The opinion
Opinions of the United
2005 Decisions States Court of Appeals
for the Third Circuit
11-30-2005
In Re: Diet Drugs
Precedential or Non-Precedential: Precedential
Docket No. 03-3401
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PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
Nos. 03-3401, 03-3402, 03-4465 & 04-3661
IN RE: DIET DRUGS (PHENTERMINE/
FENFLURAMINE/DEXFENFLURAMINE)
PRODUCTS LIABILITY LITIGATION
Clara Clark, Linda Smart and all other
class members represented by Fleming
& Associates, L.L.P.,
Appellants in No. 03-3401
Hariton & D'Angelo, LLP and
Napoli, Kaiser, Bern & Associates, LLP,
on behalf of themselves, claimant
James Axford and similarly situated
class members represented by the
Hariton and Napoli Firms whose claims
are affected by Pretrial Order No. 2929,
Appellants in No. 03-3402
Shanne Webb-Cochran, Renai Kuykendall,
Willa Sartin, Dawn Stewart and
Joanne Valenti, on behalf of themselves
and all other class members who have
ingested fen-phen and who suffer, or
will suffer, from elevated pulmonary
hypertension not secondary to valvular
heart disease,
Appellants in No. 03-4465
Doris Weller and Ellen Carey,
whose claims are affected by
Pretrial Order No. 3849,
Appellants in No. 04-3661
Appeals from the United States District Court
for the Eastern District of Pennsylvania
(MDL No. 1203)
District Judge: Honorable Harvey Bartle, III
__________________
Argued on April 22, 2005
Before: ROTH, FUENTES and STAPLETON, Circuit
Judges.
(Filed: November 30, 2005)
Thomas C. Goldstein, Esquire (ARGUED)
Goldstein & Howe
2
4607 Asbury Place, N.W.
Washington, D.C. 20016
Howard I. Langer, Esquire (ARGUED)
Langer & Grogram
1600 Market Street, Suite 2020
Philadelphia, PA 19103
Sylvia Davidow, Esquire
Fleming & Associates
1330 Post Oak Blvd., Suite 3030
Houston, TX 77056
Mario D’Angelo, Esquire
Hariton & D’Angelo
3500 Sunrise Highway, Suite T-207
Great River, NY 11739
Paul J. Napoli, Esquire
Denise A. Rubin, Esquire
Napoli, Kaiser, Bern & Associates
3500 Sunrise Highway, Suite T-207
Great River, NY 11739
Counsel for Appellants
Robert D. Rosenbaum, Esquire (ARGUED)
Arnold & Porter
555 12 th Street, N.W.
Washington, DC 20004
3
Peter L. Zimroth, Esquire
Arnold & Porter
399 Park Avenue
New York, NY 10022-4690
John J. Cummings, III, Esquire
Cummings, Cummings & Dudenhefer
416 Gravier Street
New Orleans, LA 70130
Samuel Issacharoff, Esquire (ARGUED)
New York University Law School
40 Washington Square South
New York, NY 10012
Michael D. Fishbein, Esquire (ARGUED)
Fred S. Longer, Esquire
Arnold Levin, Esquire
Levin, Fishbein, Sedran & Berman
510 Walnut Street, Suite 500
Philadelphia, PA 19106
Counsel for Appellees
OPINION
4
ROTH, Circuit Judge:
These appeals arise from the District Court’s efforts to
oversee the Nationwide Class Action Settlement Agreement
in the multi-district (MDL) 1203 litigation between Wyeth 1
and a class comprising former users of Wyeth’s diet
medications, fenfluramine and dexfenfluramine. This appeal
is the consolidation of challenges by three different groups of
Appellants, all claiming that they should not be bound by the
Settlement Agreement. For the reasons discussed, we find
that all three groups of Appellants are bound by the
Settlement Agreement and we will affirm the District Court’s
decision.
I. The Settlement Agreement
1
In March 2002, the manufacturer of the drugs in
question changed its name from American Home Products to
Wyeth. We will refer to it as Wyeth.
5
The history of this case is detailed in In re Diet Drugs
Prods. Liab. Litig., 282 F.3d 220, 225-29 (3d Cir. 2002) and
will only be briefly summarized here. In 1999, Wyeth
reached a settlement that provided a variety of remedies for
users and former users of its diet medications. The District
Court approved the plan in Pretrial Order 1415 and the
accompanying memorandum. The remedies provided
depended on whether the class members were ultimately
diagnosed with one of several heart conditions.
