) (emphasis added). Stated differently, "federal courts have never been empowered to issue advisory opinions." FCC v. Pacific Found., 438 U.S. 726, 735 (1978).
3 Lujan v. Defenders of Wildlife, 504 U.S. 555, 560-61 (1992).
4 Spokeo, Inc. v. Robins, 578 U.S. 330 (2016).
5 Both cases addressed disputes arising under the Fair Credit Reporting Act.
6 Spokeo, 578 U.S. at 340.
7 TransUnion, 141 S. Ct. at 2204.
8 Adamson v. Volkswagen Grp. Of Am., Inc., 2023 U.S. Dist. LEXIS 6064, at *2 (D. Colo. Jan. 12, 2023).
9 Id. at *3-4.
10 Id. at *13-14; Adamson v. Volkswagen Grp. Of Am. Inc., 2023 U.S. Dist. LEXIS 51824, at * (D. Colo. Mar. 27, 2023) (adopting the report and recommendation to dismiss the complaint for lack of standing).
11 Id. at *16-17.
12 O.E.M. Glass Network, Inc. v. Mygrant Glass Co., Inc., 2023 U.S. Dist. LEXIS 45497, at *54 (E.D.N.Y. Mar. 17, 2023).
14 O.E.M. Glass Network, 2023 U.S. Dist. LEXIS 45497, at *55.
15 In re HIV Antitrust Litig., No. 3:19-cv-02573-EMC, at *58-59 (N.D. Cal. Sept. 27, 2022), Dkt. No. 1452-7.
16 In re HIV Antitrust Litig., No. 3:19-cv-02573-EMC, at *14-18 (N.D. Cal. Feb. 17, 2023), Dkt. No. 1656.
17 In re Namenda Indirect Purchaser Antitrust Litig., 338 F.R.D. 257, 542 (S.D.N.Y. 2021).
18 Id. at 566-71.
19 See, e.g., Mot. Hr'g Tr., In re Aggrenox Antitrust Litig., 3:14-md-02516-SRU, at 81:17-18, 85:14-16 (D. Conn. Oct. 14, 2016); In re Asacol Antitrust Litig., 2017 U.S. Dist. LEXIS 952, at *16-18 (D. Mass. Jan. 4, 2017) ("there is no evidence that the defendants would be able to ascertain how the pricing of Asacol products affected premiums or the financial status of the EPPs, since 'EPPs reimburse prescriptions for thousands—if not tens of thousands—of different drugs or dosages"). Similarly, in antitrust cases concerning overcharges on components of electronic products, courts have required proof that the overcharges were in fact passed through in the final price for finished electronic products when class members allege they were harmed by purchasing these finished products. When the allegations of price-fixing related to the component part, there must be a showing that the plaintiffs who purchased the finished product were overcharged. See, e.g., In re Lithium Ion Batteries Antitrust Litig., 2018 U.S. Dist. LEXIS 35744 (N.D. Cal. Mar. 5, 2018) (denying certification of indirect purchaser class when there was no evidence of a finished product overcharge attributable to the component battery cost, and finding plaintiffs' argument that class members experienced pass-through injury through quality reductions "pure theory without any factual support"); see also In re TFT-LCD Antitrust Litig., 267 F.R.D. 583, *588 (N.D. Cal. 2010) (noting the component TFT-LCD panel is usually a significant part of the total cost of certain finished TFT-LCD products); In re Static Random Access Memory Antitrust Litig., 264 F.R.D. 603 (N.D. Cal. 2009) (acknowledging the methodology for calculating damages "allows direct computation of per-unit overcharges to indirect SRAM purchasers").
20 Sidibe v. Sutter Health, 2020 U.S. Dist. LEXIS 136657, at *4-5 (N.D. Cal. July 30, 2020).
21 Id. at *6.
22 Id. at *36-37.
23 Id. at *39-40.
24 See infra. See also, e.g., Roche Diagnostics Corp. v. Smith, 2022 U.S. Dist. LEXIS 178662 (D.N.J. Sept. 30, 2022) (addressing Article III standing for fraud claims, the court held that "because LifeScan alleges an economic injury—rebates paid from its treasury—it has met Article III's standing requirements")
25 Adamson, 2023 U.S. Dist. LEXIS 51824, at *16 & n.2.
26 Id. at *54-55.
27 See DaimlerChrysler Corp. v. Cuno, 547 U.S. 332, 352 (2006); see also e.g., Davis v. FEC, 554 U.S. 724, 734 (2008).
28 See, e.g., In re Xyrem (Sodium Oxybate) Antitrust Litig., 555 F. Supp. 3d 829 (N.D. Cal. 2021) ("United, as a third-party payor, paid for and/or provided reimbursement for United members . . . . United therefore has Article III standing where its members transacted with a pharmacy to obtain Xyrem.").
29 2021 U.S. Dist. LEXIS 36238, at *6-8 (D.N.J. Feb. 26, 2021).
30 Id. at *11 & n.1.
31 Id. at *15-16.
32 Id. at *19.
33 See Staley v. Gilead Scis, Inc., 2022 U.S. Dist. LEXIS 226735 (N.D. Cal. Aug. 5, 2022) (dismissing for lack of Article III standing); see also Staley v. Gilead Scis, Inc., 2022 U.S. Dist. LEXIS 44935 (N.D. Cal. Mar. 14, 2022) (previous decision declining to dismiss due to a gap in the evidentiary record); Staley v. Gilead Scis, Inc., 2022 U.S. Dist. LEXIS 182650 (N.D. Cal. Oct. 5, 2022) (denying motion for reconsideration of dismissal on the merits).
34 2022 U.S. Dist. LEXIS 226735, at *34.
35 Id. at *32.
37 Id. at *39.
38 Id. at *39-40.
39 In re EpiPen (Epinephrine Injection, USP) Mktg., Sales Practices & Antitrust Litig., 2022 U.S. Dist. LEXIS 14480 (D. Kan. Jan. 26, 2022) ("Because plaintiffs have built their theory of damages around facts that involve health insurance arrangements, the court finds that defendants deserve some room to challenge plaintiffs' damages model with evidence. So, the court won't preclude defendants from introducing evidence about insurance coverage or arguing that certain class members haven't sustained an injury because their insurance providers paid the alleged EpiPen overcharges.")
40 Staley v. Gilead Scis, Inc., 2022 U.S. Dist. LEXIS 71853, at *37-40 (N.D. Cal. Apr. 19, 2022). Because this order dismissed the lead named plaintiff, the case name was subsequently changed to In re HIV Antitrust Litigation.
41 See, e.g., In re Lithium Ion Batteries Antitrust Litig., 2016 U.S. Dist. LEXIS 34641, at *51-52 (N.D. Cal. Mar 14, 2016) (some named plaintiffs were discovered to have purchased only products that fell outside the class definition, such as purchases made outside of the class period or of products that were not at issue in the case).
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