Court Opinion

ID: 9594016
Source: CourtListenerOpinion
Date Created: 2023-08-22 00:26:16.430298+00
Date Added: 2024-06-11T13:05:25.389979
License: Public Domain

AMBRO, Circuit Judge,
dissenting in part.
I join Judge Jordan’s excellent opinion on all points save one — I believe the District Court abused its discretion in assessing the “downstream opt-out” plaintiffs at a lower rate for the case-wide services provided by the plaintiffs’ management committee (the “PMC”) than it assessed the “initial opt-out” and primary pulmonary hypertension (“PPH”) plaintiffs. I would therefore grant the request of appellants — Freedland, Farmer, Russo, Behren & Sheller and Raymond Valori P.A. (collectively “Valori”) — to vacate the District Court’s order refunding fees exclusively to the downstream opt-out plaintiffs, *554and remand so that the refunds can be redistributed pro rata to all plaintiffs charged for the PMC’s services.
To review, the District Court awarded Class Counsel attorneys’ fees for assisting in the recoveries of two separate sets of plaintiffs whom its members did not represent: (1) plaintiffs who recovered within the class action (recoveries that essentially involved proving eligibility for the various funds created by the Settlement Agreement and its subsequent amendments); and (2) plaintiffs who recovered outside the class action (but whose recoveries were, according to the District Court, aided substantially by the PMC’s case-wide services). The latter set of plaintiffs included three different groups: PPH plaintiffs (whose claims were not covered by the Settlement Agreement), initial opt-out plaintiffs (who opted out of the class action entirely and pursued individual tort actions against Wyeth), and downstream opt-out plaintiffs (who exercised their opt-out rights after receiving some benefits from the Settlement Agreement and with respect to whom Wyeth agreed, as part of the Settlement Agreement, to relinquish any statute-of-limitations defenses in exchange for those plaintiffs being barred from seeking punitive damages).
In 1998, the District Court ordered Wyeth to withhold 9% of all payments made to federal diet drug plaintiffs (whose cases had passed through that Court pursuant to the directions of the Judicial Panel for Multidistrict Litigation) and 6% of all payments made to plaintiffs in coordinated state cases.58 The money withheld was placed into the “MDL Fee and Cost Account,” with the idea that it would later be used to compensate Class Counsel for the PMC’s case-wide services.59 In 2002, the Court lowered those percentages to 6% and 4%, respectively. In 2008 (in one of the orders before us now), the Court ratified Class Counsel’s proposal to refund a portion of the downstream opt-out plaintiffs’ PMC fees while refunding nothing to the initial opt-out or PPH plaintiffs.60 The result of that refund was that the downstream opt-out plaintiffs ended up assessed at rates of (respectively) 2% and 1.33%, while the other plaintiffs subject to PMC fees were kept at 6% and 4%. Class Counsel made the refund proposal pursuant to an agreement it had reached prior to submitting its final fee petition with the so-called “Major Filers,” a group that included lawyers for approximately 97% of the downstream opt-out plaintiffs (along with lawyers for a large number of plaintiffs who recovered within the class action). As part of that agreement, the Major Filers pledged to refrain from lodging any objections to Class Counsel’s subsequent fee petition.
On its face, it seems suspicious that the one group that was charged less for the PMC’s case-wide services also happened to be the one group that reached an outside deal with Class Counsel. Nonetheless, the District Court justified subjecting the downstream opt-out plaintiffs to the lower assessment through the following chain of reasoning. It reasoned, first, that, because the purpose of the PMC fees was to compensate Class Counsel for benefits provided to those who recovered outside the Settlement Agreement, it could not assess PMC fees on recoveries that were the product of the Settlement Agreement. *555The Court then inferred that, because in calculating the value of the Settlement Agreement it had credited that Agreement with producing half of the $2.3 billion recovered by the downstream opt-out plaintiffs,61 it would be improper for Class Counsel to receive PMC fees corresponding to the full amount recovered by the downstream opt-out plaintiffs. From that, the Court concluded that it should refund the excess back to the downstream opt-out plaintiffs. In taking this path, the District Court was (largely) adopting the reasoning that Class Counsel had laid out in its fee petition.62
As the majority recognizes, every step in the District Court’s reasoning makes sense, except the last. It is true that Class Counsel’s award for the Settlement Agreement included compensation for creating half the value recovered by the downstream opt-out plaintiffs. But the money to fund that compensation did not come out of the downstream opt-out plaintiffs’ recovery (even though it was compensation for enabling part of that recovery). Rather, as Class Counsel conceded during oral argument, that money came out of the $200 million Wyeth deposited into the Fund A Legal Fees Escrow Account. Accordingly, while it was appropriate for the Court to be concerned about authorizing double dipping (by allowing Class Counsel to recover twice, in two different capacities, for enabling the same recovery), there was no corresponding danger that the downstream opt-out plaintiffs would be double-charged. As such, the effect of the District Court’s refund order was that the downstream opt-out plaintiffs ended up being charged less for the PMC’s case-wide services than were the other groups subject to PMC fees,63 despite the fact that the downstream opt-out plaintiffs received no fewer benefits from those services, and, overall, certainly received more from the efforts of Class Counsel (since they benefitted both from the Settlement Agreement and the PMC’s services).
