Petition for Writ of Certiorari — Wyeth v. Smart

Supreme Court brief2004

Ask Donna

What actually matters in this document.

Text

7 FILED

J4 427 SEP 29 2004

No. 04-

gat Sal Wal <i 8 -e al et =)

IN THE

‘Supreme Court of the United States

WYETH,

Petitioner.

Vv.

LINDASMART, et al.,

Respondents.

ON PETITION FOR A WRIT OF CERTIORARI TO THE

UNITED STATES Court OF APPEALS FOR THE THIRD CIRCUIT

PETITION FOR A WRIT OF CERTIORARI

Rosert D. ROSENBAUM Peter L. ZIMROTH

JEROME I. CHAPMAN Counsel of Record

SARAH M. BRACKNEY ARNOLD & PorTeR LLP

RICHARD KORNYLAK 399 Park Avenue

ARNOLD & PorTER LLP New York, NY 10022

555 12th Street, N.W. (212) 715-1010

Washington, D.C. 20004

(202) 942-5862

Counsel for Petitioner

189929 cr

COUNSEL PRESS

(800) 274-3321 + (800) 359-6859

QUESTIONS PRESENTED

Whether the Court of Appeals gave undue deference to

state courts in restricting the power of federal courts

effectively to enforce their own judgments and protect

their own jurisdiction over class action settlements which

impose limitations on class members’ state court

lawsuits.

Whether the Court of Appeals misperceived this Court’s

decisions in Amchem Products Inc. v. Windsor, 521 U.S.

591 (1997), Ortiz v. Fibreboard Corp., 527 U.S. 815

(1999), and Phillips Petroleum Co. v. Shutts, 472 U.S.

797 (1985), concerning due process principles governing

class action notices and thereby undermined the viability

and enforceability of federal class action settlements by

construing their terms against the settling defendant.

PARTIES TO THE PROCEEDING BELOW AND

RULE 29.6 STATEMENT

Petitioner Wyeth has no parent company, and no publicly

held company owns more than 10 percent of Wyeth’s stock.

Respondents are Linda Smart, Clara Clark, George M.

Fleming, Fleming & Associates, L.L.P., Mike O’Brien,

Michael C. Abbott, Keith K. Barlow, Ruby S. Barlow,

Cherry Barnes, Joe Wayne Burton, Nora K. Burton, Lonelle

S. James, Michael J. Miller, Kenneth W. Smith, Miller &

Associates, Edward A. Williamson, Fenton B. DeWeese, II,

The Law Office of Edward A. Williamson, Merrida Coxwell,

Charles R. Mullins, Coxwell & Associates, PLLC,

Eugene C. Tullos, Linda Eichmiller, Brenda Cook,

Richard Cook, Doris Caldwell, Susan McCarty, Jim McCarty,

Jr., Julia Campbell, Carolyn Winters, Bobby G. Winters,

Macy Houston, and John F. Houston.

TABLE OF CONTENTS

Page

GUESTIONS PRESENTED .... 00.00. .0ccesese i

PARTIES TO THE PROCEEDING BELOW AND

ti) KS oyy ye" |, 5 il

po Rs So yy 9) rr lil

TABLE OF CITED AUTHORITIES ............ Vv

po FS eo & .. rr Viil

SE l

STATEMENT OF JURISDICTION ............. 1

STATUTORY PROVISIONS INVOLVED ....... 1

eee ee re 2

SrAseeeens OF IHECASE ...............5. 3

A. The Class Action Settlement............. 3

B. Respondents’ Lawsuits and the District

| Bere eerie eee 6

C. The Court of Appeals’ Reversal .......... i 2

Contents

REASONS FOR GRANTING THE PETITION ...

PTET TT ee yee te Peer Trea TT Te

Il.

THE COURT OF APPEALS’ DECISION

PRESENTS AN IMPORTANT QUESTION

BECAUSE IT IMPROPERLY BALANCES

THE RESPECTIVE ROLES OF THE

FEDERAL AND STATE COURTS IN

ENFORCING A FEDERAL COURT CLASS

ACTION SETTLEMENT ...............

THE COURT OF APPEALS’ DECISION

PRESENTS AN IMPORTANT QUESTION

BECAUSE IT MISPERCEIVED THIS

COURT’S PRIOR TEACHINGS ON THE

DUE PROCESS REQUIREMENTS FOR

CLASS NOTICES AS REQUIRING AN

UNDULY CONSTRICTED READING OF

SETTLEMENT AGREEMENTS .........

oo ee re re a er ee

Page

OO ET

TABLE OF CITED AUTHORITIES

Page

Cases °

Amchem Prods. Inc. v. Windsor, 521 U.S. 591 (1997)

Gee PT Eee TAU PC ee TC CULEC CTT CT eee ee passim

In re Airline Ticket Comm'n Antitrust Litig., 268 F.3d

Dae Ce Gs PED oko vores ba coh eee eee 24

In re Cendant Corp. PRIDES Litig., 233 F.3d 188

pe | ee oe ee eet ee 23

In re Diet Drugs (Phentermine, Fenfluramine,

Dexfenfluramine) Prods. Liab. Litig., MDL

No. 1203, 2000 WL 1222042 (E.D. Pa. Aug. 28,

EP OEP T ESE Se ere ree res ee 3, 4, 5, 6

In re Holocaust Victim Assets Litig., 282 F.3d 103

Cee Rs Se as wo ceeceek Fou Verne eee: 24

Int’] Longshoremen ss Ass'n v. Philadelphia Marine

Trade Ass'n, 389 U.S. 64 (1967) ............. 20

Livingstone v. N. Belle Vernon Borough, 91 F.3d 515

pe | eee worrr rc ye Try rere rrr ee 23

Ortiz v. Fibreboard Corp., 527 U.S. 815 (1999)

‘pda pS SASS Saw Pe Gat Neu ee ere eates cee i, 9, 22

Phillips Petroleum Co. v. Shutts, 472 U.S. 797

CRE Ss ena we ek oe ee eo eens tr oe i, 9, 22

Cited Authorities

Page

Pretrial Order No. 3888, MDL 1203 (E.D. Pa.

A SE bie vk evil cee ek ake re ce ee 11

Pretrial Order No. 3962, MDL 1203 (E.D. Pa.

ee By Piro or anor 11

Schmidt v. Lessard, 414 U.S. 473 (1974) ......... 20

United States v. New York Telephone Co., 434 U.S.

Se PE Die eee tee Hed 0 21

Statutes

ra RED i's 6x55 on Seek eee |

All Writs Act, 28 U.S.C. § 1651(a) ............ ‘7, ae

Anti-Injunction Act, 28 U.S.C. § 2283 ......... passim

Rules

FEDERAL RULES OF CiviL PROCEDURE 23(c)(2)(B) ... 25

FEDERAL RULES oF CiviL PROCEDURE 65(d) ........ 19, 20

Vil

Cited Authorities

Other Authorities

Alex Raskolnikov, Note, /s There a Future for Future

Claimants After Amchem Products, Inc. v.

Windsor?, 107 YALE L.J. 2545 (1998) .........

Francis E. McGovern, Settlement of Mass Torts in a

Federal System, 36 Wake Forest L. Rev. 871

NE wravcn hoe tS LER Uc aciee cae eas

Richard A. Nagareda, Autonomy, Peace, and Put

Options in the Mass Tort Class Action, 115 Harv.

ic Pe Es vk < oC dvk oxerwke eee veese

Treatises

13 WILLISTON ON ConTRACctTs § 38:15 (4th ed. 2000)

SR ERO ADD. EER SPESCAEASPESseCwAa s@-seéeeanrtwve2en es 8 0 @

2 CoRBIN ON ConTRACTS § 5.27 (rev. ed. 1995) ....

Herbert B. Newburg & Alba Conte, NEwBuRG ON

Crass Actions § 11.53 (3d ed. 1992) ..........

RESTATEMENT (SECOND) OF Contracts § 205 (1981)

2:3 9 6 228 O62 Oe. .4 OO 2S OS 2-8 OS C'S OE O.s.F BS OO. 4 OS SO

Page

ee nO eR eT a ee

Vill

TABLE OFAPPENDICES

Appendix A — Opinion Of The United States Court

Of Appeals For The Third Circuit Dated May 25,

5 ee ye eer a ny ee

Appendix B — Memorandum And Pretrial Order

No. 3088 Of The United States District Court For

The Eastern District Of Pennsylvania Dated

Sg Pe eer ere er ere eee

Appendix C — Pretrial Order No. 2883 Of The

United States District Court For The Eastern

District Of Pennsylvania Dated June 10, 2003

2.8 2 OC_6 2.0 2 't: 2 eo 2 8.8 O20 €:82'O OO 8 2 eee 22S 2S 8 Oe Se ee

Appendix D — Memorandum And Pretrial Order

No. 2828 Of The United States District Court For

The Eastern District Of Pennsylvania Dated

EN Ss Si oadd a isa Srnar es conweces

Appendix E — Memorandum And Pretrial Order

No. 2717 Of The United States District Court For

The Eastern District Of Pennsylvania Dated

PU Ps PU eos 183 ea a eRe 8 oko es

Appendix F — Memorandum And Pretrial Order

No. 2680 Of The United States District Court For

The Eastern District Of Pennsylvania Dated

SP UL EE no obs uu 3s b 4 Gb Sa yh ae baceus

Page

56a

64a

69a

125a

Appendices

Page

Appendix G — Memorandum And Pretrial Order

No. 2625 Of The United States District Court For

The Eastern District Of Pennsylvania Dated

Se SCRE 3 is 6asaeav denn ee eee ees 146a

Appendix H — Order Of The United States Court

Of Appeals For The Third Circuit Denying Petition

For Rehearing Dated June 29, 2004 ............ 155a

Petitioner Wyeth respectfully petitions for a writ of

certiorari to review the judgment of the United States Court

of Appeals for the Third Circuit in this case.

OPINIONS BELOW

The opinion of the Court of Appeals is reported at 369

F.3d 293 (2004) and is reproduced in the appendix (App. at

la-55a). The United States District Court for the Eastern

District of Pennsylvania issued six injunctions that were

reviewed by the Third Circuit. Those orders are unreported

and are reproduced in the appendix (App. at 56a-154a).

The order of the Court of Appeals denying petitioner’s

petition for rehearing and for rehearing en banc is unreported

and is reproduced in the appendix (App. at 155a-157a).

STATEMENT OF JURISDICTION

The judgment of the Court of Appeals was entered on

May 25, 2004. Petitioner’s timely petition for rehearing was

denied on June 29, 2004. This Court’s jurisdiction is invoked

under 28 U.S.C. § 1254(1).

STATUTORY PROVISIONS INVOLVED

The All Writs Act, 28 U.S.C. § 1651(a), provides that:

The Supreme Court and all courts established by

Act of Congress may issue all writs necessary or

appropriate in aid of their respective jurisdictions

and agreeable to the usages and principles of law.

The Anti-Injunction Act, 28 U.S.C. § 2283, provides that:

A court of the United States may not grant an

injunction to stay proceedings in a State court

except as expressly authorized by Act of Congress,

or where necessary in aid of its jurisdiction, or to

protect or effectuate its judgments.

INTRODUCTION

The Court of Appeals’ decision has widespread

implications for the respective roles of the federal and state

judiciaries in enforcing federal court class action settlements

of mass tort claims. The settlement at issue here permits class

members to sue Wyeth in state or federal court if they

were unaware of their injury at the time of the settlement,

but bars class members from seeking punitive or similar

non-compensatory damages in their suits. Even though the

settlement expressly vests “continuing and exclusive”

jurisdiction in the District Court to enforce its terms, the

Court of Appeals’ decision severely limits the power of the

federal settlement court to prevent respondents’ blatant

attempts to evade the punitive damages bar in their state court

lawsuits. The Court of Appeals shifted to those state courts

the responsibility for interpreting and enforcing the federal

court settlement. The Court of Appeals’ unprecedented

conclusion that this result is required by principles of

federalism and comity is contrary to law and elevates those

principles above the paramount requirement that a federal

court must have the ability to protect its own jurisdiction

and effectuate its own judgment. Petitioner respectfully urges

this Court to hear this case and correct that improper balance.

This case has broader implications than merely the

particular settlement at issue here, although there are

approximately 30,000 class members with similar suits

pending in state courts at this time. Professor John Coffee

testified that this Settlement “should be and will be the model

for the future for dealing with large scale mass torts.”! That

is so, he testified, because this settlement, by permitting

subsequent class member lawsuits, “does not run afoul of

any of the concerns” expressed by this Court in Amchem

Products Inc. v. Windsor, 521 U.S. 591 (1997), about binding

class members unaware of an injury.” The Court of Appeals’

decision here, however, will be the death knell of this

innovative settlement structure.

STATEMENT OF THE CASE

A. The Class Action Settlement

In September 1997, Wyeth ceased marketing two

prescription anti-obesity medications, Pondimin and Redux,

in response to reports associating those drugs with valvular

heart disease (“VHD”), a disease of the aortic or mitral valve

of the heart. After two years of extensive litigation involving

thousands of lawsuits, Wyeth entered into a nationwide class

action settlement agreement (the “Settlement”). The District

Court approved the Settlement. See In re Diet Drugs

(Phentermine, Fenfluramine, Dexfenfluramine) Prods. Liab.

Litig., MDL No. 1203, 2000 WL 1222042 (E.D. Pa. Aug. 28,

1. Tr. of Fairness Hearing of May 3, 2000 (Coffee), at 237

(Docket No. 99-20593 (E.D. ie entered June 28, 2000, at 1051 of

MDL-1203).

2. Id. at 236.

2000) (order approving settlement). The class encompasses

all persons in the United States who had used either of those

drugs, almost 6 million people.

Wyeth agreed to pay up to $3.75 billion under the

Settlement. A portion of those funds supports a nationwide

medical monitoring program. Qualifying class members

found to have VHD may receive substantial compensation

under the Settlement. In the alternative, if they were unaware

of their injury at the time of the Settlement and learn of such

an injury through the Settlement’s medical monitoring

program or otherwise, they may then exercise an

“Intermediate Opt-Out” or similar right (referred to here as

“IOO”) and sue Wyeth in the tort system for compensation.

In approving the Settlement, the District Court explained that

it “provides multiple opportunities for class members to gain

information concerning the injuries they have suffered as a

result of taking Pondimin and Redux and to opt-out of the

settlement in light of the information gained through those

opportunities.” Jn re Diet Drugs, 2000 WL 1222042, at *25.

100 plaintiffs remain class members, and their lawsuits

are governed by provisions of the Settlement in a number of

respects. For example, the Settlement permits IOO plaintiffs

to sue only based on VHD and not based on any other

condition. IOO plaintiffs may not assert claims for consumer

fraud or medical monitoring. And the Settlement restricts

certain uses of any prior verdict, judgment or factual finding.

Moreover, and of central importance to the Settlement,.

it provides that an IOO plaintiff “may not seek punitive,

wa,

exemplary, or any multiple damages.” JA at 616.° In return,

Wyeth agreed, among other things, not to assert the statute

of limitations against IOO plaintiffs. The District Court

found, in approving the Settlement, that the prohibition

against punitive, exemplary or multiple damages “represents

a fair and wholly appropriate trade-off” in light of the

significance of Wyeth’s waiver of limitations defenses.

In re Diet Drugs, 2000 WL 1222042, at *49 n.22. That waiver

“serve[s] to protect the class against some of the main risks

they face toward recovery.” Jd.

Before approving the Settlement, the District Court

directed an extensive notice plan, including broadcasts on

network and cable television and on radio, publication in

newspapers and in many magazines, and an enormous mailing

of Notice packages. The Notice package explained the

medical issues relating to VHD and summarized in some

detail the complex provisions of the Settlement. The Notice

outlined the options available to class members, including

their right to opt out of the class at that time as well as the

availability of possible IOO rights at a later time. The Notice

emphasized the restrictions on IOO suits, including that they

could “not seek punitive or multiple damages.” App. at 3la

(quoting Notice). ris

The Settlement provided, as a condition to Wyeth’s

obligations, that the District Court must retain “continuing

and exclusive” jurisdiction “to administer, supervise,

interpret, and enforce [the Settlement] in accordance with

its terms.” JA at 699-700. Upon approving the Settlement,

the District Court accordingly entered an order retaining

3. Citations to the Joint Appendix submitted to the Third Circuit

will be citedas “JA at.”

exclusive jurisdiction, including jurisdiction “to enter such

other and further orders as are needed to effectuate the terms

of the Settlement.” Jn re Diet Drugs, 2000 WL 1222042,

at *72. 5

B. Respondents’ Lawsuits and the District Court’s

Injunctions

Class member-respondents Clara Clark and Linda Smart

chose not to opt out of the class. They subsequently exercised

IOO rights, however, and sued Wyeth in Orange, Texas and

in Alice, Texas, respectively, based on alleged VHD.

They proceeded to litigate their claims in a manner that made

clear they sought more than compensatory damages in order,

as they admitted in open court, to obtain “moral vindication.”

JA at 2574. While their complaints did not explicitly assert

a claim for punitive damages, the District Court found that

“what [Mr. Fleming, their common counsel] is not doing in

name, he is doing in substance” by means of inflammatory

evidence and arguments designed to inflate an award for pain

and suffering. App. at 138a.

The District Court first enjoined Mss. Clark and Smart

and their attorney from using evidence or arguments designed

to obtain punitive, exemplary or multiple damages. App. at

146a-154a (Clark) and 135a-145a (Smart). They flouted and

evaded those injunctions, making clear their continued intent

to seek punitive or exemplary damages in substance if not in

name. See App. at 125a-134a. They argued they did not know

what specifically they were enjoined from doing because of

the general wording of the injunctions. After three separate

such incidents in the Clark and Smart cases, id., the District

Court found that their counsel was engaged in “a blatant

assault aimed at flouting [the prior injunction] of this

court and undermining the carefully crafted” Settlement.

