In Re: Diet Drugs V. , 451 F. App'x 165 ( 2011 )


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  •                                             NOT PRECEDENTIAL
    UNITED STATES COURT OF APPEALS
    FOR THE THIRD CIRCUIT
    _____________
    No. 11-1617
    _____________
    In Re: DIET DRUGS (PHENTERMINE/FENFLURAMINE/DEXFENFLURAMINE)
    PRODUCTS LIABILITY LITIGATION
    v.
    RICHARD FARR,
    Appellant
    _______________
    On Appeal from the United States District Court
    for the Eastern District of Pennsylvania
    (D.C. No. 99-cv-20593)
    (MDL 1203)
    District Judge: Hon. Harvey Bartle, III
    _______________
    Submitted Under Third Circuit LAR 34.1(a)
    November 10, 2011
    Before: SCIRICA, SMITH, and JORDAN, Circuit Judges.
    (Filed November 14, 2011)
    _______________
    OPINION OF THE COURT
    _______________
    JORDAN, Circuit Judge.
    Richard Farr appeals the February 2, 2011 order of the United States District Court
    for the Eastern District of Pennsylvania denying his supplemental claim for Matrix
    compensation benefits under the Diet Drugs Nationwide Class Action Settlement
    Agreement (the “Settlement Agreement” or “Agreement”). For the reasons that follow,
    we will affirm.
    I.     Background
    A.     The Diet Drugs Class Action Settlement
    This appeal arises out of a claim from the settlement of multi-district products
    liability litigation regarding the diet drugs Pondimin and Redux, previously sold by
    American Home Products (“AHP”).1 See In re Diet Drugs Prods. Liab. Litig., 
    543 F.3d 179
    , 181 (3d Cir. 2008). In November 1999, Wyeth, the successor in interest to AHP,
    joined plaintiffs’ representatives in a Settlement Agreement, which was approved by the
    District Court in August 2000. See 
    id. at 181.
    Under the terms of the Agreement, Wyeth
    was required to contribute funds for the payment of claims. See 
    id. at 180.
    The AHP
    Settlement Trust (the “Trust”), acting through its trustees and claims administrator,
    administers and reviews claims to determine the benefits, if any, that a class member is
    qualified to receive under the terms of the Settlement Agreement. See 
    id. 1 In
    our prior decisions, we have provided a detailed description of the Diet Drugs
    litigation. See, e.g., In re Briscoe, 
    448 F.3d 201
    , 206-08 (3d Cir. 2006); In re Diet Drugs
    Prods. Liab. Litig., 
    401 F.3d 143
    , 147-48 (3d Cir. 2005); In re Diet Drugs Prods. Liab.
    Litig., 
    385 F.3d 386
    , 389-92 (3d Cir. 2004); In re Diet Drugs Prods. Liab. Litig., 
    282 F.3d 220
    , 225-29 (3d Cir. 2002).
    2
    B.     Matrix Compensation Under the Settlement Agreement
    Claimants who qualify for benefits receive compensation based on one of four
    payment matrices: A-1, A-2, B-1, and B-2 (each, a “Matrix”).2 Each Matrix describes
    the amount which a claimant is entitled to recover based on the level of severity of the
    medical condition and the age at which the claimant was first diagnosed as suffering from
    that level of severity. There are five levels within each Matrix, and the severity of the
    condition determines a claimant’s level within a Matrix. A claimant is eligible for
    compensation under A-1 unless the claimant has one or more reduction factors as
    provided in the Settlement Agreement. If a reduction factor exists, benefits are
    determined by Matrix B-1, which is also referred to as the reduced payment matrix. Two
    such reduction factors are mitral valve prolapse and chordae tendineae rupture.
