192 B.R. 516 (Bkrtcy.D.N.D. 1996)
In re Kenneth R. MICKELSON and Mary Jean Mickelson d/b/a Mickelson Seed Company, Debtors.
Bankruptcy No. 95-30460.
United States Bankruptcy Court, D. North Dakota.
February 20, 1996
[Copyrighted Material Omitted]
Kip Kaler, Fargo, ND, for Trustee.
Joseph Turman, Fargo, ND, for Pete and Curtis Haman.
George Ackre, Cando, ND, for Debtors.
Shane Goettle, Minot, ND, for WEJCO, Inc.
Lynn Jordheim, Fargo, ND, for USA/IRS.
Wayne Drewes, Trustee, Fargo, ND.
MEMORANDUM AND ORDER
WILLIAM A. HILL, Bankruptcy Judge.
This matter is before the court on the trustee's objection to claims (filed December 21, 1995) to a number of claims filed in connection with this case. Although the Debtor was involved in certain aspects of the grain business, none of the claims are against grain proceeds. All are unsecured claims of individuals, farmers and businesses, who did business with the Debtor. The principal issue is whether any of the claimants are entitled to priority under § 507(a)(5)(A). It is the trustee's position that, owing to the nature of the Debtor's business, and the type of transactions involved, none of the claims qualify for priority treatment. A hearing was held on February 8, 1996.
The Debtor, Ken Mickelson, resides in Rolla, North Dakota where he owns and operates an unincorporated business known as Mickelson Seed Company. Commencing operations in 1990, his company engaged in two aspects of seed preparation. It bought grain from farmers, conditioned it and resold it in the market as seed for planting. It also custom conditioned seed for farmers--taking the farmer's seed in, treating it with fungicide and returning it to the farmer. The business was expanded in 1991 to include the sale of various types of equipment related to grain drying. The company also acted as agent for the sale of certain types of farm chemicals.
Physically, the company's seed plant consists of a metal building with treating equipment, a scale and a warehouse for the storage of bagged seed and equipment. Ten grain bins are on site with total storage capacity of 30,000 bushels.
The Debtor's business was not licensed by the state of North Dakota as a public warehouse and according to the debtor, he did not accept grain for storage. He did, however, purchase grain from farmers and re-sell it to the public, to other farmers, and other seed companies.
Section 726 providing for the distribution of estate assets, allows for payment first to the nine priority classes set forth in § 507(a), followed by distribution to general unsecured claimants. The fifth priority under § 507(a)(5)(A) allows payment up to $4,000 of the unsecured claims of persons engaged in the production or raising of grain, as defined in § 557(b) against a debtor who owns or operates a grain storage facility, as defined in § 557(b), for grain or the proceeds of grain. Section 507(a)(5)(A) cannot be understood without reference to § 557, and understanding the relationship and reasons prompting their enactment in 1984.
On its face, § 507(a)(5)(A) sets out three criteria which must be established for priority treatment:
1. The claim must be by a person engaged in the production or raising of "grain" as defined in § 557(b)(1).
2. The claim must be for grain or proceeds of grain.
3. The claim must be against a debtor who owns or operates a "grain storage facility" defined by § 557(b)(2) as a site or physical structure regularly used to store grain for producers or to store grain acquired from producers for resale.
NON-GRAIN RELATED CLAIMS
1. Claims arising from the sale of fuel oil, advertising, certification, services, and the like. Claims arising from the sale of product and services to the debtor for which payment was not received are not claims qualifying for priority treatment under § 507(a)(5)(A) or any of the other provisions of § 507. They are not claims for grain or proceeds of grain. Claims No. 4, 7, 16, 18, 37 and 44, are denied priority status and are allowed treatment as general unsecured claims.
2. Claims by creditors who purchased equipment from the debtor. Claims by creditors who purchased grain drying equipment from the debtor, paying for the same in whole or part but not receiving the equipment are not claims amenable to priority treatment under § 507(a)(5)(A) because they are not claims for grain or proceeds of grain. Tom Voller, claim No. 83, argues for priority treatment alternatively under § 507(a)(6). This section pertains to the prepayment of money in connection with the purchase of goods for personal, family, or household use. Voller's claim relates to grain drying equipment which the court does not regard as qualifying for § 507(a)(6) treatment. Claims No. 45, 51, 75, and 83 are denied priority treatment and are allowed treatment as general unsecured claims.
