Opinion ID: 204019
Heading Depth: 1
Heading Rank: 7

Heading: class-wide judgment

Text: The final issue presented by this appeal is whether the district court erred in entering a class-wide judgment, a decision that AstraZeneca argues impermissibly abridged its substantive rights and violated due process by depriving AstraZeneca of its opportunity to raise individual defenses against each class member. See Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 612-13, 117 S.Ct. 2231, 138 L.Ed.2d 689 (1997) (citing the Rules Enabling Act, 28 U.S.C. § 2072(b) for the proposition that Fed.R.Civ.P. 23 may not be used to abridge, enlarge or modify any substantive right). AstraZeneca mounts three specific challenges on this score: first, that the district court erred in extending its judgment under § 9 of Chapter 93A to TPPs whose proper avenue for relief was § 11, a section to which the plaintiffs allegedly did not prove themselves entitled; second, that the class-wide judgment denied the company its opportunity to litigate individualized issues of knowledge, causation, and injury as to absent class members; and third, that the district court's aggregate damages calculation overlooked the individualized circumstances of absent class members. We discuss each argument in turn, but we find none persuasive.
AstraZeneca's first challenge to the class-wide judgment is its claim that the district court erred in allowing the TPPs to advance their claims under § 9 rather than requiring them to make proof under § 11. As the district court properly noted, at least as to business claims, § 9 and § 11 of Chapter 93A are mutually exclusive and plaintiffs' claims can proceed under only one section. See Mass. Gen. Laws ch. 93A, § 9 (Any person, other than a person entitled to bring action under section eleven of this chapter ... may bring an action .... (emphasis added)); Cont'l Ins. Co. v. Bahnan, 216 F.3d 150, 156 (1st Cir.2000) (By their terms, however, [§ 9 and § 11] of chapter 93A... are mutually exclusive.); Frullo v. Landenberger, 61 Mass.App.Ct. 814, 814 N.E.2d 1105, 1112 (2004) (A business claim cannot be asserted under § 9.). Whereas § 9 affords a private remedy to the individual consumer who suffers a loss as a result of the use of an unfair or deceptive act or practice, § 11 grants a cause of action to [a]ny person engaged in the conduct of any trade or commerce, which the Massachusetts Supreme Judicial Court (SJC) has interpreted to mean persons acting in a business context. Lantner v. Carson, 374 Mass. 606, 373 N.E.2d 973, 976 (1978). [27] Calling the distinction between § 9 and § 11 as clear as mud, the district court cited Linkage Corporation v. Trustees of Boston University, 425 Mass. 1, 679 N.E.2d 191, 209 (1997), for the proposition that [i]n most circumstances, a charitable institution will not be engaged in trade or commerce when it undertakes activities in furtherance of its core mission, and distinguished that situation from one where a non-profit organization is merely engaged in the customary business necessary to meet its charitable purpose, see Trs. of Boston Univ. v. ASM Commc'ns, Inc., 33 F.Supp.2d 66, 77 (D.Mass.1998). It then turned to the individualized circumstances of this case to guide its inquiry into whether the plaintiffs are entitled to sue under § 9, see Begelfer v. Najarian, 381 Mass. 177, 409 N.E.2d 167, 176 ([B]usiness context must be determined from the circumstances of each case.), and specifically focused on the nature of the transaction, the character of the parties involved, and whether the transaction is motivated by business or personal reasons, see Linkage Corp., 679 N.E.2d at 207 ( citing Begelfer, 409 N.E.2d at 176). As to plaintiff BCBS-MA, the district court found that in its conduct relevant to its claims in this case, BCBS-MA was a non-profit organization acting pursuant to its legislative mandate, engaged in a key part of its core mission, and not motivated by the desire to make money, and therefore is eligible to bring [its] claims under § 9 of Chapter 93A. Without significant explanation, the district court extended this conclusion, [a] fortiori, to all Taft-Hartley funds, [28] and