    To receive Matrix benefits, a claimant must submit a Matrix compensation
    benefits claim form (a “Green Form”) to the Trust. A physician must complete a portion
    of a Green Form on behalf of the claimant, answering questions concerning the
    claimant’s medical condition and providing the appropriate documentation that may be
    relevant to determine the amount of compensation payable. Based on both the
    information in a Green Form and the supporting documentation, the Trust makes a Matrix
    benefits determination, subject to the audit provisions of the Settlement Agreement.3 If
    2
    Two of the matrices, A-2 and B-2, apply only to derivative claimants. Since Farr
    is not a derivative claimant, matrices A-2 and B-2 are not applicable to the issues raised
    in this appeal.
    3
    Pursuant to § VI.F.2 of the Settlement Agreement, Wyeth has the right to submit
    to the Trust up to 10% of the claims made during the prior quarter for audit . The Trust
    3
    the Trust identifies an inconsistency in the information provided in the Green Form, the
    Trust reviews the submitted documentation to resolve the inconsistency.
    Claimants who received Matrix benefits at one level may make a supplemental
    claim if their condition worsens to a point which would qualify them for a higher level of
    compensation. Specifically, § IV.C.3 of the Settlement Agreement provides that a
    claimant “can step up to higher Matrix-Level Conditions and will be paid the incremental
    dollar amount, if any, by which the Matrix payment for the higher Matrix-Level
    Condition exceeds the Matrix payment previously received.” (App. at 355 (emphasis
    added).)
    C.     Farr’s Claims With the Trust
    1.     September 2000 Claim
    Farr filed a Green Form in September 2000 seeking A-1 Level IV benefits (the
    “September 2000 Claim”), after undergoing mitral valve surgery.4 Two questions that a
    Green Form asks, among others, is whether a claimant has “[m]itral valve prolapse” or
    “[c]hordae tendinae rupture.”5 (App. at 85.) Based on Farr’s physician’s review of
    retains a cardiologist to audit such claims. However, in 2002, the District Court found
    that many claimants were submitting illegitimate claims for Matrix B payments and, thus,
    ordered the Trust to audit every claim for Matrix B benefits. See In re Diet Drugs Prods.
    Liab. Litig., No. 99-20593, 
    2002 WL 32067308
    , at *6 (E.D. Pa. Nov. 26, 2002); see also
    In re Diet Drugs Prods. Liab. Litig., 200 F. App’x 95, 98 (3d Cir. 2006).
    4
    Farr had submitted a Green Form in March 2000 indicating moderate mitral
    regurgitation but reported no condition that would qualify him for any level of Matrix
    benefits.
    5
    Though the Settlement Agreement spells the word “tendineae,” the Green Form
    spells the word “tendinae.” Other than when quoting language from the Green Form, we
    adopt the spelling used in the Settlement Agreement.
    4
    Farr’s medical reports, Farr’s physician marked “no” for both of those questions.
    However, the medical records attached to the September 2000 Green Form indicated that
    Farr in fact had “mitral valve prolapse” (App. at 293) and “chordae tendineae [that are]
    fused and slightly thickened,” (App. at 150).
    As a result of that discrepancy, Wyeth submitted the September 2000 Green Form
    to the Trust for audit as to whether Farr’s physician made a material misrepresentation
    when he indicated Farr did not have chordae tendineae rupture. In the initial audit report,
    the auditing cardiologist wrote that the echocardiogram attached to the September 2000
    Green Form “clearly show[ed] ruptured chordae.” (App. at 106.) Despite that finding,
    the auditing cardiologist checked the box which indicated that the physician’s answers on
    the September 2000 Green Form and the medical information reviewed were consistent
    and reflected a reasonable medical judgment6 and that Farr qualified for A-1 Severity
    Level IV benefits. Eleven days later, though, the same auditing cardiologist issued a
    revised report indicating that the physician’s answers on the September 2000 Green Form
    and the medical information received did not reflect a reasonable medical judgment and
    that Farr only qualified for B-1 Severity Level III benefits.
