In Re Diet Drugs (Phentermine/Fenfluramine/Dexfen-Fluramine) Products Liability Litigation

Opinions of the United
2004 Decisions States Court of Appeals
for the Third Circuit
10-5-2004
In Re: Diet Drugs
Precedential or Non-Precedential: Precedential
Docket No. 03-2025
Follow this and additional works at: http://digitalcommons.law.villanova.edu/thirdcircuit_2004
Recommended Citation
"In Re: Diet Drugs " (2004). 2004 Decisions. Paper 179.
http://digitalcommons.law.villanova.edu/thirdcircuit_2004/179
This decision is brought to you for free and open access by the Opinions of the United States Court of Appeals for the Third Circuit at Villanova
University School of Law Digital Repository. It has been accepted for inclusion in 2004 Decisions by an authorized administrator of Villanova
University School of Law Digital Repository. For more information, please contact Benjamin.Carlson@law.villanova.edu.
PRECEDENTIAL MDL No. 1203
UNITED STATES COURT OF District Court Judge: The Honorable
APPEALS Harvey Bartle, III
FOR THE THIRD CIRCUIT
Argued on December 10, 2003
Nos. 03-2025, 03-2063 and 03-2072
Before: AMBRO, FUENTES and
CHERTOFF, Circuit Judges
IN RE: DIET DRUGS
(PHENTERMINE/FENFLURAMINE/
DEXFENFLURAMINE) (Filed October 5, 2004)
PRODUCTS LIABILITY LITIGATION
FLEMING & ASSOCIATES, LLP,
on behalf of its clients subject to the
Sixth Amendment to the Nationwide George M. Fleming
Class Action Settlement Agreement with Sylvia Davidow
American Home Products Corporation, Rand P. Nolen
Appellant in No. 03-2025 Fleming & Associates, LLP
1330 Post Oak Blvd., Suite 3030
JOEL ZUCKERBERG, Houston, TX 77056
Appellant in No. 03-2063
Jonathan Massey (argued)
HARITON & D’ANGELO, LLP and Jonathan Massey, P.C.
NAPOLI, KAISER, BERN & 3920 Northampton Street N.W.
ASSOCIATES, LLP, on behalf of Washington, DC 20015
themselves and their clients who are
specifically identified in and/or whose Mike O’Brien
claims are affected by Pretrial Order No. Mike O’Brien, P.C.
2778, 1330 Post Oak Blvd., Suite 2960
Appellants in No. 03-2072 Houston, TX 77056
Attorneys for Appellant
_______________ Fleming & Associates, LLP
N. Albert Bacharach, Jr.
115 Northeast 6th Avenue
On Appeal from the United States Gainesville, FL 32601-3416
District Court
for the Eastern District of Pennsylvania Attorney for Appellant
Civil Action No. 99-20593 Joel Zuckerberg
Houston, TX 77077
Paul J. Napoli
Denise A. Rubin Attorneys for Appellees
W. Steven Berman American Home Products Corporation
Napoli, Kaiser, Bern & Associates (a.k.a Wyeth), Plaintiffs’ Class and Class
3500 Sunrise Highway, Suite T207 Counsel
Great River, NY 11739
Mario D’Angelo
Hariton & D’Angelo OPINION OF THE COURT
3500 Sunrise Highway, Suite T207
Great River, NY 11739
FUENTES, Circuit Judge:
Attorneys for Appellants
This appeal arises from the multi-
Napoli, Kaiser, Bern & Associates, LLP
district litigation (MDL) 1203 diet drug
and Hariton & D’Angelo, LLP
product liability litigation. The appeal
concerns the validity of an amendment (the
“Sixth Amendment”) to the Nationwide
Peter L. Zimroth
Class Action Settlement Agreement (the
Arnold & Porter
“Settlement A greem ent”) e xecu ted
399 Park Avenue
between Appellants and American Home
New York, NY 10022
Products Corporation (a.k.a. “Wyeth”)1 in
relation to the diet drugs litigation. The
Robert D. Rosenbaum (argued)
Sixth Amendment was approved by the
Sarah M. Brackney
District Court in Pretrial Order (“PTO”)
Arnold & Porter
No. 2778. The Amendment gives
555 Twelfth Street
claimants who would otherwise have been
Washington, DC 20004
bound by the Settlement Agreement the
right to opt out of the Agreement and
Arnold Levin
proceed with tort litigation against Wyeth
Michael D. Fishbein (argued)
in the event that the fund established to
Fred S. Longer
pay claims und er the S ettlement
Arnold & Levin
Agreement (i.e., the “Settlement Trust”)
510 Walnut Street, Suite 500
becomes insolvent. Under the Sixth
Philadelphia, PA 19106
Charles R. Parker 1
American Home Products changed its
John Roberson
name to Wyeth in March 2002. We use
Hill & Parker
the name Wyeth.
