UNITED STATES DISTRICT COURT DISTRICT OF NEW JERSEY
ADRIANA M. CASTRO, M.D., P.A.; SUGARTOWN PEDIATRICS, LLC; and MARQUEZ and BENGOCHEA, M.D., P.A., on behalf of themselves and all others similarly situated,
Plaintiffs, v.
Civil Action No. 11-7178(JMV)(MAH)
SANOFI PASTEUR INC.,
Defendant.
MEMORANDUM OF LAW IN SUPPORT OF PLAINTIFFS’ MOTION FOR
PRELIMINARY APPROVAL OF THE PROPOSED SETTLEMENT, APPROVAL OF THE PROPOSED MANNER AND FORM OF NOTICE, AND APPOINTMENT OF
ESCROW AGENT AND SETTLEMENT ADMINISTRATOR
Peter S. Pearlman COHN LIFLAND PEARLMAN HERRMANN & KNOPF LLP Park 80 Plaza West-One 250 Pehle Avenue, Suite 401 Saddle Brook, NJ 07663 Telephone: (201) 845-9600 Facsimile: (201) 845-9423
James E. Cecchi CARELLA, BYRNE, CECCHI, OLSTEIN, BRODY & AGNELLO, P.C. 5 Becker Farm Road Roseland, NJ 07068 Telephone: (973) 994-1700 Facsimile: (973) 994-1744
Co-Liaison Counsel for Plaintiffs and the Class
[Additional Counsel on Signature Page]
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TABLE OF CONTENTS Page
I. INTRODUCTION .............................................................................................................. 1
II. BACKGROUND AND PROCEDURAL HISTORY ......................................................... 2
A. Parties’ Claims and Allegations .......................................................................................... 2
B. Discovery and Motion Practice ........................................................................................... 4
1. Fact Discovery and Related Motions .............................................................................. 4
2. Expert Discovery and Related Motions .......................................................................... 6
3. Class Certification and Related Work ............................................................................. 8
C. Present Posture of the Litigation ....................................................................................... 10
D. Negotiations and Settlement ............................................................................................. 13
III. THE SETTLEMENT SATISFIES THE CRITERIA FOR PRELIMINARY APPROVAL ..................................................................................................................... 16
A. The Settlement is the Product of Extensive Arm’s-Length Negotiations by Experienced Class Counsel ............................................................................................... 17
B. Consideration of the Factors Relevant to Final Approval Also Support Preliminary Approval........................................................................................................ 19
IV. THE PROPOSED NOTICE PLAN .................................................................................. 25
A. The Proposed Manner of Notice is One This Court Has Already Approved ................... 25
1. Direct Notice ................................................................................................................. 26
2. Publication Notice ......................................................................................................... 26
3. Website and Toll-Free Telephone ................................................................................. 27
B. The Form and Contents of the Notice are Similar to the Class Notice ............................. 27
V. PROPOSED SCHEDULE FOR SERVICE OF NOTICE, MOTIONS FOR FEES AND SERVICE AWARDS, CLASS EXCLUSIONS, OBJECTIONS, AND FAIRNESS HEARING ..................................................................................................... 29
VI. RUST SHOULD BE APPROVED AS SETTLEMENT ADMINISTRATOR ................ 30
VII. HUNTINGTON NATIONAL BANK SHOULD BE APPROVED AS ESCROW AGENT ............................................................................................................................. 30
VIII. CONCLUSION ................................................................................................................. 31
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TABLE OF AUTHORITIES
Cases Page(s)
Allied Orthopedic Appliances Inc. v. Tyco Health Care Group LP, 592 F.3d 991 (9th Cir. 2010) .................................................................................................... 22
Cotton v. Hinton, 559 F.2d 1326 (5th Cir. 1977) .................................................................................................. 18
Eisai, Inc. v. Sanofi Aventis U.S., LLC, 821 F.3d 394 (3d Cir. 2016)...................................................................................................... 11
Fisher Bros. v. Phelps Dodge Indus., Inc., 604 F. Supp. 446 (E.D. Pa. 1985) ............................................................................................. 18
Girsh v. Jepson, 521 F.2d 153 (3d Cir. 1975)...................................................................................................... 19
Henderson v. Volvo Cars of N. Am., LLC, No., 09-4146, 2013 WL 1192479 (D.N.J. Mar. 22, 2013) ............................................................... 21
Hosp. Serv. Dist. v. Tyco Int’l, Ltd., 247 F.R.D. 253 (D. Mass. 2008) ................................................................................................. 9
In re Aetna UCR Litig., No. 07-3541, 2013 WL 4697994 (D.N.J. Aug. 30, 2013) .............................................. 1, 16, 17
In re Automotive Refinishing Paint Antitrust Litig., MDL 1426, 2004 WL 1068807 (E.D. Pa. May 11, 2004) ........................................................ 16
In re Cendant Corp. Sec. Litig., 109 F. Supp. 2d 235 (D.N.J. 2000) ........................................................................................... 23
In re Deepwater Horizon, 739 F.3d 790 (5th Cir. 2014) .................................................................................................... 26
In re Elec. Carbon Prods. Antitrust Litig.,
447 F. Supp. 2d 389 (D.N.J. 2006) ........................................................................................... 20
In re GMC Pick-Up Truck Fuel Tank Prods. Liab. Litig., 55 F.3d 768 (3d Cir. 1995)........................................................................................................ 19
In re Johnson & Johnson Derivative Litig., 900 F. Supp. 2d 467 (D.N.J. 2012) ..................................................................................... 21, 22
In re Merck & Co., Inc. Vytorin ERISA Litig., No. 08-CV-285, 2010 WL 547613 (D.N.J. Feb. 9, 2010) ........................................................ 19
In re Mushroom Direct Purchaser Antitrust Litig., No. 06-0620, 2015 WL 5767415 (E.D. Pa. July 29, 2015) ........................................................ 9
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In re Philips/Magnavox TV Litig., No. 09-3072, 2012 WL 1677244 (D.N.J. May 14, 2012) ................................................... 16, 28
In re Prudential Ins. Co. of Am. Sales Practices Litig., 962 F. Supp. 450 (D.N.J. 1997) ................................................................................................ 18
In re Prudential Ins. Co. of Am. Sales Practices Litig., 148 F.3d 283 (3d Cir. 1998)................................................................................................ 18, 27
In re Safety Components,
Int’l, 166 F. Supp. 2d 72 (D.N.J. 2001) .................................................................................... 22
In re Schering-Plough/Merck Merger Litig., 2010 WL 1257722 (D.N.J. Mar. 26, 2010) ............................................................................... 21
In re Warfarin Sodium Antitrust Litig., 212 F.R.D. 231 (D. Del. 2002) ........................................................................................... 24, 27
In re Warfarin Sodium Antitrust Litig., 391 F.3d 516 (3d Cir. 2004)...................................................................................................... 21
In re Warner Comms. Secs. Litig., 618 F. Supp. 735 (S.D.N.Y. 1985) ........................................................................................... 23
It’s My Party, Inc. v. Live Nation, Inc., 811 F.3d 676 (4th Cir. 2016) .................................................................................................... 11
Jones v. Commerce Bancorp Inc., No. 05-5600, 2007 WL 2085357 (D.N.J. July 16, 2007) ......................................................... 16
Lenahan v. Sears, Roebuck & Co., No. 02-0045, 2006 WL 2085282 (D.N.J. Jul. 10, 2006) .......................................................... 17
Mullane v. Central Hanover Bank & Trust Co., 339 U.S. 306 (1950) ............................................................................................................ 24, 26
Nichols v. Smithkline Beecham Corp.,
No. 00-6222, 2005 WL 950616 (E.D. Pa. Apr. 22, 2005) ........................................................ 24
Race Tires Am., Inc. v. Hoosier Racing Tire Corp., 614 F.3d 57 (3d Cir. 2010)........................................................................................................ 10
Sheinberg v. Sorensen, No. 00-6041, 2016 WL 3381242 (D.N.J. June 14, 2016) ......................................................... 20
Singleton v. First Student Mgmt. LLC, No. 13-1744, 2014 WL 3865853 (D.N.J. Aug. 6, 2014) .................................................... 18, 21
Smith v. Prof’l Billing & Mgmt. Servs., No. 06-4453, 2007 WL 4191749 (D.N.J. Nov. 21, 2007) ........................................................ 16
St. Francis Med. Ctr. v. C.R. Bard, Inc., 657 F. Supp. 2d 1069 (E.D. Mo. 2009)..................................................................................... 22
Sullivan v. DB Invs., Inc., 667 F.3d 273 (3d Cir. 2011)...................................................................................................... 24
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Suture Express, Inc. v. Owens & Minor Distrib., No. 12-2760, 2016 WL 1377342 (D. Kan. Apr. 7, 2016) ......................................................... 12
Varacallo v. Mass. Mut. Life Ins. Co., 226 F.R.D. 207 (D.N.J. 2005) ............................................................................................. 17, 27
Rule
Fed. R. Civ. P. 23 .............................................................................................................. 24, 25, 28
Other Authority
Manual for Complex Litigation § 21.632 (2004).......................................................................... 16
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I. INTRODUCTION
After over five years of hard-fought complex litigation, the three class representative
plaintiffs Adriana M. Castro, M.D., P.A., Sugartown Pediatrics, LLC, and Marquez and
Bengochea, M.D., P.A. (“Plaintiffs”), and defendant Sanofi Pasteur Inc. (“Sanofi”), have entered
into a proposed settlement (the “Settlement”), resolving claims brought by Plaintiffs and a
certified class of healthcare providers and medical product distributors (the “Class”) (defined
below). Under the Settlement, Sanofi has agreed to pay $61.5 million in cash (the “Settlement
Amount”) and release certain claims against Plaintiffs and the Class in exchange for dismissal of
this litigation with prejudice and a release of certain claims by Plaintiffs and the Class.1 Given
(a) the risks inherent in this complex antitrust action, in which Plaintiffs alleged that Sanofi
bundled certain of its vaccines to foreclose a rival and enhance its market power, and (b) the
Settlement’s value in comparison to similar bundling antitrust class actions in the healthcare field
(see Part III.B, below), the Settlement is fair, reasonable, and adequate, and warrants preliminary
approval. See In re Aetna UCR Litig., No. 07-3541, 2013 WL 4697994, at *10 (D.N.J. Aug. 30,
2013) (“Preliminary approval is not binding, and it is granted unless a proposed settlement is
obviously deficient”).