App. at 130a.

Because of such persistent and provocative behavior, and

in order to “eliminate as much chance for evasion as

possible,” the District Court found it necessary to

review respondents’ trial plan with the parties. App. at 74a,

133a-134a. Based on that review, the Court made detailed

rulings, enjoining specific evidence or categories of evidence

whose “sole or predominate purpose” the Court found was

to “inflam[e] the jury to punish Wyeth... .” App. at 73a.

The Court ruled that certain other evidentiary questions

would be left to the state trial court. See, e.g., App. at 76a.

See generally App. at 69a-124a.

The other respondents had also exercised IOOs, had sued

in state courts in Mississippi and Georgia, and had proposed

to use the same evidence as that proffered in the Clark and

Smart cases. The District Court subsequently issued virtually

identical injunctions against those respondents as were issued

against respondents Clark and Smart. App. at 64a-68a and

56a-63a.

C. The Court of Appeals’ Reversal

The Third Circuit Court of Appeals found that the District

Court had the power to issue these injunctions under the

All Writs Act, 28 U.S.C. § 1651(a), and an exception to the

Anti-Injunction Act, 28 U.S.C. § 2283. The Court referred

to the Settlement as “a landmark effort to reconcile the rights

of millions of individual plaintiffs with the efficiencies and

fairness of a class-based settlement. Critical to this effort,”

the Court continued,

was the allowance of [IOOs], so that potential

class members were not faced with an all-or-

nothing decision at the threshold. To make this

allowance meaningful, the settlement had to

protect Wyeth against its largest fear, potentially

ruinous punitive damage awards. At the same

time, it had to allow [IOOs] to have a fair chance

to litigate their claims and obtain those damages

that were expressly preserved.

App. at 51a. The Court found “justifiable” the District Court’s

concern “that the plaintiffs were seeking to obtain through

the back door what they were barred from receiving through

the front.” App. at 12a. The Court acknowledged that “the

punitive damages release is a central pillar” of the Settlement

and that the District Court must have the power to give effect

to that provision if the Settlement and the District Court’s

jurisdiction are not to be rendered “nugatory.” App. at 27a.

The Court of Appeals found that the District Court had

entered the injunctions at issue “in order to protect the

settlement against guerilla warfare from the opt-out lawyers.”

App. at 22a.

The Court of Appeals nevertheless found that the District

Court had erred in entering the injunctions at issue, except

to the extent that they prohibited the use of evidence relevant

~ “exclusively” to punitive damages, i.e., evidence about

Wyeth’s sales, profits and net worth. App. at 40a.

(1) The Court of Appeals concluded that the injunctions

went too far over “appropriate boundaries in relation to state

courts.” App. at 7a. The injunctions “disrupt[ed] the state

court’s ability to manage its own judicial process” and failed

to “minimize[] entanglement in the state judge’s ability to

supervise judicial proceedings in his own courtroom.”

App. at 50a-51a. The District Court had “effectively adopted

the role of a trial judge balancing probative value against

unfair prejudice” and had therefore unduly intruded into the

state court’s function. App. at 44a. For essentially the same

reason, the Court of Appeals also found that the injunctions

were not “workable.” App. at 47a-51a.

(2) To the extent the injunctions barred the use of

evidence which was not only related to punitive damages

but which was also probative of liability, causation or

compensation, the Court of Appeals also stated that those

orders were “not fairly comprehended within the terms of

the settlement agreement and class notice.” App. at 7a.

This was so even if such evidence was offered, as the District.

Court had found, for the “sole or predominant purpose” of

inflaming the jury to punish Wyeth. App. at 73a. The Court

of Appeals found it necessary to “strictly construe” the

Settlement’s restrictions, largely based on its understanding

of this Court’s emphasis on due process constraints on the

binding effect of class action settlements on absent class

members in Ortiz v. Fibreboard Corp., 527 U.S. 815,

845-48 (1999); Amchem Prods. Inc. v. Windsor, 521 U.S. 591,

620 (1997); and Phillips Petroleum Co. v. Shutts, 472 U.S.

797, 812 (1985). App. at 5a. Although the class Notice here

clearly advised class members of the restriction against their

seeking punitive, exemplary or multiple damages, the Court

was concerned that the Notice did not expressly tell class

members that this restriction could have an impact on their

strategy in litigating compensatory damages. The Court of

Appeals therefore indicated that the Settlement should not

be interpreted as permitting the District Court to prohibit

class members’ use of evidence probative of compensatory

damages, even if offered for the sole or predominant purpose

of inflaming the jury so that it awards inflated damages.‘

(3) Nevertheless, the Court of Appeals acknowledged

that the Settlement does in fact preclude the use of tactics by

class members to inflame the jury in order to obtain an

inflated compensatory damage award. The state court, said

the Court of Appeals, had an obligation under the Settlement

to preclude the use of such tactics. The federal settlement

court, however, could not do so. In a comment which goes

to the heart of the decision, the Court observed that, while it

had limited the District Court's ability to do so,

the state courts are presumably mindful of the

obligation to honor the settlement agreement, and

to ensure that the parties do not evade it. That

will undoubtedly impel the state courts during trial

to exclude evidence when its prejudicial effect

(namely its tendency to inflame the jury and

4. In the Clark and Smart state court actions, Wyeth had offered

to stipulate that, in order to obtain a judgment against it, those

respondents would not need to demonstrate that Wyeth breached a

duty or that its drugs could cause VHD, thereby eliminating any need

for evidence probative of Wyeth’s fault. Respondents would only

need to show that they had VHD, that it was in fact caused by Wyeth’s

drugs (rather than by a number of other widely-known causes) and

the amount of their damages. The state court in Smart accepted that

proposal, but the state court in Clark rejected it, while suggesting

that a different type of stipulation might be acceptable. The Court of

Appeals mistakenly stated that Wyeth did not offer the type of

stipulation suggested by that Court. App. at 17a-18a, 45a-46a.

But Wyeth did in fact submit a revised stipulation ‘in Clark that

incorporated the state judge’s suggestions. JA at 3425, 3428, 3429,

enclosing proposal at 3426-27.

11 .

improperly inflate compensatory damages)

outweighs its probative value.

App. at 53a (emphasis added). The Court of Appeals also

stated that the District Court was “free to consider other

measures,” aside from imposing evidentiary restrictions,

“that will effectuate the limitations of the settlement

agreement.” App. at 53a. One example offered by the Court

of Appeals was that the District Court could consider ordering

the parties to stipulate to a bifurcated trial in which damages

are determined apart from liability. The Court of Appeals

made clear, however, that, even as to this alternative form of

possible relief, the federal court would be subservient to the

state courts. The Court of Appeals stated that this form of

relief would only be permissible “in the event that the state

court were to deem it advisable.” App. at 53a.

The Court of Appeals vacated the District Court’s

injunctions and remanded with instructions to modify them

“in accordance with this opinion.” App. at 55a.°

5. Upon remand, the District Court has modified its injunctions

to require the parties to stipulate to bifurcation in their state court

trials, as‘suggested by the Court of Appeals, although, pursuant to

its decision, “the state trial judge would have the final word.”

Pretrial Order No. 3888, MDL 1203 (E.D. Pa. Aug. 30, 2004), at-S.

It is not yet known whether those state courts will approve such

bifurcated trials. The respondents have already filed a further appeal

to the Third Circuit Court of Appeals from those modified injunctions

and have also filed a petition for writ of mandamus in that Court,

arguing that the modified injunctions are inconsistent with the

Third Circuit’s decision. See Docket Nos. 04-3591 (appeal) and

04-3643 (petition for mandamus). The District Court stayed the

effectiveness of its order, as to any plaintiff who obtains a

postponement of his or her trial until after the Court of Appeals has

ruled on that appeal and that petition. Pretrial Order No. 3962, MDL

1203 (E.D. Pa. Sept. 22, 2004). The Court of Appeals has expedited

its consideration of the appeal and the mandamus petition.

Wyeth’s petition for rehearing en banc was denied. Wyeth

thereupon timely filed this Petition for Writ of Certiorari,

seeking review of the Court of Appeals’ order.

REASONS FOR GRANTING THE PETITION

Summary

The Court of Appeals’ decision improperly balances the

respective roles of the federal and state courts in enforcing a

federal court class action settlement. The Court of Appeals

found that, even to enforce its own judgment and protect its

own jurisdiction, the District Court unduly intruded into state

court proceedings to prevent respondents’ “guerilla warfare”

against the “central pillar” of the Settlement. Based on a

misguided view of principles of federalism and comity, the

Court of Appeals essentially left to the state trial judges the

job of enforcing the federal settlement in their respective

trials, at least to the extent that respondents’ circumvention

took the form of using unduly inflammatory evidence.

But nothing in the Anti-Injunction Act, 28 U.S.C. § 2283,

and nothing in any of this Court’s jurisprudence suggests

that principles of federalism and comity should predominate

over the ability of a federal court effectively to rein in the

type of blatant disregard and circumvention of its own

judgment and orders reflected here.

Moreover, any intrusion into state court proceedings

arising from the orders at issue here is a necessary

consequence of the fact that this federal court judgment

permits state court lawsuits but subjects them to crucial

restrictions. If this type of settlement structure is ever to be

used again, defendants must be assured that the federal

a a eee

settlement court has the power and the recognized flexibility

to take action needed to protect the defendant against evasion

of the punitive damages bar, even if some intrusion into state

court proceedings is an unavoidable consequence. Principles

of federalism and comity in this context must be applied in

light of the necessity of giving the federal settlement court

not only the theoretical power, but also the practical ability

to take such actions. Otherwise, federal courts will not only

be deprived of the capability to protect their own jurisdiction

and their own judgments, but they will also be deprived of

the viability of this type of settlement agreement for use in

resolving mass torts.

This Petition should also be granted because of the

widespread implications of the Court of Appeals’ erroneous

indications that due process considerations required the

suspension of the normal principles of contract construction

and interpretation in enforcing a class action settlement

agreement. The Court of Appeals explained that, because the

notice sent to class members did not explicitly tell them they

would be prohibited from depriving Wyeth of the benefit of

its bargain by attempting to evade the Settlement’s

restrictions, class members would only be held to the

Settlement’s express restrictions, “strictly construed.”

But there is nothing unfair, and certainly nothing rising to

the level of a due process concern, about preventing class

members from attempting to end-run express restrictions

merely because the class notice did not spell out that they

would be precluded from doing so.

I. THE COURT OF APPEALS’ DECISION

PRESENTS AN IMPORTANT QUESTION

BECAUSE IT IMPROPERLY BALANCES THE

RESPECTIVE ROLES OF THE FEDERAL AND

STATE COURTS IN ENFORCING A FEDERAL

COURT CLASS ACTION SETTLEMENT

The Court should grant this Petition because the Court

of Appeals’ decision, based on a misguided view of

federalism and comity, essentially negated the District Court’s

retention of exclusive jurisdiction to enforce a federal court

settlement and severely restricted the District Court’s ability

to enforce its own judgment.

The Court of Appeals acknowledged that the District

Court had the power to enforce its own judgment, which

incorporated the Settlement. And the Court of Appeals agreed

with the District Court that the relief it had ordered was an

effective means to enforce a “central pillar” of the Settlement,

namely class members’ agreement not to seek punitive,

exemplary or multiple damages. Moreover, the Court of

Appeals, despite some parts of its decision which suggest

the contrary, concluded by recognizing that the Settlement

precludes class members from seeking to circumvent that

restriction. See App. at 53a (the state courts are “presumably

mindful of the obligation to honor the settlement agreement”

by excluding evidence likely to “improperly inflate

compensatory damages”). Yet the Court of Appeals found

that principles of federalism and comity required that the

enforcement of those restrictions in state court OO suits must

be left in the hands of the respective state trial courts. In the

interest of avoiding impingement on what the Court of

Appeals viewed as the prerogatives of those state trial courts,

the Court of Appeals unduly diminished the legitimate, and

indeed necessary, authority of federal settlement courts to

effectuate the provisions of their own judgments over which

they have retained jurisdiction.

The Court of Appeals relied in part on its view that the

state courts could be relied upon to prevent evasion of the

Settlement by precluding evidence when its tendency to

inflame the jury and improperly inflate compensatory

damages outweighs its probative value. App. at 53a. But the

point is not whether state courts can be trusted to enforce

the Settlement. The critical point is that the orders at issue

here enforced the District Court’s own judgment. Any

intrusion into state court proceedings arising from the entry

of such an order is a necessary consequence of the fact that

this federal court judgment permits state court lawsuits but

subjects them to restrictions.

This type of settlement, which permits class members to

withdraw and sue in the tort system, has been widely hailed

as addressing the concerns expressed by this Court in

Amchem. The Court there expressed grave reservations about

the ability of mass tort plaintiffs to receive effective notice

of class action settlements if they are unaware of any injury.

521 U.S. at 628-29. After that decision, commentators

questioned whether mass tort class actions could ever be

certified and settled where some injuries were unknown.

See, e.g., Alex Raskolnikov, Note, Js There a Future for

Future Claimants After Amchem Products, Inc. v. Windsor?,

107 YALE L.J. 2545 (1998). Columbia Law School Professor

John Coffee testified in support of the Settlement here,

however, that it was

the most sophisticated, innovative attempt to

design something that does not run afoul of any

of the concerns of Amchem or Ortiz... . I think

that is probably the only way that a class action

can deal with the mass tort phenomenon. This

case, this proposed settlement I think should be

and will be the model for the future for dealing

with large scale mass torts.’

See also Richard A. Nagareda, Autonomy, Peace, and Put

Options in the Mass Tort Class Action, 115 Harv. L. Rev.

747, 796 (2002) (This Settlement is a “bold new approach.”);

Francis E. McGovern, Settlement of Mass Torts in a Federal

System, 36 Wake Forest L. REV. 871, 883 (2001) (The diet

drug settlement was commended as one of “t]he most notable

current examples” of “a settlement that wil] satisfy the

dictates of Amchem and Ortiz.”).

But critical to any defendant’s willingness to pay billions

of dollars in settlement and nevertheless permit class

members to sue it in the state court tort system is protection

against what Professor Nagareda said was “the most

normatively troubling source of volatility for mass tort

defendants: the prospect of duplicative punitive damage

awards over time.” Nagareda, 115 Harv. L. Rev. at 797.

The Court of Appeals here agreed, finding the restriction

against class members’ seeking punitive or similar damages

to be a “central pillar” of the Settlement. App. at 27a.

The Court of Appeals nevertheless deprived the

defendant of the mechanism for which it had bargained to

emsure that that “central pillar” would not falter — the

exclusive power of the federal court to enforce the restriction

6. Tr. of Fairness Hearing of May 3, 2000 (Coffee), at 236-37.

See supra note 1. f

on class members’ seeking punitive or similar damages.

The Court of Appeals recognized that that protection was

gained as a trade-off “in return for” Wyeth’s funding a

nationwide medical monitoring program, permitting class

members found to be injured to sue and waiving its powerful

statute of limitations defenses in such suits. App. at 30a.

The effective result of the Court of Appeals’ decision,

however, will be that class members’ suits once barred by

the statute of limitations will be resuscitated by the

Settlement, while the adequacy of the defendant’s protection

against punitive damages in those suits will depend on the

rulings made by each of the numerous state courts in which

class members have brought their suits. There is of course

no way to ensure that those state court rulings will be

consistent or that all of those rulings will fully accord the

defendant the protection for which it bargained.

Nothing in the Anti-Injunction Act or in any established

principles of federalism and comity requires such a dramatic

shift in the relative roles of the federal and state courts in

enforcing federal class action settlements. This Court’s

review is warranted to restore the appropriate allocation of

authority between the federal and state courts in that regard.

It is worthy of note that there are 30,000 class members

who have exercised IOOs under the Settlement and are now

litigating their claims against Wyeth in state courts.

Approximately 100 of those claims are scheduled for trial in

only the next few months, and other trials will start thereafter.

The District Court was well aware of the broader implications

of respondents’ abuses. If these respondents are not enjoined,

the District Court observed in a passage quoted with approval

by the Court of Appeals, “the floodgates will be open, and

the prohibition against punitive damages in the court

approved Settlement Agreement will be nothing but a dead

letter.” App. at 22a.’

The Court of Appeals’ decision therefore represents the

death knell for what has been hailed by Professor Coffee

and others as a “model” for future mass tort class action

settlements. No right-thinking defendant would ever enter

into such a class action settlement under these circumstances.

It is no secret that plaintiffs’ attorneys in mass tort litigation

generally seek out the most plaintiff-friendly state courts in

the nation in which to bring their actions. As the Chamber of

Commerce of the United States observed in its amicus brief

to the Third Circuit Court of Appeals:

If district courts cannot hold class members to

their bargain, . . . then the wind will go out of the

sails of this useful new vehicle for settling mass

tort claims. No defendant will agree to a settlement

that allows futures plaintiffs to choose the higher

of settlement-matrix benefits and tort-system

remedies, when the defendant gains no real

-protection from having to pay even more than

compensatory damages.

Brief of Amicus Chamber of Commerce of the United States

(July 11, 2003), at 19 (emphasis added).

7. After the Court of Appeals’ decision vacating the injunctions,

respondents’ counsel participated in the issuance of a press

release claiming that he could now use evidence to “outrage”

future juries in the trials of 9,000 IOO plaintiffs he represents.

Press Release, Majority Counsel, “Victims, Attorneys Praise

New Ruling in Fen-Phen Litigation; Ruling Allows Key

Evidence in Thousands of Heart Vaive Cases, Says Majority

Counsel” (May 26, 2004), www. forrelease.com/D20040 526/

daw036.P2.05262004183106.13851.html.