5300 Memorial Drive, Suite 700
2
Amendment, claimants’ rights to sue issued a press release reporting abnormal
Wyeth are subject to certain restrictions. echocardiograms in a “higher than
Because of these restrictions, Appellants expected percentage of” patients taking the
here argue that the District Court should drugs. See Press Release, FDA, FDA
not have approved the Sixth Amendment Announces Withdrawal of Fenfluramine
as fair, adequate and reasonable. and Dexfenfluramine (Fen-Phen) (Sept.
Appellants further argue that they were 15, 1997). Subsequent studies suggested
deprived of due process in that they (1) did that the drugs may have been linked to
not receive adequate notice of the risk of serious cardiopulmonary side effects,
Trust insolvency when they opted to be including heart-valve regurgitation (the
bound by the Settlement Agreement and reverse flow of blood through a closed
( 2 ) d i d n o t re c e i v e a d eq u a t e valve of the heart).
representation.
After the withdrawal of the diet drugs,
Because we believe that the Sixth 18,000 individual suits and 100 class
Amendment provides class members with actions were filed in state and federal
additional rights that did not exist under courts. In December 1997, the federal
the original Settlement Agreement cases were consolidated for pretrial
(specifically, the right to sue W yeth, albeit purposes in the Eastern District of
subject to certain conditions) we will Pennsylvania pursuant to MDL 1203. In
affirm the District Court’s approval of the November 1999, Wyeth entered into a
Amendment as fair, adequate and Nationwide Class Action Settlement
reasonable. We reject the due process Agreement with users of the diet drugs in
notice and adequate representation the United States. After conducting
arguments, because those arguments relate fairness proceedings, the District Court in
to the original Settlement Agreement, the the Eastern District of Pennsylvania
validity of which is not properly before certified a settlement class and approved
this Court, and have been previously and the Settlement Agreement, finding it “fair,
finally heard and rejected by this Court. reasonable and adequate.” See PTO 1415.
Accordingly, we hold the Sixth The Settlement Agreement became final
Amendment to the Settlement Agreement upon exhaustion of all appeals. The
to be valid. Settlement Agreement established the
Settlement Trust to administer Wyeth’s
I. FACTUAL BACKGROUND AND
obligations to class members who agreed
PROCEDURAL HISTORY
to participate in the Settlement.
Prior to 1997, Wyeth sold two
Diet drug users who wished to opt out of
prescription drugs for the treatment of
the Settlement Agreement could do so by
obesity, fenfluramine and
filing an “Initial Opt Out” form by March
dexfenfluramine, marketed as “Pondimin”
30, 2000. Putative class members were
and “Redux.” In September 1997, the U.S.
informed of the right to opt out through
Food and Drug Administration (FDA)
3
“an elaborate and extensive plan of and to pursue claims against Wyeth subject
notice,” which included weeks of to certain limitations. These limitations
television, print, and internet advertising, included a prohibition against “seek[ing]
patient notification materials provided punitive, exemplary, or any multiple
through pharmacists and prescribing damages.” App. at 85-86.