Plaintiffs seek the Court’s entry of an order providing for preliminary approval, which
will set in motion a process for the Court to assess final approval of the Settlement, after
provision of (i) notice to the Class, (ii) an opportunity for each Class member to exclude itself
from, object to, or otherwise be heard regarding the Settlement, and (iii) a subsequent hearing on
final approval (the “Fairness Hearing”). Plaintiffs seek the Court’s approval of the manner and
1 The parties’ respective releases are summarized in Part II.D below and set forth in the Settlement Agreement. See Decl. of James E. Cecchi (Jan. 13, 2017) (“Cecchi Decl.”), Ex. 1 at 8-11.
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form of the proposed Long Form and Summary notices (collectively, the “Notices”),
appointment of Huntington National Bank as Escrow Agent, appointment of Rust Consulting,
Inc. as Settlement Administrator, and establishment of a briefing schedule for (1) final settlement
approval and a proposed plan of distribution, and (2) Class Counsel’s application for attorneys’
fees, expenses, and Class Representative service awards. Sanofi has reviewed all of the papers
associated with this motion, and consents in all of the requested relief.
II. BACKGROUND AND PROCEDURAL HISTORY
A. Parties’ Claims and Allegations
Plaintiffs filed this case on December 9, 2011, ECF No. 1, and subsequently submitted a
Consolidated Amended Class Action Complaint (“CAC”) on January 20, 2012. ECF No. 28. The
certified Plaintiff Class includes nearly 30,000 geographically dispersed entities (comprised of
about 25,000 physician practices, a 1000 hospitals, 2000 pharmacies, and 100 wholesalers), each
of which purchased Menactra, a quadrivalent meningococcal (“MCV4”) vaccine, directly from
Sanofi or its subsidiary, VaxServe, Inc., from March 1, 2010 to December 31, 2014. See ECF
No. 416 at 1-2, as modified by ECF No. 476 (setting end of the Class Period as December 31,
2014).
Plaintiffs allege that Sanofi held a dominant share of five pediatric vaccine markets,
including Menactra’s 100% monopoly in the MCV4 market, from 2005 to February 2010.
Plaintiffs allege further that, in 2009, Sanofi learned that Novartis was planning to compete in
the MCV4 market by entering with Novartis’s own MCV4 vaccine, Menveo.2 The CAC alleges
that Sanofi responded in mid-2009 by bundling the sale of Menactra with certain of Sanofi’s
other market dominant pediatric vaccines (the “Bundle”). Plaintiffs claim that Sanofi used the
2 Menveo has been sold by GlaxoSmithKline since the end of 2014. See, e.g., ECF No. 475 at 17.
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Bundle—rather than competing through lower prices or improved quality—to enhance and
maintain its monopoly power in multiple vaccine markets, including the MCV4 market.
The CAC alleges that Sanofi implemented the Bundle through contracts with Physician
Buying Groups (“PBGs”), Group Purchasing Organizations (“GPOs”),3 and healthcare systems,
among others. Plaintiffs allege, in addition, that the Bundle effectively caused healthcare
providers to buy substantially all of their MCV4 vaccines from Sanofi because, due to the
Bundle, buyers risked paying higher prices for Sanofi’s pediatric vaccines merely for buying
Menveo from Novartis. The CAC alleges Sanofi’s conduct foreclosed Novartis’s rival MCV4
vaccine, and allowed Sanofi to maintain its monopoly power in the MCV4 market unlawfully.
Plaintiffs claim further that Sanofi’s actions created a “market division,” which stifled
competition on both sides of the MCV4 market. In particular, Plaintiffs say the Bundle caused all
Class members to pay artificially inflated prices for MCV4 vaccines. Based on these and other
allegations, Plaintiffs’ CAC claims Sanofi violated Sections 1 and 2 of the Sherman Act.
Sanofi denies Plaintiffs’ claims, contending that its contracting and pricing practices did
not constitute anticompetitive bundling, but instead was procompetitive and benefited consumers
by, among other things, lowering vaccine prices. It claims as well that Novartis was not
foreclosed from competing in the alleged MCV4 market, asserting that Novartis was both a
profitable and successful competitor to Sanofi. It further claims that Plaintiffs’ contentions, if
proven, are nonetheless non-cognizable under the Sherman Act.
On February 27, 2012, Sanofi moved to dismiss the case and filed a standalone
Counterclaim “against the Class Representatives and each opt-in member or non-opt-out member
of any class that may be certified in this action.” ECF Nos. 50, 54 at ¶ 2. The Counterclaim
3 PBGs and GPOs aggregate the purchases of their members (physician practices and other healthcare providers), but do not buy vaccines themselves.
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alleged that Plaintiffs and other physician practices members of the Class had engaged in
unlawful collective action through membership in PBGs, purportedly causing vaccine prices to
fall below competitive levels. ECF No. 54 at ¶ 4.
Plaintiffs moved to dismiss Sanofi’s counterclaim on procedural grounds, ECF No. 74,
and Judge Linares granted the motion. ECF No. 100.4 On August 6, 2012, Judge Linares denied
Sanofi’s motion to dismiss the CAC in its entirety. ECF Nos. 106-07. Sanofi then filed its
counterclaim again as part of its Answer to the CAC. ECF No. 111. Plaintiffs again moved to
dismiss the counterclaim, and Judge Linares dismissed it with prejudice. ECF Nos. 135-36.
Sanofi pursued interlocutory appellate relief of the dismissal of its counterclaim. On
April 9, 2013, Judge Linares denied both Sanofi’s request for entry of final judgment and leave
for interlocutory appeal of the dismissal of its counterclaim. ECF Nos. 169-70.
B. Discovery and Motion Practice
Discovery in this case has been time-intensive and hotly contested. It has spanned four
years and resulted in over thirty fact and expert depositions (including depositions of four experts
spanning ten days), review of almost four million pages of party and non-party documents, and
litigation of a wide range of discovery and other pretrial motions, including motions to compel
discovery, to stay discovery, to strike pleadings, to exclude experts, to certify a class, to obtain
summary judgment, and to obtain leave to seek appellate relief, among others.
1. Fact Discovery and Related Motions
Sanofi initially moved to stay discovery while its motion to dismiss was pending, which
Magistrate Judge Hammer denied in July 2012. See ECF No. 102.
4 This case was initially assigned to Judge Linares. It was reassigned to Judge Arleo on December 12, 2014, and then reassigned to Your Honor on February 25, 2016. ECF Nos. 307, 426.
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Plaintiffs engaged in extensive discovery efforts. Plaintiffs noticed and took nineteen
depositions of Sanofi personnel, as well as three depositions of third-party witnesses from PBGs.
Plaintiffs served sixty-six requests for admission, twenty-five interrogatories, and eighty-nine
document requests, along with nineteen subpoenas on third parties demanding documents.