3. Wage claims. The claims of Jon Halone, Claim No. 73, and Kurt Carpenter, Claim No. 87, are for labor. Priority treatment under § 507(a)(3)(A) is available only where the unpaid wages or salaries including vacation pay were earned within 90 days prior to the petition date. From the respective proofs of claims, it appears both claims fall outside the 90-day period. Accordingly, Claims No. 73 and No. 87 are denied priority treatment and allowed treatment as general unsecured claims.
GRAIN-RELATED CLAIMS
1. Seed purchased from the debtor. A number of claims are presented by individuals and other seed companies who purchased seed from the debtor by making a pre-payment, expecting but not receiving delivery of the product. Of these, Claim No. 30 of Farmers Union, Claim No. 47 of Ross Seed Co. and Claim No. 53 of Gold Country Seeds fail to meet the first element of § 507(a)(5)(A) in that they are not entities engaged in the production or raising of grain.
Claims No. 3, 19/62, 20, 27, 29, 30, 31, 32, 33, 35, 36, 46, 47, 48, 49, 50, 53, 55, 56, 57, 58, 60, 63, 64, 66, 68, 70, 71, 72/78, 74, 77, and 82.
2. Grain purchases by the debtor. The claims of Kevin Archibald, Claim No. 76, that of Wayne Johnson, Claim No. 89 (replacing No. 81) and that of Pete Haman, Claim No. 85, stem from the purchase of grain by the Debtor for which the respective claimant was not paid. Each of these individuals are farmers engaged in the production of grain. No appearance was made by Archibald and little can be gathered from his proof of claim except to conclude that he delivered durum seed valued at $4,000 to the Debtor for which he was not paid. Johnson, testifying through affidavit, stated that he marketed grain through the Debtor in the same fashion he would have with any other elevator or storage facility. He delivered grain to the Debtor because of a better price. There was a security interest taken in 12,000 bushels but whether or not it was ever perfected is unknown. There is no evidence of such. There is also no evidence suggesting that the transaction was anything but a straight forward purchase of grain by the Debtor.
Haman was a long-time customer of the Debtor both buying seed and other products from him and, in turn, selling the Debtor grain. According to the Debtor's testimony, he never acted as a broker or held himself out to be a broker of grain but did purchase grain for his own inventory, later selling it as seed to others. In Haman's case, the Debtor purchased grain from Haman and a short time later sold it to an elevator. The Debtor stated that this only happened when he had overbought grain needed for seed purposes. There is no evidence suggesting the Debtor accepted grain for storage or that he accepted grain in bailment for resale. Both Johnson and Haman, apparently acknowledging that they sold grain to the Debtor, take the position that a § 507(a)(5)(A) priority does not require a bailment situation but extends to anyone who sold grain and has not been paid for it. In their view, both a bailor/bailee and a buyer/seller relationship qualify for priority treatment under this section.
Section 507(a)(5)(A) is symbiotic of § 557, both having been born out of the crucible of the farming crisis of the 1980's. The few cases applying § 507(a)(5)(A) have placed considerable weight on the legislative history and the problems seen by Congress as necessitating their enactment. Although there was apparently no legislative history specifically attributable to these two sections, there was considerable comment regarding their 1983 counterparts found as §§ 236, 235, and 237 of the Omnibus Bankruptcy Improvements Act of 1983 passed by the Senate as S. 445. Senate subcommittee testimony focused on the problem of recovering farm products located in storage facilities:
(3) the requirements of present law which mandate that owners of crop assets held by the debtor solely on the basis of his status as a bailee must share grain assets held by the trustee in bankruptcy on a pro rata basis with any creditor holding a security interest in assets of a similar type which are owned by the debtor, such that the bailors of such storage contract crop assets have the value of their property diminished for the benefit of such creditors when there is a shortage of produce on hand;
(4) the unprotected status, as unsecured creditors in bankruptcy, of farmers who have sold crops to a farm produce storage facility but have not received payment for that crop;
(5) the reluctance of some courts to accept warehouse receipts and scale tickets, the principle [sic] documents used in warehouse business to establish record of ownership of crop assets stored in warehouse facilities on bailment contracts, as evidence of ownership in bankruptcy abandonment proceedings; ...