also to the other class-member TPPs. In a footnote, the district court added, After reviewing the relevant law, plaintiffs also satisfy the requirements necessary to bring an action under § 11. Given the finding that § 9 is appropriate, I decline to fully address those issues. [29] In re Pharm., 491 F.Supp.2d at 82 n. 53. On appeal, AstraZeneca trifurcates its challenge. It first argues that the named plaintiffs should not be allowed to avail themselves of § 9 because, although they are non-profit entities, each was acting in a business context and thus brings a business claim better suited for § 11. It next argues that, even if the named plaintiffs could proceed under § 9, the district court made no fact findings sufficient to extend the same conclusion to the for-profit TPP class members. Finally, AstraZeneca argues that the district court's alternative holding that plaintiffs also satisfy the requirements necessary to bring an action under § 11 was both inadequately explained and wrong, and thus cannot render the errors as to § 9 harmless. We need not reach the first two of these challenges because we reject the third: even assuming, arguendo, that the district court erred in allowing the plaintiffs to proceed under § 9, we agree with the district court that the TPPs have satisfied the requirements necessary to bring an action under § 11. With regard to § 11, AstraZeneca argues that the TPPs failed to establish that its monetary loss arises from a business transaction between the plaintiff and defendant, stressing that the TPPs and AstraZeneca were not in privity with each other on any of the payments at issue. However, Massachusetts appellate courts have counseled that, in a fraud suit under § 11 where the parties are engaged in more than a minor or insignificant business relationship, such privity is not required. Standard Register Co. v. Bolton-Emerson, Inc., 38 Mass.App.Ct. 545, 649 N.E.2d 791, 795 (1995) ([P]rivity is not required to maintain a nonwarranty-based action under 93A, i.e., one based on fraud, so long as the parties are engaged in more than a minor or insignificant business relationship. ( citing Mongeau v. Boutelle, 10 Mass.App.Ct. 246, 407 N.E.2d 352 (1980))). [30] What, specifically, constitutes a minor or insignificant business relationship has not been fully fleshed out in the Massachusetts courts, but it has been described as requiring that there must exist some commercial relationship between the parties or the plaintiffs must demonstrate that the defendants' actions interfered with trade or commerce. Spencer v. Doyle, 50 Mass.App.Ct. 6, 733 N.E.2d 1082, 1087 (2000). For purposes of our § 11 analysis, that the relationship between AstraZeneca and the TPPs meets the standard articulated in Spencer is obvious. Additionally, Massachusetts case law offers ample support for allowing the plaintiffs to proceed under § 11 despite the lack of strict privity with AstraZeneca. For instance, in Standard Register, two defendants who fraudulently negotiated and induced the ... contract with Standard Register and orchestrated the misrepresentation regarding the progress of the project, but who were not in privity with the plaintiffs, were sued under § 11. 649 N.E.2d at 795. Similarly, in First Enterprises, Ltd. v. Cooper, 425 Mass. 344, 680 N.E.2d 1163 (1997), the SJC discussed, with approval and in the context of a § 11 claim, a case in which a buyer of goods sued attorneys despite the fact that the attorneys were not party to the relevant transaction because the attorneys had injected themselves into the trade and commerce of the buyer and seller. Id. at 1165-66 (discussing Kirkland Constr. Co. v. James, 39 Mass.App.Ct. 559, 658 N.E.2d 699 (1995), and concluding that the defendant in First Enterprises did not, as did the attorneys in Kirkland, supra, inject himself into trade or commerce (internal quotation marks omitted)). We see no meaningful distinction to be drawn between these cases and the case at bar. For years, AstraZeneca manipulated a pricing scheme by repeatedly making misrepresentations about the cost of Zoladex that it knew would increase the amount the plaintiffs would have to pay. That