Re: Orthopedic Bone Screw Litigation

Opinions of the United
2001 Decisions States Court of Appeals
for the Third Circuit
4-16-2001
Re: Orthopedic Bone Screw Litigation
Precedential or Non-Precedential:
Docket 99-2054
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Filed April 16, 2001
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
No. 99-2054
IN RE: ORTHOPEDIC BONE SCREW
PRODUCTS LIABILITY LITIGATION
Alexander Sambolin,
Appellant
On Appeal from the United States District Court
for the Eastern District of Pennsylvania
(M.D.L. Docket No. 1014)
District Judge: Honorable Louis C. Bechtle
Argued: September 13, 2000
Before: BECKER, Chief Judge, NYGAARD and AMBRO,
Circuit Judges
(Filed: April 16, 2001)
Brian S. Wolfman (Argued)
Public Citizen Litigation Group
1600 20th Street, N.W.
Washington, D.C. 20009
Counsel for Appellant
Richard I. Werder, Jr . (Argued)
Deborah L. Hamilton
Jones Day Reavis & Pogue
North Point
901 Lakeside Avenue
Cleveland, OH 44114
Counsel for Appellee AcroMed
Corporation
Frederick S. Longer (Argued)
Arnold Levin
Levin, Fishbein, Sedran & Berman
510 Walnut Street, Suite 500
Philadelphia, PA 19106
Counsel for Appellee Plaintiffs'
Legal Committee
Robert E. Welsh, Jr. (Argued)
Welsh & Recker, P.C.
Suite 2903
2000 Market Street
Philadelphia, PA 19103
Counsel for Intervenor Robert E.
Welsh, Jr.
OPINION OF THE COURT
AMBRO, Circuit Judge
Alexander Sambolin appeals from an order of the United
States District Court for the Eastern District of
Pennsylvania dismissing his claim as untimely. As a result
of the dismissal, Sambolin's claim fails to qualify for
compensation pursuant to the multidistrict class action
settlement agreement (the "Settlement Agr eement") between
the Appellees -- AcroMed Corporation ("Acr oMed") and the
Plaintiffs' Legal Committee ("PLC")-- approved by the
District Court in In re: Orthopedic Bone Screw Products
Liability Litigation, 176 F.R.D. 158 (E.D. Pa. 1997). On
appeal, Sambolin presents three ar guments that the
District Court improperly denied him participation in the
mandatory, non-opt-out settlement class. He first
maintains that the District Court abused its discr etion in
denying him participation in the settlement under the
equitable doctrine of "excusable neglect," a doctrine whose
label we find unnecessarily pejorative her e but whose
principles are nonetheless relevant. Sambolin next argues
that the settlement's registration deadline, under which his
claim is untimely, violates the equal protection and
procedural due process protections of the Fifth and
Fourteenth Amendments. His final contention on appeal is
2
that the court-approved notice program in this class action
was deficient under the standards of Federal Rule of Civil
Procedure 23 and due process.
We forgo ruling on the constitutional challenges, for we
conclude that the District Court's ruling was inconsistent
with the exercise of sound discretion in denying Sambolin
participation in the settlement solely for his failure to
comply with the registration deadline imposed. We
recognize that deadlines are an integral component of
effective consolidation and management of the modern
mass tort class action. See, e.g., In r e Gypsum Antitrust
Cases, 565 F.2d 1123, 1127 (9th Cir . 1977). Yet rigid and
unquestioned adherence to such limitations belies
principles of equity and the court's role as afiduciary in
class actions when allowing a claimant participation in a
settlement works no harm on the conduct of the
proceedings and does not significantly pr ejudice the
interests of the parties. In the circumstances this case
presents, we reverse the District Court's order denying
Sambolin participation in the AcroMed settlement.
I. JURISDICTION
The District Court exercised diversity jurisdiction over
this multidistrict litigation matter pursuant to 28 U.S.C.
SS 1332(a) and 1407. In re: Orthopedic Bone Screw Prods.
Liab. Litig., 176 F.R.D. 158, 171 (E.D. Pa. 1997). The order
denying Sambolin participation in the settlement is a final
decision of the District Court conferring jurisdiction on this
Court pursuant to 28 U.S.C. S 1291.
II. FACTS
The circumstances surrounding the pedicle bone screw
litigation and resulting settlement by Acr oMed have
received more complete and eloquent exposition in other
opinions than is required in this appeal. See, e.g., In re:
Orthopedic Bone Screw Prods. Liab. Litig., 193 F.3d 781,
784-87 (3d Cir. 1999). As a result, we cover only the
highlights and how they pertain to Sambolin's claims.
The multidistrict litigation of orthopedic bone scr ew
3
products liability claims has been directed by the nine-
member PLC, which agreed, in December 1996, to settle
with one of the principal manufacturers of bone screws --
AcroMed. Under the terms of the Settlement Agreement,1
AcroMed agreed to create a fund of $100 million, plus the
proceeds of the bulk of its insurance policies, in return for
a complete release from liability by the certified class.2
Because the $100 million exceeded AcroMed's ear nings or
net assets at the time, it was obtained by monetizing
AcroMed's future earnings and was conditioned on the
resolution of this action. The District Court granted
mandatory, non-opt-out class certification under Fed. R.
Civ. P. 23(b)(1) and preliminarily appr oved the Settlement
Agreement on January 16, 1997 in Pretrial Order ("PTO")
No. 724.3 In re: Orthopedic Bone Screw Prods. Liab. Litig.,
No. M.D.L. 1014, 1997 WL 303242 (E.D. Pa. January 16,
1997) (hereinafter "PTO 724"). The Court's final approval of
the Settlement Agreement followed on October 17, 1997. In
re: Orthopedic Bone Screw, 176 F .R.D. at 186.
