Opinion ID: 1349586
Heading Depth: 2
Heading Rank: 3

Heading: Applicability of the MDL Assessments to Appellants' Cases

Text: Appellants argue that it was improper, under the common benefits doctrine, for the Court to levy assessments against their clients (1) who recovered against Wyeth on their PPH claims, which were not covered by the Settlement Agreement (PPH clients), and (2) who exercised initial opt-outs from the Settlement Agreement and recovered against Wyeth independently (initial opt-out clients). [43] In addition, Riepen contends that the MDL assessment should not have been levied against one of his client's recoveries because the District Court lacked subject matter jurisdiction over that client's claims. Under the common benefit doctrine, [44] an award of attorney's fees is appropriate where `the plaintiff's successful litigation confers a substantial benefit on the members of an ascertainable class, and where the court's jurisdiction over the subject matter of the suit makes possible an award that will operate to spread the costs proportionately among them.' Polonski, 137 F.3d at 145 (quoting Hall, 412 U.S. at 5, 93 S.Ct. 1943). Thus, in order to obtain common benefit fees, an attorney must confer a substantial benefit to members of an ascertainable class, and the court must ensure that the costs are proportionately spread among that class. Id. Both Riepen and Valori argue that Class Counsel conferred no benefit on their initial opt-out and PPH clients. Valori also contends that the initial opt-out and PPH plaintiffs bear a disproportionate burden of the assessment, when compared with the downstream opt-out claimants. The PMC questions whether the common benefit doctrine even applies in multidistrict litigations such as this one, and suggests that the principal basis for the exercise of a district court's power to levy an assessment derives from the docket management powers of the federal judiciary. (Appellees' Br., No. 08-2363, at 57.) The Judicial Panel for Multidistrict Litigation is empowered, under 28 U.S.C. § 1407, to transfer related cases to a single court, and that court hasand is expected to exercisethe ability to craft a plaintiffs' leadership organization to assist with case management. Inherent in that ability, according to the PMC, is the power to fashion some way of compensating the attorneys who provide class-wide services. The PMC finds support for its position in In re Air Crash Disaster at Fla. Everglades on Dec. 29, 1972, 549 F.2d 1006 (5th Cir.1977). Like this case, Florida Everglades was a multidistrict litigation in which, at the fee award stage, the MDL court granted the plaintiffs' management committee a fee award drawn from the fees received by individual plaintiffs' attorneys. Id. at 1008-09. The United States Court of Appeals for the Fifth Circuit concluded, over the appellants' objection, that levying such an assessment was within the District Court's managerial power: Appellants approach the case as though it were purely a private contest over fees between competing lawyers. This approach is a nostalgic luxury no longer available in the hard-pressed federal courts. It overlooks the much larger interests which arise in litigation such as this. Each case in the consolidated case was private in its inception. But the number and cumulative size of the massed cases created a penumbra of class-type interest on the part of all litigants and of public interest on the part of the court and the world at large. The power of the court must be assayed in this semi-public context. Id. at 1012. The Fifth Circuit's observations are apt and apply with even greater force in this MDL, which dwarfed the size of Florida Everglades, with hundreds of thousands of class members spread all across the United States. That is not to say, however, that the District Court can ignore basic principles of fairness in applying an assessment. Florida Everglades is not to the contrary. Indeed, the Fifth Circuit vacated the fee award and remanded so that the district court could conduct a hearing in the full sense of the word and enter findings of fact and conclusions of law from which the court of appeals could determine whether the award constituted a fair and just enrichment of the plaintiffs' committee, should the district court's decision be appealed. Id. at 1021. Likewise, we must ensure that the District Court granted Class Counsel a just award in this case. Whether we do so by applying the common benefits doctrine or independently assessing whether the District Court properly exercised its managerial power is of no real consequence. No matter how we label our analysis, we must determine whether the Court abused its discretion in concluding that Class Counsel conferred a substantial benefit on the initial opt-out and PPH plaintiffs or in how it spread the burden of the assessment among claimants who recovered outside of the Settlement Agreement.