Document discovery resulted in the production of over one million documents, and, due
to third party productions, continued well past the scheduled close of discovery.5 Other written
discovery was voluminous too: Sanofi served 964 requests for admission on Plaintiffs (which,
upon Court intervention, Sanofi reduced to 388) and 24 numbered interrogatories with numerous
subparts. Depositions of witnesses from Novartis and Navigant Consulting also took place.
Sanofi deposed the three Class Representatives in this case. On June 28, 2013 and then
again on October 1, 2014, Sanofi deposed Class Representative Dr. Eysa M. Marquez-Brito; on
August 16, 2013, Sanofi deposed Dr. Louis Giangiulio of Class Representative Sugartown
Pediatrics, LLC; and on September 27, 2013, Sanofi deposed Class Representative Dr. Adriana
Castro. Sanofi also deposed Dr. Marquez-Brito’s husband and medical practice partner, Dr. Jose
Bengochea, on October 1, 2014.
The parties also engaged in substantial discovery motion practice. Magistrate Judge
Hammer appointed, at the parties’ expense, a Special Master on June 7, 2013 to help the Court
resolve these various discovery disputes. ECF No. 191. That appointment spawned its own
motion practice. Sanofi moved the Court for clarification of the Special Master’s authority
seeking a ruling that the Special Master could “issue orders and set deadlines for compliance
5 Third party discovery relating to certain of Sanofi’s requests for documents from Novartis continued well beyond the close of fact discovery. On April 20, 2016, Magistrate Judge Hammer granted a motion to compel brought by Sanofi, arising from a June 2013 subpoena that Sanofi had issued to Novartis. ECF 442. That Order generated rolling discovery of hundreds of thousands of additional pages of documents, and did not complete until December 2016.
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with those orders.” ECF No. 221 at 1-2. The Court denied Sanofi’s request, concluding that
granting such authority to the Special Master was inappropriate “given the staggering volume of
materials submitted thus far to the Special Master, and the risk that such protracted and
voluminous litigation by both parties may seriously impede the progress of the Special Master
and the Court in resolving the disputes between the parties.” Id. The briefing before the Special
Master was extensive. For instance, in order to comply with the Special Master’s directive,
Sanofi submitted a memorandum in excess of 900 pages objecting to Plaintiffs’ responses to the
388 RFAs that Sanofi had served. Over the course of discovery, the Special Master issued
several voluminous Reports & Recommendations. See, e.g., ECF Nos. 211, 212, 213, 229, 238,
239, 260. Both parties, and non-party Novartis, filed objections to several of these rulings,
spawning still further motion practice.
2. Expert Discovery and Related Motions
In addition to developing a substantial factual discovery record, the parties engaged in
extensive expert discovery, which the Court bifurcated into class and merits phases. ECF No.
104.
a) Class Expert Discovery
Plaintiffs served five expert reports in support of class certification. Plaintiffs’ primary
expert economist, Professor Einer Elhauge, served three reports and Plaintiffs’ other economic
expert, Dr. Jeffrey Leitzinger, served two more. Sanofi, via its proffered expert economist, Mr.
David Kaplan, served a rebuttal report, a sur-rebuttal report, and a sur-sur-rebuttal report to Prof.
Elhauge’s reports.6 Sanofi deposed Prof. Elhauge for three days and Dr. Leitzinger for one.
Plaintiffs deposed Mr. Kaplan for two days.
6 Plaintiffs maintained that Mr. Kaplan’s sur-sur-rebuttal report was not authorized by the then-operative scheduling order.
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Prof. Elhauge’s reports opined on, among other things, the relevant market, the pro- and
anticompetitive effects of Sanofi’s Bundle, and the effect of the Bundle on the prices paid by all
or nearly all Class members for Menactra and Menveo. Mr. Kaplan rebutted Prof. Elhauge’s
bundling analysis, and further opined that his theory and models were flawed and unreliable.
In December 2014, Sanofi requested permission to move for appointment of an
independent expert under Federal Rule of Evidence 706, or as a technical advisor. Judge Arleo
declined the request noting that “the expert briefing in this matter of over one thousand pages
and depositions submitted by both parties exhaustively explore the various factual questions for
which experts may be valuable—here, economic, econometric, and statistical issues—and
additional expert briefing before class certification would be duplicative at best and counter-
productive at worst.” ECF No. 330 at 2 n.1 (parentheticals removed). The Court further observed
that the timing of Sanofi’s request “further underscores the risk of delay here.” Id.
On February 13, 2015, Sanofi moved under Daubert to exclude Prof. Elhauge’s opinions
as expressed in his three class certification reports. Plaintiffs opposed. In September 2015, Judge
Arleo held a three-day Daubert evidentiary hearing relating to Prof. Elhauge’s class certification
opinions, during which both Prof. Elhauge and Mr. Kaplan testified on direct and cross. That
hearing extensively covered Prof. Elhauge’s theories and analyses of the case for class
certification purposes. Later that month, the Court, in conjunction with granting Plaintiffs’
motion for class certification (see Part II.B.3, below), denied Sanofi’s class-certification related
Daubert motion.
b) Merits Expert Discovery
After the Court certified this case as a class action, a merits round of expert discovery
ensued. Prof. Elhauge served a report (dated Dec. 14, 2015); Sanofi’s expert, Dr. Daniel
Rubinfeld, served a report (dated Feb 12, 2016); Prof. Elhauge served a rebuttal report (dated
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Apr. 25, 2016); and Dr. Rubinfeld served a “Supplemental Report.”7 Combined, these merits
expert reports reached a thousand pages in length (not including appendices and back-up data).
Sanofi deposed Prof. Elhauge, for one full day (his fourth day of depositions in the case),
and Plaintiffs deposed Dr. Rubinfeld, for one full day. Expert discovery closed in July 2016.8
3. Class Certification and Related Work
After extensive briefing, the submission of a huge record, and a three-day Daubert
hearing relating to class certification issues, on September 30, 2015, Judge Arleo issued an
Opinion and Order granting Plaintiffs’ motion for class certification (and, as mentioned above,
denying Sanofi’s Daubert motion). ECF Nos. 415-16. The Court certified the following Class
under Federal Rule 23(b)(3):
All persons or entities in the United States and its territories that purchase Menactra directly from defendant Sanofi Pasteur Inc. (“Sanofi”) or any of its divisions, subsidiaries, predecessors or affiliates, such as VaxServe, Inc., during the period from March 1, 2010 through such time as the effects of Sanofi’s illegal conduct have ceased (“Class Period”), and excluding all governmental entities, Sanofi, Sanofi’s divisions, subsidiaries, predecessors, and affiliates Kaiser Permanente and the Kaiser Foundation (collectively “Kaiser”), and any purchases by entities buying Menactra pursuant to a publicly-negotiated price (i.e., governmental purchasers).
ECF No. 415 at 2.9 The Court found Plaintiffs had “presented proof common to the proposed
class on all elements of their antitrust claims.” Id. at 1. Among the common issues certified for
class treatment were the boundaries of the relevant market, whether Sanofi possessed monopoly
power, whether Sanofi willfully maintained or enhanced said monopoly power through its
7 Plaintiffs maintained that the supplemental report, dated June 10, 2016, was not authorized under the then-pending scheduling order. 8 Third-party discovery relating to certain requests for Novartis documents continued beyond the close of fact discovery. See supra n.5. 9 This Court later (on October 11, 2016) amended the class definition to end the Class Period at December 31, 2014. ECF No. 476.
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bundled penalty program, the validity of Sanofi’s claimed procompetitive justifications, and
whether its conduct inflated MCV4 vaccine prices. Id. at 34.
In denying Sanofi’s Daubert motion, Judge Arleo found Prof. Elhauge to be “eminently
qualified,” “a preeminent antitrust scholar” and, as other courts have found, a “highly qualified
antitrust titan.” Id. at 4, 10 (quoting, in part, In re Mushroom Direct Purchaser Antitrust Litig.,
No. 06-0620, 2015 WL 5767415, at *4 (E.D. Pa. July 29, 2015); Natchitoches Par. Hosp. Serv.
Dist. v. Tyco Int’l, Ltd., 247 F.R.D. 253, 273 (D. Mass. 2008)). The Court went on to find that
Prof. Elhauge’s economic models demonstrating liability, impact, and damages were reliable,
admissible, and supported by record evidence. See ECF No. 415 at 11-13.
Judge Arleo appointed Berger & Montague, P.C. and the Nussbaum Law Group, P.C.,
who had been serving as interim Co-Lead Counsel from the outset of the case, as Co-Lead Class
Counsel (“Co-Lead Counsel”). ECF No. 416. The law firms of Carella, Byrne, Cecchi, Olstein,
Brody & Agnello, P.C. and Cohn Lifland Pearlman Herrmann & Knopf LLP serve as Co-Liaison
Class Counsel. Several other firms have served as counsel for the Class under the direction of
Co-Lead Counsel. All Plaintiffs’ counsel are collectively referred to as “Class Counsel.”