Each class member was placed into one of five groups.
Class 1 consisted of class members who did not know
whether they had a condition termed FDA positive ventricular
heart disease (VHD) 2 , and was further subdivided into class
members who had used the diet drugs for more than 60 days
2
“FDA Positive VHD” refers to a severity of heart valve
regurgitation, as defined in the Settlement Agreement.
6
and class members who had used the drugs for less than 60
days. Class 2 consisted of class members who knew they had
FDA positive VHD and was also subdivided based on diet
drug usage of more or less than 60 days. Class 3 was
comprised of class members who did not know whether they
had FDA positive VHD at the time of settlement, but were
diagnosed with a less serious condition called mild mitral
regurgitation by the end of the settlement screening period.
The settlement provided funding for screening tests to
determine whether class members had qualifying heart disease
and for compensation for the cost of the drugs and medical
treatment, depending on the ultimate diagnosis. The
Settlement Agreement expressly barred participating class
members from pursuing any settled claims against Wyeth.
The settlement provided the option for class members
to opt out at the time of settlement (“initial opt outs”) or to be
7
bound by the Settlement Agreement. Those class members
diagnosed as having FDA positive VHD by a specified date
could either register for further benefits or exercise an
“intermediate opt out” and sue Wyeth in the state tort system.
In addition, those class members diagnosed as having a lesser
condition, mild mitral regurgitation, could either claim
compensation under the settlement or exercise a “back end
opt out” and sue Wyeth in the tort system. The class members
who exercised intermediate or back end opt outs are
collectively referred to as “downstream opt outs.” In
exchange for Wyeth’s waiver of a statute of limitations
defense, class members exercising downstream opt out rights
cannot sue for punitive damages.
The Settlement Agreement explicitly excluded those
individuals with a more serious condition, primary pulmonary
hypertension (“PPH”), allowing them to sue Wyeth in the
8
state tort system. The settlement did not include any recovery
for plaintiffs alleging a variety of conditions, including
neurotoxicity and elevated pulmonary hypertension (“PH”),
because the District Court found that the evidence did not
support a connection between the use of diet drugs and these
conditions.
II. Jurisdiction and Standard of Review
We have jurisdiction over Pretrial Orders 2929, 3849
and 3085 because they are all final orders of the District Court
within the meaning of 28 U.S.C. § 1291.
The District Court’s legal conclusions are subject to
plenary review. In re Prudential Ins. Co. of Am. Sales
Practices Litig., 261 F.3d 355, 363 (3d Cir. 2001). We review
the District Court’s determination of adequacy of
representation as an exercise of its discretionary authority in
class action proceedings for abuse of discretion. In re
9
Prudential Ins. Co. of Am. Sales Practices Litig., 148 F.3d
284, 299 (3d Cir. 1998). All underlying factual issues are
reviewed for clear error. Id.
III. Due Process Protections for Class Members
In all three appeals before us, Appellants argue that
they are not bound by the Settlement Agreement because their
due process rights were not upheld, either because of
inadequate notice or inadequate representation. A threshold
question in all three of these appeals is whether these
Appellants are entitled to bring a collateral attack on the
Settlement Agreement.
A class member must have certain due process
protections in order to be bound by a class settlement
agreement. The general principle is that “there has been a
failure of due process only in those cases where it cannot be
10
said that the procedure adopted, fairly insures the protection
of the interests of absent parties who are to be bound by it.”
Hansberry v. Lee, 311 U.S. 32, 42 (1940). In a class where
opt out rights are afforded, these protections are adequate
representation by the class representatives, notice of the class
proceedings, and the opportunity to be heard and participate
in the class proceedings. Phillips Petroleum Co. v. Shutts,
472 U.S. 797, 811-12 (1985). The adequate representation
requirement “serves to uncover conflicts of interest between
named parties and the class they seek to represent.” Amchem
Products, Inc. v. Windsor, 521 U.S. 591, 625 (1997). This
requirement is codified in Fed. R. Civ. P. 23(a)(4), which
requires that “the representative parties will fairly and
adequately protect the interests of the class.”