    Nevertheless, the Trust did not pay B-1 Severity Level III benefits to Farr for the
    September 2000 Claim. A debate arose instead. On July 23, 2001, the Trust’s claims
    administrator, C. Judson Hamlin, wrote a letter to the trustees of the Trust and counsel for
    Wyeth indicating that the Trust had not dealt fairly with Farr’s claim. Specifically,
    6
    The Trust contends that the auditing cardiologist mistakenly checked off that
    box.
    5
    Hamlin expressed concern that a Trust representative might have asked the cardiologist to
    revisit the original audit report, and that the revised audit report arrived at a different
    conclusion than it had in the original audit report based on the same evidence.7 Hamlin
    concluded that, if the Trust did not award Farr A-1 Level IV benefits, it must reveal to
    Farr the “two contradictory audit reports so he may properly pursue his remedy in the
    courts.” (App. at 117.) In response, on August 2, 2009, counsel for Wyeth maintained
    that Wyeth believed Farr was only entitled to B-1 Level III benefits, noting that it would
    “certainly present Mr. Farr’s entire file to the Court for an objective assessment of
    whether the Claim should be paid on the A or B Matrix.” (App. at 111.)
    In the end, on August 9, 2001, the Trust issued a final determination letter (the
    “2001 Final Determination Letter”) that appears to reflect a compromise.8 It awarded
    Farr A-1 Level II benefits ($473,032) for his September 2000 Claim. In the cover letter
    attached to the 2001 Final Determination Letter (the “8/9/01 Cover Letter”), Hamlin
    wrote that “I have briefly discussed with you the impact of the ruptured tendon chordae
    7
    In his letter, Hamlin argued that the echocardiogram dated March 8, 2000 that
    was attached to the March 2000 Green Form did not indicate a ruptured chordae, and that
    the first indicator of a ruptured chordae appeared in the medical reports attached to the
    September 2000 Green Form. Accordingly, Hamlin contended that there was no material
    misrepresentation made on the March 2000 Green Form based on the March 8, 2000
    echocardiogram. However, the matter was submitted for audit on April 27, 2001,
    specifically referring to an echocardiogram dated July 28, 2000 that was attached to the
    September 2000 Green Form. That reference indicates that the audit report was based on
    the September 2000 Green Form and its attached medical documentation, not the March
    2000 Green Form and its attached medical documentation.
    8
    The Trust claims that the decision to pay Farr A-1 Level II benefits was
    “unilaterally determined” by Hamlin. (Appellee AHP Settlement Trust’s Answering Br
    at 10.)
    6
    which AHP argued reduced your claim to a [B-1 Severity II] level. In view of all the
    circumstances this award was the highest I could convince the Trust to reach.” (App. at
    75.) In the closing sentence of the 8/9/01 Cover Letter, Hamlin wrote: “I also wish to
    remind you that if your condition worsens or progresses in the future you will be eligible
    to apply for additional compensation beyond the [A-1 Severity II] level.” (Id. (emphasis
    added).)
    2.     Supplemental Claim
    Farr submitted a supplemental Green Form in September 2004 seeking A-1 Level
    IV benefits (the “Supplemental Claim”), after suffering a stroke related to another mitral
    valve surgery. The September 2004 Green Form, attested to by a different physician than
    the September 2000 Green Form, indicated that Farr had mitral valve prolapse, an
    independent factor reducing a claim to Matrix B. At audit, it was determined that Farr
    also had chordae tendineae rupture. In April 2006, after various communications with
    Farr to assist him in completing the September 2004 Green Form as well as to notify him
    that the Supplemental Claim would likely not result in any additional benefits,9 the Trust
    denied Farr the additional benefits he sought pursuant to the Supplemental Claim. It
    based its conclusion on the September 2004 Green Form answer indicating the presence
    of mitral valve prolapse as well as the auditing cardiologist’s finding of chordae
    tendineae rupture.
    9
    All awards under Matrix B-1 would have been less than the A-1 Level II benefits
    that Farr received as a result of his September 2000 Claim.