doctors, a toll-free number, and a detailed
Diet drug users who currently suffer
“notice package” sent to all possible class
from severe heart-valve regurgitation or
members whose names and addresses were
from moderate reg urgitatio n w ith
known or who called the toll-free number.
complicating features, or who have less
PTO 1415. Persons who timely exercised
severe heart-valve conditions that progress
initial opt out rights were free to pursue
to the more serious levels in the fifteen
any and all claims against Wyeth. Those
years following execution of the
who did not remained members of the
Settlement Agreement, may claim and
class and agreed to be bound by the
re c ove r com pens ation u nder the
conditions and benefits of the Settlement
Settlement. The amount of their recovery
Agreement. Upon ap proving the
is determined by damage “Matrices” that
Settlement Agreement, the District Court
assess factors such as severity and length
entered PTO 1415, which expressly “bars
of illness to calculate the damage award.3
and enjoins” all class members “from
Alternatively, class mem bers with
asserting, and/or continuing to prosecute”
conditions that would allow them to
any settled claim against Wyeth.2
qualify for these “Matrix” benefits (and
The S et tl em e n t A g r ee m ent who fulfill other eligibility requirements
contained an exception to this bar, set out in the Agreement) may exercise
permitting class members who met “Back-End Opt Out” rights and pursue tort
specific physical requirements (diagnosed claims against Wyeth, so long as they have
as having a severity of heart-valve not already made a claim for compensation
regurgitation defined as “FDA Positive”) under the Settlement Agreement. Once a
to pursue “Intermediate Opt Out” rights. class member discovers that his heart-
These rights allowed class members to opt valve condition is serious enough to
out of the Settlement at a date beyond the qualify him for Matrix-level benefits, the
Initial Opt Out period (without Wyeth class member must make an election as to
asserting statute of limitations defenses)
3
Class members may receive payment
2
PTO 1415 further provides for the based on one level of disease and “step
settlement court to retain “continuing and up” to additional Matrix compensation if
exclusive jurisdiction . . . to administer, they exhibit a Matrix-level injury by year
supervise, interpret and enforce the 2015 and their heart-valve conditions
Settlement in accordance with its terms.” increase in severity to a higher level before
they reach the age of 80.
4
which option to pursue. The Settlement likely claims.
Agreement specifically provides that “[a]
However, after approval of the
Class Member may not exercise a Back-
Settlement Agreement, the Trust was
End Opt Out right after claiming any
inundated with Green Form claims for
Matrix Compensation Benefits.” App. at
Matrix benefits in a volume not anticipated
575. As with the Intermediate Opt Out,
by the experts who testified at the fairness
class members exercising Back-End Opt
hearing. As the District Court determined,
Out rights will not be blocked by statute of
a significant proportion of the filings came
limitations defenses, but are restricted
from a few law firms that represented large
from asserting punitive, exemplary, or
numbers of claimants. The District Court
multiple damages.
also observed that, in conducting their
Thus, according to the system set claims process, these firms carried out
out in the Settlement Agreement, any diet mass screening programs in which
drug users who fail to exercise Initial, cardiologists retained by the firms “made
Intermediate, or Back-End Opt Out rights unreasonable judgments on a broad scale”
are bound by the terms of the Settlement concerning the existence, history, nature,
Agreement and its bar against attempting and degree of heart-valve disease claimed.
to pursue any claims against Wyeth. For PTO 2640. The claims process was
those who remain in the Settlement, a further frustrated by the fact that several of
claim for Matrix benefits is made by the Green Forms submitted were
submitting a three-part “Green Form” to incomplete, which made it impossible for
the Settlement Trust. Wyeth funds Trust administrators to assess eligibility
payment of Matrix benefits through for the particular Matrix benefit claimed.
deposits into the Trust. Under the To ameliorate the situation, the District
Settlement Agreement, Wyeth’s funding Court ordered that all claims for M atrix
obligation is limited to $3.75 billion, plus benefits be subjected to audit.