The circumstances presented here call, not for the

application of deference and comity to state courts, but for

the recognition that the federal settlement court’s exclusive

jurisdiction to interpret, enforce and effectuate its own

judgment must be paramount. This is vital if the integrity of

such settlements and the jurisdiction of the federal settlement

courts are to be preserved. The All Writs Act and the

Anti-Injunction Act reflect a fundamental policy that a federal

court must be able to act “where necessary in aid of its

jurisdiction, or to protect or effectuate its judgments,”

28 U.S.C. § 2283, even if its order affects state court

proceedings. The decision here, however, rests on the

erroneous premise that considerations of federalism and

comity require subordination of that fundamental policy.

That is not to say that the federal settlement courts should

not strive to minimize the extent of their intrusion into state

court proceedings. The District Court here, however, was

impelled to fashion a very detailed injunction by the conduct

of the respondents, who repeatedly claimed they did not

understand what the District Court had required of them in

prior, more general, injunctions. E.g., JA at 2504-06.

The Court of Appeals recognized, based on the record here,

that respondents “repeatedly skirted the settlement and the

District Court’s orders, plainly seeking to inject prejudicial

matter into the state court cases.” App. at 21a. Indeed, the

Court of Appeals referred to their conduct as “guerrilla

warfare.” App. at 22a.

Nevertheless, respondents repeatedly argued that they

could not be held in contempt of the District Court’s earlier

and more general injunctions because those orders were

“inadequately precise” under Rule 65(d) of the Federal Rules

of Civil Procedure to be enforceable.* The District Court

expressly found, after a series of such incidents, that

plaintiffs’ counsel “has engaged in a pattern of evasion and

lack of candor with this court.” App. at 129a. The District

Court ultimately concluded that

[i]t has now become clear to the court that the

only effective way to safeguard the Settlement

Agreement is to enter a detailed order before trial

outlawing specific topics of inquiry which have

the sole or predominant purpose of inflaming the

jury to punish Wyeth and excluding individual

exhibits and deposition testimony going to the

issue of punitive damages.

App. at 73a. Without such specificity, respondents

undoubtedly would have once again refused to obey the order,

claiming it was not sufficiently specific.

Federal settlement courts must have available a range of

options to craft their orders as needed to meet the conduct at

issue and to make those orders effective. As this Court held

8. See, e.g., Schmidt v. Lessard, 414 U.S. 473, 476 (1974)

(Rule 65(d) “was designed to prevent uncertainty and confusion

on the part of those faced with injunctive orders, and to avoid

the possible founding of a contempt citation on a decree too vague

to be understood.”) (citations omitted); Jnt’l Longshoremen'’s

Ass'n v. Philadelphia Marine Trade Ass'n, 389 U.S. 64, 76 (1967)

(same).

in United States v. New York Telephone Co., 434 U.S. 159,

172 (1977), a federal court is empowered by the All Writs

Act, 28 U.S.C. § 1651(a), and the Anti-Injunction Act,

28 U.S.C. § 2283, “to issue such commands .. . as may be

necessary or appropriate to effectuate and prevent the

frustration of orders it has previously issued in its exercise

of jurisdiction otherwise obtained.” If class members engage

in the type of “guerilla warfare” as found here, the federal

settlement courts must be recognized as having the ability to

protect their own judgment and their continuing jurisdiction.

This Court should rule that federal settlement courts’

authority over the enforcement of federal court class action

settlements is and must be paramount, and that principles of

federalism and comity must be subordinated to the effective

ability of those courts to enforce their judgments.

Il. THE COURT OF APPEALS’ DECISION

PRESENTS AN IMPORTANT QUESTION

BECAUSE IT MISPERCEIVED THIS COURT’S

PRIOR TEACHINGS ON THE DUE PROCESS

REQUIREMENTS FOR CLASS NOTICES AS

REQUIRING AN UNDULY CONSTRICTED

READING OF SETTLEMENT AGREEMENTS

The Court should also grant this Petition because the

Court of Appeals misperceived this Court’s prior decisions

concerning due process requirements for class action

settlement notices. If allowed to stand, the Court of Appeals’

decision is likely to have a significant and adverse effect on

the administration of future federal court class action

settlements.

The Court found that, in order to avoid the due process

concerns expressed by this Court in Amchem, Ortiz and

Shutts, restrictions on class members not expressly spelled

out in either the class notice or the settlement agreement must

be “strictly construed” against the settling defendant.

App. at 5a, 30a-31a, 36a-37a. The Court therefore rejected

the interpretation of the Settlement agreed to by all of (1) the

Court-appointed counsel for the class who had negotiated

the Settlement (“Class Counsel”), (2) Wyeth as the

counterparty in those negotiations and (3) the District Court

supervising the Settlement on an ongoing basis. None of those

cases expressed any due process concern with the content of

class notices, however, much less concerns which would

justify such a constricted reading of class action settlement

agreements.

It is unnecessary, if not impossible, for a class action

settlement agreement governing conduct long into the future,

as here, to anticipate and address every conceivable scenario

in which persistent and clever attorneys for absent class

members might seek to evade the settlement’s restrictions.

A settlement agreement is a contract, and it is a fundamental

precept that all contracts contain an implicit obligation on

each contracting party not to deprive the other party of the

benefit of the bargain. 13 WILLISTON On Contracts § 38:15

(4th ed. 2000) (“The underlying principle is that there is an

implied covenant that neither party will do anything which

will have the effect of destroying or injuring the right of the

other party to receive the fruits of the contract; in other words,

in every contract there exists an implied covenant of good

faith and fair dealing.”’).°

9. See also 2 CorBin on Contracts § 5.27 (rev. ed. 1995)

(“[E]very contract contains an implied obligation of good faith and

fair dealing in its performance and enforcement.”);. RESTATEMENT

(Cont’d)

The relevant bargain here was that qualified class

members could sue for compensation for specified injuries,

but that they could not “seek” damages for the purpose of

punishing Wyeth, making an example of it or multiplying

the damages. When respondents engaged in “guerilla

warfare” against the Settlement by attempting, among other

things, to introduce all the same evidence and make all the

same arguments as they had previously used in punitive

damages trials, the District Court correctly found they were

violating the Settlement. Under established principles of

contract law, respondents were breaching their implied duty

of good faith and fair dealing, whether or not they were also

breaching the express terms of the Settlement. And when

the District Court enjoined them from doing so, it was merely

enforcing the express and implied terms of the Settlement.

Nevertheless, the Court of Appeals “strictly construed”

the terms of the Settlement against Wyeth because it found

that the court-approved class Notice did not adequately warn

class members that the punitive damages restriction might

impact on their strategy in litigating their compensatory

damage claims. But there was nothing unfair, much less

(Cont’d)

(SECOND) oF Contracts § 205 (1981) (“Every contract imposes upon

each party a duty of good faith and fair dealing in its performance

and its enforcement.”) and cmt.d (“Subterfuges and evasions violate

the obligation of good faith in performance. . . .”); Livingstone v. N.

Belle Vernon Borough, 91 F.3d 515, 526 n.11 (3d Cir. 1996)

(“The duty of good faith and fair dealing exists not only under federal

common law, but also under Pennsylvania law.”) (citations omitted).

Settlement agreements are contracts, to be interpreted and construed

under principles of contract law. See, e.g., In re Cendant Corp.

PRIDES Litig., 233 F.3d 188, 193 (3d Cir. 2000) (“[B]asic contract

principles do indeed apply to settlement agreements. . . .”).

bordering on a deprivation of due process, about enforcing

an implied duty against evasion even if the Notice had no

such statement. The Notice emphasized that IOO claimants

would not be able to seek punitive or similar damages.

App. at 31a. (“However, it is important to understand that if

you exercise the [I[OO] and choose to bring a lawsuit against

[Wyeth], your lawsuit will be subject to certain restrictions

including the following: ... you may not seek punitive or

multiple damages.”’) (emphasis in original). No class member

could have thought in good faith that, without violating the

Settlement, he or she could engage in the kind of “guerilla

warfare” found here to evade that restriction and obtain an

inflated damage award. rs

This Court’s prior decisions have never required that a

notice of a class action settlement must anticipate and spell

out every possible implication and interpretation of each

material term of a class action settlement agreement. It has

been widely understood instead that the function of a class

notice is to summarize the principal terms of the agreement.'°

The interpretation and construction of those terms is left for

later decision as disputes arise, based on basic principles of

contract law.'' The Settlement here is enormously

10. See, e.g., Herbert B. Newburg & Alba Conte, NEwBuURG ON

Crass Actions § 11.53 (3d ed. 1992) (“Rule 23(e) notice is designed

to be only a summary of the litigation and the settlement and it is

crucial to apprize class members of the right and opportunity to

inspect the complete settlement documents, papers, and pleadings

filed in the litigation. The notice need not be unduly specific.”).

11. See, e.g., In re Holocaust Victim Assets Litig., 282 F.3d 103,

108 (2d Cir. 2002) (contract principles to be applied to determine

scope of release in class action settlement); /n re Airline Ticket

Comm'n Antitrust Litig., 268 F.3d 619, 623-25 (8th Cir. 2001)

(contract principles applied to determine scope of settlement class).

complicated. It covers many issues, not only those addressing

10Os. If it were necessary, to ensure the ability later to obtain

enforcement injunctions, to explain in detail in the notice all

possible implications and interpretations of each significant

provision, class notices would become overwhelmingly

complex and difficult to understand. Yet only recently this

Court approved an amendment to the Federal Rules of Civil

Procedure requiring class action notices to be “concisely”

stated. See Fep. R. Civ. P. 23(c)(2)(B) (as effective Dec. 1,

2003).

CONCLUSION

For all these reasons, the Petition for a Writ of Certiorari

should be granted.

Respectfully submitted,

RosertT D. ROSENBAUM PETER L. ZIMROTH

JEROME I. CHAPMAN Counsel of Record

SARAH M. BRACKNEY ARNOLD & Porter LLP

RICHARD KORNYLAK 399 Park Avenue

ARNOLD & PorTER LLP New York, NY 10022

555 12th Street, N.W. (212) 715-1010

Washington, D.C. 20004

(202) 942-5862

Counsel for Petitioner

APPENDIX

APPENDIX A — OPINION OF THE UNITED STATES

COURT OF APPEALS FOR THE THIRD a

DATED MAY 25, 2004

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

Nos. 02-4582, 03-2033,

03-2936, and 03-4362 -

(02-4582)

IN RE: DIET DRUGS

(PHENTERMINE/FENFLURAMINE/

DEXFENFLURAMINE)

PRODUCTS LIABILITY LITIGATION

Linda Smart, a class member who has exercised her

intermediate opt-out rights

Appellant |

(03-2033)

IN RE: DIET DRUGS

(PHENTERMINE/FENFLURAMINE/

DEXFENFLURAMINE)

PRODUCTS LIABILITY LITIGATION

Clara Clark, Linda Smart, George M. F leming, Fleming &

Associates, L.L.P., Mike O’Brien and Michael C. Abbott,

Appellants

Appendix A

(03-2936)

IN RE: DIET DRUGS

(PHENTERMINE/FENFLURAMINE/

DEXFENFLURAMINE)

PRODUCTS LIABILITY LITIGATION

Keith K. Barlow, Ruby S. Barlow, Cherry Barnes, Joe Wayne

- Burton, Nora K. Burton, Lonelle S. James, Michael J. Miller,

Kenneth W. Smith, Miller & Associates, Edward A.

Williamson, Fenton B. DeWeese, II, The Law Office of

Edward A. Williamson, Merrida Coxwell, Charles R. Mullins,

Coxwell & Associates, PLLC, and Eugene C. Tullos,

Appellants

(03-4362)

IN RE: DIET DRUGS

(PHENTERMINE/FENFLURAMINE/

DEXFENFLURAMINE)

PRODUCTS LIABILITY LITIGATION

Linda Eichmiller, Brenda Cook, Richard Cook, Doris

Caldwell, Susan McCarty, Jim McCarty, Jr., Julia Campbell,

Carolyn Winters, Bobby G. Winters, Macy Houston, and

John F. Houston, III,

Appellants.

Appendix A

On Appeal from the United States District Court for the

Eastern District of Pennsylvania

(MDL No. 1203)

District Judge: Honorable Harvey Bartle, III

Argued: December 10, 2003

Before AMBRO, FUENTES and CHERTOFF, Circuit Judges.

(Opinion filed May 25, 2004)

OPINION

Chertoff, Circuit Judge.

This appeal arises out of the settlement of a complex

multidistrict federal mass tort class action. As part of the

complicated settlement agreement, class members were

entitled to opt out at various stages. Those who chose to opt

Out initially were freed to pursue their remedies elsewhere.

Those who did not opt out at the beginning were afforded

opportunities to opt out “downstream” at an intermediate

stage or at the “back-end.” But those downstream opt-out

rights were not absolute. Rather, members who elected to

delay an opt-out beyond the initial stage were informed that

they would not have unfettered ability to litigate all claims

elsewhere. Instead, among other things, these so-called

intermediate and back-end class “opt-outs” were precluded

under the settlement agreement from pursuing punitive,

exemplary, or multiple damages.

Appendix A

The questions presented here arise from the District

Court’s efforts to enforce the terms of the settlement against

intermediate opt-out class members now litigating their

claims in various state courts. What appellee class counsel

and appellee defendant fear is that counsel for intermediate

opt-outs will undermine the efficacy of the settlement by

evading or circumventing the punitive damages restrictions

to which they are bound under the agreement. Appellants,

who are individual intermediate opt-outs now pressing claims

in state court, complain that the District Court has gone

beyond enforcing the plain restrictions of the settlement and

has taken steps that will hamper or defeat plaintiffs’ ability

to pursue claims that are not barred by the settlement.

In one sense, the issues framed in the appeal reflect

efforts by creative counsel on both sides to interpret and apply

settlement terms so as to gain advantage in the individual

lawsuits brought by intermediate opt-outs in various state

courts. But larger institutional and fairness issues are at stake.

The nationwide class settlement is a device that holds

the promise of resolving millions of claims in a way that

affords deserving claimants some measure of relief while

preserving a defendant business as a viable entity that can

actually pay compensation. See Jn re Gen. Motors Corp. Pick-

Up Truck Fuel Tank Prods. Liab. Litig., 55 F.3d 768, 784

(3d Cir.1995). All claimants benefit from such an outcome,

because each has a fair opportunity at recovery. Later

claimants need not fear that the fund will be exhausted before

their turn comes, or that the defendant will undertake a

scorched earth defense that consumes assets otherwise

available for compensation, or simply turn off the spigot by

Appendix A

filing for bankruptcy. The defendant, too, obviously benefits

from a limit to liability that ensures corporate survival. For

this type of global settlement to work, however, the district

court must successfully discharge the herculean task of

enforcing the terms of the class settlement agreement against

the constant pressure of some settlement class members who,

having obtained part of a loaf through the agreement, now

pursue alternative avenues to obtain additional slices.

Otherwise, individual class members’ activities “would be

disruptive to the district court’s ongoing settlement

management and would jeopardize the settlement’s fruition.”

Carlough v. Amchem Prods., Inc., 10 F.3d 189, 204

(3d Cir.1993).

As appealing as the efficiencies of a nationwide mass

tort class settlement may be, however, the Supreme Court

has repeatedly cautioned that they cannot override

fundamental principles of due process or faithful application

of controlling law. See Ortiz v. Fibreboard Corp., 527 U.S.

815, 845-48 (1999); Amchem Prods., Inc. v. Windsor, 521

U.S. 591, 620 (1997); Phillips Petroleum Co. v. Shutts, 472

U.S. 797, 812 (1985). Because a class settlement disposes

of the rights of many people who are absent from the

proceeding and only virtually represented by class counsel,

due process considerations such as adequacy of notice and

adequacy of representation have special force. Ortiz, 527 U.S.

at 847-48. As we observed in our opinion in Georgine yv.

Amchem Prods., Inc.-in a passage endorsed by the Supreme

Court, see 521 U.S. at 628—inadequacies in the quality of

notice raise “serious fairness concerns.” 83 F.3d 610, 634

(3d Cir.1996).

Appendix A

Moreover, when a federal court seeks to effectuate a

settlement agreement by way of enjoining state court

proceedings, additional constraints qualify its authority. We

have held that district courts have the authority under the

All Writs Act, 28 U.S.C. § 1651, to protect their jurisdiction

by enjoining state court proceedings that interfere with a

judicially approved settlement. See Jn re Prudential Ins. Co.

Sales Practices Litig., 314 F.3d 99, 103-05 (3d Cir.2002)

(hereinafter Prudential II ); In re Diet Drugs Prods. Liab.

Litig., 282 F.3d 220, 233-39 (3d Cir.2002) (hereinafter

Diet Drugs I). But the Anti-Injunction Act, 28 U.S.C. § 2283,

and federalism concerns circumscribe this power and require

that it be “construed narrowly” and invoked sparingly.

Diet Drugs I, 282 F.3d at 233-34. The power of federal courts

to intrude into the domain of state courts administrating their

own laws implicates a host of sensitive concerns and is

therefore limited. See, e.g., Rizzo v. Goode, 423 U.S. 362,

379-80 (1976); Huffman v. Pursue, Ltd., 420 U.S. 592, 600-

01 (1975).

In addition, as with any injunction, traditional principles

of equity apply. The terms of any injunction, for example,

must be commensurate with the violation the court seeks to

remedy. And practical considerations such as manageability

and enforceability militate against an order that enmeshes a

district court in protracted micromanagement of litigation in

a state court. These principles of equity counseling

restraint take on particular significance when issues of

federalism are involved. When federal courts are confronted

with requests for relief that require interference with state

civil functions, “they should abide by standards of restraint

that go well beyond those of private equity jurisprudence.”

Huffman, 420 U.S. at 603.

- Appendix A

All of these concerns come to bear on our resolution of

the appeal from the District Court’s orders in this case. For

the reasons stated in this opinion, we agree that the District

Court had power under the All Writs Act to supervise and

curtail the actions of intermediate opt-out class members in

pursuing their individual claims. But we believe that the

injunctions imposed some restrictions not fairly

comprehended within the terms of the settlement agreement

and class notice and, in certain ways, transgressed the limits

of federalism and prudence that confine the exercise of

federal judicial authority.