Sanofi petitioned the Third Circuit under Federal Rule 23(f) for leave to appeal from
Judge Arleo’s Order certifying the class. On December 8, 2015, the Third Circuit summarily
denied leave (with a vote of 2-1). Order, Castro v. Sanofi Pasteur Inc., No. 15-8099 (3rd Cir.
Dec. 8, 2015).
In March 2016, prior to commencement of expert witness merits depositions, the parties,
for a second time,10 entered into a private mediation at the suggestion of Judge Arleo. The
10 Over a year earlier, in November 2014, the parties also attempted to mediate the dispute before a private mediator, The Honorable Chares B. Renfrew (Ret.). The mediation, which had been preceded by extensive briefing by the parties, lasted all day and ended without agreement.
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Mediator was attorney William J. O’Shaughnessy, Esq. The parties conferred with the Mediator
weeks before the mediation, provided written responses to numerous questions he posed,
submitted detailed confidential mediation statements and a PowerPoint presentation. The
mediation took place on March 16, 2016 at the law firm of McCarter & English, LLP in Newark.
Over the course of a day, Class Counsel and Sanofi, each on an ex parte basis, presented their
positions to the Mediator, responded to his follow-up questions, explained the strengths and
weaknesses of both sides’ respective positions, and discussed settlement. The mediation ended
without resolution.
In September 2016, Sanofi moved for summary judgment and (again) to exclude Prof.
Elhauge under Daubert—this time on the merits. Plaintiffs opposed these motions on November
11, 2016. Reply briefing was scheduled to be due by January 20, 2017. ECF No. 497.
C. Present Posture of the Litigation
At the time of Settlement, Sanofi’s summary judgment and Daubert motions were
pending (albeit not fully briefed). Sanofi’s summary judgment motion sought to dispose of this
case in its entirety. Sanofi’s Daubert motion posed a similar threat to the case given that
Plaintiffs’ case for violation, impact, and damages relies in substantial part on the testimony of
Prof. Elhauge. See, e.g., Race Tires Am., Inc. v. Hoosier Racing Tire Corp., 614 F.3d 57, 73 (3d
Cir. 2010) (“[t]o avoid summary judgment, an antitrust plaintiff must come forward with
economically plausible evidence supporting the elements of its claim.”) (citing cases). Sanofi’s
motion seeks to exclude what Sanofi terms as Prof. Elhauge’s “incentive modification theory,”
as well as the model on which he relied to generate impact and damages. Had the Court granted
this motion, Plaintiffs would have had no way to present their case at trial. Therefore, either or
both of Sanofi’s pending motions, if granted, could have mortally wounded Plaintiffs’ case.
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a. Sanofi’s Motion for Summary Judgment
Sanofi’s motion for summary judgment contends that, even if Sanofi’s sales practices
operated as Plaintiffs had alleged, they did not violate the Sherman Act. In particular, Sanofi
argued that anticompetitive conduct requires a showing of collusion or exclusion, but that
Plaintiffs could not sustain a showing of either type of conduct. Sanofi contended that Plaintiffs
lacked evidence (or even an allegation) of collusion between Sanofi and Novartis. It further
contended that Plaintiffs lacked evidence that Novartis was excluded or foreclosed from the
alleged relevant market because the alleged conduct made Novartis better off, not worse off.
Accordingly, Sanofi argued that Plaintiffs could show no more than oligopoly facilitating
conduct, which Sanofi contended is not unlawful under the Sherman Act. ECF No. 469-1 at 1-6.
Sanofi also argued, separately, that summary judgment was warranted because its practices did
not fail the “discount attribution” or “Peace Health” test. Sanofi insists that Plaintiffs’
allegations of wrongdoing have no authority other than Plaintiffs’ own expert’s academic work.
Id. at 2.
Plaintiffs believe that Sanofi’s motion was without merit and that Sanofi’s alleged
bundling unlawfully foreclosed competition to divide the MCV4 market between it and Novartis,
and does articulate conduct prohibited by the Sherman Act. See, e.g., ECF 415. Nonetheless,
Plaintiffs recognize that Sanofi vigorously opposed Plaintiffs’ theories that bundling can lead to
an anticompetitive “market division;” that a competitor could be deemed “excluded” even if it
benefited from the challenged conduct; and that a price simulation model can be used to generate
damages in a private antitrust case.
Indeed, Sanofi marshalled several recent decisions that it claimed should compel the
Court to reject Prof. Elhauge’s theories and which, it says, reflect a trend of courts rejecting
similar approaches to bundling and market share discount cases. See, e.g., Eisai, Inc. v. Sanofi
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Aventis U.S., LLC, 821 F.3d 394 (3d Cir. 2016) (affirming district court dismissal of antitrust
market share discount case at summary judgment phase); It’s My Party, Inc. v. Live Nation, Inc.,
811 F.3d 676 (4th Cir. 2016) (affirming district court dismissal of antitrust bundling case at
summary judgment phase); Suture Express, Inc. v. Owens & Minor Distrib., No. 12-2760, 2016
WL 1377342 (D. Kan. Apr. 7, 2016) (granting defendant motion for summary judgment
disposing entirely of antitrust tying and bundling case). While Plaintiffs believe all of these
decisions are distinguishable, they created litigation risks that Class Counsel had to consider in
settling the case.
b. Sanofi’s Daubert Motion
Sanofi’s Daubert motion attacks what it calls Prof. Elhauge’s “incentive modification
theory,” by which Sanofi referenced Prof. Elhauge’s view that the Bundle softened the incentives
of both Sanofi and Novartis to compete. Sanofi also challenged Prof. Elhauge’s simulation
model that he relied on to support his theory that the Bundle inflated prices, and to demonstrate
impact and establish damages. Sanofi contends that both of Prof. Elhauge’s approaches are
“brand-new” and that his incentive modification approach “has never been empirically tested,
does not involve bundling, relies on strict and inapplicable assumptions, and generates results
that contradict the undisputed facts here.” ECF No. 472 at 5. Sanofi argues that Prof. Elhauge’s
simulation model (used to compute damages) has never been approved “at the merits stage, to
show causation, liability or damages,” and is unreliable. Among other things, Sanofi contends
the model Prof. Elhauge uses to draw his conclusions is not properly “calibrated,” is “hardwired
to generate enormous damages,” and employs assumptions that are “‘extreme’ and ‘unrealistic.’”
Id. at 9.
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Sanofi additionally argues that three recent federal antitrust decisions, namely Eisai, Live
Nation, and Suture Express, have rejected Prof. Elhauge’s expert opinions (or portions thereof),
and compel (another) “thorough Daubert review” here. ECF No. 472 at 3-4.
Although Plaintiffs, in their opposition briefing, vigorously rebutted Sanofi’s Daubert
arguments, and Plaintiffs believe Prof. Elhauge’s opinions are correct on the facts, consistent
with the law, and represent good science, Plaintiffs must nonetheless exercise caution in
forecasting the outcome of any complicated motion in an antitrust case.
D. Negotiations and Settlement
With all of these (and other) risk factors in mind, Plaintiffs, in December 2016, after
several weeks of arm’s-length negotiations, entered into the Settlement with Sanofi for (a)
payment of $61.5 million in cash to Plaintiffs and the Class, and (b) Sanofi’s release of its
antitrust counterclaim, in exchange for Plaintiffs’ and the Class’s dismissal of this case with
prejudice, and certain releases from Plaintiffs and the Class.
In general terms, under the Settlement Agreement, Plaintiffs have agreed to release the
following on behalf of all persons and entities that do not exclude themselves from the Class:
(i) For Claims arising prior to the Settlement Date, any and all manner of Claims relating in any way to Conduct that was alleged or could have been alleged based on any factual predicate in the Action, including, but not limited to, Sanofi’s pricing, sales, marketing, and contracting (including enforcing and administering such contracts) practices, and Sanofi’s alleged cooperative relationship with Merck relating to the sale of pediatric or adolescent vaccines, and any claim involving any allegation that Sanofi engaged in unlawful tying, bundling, exclusionary conduct, restraint of trade, anticompetitive conduct, monopolization, attempted monopolization, or similar unfair method of competition or unfair business practice in violation of any federal or state law;
(ii) For Claims arising after the Settlement Date, any and all manner of Claims relating in any way to Conduct that is the same as or substantially similar to the Conduct that was alleged or could have been alleged based on any factual predicate in the Action had it occurred prior to the Settlement Date. For avoidance of doubt, and without limiting the definition and scope of the “Plaintiffs’ Released Claims,” (x) Sanofi shall have no obligation under the Settlement Agreement to
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change any of its practices; (y) Sanofi shall have no liability to any Releasing Party for continuing to engage in, or for any failure to make changes to Conduct that was alleged or could have been alleged based on any factual predicate in the Action; and (z) the term “Plaintiffs’ Released Claims” shall include without limitation any Claim based on any factual predicate in the Action or which could have been based on any factual predicate in the Action that Sanofi’s pricing, sales, marketing, and contracting (including enforcing and administering such contracts) practices as they exist prior to the Settlement Date (or as they may exist after the Settlement Date if the same as or substantially similar to practices that pre-date the Settlement Date) constitute unlawful tying, bundling, exclusive dealing, exclusionary conduct, restraint of trade, anticompetitive conduct, monopolization, attempted monopolization, or similar unfair competition or unfair business practices in violation of any federal or state law.