any increase in value of the principal of
Despite this effort, the risk
the Trust. The fact of this limit was made
remained that the number of claims would
known to class members through the class
exhaust the Trust’s available funds.
notice. During the fairness hearing before
Additionally, the remedy intended under
the District Court, experts testified as to
the Settlement Agreement to address the
their conclusion that, after considering
problem of insufficient Matrix funds, the
e x t e n s iv e e p i d e m i o l o g i c a l a n d
Back-End Opt Out, was not available to
demographic evidence, $3.75 billion was
class members who had already filed
more than sufficient to pay all Matrix
claims for Matrix benefits. Therefore, in
claims anticipated under the Settlement.
response to the potential risk of Trust
Based on this evidence, to which none of
insolvency, Wyeth and Class Counsel
the parties objected, the District Court
executed a proposed Sixth Amendment to
found the funds sufficient to satisfy all
the Settlement Agreement, which would
5
create a new opt out right for class Form submitted for Matrix benefits.6 By
members who claimed Matrix benefits by extension, this provision allows the Trust
May 3, 2003, and were found medically to determine whether a class member is
eligible for these benefits, but would qualified to exercise a Sixth Amendment
otherwise go without payment under the Opt Out.
original Settlement Agreement in the event
After conducting an approval
of funding insufficiency. 4 Under the Sixth
hearing, the District Court issued PTO
Amendment Opt Out right, claimants may
2778, finding the Sixth Amendment fair,
pursue a tort action but may not name any
reasonable and adequate. However,
defendant other than Wyeth, may not join
Ap pellan ts argue that the Sixth
any other plaintiff (other than a derivative
Amendment deprives them of their full
plaintiff), and may not consolidate their
litigation rights by imposing new
action with any other.5 The Sixth
restrictions on their ability to pursue tort
Amendment Opt Out right is also subject
claims against Wyeth (i.e., limiting the
to the same restrictions placed on the
defendants whom they may name and join,
Intermediate and Back-End Opt Out in that
and barring consolidation of actions).
persons exercising this opt out may not
Related to this argument is Appellants’
pursue punitive, exemplary, or multiple
claim that the class notice pertaining to the
damages. In addition to the opt out
original Settlement Agreement was
provision, the Sixth Amendment also sets
inadequate for not specifically informing
forth criteria for the required level of
diet drug users of the risk of Trust
completedness of the three-part Green
insolvency and that their representation
was inadequate as a result of this risk of
insolvency. Thus, Appellants contend that
class members affected by the risk of
4
Before the District Court’s approval of insolvency were denied due process and
the Settlement Agreement in August 2000, should be permitted to opt out of the
the Settlement Agreement had been Settlement unconditionally.
amended five times. For convenience, we II. DISCUSSION
will refer to the Settlement Agreement as
it stood prior to approval of the Sixth
Amendment as the “original” settlement.
6
Thus, under the Sixth Amendment, a
5
The option is not available to class claim for Matrix benefits will be deemed
members who have already received a filed upon the Trust’s receipt of either (1)
payment of any Matrix benefit. Instead, a “Part I” of a Green Form signed by the
residual amount of $255 million will class member or (2) “Part II” of a Green
remain in the fund to pay claims arising Form signed by a class member indicating
from progression of already compensated that he accepts entitlements to M atrix
Matrix-level diseases. benefits.
6
A. Fairness, Adequacy and
R e a s o n a b l e n e s s o f t h e S i x th
Amendment
1. Additional Rights Provided by
the Sixth Amendment
Under Federal Rule of Civil class members that the original Settlement
Procedure 23(e)(1)(A), a “court must Agreement did not contain. They stress
approve any settlement, voluntary that, in evaluating an amendment to a class
dismissal, or compromise of the claims, action settlement, the court should
issues, or defenses of a certified class.” consider whether the amendment provides
Subsection (C) states that “[t]he court may additional benefits and protections for the
approve a settlement, voluntary dismissal, class. See, e.g., In re Sulzer Prosthesis
or compromise that would bind class Liab. Litig., 2002 WL 553728, at *1 (N.D.