S.Rep. No. 98-65, 98th Cong., 1st Sess., p. 25, The Omnibus Bankruptcy Improvements Act of 1983, report of the Committee on the Judiciary United States Senate. There is an obvious correlation of paragraphs (3) and (5) with 1984 sections 557 and 507(a)(5). The Senate report further states that the Committee bill would accomplish the following to alleviate the above-described problems:
. . . . .
(2) The bill would require the court to distribute grain assets or the proceeds of such assets first to producers who have merely stored their grain in such a facility upon a contract of bailment;
. . . . .
(5) The bill contains measures which would strengthen present provisions of the Code allowing a right of reclamation to producers who have sold goods to a debtor in bankruptcy who have not received payment;
(6) The bill contains measures requiring the bankruptcy court to accept valid warehouse receipts and scale tickets as proof of ownership of crop assets possessed by the debtor upon contracts of bailment where they were issued for that purpose;
. . . . .
Page 521.
(8) The bill grants farm producers a priority position in the distribution of assets of the bankrupt to general unsecured creditors when those farm producers have suffered a loss as a result of the sale or conversion of farm produce to or by a debtor operating a storage facility, after trustee and court expenses, wages of employees, and pension plan payments.
Id., at 26. Once again there is an identification of those comments with the 1984 amendments: paragraphs (2) and (6) with § 557; and paragraph (8) with § 507(a)(5). Paragraph 5 pertains to the reclamation rights now codified in § 546(d). The Bill referred to in the above Senate report was subsequently passed by Congress as the 1984 Amendments.
Courts have never construed § 507(a)(5)(A) standing alone, to accord sellers of grain a priority claim. Rather, the priority right granted by § 507(a)(5)(A) is to be regarded as an essential ancillary to § 557. The intent of § 557 was to prevent "forced sharing" by a producer/depositor with secured lenders. It addresses those bailment situations where producers had deposited grain with a grain storage facility for storage and/or resale. Always, however, title remained in the producer. Upon the storage facility's bankruptcy, the court could then provide for expedited distribution of the grain back to the producer who held title. If the quantity of grain held exceeded 10,000 bushels, then the trustee is to sell it with the proceeds being distributed to title holders. 11 U.S.C. § 557(i). Section 507(a)(5)(A) comes into play when there is insufficient grain or proceeds as a result of the trustee's sale for immediate distribution back to the producer. To the extent a producer has not recovered the full amount of his grain pursuant to § 557, he is entitled to an allowed unsecured claim with fifth priority pursuant to § 507(a)(5)(A). In re Childress, 182 B.R. 545 (Bankr.W.D.Mo.1995); In re Esbon Grain Co., Inc., 55 B.R. 308 (Bankr.D.Kan.1985). None of the grain-related claimants stored grain with the Debtor. Of the three who sold grain to the Debtor, none can claim to have retained title. For them to have a right to a § 507(a)(5)(A) priority, they must first have been entitled to recover the grain itself or, where it has been sold by the trustee pursuant to § 557(i), the proceeds. This is the genesis for criteria number 2 noted above--the claim must be a title right for "grain or proceeds of grain." The § 507(a)(5)(A) reference to "proceeds" does not mean proceeds due a person as payment for grain sold to a grain storage facility where title has passed to the facility as purchaser.
Thus, even if the court were to conclude that the Debtor is a grain storage facility, which does not appear established by the evidence, the grain-related claimants would still fail to qualify as § 507 priority claimants.
Although the debtor does have capacity for storage, the evidence does not establish that it was "regularly" used for the storage of producers' grain. Characterization of an entity as a "grain storage facility" for purposes of § 557 is not determined exclusively by whether it was a licensed or bonded warehouseman under applicable state law. This court is of the view in this regard that the factual circumstances carry the most weight.
For these reasons, those claimants who purchased seed from the Debtor but who did not receive the product (Claims No. 3, 19/62, 20, 27, 29, 30, 31, 32, 33, 35, 36, 46, 47, 48, 49, 50, 53, 55, 56, 57, 58, 60, 63, 64, 66, 68, 70, 71, 72/78, 74, 77, and 82) are denied priority treatment and are allowed treatment as general unsecured claims. Similarly, the Claims of Archibald, Johnson, and Haman (Claims No. 76, 89, and 85) are denied priority treatment and are allowed treatment as general unsecured claims.
SO ORDERED.
that could be used to ascertain the class and the existence of NCPDP standards."