scheme exploited the TPPs, who believed the AWPs reflected actual acquisition costs, lacked information about the extent of the deceptive practices, were unable to adapt, and were among the obvious and foreseeable victims. AstraZeneca thus unquestionably orchestrated the scheme at the cost of the TPPs, and in so doing, effectively determined the amount of money the TPPs would overpay to their counterparties for Zoladex. That the fraud passed through third parties along the way does not reduce or undo the influence AstraZeneca wielded over the plaintiffs' transactions, an influence so great as to make AstraZeneca and the plaintiffs a kind of functional counterparties. See Leardi v. Brown, 394 Mass. 151, 474 N.E.2d 1094, 1101 (1985) (Technicalities are not to be read into the statute in such a way as to impede the accomplishments of substantial justice.); see also Ameripride Linen & Apparel Svcs., Inc. v. Eat Well, Inc., 65 Mass.App.Ct. 63, 836 N.E.2d 1116, 1122 (2005) (same). Thus, and mindful of the duration and extent of the unfair and deceptive practices, the ongoing business relationship between AstraZeneca and the TPPs cannot be said to be minor or insignificant. AstraZeneca also argues that the plaintiffs may not avail themselves of § 11 because AstraZeneca's conduct did not occur primarily and substantially within Massachusetts. See Kuwaiti Danish Computer Co. v. Digital Equip. Corp., 438 Mass. 459, 781 N.E.2d 787, 797 (Mass.2003) ([A] a judge should ... determine whether the center of gravity of the circumstances that give rise to the [§ 11] claim is primarily and substantially within the Commonwealth.). Whether this test has been met is a question of law subject to plenary review, id., but it is also a fact intensive inquiry that is unique to each case, and [s]ignificant factors ... for one case may be nonexistent in another, id. at 798. In all events, however, the focus of the inquiry should be on the purpose and scope of Chapter 93A. Id. at 799. Under these standards, we agree with the district court's finding that the plaintiffs may proceed under § 11. It is true, of course, that Delaware is AstraZeneca's principal place of business, that its conduct was directed nationwide, and that none of the pricing compendia at issue were located in Massachusetts. That does not mean, however, that AstraZeneca is correct to assert that its conduct had no connection to Massachusetts, for it is clear from the district court's findings that AstraZeneca's conduct directly, and by design, affected physicians in Massachusetts and caused financial injury to payors in Massachusetts. It is also true that the definitions of Class 2 and Class 3 are limited to plaintiffs with a substantial connection to Massachusetts. Moreover, the purpose of Chapter 93A to encourage more equitable behavior in the marketplace and impose liability on persons seeking to profit from unfair practices is undoubtedly consistent with allowing a § 11 claim under the circumstances. Arthur D. Little, Inc. v. Dooyang Corp., 147 F.3d 47, 55 (1st Cir.1998) ( quoting Linkage Corp., 679 N.E.2d at 208). Especially in light of the burden of proof on this issue, which rests with AstraZeneca, see Kuwaiti Danish Computer Co., 781 N.E.2d at 797 ( citing Mass. Gen. Laws ch. 93A, § 11), we agree with the district court that the TPPs have satisfied this requirement of § 11. Finally, AstraZeneca's complaint that the district court's explanation for its § 11 finding was inadequate is unavailing. The district court's finding as to § 11 is explicit, and even if it weren't, we are empowered to affirm the district court based on any grounds apparent in the record. See Peguero-Moronta v. Santiago, 464 F.3d 29, 34 (1st Cir.2006); United States v. Podolsky, 158 F.3d 12, 16 (1st Cir.1998) ([A]n appellate court, faced with the task of reviewing an inscrutable order, may either remand for a fuller exposition or act, without remanding, if a reasonable basis supporting the order is made manifest on the record.). We will therefore not disturb the district court's finding that the TPPs may avail themselves of § 11; the district court's errors regarding § 9, if any, were harmless.