members only after a hearing and on Ohio Mar. 14, 2002) (granting approval to
finding that the settlement, voluntary amended settlement agreement that
dismissal, or compromise is fair, increased overall value of the settlement
reasonable, and adequate.” In PTO 2778, and eliminated liens on defendants’ assets
the District Court held that this standard for the benefits of opt-outs). One purpose
for analyzing the fairness of a proposed for which it is appropriate to approve such
settlement under Rule 23(e) should also be an amendment is adjusting for changed
applied to analyze the fairness of a circumstances, particularly in light of the
proposed amendment to the settlement. parties’ experience in implementing the
See Walsh v. Great Atl. & Pac. Tea Co., agreement. See, e.g., In re Joint E. & S.
726 F.2d 956, 965 (3d Cir. 1983) (A court Dists. Asbestos Litig., 237 F. Supp. 2d
may approve a proposed class action 297, 300 (E.D.N.Y. 2002).
settlement if it is “fair, adequate, and
The new Sixth Amendment Opt Out right
reasonable” to class members.).7
provides class members who claim Matrix
Class Counsel and Wyeth argue that the benefits with at least some protection
Sixth Amendment provided new rights to against the risk that their injuries would go
uncompensated if the Settlement Trust
becomes insolvent at some future time. As
7
This Court has not addressed the it is now, Wyeth’s financial obligations to
proper standard for a District Court to the settlement Trust are subject to a
review an amendment to a settlement specified maximum under the Settlement
agreement. Neither party argues, however, Agreement. Wyeth, therefore, has no
that the District Court applied the wrong further obligation to pay otherwise eligible
standard. Matrix claimants once its $3.75 billion
7
funding contribution is exhausted. Appellants are correct that exhaustion of
funds voids the Settlement Agreement and
Appellants do not argue that any
leaves them free to pursue their tort rights
provision of the Settlement Agreement
without restriction, “then Class Members
obligates Wyeth beyond this amount if the
will have lost nothing by [the District
Trust cannot satisfy all claims. Rather,
Court’s] approval of the Amendment.” Id.Appellants claim that class members did
not receive adequate notice under Rule Further, the Amendment provides
23(e) of the risk of Trust insolvency. that, if the Trust becomes insolvent, Wyeth
Thus, they argue from principles of has the option of paying any eligible
contract and equity (discussed more fully unpaid claims (although it would have no
below) that any unpaid class members contractual obligation to do so) or leaving
would not have received the full benefit of them unpaid, subject to the Sixth
their agreement under the Settlement due Amendment Opt Out. This provision was
to a mutual mistake of fact concerning the intended to give Wyeth an incentive to
Trust’s capacity to satisfy all potential fund such benefits voluntarily in order to
claims. Therefore, Appellants contend that avoid defending tort claims by unpaid
the Settlement Agreement is void and that Matrix claimants (a threat that did not exist
unpaid claimants should be released from before the Amendment). Consolidated
the agreement and permitted to sue Wyeth Brief at 26. However, Appellants argue
without restriction. that Wyeth always had a right to
voluntarily fund unpaid Matrix claims
Even if Appellants are correct in these
despite the Sixth Amendment and,
contract and equity arguments, the District
therefore, that this provision of the
Court found that class members would
Amendment conferred no additional
suffer no harm by approval of the Sixth
benefit on Appellants. Appellant Brief at
Amendment. The Court explained that
25. We are not convinced by Appellants’
because Wyeth’s obligation to the class is
argument here. It is true that if Wyeth
capped at $3.75 billion, the Amendment
chooses to pay a claim in the event of
provides a new benefit by providing those
funding exhaustion, then the compensated
Matrix claimants who would otherwise go
claimant will simply have received his
unpaid “with a specific contractual right to
bargained-for benefit under the Settlement.
pursue their compensatory claims against
However, Appellants cannot view this
Wyeth” by opting out of the Settlement.
provision of the Amendment in isolation.