Id. at 151 (citations and internal quotation marks omitted).
Wellbutrin held that "[t]his evidence is not enough to show by a preponderance of the evidence that the class is ascertainable."
Id. Importantly, the court reached this decision when it decided whether the
Wellbutrin plaintiffs had shouldered their burden to establish that class certification was warranted under
Fed. R. Civ. P. 23(b)(3).
Id. But the
court didn't exclude Prof. Rosenthal's opinions as unreliable under
Daubert.
The court recognizes that the Wellbutrin court also applied the Third Circuit's "administrative feasibility" standard for determining the class's ascertainability. 308 F.R.D. at 151. Plaintiffs assert that this is not the appropriate standard for determining ascertainability under our court's governing law. As already discussed, this Order doesn't decide that issue.
The Wellbutrin court did exclude another of Prof. Rosenthal's opinions under Daubert—but the excluded opinion is not relevant here. 308 F.R.D. at 146-47.
In short, Wellbutrin's conclusion doesn't apply here because plaintiffs have made a stronger showing than plaintiffs did there. Prof. Rosenthal's report provides a direct, specific, and principled explanation how she can avoid the Wellbutrin problem. Prof. Rosenthal's opinion here doesn't rely on conclusory statements. Instead, she has offered a reliable method for identifying these consumers using PBM data. Defendants' challenges about whether the PBM data actually is available in this case—as opposed to other cases—go to the weight of her opinions. The court declines to exclude her opinions for this reason.
iii. Consumers Who Paid Cash
Finally, defendants assert that Prof. Rosenthal offers no reliable methodology for identifying the EpiPen consumers who paid cash for their EpiPen purchases. In her Reply Report, Prof. Rosenthal responds to the concerns described in Prof. Hughes's Expert Report about the availability of data for cash payers. Doc. 1711-1 at 29 (Rosenthal Reply Report ¶ 48). Prof. Rosenthal identifies two means to gather information about cash-paying EpiPen consumers. "First, the individuals will have records on the transactions." Id. "Second, pharmacy records will contain information on these transactions . . . ." Id. She points out that "Plaintiffs have in fact produced a large sample of pharmacy records for cash payers in the form of the IQVIA Xponent data." Id. But, she concedes that the IQVIA Xponent data "used in [her] report do not have patient identifiers (IQVIA protects these for good reason)." Id. Nevertheless, Prof. Rosenthal opines that "such identifiers do in fact exist at the dispensing pharmacies and presumably the Court could compel their production if it were deemed necessary." Id.
Again, defendants cite the Wellbutrin case as support for excluding Prof. Rosenthal's methodology for identifying consumers who paid cash for EpiPens. Defendants assert that the Wellbutrin court was "not persuaded by [Prof. Rosenthal's] conclusory statements" that "records at the retail pharmacy and PBM level . . . can be used to identify class members" when she had not "examined or analyzed these pharmaceutical records." In re Wellbutrin XL Antitrust Litig., 308 F.R.D. at 150. But, as already discussed, the Wellbutrin court considered Prof. Rosenthal's opinions in the context of determining whether class certification was appropriate. Id. at 150-51. It didn't exclude her opinion about identifying consumers with pharmaceutical records under Daubert as unreliable. Instead, it found that her opinions didn't support class certification under Rule 23(b)(3).
The court is persuaded that defendants have come forward with legitimate and even substantiated questions about Prof. Rosenthal's opinions for cash payers. But the governing law doesn't use that threshold as the standard for excluding an expert's opinion. Instead, the standard inquires whether Prof. Rosenthal has marshaled "sufficient facts to validate [her opinions] in the eyes of the law . . . ." Pioneer Ctrs., 858 F.3d at 1342 (citation and internal quotation marks omitted). Mindful that "rejection of expert testimony is the exception rather than the rule," Fed. R. Evid. 702 advisory committee's notes to 2000 amendments, the court exercises its discretion and declines to exclude Prof. Rosenthal's methodology for identifying consumers who paid cash for EpiPens. On balance, Prof. Rosenthal offers a reasonably reliable method for identifying these consumers using either their own or pharmacy records. In the end, merits discovery may substantiate Prof. Hughes's view. The task of gathering pharmacy records may prove overwhelming because it requires collecting data from about 65,000 pharmacies, more than 23,000 of which are independent. Doc. 1850 at 16. Also, defendants question whether class members will have records showing both that they purchased an EpiPen and that they paid more than nothing for their purchase (meaning that insurance, coupons, or patient assistance didn't cover the entire price of the products). Doc. 1884 at 11. These arguments test the weight of Prof. Rosenthal's opinion, but they don't preclude its admission from the court's consideration of the class certification motion.