(iii) For Claims based on Conduct occurring prior to the Final Approval Order, any and all manner of Claims relating in any way to the litigation or settlement of this Action, including, without limitation, relating in any way to any settlement discussions, the negotiation of, and agreement to this Agreement by the Defendant, or any terms or effect of this Agreement (other than claims to enforce the Agreement).
(iv) For avoidance of doubt, and without limiting the definition and scope of “Plaintiffs’ Released Claims,” the term “Plaintiffs’ Released Claims” includes any Claim relating to any Relevant Vaccine to the extent such Claims fall within subsections (i) and (ii) of this Section II. Also for avoidance of doubt, the term “factual predicate” as used in this Section shall not be construed to exclude from the scope of any “Plaintiffs’ Released Claims,” Claims that are based on any Relevant Vaccine (whether or not it relates to meningitis vaccines) or Claims that arise after the Settlement Date if otherwise within the scope of the Release.
Cecchi Decl. Ex. 1 at 8.11
11 In addition, “Sanofi’s Released Claims” means:
(i) For Claims arising prior to the Settlement Date, (a) any and all manner of Claims relating in any way to Conduct that was alleged or could have been alleged based on any factual predicate in Sanofi Pasteur’s Counterclaim (ECF No. 111) (the “Counterclaim”), including those relating to Sanofi’s allegations that, inter alia, Plaintiffs and/or other Class members engaged in unlawful collective action to depress vaccine prices (“Counterclaim Conduct”), and (b) any and all manner of Claims against Class Counsel, any and all consultants to or experts retained by Class Counsel relating to the investigation, litigation, prosecution, or settlement of this Action.
(ii) For Claims arising after the Settlement Date, any and all manner of Claims relating in any way to Conduct that is the same or substantially similar to the Conduct that was alleged or could have been alleged based on any factual predicate in the Counterclaim had it occurred prior to the Settlement Date. For avoidance of doubt, and without limiting the definition and scope of the “Sanofi’s Released Claims,” (x) Plaintiffs shall have no obligation under the Settlement
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The Settlement is the product of arm’s-length and contentious negotiations spanning
several years, including negotiations over two separate private mediations (with two different
mediators), and extensive negotiations between experienced and informed attorneys in the weeks
before the execution of the Settlement. The negotiations included input from the parties,
concessions from both sides, as well as careful consideration of each side’s strengths and
weaknesses. The Settlement is a strong result for the Class, assuring a meaningful monetary
award in the short run, releasing Sanofi’s Sherman Act counterclaim, and avoiding the
uncertainties, risks (including, e.g., appellate risks), and extended delays of continuing to litigate
this class action (which is entering its sixth year).
Agreement to change any Counterclaim Conduct, (y) Class members shall have no liability to any Released Party for continuing to engage in, or for any failure to make material changes to, any Counterclaim Conduct.
(iii) For Claims based on Conduct occurring prior to the Final Approval Order, any and all manner of Claims relating in any way to the litigation or settlement of the Action and/or Counterclaim, including, without limitation, relating in any way to any settlement discussions, the negotiation of, and agreement to, this Agreement by Sanofi Pasteur Inc., or any terms or effect of this Agreement (other than claims to enforce the Agreement).
(iv) For avoidance of doubt, and without limiting the definition and scope of “Sanofi’s Released Claims,” the term “Sanofi’s Released Claims” includes any Claim relating to any Relevant Vaccine to the extent such Claims fall within subsections (i) and (ii) of this Section
(v) Notwithstanding anything to the contrary in this Agreement, the term “Sanofi Released Claims” shall not include any Claim that may be asserted by Sanofi as a permissive or compulsory counterclaim in a suit brought by a Class Member to the extent that either (i) such suit involves or includes any claim of any sort that Sanofi engaged in unlawful tying, bundling, exclusive dealing, exclusionary conduct, restraint of trade, anticompetitive conduct, monopolization, attempted monopolization, or similar unfair competition or unfair business practices in violation of any federal or state law; or (ii) such suit, regardless of the nature of the claim, is brought as or later becomes a class action or putative class action. To the extent such a counterclaim is asserted, the Parties agree that no ruling, order, or judgment in this case shall have res judicata, collateral estoppel or offensive collateral estoppel effect as against Sanofi. Without limiting the foregoing, the Parties agree that any Final Judgment and Order of Dismissal shall include a provision that prior rulings, orders, and judgments in the case, including but not limited to the Court's orders with respect to Sanofi’s counterclaim, shall not have any res judicata, collateral estoppel, or offensive collateral estoppel effect with respect to a counterclaim asserted by Sanofi in a suit brought by a Class Member.
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Finally, subject to the Court’s approval, and upon a briefing schedule proposed below,
Class Counsel will seek an award of attorneys’ fees of up to one-third of the gross Settlement
Amount, plus reasonable expenses, as well as Class Representative service awards of up to
$100,000 for each of the three Class Representatives.
III. THE SETTLEMENT SATISFIES THE CRITERIA FOR PRELIMINARY APPROVAL
Under the totality of the circumstances and applicable law, the Settlement more than
satisfies the liberal standard for preliminary approval of a class settlement.
Preliminary approval requires a court to “make a preliminary evaluation of the fairness of
the settlement before directing that notice be given to the settlement class.” Smith v. Prof’l
Billing & Mgmt. Servs., No. 06-4453, 2007 4191749, at *1 (D.N.J. Nov. 21, 2007). “Preliminary
approval is not binding, and it is granted unless a proposed settlement is obviously deficient.”
Aetna UCR Litig., 2013 WL 4697994, at *10. “Preliminary approval is appropriate where the
proposed settlement is the result of the parties’ good faith negotiations, there are no obvious
deficiencies and the settlement falls within the range of reason.” Smith, 2007 WL 4191749, at *1
(citing Jones v. Commerce Bancorp Inc., No. 05-5600, 2007 WL 2085357, at *2 (D.N.J. July 16,
2007)).
Preliminary approval does not require a court to reach any ultimate conclusions on the
issues of fact and law that underlie the merits of the dispute. See In re Automotive Refinishing
Paint Antitrust Litig., MDL 1426, 2004 WL 1068807, at *1-2 (E.D. Pa. May 11, 2004)
(distinguishing between preliminary approval and final approval) (citing Manual for Complex
Litigation § 21.632 (2004)). No Class member’s substantive rights are prejudiced by preliminary
approval; preliminary approval is solely to obtain authority for notifying the Class of the terms of
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the Settlement and to set the stage for the final approval of the Settlement after notice to the
Class and the Fairness Hearing.
A. The Settlement is the Product of Extensive Arm’s-Length Negotiations by Experienced Class Counsel
The Settlement is the result of extensive arm’s-length negotiations undertaken in good
faith by highly experienced plaintiff and defense counsel, which negotiations occurred over
several years. These negotiations include two separate mediation processes. The second
mediation took place after the bulk of discovery and briefing had already occurred, and after the
Court had certified the Class, denied Sanofi’s first Daubert motion, and ruled on a host of
discovery matters. See In re Philips/Magnavox TV Litig., No. 09-3072, 2012 WL 1677244, at
*11 (D.N.J. May 14, 2012) (“[w]here this negotiation process follows meaningful discovery, the
maturity and correctness of the settlement become all the more apparent”).
And while the ultimate Settlement was not reached with the direct involvement of either
mediator, those mediations contributed to the development and scrutiny the parties applied in
assessing their position. See Aetna UCR Litig., 2013 WL 4697994, at *11 (“sessions with a
respected and experienced mediator, gave counsel on both sides ample opportunity to adequately
assess the strengths of their respective positions and facilitated serious and informed
negotiations”); Lenahan v. Sears, Roebuck & Co., No. 02-0045, 2006 WL 2085282, at *14
(D.N.J. Jul. 10, 2006) (rigorous mediation and negotiation processes “gave the parties ample
opportunity to assess the relative strengths and weaknesses of their claims”).