The majority nonetheless holds that it was not an abuse of discretion for the District Court to order the excess PMC fees refunded solely to the downstream opt-out plaintiffs, rather than (as Valori urges us to do here) distributing the refunds among all those assessed such fees. The majority’s reasoning essentially is that the applicable body of law merely requires that the fees assessed against a particular beneficiary be proportional to what that beneficiary received, not that the fees be proportional to those assessed against oth*556er beneficiaries. On that basis, the majority concludes that there was no abuse of discretion here because the PMC fees assessed against the initial opt-out and PPH plaintiffs were proportional to the benefits they received from the PMC’s case-wide services, leaving those groups with basically no cause for complaint.
I agree that, viewed from the vantage point merely of the particular benefits the initial opt-out and PPH plaintiffs received, the PMC fees assessed against them were fair. I disagree, however, that that is the only legally relevant vantage point.64
For starters, I believe that the majority applied the wrong body of law. They derive their conclusion from Boeing Co. v. Van Gemert, 444 U.S. 472, 100 S.Ct. 745, 62 L.Ed.2d 676 (1980), a case that lays out the contours of the “common fund doctrine.” Boeing, as the majority notes, does not articulate an explicit requirement that a district court, in awarding attorneys’ fees, ensure that those fees are allocated proportionally across the entire class of beneficiaries.65 Yet the PMC fees were not assessed pursuant to the common fund doctrine.66 That doctrine applies only where (as in the case of the award for the Settlement Agreement) fees are being awarded as compensation for giving “each member of a certified class ... an undisputed and mathematically ascertainable claim to part of a lump-sum.” Id. at 479, 100 S.Ct. 745. The PMC fees, on the other hand, were not awarded for creating a fund from which the different opt-out and PPH plaintiffs recovered. Rather, they were awarded for creating diffuse, non-monetary, benefits (e.g., discovery materials, drawing Wyeth to the bargaining table, etc.) that helped those plaintiffs recover outside the class action. As such, they were awarded pursuant to the “common benefit doctrine,” which requires only that the party receiving the attorneys’ fees have conferred a “substantial benefit” on “members of an ascertainable class,” not that the benefit it conferred creates a re*557covery fund. Polonski v. Trump Taj Mahal Assocs., 137 F.3d 139, 145 (3d Cir.1998).
The reason this distinction matters is that it is an explicit requirement of the common benefit doctrine that, in awarding fees, a “court ... ensure that the costs are proportionally spread among that class.” Id. The District Court failed to do that here, and, accordingly, I believe it abused its discretion.67
In addition, I am more troubled than my colleagues that the District Court arrived at the lower rate of assessment for the downstream opt-out plaintiffs in response to an agreement reached between Class Counsel and a group, the Major Filers, that included almost all the downstream opt-out plaintiffs. I believe that, presented with a proposal that benefitted a group that was a party to the proposal (the downstream opt-out plaintiffs) at the expense of group that was not a party to it (the initial opt-out and PPH plaintiffs), the District Court was required to subject that proposal to extra scrutiny. That the District Court adopted Class Counsel’s flawed reasoning more or less in full suggests to me that such scrutiny was not applied. That, too, was an abuse of discretion.
My suspicion is that what is driving the majority’s reluctance to find an abuse of discretion here (despite agreeing that the District Court’s reasoning was flawed) is its belief that it would be a shame “to vacate the entire award based solely on how it was allocated, when the award is persuasively justified in all other respects.” Maj. Op. at 551. I share the view that the problem I am focusing on represents, at most, a minor blemish in the District Court’s otherwise excellent, and persuasive, treatment of an extraordinarily difficult case. But I do not agree that rectifying the disproportionate allocation of the PMC fees requires anything so drastic as vacating the entire award. All that needs to be vacated is the separate order refunding the excess PMC fees exclusively to the downstream opt-out plaintiffs. That would leave the entire award to Class Counsel — both the $434,511,777.33 it received for the Settlement Agreement and the $133,161,455 it received in PMC fees — untouched.
I agree that there might be some administrative difficulties associated with reclaiming the $52 million in PMC fees that were already refunded to the downstream opt-out plaintiffs. I too share the majority’s frustration with Valori’s failure to request a stay of the distribution order he later challenged on appeal. I do not, however, consider such problems insoluble, since we deal here with purely fungible assets — money. For that reason, I consider wholly inappropriate Class Counsel’s suggestion — wisely sidestepped by the majority, Maj. Op. at 552 n. 55 — that we extend beyond the bankruptcy context the controversial doctrine of equitable mootness, which applies only to attempts to “unscramble] complex bankruptcy reorganizations,” and even then “ ‘is limited in scope and should be cautiously applied.’ ” Nordhoff Invs., Inc. v. Zenith Elecs. Corp., 258 F.3d 180, 185 (3d Cir.2001) (quoting In *558re PWS Holding Corp., 228 F.3d 224, 236 (3d Cir.2000)).
In sum, I would vacate the order refunding the excess PMC fees exclusively to the downstream opt-out plaintiffs and remand with instructions that the excess be redistributed pro rata to all plaintiffs assessed such fees. Because the majority would affirm the District Court in all aspects, I respectfully dissent as to this issue only.