The court addresses the weight to give Prof. Rosenthal's opinion about the ascertainability of the putative class members in the Order on the class certification motion at Part IV.C.1.
The court declines to exclude Prof. Rosenthal's ascertainability opinion under Daubert.
Defendants ask that, if the court declines to exclude Prof. Rosenthal's ascertainability opinion as unreliable under Rule 702 or improper rebuttal testimony, the court give defendants an opportunity to depose Prof. Rosenthal about the ascertainability opinion in her Reply Report, introduce additional expert rebuttal testimony, and submit supplemental briefing in opposition to plaintiffs' Motion for Class Certification. The court denies this request. Prof. Rosenthal submitted her Reply Report on April 26, 2019. Defendants had plenty of time to review and respond to this Reply Report before the court held its June 11-12, 2019 hearing on the Motion for Class Certification. Also, Prof. Hughes has had the chance to review and comment on Prof. Rosenthal's Reply Report. See, e.g., Doc. 1850-1 (May 21, 2019 Decl. of Dr. James W. Hughes in Supp. of Defs.' Mot. to Exclude Expert Opinions of Professor Meredith Rosenthal). For all these reasons, the court denies defendants' request.
c. Probability Opinion
Next, defendants argue that the court should exclude Prof. Rosenthal's probability opinion. This opinion "estimate[s] the percentage" of putative class members "who might not have suffered an overcharge from the particular misconduct alleged by Plaintiffs." Doc. 1711-1 at 29-30 (Rosenthal Reply Report ¶ 50). Defendants give four reasons for excluding Prof. Rosenthal's probability opinion: (1) the opinion depends on unreasonable assumptions that the record doesn't support; (2) the opinion lacks support in the relevant field and case law; (3) the opinion is incapable of measuring classwide injury; and (4) it is improper rebuttal testimony. The court addresses each of defendants' arguments, in turn, below.
i. Unsupported Assumptions
Defendants argue the court must exclude Prof. Rosenthal's probability opinion as unreliable because it is not "based upon conclusions from established evidentiary facts." United States v. Rice, 52 F.3d 843, 847 (10th Cir. 1995); see also Cochrane v. Schneider Nat'l Carriers, Inc., 980 F. Supp. 374, 378 (D. Kan. 1997) (excluding expert opinion that was "based on unjustified assumptions" and "therefore will not assist the trier of fact"). To support this argument, defendants direct the court to three assumptions that Prof. Rosenthal makes in her analysis.
First, defendants assert that Prof. Rosenthal wrongly assumes the same probability for the rate that each third party payor ("TPP") will reimburse the purchase of a branded EpiPen or 2-Pak. See Doc. 1711-1 at 31-33 (Rosenthal Reply Report ¶¶ 54, 56). Defendants contend her assumption is not supported by the record. For support, they cite portions of Mylan's expert's report that identify differences among TPPs that, the competing expert contends, Prof. Rosenthal failed to consider when forming her opinions. Doc. 1850 at 19. These differences include variations in formularies, benefit design, negotiating power, and rebate payment. Id.
Second, defendants contend that Prof. Rosenthal uses an arbitrary and unfounded estimate of 95% to calculate the rate consumers would have switched from the EpiPen to a generic EAI device. Doc. 1850 at 20; see also Doc. 1711-1 at 30-31 (Rosenthal Reply Report ¶ 53, n.59). Again relying on Mylan's expert's opinion, defendants argue Prof. Rosenthal's generic conversion assumption is just wrong. Doc. 1850 at 20. They assert her assumption is flawed because she didn't consider other evidence of lower generic switching rates, including evidence of the Teva generic's performance and forecasts. Id. Defendants also refute Prof. Rosenthal's assertion that her methodology "can accommodate a range of yardsticks." Doc. 1711-1 at 19 (Rosenthal Reply Report ¶ 27). They contend that any reduction in her generic conversion assumption still doesn't account for the probability that the consumers are brand loyalists who would have continued purchasing the EpiPen even if a generic EAI was available. Doc. 1850 at 21.