The class certified in the settlement included all persons
who underwent surgical implanting of Acr oMed bone
screws through December 31, 1996, a gr oup estimated by
the parties to exceed 100,000. Id. at 170-71, 173. These
_________________________________________________________________
1. Though the Settlement Agreement was the subject of frequent revision,
none of its provisions relevant to this appeal were changed.
2. Under the Settlement Agreement, the r eleased parties include AcroMed
and any treating physicians and hospitals who might be liable on a
products liability theory. "However, claims for independent medical
malpractice against these physicians and hospitals will not be dismissed
under the settlement." In re: Orthopedic Bone Screw, 176 F.R.D. at 166.
3. Though not directly pertinent to this appeal, it should be noted that
the District Court's grant of certification r easoned that AcroMed had a
"limited fund" with which to meet the demands of plaintiffs. In re:
Orthopedic Bone Screw, 176 F.R.D. at 177. Since that ruling, the "limited
fund" of a defendant to meet claims has been substantially
circumscribed by the Supreme Court as a basis for the maintenance of
a class action. See Ortiz v. Fibreboar d Corp., 527 U.S. 815 (1999) (when
a mandatory class action is certified on a limited fund theory, the fund
must be limited independently of the parties' agr eement). Before the
ruling in Ortiz, the appeal of the settlement's approval in this case was
voluntarily dismissed.
4
class members were required by the Settlement Agreement
to file two documents to perfect their rights to recovery.
First, it required claimants to file a Registration Form by
May 1, 1997 to participate in the settlement. PTO 724,
P 12. The Registration Form requir ed, inter alia, listing the
claimant's name, address, age, Social Security number,
legal representation and date and type of bone screw
surgery. Second, the Settlement Agreement required the
filing of a Proof of Claim form, which was to be drafted by
the later-appointed Claims Administrator to permit an
equitable distribution of the settlement fund. The Claims
Administrator was appointed in January 1998 and a Pr oof
of Claim form was agreed on by the parties and approved
by the Court on January 6, 1999. PTO 1655. The Pr oof of
Claim form contained extensive release and indemnity
terms and required claimants to describe and document
their medical histories with the AcroMed bone screws in
some detail. It further stated that it must be mailed to the
Claims Administrator postmarked no later than April 15,
1999. The Court was unequivocal in its statement of the
consequence of a failure to file timely both forms.
"Settlement Class Members who are Acr oMed Orthopedic
Bone Screw Recipients and who do not timely Register and
submit Claims Forms are not entitled to share in the
AcroMed Settlement Fund, [and] ar e . . . barred and
enjoined from asserting Settled Claims." PTO 724, P 12.
Nevertheless, neither of the deadlines for the two forms
escaped postponement. The May 1, 1997 Registration Form
deadline was pushed back until May 15, 1997 due to
administrative difficulties caused by receiving and
processing the large volume of registrations. Almost two
years later, the Proof of Claim deadline was delayed twice,
cumulatively from April 15, 1999 until June 15, 1999, to
remedy the difficulties of many claimants documenting
their injuries. PTO 1802.
Pretrial Order No. 724 also approved the settlement's
notice procedures. The Settlement Agr eement required the
PLC to mail a settlement notice and the Registration Form
to known class members, primarily persons who had
already filed suit against AcroMed or who had identified
themselves to the PLC by responding to a series of
5
advertisements placed by various plaintiffs' attorneys. This
group was comprised of 6,949 persons who wer e either
class members or related claimants. The Settlement
Agreement further provided for additional constructive
notice in certain newspapers. Pursuant to the Court's order
and the Settlement Agreement, formal notice was published
during January and February 1997 as follows: twice in USA
Today, a national newspaper with a cir culation of 1.9 to 2.4
million; once in TV Guide, a national magazine with a
circulation of 13 million; once in Parade Magazine, a
national Sunday newspaper insert with a circulation of 81
million; and once in "a Spanish-language newspaper of
general circulation in Puerto Rico." PTO 724, P 8. The
Puerto Rican newspaper chosen was El Nueva Dia ,
published in San Juan, Puerto Rico. The notice in El Nueva
Dia ran on January 24, 1997 in small text on page 50. The
publication notice published in each of the periodicals
contained basic information about the settlement, including
the May 1, 1997 Registration Form deadline, and the
address of the PLC where potential class members could
write for more information. Other than the PLC's address,
the notice listed no other means to receive further
information, no telephone number (toll-fr ee or otherwise)
and no internet address. Purportedly as a result of the
published notice, the PLC received 1,457 r equests for
further information or registration for ms by late April 1997.
Sambolin lives outside Luquillo, a seaside village on the
Northeast coast of Puerto Rico. He had AcroMed pedicle
screws implanted in his spine on April 3, 1995 4 to treat
recurring back pain. Sambolin's initial r ecovery went well,
but six weeks following the surgery he experienced severe
back pain. Physicians later diagnosed the pain as the result
of one loose and one broken AcroMed scr ew, and both were
extracted in June 1996. According to Sambolin, the
AcroMed screws caused him severe pain and ongoing
medical difficulties. Sambolin communicated with attorneys
in Puerto Rico at some point in 1997, but they failed to
inform him of the settlement. Later that year , he spoke with
_________________________________________________________________
4. Because the settlement class includes all r ecipients of AcroMed
pedicle
screws before December 31, 1996, it is undisputed that Sambolin is
within the certified class.
6
a Miami attorney who apprised him of the class action and
settlement and helped him prepare the necessary
paperwork. Without delay, the settlement Registration Form
was signed on December 16, 1997, and subsequentlyfiled
with the Claims Administrator, approximately seven months
after the May 1 deadline stated in the notices and r epeated
on the Registration Form.
In September 1998, the Claims Administrator submitted
the Proposed Plan of Settlement Administration (the
"Proposed Plan") for the Court's appr oval. Among other
details, the Proposed Plan stated that class members who
failed to submit the Registration Form by the May 1997
deadline were subject to a 20% reduction in award "points,"
and not total disqualification from participation in the
settlement. Withholding judgment on the Pr oposed Plan,
the District Court approved the Proof of Claim form
accompanying the Plan on January 6, 1999. PTO 1655. It
then was disseminated to all settlement registrants,
whether timely or not.
