Case 2:11-cv JMV-MAH Document Filed 01/27/17 Page 1 of 37 PageID: UNITED STATES DISTRICT COURT DISTRICT OF NEW JERSEY

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1 Case 2:11-cv JMV-MAH Document Filed 01/27/17 Page 1 of 37 PageID: 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, Civil Action No (JMV)(MAH) Plaintiffs, v. 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 Telephone: (201) Facsimile: (201) James E. Cecchi CARELLA, BYRNE, CECCHI, OLSTEIN, BRODY & AGNELLO, P.C. 5 Becker Farm Road Roseland, NJ Telephone: (973) Facsimile: (973) Co-Liaison Counsel for Plaintiffs and the Class [Additional Counsel on Signature Page]

2 Case 2:11-cv JMV-MAH Document Filed 01/27/17 Page 2 of 37 PageID: TABLE OF CONTENTS Page I. INTRODUCTION... 1 II. BACKGROUND AND PROCEDURAL HISTORY... 2 III. A. Parties Claims and Allegations... 2 B. Discovery and Motion Practice Fact Discovery and Related Motions Expert Discovery and Related Motions Class Certification and Related Work... 8 C. Present Posture of the Litigation D. Negotiations and Settlement THE SETTLEMENT SATISFIES THE CRITERIA FOR PRELIMINARY APPROVAL A. The Settlement is the Product of Extensive Arm s-length Negotiations by Experienced Class Counsel B. Consideration of the Factors Relevant to Final Approval Also Support Preliminary Approval IV. THE PROPOSED NOTICE PLAN A. The Proposed Manner of Notice is One This Court Has Already Approved Direct Notice Publication Notice Website and Toll-Free Telephone B. The Form and Contents of the Notice are Similar to the Class Notice V. PROPOSED SCHEDULE FOR SERVICE OF NOTICE, MOTIONS FOR FEES AND SERVICE AWARDS, CLASS EXCLUSIONS, OBJECTIONS, AND FAIRNESS HEARING VI. RUST SHOULD BE APPROVED AS SETTLEMENT ADMINISTRATOR VII. HUNTINGTON NATIONAL BANK SHOULD BE APPROVED AS ESCROW AGENT VIII. CONCLUSION i

3 Case 2:11-cv JMV-MAH Document Filed 01/27/17 Page 3 of 37 PageID: TABLE OF AUTHORITIES Cases Page(s) Allied Orthopedic Appliances Inc. v. Tyco Health Care Group LP, 592 F.3d 991 (9th Cir. 2010) Cotton v. Hinton, 559 F.2d 1326 (5th Cir. 1977) Eisai, Inc. v. Sanofi Aventis U.S., LLC, 821 F.3d 394 (3d Cir. 2016) Fisher Bros. v. Phelps Dodge Indus., Inc., 604 F. Supp. 446 (E.D. Pa. 1985) Girsh v. Jepson, 521 F.2d 153 (3d Cir. 1975) Henderson v. Volvo Cars of N. Am., LLC, No., , 2013 WL (D.N.J. Mar. 22, 2013) Hosp. Serv. Dist. v. Tyco Int l, Ltd., 247 F.R.D. 253 (D. Mass. 2008)... 9 In re Aetna UCR Litig., No , 2013 WL (D.N.J. Aug. 30, 2013)... 1, 16, 17 In re Automotive Refinishing Paint Antitrust Litig., MDL 1426, 2004 WL (E.D. Pa. May 11, 2004) In re Cendant Corp. Sec. Litig., 109 F. Supp. 2d 235 (D.N.J. 2000) In re Deepwater Horizon, 739 F.3d 790 (5th Cir. 2014) In re Elec. Carbon Prods. Antitrust Litig., 447 F. Supp. 2d 389 (D.N.J. 2006) In re GMC Pick-Up Truck Fuel Tank Prods. Liab. Litig., 55 F.3d 768 (3d Cir. 1995) 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 (D.N.J. Feb. 9, 2010) In re Mushroom Direct Purchaser Antitrust Litig., No , 2015 WL (E.D. Pa. July 29, 2015)... 9 ii