There must be a process by which an individual class
member or group of class members can challenge whether
11
these due process protections were afforded to them. Grimes
v. Vitalink Comm’ns Corp., 17 F.3d 1553, 1558 (3d Cir.
1994). This challenge can take the form of an appeal of the
class certification itself, a collateral attack on an already-
certified class, or a Rule 60(b) motion. In re Real Estate Title
& Settlement Servs. Antitrust Litig., 869 F.2d 760, 767 (3d
Cir. 1989).
Class members are not, however, entitled to unlimited
attacks on the class settlement. Once a court has decided that
the due process protections did occur for a particular class
member or group of class members, the issue may not be
relitigated. Appellants understandably rely heavily on
Stephenson v. Dow Chemical Co., 273 F.3d 249 (2d Cir.
2001), aff’d by equally divided Court, 539 U.S. 111 (2003), in
support of their insistence that they have a right to collaterally
attack the adequacy of representation determination of the
12
class action court. While Stephenson supports appellant’s
position on this issue, it is inconsistent with circuit case law
by which this panel is bound. In Carlough v. Amchem
Products, Inc., 10 F.3d 189 (3d Cir. 1993), we held that notice
and failure to exercise an opportunity to “opt out” constitutes
consent to the jurisdiction of the class action court by an
absent member of a plaintiff class even when that member
lacks minimum contact with the class action forum. Then, in
Grimes v. Vitalink Communications Corp., 17 F.3d 1553 (3d
Cir. 1994), we further held that, where the class action court
has jurisdiction over an absent member of a plaintiff class and
it litigates and determines the adequacy of the representation
of that member, the member is foreclosed from later
relitigating that issue. Thus, it follows that challenges to the
terms of a settlement agreement, itself, are not appropriate for
collateral review. See In re Orthopedic Bone Screw Products
13
Liab. Litig., 350 F.3d 360, 364-65 (3d Cir. 2003) (holding that
a “challenge to the propriety of the settlement agreement and
its terms” is foreclosed by the approval of the settlement
agreement in a final, unappealable order.)
IV. Current Challenges to the Settlement Agreement
The appeals before this Court are from three Pretrial
Orders of the District Court, all addressing variations on the
same situation. Pretrial Order 2929 (appeals docketed at 03-
3401 and 03-3402) was the denial of a motion made after
settlement by Appellants, all of whom were downstream opt
outs, arguing that their due process rights were violated by
inadequate representation at settlement. Pretrial Order 3085
(appeal docketed at 03-4465) was the denial of a motion made
after settlement by Appellants, all of whom had PH, a
condition not covered by the settlement, arguing that their due
process rights were violated by inadequate representation at
14
settlement.3 Pretrial Order 3849 (appeal docketed at 04-3661)
was the grant of a motion by Wyeth to enjoin Appellants, who
were not diagnosed by the settlement deadline, from bringing
suit in New York to challenge the adequacy of their notice
and representation at settlement.
Applying due process protections to the facts of each
set of Appellants, we find that they have already received
adequate procedural protections. No collateral review is
available when class members have had a full and fair hearing
and have generally had their procedural rights protected
during the approval of the Settlement Agreement. Collateral
review is only available when class members are raising an
issue that was not properly considered by the District Court at
3
PTO 3085 also included class members who have PPH,
raising a challenge based on inadequate representation, but those
PPH-diagnosed class members are not part of this appeal.
15
an earlier stage in the litigation. Here, the District Court
carefully examined the adequacy of representation and
procedural protections at the fairness hearing, and that
examination duly covered the variations presented by the
appeals before us. Thus, the District Court was correct in
rejecting all three challenges. To illuminate this conclusion,
we will address the three appeals before us individually.
A. Downstream Opt Outs
As to the first group of Appellants, the downstream opt
outs, it is clear that the issue of adequacy of representation
was explicitly addressed by the District Court at the fairness
hearing. See PTO 1415 Memorandum at 99-122.
The District Court specifically considered Appellants’
arguments regarding intraclass conflicts. The District Court
gave considerable treatment to the argument that this
Settlement Agreement had problems analogous to those in
16
Amchem Products, Inc. v. Windsor, 521 U.S. 591 (1997).