Sambolin filed his Proof of Claim on February 10, 1999,
well before the initial April 15, 1999 deadline. Shortly
afterward, he requested of the Claims Administrator that
the 20% reduction in the Proposed Plan be waived as to his
claim because the notice of the registration deadline was
deficient. On February 22, 1999, the District Court issued
PTO 1722, which rejected the 20% discounting pr ovision of
the Proposed Plan and reasserted its position in PTO 724 --
that May 1, 1997 was an absolute deadline for r egistration,
as stated in the notices and on the Registration For m. The
Court did, however, extend the registration deadline to May
15, 1997 to remedy any receipt date pr oblems encountered
by the large numbers of registrations r eceived by the PLC
during that period. The absolute deadline for r egistration of
May 15, 1997 was restated again in PTO 1757, but the
Court in this order also permitted late r egistrants, such as
Sambolin, to show cause to the Claims Administrator why
their claims should be deemed timely.
Sambolin responded to the show cause or der with a one-
page statement asserting ignorance of the settlement and
lack of notice. That response was rejected by the Claims
Administrator. Sambolin protested his exclusion from the
7
settlement in a motion filed with the Court r equesting relief
from PTO 1722. That motion, which is the subject of this
appeal, was considered at a November 22, 1999 status
conference and was rejected by the Court in PTO 1870
without comment.
In PTO 1930 the District Court addressed, in bulk, the
validity of claims presented by untimely r egistrants in their
appeal from the Claims Administrator's r ejection of their
claims. In re: Orthopedic Bone Scr ew, C.A. No. 97-381, 2000
WL 1023782 (E.D. Pa. July 10, 2000). That or der addresses
the claims of 168 class members who failed to file the
Registration Form by May 15, 1997 and who r esponded to
the show cause order of PTO 1757, including Sambolin.
The Court first rejected claims that the settlement's notice
provisions were inadequate under Fed. R. Civ. P. 23(b)(1)
and related principles of due process. Id. at *9. It further
applied the "excusable neglect" standar d we later address
in this opinion and permitted eight persons to participate in
the settlement under its rationale. Id. at *11. All of the eight
late registrants included in the settlement suf fered from
debilitating medical disabilities that prevented the timely
perfection of their claims. Id.
According to the Claims Administrator, there have been
534 late filings of the Registration Form as of February 14,
1999. Between 243 and 306 of these arrived befor e
Sambolin's Registration Form in December 1997. According
to the PLC's records, there ar e 104 claimants in Sambolin's
predicament -- an untimely Registration For m but a timely
Proof of Claim. Assuming that Sambolin's statements in his
Proof of Claim are accurate, the Claims Administrator has
estimated his gross award at $33,000, subject to
deductions for legal fees and potential subr ogation claims.
III. DISCUSSION
We undertake circumspectly our r eview of the District
Court's exercise of its equitable authority to excuse the late
filings, as the District Court's application of those powers is
only reviewable by this Court for an abuse of discretion.
See In re Cendant Corp. Prides Litig., 233 F.3d 188, 192 (3d
Cir. 2000) (hereinafter "Cendant Prides I"); In re: Gypsum
8
Antitrust Cases, 565 F.2d at 1128; cf. Dominic v. Hess Oil
V.I. Corp., 841 F.2d 513, 516 (3d Cir. 1988) (employing an
abuse of discretion standard to the r eview of a grant of
extension of time to serve process). We refrain from
substituting our judgment for that of the District Court
insofar as its holding is reasonable and supported by the
evidence. "The 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." Gypsum Antitrust, 565 F .2d at 1128; see also
Rode v. Dellarciprete, 892 F .2d 1177, 1182 (3d Cir. 1990)
(finding an abuse of discretion "when no r easonable person
would adopt the district court's view"). "W e will therefore
not disturb an exercise of discretion``unless there is a
"definite and firm conviction that the court below
committed a clear error of judgment in the conclusion it
reached upon a weighing of the relevant factors.' " Hanover
Potato Prods., Inc. v. Shalala, 989 F .2d 123, 127 (3d Cir.
1993) (citing Ferrero, U.S.A., Inc. v. Ozak Trading, Inc., 952
F.2d 44, 48 (3d Cir. 1991) (citation omitted)). "An appellate
court may find an abuse of discretion wher e the ``district
court's decision rests upon a clearly err oneous finding of
fact, an errant conclusion of law or an impr oper application
of law to fact.' " In re Gen. Motors Corp. Pick-up Truck Fuel
Tank Prods. Liab. Litig., 55 F .3d 768, 783 (3d Cir.) (citing
International Union, UAW v. Mack T rucks, Inc., 820 F.2d 91,
95 (3d Cir. 1987), cert. denied, 499 U.S. 921 (1991))
(hereinafter "GM Truck"), cert. denied sub. nom., Gen.
Motors Corp. v. French, 516 U.S. 824 (1995).
A.
In reviewing the District Court's order denying Sambolin
participation in the settlement, we are hamper ed by the
summary treatment given his claim by the Court. It chose
not to explain its reasoning in denying Sambolin's motion,
stating only that "Sambolin's Motion . . . for Relief from
Pretrial Order No. 1722 is DENIED." (PTO 1870). Generally
we require further explanation of an or der terminating a
litigant's claim. See Interpace Corp. v. City of Philadelphia,
438 F.2d 401, 404 (3d Cir. 1971) ("[I]t is a salutary practice
to give the litigants, either orally or in writing, at least a
9
minimum articulation of the reasons for its decision.").