Emphatically, the District Court is empowered to protect

its jurisdiction and effectuate the settlement agreement.

In this case, however, elements of the protective orders in

question must be refashioned to be consistent with fair class

notice, to respect appropriate boundaries in relation to state

courts, and to accord with traditional principles of equity

jurisprudence.

The history of this litigation was previously detailed in

our opinion in Diet Drugs I, 282 F.3d at 225-29. The cases

marshaled oefore the District Court arose from the marketing

of two appetite suppressants, fenfluramine (sold as

“Pondimin”) and dexfenfluramine (sold as “Redux”).

Appellee American Home Products' removed the drugs from

1. American Home Products changed its name to Wyeth in

March of-2002. We use the name Wyeth for the remainder of the

opinion.

Appendix A

the market in September of 1997, after data came to light

suggesting a link between use of the drugs and valvular heart

damage (“VHD”) and after the United States Food and Drug

Administration (“FDA”) issued a public health advisory alert.

By that time, four million people had taken Pondimin over

the previous two years, and two million people had taken

Redux.

Following the FDA’s issuance of the public health

warning and Wyeth’s withdrawal of the diet drugs from the

market, approximately eighteen thousand individual lawsuits

and over one hundred putative class actions were filed in

federal and state courts around the country. Most plaintiffs

alleged that the drugs caused them to suffer from VHD. A

small fraction claimed the drugs caused them to suffer from

primary pulmonary hypertension (“PPH,” a rare and often

fatal lung disease), neurotoxic injuries, or other assorted

injuries. In December of 1997, the Judicial Panel for

Multidistrict Litigation transferred all the federal actions to

Judge Louis Bechtle in the United States District Court for

the Eastern District of Pennsylvania, creating Multidistrict

Litigation 1203 (“MDL 1203”).?

In April of 1999, Wyeth began “global” settlement talks

with plaintiffs in the federal action together with several

plaintiffs in similar state class actions. The parties reached a

tentative settlement agreement for a nationwide class in

November of 1999. Soon thereafter, on November 23, 1999,

the District Court conditionally certified a nationwide

2. Judge Bechtle has since retired, and Judge Harvey Bartle,

III, now presides over MDL 1203.

Appendix A

settlement class and, concurrently, preliminarily approved

the settlement.

The Court scheduled a fairness hearing for May 1, 2000

on class certification and final settlement approval.

On August 28, 2000, the District Court entered a final order

certifying the class and approving the settlement.

The settlement agreement embraces all persons who took

Pondimin or Redux. Wyeth undertook to pay up to $3.75

billion (present value) to fund benefits to members of the

class. Settling class members agreed in return to release

Wyeth from all claims arising out of their ingestion of the

drugs, other than claims based on PPH brought by individuals

who met certain medical criteria.

The agreement was crafted to avoid an all-or-nothing

choice at the threshold. Rather, several opt-out points were

envisioned at various places along the continuum of the

settlement period. Putative class members who wished to

opt out entirely from the settlement, foregoing all benefits

and any restrictions, were obliged to file their opt-out notices

by March 30, 2000. Drug users who chose not to opt out

initially became settlement class members, bound not to

assert “settled claims” against Wyeth except as the agreement

permits.’

3. “Settled claims” generally included all conceivable claims

arising out of purchase and use of the diet drugs but specifically’

excluded, among other things, claims based on PPH.

10a

Appendix A

The agreement allows class members who are medically

and otherwise eligible opportunities to opt out at a later time,

at an intermediate stage.* Those who choose to opt out at an

intermediate stage receive no compensation but are permitted

to pursue most of their “settled claims” individually, subject

to certain restrictions. The settlement agreement provides,

in relevant part:

[Intermediate opt-outs] may not seek punitive,

exemplary, or any multiple damages against

[Wyeth and other released parties]; ....

[Intermediate opt-outs] may not use any previous

verdicts or judgments against [Wyeth], or factual

findings necessary to such verdicts or judgments,

for purposes of establishing claims or facts

in order to obtain a verdict or judgment....

Nor may [an intermediate opt-out] ... seek to

introduce into evidence against [Wyeth], for any

purpose, such a verdict, judgment or factual

finding.

Joint App. 616-17.

In return for intermediate opt-outs’ acceptance of the

limitation on punitive and multiple damages, Wyeth agreed

not to assert any statute of limitations, laches, or claims-

splitting defenses against allowed individual claims.

4. Some class members who did not exercise an intermediate

opt-out reserved a so-called “back-end” opt-out right. Back-end opt-

out rights are not at issue in this appeal.

lla

Appendix A

In approving the settlement, the District Court expressly

relied in part on the finding that “class members had an____

opportunity to preserve their punitive damages claims by

exercising the initial opt out.” Jn re Diet Drugs Prods. Liab.

Litig., No. 99-20593 2000 WL 1222042, at *49 n. 22 (E.D.Pa.

Aug.28, 2000) (“Memorandum and Pretrial Order No. 1415,”

hereinafter “PTO 1415”). The District Court also observed

that the waiver of punitive damages was not an inappropriate

“trade-off,” since “punitive damage claims are often illusory”

and subject to judicial limitation or reduction as a matter of

fairness to.the defendant. Jd. In addition, the District Court

expressly retained jurisdiction to “enforce the Settlement in

accordance with its terms; ... and to enter such other and

further orders as are needed to effectuate the terms of the ‘

Settlement.” Jd. at *72.

This Court affirmed PTO 1415 without opinion.

In re Diet Drugs Prods. Liab. Litig., 275 F.3d 34 (3d

Cir.2001).

« C.

A number of class members who did not exercise their

initial opt-out rights elected to opt out at the intermediate

stage. Plaintiffs Clara Clark and Linda Smart, both

represented by the Texas law firm of Fleming & Associates,

filed lawsuits in Texas state court. Clark sued Wyeth and her

physician in 2002, alleging claims of negligence, products

liability, improper warnings, and fraud. Clark’s final amended

petition seeks recovery of compensatory damages, including

damages for pain, disfigurement, mental anguish, and medical

expenses. Likewise, Smart’s petition alleges claims against

12a

Appendix A

Wyeth and her physician for actual damages for pain,

disfigurement, anguish, and medical expenses arising from

state tort claims of negligence, failure to warn, and design

defect.

Meanwhile, in state court in Mississippi, class member

Lonelle James, and others, also filed claims against Wyeth

after exercising their intermediate opt-out rights. James was

selected as the first trial plaintiff. Her claims were based on

state law theories of negligence, strict liability for design

“and marketing defect, inadequate and improper warnings,

misrepresentation, and breach of implied warranty. James

sought compensatory damages—including damages for pain

and mental anguish, lost earnings, disfigurement, physical

impairment, medical expenses, and loss of enjoyment of

life—from both Wyeth and her physician.

Plaintiffs’ state court claims were pleaded in terms that

appeared to abide by the terms of the settlement preclusion

of punitive and multiple damages. But the actual conduct of

the litigation raised justifiable fear in the District Court, and

“among-the counsel for defendant and the class, that the

plaintiffs were seeking to obtain through the back door what

they were barred from receiving through the front. Reviewing

the state court submissions by Clark’s counsel, the District

Court found-and this is undisputed- that Clark’s case

summary was “replete with statements leading ineluctably

to the conclusion that such punitive damages are being

sought, even though not by that name.” Jn re Diet Drugs

Prods. Liab. Litig., No. 99-20593, Memorandum and Pretrial

Order No. 2625, at 2 (E.D. Pa. filed October 16, 2002)

(hereinafter “PTO 2625”). Clark’s case summary expressed

l3a

Appendix A

the intent to offer evidence concerning “‘tens of thousands

of people [who] were injured’”; Wyeth’s guilt of “‘corporate

avarice’”; and its alleged “‘goal of increasing profits at the

expense of human life.’” Jd. at 2-3. Worse yet, another

submission (in a perhaps Freudian slip) averred that, among

other things, ““‘[p]laintiff seeks punitive damages.’” /d. at 4.

Before the District Court, Clark’s counsel disavowed that

claim as an error. The District Court concluded, however,

that Clark’s counsel was seeking to “circumvent” the punitive

damages bar and enjoined him from:

eee

introducing any evidence or making any statement

before or argument to the court or jury related

directly or indirectly to (a) punitive, exemplary

or multiple damages, however described; and (b)

malicious, wanton or other similar conduct of

Wyeth, however described; .. . [or] any medical

condition of plaintiff caused by Wyeth other than

mitral valve regurgitation [VHD] or pulmonary

hypertension secondary to mitral valve

regurgitation.

Id. at 99 2-3.

Soon thereafter counsel Fleming’s other client, Linda

Smart, found her state court case brought to the attention of

the District Court. The District Court noted that Fleming was

obviously aware of the ruling in the Clark litigation, but

nevertheless had submitted a proposed jury charge containing

inflammatory language and references to destruction of

evidence and a cover up. The District Court rejected the

14a

- Appendix A

contention that this evidence was admissible on issues

properly before the state trial court and concluded that

to allow aclass member to introduce into evidence

or to argue the elements of a punitive damage

claim on the condition that he or she does not

specifically request punitive damages by name

_. would create a giant loophole.

In re Diet Drugs Prods. Liab. Litig., No. 99-20953,

Memorandum and Pretrial Order No. 2680, at 7 (E.D. Pa.

filed December 11, 2002) (hereinafter “PTO 2680”).

Consequently, the Court issued an injunction similar to that

in the Clark case.

Only a few weeks later, Wyeth returned to District Court

once again to address Clark. Reviewing Clark’s amended trial

exhibit list, the District Court observed that it demonstrated

“counsel’s motive to infect the trial with improper bad

conduct evidence concerning Wyeth.” Jn re Diet Drugs Prods.

Liab. Litig., No. 99-20593, Memorandum and Pretrial Order

No. 2717 at 3 (E.D. Pa. filed January 29, 2003) (hereinafter

“PTO 2717”). At the same time-and significantly-the District

Court quoted the state trial judge, who expressed his

commitment to assure ““‘a fair verdict that is an approximation

of the damages and not a result of them [the jury] being

incensed.’” Jd. at 4. The District Court concluded that counsel

Fleming had merely withdrawn certain submissions and

substituted others in an effort to circumvent the prior

injunctions.

l5a

Appendix A

The District Court held Fleming in civil contempt and

issued an order, PTO 2717, enjoining Clark and her counsel

from commencing the state trial until Fleming submitted,

and the Court approved, a statement under oath that he would

obey PTO 2625. The order provided:

That statement must declare that with respect to

Wyeth’s conduct he will not inject into the case

any evidence, statement, or argument, directly or

indirectly, that connotes more than simple

negligence or defective design without fault. The

statement must also declare that he will not

introduce at the trial any reference to Wyeth’s size,

financial condition, or worth. He must also include

as part of his statement his trial exhibits, witness

list, and points for charge ....

Id. at ¥ 2.

Back in Texas, the trial judge in the Clark case held an

extensive pretrial conference. On February 5, 2003, State

District Judge Dennis Powell issued an extensive thirteen-

page pretrial order. Judge Powell’s carefully reasoned and

written opinion exhibited understanding of the effect of the

settlement preclusion and a determination to honor it.

The State District Judge perceptively observed that

“not surprisingly, the plaintiff wants to try the case in a

manner that will maximize the chances of a significant

recovery, and, not surprisingly, the defendant wants to try

the case in a manner that will minimize the chances of a

significant recovery.” Joint App. 1281. Accordingly, the state

court flatly prohibited evidence relevant only to punitive or

l6a

Appendix A

~ exemplary damages and evidence relevant to other issues but

unduly prejudicial or misleading. At the same time, Judge

Powell said he would

not require the plaintiff to “try the case in a

vacuum of the defendant’s design,” which could

result in the jury improperly speculating about

liability issues and evidence (or the lack thereof)

and factoring such speculations into causation

issues or damage evaluations.

Id. at 1282.

A good deal of the state pretrial order is devoted to

analyzing Wyeth’s purported willingness to stipulate or

concede certain issues so as to remove them from the case.

This offer-which was brandished by Wyeth before the federal

District Court during the Fleming contempt proceeding that

led to PTO 2717-presumably would have eliminated any

proper incentive for Clark to offer inflammatory evidence as

part of a negligence or design case. But the State District

Judge, armed with his understandably greater familiarity with

Texas tort law, found Wyeth’s apparent concessions to be

less than they appeared. As he pointed out, the proposed

concessions, which would supposedly leave only causation

and damages in the case, would actually do no such thing.

In the words of Judge Powell:

Likewise the defendant created the impression

before [U.S. District] Judge Bartle that “they

[Wyeth] also admitted that the injury was

foreseeable,” and that “the injury is foreseeable

17a

Appendix A

from the defectively designed product.”

Nonetheless, contrary to the representations to

both courts, the [proposed concession] contains

no finding that the injury was foreseeable by the

defendant, or that the injury was foreseeable from

the defectively designed product. The law requires

proof, the plaintiff pleaded it, the defendant

refused to admit it was conceded, but then the

defendant does not want the plaintiff to put on

evidence on that element.

Id. at 1288-89.

The state trial court noted an additional problem: the

proposed concessions would place the court in a dilemma.

If certain issues were taken from the case with no actual

admission by Wyeth, it would require the court to instruct

the jury that defendant would be automatically liable if the

plaintiff’s injury were caused by Wyeth’s drug, without regard

to fault. But this is a matter that could affect jury voir dire,

Judge Powell explained, and might require striking potential

jurors who could not return a verdict on damages without

“considering whether absolute liability law was fair or not.”

Id. at 1290.

For these reasons, Judge Powell declined to accept

Wyeth’s concessions in their tendered form, although he

remained open to a stipulation of outright admission on one

or more of the elements of any cause of action. “No doubt

some evidence that would be relevant to liability would also

be relevant to causation, but this submission would greatly

simplify the evidence. .. .” Jd. at 1291.

18a

Appendix A

Evidently, the parties found this invitation unappealing,

and the action moved again to federal court in Philadelphia.

In March of 2003, the District Court conducted a lengthy

conference and reviewed and ruled on voluminous deposition

excerpts and proposed trial exhibits to determine whether

the settlement agreement barred Clark from offering them

into evidence at trial. The District Court entered an order

that enforces a series of prophylactic prohibitions against

introducing evidence deemed relevant only to punitive

damages or unfairly prejudicial when balanced against

probative value.

First, the order forbids plaintiffs from offering into

evidence a list of specific exhibits and deposition testimony.

And, except as specifically allowed by the accompanying

memorandum, it prohibits counsel from “making any

statement or argument to the court or jury related directly or

indirectly” to the forbidden evidence. The District Court

ruled, for example, that Clark (1) could attack the credibility

of certain medical review articles by proving they were

funded by Wyeth, but not by showing that they were actually

ghostwritten at the behest of Wyeth; (2) could not offer any

evidence of concealment of information or destruction of

documents; (3) must redact portions of documents suggesting

problems with Wyeth’s diligence in reporting serious

side-effects of the drugs to the FDA; and (4) must redact an

internal Wyeth memorandum to eliminate the phrase

“the public is increasingly concerned and afraid of the drug.”

In re Diet Drugs Prods. Liab. Litig., No. 20593,

Memorandum and Pretrial Order No. 2828 (E.D. Pa. filed

April 8, 2003) (hereinafter “PTO 2828”).

19a

Appendix A

Second, the order bars Clark and her attorneys

from “introducing any evidence, making any statement

before or ana to the court or jury, related directly or

indirectly to”

[1] punitive, exemplary or multiple damages,

however described;

[2] malicious, wanton or other similar conduct

of Wyeth, however described;

[3] any medical condition of plaintiff caused by

Wyeth other than left-sided mitral valve

regurgitation or pulmonary hypertension

secondary to mitral valve regurgitation;

[4] Wyeth’s profits, size or financial condition;

[5] the amount or size of Wyeth’s sales of diet

drugs or other products;

[6] Wyeth’s marketing or promotion of diet drugs

to the extent that Wyeth placed marketing or

promotion ahead of health or safety concerns;

[7] any deception or any destruction, hiding,

overwriting, or deliberate miscoding of documents

or information by Wyeth;

20a

Appendix A

[8] any involvement by Wyeth in the ghostwniting

of articles;

[9] primary pulmonary hypertension;

[10] neurotoxicity; and

[11] any other disease, illness or condition or

persons suffering from any other disease, illness

or condition caused by Redux or Pondimin except

for left-sided valvular heart disease or pulmonary

hypertension secondary to left-sided valvular heart

disease.

Id. at 1-3 (emphasis added). So, for example, the District

Court allowed Clark to prove that relevant warnings were

inadequate or wrong but said Clark “may not prove or argue

that any such failure was deliberate or intentional.” Jd. at 9.

The District Court vacated its previous orders, PTO 2625

and PTO 2717, in light of the more recent and comprehensive

PTO 2828. And, on June 10, 2003, the District Court issued

Pretrial Order 2883 (“PTO 2883”), which essentially

incorporated the restrictions of PTO 2828 and enforced them

against plaintiff James in her case in Mississippi state court.

Appellants timely appealed PTO 2680 (Smart), PTO 2828

(Clark), and PTO 2883 (James).

In October of 2003, while those appeals were pending,

Wyeth returned to federal court seeking an injunction against

other intermediate opt-outs-including Linda Eichmiller, also

represented by Fleming & Associates-pursuing claims in

i ea

21a

Appendix A

Georgia and Mississippi state courts. Wyeth argued that

counsel from Fleming & Associates were seeking to introduce

evidence in violation of PTO 2828 even though they had

agreed to comply with PTO 2828 in other cases pending our

review of the order on appeal.