Throughout every stage in the mediation and negotiation process, the parties weighed the
strengths and weaknesses of Plaintiffs’ claims and Sanofi’s defenses, including consideration of,
among other issues, liability, causation, and damages. The parties engaged in intensive
bargaining over the merits and value of Plaintiffs’ claims. Because of the extensive, arm’s-length
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bargaining involved, there is no issue (or even a suggestion) that there is any collusive aspect to
the proposed Settlement. Balancing the risks and resources, the proposed $61.5 million cash
payment, and Sanofi’s release of its counterclaim, is a fair, reasonable, and just result.
The principal attorneys for the Class here, Co-Lead Counsel Eric L. Cramer and Linda
Nussbaum, are each highly experienced antitrust attorneys who have served as lead class counsel
in numerous complex antitrust actions, having collectively resolved class cases amounting to
well over $4 billion during their respective careers. Their judgment, as Co-Lead Counsel, that the
settlement is fair and reasonable is entitled to considerable weight. See Varacallo v. Mass. Mut.
Life Ins. Co., 226 F.R.D. 207, 240 (D.N.J. 2005) (“Class Counsel’s approval of the Settlement
also weighs in favor of the Settlement’s fairness.”); In re Prudential Ins. Co. of Am. Sales
Practices Litig., 962 F. Supp. 450, 543 (D.N.J. 1997) (citing Cotton v. Hinton, 559 F.2d 1326,
1330 (5th Cir. 1977) (court is “entitled to rely upon the judgment of experienced counsel for the
parties”)), aff’d, 148 F.3d 283 (3d. Cir. 1998). Courts have explicitly deferred to the judgment of
experienced counsel who have conducted arm’s-length negotiations in approving class action
settlements. See, e.g., Fisher Bros. v. Phelps Dodge Indus., Inc., 604 F. Supp. 446, 452 (E.D. Pa.
1985) (“the professional judgment of counsel involved in the litigation is entitled to significant
weight”).
Co-Lead Class Counsel and Liaison Class Counsel all have extensive antitrust class
action experience and have been on the forefront of medical and pharmaceutical antitrust
litigation for years. Each has vast experience with complex litigation generally. Indeed, Class
Counsel have represented certified classes of direct purchasers in numerous antitrust cases
relating to alleged monopolists’ exclusion of rival manufacturers from various markets in the
pharmaceutical and medical device industries, including by the alleged use of exclusionary
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contracting practices. Co-Lead Class Counsel are therefore experienced in the prosecution,
evaluation, and settlement of this particular type of antitrust litigation.
Co-Lead Class Counsel strongly recommend the Settlement, which falls within the range
of reasonableness and is fully supported by the three Class Representatives.
B. Consideration of the Factors Relevant to Final Approval Also Support Preliminary Approval
While consideration of the requirements for final approval is not required at this stage, “it
is important to consider the final approval factors [at the preliminary approval] stage in order to
identify any issues that could impede [final approval].” Singleton v. First Student Mgmt. LLC,
No. 13-1744, 2014 WL 3865853, at *5 (D.N.J. Aug. 6, 2014). Those factors are:
(1) the complexity, expense and likely duration of the litigation;
(2) the reaction of the class to the settlement;
(3) stage of the proceedings and the amount of discovery completed;
(4) risks of establishing liability;
(5) risks of establishing damages;
(6) risks of maintaining the class action through the trial;
(7) ability of the defendants to withstand a greater judgment;
(8) the range of reasonableness of the settlement fund in light of the best possible recovery; and
(9) the range of reasonableness of the settlement fund to a possible recovery in light of all the attendant risks of litigation.
Girsh v. Jepson, 521 F.2d 153, 157 (3d Cir. 1975). All of the relevant factors here militate in
favor of the Settlement.
The first Girsh factor—the complexity, expense and likely duration of the litigation—
supports approval here. This case has been litigated for over five years. Indeed, given the stage
of the litigation, and the fact that there is likely to be an appeal of any final judgment, this case,
absent settlement, is unlikely to conclude for at least several more years. See Part II.B.2, above.
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Because the Settlement has not yet been presented to the Class, the second Girsh factor
(reaction of the Class to the settlement), is not ripe for consideration, although Plaintiffs note that
the three Class Representatives believe the Settlement to be an excellent result for the Class.
The third Girsh factor requires the Court to “consider the ‘degree of case development
that Class Counsel have accomplished prior to Settlement,’ including the type and amount of
discovery already undertaken.” In re Merck & Co., Inc. Vytorin ERISA Litig., No. 08-CV-285,
2010 WL 547613, at *7 (D.N.J. Feb. 9, 2010) (quoting In re GMC Pick-Up Truck Fuel Tank
Prods. Liab. Litig., 55 F.3d 768, 813 (3d Cir. 1995)). “[U]nder this factor the Court considers
whether the amount of discovery completed in the case has permitted ‘counsel [to have] an
adequate appreciation of the merits of the case before negotiating.’” Id. at *29 (alteration in
original).
This factor weighs heavily in favor of approval here. As detailed in Part II above, there
has been extensive discovery on both sides, fact and expert discovery has closed, and Sanofi’s
pending motions and trial are all that remain. Discovery spanned four years and included, among
other things, review of almost 1 million documents (nearly 4 million pages), dozens of
depositions of party and non-party witnesses covering both class and merits issues, an especially
intensive written discovery process that involved extensive proceedings before a court-appointed
Special Master, and expert reports running into the thousands of pages along with fact and expert
depositions on both class and merits issues. See Sheinberg v. Sorensen, No. 00-6041, 2016 WL
3381242, at *7 (D.N.J. June 14, 2016) (recognizing the role of “meaningful discovery” in
evaluating and arriving at a proper settlement amount) (quoting In re Elec. Carbon Prods.
Antitrust Litig., 447 F. Supp. 2d 389, 400 (D.N.J. 2006)).
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In Sheinberg, the court noted that “the Settlement was reached after extensive arm’s-
length negotiations and mediation sessions” finding “that Class Counsel had a thorough
appreciation of the merits of the case prior to settlement” in supporting its conclusion that this
“factor weighs in favor of approval.” Id. The same reasoning and conclusion apply here. Class
Counsel have thoroughly analyzed all the relevant evidence in connection with (i) exhaustive
briefing on class certification and Daubert motions, along with the three-day evidentiary
Daubert hearing, and (ii) summary judgment briefing, evidentiary submissions, and a second
Daubert motion. The extensive discovery record and fact development process, repeatedly tested
through motion practice and other challenges, assisted Class Counsel and their expert in
evaluating the proposed Settlement in light of the relative strengths and weaknesses of the case
and other litigation risks.
The fourth, fifth and sixth Girsh factors (risks of establishing liability, damages and
maintaining the class action through trial) are appropriately considered together for purposes of
preliminary approval. Singleton, 2014 WL 3865853, at *6. While the case is strong, there are
significant risks to the Class, including by way of pending dispositive motions, possible pitfalls
at trial, risk of appeal, and risks associated with mere extensive delay. See Part II.B.
As to the seventh Girsh factor, although Sanofi has assets to pay more than a settlement
of $61.5 million, the fact that a defendant can pay more does not make an otherwise reasonable
settlement unreasonable. See Henderson v. Volvo Cars of N. Am., LLC, No. 09-4146, 2013 WL
1192479, at *11 (D.N.J. Mar. 22, 2013) (“Plaintiffs acknowledge that ‘there is currently no
indication that Volvo here would be unable to withstand a more significant judgment,’ but ‘to
withhold approval of a settlement of this size because it could withstand a greater judgment
would make little sense where the [settlement agreement] is within the range of reasonableness
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and provides substantial benefits to the Class.’”) (citing cases where settlement was approved
despite defendants’ ability to withstand a greater judgment); In re Johnson & Johnson Derivative
Litig., 900 F. Supp. 2d 467, 484 (D.N.J. 2012) (“But even assuming there are sufficient funds to
pay a greater judgment, the Third Circuit has found that a defendant’s ability to pay a larger
settlement sum is not particularly damaging to the settlement agreement’s fairness as long as the
other factors favor settlement”) (internal quotations and citations omitted).
The final two Girsh factors “evaluate whether the settlement represents a good value for a
weak case or a poor value for a strong case.” In re Warfarin Sodium Antitrust Litig., 391 F.3d
516, 538 (3d Cir. 2004). As courts in this district have often explained, “according to Girsh,
courts approving settlements should determine a range of reasonable settlements in light of the
best possible recovery (the eighth Girsh factor) and a range in light of all the attendant risks of
litigation (the ninth factor).” In re Schering-Plough/Merck Merger Litig., 2010 WL 1257722, at
*12 (D.N.J. Mar. 26, 2010). The Court should keep in mind “settlement represents a compromise
in which the highest hopes for recovery are yielded in exchange for certainty and resolution and
[courts should] guard against demanding to[o] large a settlement based on the court’s view of the
merits of the litigation.” Johnson & Johnson, 900 F. Supp. 2d at 484-85 (alteration in original)
(quoting In re Safety Components Int’l, 166 F. Supp. 2d 72, 92 (D.N.J. 2001)).