Indeed, as we commented in Cendant Prides I,"[w]e have
imposed a duty of explanation on District Courts when they
conduct ``excusable neglect' analysis." Cendant Prides I, 233
F.3d at 196 (citing Chemetron Corp. v. Jones, 72 F.3d 341,
350 (3d Cir. 1995)). Yet we must acknowledge that the
District Court realized that it would face a bevy of
substantially similar claims in response to its show cause
order. As such, we will adopt, wher e relevant, the Court's
later analysis of these claims, see In r e: Orthopedic Bone
Screw Prods. Liab. Litig., C.A. No. 97-381, 2000 WL
1023782 (E.D. Pa. July 10, 2000) (PTO 1930), as it applies
with equal force, and with the same result, to Sambolin's
case.
Settlement administration in a complex class action often
requires courts to use their equitable powers under Rule 23
to manage the disparate interests competing over a finite
pool of assets with which to satisfy the class. As stated in
the Manual for Complex Litigation, "[t]he equitable powers
of the court may be invoked to deal with other pr oblems
that commonly arise during administration of the
settlement." Manual for Complex Litigation (Thir d) S 30.47
(1995) (the "Manual"). These equitable powers are retained
by the court until the settlement fund is actually
distributed. See Zients v. LaMorte, 459 F .2d 628, 630 (2d
Cir. 1972). A primary use of these equitable powers is
balancing the goals of expedient settlement distribution and
the consideration due to late-arriving class members.
Compare Georgine v. Amchem Prod., Inc., No. 93-0215, 1995
WL 251402, *5 (E.D. Pa. Apr. 26, 1995) ("This Court has an
interest in enforcing its deadlines and ensuring that this
litigation finally comes to a conclusion.") with the Manual
S 30.47 ("Adequate time should be allowed for late claims
before any refund or other disposition of settlement funds
occurs."). Integral to this balancing, however , is the court's
responsibility and "inherent power and duty to protect
unnamed, but interested persons." Zients , 459 F.2d at 630.
The Second Circuit in Zients likened those claimants
excluded from recovery in a class action to "wards of the
court," id., and we have similarly stated that "the court
plays the important role of protector of the absentees'
interests, in a sort of fiduciary capacity." GM Truck, 55 F.3d
10
at 784; see also In re Cendant Corp. Prides Litig., No. 99-
5555, 2001 WL 276677, at *6 (3d Cir. Mar ch 21, 2001).
Though we were speaking more generally in GM Truck
about the court's approval of class counsel and evaluation
of the settlement's fairness, the aggr egate nature of the
class action in no way implies that the court'sfiduciary
duties to the whole class are somehow gr eater or more
important than its duties to the individual members of the
class.
The district courts of this Circuit have fr equently
analyzed late claims in class actions under the rubric of
whether the claimant has shown "excusable neglect." See In
re Cendant Corp. Prides Litig., 189 F .R.D. 321, 324 (D.N.J.
1999); Valente v. Pepsico, Inc., 89 F .R.D. 352, 359 (D. Del.
1981); Georgine, 1995 WL 251402, at *3. There is authority
for the correctness of doing so. See Super markets Gen.
Corp. v. Grinnell Corp., 490 F.2d 1183, 1186 (2d Cir. 1974).
Indeed, this Court recently announced in a pair of decisions
from the Cendant Prides litigation that the "excusable
neglect" standard, as announced in the Supr eme Court's
ruling in Pioneer Inv. Servs. v. Brunswick Assoc. Ltd. P'ship,
507 U.S. 380 (1993), provides the analysis for consideration
of untimely claims for inclusion in a class action settlement.5
Cendant Prides I, 233 F.3d at 196; In re Cendant Corp.
Prides Litig., 235 F.3d 176, 180 (3d Cir . 2000) (hereinafter
"Cendant Prides II").
Thus we begin with Pioneer, in which the Supreme Court
addressed excusable neglect in the context of Fed. R.
Bankr. P. 9006(b)(1), governing the enlargement of time for
filing of proofs of claim in bankruptcy cases. The Court in
Pioneer noted that the genesis of the bankruptcy rule was
found in Fed. R. Civ. P. 6(b), which gover ns the
enlargement of time periods in the civil rules. Pioneer, 507
U.S. at 391. It stated that
_________________________________________________________________
5. Though the opinions in both Cendant Prides I and Cendant Prides II
were not released until after oral ar gument in this matter, we find that
neither opinion substantially alters the analysis suggested by the parties
-- namely, whether Sambolin could demonstrate"excusable neglect"
under the considerations announced in Pioneer .
11
in applying Rule 6(b), the Courts of Appeals have
generally recognized that "excusable neglect" may
extend to inadvertent delays. Although inadvertence,
ignorance of the rules, or mistakes construing the rules
do not usually constitute "excusable" neglect, it is clear
that "excusable neglect" under Rule 6(b) is a somewhat
"elastic concept" and is not limited strictly to omissions
caused by circumstances beyond the contr ol of the
movant.
Id. at 391-92 (citations omitted). As such, Pioneer rejected
the holding of some courts of appeal that the benefit of
excusable neglect could only be employed wher e late filing
was due to circumstances beyond the contr ol of the party.
Id. at 387. This analysis eschews any per se rule that
excusable neglect is unavailable to a party whose untimely
filing was due to circumstances within his or her control.6
See Cendant Prides I, 233 F.3d at 196. Indeed, in Cendant
Prides II this Court excused the late filing of a class action
proof of claim form where the "r eason for the delay . . . was
either unforeseeable sabotage by mailroom employees who
purposely misled [the claimant], or even mor e simply, a
mailroom which did not operate as it should have in the
ordinary course of business." Cendant Prides II, 235 F.3d at
183.