Third, defendants assert that Prof. Rosenthal's 2-Pak probability calculations are unreliable. Using a Mylan slide deck from May 2010, Prof. Rosenthal estimates that 65% of patients would have preferred to purchase a 2-Pak instead of a single EpiPen. Doc. 1711-1 at 32-33 (Rosenthal Reply Report ¶ 55, n.61). Defendants argue that her assumption is flawed because it ignores evidence showing that, after May 2010, doctors were recommending and patients were preferring to purchase EpiPens in packages of two.
All of defendants' criticisms about the assumptions Prof. Rosenthal uses to support her probability opinion go to the weight of her opinion testimony, but not its admissibility. Prof. Rosenthal's Reply Report adequately explains why she made the assumptions her probability analysis made and why, she contends, those assumptions are proper under the facts of the case. Doc. 1711-1 at 30-33 (Rosenthal Reply Report ¶¶ 53-56). And, her Reply Report rebuts the criticisms that Mylan's expert makes about those assumptions. Id. at 19-20, 24-25 (Rosenthal Reply Report ¶¶ 27-29, 37-39). Defendants' challenges to those assumptions don't show that Prof. Rosenthal's probability opinion is so unreliable that the court must exclude it. See, e.g., In re Lidoderm Antitrust Litig., No. 14-md-02521-WHO, 2017 WL 679367, at *28 (N.D. Cal. Feb. 21, 2017) (denying motion to exclude expert opinion because it was based on "reasonable assumptions and evidence, and supported by reasoned principles as well as academic scholarship" and while "some of those assumptions [were] disputed," those disputes did not "make [the expert's] reliance on them improper").
Instead, defendants' challenges more properly are presented through the "presentation of contrary evidence" on class certification because these are "the traditional and appropriate means of attacking shaky but admissible evidence." Daubert, 509 U.S. at 596 (citation omitted). And, indeed, defendants have asserted these challenges in their Opposition to the class certification motion. See, e.g., Doc. 1636 at 41-43 (criticizing Prof. Rosenthal's failure to account for consumers who would have purchased a 2-Pak even if a single pack was available), 53-55 (challenging Prof. Rosenthal's assumption that 95% of consumers would have switched to a generic), 60-61 (explaining how brand loyalty and rebates may result in no injury to a consumer). The court declines to exclude Prof. Rosenthal's probability opinion based on the assumptions she made to support it.
The court addresses Prof. Rosenthal's probability opinions in its Order on the class certification motion at Part IV.E.2.b.ii.
ii. Unsupported in the Field or Case Law
Next, defendants assert that Prof. Rosenthal's probability opinion is unreliable because her methodology has no support in the field or the case law. Defendants concede that Prof. Rosenthal's Reply Report opines that "health economists routinely use probabilities to estimate the distribution of harms and benefits to populations from a range of policy and clinical interventions." Doc. 1711-1 at 30 (Rosenthal Reply Report ¶ 51). And she cites two articles as support for this assertion. Id. (Rosenthal Reply Report ¶ 51, n.57). Relying on an opinion from Mylan's expert, defendants argue that these two articles don't use the same methodology that Prof. Rosenthal has used. Doc. 1850 at 22. And thus, they contend, plaintiffs can't show that her methodology has support in the field. Plaintiffs respond that Mylan's expert merely tries to distinguish Prof. Rosenthal's methodology from the ones discussed in the two cited articles. But, they contend, Mylan's expert doesn't refute Prof. Rosenthal's basic premise that health economists routinely use probabilities to analyze the distribution of harms and benefits to a population.
Also, defendants assert that no court ever has accepted Prof. Rosenthal's probability analysis. For support, defendants assert that "plaintiffs in one recent case submitted Prof. Rosenthal's probability analysis as the leading piece of evidence that they argued warranted consideration of the First Circuit's denial of class certification. But the district court rejected the analysis and plaintiffs' motion." Doc. 1850 at 23 n.8 (citing Electronic Order, In re Asacol Antitrust Litig., No. 15-cv-12730-DJC (D. Mass. Apr. 11, 2019), ECF No. 772). As plaintiffs correctly point out, the Massachusetts order defendants cite is a three-paragraph text order denying a motion for leave to file a renewed motion for class certification because it "would be futile" and "would involve re-litigation of matters previously decided." Electronic Order, In re Asacol Antitrust Litig., No. 15-cv-12730-DJC (D. Mass. Apr. 11, 2019), ECF No. 772. The text order says nothing about Prof. Rosenthal or that the court is rejecting her analysis. Id.