    7
    D.     Order to Show Cause Proceedings
    After the Trust denied the Supplemental Claim, Farr filed an “Omnibus Motion
    Regarding Claim of Richard Farr for Matrix A-1 Benefits and Discovery of Fraudulent
    Tampering of Audit Results” (the “Omnibus Motion”). Upon receiving the Omnibus
    Motion, the Trust requested that the District Court issue an order affirming the Trust’s
    determination to deny payment for the Supplemental Claim, and the District Court issued
    an order directing Farr to show cause why the relief requested by the Trust should not be
    granted.
    When the District Court reviewed the record developed in response to the show
    cause order and the Omnibus Motion, it affirmed the Trust’s decision to deny the
    Supplemental Claim. First, the Court rejected Farr’s argument that, based on the 8/9/01
    Cover Letter, the Trust is prohibited, by contract or collateral estoppel, from considering
    him as warranting only B-1 Matrix benefits. As to the contract argument, the Court
    concluded that, even assuming the 8/9/01 Cover Letter created a binding contract, it only
    stated that Farr would be “eligible to apply for additional compensation beyond the [A-1
    Severity II] level.” (App. at 10.) As to the collateral estoppel argument, the Court
    rejected Farr’s position “because the parties did not litigate Farr’s alleged entitlement to
    Matrix A-1 benefits and no court entered a final judgment upon which such a
    determination of his alleged entitlement was essential.” (App. at 11.) The District Court
    next concluded that Farr, in the show cause record, did not meet his burden to prove that
    there was a reasonable medical basis supporting his claim for A-1 Level IV benefits,
    because he had conceded the existence of mitral valve prolapse.
    8
    Farr timely appealed.
    II.    Discussion10
    “We review a District Court’s exercise of its equitable authority to administer and
    implement a class action settlement for abuse of discretion.” In re Diet Drugs Prods.
    Liab. 
    Litig., 543 F.3d at 184
    n.10. An abuse of discretion may be found if the District
    Court’s decision “rest[s] on a clearly erroneous finding of fact, an errant conclusion of
    law or an improper application of law to fact.” 
    Id. (internal quotation
    marks and citation
    omitted).
    On appeal, Farr contends that the District Court erred in (1) determining that a
    contract did not exist to pay him Matrix A-1 benefits for the Supplemental Claim; (2)
    refusing to compel the Trust to pay Farr’s Supplemental Claim because his September
    2000 Claim “pass[ed] the original independent audit” (Appellant’s Opening Br. at 24);
    and (3) denying Farr due process by engaging in contract interpretation analysis without
    “notice … or an opportunity … to respond,”11 (Id. at 29). We disagree with each of
    those contentions.
    A.     The 8/9/01 Cover Letter Did Not Create a Contract to Pay Matrix A
    Benefits for the Supplemental Claim
    Farr argues that the District Court erred when it determined that the 8/9/01 Cover
    Letter did not create an enforceable contract which obligated the Trust to pay him Matrix
    10
    We exercise jurisdiction over a final order of the District Court pursuant to 28
    U.S.C. § 1291.
    11
    Farr does not challenge the District Court’s determination that he failed to meet
    his burden of showing a reasonable medical basis for his assertion that he is entitled to A-
    1 Level IV benefits. Therefore, we will not address that issue on appeal.
    9
    A benefits for the Supplemental Claim. To form a contract, there must be an offer,
    acceptance, and consideration. Yarnall v. Almy, 
    703 A.2d 535
    , 538 (Pa. Super. Ct. 1997).
    With regard to contract interpretation, “[w]here [the] language [of a contract] is clear and
    unambiguous, the focus of interpretation is upon the terms of the agreement as manifestly
    expressed.” Bohler-Uddeholm Am., Inc. v. Ellwood Grp., Inc., 
    247 F.3d 79
    , 92-93 (3d
    Cir. 2001) (quoting Steuart v. McChesney, 
    444 A.2d 659
    , 661 (Pa. 1982)).