The fault of the untimely party is not our only
consideration in determining whether a claimant should
_________________________________________________________________
6. It also bears noting that while fault does not necessarily invalidate a
claim of "excusable neglect," the analysis applies with equal force on the
other end of the spectrum -- to those whose untimely filing was entirely
faultless. "Excusable neglect," then, is not an entirely proper label for
the
scope of inquiry available under its rationale. As the Court observed in
Pioneer, the "ordinary meaning of ``neglect' is ``to give little attention
or
respect' to a matter, or closer to the point for our purposes, ``to leave
undone or unattended to esp[ecially] through carelessness.' " Pioneer, 507
F.2d at 388 (citing Webster's Ninth New Collegiate Dictionary 791 (1983))
(emphasis in original). Thus, even though "neglect" is normally perceived
negatively to connote carelessness in pursuit of a claim, it also
"encompasses . . . simple, faultless omissions to act." Id. While
"neglect"
may not be an apt term to describe those situations in which the failure
to file timely is entirely faultless, the principles extracted from the
doctrine of "excusable neglect" apply nonetheless.
12
have the benefit of excusable neglect. Pioneer noted the
following four factors: 1) the danger of prejudice to the
nonmovant; 2) the length of the delay and its potential
effect on judicial proceedings; 3) the r eason for the delay,
including whether it was within the reasonable control of
the movant; and 4) whether the movant acted in good faith.
Pioneer, 507 U.S. at 395; see also Cendant Prides I, 233
F.3d at 196. We earlier stated, while discussing excusable
neglect in the context of Fed. R. Civ. P. 4 (regarding time for
issuing service), that the District Court should inquire into
six factors. See Dominic v. Hess Oil V.I. Corp., 841 F.2d 513,
517 (3d Cir. 1988).
1) whether the inadvertence reflected pr ofessional
incompetence such as ignorance of rules of pr ocedure,
2) whether an asserted inadvertence reflects an easily
manufactured excuse incapable of verification by the
court, 3) counsel's failure to provide for a readily
foreseeable consequence, 4) a complete lack of
diligence or 5) whether the inadvertence resulted
despite counsel's substantial good faith efforts towards
compliance . . . . Moreover, we also consider whether
the enlargement of time will prejudice the opposing
party.
Id. (citing Consol. Freightways Corp. of Del. v. Larson, 827
F.2d 916, 919 (3d Cir. 1987)). These six factors, announced
in Dominic before Pioneer was decided, present a more
specific application of the general considerations later
announced by the Supreme Court in Pioneer . We
commented in Cendant Prides I that the Dominic factors
that were not restated in Pioneer were instead subsumed in
the more general consideration of "r eason for the delay."
Cendant Prides I, 233 F.3d at 196 n.8.
Lacking any allegations of professional incompetence in
this case, it seems less important to focus on the
"inadvertence" of counsel which concer ned the Court in
Dominic. Consequently, for purposes of applying excusable
neglect principles to Rule 23, we will employ the four
factors announced in Pioneer to Sambolin's claim.
B.
We cannot agree with the District Court that Sambolin
should be excluded from the settlement class simply
13
because he failed to meet the May 15, 1997 r egistration
deadline. Rather, we are convinced in these circumstances
that Sambolin has adequately pursued his claim against
AcroMed in good faith and with reasonably timely efforts
since learning of the settlement. Under these facts, we find
that each factor of the Pioneer analysis counsels in favor of
including Sambolin within the settlement class and that the
Court abused its discretion in excluding him fr om sharing
in the remedy.
i. The Danger of Prejudice to the Non-Movant
Consideration of the prejudices created by including
Sambolin's claim within the settlement class is a unique
inquiry, for while the expansion of the plaintif f class in the
ordinary class action will be to the detriment of the
defendant, here the liability of AcroMed has been capped by
the Settlement Agreement at over $100 million. Inclusion of
Sambolin's claim, and those of others similarly situated,
has no effect on the amount AcroMed will pay to those
aggrieved by its products. The prejudice to AcroMed by
counting Sambolin's claim is similar to that in the closed-
end class action in Cendant Prides II, in which this Court
noted that inclusion of another claimant within the class
will do no detriment where the scope of the defendant's
liability has already been fixed. Cendant Prides II, 135 F.3d
at 184 ("The Court found that Cendant would not be
harmed because the original limits of Cendant's financial
obligation had not been expanded."). Indeed, in Cendant
Prides II (unlike here) Cendant would have received as a
windfall any diminution in claims caused by a plaintiff 's
exclusion from the class. "In truth, since the only
``prejudice' Cendant would suffer by being forced to pay [the
claimant] is the ``loss of a windfall,' we conclude that
Cendant will suffer no prejudice at all." Id. AcroMed would
not receive any similar windfall in this case, and thus it has
no argument that it will be prejudiced by Sambolin's
recovery.
More generally, we find it appropriate to consider the
effect of Sambolin's inclusion on those whom it might
prejudice -- namely those members of the settlement class
who filed their registrations by the May 15, 1997 deadline.
It cannot be maintained that timely registrants are more
14
deserving of remedy, for purposes of equity, than tardy
registrants with similar claims, presuming the failure to
register on time was indeed blameless. By excluding
Sambolin and other similarly situated late r egistrants from
the class, the timely registrants would r eceive what is
essentially a "windfall," comprised of some portion of the
recovery that would be owed to the otherwise deserving late
registrants. As noted in Cendant Prides II , the loss of a
windfall is not prejudicial. Cendant Prides II, 235 F.3d at
184.
Even if we were to assume, arguendo , Sambolin's
recovery prejudices other class members, there are only
approximately 100 claimants who, like Sambolin, failed to
file a timely Registration Form but didfile the Proof of
Claim form by the twice-extended June 15, 1999 deadline.
Assuming all of these claimants present valid claims for
inclusion in the class, which is by no means certain, they
would still represent only a minuscule fraction of the total
settlement class, estimated at 4,412 bone scr ew recipients,
1,424 consortium claims and 1,109 subrogation claims.