In contrast, plaintiffs assert that the First Circuit considered a probability analysis "similar" to the one offered here by Prof. Rosenthal, along with other summary judgment evidence, and concluded that a TPP plaintiff had submitted sufficient causation proof to survive summary judgment. Doc. 1860 at 23 (citing In re Celexa & Lexapro Mktg. & Sales Practices Litig., 915 F.3d 1, 13-14 (1st Cir. 2019) (holding district court erred by granting defendant's summary judgment motion)). Specifically, Prof. Rosenthal had opined in Celexa & Lexapro that a defendant pharmaceutical company's "spending on promotions in general correlated positively with sales." In re Celexa & Lexapro Mktg. & Sales Practices Litig., 915 F.3d at 12. She concluded that the defendant's off-label promotions had produced 76% of Celexa prescriptions and 54% of Lexapro prescriptions. Id. at 13. And "Dr. Rosenthal estimated that if [the TPP plaintiff] paid for as few as five independent prescriptions, there would be a 98% chance that at least one was the result of off-label marketing." Id. The First Circuit noted that the record showed the TPP plaintiff likely paid for more than five prescriptions, and "[s]o the odds that [the TPP plaintiff] was not harmed if the drugs were, indeed, ineffective was likely infinitesimal (assuming the prescriptions were independent of one another)." Id. Thus, the First Circuit concluded, the TPP plaintiff "could establish causation and injury at least for any TPP who paid for more than a handful of different patients' prescriptions." Id. at 14.
The First Circuit also recognized that "there is room for reasonable disagreement on the merits of Dr. Rosenthal['s]" assumptions, but it recognized that a jury could accept them "as reasonable." Id. at 13. And while the court noted that the district court had not yet conducted a Daubert analysis of the experts' opinions, id., the Circuit nevertheless didn't find any flaws with Dr. Rosenthal's analysis. To the contrary, the court considered her opinion when reversing the summary judgment order. Id. at 13-14.
After examining the parties' competing arguments, the court is unpersuaded by defendants' argument that Prof. Rosenthal's methodology lacks sufficient support in the field to require excluding her opinions on class certification. Defendants' disagreements about her methodology go to the weight of her opinion, which the court can consider when deciding the class certification motion.
The court addresses Prof. Rosenthal's probability opinions in its Order on the class certification motion at Part IV.E.2.b.ii.
iii. Incapable of Measuring Classwide Injury
Defendants next argue that Prof. Rosenthal's probability opinion is unreliable because it is not capable of measuring classwide injury. Defendants assert that plaintiffs have the burden to establish classwide injury which, they contend, requires a showing of actual injury to all or substantially all class members. Instead, defendants assert, Prof. Rosenthal's probability opinion simply estimates the percentage of putative class members "who might not have suffered an overcharge from the particular misconduct alleged by Plaintiffs." Doc. 1711-1 at 29-30 (Rosenthal Reply Report ¶ 50) (emphasis added). Thus, defendants contend, Prof. Rosenthal's opinion is not reliable because it doesn't establish the actual percentage of consumers who, in fact, sustained an injury.
Plaintiffs respond that they aren't required to establish the percentage of consumers who actually sustained injuries to prevail on class certification. Instead, they contend, class certification just requires that plaintiffs show "there is no basis to conclude that a 'great number' of members could not have been harmed as alleged by plaintiffs." In re Syngenta AG MIR 162 Corn Litig., 2016 WL 5371856, at *4 (quoting Messner v. Northshore Univ. HealthSystem, 669 F.3d 802, 824 (7th Cir. 2012)). And, plaintiffs argue, Prof. Rosenthal's analysis sufficiently demonstrates that few consumers could not have sustained harm from defendants' alleged misconduct. Doc. 1711-1 at 29-33 (Rosenthal Reply Report ¶¶ 50-56). In their Reply, defendants argue that this isn't the correct standard for determining predominance on a Rule 23 motion. And, even if it were, Prof. Rosenthal's opinion doesn't satisfy that standard.
