In re: Diet Drugs v. ( 2014 )

NOT PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
____________
Nos. 13-4244 & 13-4729
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IN RE: DIET DRUGS
(PHENTERMINE/FENFLURAMINE/DEXFENFLURAMINE)
PRODUCTS LIABILITY LITIGATION
Tom S. Yeary,
Appellant in 13-4244
Melanie L. Groce,
Appellant No. 13-4729
____________
On Appeal from United States District Court
for the Eastern District of Pennsylvania
(E.D. Pa. 2-99-cv-20593, 2-11-md-01203 & 2-16-md-01203)
District Judge: Honorable Harvey Bartle, III
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Submitted Pursuant to Third Circuit LAR 34.1(a)
June 10, 2014
Before: FISHER, COWEN and TASHIMA,* Circuit Judges.
(Filed: August 4, 2014)
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OPINION
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TASHIMA, Circuit Judge.
*
The Honorable A. Wallace Tashima, Senior Circuit Judge for the Ninth Circuit
Court of Appeals, sitting by designation.
Tom Yeary and Melanie Groce (together, AAppellants@) appeal decisions1
of the United States District Court for the Eastern District of Pennsylvania denying them
recovery under the terms of the Diet Drug Nationwide Class Action Settlement
Agreement (the ASettlement Agreement@). We will affirm.
I.
We write principally for the parties, who are familiar with the factual context and
legal history of this case. Therefore, we will set forth only those facts necessary to our
analysis.2
This case is part of an ongoing multi-district litigation concerning diet drugs called
APondimin@ and ARedux,@ previously sold by Wyeth.3 Under the Settlement Agreement,
Wyeth was required to contribute funds to a trust for the payment of claims. The
resulting Settlement Trust (the ATrust@) is responsible for administering and reviewing
class members= claims to determine eligibility for benefits.
To qualify for benefits, claimants must submit a AGreen Form@ disclosing their
personal and medical information. Part II of the Green Form requires a board-certified
1
The District Court denied Yeary=s claims in Pretrial Order (APTO@) 9149
and Groce=s claims in PTO 9166. Their claims were briefed separately on appeal, but
will be resolved together.
2
We have previously described the diet drugs litigation in detail. See, e.g.,
In re Diet Drugs, 582 F.3d 524, 529-32 (3d Cir. 2009); In re Briscoe, 448 F.3d 201, 206-
08 (3d Cir. 2006); In re Diet Drugs, 401 F.3d 143, 147-48 (3d Cir. 2005); In re Diet
Drugs, 385 F.3d 386, 389-92 (3d Cir. 2004); In re Diet Drugs, 282 F.3d 220, 225-29 (3d
Cir. 2002).
3
Prior to March 11, 2002, Wyeth was known as American Home Products
Corporation.
2
cardiologist or board-certified cardiothoracic surgeon (Aattesting physicians@) to attest to
the claimant=s level of valvular heart disease, based on a reading of an echocardiogram
videotape. Claimants qualify for benefits if they suffer from, among other things,
moderate or more severe mitral regurgitation. Benefits are calculated based on several
factors, including age, duration of diet drug use, and severity of disease.
The Settlement Agreement directs the Trust to audit 15% of submitted claims.
When a claim is selected for audit, the Trust forwards the claimant=s medical history and
echocardiogram to an independent board-certified cardiologist (an Aauditing physician@).
The auditing physician reviews the medical file and determines whether a reasonable
medical basis supports the findings of the claimant=s attesting physician. As part of the
audit, the Trust also reviews the claimant=s Green Form for any intentional material
misrepresentations of fact.
Appellants submitted completed Green Forms in the fall of 2002. Their attesting
physicians4 submitted findings that Appellants suffered from moderate mitral
regurgitation, abnormal left atrial dimension, and reduced ejection fraction in the range of
50% to 60%. Based on such findings, Appellants would be entitled to Matrix A-1, Level
II benefits B approximately $500,000 each.
Unexpectedly, the Trust was inundated with claims B by November 2002, the
Trust was expected to receive more than 75,000 claims, more than twice the number of
4
Dr. Dominic Pedulla was Yeary=s attesting physician, and Dr. Howard
Brazil was Groce=s attesting physician.
3
claims anticipated at the time of settlement. See PTO No. 2662 at 8. The District Court
determined that many of these submissions were unreliable due to mass screening
programs implemented by various law firms in which aardiologists made broad-sweeping
and unreasonable judgments concerning the evidence of valid claims. See In re Diet
Drugs, 543 F.3d 179, 182 n.4 (3d Cir. 2008). To address this problem, the District Court
modified the Settlement Agreement=s 15% auditing cap to allow for the audit of every
claim. PTO No. 2662.