App. at 10. This right was nonexistent
The Amendment as a whole provides an
under the original Settlement Agreement
additional benefit to claimants through its
as eligible class members who filed Green
new opt out right in addition to the
F o rm s claim in g M atrix be nefit s
incentive it gives Wyeth to pay claims
relinquished their Back-End Opt Out rights
voluntarily. A claimant’s chance of
and, consequently, agreed to be bound by
recovering damages is only strengthened
the Settlement. On the other hand, if
8
by the added incentive provided by the opt tort action against Wyeth at all if the Trust
out and voluntary payment provisions of becomes insolvent. 8 The District Court
the Sixth Amendment combined. Thus, did not find sufficient reason to reject the
the Sixth Amendment provides all Amendment simply because the right to
claimants with additional protections sue under it “comes at the price of certain
against being left empty-handed that did restrictions and may not go so far as
not exist under the original Settlement [Appellants] would like.” App. at 11.
Agreement. Further, the District Court stressed that the
Sixth Amendment provides more security
for a Matrix claimant than the option
2. Restrictions on the Sixth proposed by Appellants because “[i]n the
Amendment Opt Out Right event of a funding shortfall, class members
cannot be at all sure they would be able to
Appellants claim that the Sixth
undo the Agreement and sue Wyeth in
Amendment unfairly and unreasonably
tort.” App. at 11.
restricts the opt out right that it provides.
First, Appellants assert that the Sixth Ap pellan ts also specifically
Amendment Opt Out strips class members challenge the reasonableness of the Sixth
of their rights to join plaintiffs and name Amendment’s restriction on joinder,
additional defendants in any lawsuit filed arguing from principles of civil procedure
against Wyeth. We are not persuaded by that the plaintiff is “the master of his own
this argument because, as discussed above, complaint” and that restrictions on joinder
the Sixth Amendment still provides class deprive opt-out plaintiffs of the right to
members with an opt out right that did not choose their jurisdiction. Appellant Brief
exist under the original Settlement at 26 (citing Holmes Group, Inc. v.
Agreement. The restrictions imposed Vornado Air Circulation Sys., 535 U.S.
apply only to suits brought by class 826, 831 (2002)). In response, Wyeth
members exercising the Sixth Amendment asserts that it negotiated this restriction in
Opt Out and, in the absence of the
Amendment, these class members would
8
have no right to bring an action at all Class members may still have a right to
because they relinquished this right under sue on a mistake of fact contract theory,
the Settlement Agreement when they asserted by Appellants here. However, in
claimed Matrix benefits. The provision of such a case, they would argue that the
the Agreement barring class members who Settlement Agreement is void, which
claim Matrix benefits from subsequently would render the Sixth Amendment
exercising a Back-End Opt Out existed irrelevant in any case and, thus, have no
before the Sixth Amendment. See bearing on the issue of whether the District
Settlement Agreement § IV.D.4.b. Court’s approval of the Amendment was
Without the Amendment, therefore, class proper.
members would have no right to bring a
9
order to prevent fraudulent joinders by settlement, voluntary dismissal, or
plaintiffs attempting to block Wyeth’s compromise.” This notice must inform
removal of state court actions to federal class members of the existence of the
court. Consolidated Brief at 31-36. pending litigation and provide them with
Although Appellants also cite decisions of the information “needed to decide,
the District Court in our case encouraging intelligently, whether to stay in or opt out.”
