# Petition for Writ of Certiorari — Wyeth v. Smart

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Petition for Writ of Certiorari
- **Published:** January 1, 2004
- **Citation:** 543 U.S. 960

## 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

Ee

i
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.

il

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.

il

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

iv

Contents

REASONS FOR GRANTING THE PETITION ...

PTET TT ee yee te Peer Trea TT Te

1.

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
12

12

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

vi

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

16

16

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

ix

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

l

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.

2

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.

3

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.

4

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,

5

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.”

6

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

7

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

8

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

9

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

10

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.

12

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

13

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.

14

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

15

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

16

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

17

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

18

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.

19

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

20

“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).

21

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.

22

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)

23

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. . . .”).

24

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).

25

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

la

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

2a

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.

3a

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.

4a

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

Sa

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).

6a

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.

7a
- 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.

I.
A.

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.

8a

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.

9a
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.

B.

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;

Se

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)).°

A.

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).°

B.

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.

A

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.

y

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.

5

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,

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386003_1385%3A1. Public record. Not legal advice.