Further assuming that the claims of these 100 ar e similar
in magnitude, and thus damages, to the remainder of the
settlement class, it cannot reasonably be ar gued that the
effect of their inclusion is anything but mar ginal. See
Zients, 459 F.2d at 630.
ii. Length of the Delay and its Effect on Judicial
Proceedings
Sambolin's Registration Form was signed andfiled on
December 16, 1997, approximately seven months following
the May 15, 1997 registration deadline. His Pr oof of Claim
form, detailing the extent of his injury and other details
necessary to resolve his claim, was filed February 10, 1999,
approximately two months before the initial deadline for
that document, April 15, 1999, and over four months before
the revised deadline of June 15, 1999. Relevant here is the
seven month delay in filing the Registration For m and what
effect that delay wrought on the pr oceedings.
In its quixotic attempt to show that the delay was
unreasonably long and substantially affected the conduct of
these proceedings, the PLC argues that the early
15
registration deadline served an important purpose in
settlement administration. Among the justifications
proffered in support of the May 15, 1997 deadline are that
it helped define the class of persons to be included in the
settlement for the final fairness hearing and facilitated the
efforts of the Claims Administrator in pr eparing
mechanisms for the eventual distribution of the settlement
fund. We have substantial doubts, however , that these
factors motivated the selection of the May 15, 1997
deadline, as the District Court granted preliminary approval
to the settlement before publication notice was even given.7
Furthermore, the Claims Administrator was not appointed
until January 30, 1998, more than a month after
Sambolin's Registration Form was filed. 8
Whatever the purpose of the May 1997 registration
deadline, focus on its rationale evades the r elevant inquiry
here: how Sambolin's failure to comply with that deadline
will deter the expedient and just resolution of claims. It is
uncontested that the PLC continued to receive and process
Registration Forms throughout 1997 and 1998.
Furthermore, the process of winnowing the valid claims
from the invalid, and the compensable claims fr om the
uncompensable, did not even begin until the 1998
appointment of the Claims Administrator and the appr oval
of a Proof of Claim form thereafter . We also find it telling
_________________________________________________________________
7. We also note on this point that the date of the fairness hearing was
April 23, 1997, a week before the first deadline for receipt of the
Registration Form.
8. The Claims Administrator further attempts to justify the registration
deadline by reasoning that the early deadline aided subrogation
claimants' subsequent identification of their claims. While this may,
indeed, have been a beneficial outcome of the r egistration deadline post
hoc, we find interesting that the initial Settlement Agreement fixed one
deadline for both bone screw recipients and subrogation claimants. Thus
the fact that subrogees were later given the opportunity to "piggyback"
their claims on those of individual claimants initially could not have
justified the May 1, 1997 deadline. Nevertheless, given that the
subrogees have long been aware of the identity of those bone screw
recipients (like Sambolin) whose recovery was precluded by their
noncompliance with the deadline, his later inclusion in the settlement
class will not unduly prejudice the ability of subrogees to "piggyback" on
those late registrants who filed timely Pr oof of Claim forms.
16
that the Claims Administrator's Proposed Plan would have
included untimely registrants, with only a 20% reduction in
the "points" used to allocate equitably the settlement fund.
While we do not review the District Court's eventual
rejection of that Plan provision, we cannot ignore the fact
that, as of September 1998, the Claims Administrator
tacitly acknowledged both that inclusion of late r egistrants
was neither prohibitively difficult nor unjust to those who
met the Proof of Claim deadline.
The PLC contends that we should look back fr om our
current vantage point in assessing the influence on the
proceedings of Sambolin's seven month delay. That is, the
PLC suggests that we should measure the delay's effects on
the proceedings as of the present and not the delay's effects
on the proceedings when that delay was ended by
Sambolin's registration. As long as distribution of the
limited fund settlement remains pending, we r eject this
contention. Such a rule would be unfair, for the delay
caused by the adjudication of the late claim, and not the
lateness of the claim itself, would often give sufficient
reason to reject the claim regar dless of the effect of the
movant's actual delay. Moreover, consideration of the
current effect of the delay on the pr oceedings would conflict
with our holding that the length of the delay should be
considered in absolute terms and not by r eference to the
import of intervening circumstances. In r e O'Brien Envtl.
Energy, Inc., 188 F.3d 116, 130 (3d Cir. 1999) (holding that
the relevant time period is the delay between the date the
bankruptcy claim should have been filed and the date it
was filed, and that the Pioneer analysis should not be
affected by the significance of the intervening approval of
the reorganization plan and the debtor's expedited
schedule).
Even if we were to consider the length of Sambolin's
delay and its effect on judicial proceedings as of today, we
are unpersuaded that including Sambolin within the
recovering class would cause great dislocation in the
current administration of the settlement. While the PLC
exhorts that "myriad" administrative issues would arise
from the recalculation of the limited fund, this claim is
unsupported. The Claims Administrator was able to
17
calculate a hypothetical recovery for Sambolin's claim quite
easily in his brief to this Court. Furthermor e, as of the
current process of the litigation, class members have only
been told the number of points they are entitled under the
Settlement Agreement and can appeal the Claims
Administrator's determination of those points. Those
appeals have as much potential to upset the curr ent
distribution of claims as the inclusion of Sambolin and
other similarly situated claimants. At oral ar gument, the
Claims Administrator himself noted that distribution of the
settlement had not occurred and, even if distribution began
before resolution of this case, the awar ds could be
structured in a manner that would allow for the inclusion
of later-allowed untimely registrants. Given these facts, we
believe that any hindrance in settlement fund
administration caused by inclusion of Sambolin's claim is
too minimal to justify exclusion of his claim on that basis.9
"We conclude that where, as her e, all the equities are on
the side of the claimants, the fund has not been distributed
and the administration of the fund would be insignificantly
hampered by allowing these few late claims, appellants
should be permitted to participate in the fund." Zients, 459
F.2d at 630-31.10
In considering the effect on the proceedings, we find that
cases applying excusable neglect concepts to the time
limitation for "opting out" of a Rule 23(b)(3) class action are
conversely distinguishable from the cir cumstances here --
essentially "opting in" to a closed-end settlement fund. See
Georgine v. Amchem Prods., Inc., Civ. A. No. 95-0215, 1995
WL 251402 (E.D. Pa. April 26, 1995). Geor gine considered
the untimely requests to opt out of the class action
asbestos settlement. Relying on In re Four Seasons Sec.