These arguments go to the merits of the class certification motion. The court will decide when ruling the class certification motion whether plaintiffs have shouldered their burden to establish classwide injury sufficient to certify a class under Rule 23. And it will consider whether Prof. Rosenthal's expert opinions constitute sufficient evidence to support class certification under the governing case law. But defendants' arguments here don't establish that Prof. Rosenthal's opinion about the percentage of uninjured class members is so unreliable that the court must exclude it under Daubert.
As previously mentioned, the court addresses Prof. Rosenthal's probability opinions in its Order on the class certification motion at Part IV.E.2.b.ii.
Also, defendants argue, Prof. Rosenthal's model cannot assess which class members, if any, were harmed by each individual theory of liability. Defendants assert that plaintiffs are required to "tie each theory of antitrust impact to an exact calculation of damages." Comcast Corp. v. Behrend, 569 U.S. 27, 37 (2013). Defendants assert that Prof. Rosenthal's analysis flunks this test because she shows "how combining multiple sources of impact reduces the probability of a class member remaining uninjured." Doc. 1711-1 at 34 (Rosenthal Reply Report ¶ 58). Plaintiffs respond that Prof. Rosenthal properly considered multiple theories of harm in her analysis because class plaintiffs have proposed certifying a class that includes multiple theories of liability, including the alleged generic delay and improper switch to the 2-Pak.
The court recognizes that Comcast differs from this case. In Comcast, plaintiffs alleged four different theories of antitrust impact, but the district court "accepted [just one of the theories] of antitrust impact as capable of classwide proof and rejected the rest." 569 U.S. at 31. The Supreme Court held that the district court erred by certifying a class based on an expert's regression model that "assumed the validity of all four theories of antitrust impact initially advanced" by plaintiffs, even though the district court had rejected three of those theories. Id. at 36. Thus, the Court found that the model "falls far short of establishing that damages are capable of measurement on a classwide basis," and "[w]ithout presenting another methodology," plaintiffs could not prove "Rule 23(b)(3) predominance." Id. at 34. Instead, the Court reasoned that "[q]uestions of individual damage calculations will inevitability overwhelm questions common to the class." Id.
That's not the posture of this case. Plaintiffs have asserted several theories of liability. And, at this stage, the court hasn't excluded any of the theories that Prof. Rosenthal uses in her analysis. Plaintiffs assert that Prof. Rosenthal's theory is consistent with Comcast because, in that case, the Supreme Court explained that "a model purporting to serve as evidence of damages in this class action must measure only those damages attributable to that theory." Id. at 35. And, because plaintiffs have identified several theories that purportedly injured the putative class members—thus producing damages—it was proper for Prof. Rosenthal to combine the theories in her analysis. See Butler v. Sears, Roebuck & Co., 727 F.3d 796, 800 (7th Cir. 2013) (recognizing that "it was not the existence of multiple theories in [Comcast] that precluded class certification; it was the plaintiffs' failure to base all the damages they sought on the antitrust impact—the injury—of which the plaintiffs were complaining"). Also, plaintiffs distinguish Prof. Rosenthal's probability opinion from the model excluded in Comcast because her probability opinion isn't a damages measurement. Prof. Rosenthal provided her damages opinions elsewhere in her expert report, and there, she separated her damage opinions among the various theories.
The court agrees that defendants' arguments about Comcast don't preclude the court from considering Prof. Rosenthal's probability opinion on class certification.
iv. Improper Rebuttal Testimony
Last, defendants assert that Prof. Rosenthal's probability methodology is improper rebuttal testimony. Similar to their arguments directed at the ascertainability opinion, above, defendants argue that Prof. Rosenthal should have offered a model to assess the possibility of uninjured class members in her opening report. Thus, defendants contend, the probability opinion she offers in her Reply Report constitutes improper rebuttal testimony.
Plaintiffs respond that, after Prof. Rosenthal submitted her initial report, defendants filed their Opposition to the class certification motion. It argued that plaintiffs' proposed class definitions contain too many uninjured class members. And one of Mylan's experts (Dr. John H. Johnson, IV) issued a report criticizing the conclusions announced in Prof. Rosenthal's initial report. Plaintiffs assert that Prof. Rosenthal's Reply Report properly responds to the arguments raised by defendants' Opposition and Mylan's expert. The court agrees with them.
Prof. Rosenthal's Reply Report explicitly recites that she offers her rebuttal opinions in response to Dr. Johnson's criticisms about her analysis, including his assertion