The District Court specifically found that there is no “futures”
problem with this Settlement Agreement because, unlike in
Amchem, where asbestos class members could not know of
their exposure or disease, potential class members are aware
of their exposure to diet drugs and any injuries from that
exposure are detectable in medical tests – the injuries will not
remain latent for 30 or 40 years. The District Court
specifically found that the medical evidence overwhelmingly
shows that the heart conditions caused by these diet drugs are
detectable shortly after use of the drugs ceases and that there
is no evidence that the conditions caused by these drugs are
latent. See PTO 1415 Memorandum at 105 (discussing
numerous medical studies).
Further, the District Court also rejected the argument
that this Settlement Agreement lacks the structural protections
17
that doomed the settlement agreement in Amchem. The
District Court specifically found that this Settlement
Agreement includes structural protections to protect class
members with varying diagnoses, pointing to the ability of a
particular class member to “step up” to higher compensation
levels as their disease progresses. PTO 1415 Memorandum at
113-4.
The District Court also considered the argument that
class members who would exercise downstream opt out rights
were subject to an improper trade-off during settlement
negotiations. After considering the relevant case law, the
District Court concluded:
In sum, the court finds that Class
Counsel’s agreement to waive
punitive damage claims on
intermediate and back end opt
outs in exchange for protection
against statute of limitations and
claim splitting defenses represents
18
a fair and wholly appropriate
trade-off. These provisions do not
represent an improper allocation,
nor do they affect the procedural
fairness of the settlement.
PTO 1415 Memorandum at 115.
These Appellants argue that because the specific
individuals who are Appellants in this case were not the
specific individuals who raised objections at the fairness
hearing, they must have the opportunity to litigate the issue
themselves. This argument ignores the underpinnings of the
class action mechanism. If this argument were to be accepted,
each class member would be able to relitigate each issue,
rendering the class action mechanism pointless. While it is
true that the specific Appellants in this case did not,
themselves, litigate this issue at the fairness hearing, other
class members who are representative of them did litigate this
issue and the District Court considered all of the arguments
19
and evidence in that regard. Appellants were represented by
other class members at the fairness hearing and because the
District Court decided that the class was adequately
represented, the issue of adequate representation of
Appellants has already been fairly litigated.
Appellants also argue that this Court has not yet
addressed the adequacy of representation because the appeal
from the approval of the class settlement was voluntarily
withdrawn due to settlement between Wyeth and the
individual class members filing that appeal. There is no
support for the proposition that because a party does not
pursue an appeal of a District Court’s order, that order does
not bind the class members or cannot be considered for its
preclusive effect. See Orthopedic Bone Screw, 350 F.3d at
361 (noting that “appeal of class settlement was voluntarily
dismissed, rendering the District Court’s order final and
20
unappealable.”)
It is also worth noting that this Court has, in other
appeals from this class settlement, addressed the adequacy of
representation. See In re Diet Drugs, 282 F.3d 220, 231 (3d
Cir. 2002) (“That various subclasses in the Brown class could
find themselves in competition does not by itself establish an
actual conflict undermining adequacy of representation”), In
re Diet Drugs, 93 Fed. Appx. 338, 344 (3d Cir. 2004)
(observing “[t]hat certain class members were differently
situated with respect to filing deadlines should not be taken to
mean that their overall interests diverged from that of the
general class” and concluding that representation was
adequate).
This first group of Appellants, the downstream opt
outs, were adequately represented at settlement and that same
issue has already been raised and litigated. These Appellants
21
have been afforded the due process protections necessary for
the Settlement Agreement to bind them. Therefore, these
Appellants cannot now challenge the adequacy of their
representation yet again by bringing this collateral attack.
B. Elevated Pulmonary Hypertension
The second group of Appellants, those with PH, also
cannot bring a collateral attack on the class settlement at this
stage in the litigation. This is for the same fundamental
reason as the downstream opt outs – the issues raised here
were raised by class members at the fairness hearing and
rejected by the District Court. The District Court heard
extensive testimony concerning various conditions and their
connection to diet drug use and approved the exclusion of PH
from the Settlement Agreement. PTO 1415 Memorandum at
29-41. In fact, the District Court specifically treated PH as a
symptom of many heart conditions, rather than a separate
22
injury caused by diet drugs in its detailed discussion of the
medical evidence. PTO 1415 Memorandum at 28-9, 32, 37,
39. Further, the District Court approved the Settlement
Agreement’s definition of PPH, a serious lung disease that
these Appellants argue is based on a flawed definition that
wrongly excludes them. PTO 1415 Memorandum at 37-41.