Laws Litig., 59 F.R.D. 667, 677 (W .D. Okl. 1973), the court,
_________________________________________________________________
9. We caution that our conclusion on this point might be different had
Sambolin not made a timely filing of the Pr oof of Claim. The Proof of
Claim contained the bulk of the information vital to settlement
administration, including the timing, nature, and severity of the injury
and information necessary to the identification of interested subrogees.
10. The PLC's attempt to distinguish the Second Circuit's holding in
Zients on the basis that distribution of the settlement fund is imminent
is hardly convincing in this case.
18
in rejecting the excusable neglect argument of the movants,
expressed its opinion that "[a] too liberal application of
[excusable neglect] in class actions would undermine the
finality of judgments entered therein and would discourage
settlement of such actions." Georgine , 1995 WL 251402, at
*6 (quoting Four Seasons). While this r esult in Georgine had
a compelling rationale in that case, Sambolin desir es the
opposite result: inclusion in a settlement that will otherwise
bar his remedy. As such, Sambolin's claim for inclusion in
an opt-in class action lacks the potentially detrimental
effect on the process of settlement fr om which a claim for
exclusion from an opt-out class action suf fers.
iii. Reason for the Delay
Sambolin's seven month delay in filing his Registration
Form resulted from his lack of awar eness, in light of the
minimal constructive notice provided by the parties, that
his right to a remedy was being litigated in a binding class
action. Though we do not at this time opine as to the
constitutional sufficiency of the notice pr ovided under Rule
23 and Mullane v. Central Hanover Bank & T rust, 339 U.S.
306, 314-15 (1950) (requiring notice "r easonably calculated,
under all the circumstances, to apprise inter ested parties of
the pendancy of the action and afford them an opportunity
to present their objections"), we do note that, absent actual
notice mailed to his address, it is incongruous, in the
unique circumstances of this case, to find Sambolin
culpable for his failure to note a small advertisement run
once on page 50 of a newspaper he does not r eceive.11
_________________________________________________________________
11. Because notice issues of this type ar e recurring in the district
courts,
we would be remiss if we did not express our concerns about the notice
program used in this class action and suggest some better practices,
especially in the wake of the Supreme Court's discussion of Rule
23(b)(1)(B) limited fund mandatory class actions in Ortiz v. Fibreboard
Corp., 527 U.S. 815 (1999). In Ortiz, the Court expressed skepticism that
Rule 23(b)(1)(B) limited fund class actions ar e valid at all under Rule
23,
and stated that, if these class actions were to be valid, they would have
to conform closely to the contours of traditional limited fund cases that
predated Rule 23. See id. at 842-44, 864. The Court noted that one of
the important characteristics of traditional limited fund cases was a
certain level of notice: "[T]raditional limited fund actions typically
provided notice to all claimants and the opportunity for those claimants
19
Indeed, in Zients the Second Circuit found that the
plaintiffs' failure to make a timelyfiling for inclusion in a
class action settlement was blameless, despite the fact that
actual notice had been mailed to them through their
_________________________________________________________________
to establish their claims before the actual distribution took place." Id.
at
841 n.19. The Court then strongly implied that a Rule 23(b)(1)(B)
mandatory limited fund class action had to meet the same procedural
requirements as to notice as Rule 23(b)(3) actions: "It is simply
implausible that the Advisory Committee, so concer ned about the
potential difficulties posed by dealing with mass tort cases under Rule
23(b)(3), with its provisions for notice and the right to opt out, see
Rule
23(c)(2), would have uncritically assumed that mandatory versions of
such class actions, lacking such protections, could be certified under
Rule 23(b)(1)(B)." Id. at 844. Thus, Ortiz seems to imply (although it
specifically declined to rule) that the level of notice required for a
settlement like AcroMed's is the same as is r equired in a Rule 23(b)(3)
action: the best notice practicable, "including individual notice to all
members who can be identified through reasonable effort." Fed R. Civ. P.
23(c)(2). Cf. Phillips Petroleum v. Shutts, 472 U.S. 797, 811-12 (1985)
(holding that "[i]f the forum State wishes to bind an absent plaintiff
concerning a claim for money damages or similar relief at law," the
notice given "must be the best practicable").
Sambolin's brief lists the following ways that the notice program in this
case could have been easily improved thr ough more directed attempts to
determine the identities of class members who were not mailed
individual notice. First, the PLC and AcroMed could have asked the
hospitals and doctors who purchased the bone screws for a list of their
patients who had bone screws implanted, as they would presumably
have these records on file. The PLC could also have sent out a general
"Dear Doctor" letter to the orthopedic medical community, explaining the
settlement and enclosing notice packets. Finally, the PLC could have
placed ads in orthopedic trade publications asking doctors for help in
identifying the names and addresses of Acr oMed bone screw recipients.
We agree that likely all of these methods would have substantially
increased the PLC's database of class members, and some combination
of them would have constituted a reasonable ef fort to identify individual
class members.
AcroMed argues that hospitals and doctors should not be used as
notice distributors because giving notice was against their interests, as
they might themselves have been targets of lawsuits. This argument is
unconvincing. First, the AcroMed settlement immunized doctors and
hospitals from AcroMed bone screw pr oducts liability lawsuits (though
20
broker. Zients, 459 F.2d at 630. Similarly, in Cendant
Prides I, this Court held that the district court acted within
its discretion in excusing the late filings of several
claimants where the stated reasons included, among
others, "the failure of claimants to r eceive notice." Cendant
Prides I, 233 F.3d at 197.
In considering the reason for the delay, we ar e not
constricted in examining the conduct of the claimant which
contributed to the delay, but may examine as well whether
the notice given by the PLC also contributed to the delay.