4 Case 2:11-cv JMV-MAH Document Filed 01/27/17 Page 4 of 37 PageID: In re Philips/Magnavox TV Litig., No , 2012 WL (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) 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) In re Schering-Plough/Merck Merger Litig., 2010 WL (D.N.J. Mar. 26, 2010) 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) In re Warner Comms. Secs. Litig., 618 F. Supp. 735 (S.D.N.Y. 1985) It s My Party, Inc. v. Live Nation, Inc., 811 F.3d 676 (4th Cir. 2016) Jones v. Commerce Bancorp Inc., No , 2007 WL (D.N.J. July 16, 2007) Lenahan v. Sears, Roebuck & Co., No , 2006 WL (D.N.J. Jul. 10, 2006) Mullane v. Central Hanover Bank & Trust Co., 339 U.S. 306 (1950)... 24, 26 Nichols v. Smithkline Beecham Corp., No , 2005 WL (E.D. Pa. Apr. 22, 2005) Race Tires Am., Inc. v. Hoosier Racing Tire Corp., 614 F.3d 57 (3d Cir. 2010) Sheinberg v. Sorensen, No , 2016 WL (D.N.J. June 14, 2016) Singleton v. First Student Mgmt. LLC, No , 2014 WL (D.N.J. Aug. 6, 2014)... 18, 21 Smith v. Prof l Billing & Mgmt. Servs., No , 2007 WL (D.N.J. Nov. 21, 2007) St. Francis Med. Ctr. v. C.R. Bard, Inc., 657 F. Supp. 2d 1069 (E.D. Mo. 2009) Sullivan v. DB Invs., Inc., 667 F.3d 273 (3d Cir. 2011) iii

5 Case 2:11-cv JMV-MAH Document Filed 01/27/17 Page 5 of 37 PageID: Suture Express, Inc. v. Owens & Minor Distrib., No , 2016 WL (D. Kan. Apr. 7, 2016) Varacallo v. Mass. Mut. Life Ins. Co., 226 F.R.D. 207 (D.N.J. 2005)... 17, 27 Rule Fed. R. Civ. P , 25, 28 Other Authority Manual for Complex Litigation (2004) iv

6 Case 2:11-cv JMV-MAH Document Filed 01/27/17 Page 6 of 37 PageID: 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 , 2013 WL , 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

7 Case 2:11-cv JMV-MAH Document Filed 01/27/17 Page 7 of 37 PageID: 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, 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, 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 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 See, e.g., ECF No. 475 at 17. 2

8 Case 2:11-cv JMV-MAH Document Filed 01/27/17 Page 8 of 37 PageID: 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. 3

9 Case 2:11-cv JMV-MAH Document Filed 01/27/17 Page 9 of 37 PageID: 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 On August 6, 2012, Judge Linares denied Sanofi s motion to dismiss the CAC in its entirety. ECF Nos Sanofi then filed its counterclaim again as part of its Answer to the CAC. ECF No Plaintiffs again moved to dismiss the counterclaim, and Judge Linares dismissed it with prejudice. ECF Nos 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 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 See ECF No 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, ECF Nos. 307,

10 Case 2:11-cv JMV-MAH Document Filed 01/27/17 Page 10 of 37 PageID: 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, 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 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

11 Case 2:11-cv JMV-MAH Document Filed 01/27/17 Page 11 of 37 PageID: 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 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 thenoperative scheduling order. 6

12 Case 2:11-cv JMV-MAH Document Filed 01/27/17 Page 12 of 37 PageID: 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 counterproductive 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 7

13 Case 2:11-cv JMV-MAH Document Filed 01/27/17 Page 13 of 37 PageID: 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 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 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, ECF No

14 Case 2:11-cv JMV-MAH Document Filed 01/27/17 Page 14 of 37 PageID: 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 , 2015 WL , 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 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 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 (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. 9

15 Case 2:11-cv JMV-MAH Document Filed 01/27/17 Page 15 of 37 PageID: 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, Reply briefing was scheduled to be due by January 20, ECF No 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. 10

16 Case 2:11-cv JMV-MAH Document Filed 01/27/17 Page 16 of 37 PageID: 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 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 11

17 Case 2:11-cv JMV-MAH Document Filed 01/27/17 Page 17 of 37 PageID: 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 , 2016 WL (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. 12

18 Case 2:11-cv JMV-MAH Document Filed 01/27/17 Page 18 of 37 PageID: 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) (ii) 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; 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 13

19 Case 2:11-cv JMV-MAH Document Filed 01/27/17 Page 19 of 37 PageID: 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) (iv) 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). 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 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 14

20 Case 2:11-cv JMV-MAH Document Filed 01/27/17 Page 20 of 37 PageID: 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. 15

21 Case 2:11-cv JMV-MAH Document Filed 01/27/17 Page 21 of 37 PageID: 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 , , 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 , 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 , at *1 (citing Jones v. Commerce Bancorp Inc., No , 2007 WL , 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 , at *1-2 (E.D. Pa. May 11, 2004) (distinguishing between preliminary approval and final approval) (citing Manual for Complex Litigation (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 16

22 Case 2:11-cv JMV-MAH Document Filed 01/27/17 Page 22 of 37 PageID: 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 , 2012 WL , 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 , 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 , 2006 WL , 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 17

23 Case 2:11-cv JMV-MAH Document Filed 01/27/17 Page 23 of 37 PageID: 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 18

24 Case 2:11-cv JMV-MAH Document Filed 01/27/17 Page 24 of 37 PageID: 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 , 2014 WL , 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. 19

25 Case 2:11-cv JMV-MAH Document Filed 01/27/17 Page 25 of 37 PageID: 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 , 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 , 2016 WL , 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)). 20