In terms of absolute dollar value, this Settlement achieves for the Class a dollar value
higher than what Plaintiffs believe are the most closely analogous healthcare-related antitrust
bundling cases—brought by some of the same Class Counsel as here, working with some of the
same expert economists and consultants. The $61.5 million Settlement achieved in this case is
the largest by a wide margin:
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Case (Year of Settlement) Settlement Result (ordered by size of settlement)
Castro v. Sanofi (2017) $61.5M
Norvir (2011)12 $52M (settled after jury trial commenced)
Hypodermic Products (2013)13 $45M
Sharps Containers (2010)14 $32.5M (settled after jury trial commenced)
Endosurgical (2008)15 $13M (for direct and indirect purchaser classes combined)
Pulse Oximetry Devices (2009)16 $0 (summary judgment granted)
Catheters (2009)17 $0 (summary judgment granted)
These are among the real world results in similar cases that the experienced Class Counsel
considered in agreeing to the Settlement.
While Plaintiffs’ expert’s analyses indicated that the potential recovery on behalf of the
Class, assuming Plaintiffs had prevailed at trial, could be higher than the Settlement amount, that
fact is virtually always true in settled cases. Sanofi’s merits expert, Dr. Rubinfeld, by contrast,
proffered damages measurements that returned much lower results than the amount in the
Settlement. Dr. Rubinfeld used a “yardstick” approach to measure the potential overcharge here
by looking at what occurred in different vaccine markets, and non-vaccine biologics markets,
when a new entrant entered a market featuring a 100% monopolist. Dr. Rubinfeld, when looking
at specific market examples, and when averaging the prices from the examples he selected in the
12 Meijer, Inc. v. Abbott Labs., No. 07-cv-05985 (N.D. Cal.). 13 In re Hypodermic Products Antitrust Litig., MDL No. 1730, No. 05-cv-1602 (D.N.J.). 14 Natchitoches Parish Hosp. Serv. Dist. v. Tyco, No. 05-12024-PBS (D. Mass.). 15 In re Endosurgical Prods. Direct Purchaser Antitrust Litig., No. 05-cv-08809 (C.D. Cal.). 16 Allied Orthopedic Appliances Inc. v. Tyco Health Care Group LP, 592 F.3d 991 (9th Cir. 2010) (affirming district court’s dismissal on summary judgment). 17 St. Francis Med. Ctr. v. C.R. Bard, Inc., 657 F. Supp. 2d 1069 (E.D. Mo. 2009).
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vaccine and non-vaccine biologics markets, arrived at damages estimates well below the amount
in the Settlement, including some yielding negative damages. Dr. Rubinfeld also used a
conjectural variation model to rebut Professor Elhauge’s damages model; under Dr. Rubinfeld’s
models, this lawsuit would return zero damages. ECF No. 469-12 at 249-66.
Put simply, when weighed against the time, expense and potential risk of further
litigation, including an adverse ruling on summary judgment or Daubert, or losing at trial, the
Settlement is a reasonable compromise that gives Class members certain recovery. In re Cendant
Corp. Sec. Litig., 109 F. Supp. 2d 235, 263 (D.N.J. 2000) (“The fact that a proposed settlement
may only amount to a fraction of the potential recovery does not, in and of itself, mean that the
proposed settlement is grossly inadequate and should be disapproved.”) (quoting In re Warner
Comms. Secs. Litig., 618 F. Supp. 735, 745 (S.D.N.Y. 1985).
Here, the Settlement of $61.5 million represents approximately 14% of the Class’s pre-
trebling damages claim for overcharges on Menactra of $439 million;18 as a percentage, this
dollar value falls well within, or even outperforms, the range of permissible settlements. See
Nichols v. Smithkline Beecham Corp., No. 00-6222, 2005 WL 950616, at *20 (E.D. Pa. Apr. 22,
2005) (approving settlement between 9.3% and 13.9% of alleged damages as consistent with
those approved in other complex class action cases); see also In re Warfarin Sodium Antitrust
Litig., 212 F.R.D. 231, 257-58 (D. Del. 2002) (“The standard for evaluating settlement involves a
18 This figure is based on the overcharges computed by Prof. Elhauge’s model for purchases by Class members of Menactra during the Class Period (as revised by this Court in its Opinion and Order concerning Class Notice). ECF 475 at 17; ECF No. 476. For this computation, Plaintiffs have excluded the damages attributable to Class member purchases of Menveo. While Plaintiffs had asserted this form of damages, and Prof. Elhauge computed them, there would have been certain additional risks in attempting to recover this form of damages—what Sanofi had termed “umbrella” damages. Sanofi had argued that this would represent recovery of damages from one party (Sanofi) based on Class member purchases from another market participant (Novartis) in a non-conspiracy case, and would therefore be improper.
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comparison of single damages, not treble damages”) (citations omitted); Sullivan v. DB Invs.,
Inc., 667 F.3d 273, 325 (3d Cir. 2011) (“we know of no authority that requires a district court to
assess the fairness of a settlement in light of the potential for trebled damages”) (emphasis in
original).
IV. THE PROPOSED NOTICE PLAN
“The court must direct notice in a reasonable manner to all class members who would be
bound by the [proposed settlement].” Fed. R. Civ. P. 23(e)(1). “[W]ithin the limits of
practicability notice must be such as is reasonably calculated to reach interested parties.”
Mullane v. Central Hanover Bank & Trust Co., 339 U.S. 306, 318 (1950). The aspects of proper
“notice” are the manner the notice is disseminated and the form and contents of the notice.
Plaintiffs did not issue the prior notices approved by the Court, ECF No. 475 (which would have
notified the Class of the class certification order), because (a) administrative issues associated
with finalizing the previous notice plan arose, and (b) as settlement talks proceeded, it made
sense to see whether those talks would succeed, and thereby avoid the possible need to issue two
class notices in close succession.
A. The Proposed Manner of Notice is One This Court Has Already Approved
The proposed manner for disseminating the Long Form Notice (“proposed Notice Plan”)
adopts Plaintiffs’ Class Notice Dissemination Plan that the Court previously approved in October
2016 (the “Class Notice Plan”). See ECF No. 475. As the Court found, the Class Notice Plan
“satisfies Rule 23’s requirements for method of distribution and it is approved.” Id. at 6; see also
ECF No. 435-2 at Ex. C to Ex. 1 (detailing Class Notice Plan).
Sanofi has reviewed and approves of the Notices themselves as well as the Notice Plan
discussed below.
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1. Direct Notice
The proposed Notice Plan provides for notice to the approximately 30,000 Class
members by mailing the Long Form Notice to Class members directly and by publication of a
Summary Notice in the periodical Pediatrics which is widely read by the Class.
Sanofi produced in discovery a database with the names, addresses, transactional data
(pricing, purchase volumes, etc.), and other identifying information for its direct customers
spanning the period January 2006 through the end of October 2013. On October 27, 2016, under
the Court’s October 11, 2016 Order (ECF 476), Sanofi produced additional data for the period of
November 2013 to December 2014. This information will be used for purposes of providing the
Long Form Notice to Class members by direct mail as set forth in the proposed Notice Plan.
Under the Plan, Rust Consulting, Inc. (“Rust”), a company experienced in the field of class
action notice and administration, will use the U.S. Postal Service’s (“USPS”) Coding Accuracy
Support System to improve the accuracy of Class member addresses and will research those
addresses that are not valid delivery-point addresses according to USPS. ECF No. 435-2 at Ex. C
to Ex. 1.
Rust will also rely on the National Change of Address database to obtain change of
address data for Class members going back 48 months. Rust will re-mail returned notices with
forwarding addresses provided by the USPS and will perform an advanced address lookup
utilizing Social Security numbers (where available) and name and address history. Id.
2. Publication Notice
In addition to direct mail, Rust will publish the Summary Notice in the medical journal
Pediatrics, a widely circulated monthly publication read by nearly 60,000 pediatricians and other
direct purchasers of MCV4 and other pediatric vaccines. Pediatrics is widely read among
pediatricians in the United States. Id.
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3. Website and Toll-Free Telephone
Finally, Rust will develop and maintain a litigation-specific website on which Class
members may obtain the Long Form and Summary Notices, certain additional case-related
documents (including, e.g., the Preliminary Approval Motion (and associated documents), the
Settlement Agreement and, when filed, Class Counsel’s motion for attorneys’ fees,
reimbursement of expenses, and service awards for the Class Representatives), and other basic
information about the litigation. Id. Rust will also establish a litigation-specific toll-free
telephone number utilizing interactive voice response and live operators. Id.