See In re O'Brien, 188 F.3d at 129. In In re O'Brien this
Court stated that "although [the claimant] was careless in
not reading the Application carefully, and specifically,
paragraphs fourteen through sixteen, his neglect is
excusable since it was caused at least in part by[the
debtor's] own failure to properly alert[the claimant] that
this ``application' was really an objection to its claim." Id.
Though the Court there was discussing the clarity of
written notice, we find Sambolin's predicament to be
analogous. The constructive notice given to him was too
_________________________________________________________________
not malpractice actions), so notice was not entir ely against their
interests. Second, Sambolin notes that ther e have been many other
similar notice programs that have involved entities distributing notice
when it was possibly against their interests to do so. For example, in
securities class action lawsuits, brokers ar e routinely used to
distribute
notice, even when they are potential tar gets of the lawsuit.
Sambolin also lists ways in which the publication notice could have
been substantially improved, asserting that the publication could have
been much broader, using a mix of national and local publications.
Additionally, Sambolin submits that the PLC could have placed notices
on the internet, run radio and television advertisements, and undertaken
a free media campaign involving public service announcements. The
content of the notice publication could also have been improved. For
example, it could have contained a simple tear -off registration form, and
included an 800 number for obtaining registration materials, both of
which would have made registration much easier . The notice also did not
warn readers of the serious consequences of missing the registration
deadline: losing one's right of action with no chance to share in the
settlement fund. While all of these efforts may not be required by due
process, we are inclined to believe that some combination of them would
help to bring the notice program closer to"the best notice practicable."
21
minimal to impart blame upon him for his lack of
awareness.
In its later rejection of the excusable neglect claims of a
group of late registrants, including Sambolin, the District
Court more fully explained its application of the Pioneer
standard to those claimants and, we believe, incorrectly
found Sambolin and others blameworthy for their failure to
become aware of the settlement. See In r e: Orthopedic Bone
Screw, C.A. No. 97-381, 2000 WL 1023782 (E.D. Pa. July
10, 2000) (PTO 1930). Responding to the Court's show
cause order, the group of 168 class members who failed to
file the Registration Form by May 15, 1997 argued for
inclusion within the settlement class. Refer encing Pioneer,
the Court permitted only eight persons to participate in the
settlement, all of whom suffered fr om medical disabilities
that prevented the timely perfection of their claims. While
we do not purport to address the claims of all of those 168
class members, at least with respect to Sambolin's
inclusion within that group we must examine the District
Court's analysis of the Pioneer considerations. In setting
out those considerations, the District Court stated:
The central feature of the court's deter mination in each
of these cases is that the person's disability or other
problem was a prohibitive factor in their[sic] attempt
to perfect their [sic] claim on a timely basis. In
contrast, although other persons demonstrated the
extent of their disability and pain, the court could not
conclude as a factual matter that the injured person's
failure to prosecute a timely claim was caused by their
[sic] injury, disability or other impediment.
PTO 1930, at *11. By focusing on whether the person's
injury prohibited the timely filing of his or her claim, the
Court's considerations turned wholly on whether the
claimant's failure to file the claim by May 15, 1997 was due
to medical circumstances beyond the contr ol of the
claimant, and not on other equitable considerations such
as the prejudice to other claimants or potential effect on
judicial proceedings. Furthermore, there is no consideration
of whether the actions of the PLC or AcroMed contributed
to the delay. See In re O'Brien, 188 F.3d at 129. By making
the medical status of the claimants in May of 1997
22
dispositive of their excusable neglect claims, the Court
misapplied the holding of Pioneer that excusable neglect is
an "elastic concept" and is "not limited strictly to omissions
caused by circumstances beyond the contr ol of the
movant." Pioneer, 507 U.S. at 392. Failing to inquire
beyond the health status of the claimant in deter mining the
reason for the delay was error.
iv. Whether the Movant Has Acted in Good Faith
Given the equitable nature of our inquiry, it is of course
true that the movant must demonstrate good faith or
otherwise seek the relief of the court with clean hands. See
Gaudiosi v. Mellon, 269 F.2d 873, 881 (3d Cir. 1959). No
party has alleged that Sambolin exhibited less than good
faith in seeking redress for his injury. He acted responsibly
and with alacrity to secure a remedy for the pain allegedly
caused to him by the pedicle screw surgery. See Cendant
Prides II, 235 F.3d at 184. Absent any further evidence that
Sambolin's failure to apprise himself seasonably of the
settlement was the result of anything other than ignorance
that his rights were being litigated in a non-opt-out class
action under Rule 23(b)(1), we find that Sambolin has
displayed good faith in his pursuit of class inclusion.
IV. CONCLUSION
Because we find that the District Court did not perform
a balancing of the equitable factors of excusable neglect in
determining Sambolin's exclusion from the settlement
class, and because none of the equitable factors support
the District Court's result, we conclude that its holding was
necessarily in error. Applying the Pioneer factors to the
facts of this case, we cannot conclude that the Court
correctly considered the equities of Sambolin's claim for
inclusion in the settlement class. While "[t]here is no
question that in the distribution of a large class action
settlement fund, ``a cutoff date is essential and at some
point the matter must be terminated,' " In re Gypsum
Antitrust Cases, 565 F.2d at 1127 (citation omitted),
application of this principle must not be so rigid as to
preclude recovery by a deserving claimant. See Zients, 459
F.2d at 631.
23
Because we conclude the District Court's ruling was
inconsistent with the exercise of sound discr etion in
excluding Sambolin from the settlement class, we do not
reach Sambolin's other claims of error in this appeal.
* * *
For the foregoing reasons, we reverse the judgment of the
District Court in that portion of Pretrial Or der No. 1870
denying Sambolin participation in the settlement class, and
remand for further proceedings consistent with this
opinion.
A True Copy:
Teste:
Clerk of the United States Court of Appeals
for the Third Circuit
24