In early 2004, the Trust audited Appellants= claims. The auditing physicians5
determined that the findings of Appellants= attesting physicians were supported by a
reasonable medical basis. Based on the audits, the Trust issued Post-Audit Determination
Letters awarding benefits. The letters informed Appellants that Athe Trust may seek
additional information . . . or call for additional steps with regard to your claim, even if
these procedures or information . . . are not anticipated at this time.@ Trust Supp. App.
(Yeary) 70sa; Trust Supp. App. (Groce) 40sa.
Before the Trust paid Appellants benefits, however, the District Court stayed the
processing of claims pending implementation of the Seventh Amendment to the
Settlement Agreement.6 At the time of the stay, there were 968 claims that had passed
5
Dr. David Lieb audited Yeary=s application, and Dr. Steven Fein audited
Groce=s application.
6
The Seventh Amendment was adopted in an attempt to hasten the 100%
auditing procedure ordered by the court. See In re Diet Drugs, 226 F.R.D. 498 (E.D. Pa.
2005).
4
audit but remained unpaid, known as Pre-stay Payable Post-Audit Determination Letter
(APADL@) claims. The Trust alleged that 580 PADL claims, including Appellants=,
contained intentional material misrepresentations of fact that were not detected during the
initial audit.
The District Court ordered the Trust to re-review the 5(a) claims7 and provide
claimants with Aa report stating with the specificity required by Fed. R. Civ. P. 9(b) and
Audit Rule 23(c) the specific factual basis for the Trust=s assertion that there was a
material misrepresentation.@ PTO No. 3883 at 5. The District Court determined that
review of 5(a) claims should proceed as follows:
To ensure that all issues relating to these claims are reviewed on a claim-
by-claim basis, the Trust shall promptly review the entire claim file for
each pre-stay payable PADL claim and issue new Post-Audit
Determinations. Claimants may contest such determinations and, after
considering any contested materials, the Trust shall issue Final Post-Audit
Determinations. If any claimant challenges a Final Audit Determination,
his or her claim shall then proceed through the show cause process as
established in PTO No. 2807.
PTO No. 5625 at 7.
The Trust issued new initial Post-Audit Determination Letters denying Appellants=
claims based on substantial evidence of intentional material misrepresentation. The
letters included findings from another auditing cardiologist, Dr. Joseph Kisslo, who, in
7
These are the 580 PADL claims referred to above. They are sometimes
called A5(a) claims,@ based on paragraph 5 of PTO No. 3883, which directs the Trust to
categorize all PADL claims in one of three categories, including A(a) Pre-Stay Payable
PADL claims where the Trust alleges that there was intentional misrepresentation . . . in
connection with the claim (>Paragraph 5(a) Claims=).@ PTO No. 3883 at 3.
5
addition to agreeing with the Trust=s ultimate determinations of intentional
misrepresentation, concluded that there was no reasonable medical basis for finding
moderate mitral regurgitation based on Appellants= echocardiograms.
Appellants contested the Trust=s determinations, but the Trust reaffirmed its
decision in its Final Post-Audit Determinations. Appellants, disputing the Trust=s Final
Post-Audit Determinations, then requested that their claims proceed through the show
cause process. The Trust applied to the District Court to require Appellants to show
cause why their claims should be paid, and the District Court issued the show-cause
orders. The District Court referred Appellants= claims to a Technical Advisor, Dr. Gary
Vigilante, to prepare a Technical Advisor Report. In his report, Dr. Vigilante agreed with
Dr. Kisslo that there was no reasonable medical basis for Appellants= attesting physicians=
findings of moderate mitral regurgitation. He also agreed that the echocardiogram Awas
not conducted in a manner consistent with medical standards.@ Trust. Supp. App. (Yeary)
239sa; Trust Supp. App. (Groce) 168sa.
After examining the record, including Dr. Vigilante=s report, the District Court
held that Appellants failed to meet their burden of proving that a reasonable medical basis
existed to support their claims. The District Court did not address whether Appellants=
claims contained intentional material misrepresentations of fact. Appellants now appeal
to this Court.
6
II.
The District Court had jurisdiction over all terms of the Settlement Agreement
under 28 U.S.C. '' 1332 and 1407. We exercise jurisdiction over a final order of the
District Court under 28 U.S.C. ' 1291.