the policy of joining claims and parties, Amchem Prods. v. Windsor, 521 U.S. 591,
Appellant Brief at 27-28, they cite no case 628 (1997); see also Phillips Petroleum
law suggesting that it would be Co. v. Shutts, 472 U.S. 797, 812 (1985)
unreasonable for the parties to enter into a (stating that class members must be
contract that imposed such a joinder provided with meaningful notice and an
restriction as a condition of a right to sue opportunity to exclude themselves from
that did not exist before (as it had been the class). Appellants argue that the
specifically relinquished under the original District Court’s finding of adequate notice
Agreement). Consolidated Brief at 37. in approving the Settlement was premised
Again, despite the joinder restriction, the in part on the assumption that the
Sixth Amendment still added new rights to Settlement funds were sufficient to pay all
the Settlement Agreement without claims for Matrix benefits. To have been
depriving class members of any adequate, Appellants argue that the notice
preexisting rights. should have informed the class that certain
members could receive no compensation if
the fund becomes insolvent. Appellant
B. Class Members’ Due Process Brief at 34-35. Appellants assert that, for
Rights: Adequacy of Notice and Class these class members “trapped inside the
Representation settlement without their promised benefit,”
the Sixth Am endm ent’s litiga tion
restrictions amount to a deprivation of
Appellants argue that M atrix rights without notice or opportunity for a
claimants who would be left empty-handed hearing. Id. at 35-36.
if the settlement funds prove to be
Appellants also argue that these
insufficient were deprived of their due
class members did not receive adequate
process rights in two instances: adequacy
class representation, as required by Rule
of notice and adequacy of class
23(a). Under Subsection (4), “[o]ne or
representation. First, Appellants claim that
more members of a class may sue or be
class members did not receive adequate
sued as representative parties on behalf of
notice of their opt out rights in accordance
all only if . . . the representative parties
with Rule 23(e). Under Subsection (B),
will fairly and adequately protect the
“[t]he court must direct notice in a
interests of the class.” Accordingly, class
reasonable manner to all class members
members with divergent or conflicting
who would be bound by a proposed
10
interests cannot be adequately represented inadequate representation in light of this
by the same named plaintiffs and class potential risk, despite the fact that such a
counsel. Amchem, 521 U.S. at 625-26. situation has not materialized and was not
Appellants cite Stephenson v. Doe even contemplated at the time of the
Chemical Co., a case in which the Second Settlement. Although couched in terms of
C i r c u i t h e l d t h at u n a n t i ci p a t e d the Sixth Amendment, in reality
developments, occurring even years after Appellants’ due process challenges take
the settlement, may render inadequate the exception to the notice and adequacy of
representation and notice afforded some representation involved with the original
class members. 273 F.3d 249, 261 (2d Cir. Settlement Agreement, insofar as they are
2001), aff’d in part, rev’d in part per centered around the alleged failure to
curiam, 539 U.S. 111 (2003). The notify potential class members of the risk
Stephenson Court held that no class action of insolvency of the Trust. The District
orders were binding on these class Court here was faced with the question of
members and, therefore, upheld a whether a proposed amendment to the
collateral attack on the class settlement. original Settlement Agreement was proper,
Id. at 259. The Supreme Court’s per and it is the Court’s answer to that
curiam opinion affirmed Stephenson on an question that is being appealed, not the
equally divided 4-4 vote, and therefore is validity of the original settlement. For that
not binding. Still, Appellants cite it as reason, this appeal is not the proper
persuasive authority here. They argue that vehic le to challenge the original
the Sixth Amendment creates tw o Settlement Agreement. That Agreement
categories of class members, each one with resulted in a final order certifying the class
divergent interests: (1) those who either and approving the settlement, which was
claimed benefits early enough to be not addressed by the District Court in this
compensated or opted out of the matter. See In re Diet Drugs, 282 F.3d
Settlement under the known opt out rights 220, 229 (3d Cir. 2002). To present such
in t h e A greement (i.e., Initia l, a challenge, Appellants must seek relief
Intermediate, or Back-End); and (2) those either under Rule 60(b)9 or through a
who claimed benefits later and are now left
with the restrictive Sixth Amendment Opt
Out right. Because of these divergent 9
Rule 60(b) allows parties to petition for
interests, Appellants argue that having a
relief from final judgments due to, among
single class counsel for both groups of
other things, “mistake, excuse, or
class members resulted in inadequate
excusable neglect,” “fraud . . .,
representation. Appellant Brief at 39.
