Court Opinion

ID: 185205
Source: CourtListenerOpinion
Date Created: 2011-02-05 02:29:00+00
Date Added: 2024-06-11T17:26:13.972006
License: Public Domain

215 F.3d 26 (D.C. 2000)
In Re:  Vitamins Antitrust Class Actions, et al.,
Nos. 99-7256, 99-7281
United States Court of Appeals FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued April 3, 2000Decided June 9, 2000
Appeals from the United States District Court For the District of Columbia(No. 99 MS 00197)

Elaine Metlin argued the cause for appellants Agri Beef  Company, et al.  With her on the briefs were C. Brooks  Wood, Kenneth L. Adams, James van R. Springer, Gerald G.  Saltarelli, Mary Martin, James Morsch, Michael C. Manning, Jenny J. Clevenger and John J. Rosenthal. Carmine R.  Zarlenga entered an appearance.
C. Brooks Wood argued the cause for appellant NutraBlend, L.L.C.
Stephen Susman argued the cause for appellees. With him  on the brief were Michael D. Hausfeld, Ann C. Yahner,  David Boies, Robert Silver, Jonathan D. Schiller, William A.  Isaacson, Tyrone C. Fahner, Andrew S. Marovitz, D. Stuart  Meiklejohn, Lawrence Byrne, Bruce L. Montgomery, Michael L. Denger and John M. Majoras.  George T. Manning  entered an appearance.
Before:  Williams, Sentelle and Tatel, Circuit Judges.
Opinion for the Court filed by Circuit Judge Williams.
Williams, Circuit Judge:

1
Over the 1990s, and even farther  back, vitamin manufacturers allegedly fixed prices on bulk  vitamin sales in violation of the antitrust laws.  By September  1999 a Department of Justice investigation had secured guilty  pleas from several major suppliers.  Dozens of private antitrust actions followed, and by late November 1999 approximately 49 cases were pending before the district court.

2
At a status conference for all interested parties on November 3, 1999, counsel for the proposed representatives of a  broad class of purchasers revealed that they had reached a  tentative settlement that would dispose of the class's claims  against seven of the defendants (who together with their  affiliates account for more than 90 percent of the bulk vitamins market).  The then-draft agreement contained a socalled "most favored nation" ("MFN") clause, requiring defendants to hike their payments to the class in the event that  within two years of that date they reached a more favorable  settlement with a plaintiff who had opted out of the class.See Settlement Agreement p p 1, 22.  Appellants--who were  then presumptive members of the class but who have since  opted out--moved to intervene under Federal Rule of Civil  Procedure 24 for the limited purpose of opposing the MFN  clause.  They argued--reasonably enough--that the clause  would make it harder for them to arrive at an independent  settlement, because it would raise the cost to defendants of  any more favorable agreement.  The district court denied the  appellants' motion to intervene but granted them leave to  participate as amici curiae.  Appellants filed timely notices of  appeal from denial of the motion to intervene.

3
While this appeal was pending, appellants all chose to opt  out of the class action.  See Tr. of Oral Arg. (Apr. 3, 2000), at  4.  The district court held its final hearing regarding class  certification and the proposed settlement, and on March 31,  2000 certified the class and approved the settlement.  Neither  of those decisions is at issue in this appeal.

4
In rejecting appellants' motion for intervention, the district  court reasoned that they lacked standing to challenge the  settlement agreement on the grounds asserted.  We agree.

5
*  *  *

6
Appellants focus on their claim to intervention as of right.Federal Rule of Civil Procedure 24(a)(2) allows such intervention for anyone who "claims an interest relating to the ...  transaction which is the subject of the action and ... is so  situated that the disposition of the action may as a practical  matter impair or impede [his] ability to protect that interest,  unless [his] interest is adequately represented by existing  parties."  Id.  Appellants argue that their interest in being  able to opt out of the class and to " 'go it alone' unhampered  by any judgment in the class action" qualifies as "an interest  relating to the ... transaction which is the subject of the  action."  Fed. R. Civ. P. 24(a).

7
But appellants trip immediately over our decision in Mayfield v. Barr, 985 F.2d 1090 (D.C. Cir. 1993).  There we held  that class members who have opted out of a 23(b)(3) class  action have no standing to object to a subsequent class  settlement;  by opting out they "escape the binding effect of  the class settlement."  Id. at 1093.  We distinguished cases in  which plaintiffs lost claims involuntarily, and concluded:

8
Our decision rests on the principle that those who fully preserve their legal rights cannot challenge an order approving an agreement resolving the legal rights of others .

9
Id.  Compare New Mexico ex rel. Energy & Minerals Dep't  v. United States Dep't of the Interior, 820 F.2d 441 (D.C. Cir.  1987), in which we concluded that dismissal of the intervening Navajo Tribe's complaint was proper because the settlement  reached by the other parties "d[id] not serve to dispose of the  Tribe's claims."  Id. at 445.