B. The Form and Contents of the Notice are Similar to the Class Notice
Plaintiffs’ proposed form of notice is appropriate. Where still applicable and relevant, it
adopts the same form as the Class Notice that this Court has already approved, ECF No. 475,
adding, as appropriate, new settlement information.
In addressing a notice’s form and content, courts have held that “[i]t is not required . . .
that class members be made cognizant of every material fact that has taken place prior to the
notice” and that “the class notice must describe the proceedings in ‘objective, neutral terms.’” In
re Deepwater Horizon, 739 F.3d 790, 819 (5th Cir. 2014) (citations omitted); see also Varacallo
v. Mass. Mut. Life Ins. Co., 226 F.R.D. 207, 227 (D.N.J. 2005) (notice requires only a general
summary of the case not detailed specifics); Warfarin, 212 F.R.D. at 253 (notice must only
describe the case in general terms and is not expected to be a complete source of information).
The class notice must simply inform class members “of the existence of the class action, the
requirements for opting out of the class and/or entering an appearance with the court, and the
applicability of any final judgment to all members who do not opt out of the class.” Prudential
Ins. Co., 148 F.3d at 326.
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The proposed Notices, based in large part on the Class Notice Plan approved by this
Court are written in neutral, plain English using bold-type to alert readers (i) to a settlement, (ii)
that their rights may be affected, and (iii) a synopsis of their legal rights and options. Further, the
proposed Notices concisely describe the following:
• the nature of the action;
• the definition of the Class;
• the Class claims, issues and the parties’ positions;
• that a Class member may object to the Settlement and the method to do so;
• that a class member may exclude itself from the Class, and the implications and method for doing so;
• the binding effect of a Class judgment on members of the Class;
• that Class members release certain claims against Sanofi by failing to exclude themselves from the Class and thereby choosing to stay in this litigation;
• the total amount Sanofi has agreed to pay to the Class;
• the Court approval process for the proposed Settlement and Class Counsel’s request for attorneys’ fees of up to one-third of the Settlement, reimbursement of all litigation expenses, and Class Representative service awards of up to $100,000; and,
• the schedule for completing the settlement approval process, including deadlines for objecting to the Settlement, and the submission of motions for final approval of the settlement, and for attorneys’ fees, expenses, and service awards to the named plaintiffs.
See Cecchi Decl. Exs. 2-3.
The proposed Class Notice also advises prospective members that they may obtain
additional information by contacting the Settlement Administrator through a toll-free telephone
number or by accessing a dedicated website that will contain relevant information, including
pleadings and pertinent Court rulings and orders in the case.
The Notices fairly describe the Settlement and its legal significance and follows the
“‘Illustrative’ Forms of Class Action Notices” posted by the Federal Judicial Center on its
website. See Federal Judicial Center’s ‘Illustrative’ Forms of Class Action Notices,” available at
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www.fjc.gov (link to “Class Action Notices Page”). These Notices satisfy the notice
requirements under Rule 23(e). See Philips/Magnavox, 2012 WL 1677244, at *14.
V. PROPOSED SCHEDULE FOR SERVICE OF NOTICE, MOTIONS FOR FEES AND SERVICE AWARDS, CLASS EXCLUSIONS, OBJECTIONS, AND FAIRNESS HEARING
As set out in the proposed Order, Plaintiffs propose the following schedule:
Event Timeline
Direct Mail of Notice to the Class Within 30 days of the Court’s entry of the Preliminary Approval Order (“Order Date”)
Publication of Summary Notice Within 30 days of the Order Date.
Submission of motion for attorneys’ fees, expenses, and service awards for the named class representatives.
Within 60 days of the Order Date.
Deadline for Class Members to Opt-Out of the Class or Object to the Settlement
Within 75 days of the Order Date.
Notice of Persons or Entities Requesting Exclusion from the Class and Status and Execution of the Notice Program
Within 90 days of the Order Date.
Submission of motion and memorandum in support of final approval of the Settlement and any responses by the parties to any objections filed by and Class members.
Within 100 days of the Order Date.
Fairness Hearing On a date to be set by the Court, but no earlier than 120 days of the date of the Order Date.
This schedule is fair to Class members. It gives approximately a month and a half for
Class Members to review the preliminary approval papers and Settlement Agreement before
deciding whether to object or opt out. And it gives approximately two weeks for Class Members
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to consider the attorneys’ application for fees, expenses, and Class Representative service
awards.
VI. RUST SHOULD BE APPROVED AS SETTLEMENT ADMINISTRATOR
This Court already approved Rust to assist in the dissemination of class notice. ECF No.
475; see also ECF No. 435-2 at Ex. B to Ex. 1 (providing Rust’s background, experience, and
relevant competencies). Plaintiffs ask that Rust’s mandate be reauthorized and expanded to
include the administration of the Settlement, including calculating each Class member’s pro rata
share of the Net Settlement Fund (which is the Settlement Fund net of Court awarded fees, costs,
service awards, and costs of notice and administration), and distributing the Net Settlement Fund
pro rata to members of the Class. Other duties include, but are not limited to, making timely tax
and related filings, making elections per applicable Treasury Regulations, and the preparation
and delivery of documents for signature. See Cecchi Decl. Ex. 1 at 18-22; Ex. 4 (Escrow
Agreement).
Rust is in the business of carrying out large public notice of payment projects on behalf
of businesses and governmental agencies. Rust has been in operation for nearly thirty years. Rust
has been appointed as settlement administrator in many pharmaceutical products antitrust class
actions. Through these and other matters, Rust has developed and demonstrated the expertise to
effectively administer settlements in pharmaceutical products antitrust class actions. See ECF
No. 435-2 at Ex. B to Ex. 1.
VII. HUNTINGTON NATIONAL BANK SHOULD BE APPROVED AS ESCROW AGENT The Settlement Agreement requires an “Escrow Agent” to be the repository of the
Settlement Fund, and to execute certain duties, including general compliance with certain
specified obligations. See Cecchi Decl. Ex. 1 at 18-22; Ex. 4 (Escrow Agreement). For instance,
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the Escrow Agent is entitled to pay out of the Settlement Fund, as directed, the costs of
settlement administration and notice to the Class and taxes, if any, associated with the Settlement
Fund.
Plaintiffs propose The Huntington National Bank (“HNB”) as Escrow Agent. HNB,
established in 1866, is among the top 1% of banks in the United States based on size. HNB’s
National Settlement Team has handled more than 900 settlements for law firms, claims
administrators, and regulatory agencies. Class counsel have utilized the services of HNB as
Escrow Agent in many class action settlements previously to great success, and HNB is qualified
to serve as Escrow Agent here.
VIII. CONCLUSION
For the foregoing reasons, Plaintiffs respectfully request that the Court grant Plaintiffs’
motion for preliminary approval of the proposed settlement, approving the manner and form of
the Notices, approving the appointment of HNB as Escrow Agent, appointing Rust as Settlement
Administrator, and establishing a briefing schedule for (1) final settlement approval and
proposed plan of distribution, and (2) Class Counsel’s application for attorneys’ fees, expenses,
and Class Representative service awards, and scheduling a fairness hearing for final approval of
the proposed Settlement.
Dated: January 27, 2017 s/ Peter S. Pearlman
Peter S. Pearlman COHN LIFLAND PEARLMAN HERRMANN & KNOPF LLP Park 80 West – Plaza One 250 Pehle Avenue, Suite 401 Saddle Brook, NJ 07663 Tel: (201) 845-9600 Fax: (201) 845-9423 [email protected]
s/ James E. Cecchi
James E. Cecchi CARELLA, BYRNE, CECCHI, OLSTEIN, BRODY & AGNELLO, P.C. 5 Becker Farm Road Roseland, NJ 07068 Tel: (973) 994-1700 Fax: (973) 994-1744 [email protected]
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Co-Liaison Counsel for Plaintiffs and the Class
Eric L. Cramer Michael J. Kane Zachary D. Caplan BERGER & MONTAGUE, P.C. 1622 Locust Street Philadelphia, PA 19103 Tel: (215) 875-3000 Fax: (215) 875-4604 [email protected] [email protected] [email protected]
Linda P. Nussbaum Bradley J. Demuth Hugh D. Sandler NUSSBAUM LAW GROUP, P.C. 1211 Avenue of the Americas, 40th Floor New York, NY 10036 Tel: (212) 702-7053 [email protected] [email protected] [email protected]
Co-Lead Counsel for Plaintiffs and the Class
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