Wyeth asserted that counsel sought to introduce evidence

regarding PPH-specifically, a label for Pondimin noting that

some users had suffered from PPH and a “black box warning”

regarding PPH that the FDA was considering in connection

with the approval of Redux-even though plaintiffs were only

claiming they suffered from VHD. The District Court entered

an injunction similar to PTO 2828, Pretrial Order 3088 (“PTO

3088”), and explicitly barred plaintiffs from seeking to

introduce the PPH evidence at trial.

Plaintiffs timely appealed PTO 3088, and it was

consolidated by orders of this Court with the other appeals

from the District Court’s earlier similar orders. We have

jurisdiction under 28 U.S.C. § 1292(a)(1).

Il.

A distasteful picture of the state court litigation emerges,

displaying what some might consider the excesses of our

adversary justice system. Each side sought to manipulate the

settlement agreement in order to optimize its advantage.

Wyeth’s counsel resisted admitting, and sought to exclude,

evidence that tended to support any liability by Wyeth.

Plaintiffs’ counsel, notably Fleming, repeatedly skirted the

settlement and the District Court’s orders, plainly seeking to

inject prejudicial matter into the state court cases, including

22a

Appendix A

information about Wyeth’s profits and sales that was clearly

irrelevant to negligence liability, causation, or compensatory

damages, and that could only be relevant to obtaining punitive

damages.

The District Court properly observed that, were plaintiffs’

counsel permitted to flout the limits of the settlement, the

floodgates will be open and the prohibition against

punitive damages in the court approved Settlement

Agreement will be nothing but a dead letter, with

potentially dire consequences for the settlement

as a whole.

PTO 2717. Faced with this prospect, the District Court

entered the injunctions at issue in this appeal in order to

protect the settlement against guerrilla warfare from the opt-

out lawyers.

Appellants now urge us to vacate the District Court’s

orders for three primary reasons. First, they argue that the

orders run afoul of the Anti-Injunction Act and All Writs Act.

Second, they contend that the Younger abstention doctrine -

required the District Court to refrain from enjoining the state

court proceedings. Finally, appellants argue that the orders

contravene the terms of the settlement agreement, are

unmanageable, and run afoul of principles of federalism and

comity.

“The standard of review for the authority to issue an

injunction under the Anti-Injunction Act and the All-Writs

Act is de novo.” Jn re Prudential Ins. Co. of Am. Sales

23a

Appendix A

Practices Litig., 261 F.3d 355, 363 (3d Cir.2001) (internal

citations omitted) (hereinafter Prudential J). When reviewing

a district court’s decision whether to abstain, “the underlying

legal questions are subject to plenary review, but the decision

to abstain is reviewed for an abuse of discretion.” Grode v.

Mut. Fire, Marine & Inland Ins. Co., 8 F.3d 953, 957 (3d

Cir. 1993). “We review the terms of an injunction for an abuse

of discretion, underlying questions of law receive de novo

review, and factual determinations are reviewed for clear

error.” Prudential I, 261 F.3d at 363. Finally, we apply plenary

review to a district court’s construction of a settlement

agreement, but we review a district court’s interpretation of

a settlement agreement for clear error. Coltec Indus., Inc. v.

Hobgood, 280 F.3d 262, 269 (3d Cir.2002) (citing In re

Cendant Corp. Prides Litig., 233 F.3d 188, 193 (3d

Cir.2000)).°

The All Writs Act empowers district courts to “issue all

writs necessary or appropriate in aid of their respective

jurisdictions and agreeable to the usages and principles of

law.” 28 U.S.C. § 1651. The authority the All Writs Act

imparts to district courts is limited, however, by the Anti-

Injunction Act, which prohibits injunctions “to stay

proceedings in a State court except as expressly authorized

by Act of Congress, or where necessary in aid of its

jurisdiction, or to protect or effectuate its judgments.”

28 U.S.C. § 2283.

5. We discussed at length the distinction between contract

construction and contract interpretation in Ram Constr. Co. v. Am.

States Ins. Co., 749 F.2d 1049, 1053 (3d Cir. 1984).

24a

Appendix A

The two statutes act in concert, and “[i]f an injunction

falls within one of [the Anti-Injunction Act’s] three

exceptions, the All-Writs Act provides the positive authority

for federal courts to issue injunctions of state court

proceedings.” Jn re Gen. Motors Corp. Pick-Up Truck Fuel

Tank Prods. Liab. Litig., 134 F.3d 133, 143 (3d Cir.1998);

see also Carlough, 10 F.3d at 201 n. 9. The pretrial

injunctions at issue here were not expressly authorized by

statute, so they may be justified only under the Anti-

Injunction Act’s “in aid of its jurisdiction” or “protect or

effectuate its judgments” exceptions. These exceptions “are

narrow and are ‘not [to] be enlarged by loose statutory

construction.’ ” Chick Kam Choo v. Exxon Corp., 486 U.S.

140, 146 (1988) (quoting Atl. Coast Line R.R. v. Bhd. Of

Locomotive Eng’rs, 398 U.S. 281, 287 (1970)).

The “protect or effectuate its judgments” exception,

known as the “relitigation exception,” is “founded in the well-

recognized concepts of res judicata and collateral estoppel.”

Id. at 147. “The relitigation exception was designed to permit

a federal court to prevent state litigation of an issue that

previously was presented to and decided by the federal court.”

Id.

We approved an injunction against state court

proceedings under the relitigation exception in Prudential I.

That case arose from the class settlement of claims brought

by Prudential policyholders arising from allegedly fraudulent

sales practices. Class members were free to choose settlement

for some policies and not for others. The notice of settlement

specifically advised each potential class member, however,

that acceptance of the settlement would prevent any future

25a

Appendix A

assertion of claims that had been or could have been asserted

with respect to any policy for which the class member chose

to settle.

Two class members accepted the settlement for several

policies but opted out for two others. They then brought a

Florida state action to recover on the two excluded policies,

basing their claims in part on facts that also supported claims

arising from settled policies. In effect, plaintiffs sought to

undermine the settlement’s claim preclusion order.

The District Court enjoined the plaintiffs in the Florida

action from “using evidence common to the purchase and

sale” of the settled policies. 261 F.3d at 368. The injunction

effectuated the settlement agreement’s bar against new claims

based on “facts and circumstances underlying” the claims

that had been settled and released. Jd. at 361. The order was

designed to prevent new claims that were based in whole or

part on settled and released claims. The straightforward

injunction language mirrored the familiar rules of claim and

issue preclusion that are often applied by courts.

This case differs from Prudential I, because under the

settlement agreement opt-outs’ settled claims do not go to

judgment; rather, their claims proceed in state courts with

limits on the type of damages they can seek. Thus the District

Court had to enforce a damages preclusion, not a claim

preclusion. This was obviously more complicated because

permitted claims could give rise to both allowable

compensatory damages and forbidden punitive damages.

26a

Appendix A

Consequently, the concepts of issue and claim preclusion

are not entirely apposite here. We need not determine whether

the District Court had the authority to effectuate the

settlement agreement’s punitive damages provision under the

Anti-Injunction Act’s relitigation exception, however,

because in any case it had the power to issue the injunction

under the “in aid of jurisdiction” exception.

“[A]n injunction is necessary in aid of a court’s

jurisdiction only if ‘some federal injunctive relief may be

necessary to prevent a state court from so interfering with a

federal court’s consideration or disposition of a case as to

seriously impair the federal court’s flexibility and authority

to decide that case.’” Diet Drugs I, 282 F.3d at 234 (quoting

Atl Coast Line R.R., 398 U.S. at 294). One instance where

we have determined that a federal court may enjoin state court

proceedings to protect its jurisdiction is when a federal court

is “entertaining complex litigation, especially when it

involves a substantial class of persons from multiple states,

or represents a consolidation of cases from multiple districts.”

Id. at 235 (citing Carlough, 10 F.3d at 202-04); see also In

re Gen. Motors, 134 F.3d at 145.

Here, as in Prudential II, the District Court retained

“continuing and exclusive jurisdiction ... to administer,

supervise, interpret and enforce the Settlement in accordance

with its terms.” Joint App. 398. In Prudential II, we

explained:

The settlement here represented a herculean effort

to provide a fair and consistent framework for the

resolution of millions of claims. The

Reel gps Tag ARRON TIC EP sh

27a

Appendix A

comprehensive procedures implemented for this

purpose were integral to this effort. Permitting

continued litigation of these claims would

“unsettle” what had been thought to be settled,

and would disrupt carefully constructed

procedures for individual dispute resolution.

Allowing comprehensive settlements to be

undermined in this way would undeniably deter

similar settlements in the future.

314 F.3d at 105; see also United States v. Alpine Land &

Reservoir Co., 174 F.3d 1007, 1015 (9th Cir.1999) (finding

that the “in aid of its jurisdiction” exception applies when

district court retains jurisdiction over a settlement

agreement).

As we have described above, the punitive damages

release is a central pillar of the settlement agreement.

Allowing state court actions to run afoul of that provision

would fatally subvert it and render the agreement (and the

Court’s jurisdiction) nugatory. The District Court’s ability

to give effect to that provision is necessary in aid of its

jurisdiction.

Yet “the fact that an injunction may issue under the Anti-

Injunction Act does not mean that it must issue.” Chick Kam

Choo, 486 U.S. at 151. Specifically, principles of comity,

federalism, and equity always restrain federal courts’ ability

to enjoin state court proceedings. See Mitchum v. Foster, 407

U.S. 225, 243 (1972); 17 Charles A. Wright & Arthur R.

28a

Appendix A

Miller, Federal Practice and Procedure § 4226, at 551 (2d

ed.1995).°

Any court determining whether to issue an injunction

must consider several factors that guide and constrain its

equitable authority. See Temple Univ. v. White, 941 F.2d 201,

214-15 (3d Cir.1991); Shields v. Zuccarini, 254 F.3d 476,

482 (3d Cir.2001). Of primary importance, a party seeking

an injunction must show that there is some legal transgression

that an injunction would remedy.’

6. Appellants raise the issue of Younger abstention, the

prudential corollary to the Anti-Injunction Act’s statutory

circumscription of federal courts’ ability to enjoin state court

proceedings, see Younger v. Harris, 401 U.S. 37 (1971), but we need

address it only briefly. Although Younger’s application to civil

proceedings between two private parties remains relatively unclear,

a consistent prerequisite is that “an important state interest is

implicated.” See Anthony v. Council, 316 F.3d 412, 418 (3d Cir.2003).

We discern nothing about the state civil proceedings at issue here-

personal injury suits sounding largely in state tort law-that can fairly

be thought to implicate “important state interests.” The instances

where the Supreme Court and this Court have applied Younger to

state civil proceedings-such as state contempt proceedings, Juidice

v. Vail, 430 U.S. 327 (1977); judicial proceedings enforcing state

court orders, Pennzoil Co. v. Texaco, Inc., 481 U.S. 1 (1987); and

child support contempt proceedings, Anthony, 316 F.3d at 421-

involved proceedings qualitatively different from those at issue here.

This much was inherent in our decision in Prudential J and Prudential

IT, where we upheld orders enjoining state tort proceedings.

7. Put differently, a party seeking a permanent injunction must

“succeed on the merits.” See, e.g., Temple Univ., 941 F.2d at 215.

29a

Appendix A

In addition, any injunction a court issues must be

commensurate with the wrong it is crafted to remedy-it is a

“settled rule that in federal equity cases ‘the nature of the

violation determines the scope of the remedy.’” Rizzo, 423

U.S. at 378 (quoting Swann vy. Charlotte-Mecklenburg Bd.

of Educ., 402 U.S. 1, 16 (1971)); see also Forschner Group,

Inc. v. Arrow Trading Co., 124 F.3d 402, 406 (2d Cir.1997)

(“It is well-settled that the essence of equity jurisdiction has

been the power to grant relief no broader than necessary to

cure the effects of the harm caused by the violation”).

As this Court stated in Zemple Univ. v, White,

- While the scope of a district court’s equitable

powers to effect a remedy is broad, the relief

which a district court may grant can be no broader

than that necessary to correct the violation. Indeed,

a federal court is required to tailor the scope of

its remedy in order to fit the nature of the violation

which it has found.

941 F.2d at 215. The proper tailoring of injunctive relief is

especially important when principles of federalism are

involved. See Rizzo, 423 U.S. at 371 (“[A]ppropriate

consideration must be given to principles of federalism in

determining the availability and scope of equitable relief.”).

In other words, “federal courts should always seek to

minimize interference with legitimate state activities in

tailoring remedies.” Stone vy. City and County of San

Francisco, 968 F.2d 850, 861 (9th Cir.1992).

Here, the putative transgression that Wyeth sought to

remedy through an injunction was appellants’ violation of

30a -

Appendix A

the settlement agreement. Thus, two interrelated

considerations guide our review: (1) the proper construction

of the settlement agreement’s punitive damages provision;

and (2) the scope of the District Court’s injunctions. In other

words, we must construe the settlement agreement and then

determine the extent to which the District Court’s injunctions

prohibited actions that contravened the terms of the

settlement. An over-inclusive injunction would run afoul of

well-established principles of equity and federalism.

The decision of a potential settlement class member to

remain with the class or to opt out entirely at the threshold is

a fateful one. The average class member has had no hand in

negotiating the terms of the settlement. As demonstrated in

Prudential I, the settlement’s preclusive effect may be broad

and strict. By waiving an initial opt-out, the class member

surrenders what may be valuable rights, in return for

countervailing benefits. In this case, important information

for these potential class members included the availability,

benefits, and disadvantage of the intermediate opt-out right.

This opt-out choice raises a significant issue of fairness.

As in Georgine v. Amchem Prods., the individual class

members here have claims “that frequently receive huge

awards in the tort system.” 83 F.3d at 633. They can hardly

knowingly waive some of their tort rights without a clear

notice of what they are waiving. They may be entirely

dependent on the class notice for this information. That is

why we paid careful attention to the language of the class

notice, which detailed the extent of the released claims, in

3la

Appendix A

upholding the injunction that enforced the preclusive

provisions of the settlement in Prudential I. 261 F.3d at

366-67.

It follows that the preclusion language in the Diet Drugs

class notice and settlement agreement must, in order to avoid

due process concerns, be strictly construed against those who

seek to restrict class members from pursuing individual

claims. Cf. United States v. Albertini, 472 U.S. 675, 680

(1985) (“Statutes should be construed to avoid constitutional

questions. .. .”). Here, the following language in the class

notice informed putative class members of the consequences

if they signed onto the class and exercised intermediate

opt-out rights:

If you exercise the Intermediate Opt-Out right, you

give up the right to receive further benefits under

the Settlement Agreement, but you may choose

to pursue in court any legal claims you may have

against [Wyeth] relating to your use of Pondimin

and/or Redux. However, it is important to

understand that if you exercise the Intermediate

Opt-Out right, and choose to bring a lawsuit

against [Wyeth], your lawsuit will be subject to

certain restrictions including the following:

* If you exercise your Intermediate Opt-Out right

and choose to bring a lawsuit against [Wyeth], you

may not seek punitive or multiple damages.

* If you exercise your Intermediate Opt-Out ri ght

and choose to bring a lawsuit against [Wyeth], you

32a

Appendix A

may only assert a legal claim based on the heart

valve condition of the relevant Diet Drug

Recipient that was [properly diagnosed within a

prescribed time period].

¢ If you exercise your Intermediate Opt-Out right

and choose to bring a lawsuit against [Wyeth],

both you and [Wyeth] will be subject to certain

additional restrictions that are described in the

Settlement Agreement. In order for [Wyeth] to be

subject to these restrictions, such as waiver of any

statute of limitations defense, you must bring your

lawsuit, if you choose to do so, within one (1)

year from the date on which you exercise your

Intermediate Opt-Out right.

Wyeth Br., Ex. A at 12. The corresponding preclusive

language in the settlement agreement regarding intermediate

opt-outs appeared in three portions:

[1] [An intermediate opt-out] may pursue all of

his or her Settled Claims (except for those claims

set forth in subparagraphs (e) and (g) of Section

1.53%), against [Wyeth and other released parties],

8. Subparagraphs (e) and (g) of Section 1.53 include, as part of

the definition of “Settled Claims,” all claims for damages or any

other remedies for:

e. consumer fraud, refunds, unfair business practices,

deceptive trade practices, Unfair and Deceptive Acts and

Practices (“UDAP”), and other similar claims whether

arising under statute, regulation, or judicial decision;

(Cont’d)

33a

Appendix A

but may only assert aclaim. . . based on the heart

valve of the relevant Diet Drug Recipient which

was diagnosed by a Qualified Physician as FDA

Positive by an Echocardiogram. .. .

[2] With respect to [any intermediate opt-out]

who initiates a lawsuit against any of the Released

Parties within one year from the date on which

the Intermediate Opt-Out right is exercised,

[ Wyeth] shall not assert any defense based on any

statute of limitations or repose, the doctrine of

laches, any other defense predicated on the failure

to timely pursue the claim, any defense based on

“splitting” a cause of action, any defense based

on any release signed pursuant to the Settlement

Agreement, and/or any other defense based on the

existence of the Settlement Agreement, except to

the extent provided herein. [Intermediate opt-outs]

may not seek punitive, exemplary, or any multiple

damages against [Wyeth or other released

parties]....

[3] [Intermediate opt-outs] may not use any

previous verdicts or judgments against [Wyeth],

or factual findings necessary to such verdicts or

judgments, for purposes of establishing claims or

(Cont'd)

g. medical screening and monitoring, injunctive and

declaratory relief].]

Joint App. 572.

34a

Appendix A

facts in order to obtain a verdict or judgment

against [Wyeth] under the doctrines of res

judicata, collateral estoppel or other doctrines of

claim or issue preclusion. Nor may [intermediate

opt-outs] seek to introduce into evidence against

‘ [Wyeth], for any purpose, such a verdict,

judgment, or factual finding. Lawsuits initiated

by [intermediate opt-outs] shall be subject to the

provisions of Section VII.F.3.’