The gravamen of AstraZeneca's second challenge to the class-wide judgment is its contention that the district court erred in addressing only the knowledge of the named class representatives, particularly BCBS-MA, when examining the TPPs' knowledge and expectations as to AWP inflation. Pointing to the fact-specific nature of the district court's analysis of the class representatives' knowledge and expectations, AstraZeneca argues that the district court should also have analyzed and permitted discovery and inquiry by AstraZeneca intothe knowledge and expectations of absent class members, who AstraZeneca maintains may have had more knowledge than BCBS-MA did of Zoladex pricing. After all, the argument runs, even if BCBS-MA lacked sufficient knowledge of AWP inflation and Zoladex pricing, [31] there is reason to believe that other, absent class members could have had more refined knowledge and expectations than the class representatives did, for at least some of the absent class members were large and sophisticated TPPs who had been directly offered discounts on Zoladex by AstraZeneca through various cost-reduction programs. Thus, AstraZeneca argues that because the actual knowledge and expectations of the absent class members was never established, the district court excused [them] from having to establish each element of their Chapter 93A claims, thereby den[ying] AstraZeneca its right to defend itself. This argument, of course, is a familiar one in the context of class action lawsuits. It is beyond question that, under some circumstances, constitutional principles prohibit a court from relying on proof relating to the class representatives to make class-wide findings. But it is equally obvious that class-action litigation often requires the district court to extrapolate from the class representatives to the entire class; for example, the district court employed just this kind of analysis without objection in this very case when it applied the discovery rule to determine when the statute of limitations should cut off the plaintiffs' claims, but did not make specific findings as to each class member, In re Pharm., 491 F.Supp.2d at 75-80. See also Hansberry v. Lee, 311 U.S. 32, 42-43, 61 S.Ct. 115, 85 L.Ed. 22 (1940) (It is familiar doctrine of the federal courts that members of a class not present as parties to the litigation may be bound by the judgment where they are in fact adequately represented by parties who are present, or where they actually participate in the conduct of the litigation in which members of the class are present as parties, or where the interest of the members of the class, some of whom are present as parties, is joint, or where for any other reason the relationship between the parties present and those who are absent is such as legally to entitle the former to stand in judgment for the latter. (citations omitted)). The district court in this case determined that the class was adequately represented when it certified the class, and it carefully examined the representatives' knowledge and expectations as to spreads. As a general matter, this is precisely the kind of analysis that Rule 23 was designed to permit, and it would quickly undermine the class-action mechanism were we to find that a district court presiding over a class action lawsuit errs every time it allows for proof in the aggregate. More specifically, the district court's aggregate determination as to knowledge and expectations was permissible and appropriate for two reasons. First, AstraZeneca and the other Track 1 defendants were allowed ample opportunity to depose TPPs prior to trialin all, these defendants deposed roughly fifty TPPs, and multiple representatives from many of those. Despite this extensive discovery, AstraZeneca marshals no specific evidence on appeal to suggest that absent class member TPPs had knowledge or expectations that differed substantially from class representative BCBS-MA. Instead, AstraZeneca states, without record citation, that many other payers were as sophisticated as BCBS-MA, and that unnamed TPPs who fully understood that AWPs were not predictably related to acquisition costs or who understood the pricing of Zoladex itself were permitted to recover. Yet the portions of the record to which AstraZeneca cites to raise the specter of individualized differences in knowledge and expectations among the class members in fact demonstrate the class members' similarities, for the record citations contain evidence that the class-member TPPs were offered the same opportunities to take advantage of discounts and rebates that BCBS-MA was offered. If these portions of the record suggest anything, it is that, contrary to AstraZeneca's position, BCBS-MA was a good proxy for the class members' knowledge and expectations. [32] Second, the district court's conclusions about industry knowledge and expectations were based on a careful analysis of the