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Precedential or Non-Precedential: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