Joint App. 615-17.

Three restrictions emerge. First, the potential class

members were told that intermediate opt-outs will be allowed

to “pursue all . . . Settled Claims” for timely diagnosed VHD,

except for those pertaining to consumer fraud or business

loss. Specifically included are claims for such open-textured

9. Section VIII.F.3 provides:

The Parties to the Settlement ... shall not seek to

introduce and/or offer the terms of the Settlement

Agreement, any statement, transaction or proceeding in

connection with the negotiation, execution or

implementation of this Settlement Agreement, any

statements in the notice documents appended to this

Settlement Agreement, stipulations, agreements, OT

admissions made or entered into in connection with the

fairness hearing or any finding of fact or conclusion of

law made by the Trial Court, or otherwise rely on the

terms of this Settlement, in any judicial proceeding,

except insofar as it is necessary to enforce the terms of

the Settlement.

Joint App. 704.

ew ot ons oe ¢ eee See

PEPE Wit os Art» er mae"

35a

Appendix A

injuries as mental anguish, pain and suffering, and loss of

consortium. Second, Wyeth agreed not to assert any defenses

based on class members’ failure to assert a timely claim and

class members “may not seek punitive, exemplary, or any

multiple damages.” Finally, the provision addressed certain

evidentiary restrictions: (1) intermediate opt-outs may not

“seek to introduce into evidence” earlier verdicts or

judgments against Wyeth, or the factual findings underlying

them; and (2) neither party can offer evidence regarding the

settlement agreement, including evidence regarding its

negotiation or implementation.

The plain language is telling. The intermediate opt-out

provision comprehensively promised that claims for a wide

variety of losses can be sought, so long as they are for FDA-

positive VHD. % here is no limitation on VHD-related claims

or causes of action. Moreover, there is no expression that

opportunities to recover for mental anguish, pain, or loss of

consortium will be impeded or hampered. If the drafters were

concerned these type of recoveries might become vehicles

for sub rosa punitive awards, they might have limited them;

they did not..

Instead, the authors of the settlement specifically

excluded only “punitive, multiple, and exemplary damages”

from the laundry list of allowable recoveries. This reinforces

the natural conclusion that claims for VHD were not restricted

by the settlement, so long as forms of damages other than

those expressly forbidden were sought.

Significantly, evidentiary restrictions are explicitly

addressed ‘in the relevant provision of the agreement. The

36a

Appendix A

agreement forbids prior adverse findings or judgnients against

Wyeth from being placed in evidence for any purpose, as

well as a wide range of evidence regarding the settlement

agreement itself. This implies to the reader of the agreement

that the drafters knew how to identify evidence restrictions

when they wished to do so. There is no restriction, however,

placed on the use of evidence simply because it would be

relevant in supporting punitive damages. One deduces from

the absence of such an evidentiary restriction that the

agreement meant only to block the specified type of damages

award and not types of evidence that are relevant to

permissible awards but might also be relevant to punitive

damages.

Appellees seek to rebut -this language by referring to

colloquy during the fairness proceedings that they claim

further refines the meaning of the punitive damages

preclusion. At an October 2002 status hearing, one negotiator

stated his understanding that

the essence of this bargain was that there would

be no punitive damages in these downstream opt

out cases and that does not simply mean no

punitive damages. What [Wyeth] was bargaining

for, clearly, they were saying . . . we were willing

to pay for what juries determine were caused by

our diet drugs without reference to some

additional element that is awarded by reference

to fault evidence.

Joint App. 2149. This might be pertinent in construing the

agreement as between parties who actually participated in

el RP RS

37a

Appendix A

the negotiations. See, e.g., Bohler-Uddeholm Am., Inc. v.

Ellwood Group, Inc., 247 F.3d 79, 114 (3d Cir.2001). But

due process considerations counsel against binding absent

potential class members to understandings that were not made

express in the class notice or settlement agreement. And we

are particularly wary of binding class members through

statements made after the settlement was finalized and after

they had to choose whether to opt out.

Appellees urge that our decision in Prudential I disposes

of appellants’ claims because they read that decision to hold

that “when class members settle and release some of their

claims-but preserve other claims from the settlement-that

release bars the plaintiffs from offering evidence relating to

the released claims in any subsequent trial of the preserved

claims.” Wyeth Br. 36. But we think that the settlement

preclusion in Prudential I is different from this one, and

different in a meaningful way.

The class notice in Prudential J informed class members

that, in return for accepting settlements on some policy

claims, they would release the defendants

from any and all causes of actions, claims,

damages, equitable, legal and administrative

relief, interest, demands or rights, of any kind or

nature whatsoever . . . that have been, could have

been, may be or could be alleged or asserted now

or in the future . . . on the basis of, connected with,

arising out of, or related to, in whole or in part,

the Released Transactions [i.e., settled policies

under the settlement agreement].

38a

Appendix A

261 F.3d at 367 (emphasis omitted). In other words, any cause

of action or claim that was in any way related to a settled

policy-even a claim that “could have been” raised on the basis

of such a policy-was barred. This release language was

indeed, as the class notice explicitly warned potential class

members, “intended to be very broad.” Jd. at 366. And the

District Court’s injunction in that case tracked the language

of the class notice, forbidding class members from bringing

a lawsuit “based on or related to the facts and circumstances

underlying the claims and causes of action” that were settled

in the class action. Jd. at 361. To block new claims “based

on facts” underlying other settled claims is simply to

effectuate the class notice language releasing claims that

“could have been brought” based on the settled transactions.

In other words, the release language in the Prudential

settlement was typical general release language that prevents

new causes of action from overlapping with settled causes

of action with a “common nucleus of operative facts.”

Id. at 367.

Contrast the language in the Diet Drugs release. The Diet

Drugs release is not structured as a broad claims preclusion, -

but as a bar only to the magnitude and type of relief.

The only claims-based limitations are that (1) the claims must

be based on a timely diagnosed VHD injury, and (2) the claim

may not be for consumer or business losses. VHD-based

claims for compensation, including for pain, anguish, and

loss of consortium, are not precluded or limited in any way.

Indeed, the settlement agreement specifically contains

Wyeth’s renunciation of any defense based on “‘splitting’ a

cause of action.” What is limited is the type and extent of

damages for such VHD-claims.

he A ar

394

Appendix A

If we were to accept Wyeth’s invitation to read this

damages limitation as if it were a broad Prudential-type

release of all claims that could be the basis for a punitive

damages award, we would face an anomaly. Since the

predicate to any punitive or multiple damages award is a

finding of tortious liability, Wyeth’s logic would foreclose

opt-out plaintiffs from proving liability at all. That

interpretation would make the settlement agreement

internally contradictory.

Of course, Wyeth does not press so absurd a contention.

But, in effect, Wyeth wants us to read this punitive damages

limitation as if it were a limit on the manner in which

opt-out plaintiffs can pursue their claims for compensation.

Under this view, a plaintiff may show unreasonable behavior

to recover compensation for negligence, unless the behavior

was really unreasonable (so that it might support punitive

damages). Put another way, Wyeth urges that very strong

evidence of fault must be diluted so that it would not arouse

the jury to award punitive damages, if punitive damages could

be awarded-which they cannot be. In the absence of an

explicit description of this novel type of restriction in the

settlement agreement, we decline to construe the agreement

to imply an evidence-dilution requirement for compensation

claims that are clearly preserved for the opt-out plaintiffs.

All of this is not to say that the District Court was

powerless to restrain opt-out plaintiffs from evading the

prohibition against exemplary damages. Even under a strict

construction of the settlement agreement, the District Court

ANa.

Appendix A

was entitled to prevent circumvention of the damages

limitation. The District Court acted consistently with the

settlement agreement, for example, when it enjoined the

introduction of certain types of evidence relevant only to the

impermissible purpose of obtaining punitive damages.

Appellants conceded this at oral argument. Tr. 9. So, as

appellants acknowledged, the District Court correctly banned

evidence relating to Wyeth’s size, profits, and sales figures,

which is not probative of liability, causation, or

compensation. Jd. at 10, 13.

But PTO 2828 swept far more broadly, prohibiting Clark

from offering evidence thet was relevant-indeed, highly

probative-on issues of negligence and failure to warn.'°

The District Court reasoned that such evidence, if suggestive

as well of intentional misconduct, fell within the punitive

damages bar because it could support a punitive verdict or

because it could inflame the state jury. The test that the

District Court seemed to employ was to place “off-limits”

evidence that was not “necessary” to prove a claim to

compensation. PTO 2828, at 8. Excluded under this approach

were pieces of evidence that “suggest malfeasance on the

part ofthe company that goes beyond mere negligence,”

id. at 27, or that “connotes more than negligence.” Jd. at 32.

10. We center our discussion on PTO 2828 because it was the

most comprehensive of the District Court’s orders and appears to

have established a baseline set of guidelines for all intermediate opt-

outs litigating their claims in state courts, regardless of whether they

were parties to PTO 2828. Counsel for Eichmiller et al., for example,

agreed to comply with PTO 2828 even though it did not specifically

bind them.

POLAK SHEMALE SELAH ELEM PRE

4la

Appendix A

Intentional or reckless behavior may be highly probative

of elements of negligence or defective design cases. The

failure to report adverse actions to the FDA-whether

accidental or intentional-would be probative of a failure to

warn. And intentional or reckless behavior is often relevant

to showing conduct below the reasonable standard of care

necessary to make out a case of negligence. '!

11. Certain categories of intentional conduct-specifically,

intentionally tortious conduct-do not support a claim of negligence

in certain jurisdictions. Compare Dairy Road Partners v. Island Ins.

Co., 992 P.2d 93, 114-15 (Haw. 2000), Ins. Co. of N. Am. v. Miller,

765 A.2d 587, 601 (Md. 2001), and Jamison vy. Encarnacion, 281

U.S. 635, 641 (1930) with Landry v. Leonard N. East Ins. Co., 720

A.2d 907, 910 (Me.1998), Am. Nat'l Fire Ins. Co. v. Schuss, 607

A.2d 418, 423 (Conn. 1992), and Walters v. Blackshear. 591 N.E.2d

184, 185 (1992). The distinguishing factor between intentionally and

negligently tortious conduct is that an intentional tortfeasor intends

to bring about the harm that results from his actions. See Schuss,

607 A.2d at 423. Thus even in those jurisdictions where negligence

and intentional torts are mutually exclusive, intentional conduct may

be relevant to negligence so long as it does not involve intent to

bring about the harmful result. See Landry, 720 A.2d at 910; Fowler

V. Harper et al., The Law of Torts § 16.9 n.2 (“An intentional act

may be negligent.”) (citing Dartez v. Gadbois, 541 S.W.2d 502

(Tex.Civ.App.1976)); sce also Ghassemieh v. Schafer, 447 A.2d 84,

89-90 (Md. Ct. Spec. App. 1982) (“We see no reason why an

intentional act that produces unintended consequences cannot be a

foundation for a negligence action.”); see also 57A Am.Jur.2d

Negligence § 30 (2004). As one major treatise explains:

[I)ntentional conduct and even intentional risk-taking is

analyzed under negligence rules unless the defendant has

a purpose to invade the plaintiff’s interests or a certainty

that such an invasion will occur... . The defendant who

(Cont'd)

42a

Appendix A

A few examples suffice to illustrate the problem. The

District Court correctly recognized that the use and content

ofa “black box” on the drug warning label “goes to the issue

of failure to warn.” Jd. at 8. Accordingly, it authorized Clark

to seek to prove that warnings were “inadequate or wrong

and that certain relevant information was not reported or not

reported on a timely basis to the FDA.” Jd. at 9. But the

Court held that to avoid “implicat[ing]” punitive damages,

Clark could not prove that any such failure was intentional.

As a consequence, the District Court struck deposition

testimony from Wyeth’s Associate Director of Safety

Surveillance specifically admitting that valvular heart

disease reactions to the drugs were not reported to the FDA.

Id. at 33. The District Court also banned testimony from other

witnesses that they fought strenuously against any “black

box” warning. PTO 2828, at 31. This evidence certainly

tended to prove that the defendant “knows or should know

of a potential risk of harm presented by a product but markets

(Cont'd)

intentionally takes a risk may or may not be negligent;

negligence will depend upon the seriousness of the risk

and the reasons for taking it.

in spite of the fact that it is conduct and risk, not mental

state that determines negligence, the defendant's state

of mind is not necessarily irrelevant in a negligence case.

The defendant’s knowledge of facts that make a given

act risky (as distinct from his attitude) is frequently

important on the negligence issue.

Dan B. Dobbs, The Law of Torts § 116 (2001).

43a

Appendix A

it without adequately warning of the danger,” which is the

definition of a “marketing defect” under Texas tort law.

See Sims v. Washex Mach. Corp., 932 S.W.2d 559, 562

(Tex. Ct. App. 1995); see also Jackson v. Johns-Manville

Sales Corp., 750 F.2d 1314, 1318-20 & n. 8 (Sth Cir.1985)

(en banc) (Mississippi law). But under PTO 2828, this

evidence was placed out of bounds.

Similarly, the District Court placed off-limits any

evidence that mentioned medical side-effects other than VHD

itself.'? This evidence was not offered to support claims for

these side-effects, since plaintiffs did not suffer from them.

Rather, they were offered for other purposes, such as to prove

duty to warn. Evidence of the totality of the risks of injury

may be admissible under state law to show the scope of the

duty to warn, even if the individual plaintiff has-not sustained

all the injuries in question. See Dartez v. Fibreboard Corp.,

765 F.2d 456, 468 (Sth Cir.1985). Nevertheless, the District

Court ruled out testimony about delays in changing warning

labels on Pondimin if the warnings concerned PPH. The

Court justified this ruling on the ground that plaintiffs did

not have these side-effects, so that this evidence would “have

the effect of unfairly arousing the jury against Wyeth.” PTO

2828, at 7.

The District Court also categorically prohibited plaintiffs

from offering evidence of “Wyeth’s marketing or promotion

12. This ruling was not based on claim preclusion. Intermediate

opt-outs were limited to recovery for VHD but were not barred from

recovery for PPH, a side-effect that is distinct from VHD. See Joint

App. 572-73, 616; PTO 1415, at 70; Jn re Diet Drugs, No. 99-20953,

Memorandum and Pretrial Order No. 3065, at 5 (E.D. Pa. filed

October 10, 2003).

44a

Appendix A

of diet drugs to the extent that Wyeth placed marketing or

promotion ahead of health or safety concerns.” Jd. at 6. The

Court took this step on the grounds that “such evidence and

argument can have no other purpose than to obtain punitive

damages.” Jd. at 20. Evidence tending simply to show that

Wyeth wanted to successfully market the diet drugs and make

a profit selling them would not be relevant to show, for

example, that Wyeth acted negligently. But excessive concer

with the image and marketing of the diet drugs at the expense

of making efforts toward determining whether they were safe

could be probative as to whether Wyeth breached a duty of

care towards the plaintiffs.

In effect, the District Court trimmed evidence that was

probative, but that it viewed as unnecessary and so

inculpatory that it might inflame the jury to award damages

that would punish Wyeth instead of simply compensating

the plaintiffs. The District Judge effectively adopted the role

of a trial judge balancing probative value against unfair

prejudice. Cf. Fed.R.Evid. 403. By doing that, he moved

beyond mere enforcement of the damages restriction, and

affected plaintiff’s right to try her permissible liability case.

A trial is more than a matter of presenting a series of

individual fact questions in arid fashion to a jury. The jury

properly weighs fact questions in the context of a coherent

picture of the way the world works. A verdict is not merely

the sum of individual findings, but the assembly of those

findings into that picture of the truth. As the Supreme Court

instructed in Old Chief v. United States, evidence “has force

beyond any linear scheme of reasoning, and as its pieces come

together a narrative gains momentum, with power not only

45a

Appendix A

to support conclusions but to sustain the willingness of jurors

to draw the inferences, whatever they may be, necessary to

reach an honest verdict.” 519 U.S. 172, 187 (1997). Unduly

sterilizing a party’s trial presentation can unfairly hamper

her ability to shape a compelling and coherent exposition of

the facts.

Of course, at trial this process of evidentiary balancing

is nuanced and contextual. For that reason, “excluding

evidence under Fed R. Evid. 403 at the pretrial stage is an

extreme measure.” Hines v. Consolidated Rail Corp., 926

F.2d 262, 274 (3d Cir.1991). In Jn re Paoli R.R. Yard PCB

Litigation, we explained:

[A] court cannot fairly ascertain the potential

relevance of evidence for Rule 403 purposes until

it has a full record relevant to the putatively

objectionable evidence. We believe that Rule 403

is a trial-oriented rule. Precipitous Rule 403.

determinations, before the challenging party has

had an opportunity to develop the record, are

therefore unfair and improper.

916 F.2d 829, 859 (3d Cir.1990) (internal citation omitted).

In short, the District Court’s broad order prematurely struck

the balance between probativeness and prejudice, and did so

for trial proceedings yet to occur in another court system

before a different judge.

Appellees argue that Clark has no cause to complain

about losing access to some evidence relevant to liability

because she was offered, and declined, Wyeth’s stipulation

46a

Appendix A

not to contest the element of breach of duty. Wyeth Br. 46.

Notably, Wyeth did not offer to concede negligence or

defective warning before the jury. It proposed, instead, a

stipulation, in the form of a conditional double negative, that

would present two specific interrogatories to the jury-cause

in fact and damages. Joint App. 3371-72.

This parsimonious-indeed, illusory-offer was

understandably rejected by Clark’s counsel. As State District

Judge Powell found, it simply misconceived Texas tort law,

and would have created confusion for the jury. But beyond

that, restricting plaintiff to a sterile concession and the right

to litigate two particularized questions would seriously

disadvantage her at trial (as skilled counsel for Wyeth surely

recognized). Jurors might well wonder at the fairness of

determining causation and damages in a vacuum devoid of

any suggestion of liability or negligence. Intermediate opt

out plaintiffs never agreed to relinquish their right to try their

allowed claims effectively in state court.