Appellants argue that their initial opt-out and PPH clients did not enjoy a substantial benefit from the PMC's services. By Appellants' lights, because those clients were not parties to the Settlement Agreement, they did not receive any of the benefitssuch as medical testing or claims preservationfor which the PMC bargained. And, although the PMC obtained class-wide discovery to which all plaintiffs' attorneys had access, Riepen in particular contends that he did not use it in pursuing his initial opt-out clients' claims against Wyeth. Rather, he insists that the only pre-existing discovery that he used to develop his initial opt-out cases was procured by lawyers (including himself) in the Texas state court cases against Wyeth. Valori is less clear about whether he used the MDL discovery, but he nonetheless argues, generally, that the PMC's work product did not substantially benefit his initial opt-out and PPH clients. According to the District Court, however, the PMC bestowed numerous benefits on initial opt-out and PPH claimants, even if their attorneys did not use the discovery that the PMC marshaled and retained. The mere availability of the discovery, in the Court's words, substantially influenced [Wyeth's] evaluation of every plaintiff[']s case. [45] (App. at 1194 (emphasis added).) More tangibly, the Court found that the PMC had, to the benefit of every claimant, helped to administer the MDL by tracking individual cases, distributing court orders, and serving as a repository of information concerning the litigation and settlement. Diet Drugs, 553 F.Supp.2d at 493. Furthermore, it obtained a number of favorable discovery and evidentiary rulings that applied on a litigation-wide basis, and it enforced a uniform procedure for the production of documents, deposition testimony, and expert disclosures that governed every MDL case against Wyeth. [46] Appellants do not contest any of those findings, and each has substantial support in the record. We think it beyond reasonable denial that the initial opt-out and PPH claimants benefitted from Wyeth's loss of bargaining power due to the PMC's efforts. As the District Court noted, Wyeth had to defend itself against the initial opt-out and PPH claimants knowing that they had access to pertinent discovery and understanding that they, in turn, knew Wyeth was heavily invested in settling. It stands to reason, then, that those plaintiffs stood a better chance of recovery from Wyeth than they would have absent the PMC's efforts. Thus, the PMC conferred a substantial benefit on the initial opt-out and PPH claimants. [47]
Valori argues that the burden of the assessment fell disproportionately on the initial opt-out and PPH claimants and that the fee award must be vacated on that basis. [48] As he notes, a 6% & 4% Assessment [49] was levied against all opt-out recoveries pursuant to the interim fee award, but, as applied to downstream opt-out claimants, the Court, in its final analysis, accepted the PMC's recommendation that the assessment be reduced to 2% & 1.33%. The PMC explained the logic behind the disparate assessments thusly: Downstream opt-out claimants, as opposed to initial opt-out and PPH claimants, recovered in part because of the Settlement Agreement. The medical monitoring that Wyeth paid for allowed them to establish their injuries, and, without the claims preservation terms to which Wyeth agreed, they may have been frozen out of the tort system. Therefore, part of the fee award drawn from downstream opt-out recoveries came out of the Settlement Accounts and the assessments from the MDL Fee and Cost Account were reduced accordingly. The reduction prevented Class Counsel from being paid twice for the benefits conferred on the downstream opt-out claimants. That the PMC created, and the District Court approved, a prophylactic against `double dipping' is laudable. (Appellee's Br., No. 08-2387, at 25.) However, it is also a non-sequitur as a response to Valori's contention that the burden of the fee award was not allocated proportionately to the benefits that each group of claimants received. Unlike the other aspects of the District Court's well-reasoned opinion that we have already addressed, its logic regarding the assessments, as allocated between the downstream opt-out claimants and the initial opt-out and PPH claimants, is assailable. [50] Even if we credit the math employed by the PMC and the District Court and assume that, despite the disparate assessments, all opt-out and PPH claimants paid a roughly equal portion of the fee award, there is a sound argument that the downstream opt-out claimants received, for the same price, a greater tangible benefit from Class Counsel's services than the initial opt-out and PPH claimants received. The inquiry we