As discussed above, the District Court heard and
rejected arguments that representation was not adequate for
those with differing conditions. PTO 1415 Memorandum at
113-5. The District Court specifically found that class
members had “meaningful opt out rights,” unlike the class
members in Amchem. PTO 1415 Memorandum at 114. In
addition, beyond the District Court’s consideration of these
issues at the fairness hearing, the District Court has already
heard and rejected collateral challenges by various class
members based on these same arguments. See PTO 2383
23
(appointing special master to administer screening of class
members who meet requirements for PPH delineated in PTO
1415), PTO 2623 (concluding that moving class members do
not meet definition of PPH, denying argument that definition
of PPH should be expanded, and finding that class members’
due process rights were not violated by the Settlement
Agreement).
Thus, the District Court not only addressed the issues
raised here by the PH Appellants at the fairness hearing, but
has also subsequently addressed the adequacy of their
representation and due process protections. As such, this
group of Appellants has received the due process protections
necessary for them to be bound by the class settlement and
cannot relitigate those issues here.
C. Post-Screening Deadline Diagnoses
The third group of Appellants, who were diagnosed
24
after the screening deadline expired, face a similar problem as
the first two sets of Appellants. Again, fairness of notice and
adequacy of representation have already been litigated.4
The District Court’s approval of the Settlement
Agreement concluded that the notice provided was more than
4
As a threshold matter, the jurisdiction of the District
Court over the third group of Appellants is disputed. The
Appellants argue that the District Court had no independent
basis of jurisdiction over them because they brought their suit
challenging the Settlement Agreement in New York. This
argument is without merit. Appellants brought suit in New York
state court and Wyeth removed the case to federal court. The
MDL panel then transferred the case to the District Court. The
case law, generally, supports the position that the MDL transfer
gave the District Court jurisdiction. See, e.g., In re Auto
Refinishing Paint Antitrust Litig., 358 F.3d 288, 197 n.11 (3d
Cir. 2004). PTO 1415 gives the District Court continuing
jurisdiction over “this action and each of the Parties, including
[Wyeth] and the class members, to administer, supervise,
interpret and enforce the settlement in accordance with its
terms.” PTO 1415 at 8. In addition, this Court has already
rejected a similar argument by other diet drugs class members.
See In re Diet Drugs, 282 F.3d 220, 230 (3d Cir. 2002),
(denying petition for writ of mandamus).
25
adequate. In fact, it appears from the record that these
Appellants received actual notice. In addition, these
Appellants are essentially relying on the same “futures”
argument that was thoroughly considered and rejected by the
District Court, as discussed above. PTO 1415 Memorandum
at 113-5. Also, as discussed above, the District Court
considered and rejected the suggestion that there were
disabling intraclass conflicts that compromised the adequacy
of representation. PTO 1415 Memorandum at 113-4.
Finally, these Appellants are attempting to factually
challenge the District Court’s conclusion that VHD is not
latent. This challenge is clearly inappropriate as it is not a
component of a due process challenge, appropriate for
collateral attack. See Orthopedic Bone Screw, 350 F.3d at
364-65 (holding that a collateral challenge to class
settlement’s terms is foreclosed). This claim could be
26
properly raised in a Rule 60(b) motion with new evidence
supporting the claim, if such evidence exists. Appellants do
note that they have filed a Rule 60(b) motion with the District
Court, but that the motion has been stayed pending the
outcome of other litigation. Regardless of that fact, the
District Court’s finding regarding the non-latent nature of
VHD should not be considered in this appeal.
V. Conclusion
All three sets of Appellants have had a full and fair
opportunity to be heard and have already raised and litigated
the challenges they argue here. It can be said “that the
procedure adopted, fairly insures the protection of the
interests” of these parties, who are properly bound by the
Settlement Agreement. Hansberry, 311 U.S. at 42. Thus, all
three groups of Appellants cannot collaterally challenge the
class settlement here and the District Court will be affirmed.
27