    We agree with the District Court that the 8/9/01 Cover Letter did not create a
    contract that obligated the Trust to pay Farr Matrix A-1 benefits on the Supplemental
    Claim. Even if the 8/9/01 Cover Letter could be construed as an offer which Farr
    accepted by not challenging the 2001 Final Determination Letter, and even if it was
    supported by adequate consideration when Farr accepted the A-1 Level II payment, the
    award received in connection with the 8/9/01 Cover Letter only applied to the September
    2000 Claim, which related to Farr’s mitral valve surgery in 2000. The 8/9/01 Cover
    Letter did not apply to the Supplemental Claim, which related to a stroke Farr suffered
    after undergoing a separate mitral valve surgery in 2004. In fact, the 8/9/01 Cover Letter
    was clear and unambiguous when it stated that Farr would only be “eligible to apply for
    additional compensation beyond the [A-1 Severity II] level” if his condition
    deteriorated.12 (App. at 75 (emphasis added).) Assuming there was a contract, applying
    12
    The contents of the 8/9/01 Cover Letter that address Farr’s eligibility to apply
    for supplemental benefits comport with § IV.C.3 of the Settlement Agreement, which
    states that a claimant “can step up to higher Matrix-Level Conditions and will be paid the
    incremental dollar amount, if any, by which the Matrix payment for the higher Matrix-
    Level Condition exceeds the Matrix payment previously received.” (App. at 355.
    (emphasis added).) Section IV.B.2.d.(2)(c)(ii) of the Settlement Agreement provides that
    10
    its terms as manifestly expressed, the District Court correctly concluded that, “at best,”
    the 8/9/01 Cover Letter provided Farr with only “the right to apply for supplemental
    Matrix Benefits.” (App. at 11.)
    B.     The Initial Audit Report Does Not Entitle Farr to A-1 Level IV Benefits
    Farr contends that, even if the 8/9/01 Cover Letter does not create a contract to pay
    him Matrix A-1 benefits on the Supplemental Claim, he should still be awarded A-1
    Level IV benefits based on the results of the initial audit of the September 2000 Green
    Form. But, contrary to his argument, the record reveals that Farr did not “pass[] [an]
    original independent audit” awarding him A-1 Level IV benefits. (Appellant’s Opening
    Br. at 24.) Rather, the results of that initial audit “clearly show[ed] ruptured chordae,”
    (App. at 106) an independent factor reducing his claim to Matrix B-1. Though the
    auditing cardiologist at first marked that Farr qualified for Matrix A-1 benefits and that
    his physician’s answers on the September 2000 Green Form and the medical information
    reviewed reflected a reasonable medical judgment, that marking was contradicted by the
    auditing cardiologist’s own comments on the audit form indicating the presence of
    ruptured chordae. Moreover, that initial audit report was subsequently revised to say that
    Farr’s physician’s answers and the medical information received did not reflect a
    both mitral valve prolapse and chordae tendineae rupture are independent factors that
    reduce a claim to Matrix B. Thus, to construe the 8/9/01 Cover Letter in a way that
    would pay Farr Matrix A benefits on all future claims would violate the terms of the
    Settlement Agreement.
    11
    reasonable medical judgment and that Farr only qualified for B-1 Severity Level III
    benefits.13
    Additionally, the audit of the September 2000 Claim, for which Farr accepted A-1
    Level II benefits, was not related to the Supplemental Claim. A separate audit was
    performed on the Supplemental Claim, which determined that Farr had chordae tendineae
    rupture.14 Moreover, Farr’s physician admitted the presence of mitral valve prolapse in
    13
    In his brief, Farr makes much of the fact that Wyeth allegedly sent his
    September 2000 Green Form to audit to determine whether there was a material
    misrepresentation as opposed to sending it to audit to determine whether there was a
    reasonable medical basis to support his physician’s opinions. Since Farr claims that he
    “pass[ed] the original independent audit,” (Appellant’s Opening Br. at 24) he says that
    we “should not relieve[] Wyeth from the consequences of its decision,” (Id. at 26). Farr
    acknowledges that if Wyeth decided to submit his claim to audit to determine whether
    there was a reasonable medical basis, the claim “would have resulted in a slam dunk
    denial of Matrix A benefits.” (Id. at 27.) On both the initial and corrected audit report of
    the September 2000 Green Form, the auditing cardiologist found ruptured chordae, which
    evinced a material misrepresentation on the September 2000 Green Form and also proved
    that there was no reasonable medical basis to support a claim for Matrix A-1 benefits.