. The 9% and 6% assessments were levied exclusively on plaintiffs who had recovered outside the class action.

. For ease of reference, I refer hereafter to these assessments as the "PMC fees.”

. Initially, Class Counsel argued that all of the PMC fees assessed against the downstream opt-out plaintiffs should be rebated. For the reasons discussed below, the District Court rejected that aspect of the proposal.

. The Court’s rationale for attributing half of the recovery of the downstream opt-out plaintiffs to the Settlement Agreement was that, because the Settlement secured a waiver from Wyeth of any statute of limitations defenses against the downstream opt-out plaintiffs, this was substantially responsible for those recoveries, even though they technically occurred outside the framework of the Settlement.

. The one exception is that, as mentioned in note 60 above, the fee petition urged the District Court to attribute all of the downstream opt-out plaintiffs’ recovery to the Settlement Agreement and, accordingly, to rebate all of the PMC fees assessed on those plaintiffs. Because the Court determined that only half of the downstream opt-out plaintiffs’ recovery could fairly be credited to the Settlement Agreement, it did not go as far as urged by Class Counsel.

. As the majority notes, Class Counsel contends that, in the end, the downstream opt-out plaintiffs were essentially charged the same as the initial opt-out and PPH plaintiffs, albeit through a different route. I am skeptical. For that to have happened, Wyeth, in settling the downstream opt-out cases, needed to have priced in the attorneys' fees that would later be taken out of the Fund A Legal Fees Escrow Account to compensate Class Counsel for half of the value of those settlements. As Wyeth had no way of knowing at the time that fees would be assessed in that manner, I find Class Counsel’s contention unconvincing (to say the least).

. My colleagues concede that "[b]asic concerns for fairness and due process always circumscribe judicial discretion....” Maj. Op. at 550 n. 52. Their point is, I believe, that there is nothing in the doctrine justifying the assessment of the PMC fees that requires the kind of proportionality demanded by Valori. As explained below, I disagree.

. I do, however, believe that such a requirement is implicit in Boeing based on the following two passages. First, in explaining the rationale for the common fund doctrine, the Boeing Court reasoned this way:
The [common fund] doctrine rests on the perception that persons who obtain the benefit of a lawsuit without contributing to its costs are unjustly enriched at the successful litigant's expense. Jurisdiction over the fund involved in the litigation allows a court to prevent this inequity by assessing attorney[s'] fees against the entire fund, thus spreading fees proportionally among those benefitted by the suit.
444 U.S. at 478, 100 S.Ct. 745 (emphasis added) (internal citation omitted). Second, in explaining how the doctrine works in practice, the Court provided this account:
Although the full value of the benefit to each absentee [class] member cannot be determined until he presents his claim, a fee awarded against the entire ... fund will shift the costs of litigation to each absentee in the exact proportion that the value of his claim bears to the total recovery.
Id. at 479, 100 S.Ct. 745 (emphasis added). It will only be the case that each class member who accesses a common fund will be charged in "exact proportion that the value of his claim bears to the total recovery” if every class member's recovery from the fund is assessed at the same rate (since that is the only way to ensure that a class member who recovers more than another class member will necessarily pay more in fees). Thus, even were it the case that Boeing applied to the PMC fees (which it does not), the disproportional allocation of those fees would still, I believe, be an abuse of discretion.

. In fairness to the majority, Valori did cite Boeing in support of its proportionality argument.

. My view does not change even if, as Class Counsel urges, we think of the PMC fees as having been assessed pursuant to the District Court’s broad managerial powers, rather than the common benefit doctrine. Because assessing fees such as the ones at issue here involves charging litigants for benefits they may have only involuntarily received, I believe the fairness concerns that always cabin a district court's discretion weigh especially heavily in this context. I would thus find an abuse of discretion even were we to conclude that the fees were assessed under neither the common fund doctrine nor the common benefit doctrine.