Moreover, removing critical issues of fact from the jury

without an adequate explanation runs the risk of distorting

jury deliberations. The absence of proof that would normally

be expected can cause the jury to draw unwarranted

inferences. “[T]here lies the need for evidence in all its

particularity to satisfy the jurors’ expectations about what

proper proof should be.” Old Chief, 519 U.S. at 188. For

this reason, unless a stipulation adequately concedes an

element of proof, it can prejudice the party carrying the

burden of proof. In this case, the proposed concession by

Wyeth would, as Judge Powell saw, “raise a substantial

47a

Appendix A

possibility that one or more jurors would be influenced by

the lack of evidence and the lack of explanation.” Joint App.

1290.

Insofar as the injunctions barred the use of evidence that

was relevant to genuine issues in the state trial-apart from

punitive, multiple, or exemplary. damages-they placed

restrictions on opt-out plaintiffs that went beyond the fair

terms of the settlement agreement.

Finally, we note that injunctions must be enforceable,

workable, and capable of court supervision. See Lemon vy.

Kurtzman, 411 U.S. 192, 200 (1973) (“[E]quitable remedies

are a special blend of what is necessary, what is fair, and

what is workable.”); United States v. Paramount Pictures,

Inc., 334 U.S. 131, 161-66 (1948) (vacating injunction that

implicated the “judiciary heavily in the details of business

management” in order for supervision “to be effective”);

Rutland Marble Co. v. Ripley, 77 U.S. 339, 358-59 (1870)

(“It is manifest that the court cannot superintend the

execution of such a decree. It is quite impracticable.”);

Restatement (Second) of Torts § 943 cmt. a (“In determining

the appropriateness of injunctive relief, the court must give

consideration to the practicality of drafting and enforcing

the order or judgment. If drafting and enforcing are found to

be impracticable, the injunction should not be granted.”).

The District Court’s orders raise practical and institutional

concerns in this regard.

48a

Appendix A

PTO 2828, as we have seen, is not limited to protecting

the core of the settlement’s damages limitation by forbidding

plaintiffs from seeking such damages in their pleadings or

presenting evidence relevant only to such damages. Rather,

the order enforces a series of prophylactic prohibitions that

affect plaintiffs’ ability to obtain permissible compensatory

damages. As written, PTO 2828-which is enforceable, of

course, by the sanction of contempt-would make it very

difficult for plaintiff to try the case that is preserved to her

under the settlement agreement.

Numerous exhibits and portions of testimony are

excluded definitively, regardless of the purpose for which

they are offered. By way of example, the District Court nixed

deposition testimony about efforts by Wyeth employees to

avoid a “black box” warning. It is not clear what recourse a

plaintiff would have if, during the course of trial, a Wyeth

employee were to assert that Wyeth was always scrupulous

and forthcoming on warning issues. By its terms, the order

would appear to forbid plaintiff from offering the deposition

testimony for purposes of rebuttal or impeachment. Nor, on

the face of the order, would plaintiff be justified in

introducing evidence of failure to warn regarding PPH on

the ground that it negates the trial testimony that Wyeth is

always forthcoming. Normally, a trial judge might well

conclude such testimony onened the door for previously out-

of-bounds evidence. PTO 2828 does not vest the state judge

with that discretion. Presumably, the parties-and the state

court-would have to contact the District Court and seek a

modification of PTO 2828.

49a

Appendix A

Even more awkward is the broadly framed prohibition

against offering evidence “related directly or indirectly” to

such topics as wanton or similar conduct by Wyeth, or

Wyeth’s marketing of diet drugs “to the extent Wyeth placed

marketing or promotion ahead of health or safety concerns.”

Almost any proof related to negligence can be regarded as

“related indirectly” to wanton conduct. Hypothetically,

imagine that Clark calls a witness who will testify that Wyeth

officials were made aware of VHD dangers and reached a

decision that no warning should be published PTO 2828

could be read to preclude this evidence because it is

“indirectly related” to “wanton or similar conduct.” Of

course, the evidence is also highly probative of negligence.

Another hypothetical: Suppose Wyeth calls a witness

who testifies that decisions about warnings are made only

after careful evaluation of scientific evidence. Would PTO

2828 allow Clark’s attorney to cross-examine on (still

hypothetical) instances where marketing considerations were

discussed in meetings about warnings?

Again, in the usual case counsel faced with such a

question would ask the trial judge for guidance either by way

of motion or sidebar. But PTO 2828 would make those

questions fodder for the District Court, without a full

appreciation of the flow of the testimony. Counsel might have

to seek, for example, telephonic sidebars with the District

Court. The order creates a highly intrusive and unworkable

regulatory scheme

Moreover, we emphasize, the rules imposed by PTO 2828

are not merely enforceable by the usual mechanism of the

50a

Appendix A

trial court’s sustaining objections or, perhaps, granting a

mistrial. Here, a violation of the rule-a wrong guess-could

result in a punitive sanction. There will be strong pressure

on counsel to steer well clear of the line and possibly forego

offering admissible evidence that Clark would normally

expect to get before the jury.

This order is even more problematic insofar as it bans

counsel from making argument “to the court” regarding these

topics. Read literally (as counsel must), this would prevent

Clark from even arguing to the state judge, outside the

presence of the jury, that certain evidence falls within or

outside the scope of PTO 2828. We do not think the District

Court actually meant to preclude such argument. Indeed, it

is hard to see what purpose would be served-and easy to see

the problems that would arise-in restraining counsel from

making arguments in state court. The point is that the District

Court’s understandable effort to lock the door against

impermissible attempts to obtain exemplary damages led to

an order that seriously interferes with Clark’s rights to try

her case.

Implicit in our discussion as well is the fact that PTO

2828 disrupts the state court’s ability to manage its own

judicial process. As the previous illustrations cuggest, PTO

2828 would remove from the state judge a whole panoply of

decisions that he or she would normally be authorized-indeed

obliged-to make. But the process the order leaves is unclear.

Some of the exclusions in the order are left to be applied by

the state judge. Others are not. It is not clear, for example,

whether the state judge would determine whether evidence

is “related indirectly” to forbidden topics.

bs oa eel

Sla

Appendix A

As we have held, the District Court had the unquestioned

right to effectuate the restraints of the settlement through an

order limiting opt-out plaintiffs’ conduct in ancillary state

proceedings. But we believe that that power must be exercised

in a manner that minimizes entanglement in the state judge’s

ability to supervise judicial proceedings in his own

courtroom. Similarly, the order should be fashioned in a

manner that presumes that the state judge is capable and

willing to enforce that settlement without close and intrusive

supervision by the District Court.

Il.

The settlement approved and supervised by the District

Court in this case is a landmark effort to reconcile the rights

of millions of individual plaintiffs with the efficiencies and

fairness of a class-based settlement. Critical to this effort

was the allowance of downstream opt-outs, so that potential

class members were not faced with an all-or-nothing decision

at the threshold. To make this allowance meaningful, the

settlement had to protect Wyeth against its largest fear,

potentially ruinous punitive damage awards. At the same

time, it had to allow intermediate opt-out plaintiffs to have a

fair chance to litigate their claims and obtain those damages

that were expressly preserved.

The District Court had, and still has, the power to

effectuate and protect the terms of this bargain. But in doing

so, the Court must be mindful of two limiting considerations:

(1) opt-outs must be able to fairly litigate the claims preserved

to them under the agreement, and (2) intrusion into state court

proceedings should be minimized.

52a

Appendix A

Accordingly, the District Court erred in imposing the

evidentiary restrictions of PTO 2828 because those

restrictions were overbroad and impinged on plaintiffs’ rights

under the settlement, and they unduly entangled the Court in

the management of separate state court proceedings. PTO

2828’s pre-trial evidentiary restrictions survive these limiting

principles only insofar as they prohibit opt-outs from offering

evidence that is relevant exclusively to forbidden damages.

See PTO 2828, {J (3)(a)-(b). As appellants themselves

concede, an injunction to that effect is entirely permissible.

Specifically, the following portions of PTO 2828 must

be vacated: (i) the categorical evidentiary restrictions in

Subsections (2)(b)-(c) and Subsections (3)(c)-(h), insofar as

they preclude plaintiffs from introducing evidence relevant

to proving their VHD claims in state court; and (ii) the

limitations on exhibits and deposition testimony in Section

(4), insofar as they preclude plaintiffs from introducing

evidence relevant to proving their claims in state court. PTO

2828 is consistent with this opinion insofar as it prohibits

plaintiffs from “introducing any evidence” relevant

exclusively to “punitive, exemplary or multiple damages,

however described,” which specifically includes evidence of

“(a) Wyeth’s profits, size or financial condition”; and “(b)

the amount or size of Wyeth’s sales of diet drugs or other

products.”

PTO 2828 also runs afoul of this opinion insofar as it

prohibits the parties from “making any statement or argument

to the court.” But the order is consistent with this opinion

insofar as it prohibits the parties from “making any statement

53a

Appendix A

or argument to the ... jury related directly” to evidence

relevant only to punitive damages."

We note that although we have limited the District

Court’s ability to prohibit the parties from offering certain

evidence in their state court trials, the state courts are

presumably mindful of the obligation to honor the settlement

agreement, and to ensure that the parties do not evade it.

That will undoubtedly impel the state courts during trial to

exclude evidence when its prejudicial effect (namely its

tendency to inflame the jury and improperly inflate

compensatory damages) outweighs its probative value. We

are confident, particularly in light of the previous state court

orders in the record, that the state courts can and wil] capably

manage this task.

In addition, our opinion leaves the District Court free to

consider other measures, aside from imposing evidentiary

restraints, that will effectuate the limitations of the settlement

agreement. The District Court might consider, for example,

ordering language to be included in a stipulation or proposed

jury instruction that would make it clear to the jury that

exemplary damages may not be awarded. Or, the Court could

direct the parties to agree to a bifurcated trial-where damages

are determined apart from liability-in the event that the state

court were to deem it advisable.

13. Although we specifically address PTO 2828, the most

comprehensive order, we expect that the District Court will modify

all orders at issue in this appeal so that they are consistent with this

opinion.

oo ae ee

54a

Appendix A

Moreover, while we understand the desirability of taking

steps to protect the settlement agreement before a trial occurs,

the District Court is not without recourse in the event that a

verdict is rendered that appears to grant punitive damages

under the guise of some other damage category. The precise

circumstances that might arise are too speculative to discuss

with specificity. But post-trial remedies should not be

categorically rejected."

We recognize that the District Court’s task is a difficult

one, particularly in light of the patent efforts by plaintiffs’

counsel to press against the damages restrictions to which

intermediate opt-outs are bound. But the Court’s power has

to be exercised consistent with the terms of the notice and

agreement on which potential class members relied at the

outset of the process. Moreover, it has to be applied to the

state courts with appropriate consideration for limitations of

equity, federalism, and comity. a

14. At oral argument, we raised the question whether the District

Court had power after a verdict to limit or remit a damage award that

seemed so excessive that it amounted to exemplary damages. We

particularly focused on the Rooker-Feldman doctrine. This decision

is not the proper place to consider fully the extent to which the

Rooker-Feldman doctrine might circumscribe the District Court’s

ability to effectuate the agreement’s punitive damages provision after

a jury has awarded a plaintiff damages. We note, however, that where

“a federal court’s proper exercise of its jurisdiction to manage its

cases has the secondary effect of voiding a state court determination,

it is not a review of that order for purposes of the Rooker-F eldman

doctrine.” Diet Drugs I, 282 F.3d at 242. On the other hand, the Full

Faith and Credit Act, 28 U.S.C. § 1738, precludes a federal court

from reconsidering a state court’s judgment as to the preclusive effect

of a federal court judgment. See Parsons Steel, Inc. v. F irst Ala. Bank,

474 U.S. 518 (1986).

55a

Appendix A

Accordingly, we will vacate the Court’s injunctions and

remand with instructions to modify them in accordance with

this opinion.

56a

APPENDIX B — MEMORANDUM AND PRETRIAL

ORDER NO. 3088 OF THE UNITED STATES

DISTRICT COURT FOR THE EASTERN DISTRICT

OF PENNSYLVANIA DATED OCTOBER 30, 2003

IN THE UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT

OF PENNSYLVANIA

MDL NO. 1203

CIVIL ACTION NO. 99-20593

IN RE: DIET DRUGS (PHENTERMINE,

FENFLURAMINE, DEXFENFLURAMINE) PRODUCTS

LIABILITY LITIGATION

THIS DOCUMENT RELATES TO: _

SHEILA BROWN, et al.

AMERICAN HOME PRODUCTS CORPORATION

MEMORANDUM AND PRETRIAL ORDER NO. 3088

Bartle, J.

Wyeth has filed a motion to enjoin plaintiff class

members and their counsel in the cases of Eichmiller v.

American Home Products Corp., Civil Action

No.2002CV52077 (Fulton County, Georgia), Cook, et al. v.

57a

Appendix B

Wyeth, Cause No.2002-21 (Hinds County, Mississippi), and

Caldwell v. American Home Products Corp., No.2002-113-

CV3 (Jones County, Mississippi) from introducing evidence

at trial related to the “four cases label” for the diet drug

Pondimin and to the “black box warning” for the diet drug

Redux for the years 1995 and 1996. Wyeth contends the

introduction of such proof would violate the Nationwide

Class Action Settlement Agreement (“Settlement

Agreement”) in this multidistrict litigation.

Under the Settlement Agreement, approved in Pretrial

Order (“PTO”) 1415, class members who are suffering from

left-sided valvular heart disease (“VHD”) may exercise either

an immediate or back-end opt-out under certain conditions.

By exercising such a downstream opt-out, as plaintiffs have

done here, they may sue Wyeth in the tort system for

compensatory damages. However, the Settlement Agreement

forbids them from suing Wyeth for punitive, exemplary, or

multiple damages. See Settlement Agreement §§ IV.D.3.C.

and IV.D .4.C.

Underlying Wyeth’s motion is its effort to prevent any

mention of primary pulmonary hypertension (“PPH”), a

progressive disease which is virtually always fatal. In a

number of previous pretrial orders, we have enjoined

plaintiffs and their counsel in other lawsuits from introducing

such evidence because it was clearly designed to inflame the

jury to award punitive damages. See PTO 2680. The plaintiffs

here allege that they are suffering from VHD and not from

PPH. Consequently, any effort to inject PPH into their trials

can only be for the purpose of obtaining punitive damages,

in fact if not in name. See PTO 2828. Because the offer of

58a

Appendix B

such evidence would clearly be in breach of the Settlement

Agreement, we have authority to prevent plaintiffs from doing

so. See In re Prudential Insur. Co. of Am. Sales Practice

Litig., 261 F.2d 355 (3d Cir.2001). Any procedural,

evidentiary, or substantial rule of law of any state must yield

to the terms of the Settlement Agreement and specifically its

punitive damages exclusion. See PTO 2818; PTO 2680.

The “four cases label” for the diet drug Pondimin stated:

There have been four causes [sic] of pulmonary

hypertension reported in association with

fenfluramine use. Two cases were apparently

reversible after discontinuation of fenfluramine,

but evidence of pulmonary hypertension recurred

in one of these patients upon rechallenge with

fenfluramine. A third patient was initially

improved with nifedipine treatment, but was noted

to have increased pulmonary arterial pressure

again at a four month follow up visit. Finally, an

irreversible and fatal case of pulmonary

hypertension has been reported in a patient who

had seven 1-month courses of fenfluramine in the

twelve years prior to death. Patients taking

fenfluramine should be advised to report

immediately any deterioration in exercise

tolerance.

Pulmonary hypertension (“PH”) is a quite common

phenomenon in the general population and should not be

confused with the fatal disease known as PPH. PH, which

involves an elevation in pulmonary artery pressure, is a

59a

Appendix B

symptom caused by various conditions, including high blood

pressure. PH can also be secondary to VHD.

While the four cases label uses the term PH rather than

the term PPH, a review of the record as well as the wording

of the four cases label itself demonstrates that it is describing

PPH. The four cases referred to in the label were actually

cases of PPH. The plaintiff in Caldwell, supra, concedes as

much in her answer to an interrogatory. Clearly the references

to PH are not to PH secondary to VHD.

The “black box warning” concerns the warning label the

Food and Drug Administration (“FDA”) was considering in

1995 and 1996 in connection with the approval of the diet

drug Redux and whether the warning should be enclosed

within a black border, that is, a black box. There can be no

doubt, and plaintiffs do not really challenge, that the

discussions with the FDA during this time period centered

on a warning for PPH and not PH secondary to VHD.

At the time we entered PTO 2828, we did not have

enough information to decide the issue now before the court.

Thus, we deferred to the trial judge to determine whether

evidence involving the four cases label and the black box

warning related to PH or to PPH. Now, having a more

complete record, we are convinced that issues of “the four

cases label” and “the black box warning” concern PPH, and

not PH or even PH secondary to VHD.!

1. If a plaintiff were allowed to introduce evidence, however

spurious, that the four cases label is about PH secondary to VHD

and not about PPH, Wyeth would face the necessity of introducing

(Cont’d)

60a

Appendix B

We made it quite clear in PTO 2828, as well as other

PTO’s, and we reiterate here that class members and their

counsel may not make any reference, directly or indirectly,

to PPH at any trial where class members are suing Wyeth for -

VHD. Likewise, they may not mention PH, except as a

secondary condition to VHD. We now rule that these

prohibitions specifically prevent reference to evidence related

to the “four cases label” for Pondimin and evidence related

to the “black box warning” in 1995 and. 1996 for Redux.

The offer and introduction of such proof would violate the

provisions of the Settlement Agreement against claims for

punitive, exemplary, or multiple damages.

We will grant Wyeth’s motion and enter the attached

injunction.