    Moreover, on the corrected audit report for the September 2000 Green Form, the
    cardiologist specifically marked that the answers and the medical information received
    from the September 2000 Green Form did not reflect a reasonable medical judgment.
    Thus, whether it was sent to audit based on a material misrepresentation or an
    unreasonable medical basis, Farr cannot claim that the initial audit report for the
    September 2000 Green Form entitles him to A-1 benefits for the Supplemental Claim.
    14
    The September 2004 Green Form did not indicate that Farr had chordae
    tendineae rupture. After the September 2004 Green Form was completed, it was sent to
    audit. Because Farr admitted the presence of mitral valve prolapse, the Trust argues that
    there was no reason to audit that issue. During the audit, the auditing cardiologist
    initially marked “yes” to the box asking whether there was a reasonable medical basis for
    the physician’s answer that there was no chordae tendineae rupture, writing that “no
    chordae rupture is seen,” but also noted the existence of mitral valve prolapse. (App. at
    81.) The Trust inquired whether the auditing cardiologist had been provided with the
    echocardiogram attached to the September 2000 Green Form. After reviewing that
    echocardiogram, the auditing cardiologist revised the audit report to mark “no” to the box
    asking whether there was a reasonable medical basis for the physician’s answer that there
    12
    the September 2004 Green Form, another independent factor reducing his Supplemental
    Claim to Matrix B-1. We agree with the District Court that “even if the Trust
    erroneously agreed to pay Matrix A-1 benefits based on the initial [i.e., the September
    2000] claim, we will not allow the explicit provisions of the Settlement Agreement to be
    ignored where an undisputed reduction factor exists.” (App. at 12.)
    C.     Farr’s Due Process Rights Were Not Violated
    Finally, Farr claims that the District Court denied him due process “when it
    engaged in contract interpretation analysis, sua sponte, and made a decision without
    providing any notice to Farr or an opportunity to Farr to respond to its arguments and
    conclusions.” (Appellant’s Opening Br. at 29.) That claim is meritless. Farr was given
    notice and an opportunity to challenge the Trust’s denial of the Supplemental Claim
    through the show cause proceedings. In papers that he submitted as part of those
    proceedings, Farr repeatedly insisted that he had a contract claim, going so far as to say
    that “the dispute in this matter involves a contract dispute and not a dispute about Farr’s
    medical condition.” (App. at 267.) Therefore, Farr should not have been surprised that
    was no chordae tendineae rupture, and wrote “the surgical operative note states clearly
    that at the time of direct evaluation of the mitral valve there was [sic] multiple ruptured
    chordae identified.” (App. at 81.) In any event, it does not matter whether it was proper
    for the Trust to consider the chordae tendineae rupture as a basis for denying the
    Supplemental Claim because the existence of mitral valve prolapse, as admitted by Farr,
    is an independent factor that reduces a claim to Matrix B-1. Since all awards under
    Matrix B-1 were less than the A-1 Level II benefits that Farr received as a result of the
    September 2000 Claim, the existence of mitral valve prolapse prevents Farr from
    receiving the additional benefits that he sought in his Supplemental Claim.
    13
    the District Court engaged in contract interpretation, and there was no denial of due
    process.
    III.   Conclusion
    For the foregoing reasons, we will affirm.
    14