class representatives and on expert testimony that was properly admitted, and therefore it did not exhibit any of the evils paraded in AstraZeneca's brief with references to cases such as Broussard v. Meineke Discount Muffler Shops, Inc., 155 F.3d 331, 343 (4th Cir.1998) (reliance on a fictitious, composite plaintiff divorced from any actual proof of damages whereas North Carolina law required reasonable certainty about lost profits awards), Western Electric Company v. Stern, 544 F.2d 1196 (3d Cir.1976) (unduly limited discovery), and Cimino v. Raymark Industries, Inc., 151 F.3d 297 (5th Cir.1998) (extrapolating damages from personal injuries and death from a set of sample cases). Nor are we persuaded that this case has individualized circumstances similar to those at issue in McLaughlin v. American Tobacco Co., 522 F.3d 215 (2d Cir.2008), where the Second Circuit cast doubt on the use of common proof to establish reliance and causation among a class of smokers who had purchased light cigarettes over a thirty-seven year period. In that case, the Second Circuit expressed its concern that the class-member consumers may have chosen the product for a variety of reasons, such as personal preference, unrelated to the alleged misrepresentations implied in the term light. Id. at 225-26 ([E]ach plaintiff in this case could have elected to purchase light cigarettes for any number of reasons, including a preference for the taste and a feeling that smoking Lights was `cool.'). Here, however, we harbor no such concerns about intractably payor-specific issues. The evidence in the record relating to the knowledge and expectations about AWP inflation and Zoladex pricing among TPPs is voluminous, and as noted above, the portions of the record cited by AstraZeneca as cause for concern contain strikingly consistent evidence as to each of the TPPs. We thus are not persuaded that the evidence of variation across the class members as to their knowledge and expectations about AWP inflation and Zoladex pricing demonstrates the existence of significant individualized issues in the first place, much less variations so significant as to raise concerns of a constitutional dimension.
AstraZeneca's third challenge to the entry of a class-wide judgment is that the district court awarded aggregate damages without any individualized determination of damages as to a single class member (including the named plaintiffs), thereby violating AstraZeneca's fundamental right to defend against each class member's claim of injury and damages. In support of its argument that a rough estimate of damages is insufficient, AstraZeneca cites In re New Motor Vehicles Canadian Export Antitrust Litigation, 522 F.3d 6, 28 (1st Cir.2008), and McLaughlin, 522 F.3d 215, for the proposition that the plaintiffs should have been required to prove that each class member was harmed by AstraZeneca's pricing practices. Requiring such proof, the company argues, ensures that AstraZeneca will pay damages reflective of its actual liability. As to whether the plaintiffs adequately proved the class members' claims of injury, AstraZeneca once again takes aim at Dr. Hartman's methodology, arguing that the approach he used to set the 30% liability speed limit failed to take into account the individualized circumstances of the class members. Little more need be said about Dr. Hartman's liability analysis or the district court's decision to adopt it. Suffice it to say that the methodology used to develop the 30% speed limit that triggered potential liability, which included an examination of TPPs' (including class representative BCBS-MA's) testimony, data, and contracts, sufficiently incorporated individualized information about the class members to support the district court's decision to adopt it for the entire class. [33] AstraZeneca's criticisms of Dr. Hartman's damages calculation, however, merit further discussion. AstraZeneca alleges that Dr. Hartman's calculation fails to account for five factors: i) that fourteen Massachusetts TPPs and 23,000 consumers opted out of the class; ii) that those persons with flat co-payments were defined out of the class; iii) that some TPPs did not always reimburse based on AWP during the class period; iv) that some physicians did not bill patients for the co-payments; and v) that some physicians did not collect the co-payments that were billed. AstraZeneca asks us to review the district court's damages methodology for a violation of the company's due process rights, and of Federal Rule of Civil Procedure 23. The use of aggregate damages calculations is well established in federal court and implied by the very existence of the class action mechanism itself. See, e.g., 3 Herbert B. Newberg & Alba Conte, Newberg on Class Actions § 10.5, at 483-86 (4th ed. 2002) (Aggregate computation of class monetary relief is lawful and proper. Courts have not required absolute precision as to