10
Appellants point to a number of cases in which we indicated  a willingness to construe Rule 24(a)'s "interest" requirement  liberally.  See Cook v. Boorstin, 763 F.2d 1462, 1466 (D.C.  Cir. 1985);  Foster v. Gueory, 655 F.2d 1319, 1324-25 (D.C.  Cir. 1981);  Smuck v. Hobson, 408 F.2d 175, 179 (D.C. Cir.  1969) (plurality opinion);  Nuesse v. Camp, 385 F.2d 694, 700  (D.C. Cir. 1967).  But of all these, only Nuesse even addressed the issue of standing.  Thus, because decisions that  depend on a merely assumed jurisdiction have no precedential  value on the jurisdictional issue, Steel Co. v. Citizens for a  Better Environment, 523 U.S. 83, 91 (1998);  Lewis v. Casey,  518 U.S. 343, 352 n.2 (1996), only Nuesse could assist appellants.  But Nuesse affords them no help, as there the court  found on the specific facts a sufficient interest for standing in  the stare decisis effect of a judgment, an analysis that has no  parallel here.

11
Standing, of course, is issue-specific.  See Lujan v. Defenders of Wildlife, 504 U.S. 555, 571-78 & nn.7-8 (1992).  And as  we noted in Mova Pharmaceutical Corp. v. Shalala, 140 F.3d 1060 (D.C. Cir. 1998), potential intervenors must demonstrate  "prudential" as well as constitutional standing.  Id. at 1074-76.  In the case of statutory rights, this requires would-be  intervenors to show that their interests are "arguably within  the zone of interests to be protected or regulated by the  statute."  Association of Data Processing Serv. Orgs., Inc. v.  Camp, 397 U.S. 150, 153 (1970).  Even if a particular litigant  is outside the class for whose benefit the statute was enacted,  that litigant retains prudential standing so long as "its interests are sufficiently congruent with those of the intended  beneficiaries that the litigants are not more likely to frustrate  than to further ... statutory objectives."  Mova Pharmaceutical, 140 F.3d at 1075 (internal quotation marks omitted).

12
But as appellants' counsel admitted at oral argument, their  interests are not congruent with the interests of the settling  class that were in play at the time of their motion to intervene.  See Tr. of Oral Arg. at 13-14.  As opt-out plaintiffs they have no interest in the specifics of the settlement  except for their desire to be free of a troublesome MFN  clause.  Id. at 14.

13
Appellants' MFN objection is, moreover, incongruent with  the interests that the rules charge the district court with  addressing.  When appellants moved to intervene, the court  had remaining before it the questions of whether (1) the  proposed class satisfied the prerequisites for certification  under Rule 23(a) and (b), (2) the form and manner of notice  satisfied Rule 23(c), and (3) the proposed settlement satisfied  the requirements of Rule 23(e).  Appellants' arguments  against the MFN clause have no logical relationship to any of  these.  The first two questions are clearly irrelevant to  appellants' claims.  Appellants do not seek to argue that the  proposed class failed to satisfy the conditions for class certification.  See Fed. R. Civ. P. 23(a), (b)(3).  And appellants'  Rule 23(c) arguments--which are treated more fully below-do not challenge the form and manner of notice at all.

14
On the subject of class viability an extra word is needed for  appellant Nutra-Blend.  According to its complaint, some of  the settling defendants compete with Nutra-Blend, selling  mixed vitamin products at retail prices below their wholesale  charges for the raw components and thus subjecting NutraBlend to a "price squeeze."  Accordingly it has argued that  the class representatives do not adequately represent its  interests.  This of course sounds like the inquiry under Rule  23(a)(4) as to adequacy of representation.  But Nutra-Blend's  objections were not made on the premise assumed by Rule  23(a)--namely, that the prospective class member would be  bound by the ensuing litigation supposedly conducted on its  behalf.1

15
Of course, in passing on the proposed settlement agreement, the district court has a duty under Fed. R. Civ. P. 23(e)  to ensure that it is fair, adequate, and reasonable and is not  the product of collusion between the parties.  See Pigford v.  Glickman, 206 F.3d 1212, 1215 (D.C. Cir. 2000);  Thomas v.  Albright, 139 F.2d 227, 231 (D.C. Cir. 1998).  Thus Rule 23(e)  provides a check against settlement dynamics that may "lead  the negotiating parties--even those with the best intentions-to give insufficient weight to the interests of at least some  class members."  Manual for Complex Litigation (Third)   30.42, at 238-40 (1995);  see also Amchem Prods., Inc. v.  Windsor, 521 U.S. 591, 621-22 (1997) (noting the dangers that  can arise owing to the usually non-adversarial posture of a  Rule 23(e) hearing).  But the district court's duty is to the  class members themselves;  it lacks the power to conduct a  free-ranging analysis as to the broader implications of the  proposed settlement agreement.  Compare Agretti v. ANR  Freight Sys., 982 F.2d 242, 248 (7th Cir. 1992) ("Nor do we  know of any cases finding standing for a non-settling party  because a settlement is allegedly illegal or against public  policy.") (cited with approval in Mayfield v. Barr).