must make, however, is not whether a portion of the District Court's logic is subject to criticism, but whether the fee award itself constitutes an abuse of discretion. Certainly, limits on the reasoning behind an award may lead to the conclusion that the award itself cannot stand. But when, as in this case, the result can otherwise be justified, we are not compelled to find an abuse of discretion. Cf. In re Nortel Networks Corp. Sec. Litig., 539 F.3d 129, 134 (2d Cir.2008) (approving fee award even though the district court neglected to use awards granted in similar cases as benchmarks). We look, then, to the basis of Valori's proportionality attack to see whether the District Court's order can be justified in spite of the attack. Valori contends that the District Court violated the principles espoused in Boeing, 444 U.S. 472, 100 S.Ct. 745, 62 L.Ed.2d 676. [51] In Boeing, the Supreme Court asserted that it is proper to award fees to a common benefits attorney only where the benefits of class recovery have `been traced with some accuracy' and the costs of recovery have been `shifted with some exactitude to those benefiting.' Id. at 480-81, 100 S.Ct. 745 (quoting Alyeska Pipeline, 421 U.S. at 265 n. 39, 95 S.Ct. 1612). However, neither Boeing nor any other authority requires courts to ensure that the costs of recovery are shifted with exactitude among the various subclasses of claimants who benefitted from class counsel's efforts. Boeing and the other cases defining the contours of the common fund doctrine mandate only that the fee awarded to class counsel was reasonable given the benefit that these attorneys provided to the class members. [52] Under Boeing, the pertinent question is not what the initial opt-out and PPH claimant paid in fees relative to what the downstream opt-out claimants paid. [53] Rather, it is whether the initial opt-out and PPH claimants paid, in an absolute sense, a fair amount for the benefit of Class Counsel's services. [54] The answer to that question, in our view, is a definite yes. As noted above, the District Court found that Class Counsel substantially enhanced all claimants' chances for recovery by amassing meaningful discovery, drawing Wyeth to the bargaining table, and negotiating with Wyeth a comprehensive settlement that evinced the company's acute interest in resolving the claims against it. Appellants have not demonstrated that these findings were clearly erroneous. Indeed, they are amply supported by the record. Given all that the initial opt-out and PPH claimants received, the 6% & 4% Assessment levied on their recoveries was reasonable, and, thus, it satisfies Boeing 's charge that costs and benefits be traced with some accuracy. Any lingering concern that the fee award imposed a disproportionately heavy burden on the initial opt-out and PPH claimants shrinks when the proportionality issue is considered in the context of the fee award as a whole. Allocating the burden of the award among the claimants was but one part of the extraordinarily complicated endeavor of determining an appropriate award in this massive MDL. Even the discrete question of how to allocate the award was fraught with complex considerations, including how to treat the downstream opt-out claimants, who recovered outside the context of the settlement but still received valuable benefits under the Settlement Agreement, and what measures, if any, should be used to prevent Class Counsel from over-recoveringvia the assessments and the Settlement Accountsfor their services that benefitted the downstream opt-out claimants. It would, in this case, be unwise to vacate the entire award based solely on how it was allocated, when the award is persuasively justified in all other respects and is justifiable in this one problematic respect. Moreover, even if we were inclined to vacate the fee award based on the allocation, it is not clear to us that Valori's requested reliefa remand to the District Court with instructions to reallocate the awardwould be feasible. Reducing the assessment on the downstream opt-out recoveries required the District Court to order refunds totaling more than $52 million to numerous law firms that, by prior court order, had paid the 6% & 4% Assessments into the MDL Fee and Cost Account. Months later, those refunds are not likely to be sitting in the bank accounts of the law firms that received them. It seems likely that taxes have been paid, referral counsel has been compensated, and, generally speaking, the refunds have, in all or in part, worked their way through the channels of commerce and, accordingly, would be difficult for the Court to reclaim. We also find it significant and surprisingthat Valori, who has argued so vigorously that the allocation is unfair, never sought