damages.... Challenges that such aggregate proof affects substantive law and otherwise violates the defendant's due process or jury trial rights to contest each member's claim individually, will not withstand analysis.... Just as an adverse decision against the class in the defendant's favor will be binding against the entire class in the aggregate without any rights of individual class members to litigate the common issues individually, so, too, an aggregate monetary liability award for the class will be binding on the defendant without offending due process. (footnotes omitted)). There is nothing about this case to suggest a contrary conclusion. Thus, to the extent that AstraZeneca argues that the district court's decision to use an aggregate damages methodology violated Rule 23 or the company's due process rights, AstraZeneca's challenge fails in the starting gate. To the extent that AstraZeneca's arguments instead go to the question of whether Dr. Hartman's methodology was sufficiently reliable, see Daubert, 509 U.S. at 597, 113 S.Ct. 2786, we review the district court's ruling for an abuse of discretion, see Gen. Elec. Co. v. Joiner, 522 U.S. 136, 141-43, 118 S.Ct. 512, 139 L.Ed.2d 508 (1997), but we find none here. To begin, we note that none of AstraZeneca's first three purported errors in Dr. Hartman's damages calculations is severe enough to suggest that the district court abused its discretion in relying on it. As to the various parties who opted out of the class action, the number of opt-outs was a small fraction of the number of notices mailed: according to a signed declaration from the Notice and Administration Manager of Complete Claim Solutions, LLC, which was appointed as the Litigation Administrator below, nearly 45,000 notices were mailed to TPPs, and nearly 950,000 notices were mailed to consumers. In the scope of a gargantuan mailing effort such as this, the number of opt-outs, while large, clearly represents a very small percentage of the class. Even assuming arguendo that Dr. Hartman's analysis did indeed fail to account for parties who opted out, any imprecision that resulted was likely to be small. And if there is a more specific reason that the particular parties who opted out might have had a disproportionate effect on the damages calculation, AstraZeneca has waived that argument by failing to advance it. Zannino, 895 F.2d at 17. Similarly, we are unable to ascertain from AstraZeneca's brief (or from the record) how Dr. Hartman's alleged failure to take into account persons who paid a flat co-payment could have affected the reliability of his damages calculation. If AstraZeneca intends to suggest that Dr. Hartman erroneously calculated damages for these persons, who were defined out of both Class 2 and Class 3, its brief is far too opaque on the nature of the alleged error or its impact on the ultimate damages calculation for us to credit it. That argument, too, is waived. Id. As to AstraZeneca's claim that some TPPs did not always reimburse based on AWP, the district court found to the contrary when it stated, Throughout this period (and until today), [AWP] has also been the pricing benchmark used by most TPPS in Massachusetts and the nation. The evidence on this point may have been mixed, as AstraZeneca has argued, but not so mixed as to render either the district court's fact finding or its reliance upon Dr. Hartman's damages calculation legally infirm. Finally, AstraZeneca's two remaining challengesthat some physicians did not bill patients for co-payments, and that some physicians did not collect the co-payments that were billedare also insufficient to prove an abuse of the district court's discretion. AstraZeneca provides no argument explaining how many co-payments went unbilled or uncollected, or what impact the resulting imprecision would have on the ultimate damages calculation. Nor does AstraZeneca address the fact that the definition for Class 3 injuries includes both actual outlays of cash and legally enforceable debts, which the co-payments, even if uncharged and uncollected, undoubtedly were. In fact, the only citation AstraZeneca offers in support of these last two challenges is to the district court's statements that doctors could not always collect the entire co-payment from those patients who were unable to pay and that some doctors did not charge Medicare beneficiaries who could not afford the coinsurance payment. These statements are hardly specific enough to show that the district court abused its discretion in imposing aggregate damages. If anything, they show that the district court was mindful of potential imprecision in the aggregate damages methodology when it imposed its award, yet decided that the imprecision, if any, was negligible. But that is neither here nor there; AstraZeneca simply has not offered sufficiently developed argumentation on this point to avoid waiver. See Zannino, 895 F.2d at 17. [34]