UNITED STATES DISTRICT COURT DISTRICT OF NEW · PDF fileMEMORANDUM OF LAW IN SUPPORT OF...

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]

Case 2:11-cv-07178-JMV-MAH Document 502-1 Filed 01/27/17 of 37 PageID: 35137

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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.


13

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


14

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


15

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.


16

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


17

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


18

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


19

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.


20

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)).


21

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


22

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:


23

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).


24

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.


25

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.


26

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.


27

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


Notice of Persons or Entities Requesting Exclusion from the Class and Status and Execution of the Notice Program


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.


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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