misrepresentation, or other misconduct of
In short, Appellants claim that they an adverse party,” or if “the judgment is
received inadequate notice that the Trust void.” Fed. R. Civ. P. 60(b); see, e.g.,
could become insolvent and received Mayberry v. Maroney, 558 F.2d 1159,
1163 (3d Cir. 1977) (entertaining Rule
11
collateral attack on the order approving the v. Local Union No. 469, 613 F.2d 1235,
Settlement. 10 Moreover, this Court has 1239 (3d Cir. 1980) (noting that “[t]he[]
already addressed the notice and adequacy issues have not been briefed on appeal,
of representation with respect to the and it does not appear from the record that
original Settlement Agreement and we the parties thoroughly developed these
found the requirements of due process topics below” and further noting that “the
satisfied. See In re Diet Drugs, 282 F.3d trial court should have an opportunity to
at 230-31; see also Shutts, 472 U.S. at 811- pass on these important questions in the
12 (setting forth “procedural due process first instance”).
protection[s]” necessary in order for a
Of course, Appellants are in no way
class action judgment to have binding
precluded from challenging the adequacy
force on absent class members). Due
of representation with respect to the
process does not require this Court to
negotiation of the Sixth Amendment here.
entertain challenges to adequacy of notice
However, we reject Appellant’s argument
and representation every time any case
that the Sixth Amendment created two
related to a class action judgment comes
groups of class members with divergent
up on appeal. See Epstein v. MCA, Inc.,
interests. At the time that the Amendment
179 F.3d 641, 648 (9th Cir. 1999) (“Due
was negotiated, the two classes Appellants
process requires that an absent class
identify–individuals who have already
member’s right to adequate representation
opted out or have been fully compensated
be protected by the adoption of the
and those that remain uncompensated and
appropriate procedures by the certifying
bound by the settlement–did not have
court and by the courts that review its
divergent interests. For obvious reasons,
determinations; due process does not
the former group had no interest
require collateral second guessing of those
whatsoever in the negotiation, while the
determinations and that review.”). If
latter group’s interest was to maximize the
Appellants have arguments that merit a
benefits available given the possibility that
Rule 60(b) motion or a collateral attack on
the Trust may become insolvent. Hence,
the validity of settlement as to certain class
class counsel only had one real interest in
members, then a record must be fully
negotiating the Amendment, and,
developed in the district court in the first
accordingly, there was no conflict.
instance. Cf. H. Prang Trucking Co., Inc.
C. Justiciability
60(b) motion with respect to class action Appellants make the final argument
settlement). that Matrix claimants who will not be paid
due to funding insufficiency should be
10
See, e.g., Stephenson, 273 F.3d 249 immediately released from the Settlement
(allowing collateral attack on a class action so that they may pursue unrestricted
settlement). actions against Wyeth in the tort system.
12
The District Court held that the principles
of justiciability prevented it from
addressing the issue of what the
consequences would be for the parties if
the Settlement Trust were actually to
become exhausted. The Court held that
the parties had no standing to bring such a
claim because they failed to allege harm
that is “actual or imminent, not
‘conjectural’ or ‘hypothetical.’” PTO
2778 (quoting Whitmore v. Arkansas, 495
U.S. 149, 155 (1990)). The Court further
pointed out that any future depletion of the
Trust remains purely speculative at the
moment, particularly since Wyeth could
still decide to supplement the funds
voluntarily in order to avoid further
litigation. We agree that a funding
shortf all is neith er “actual” nor
“imminent” here. This is particularly true
given the measures currently undertaken
by Trust administrators, such as auditing
of Green Form claims, to ease the strain on
the Trust. Considering these measures,
and the fact that $2 billion still remains
available to the Trust to satisfy Matrix
benefits, depletion of the Settlement funds
may never occur. We, therefore, reject
Appellant’s claim here as it is not fit for
adjudication at this time.
III. CONCLUSION
For the foregoing reasons, we
affirm the order of the District Court as set
forth in PTO 2778, approving the Sixth
Amendment to the Nationwide Class
Action Settlement Agreement.
13