a stay of the refund distribution pending appeal. Had Valori moved for a stay, and had the Court granted his motion, the practical difficulties associated with administering the redistribution that he requests would be alleviated. When pressed on the matter during oral argument, Valori asserted that, in order to request a stay, he would have had to post a supersedeas bonda bond that, given the enormous amount of money at issue in this case, he would not have been able to affordso the Court probably would not have granted his request anyway. That defeatist stance is too convenient an excuse. Although Fed.R.Civ.P. 62(d) states that [i]f an appeal is taken, the appellant may obtain a stay by supersedeas bond, courts may forego that requirement when there are other means to secure the judgment creditor's interests. See, e.g., Arban v. West Pub. Corp., 345 F.3d 390, 409 (6th Cir.2003) (expressing the view that Rule 62(d), which speaks to stays granted as a matter of right, does not constrain district courts from granting stays in accordance with their discretion); Fed. Prescription Serv., Inc. v. Am. Pharm. Ass'n, 636 F.2d 755, 759 (D.C.Cir.1980) (same); Munoz v. City of Phila., 537 F.Supp.2d 749, 751-52 (E.D.Pa.2008) (granting a stay without requiring a bond where the movant had sufficient funds to pay the judgment against it and there was no basis to think that prompt payment [would] not take place should the judgment be sustained on appeal). Here, the assessments and fees awarded pursuant to the Settlement Agreement were maintained in escrow accounts under the District Court's control. It is therefore quite possible, perhaps even likely, that the Court would have waived the bond requirement or required a substantially reduced bond in this case. All of that being said, we need not decide whether practical difficulties in administering a reallocation, or Valori's inaction in attempting to mitigate those difficulties, foreclose us from remanding the matter. [55] As noted above, we do not believe that the District Court's allocation, viewed in context, constitutes an abuse of discretion.
According to Riepen, the MDL assessment, even if properly applied to the initial opt-out and PPH plaintiffs, should not have been applied to the recovery of his client Jana Harris because her case did not belong in federal court in the first place. In February 1999, Riepen field suit in a Kansas state court on the behalf of Harris, a citizen of Kansas. Among the defendants named in the suit was a pharmacy with its principal place of business in Kansas. Wyeth argued that the pharmacy was fraudulently joined to defeat removal, and it proceeded to file a notice of removal to shift the case to federal court. Riepen's co-counsel filed a motion to remand, but before the United States District Court for the District of Kansas could rule on the motion, the case was transferred to the Eastern District of Pennsylvania as part of the MDL. Harris settled her case with Wyeth, and the case was dismissed with prejudice pursuant to a motion that Riepen did not oppose, before the District Court denied the remand motion on December 7, 2000. [56] It is well-settled law that subject matter jurisdiction can be challenged at any point before final judgment, In re Kaiser Group Intern. Inc., 399 F.3d 558, 565 (3d Cir.2005) (citation omitted), but the necessary corollary is that subject matter cannot be challenged after such judgment is entered. See Hodge v. Hodge, 621 F.2d 590, 592 (3d Cir.1980) (It was settled long ago ... that when a federal court proceeds to final judgment on the merits, the issue of subject matter jurisdiction is res judicata even though it was not litigated .... (citation omitted)). Here, final judgment was entered in Harris's case when the District Court dismissed it with prejudice. Riepen argues that the matter is still open because the District Court retained the ability to exempt him from the assessment until it issued its final, appealable attorneys' fee order in July 2008. But authority from the Supreme Court and our Court makes clear that a decision on the merits is separate from orders regarding attorneys' fees for the purposes of finality and appealability. See White v. N.H. Dept. of Employment Sec., 455 U.S. 445, 451-52, 102 S.Ct. 1162, 71 L.Ed.2d 325 (1982) ([A] request for attorney's fees ... raises legal issues collateral to and separate from the decision on the merits.); In re Colon, 941 F.2d 242, 245 (3d Cir.1991) (treat[ing] attorneys' fees apart from the merits for purposes of appeal). Thus, while Riepen may challenge the attorneys' fees and cost assessments that were imposed on him, he cannot do so by attacking subject matter jurisdiction on a case that was dismissed with prejudice almost ten years ago. [57]