AWe 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, 543 F.3d
at 184 n.10. An abuse of discretion exists if the District Court=s decision Arest[s] on a
clearly erroneous finding of fact, an errant conclusion of law or an improper application
of law to fact.@ Id. (quoting In re Nutraquest, Inc., 434 F.3d 639, 645 (3d Cir. 2006))
(internal quotation marks omitted).
III.
Appellants raise two primary issues on appeal. First, Appellants argue that the District
Court clearly erred in holding that Appellants= claims were not supported by a reasonable
medical basis. Second, Appellants argue that the Trust=s second review of their claims
violated the Settlement Agreement, their right to due process, and the District Court=s
PTOs. We disagree with both of these contentions.
A.
AOnce the Trust denies a claim and the claim advances to a show cause
proceeding, the claimant has the burden of proving there was a reasonable medical basis
7
for the attesting physician=s representations.@ Id. at 189. Appellants contend they met
this burden because their claims were supported by the findings of their attesting
physicians, as well as the Trust=s own auditing cardiologists. The District Court denied
Appellants= claims on the ground that Appellants failed to rebut the findings of Dr. Kisslo
and Dr. Vigilante, who each determined that Appellants= attesting physicians improperly
measured regurgitation and failed to conduct the echocardiogram in a manner consistent
with medical standards.
We hold that the District Court=s findings are not clearly erroneous. AThe test is
not what this court would have done under the same circumstances; that is not enough.
The court must feel that only one order could have been entered on the facts.@ In re
Orthopedic Bone Screw Prods. Liab. Litig., 246 F.3d 315, 320 (quoting In re Gypsum
Antitrust Cases, 565 F.2d 1123, 1128 (9th Cir. 1977)) (internal quotation marks omitted).
Without rebutting Dr. Kisslo=s and Dr. Vigilante=s findings, Appellants cannot
demonstrate that the only conclusion that may be drawn from their echocardiograms is
that of moderate mitral regurgitation. Because the record supports a finding that there is
no reasonable medical basis for Appellants= attesting physicians= Green Form findings,
we cannot conclude that the District Court abused its discretion in holding that
Appellants failed to meet their burden of proving that there was a reasonable medical
basis for their attesting physicians= Green Form findings.
8
B.
Appellants= three arguments challenging the Trust=s second review of claims are
unavailing. First, the Settlement Agreement permitted the District Court to order the re-
audit of Appellants= claims and to rule against Appellants in show cause proceedings on
reasonable-medical-basis grounds. The Agreement expressly authorized the District
Court to Aorder the Trustees and/or Claims Administrator(s) to perform such additional
audits and/or adopt such additional claims administration procedures as the Court deems
appropriate.@ 8 Settlement Agreement VI.E.8. It also clearly authorized the District Court
to deny Appellants= claims during the show cause process A[i]f the Court determines that
there was no reasonable medical basis to support a material representation made by a
physician in support of a Claim.@ Id. Thus, the District Court did not violate the
Settlement Agreement by ordering the second audit of Appellants= claims or by denying
the claims on grounds that they were not supported by a reasonable medical basis.
Second, no due process violation occurred because Appellants had notice of the
District Court=s procedures and ample opportunity to be heard. Mullane v. Cent. Hanover
8
Appellants cite in their supplemental letters In re Deepwater Horizon, 753
F.3d 509 (5th Cir. 2014), in support of their argument that authorizing the second audit
exceeded the District Court=s authority. That case is inapplicable here because, in that
case, the Fifth Circuit determined that the claims administrator exceeded its authority by
requiring claims to meet a condition for approval that the settlement agreement expressly
did not require. See id. at 512. By contrast, the Settlement Agreement here expressly
authorized the District Court to order additional audits.
9
Bank & Trust Co., 339 U.S. 306, 314 (1950). In fact, both Appellants were heard during
their respective show cause proceedings, albeit without oral argument.
Third, we reject Appellants= arguments that the Trust violated PTO Nos. 3883 and
5625. The Trust did not violate PTO No. 3883 because it timely furnished Appellants
with individual reports that specified the factual basis for the Trust=s findings of material
misrepresentation. Neither did the Trust violate PTO No. 5625 because the Trust did not,
contrary to Appellants= argument, exceed the scope of review authorized by the order.
Accordingly, we reject Appellants= arguments challenging the second review of
their claims.
IV.
For the foregoing reasons, we will affirm the District Court=s orders denying
Appellants= claims for benefits.
10