(Cont'd)

truthful evidence that it really is about PPH. A plaintiff would thus

have achieved indirectly what the Settlement Agreement forbids, that

is, the introduction of the inflammatory issue of PPH into a case

involving VHD.

reasons set forth in the accompanying Memorandum, it is

hereby ORDERED that:

6la

Appendix B

IN THE UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT

OF PENNSYLVANIA

MDL NO. 1203

CIVIL ACTION NO. 99-20593

IN RE: DIET DRUGS (PHENTERMINE,

FENFLURAMINE, DEXF ENFLURAMINE) PRODUCTS

LIABILITY LITIGATION

THIS DOCUMENT RELATES TO:

SHEILA BROWN, et al.

AMERICAN HOME PRODUCTS CORPORATION

PRETRIAL ORDER NO. 3088

AND NOW, this 30th day of October, 2003, for the

(1) the plaintiffs and their agents, attorneys, and

derivative claimants are ENJOINED in the cases of

Eichmiller v. American Home Products Corp., Civil Action

No.2002CV52077 (Fulton County, Georgia), Cook, et al. v

Wyeth, Cause No.2002-21 (Hinds County, Mississippi), and

62a :

Appendix B

Caldwell v. American Home Products Corp., No.2002-113-

CV3 (Jones County, Mississippi) from introducing any

evidence, making any statement before or argument to the

court or jury, related directly or indirectly to:

(a) punitive, exemplary or multiple damages,

however described;

(b) malicious, wanton or other similar

conduct of Wyeth, however described;

by Wyeth other than left-sided mitral valve

regurgitation or pulmonary hypertension

secondary to mitral valve regurgitation;

(d) Wyeth’s profits, size or financial

condition;

(e) the amount or size of Wyeth’s sales of diet

drugs or other products;

(f) Wyeth’s marketing or promotion of diet

drugs to the extent that Wyeth placed marketing

or promotion ahead of health or safety concerns,

(g) any deception or any destruction, hiding,

overwriting, or deliberate miscoding of documents

or information by Wyeth;

(h) any involvement by Wyeth in the

ghostwriting of articles;

' 63a

Appendix B

(i) primary pulmonary hypertension;

(j) neurotoxicity;

(k) any other disease, illness or condition or

persons suffering from any other disease, illness

or condition caused by Redux or Pondimin except

for left-sided valvular heart disease or pulmonary

hypertension secondary to left-sided valvular heart

disease; and

(1) the “four cases label” for Pondimin and

the “black box warning” for Redux in 1995 and

1996; and

(2) the parties shall deliver forthwith to the state trial

judges a copy of this Memorandum and Pretrial Order.

BY THE COURT:

s/ Harvey Bartle

Harvey Bartle, J.

64a

APPENDIX C — PRETRIAL ORDER NO. 2883 OF

THE UNITED STATES DISTRICT COURT FOR THE

EASTERN DISTRICT OF PENNSYLVANIA

DATED JUNE 10, 2003

IN THE UNITED STATES DISTRICT COURT FOR

THE EASTERN DISTRICT OF PENNSYLVANIA

MDL No. 1203

Civil Action No. 99-20593

IN RE DIET DRUGS (PHENTERMINE/

FENFLURAMINE/ DEXFENFLURAMINE) PRODUCTS

LIABILITY LITIGATION

This document relates to:

SHEILA BROWN, et al.

AMERICAN HOME PRODUCTS CORPORATION

Pretrial Order No. 2883

The Court, having considered Wyeth’s Motion For

Injunctions To Enforce The Nationwide Class Action

Settlement Agreement (“Motion to Enforce”) in the actions

entitled Wilson, et al. v. Weeth, et al., No. 3:03cv305BN (S.D.

Miss.) and James, et al. v. Wyeth et al., No. 2002-95 (Smith

County, Miss.) (the “Mississippi Actions”), and the

submissions of counsel presented in support of and

65a

Appendix C

Opposition to the Motion to Enforce, and finding good and

Just cause therefor,

IT IS HEREBY ORDERED that Wyeth’s Motion to

Enforce is GRANTED; and

IT IS FURTHER ORDERED that:

(1) Plaintiffs Keith K. Barlow, Ruby S. Barlow, Cherry

Barnes, Joe Wayne Burton, Nora K. Burton and Lonelle S.

James, in the case of James, et al. v. Wyeth,

et al., No. 2002-95, pending in the Circuit Court of Smith

County, Mississippi (the “James Plaintiffs”), and the

respective agents, attorneys and derivative claimants, are,

each of them, ENJOINED from introducing any evidence,

making any statement before or argument to the court or jury,

related directly or indirectly to:

(a) punitive, exemplary or multiple damages,

however described;

(b) malicious, wanton or other similar conduct

of Wyeth, however described; and

Wyeth other than left-sided valve

regurgitation or, for those plaintiffs who

allege it, pulmonary hypertension secondary

to mitral valve regurgitation; —

and

66a

Appendix C

(2) Without limitation as to the scope of the injunction

set forth in paragraph 1, the James Plaintiffs, and their

respective agents, attorneys and derivative claimants, are,

each of them, ENJOINED from introducing any evidence or

making any statement before or argument to the court or jury

related directly or indirectly to the following subjects:

(a) Wyeth’s profits, size or financial condition;

(b) the amount or size of Wyeth’s sales of diet

drugs or other products;

to the extent that Wyeth placed marketing or

promotion ahead of health or safety concems,

(d) any deception or any destruction, hiding,

overwriting, or deliberate miscoding of

documents or information by Wyeth;

(e) any involvement by Wyeth in the

ghostwriting of articles;

(f) primary pulmonary hypertension,

(g) neurotoxicity; and

(h) any other disease, illness or condition or

persons suffering from any other disease,

illness or condition caused by Redux or

Pondimin except for left-sided valvular heart

67a

Appendix C

disease or, for those plaintiffs who allege it,

pulmonary hypertension secondary to mitral

valvular heart disease;

and

(3) Without limitation on the scope of the injunctions

set forth in paragraphs 1 and 2, the James Plaintiffs, and

their respective agents, attorneys and derivative claimants,

are, each of them, ENJOINED from introducing (a) any

exhibit or deposition testimony which was not included in

(i) the Third Amended Exhibit List (as such exhibits were

redacted) or which was withdrawn by plaintiff from such

list, as reflected in Pretrial Order No. 2828 and its

accompanying Memorandum and Pretrial Order No. 2865,

or (i) the Sixth Amended Deposition Designations submitted

to this Court on March 21, 2003 by Plaintiff Clara Clark

pursuant to Pretrial Order No. 2717 (together, the “Proffered

Clark Trial Plan”),' and (b) any exhibit (or portion of an

exhibit) or deposition testimony (or portion of deposition

testimony) included in the Proffered Clark Trial Plan, or

making any statement before or argument to the court or jury

in the James action related directly or indirectly to those

exhibits and that deposition testimony or the contents thereof,

1. Acopy of the Clark Third Amended Exhibit List, the exhibits

(with the Clark plaintiff s redactions), the Clark Sixth Amended

Deposition Designations and the text of the Clark plaintiff’s

designated testimony are attached hereto as Exhibits “A,” “B,” “C”

and “D,” respectively, and are incorporated into this Order.

68a

Appendix C

except as allowed in Pretrial Order No. 2828 and its

accompanying Memorandum and Pretrial Order No. 2865’;

and

(4) The parties shall deliver forthwith to the presiding

court in the James action a copy of this Order, including the

exhibits attached hereto.

SO ORDERED THIS 10th DAY OF JUNE 2003

s/ Harvey Bartle

HARVEY BARTLE, Iii, J.

2. A copy of Pretrial Order No. 2828 and its accompanying

Memorandum and Pretrial Order No. 2865 are attached hereto as

Exhibits “E” and “F”, respectively, and are incorporated into this

Order.

69a

APPENDIX D — MEMORANDUM AND PRETRIAL

ORDER NO. 2828 OF THE UNITED STATES

DISTRICT COURT FOR THE EASTERN DISTRICT

OF PENNSYLVANIA DATED APRIL 8, 2003

IN THE UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF PENNSYLVANIA

MDL Docket No. 1203

CIVIL ACTION NO. 99-20593

IN RE: DIET DRUGS (PHENTERMINE,

FENFLURAMINE, DEXF ENFLURAMINE) PRODUCTS

LIABILITY LITIGATION

THIS DOCUMENT RELATES TO

SHEILA BROWN, et al.,

AMERICAN HOME PRODUCTS CORPORATION.

MEMORANDUM AND PRETRIAL ORDER NO.2828

Bartle, J. April 8, 2003

This Memorandum and Pretrial Order is an outgrowth

of injunctions we entered against class member Clara Clark

and her counsel because of their attempt to inject into the

case of Clark v. Wyeth, et al., No. B020182-C, pending in

the District Court of Orange County, Texas, the issue of

70a

Appendix D

punitive damages in violation of the Nationwide Class Action

Settlement Agreement involving the diet drugs commonly

known as “fen-phen.” See Memorandum and Pretrial Order

(“PTO”) 2625 (Oct. 16, 2002) and Memorandum and PTO

2717 (Jan. 29, 2003).

The Nationwide class Action Settlement Agreement,

which was approved by the court in PTO 1415, allows class

members under certain circumstances to opt out of the

settlement and sue Wyeth for damages in the tort system.

Ms. Clark, as was her right, exercised what is known as an

intermediate opt-out and brought an action against Wyeth in

the state court in Texas. She had ingested Redux, one of the

fen-phen drugs. Despite her opt-out, Ms. Clark still remains

a class member and is bound by the terms of the Settlement

Agreement even though she has elected her opt-out right.

See Settlement Agreement §§ II.B. and IV.D.3. Under the

Settlement Agreement, persons electing to sue Wyeth rather

than to receive what are known as Matrix benefits are

prohibited from seeking “punitive, exemplary, or multiple

damages” against settled parties, including Wyeth. settlement

Agreement § IV.D.3.c; see Memorandum and PTO 2625.

The current controversy had its genesis in a motion filed

by Wyeth in this multi-district litigation (“MDL”) court to

enjoin plaintiff class member and her counsel from seeking

such damages in her state court lawsuit. For the reasons stated

in PTO 2625, this court found that they were seeking to insert

the issue of punitive damages (in fact although not in name)

into the case as evidenced by papers they had filed with the

T7la

Appendix D

state court as well as by some of the exhibits and testimony

they intended to introduce at the trial. Consequently, we

enjoined plaintiff and her counsel from doing so.!

Unfortunately, while they withdrew a few objectionable

exhibits, their subsequent filings with the state court clearly

demonstrated that they did not intend to comply with this

court’s injunction. Even the Texas trial judge concluded that

Ms. Clark and her counsel were continuing to press for

punitive damages. PTO 2717 at 4. Wyeth thereafter filed a

motion for civil contempt against Ms. Clark’s counsel,

George M. Fleming, Esquire of Houston, Texas. After a

hearing, the court found Mr. Fleming in civil contempt and

further enjoined plaintiff and her counsel from trying the case

in the Texas state court until counsel purged himself and

satisfied the court they would not seek punitive damages in

violation of the Nationwide Class Action Settlement

Agreement. See PTO 2717 4 2; Jn re Prudential Ins. Co. of

Am. Sales Practices Litig., 261 F.3d 355, 364 (3d Cir. 2001).

The prohibition against punitive damages is a critical

provision for which Wyeth bargained and which received

court approval after a lengthy fairness hearing in May, 2002.

See Memorandum and Pretrial Order No. 1415 (Aug. 28,

2000). ‘

1. The court also had entered a similar injunction against the

plaintiff and her counsel, the same George Fleming, in the case of

Smart v. American Home Products Corp., No. 02-04-40259-CV,

pending in the District Court of Jim Wells County, Texas. See PTO

2680 (Dec. 11, 2002).

72a

Appendix D

This issue has serious ramifications far beyond the Clark

case. As we explained in PTO 2717:

If George Fleming is allowed to proceed as he

wishes here, others will not be far behind. The

floodgates will open and the prohibition against

punitive damages in the court approved Settlement

Agreement will be nothing but a dead letter, with

potentially dire consequences for the settlement

as a whole. This court has a special responsibility

to prevent this outcome from happening.

Our Court of Appeals has repeatedly recognized the

power of the federal court overseeing a nationwide class

action settlement to issue an injunction under the “in aid of

its jurisdiction” exception to the Anti-injunction Act,

28 U.S.C. § 2283, Most recently, in upholding the District

court’s issuance of such an injunction, our Court of Appeals

cogently stated:

We have recognized that district courts overseeing

complex federal litigation are especially

susceptible to disruption by related actions in state

fora. In re Diet Drugs, 282 F.3d at 235-36.

Undeniably, this one discrete case would have

provided little disruption to an eight-million-

member class action. But while the Illinois

litigation would not have brought down the

settlement on its own, permitting this kind of

action would open up the possibility of a large, or

even an overwhelming, number of collateral

73a

Appendix D

attacks on the settlement itself, especially given

the eight-million-member class.

In re Prudential Ins. Co. of Am. Sales Practices Litig., 314

F.3d 99, 104 (3d Cir. 2002).

Our goal is and has always been to allow Ms. Clark to

have her day in the Texas court as soon as possible as long

as it is in conformity with the Settlement Agreement. As a

result, we urged the parties to meet after the injunctions were

entered to see if they could resolve the dispute over specific

exhibits and testimony which plaintiff intended to introduce

at the trial and which Wyeth contended were designed to

arouse the jury to award punitive damages. Until these issues

were resolved, Ms. Clark’s case would not go to trial.

A meeting of counsel took place but was not fruitful.

It has now become clear to the court that the only

effective way to safeguard the Settlement Agreement is to

enter a detailed order before trial outlawing specific topics

of inquiry which have the sole or predominant purpose of

inflaming the jury to punish Wyeth and excluding individual

exhibits and deposition testimony going to the issue of

punitive damages. As a practical matter, once the trial is

underway it will be too late for this court to prevent any

breach of the Settlement Agreement.

II.

The court held a lengthy status conference with counsel

on March 25, 2003 to review and rule on over a hundred

exhibits to determine whether they run afoul of the Settlement

74a

Appendix D

Agreement’s prohibition and this court’s injunctions. We also

have read numerous pages of contested deposition testimony.

The purpose of our review is narrow. We recognize that our

role is not to try the Clark case or to dictate plaintiff’s trial

strategy, but simply to prevent a class member from breaching

the prohibitions in the Settlement Agreement against punitive

damages. As previously noted in PTO 2717, a party may not

rely on state evidentiary rules, or procedural or substantive

law to override the punitive damage exclusion of the

Settlement Agreement.

In reviewing the history of the case as well as the

particular exhibits and deposition testimony in question, a

number of subjects stand out which relate solely to the issue

of punitive damages or whose probative value is clearly

outweighed by the unfair prejudice to Wyeth with respect to

punitive damages. Consequently, in order to uphold the

Settlement Agreement pursuant to PTO 1415 and to eliminate

as much chance for evasion as possible, we will enjoin

plaintiff and her counsel from introducing evidence or making

any statement before or argument to the court or jury related

directly or indirectly to these subjects. They are: (a) Wyeth’s

profits, size or financial condition; (b) the amount or size of

Wyeth’s sales of diet drugs or other products; (c) Wyeth’s

marketing or promotion of diet drugs to the extent that Wyeth

placed marketing or promotion ahead of health or safety

concerns; (d) any deception or any destruction, hiding,

overwriting, or deliberate miscoding of documents or

information by Wyeth; (e) any involvement by Wyeth in the

ghostwriting of articles; (f) primary pulmonary hypertension;

(g) neurotoxicity; and (h) any other disease, illness or

condition or persons suffering from any other disease, illness

75a

Appendix D

or condition caused by Redux or Pondimin except for left-

sided mitral valve regurgitation or pulmonary hypertension

secondary to left-sided mitral valve regurgitation.

Subjects (a) through (c) have no relevance whatsoever

to whether Redux caused Ms. Clark’s current medical

condition. They focus on Wyeth’s wealth, size, or overriding

financial motives which have nothing to do with the merits

of the case and everything to do with punishment of Wyeth.

Subjects (d) and (e), concerning any deception or any

destruction, hiding or deliberate miscoding of documents or

information or the ghostwriting of articles paid for by Wyeth

are designed to demonstrate willful, wanton or malicious

conduct rather than negligence or strict liability. Subject (f)

dealing with primary pulmonary hypertension (“PPH”) and

subject (g) dealing with neurotoxicity can have no other

purpose in this case than to inflame the jury to award more

than compensatory damages. PPH is a fatal, although rare,

condition allegedly caused by fen-phen. Gratefully, Ms. Clark

does not claim to suffer from such a condition. Likewise,

she has not been diagnosed with neurotoxicity, a serious brain

injury allegedly resulting from exposure to fen-phen.

Plaintiff’s effort to inject subject (h) can have no legitimate

purpose to prove her claim for compensatory damages. She

alleges only that she has left-sided valvular heart disease or

pulmonary hypertension secondary to left-sided valvular

heart disease. Other illnesses or persons suffering from other

illnesses caused by Redux or fen-phen can only have the

effect of unfairly arousing the jury against Wyeth without

otherwise supporting her allowable claims under the

Settlement Agreement.

76a

Appendix D

There have been numerous disputes between the parties

over whether Wyeth’s use of the term pulmonary hypertension

(“PH”) in various exhibits meant PPH or simply pulmonary

hypertension. There is a significant difference between the

two. As noted above, PPH is a fatal condition. As a result,

we have forbidden any mention of PPH since Ms. Clark did

not suffer from it, and plaintiff has previously agreed to redact

all references to PPH and any discussion about it. What Wyeth

meant in any particular instance when it used the term

pulmonary hypertension will have to be decided by the trial

judge based on the facts before him. If plaintiff’s reference

to Wyeth’s use of PH does not include any reference to PPH

or the

This text is long and has been trimmed here. Open the source document for the complete record.

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.