16
Appellants' only mention of the class's interests appears in  a footnote in which they argue that the class will not actually  benefit from the MFN clause.  But even here they do not say  that its inclusion actually harms the class members.  Of  course they might argue that in securing the MFN clause the  class representatives must have traded away some alternative  (and real) advantage.  But that argument's force would turn  on a showing that defendants seriously resisted the clause, on  which appellants offer no evidence.  In fact the defendants  may well not have much resisted, affirmatively liking a  Ulysses-tied-to-the-mast arrangement that enables them to  convincingly stiff opt-outs who demand more.  Cf. Decl. of  William M. Landes at 8-9 (excerpted at Joint Appendix 246).In any event, appellants do not deny that their sole actual  concern is that the MFN clause limits their ability to reach a  settlement more lucrative than that offered to the class.Consequently, their arguments fall outside of the zone of  interests protected by Rule 23(e).

17
Appellants' alternative tack invokes their right to opt out,  starting with the notice protections of Rule 23(c)(2).  But the  rule by its terms is purely procedural.  Any substantive right  to be free of ancillary effects flowing from a class settlement  must be found elsewhere.

18
Appellants next look to the Due Process Clause (presumably of the Fifth Amendment) for their claimed right to be  free of any effects of the class settlement.  It is, of course,  not in dispute that notice and an opportunity to opt out are  requirements of due process--for any party to be bound by  the litigation.  See Fed. R. Civ. P. 23, Advisory Committee  Notes to the 1966 Amendment for Subdivision (d)(2) ("This  mandatory notice pursuant to subdivision (c)(2) ... is designed to fulfill requirements of due process to which the  class action procedure is of course subject.");  Ortiz v. Fibreboard Corp., 527 U.S. 817, ___, 119 S. Ct. 2295, 2314-15;Hansberry v. Lee, 311 U.S. 32, 40 (1940).

19
Indeed, as Mayfield makes clear, one may challenge a  settlement agreement to which he is not a party if the  agreement will cause him " 'plain legal prejudice,' as when  'the settlement strips the party of a legal claim or cause of  action.' "  Mayfield, 985 F.2d at 1093 (quoting Agretti, 982 F.2d at 247);  see also Alumax Mill Prods. v. Congress Fin.  Corp., 912 F.2d 996, 1002 (8th Cir. 1990) (allowing nonsettling  defendant to challenge a partial settlement that dismissed  with prejudice its cross-claims and stripped it of indemnity  and contribution rights).  But the MFN clause here causes no  plain legal prejudice.  Although the alleged injury is more  substantial than that claimed by the nonsettling plaintiffs in  Mayfield, here as there the nonsettling plaintiffs have fully  preserved their "right to litigate their claims independently."985 F.2d at 1093.

20
Other cases have turned on a similar understanding of  "plain legal prejudice."  In Quad/Graphics, Inc. v. Fass, 724 F.2d 1230 (7th Cir. 1983), cited with approval in Mayfield, a  settlement required a participant not to "voluntarily" participate in the continuing litigation.  The court insisted that the  non-settling party show "plain legal prejudice," a formula it took from its cases interpreting Federal Rule of Civil Procedure 41(a)(2). 724 F.2d at 1231.  It found none, even though  that party clearly had had reason to expect advantageous  cooperation from the settling party, and the settlement restriction would require it to incur the burden of a lawsuit to  extract whatever cooperation it was legally entitled to.  Id. at  1234.  Similarly, in Agretti, 982 F.2d at 247-48, the court  ruled that a party to a contract had no standing to challenge a  settlement agreement in which a settling party on the same  side agreed to declare the contract void.  Because the nonsettling party retained the right to assert that the contract was  valid and enforceable, it suffered no plain legal prejudice,  despite the obvious practical burden of having its contractual  partner disavow the contract.  See id. at 248.  The settlement  limitations imposed by the MFN clause are no more onerous  than the burdens imposed on non-settling parties in these  cases.

21
Finally, we turn to appellants' argument that the district  court abused its discretion in denying them permissive intervention under Rule 24(b)(2).  Although the denial of a motion  for permissive intervention is not normally appealable in  itself, see Twelve John Does v. District of Columbia, 117 F.3d 571, 574 (D.C. Cir. 1997), we may exercise our pendent  appellate jurisdiction to reach questions that are "inextricably  intertwined with ones over which we have direct jurisdiction."Id. at 574-75.  Here the basis for appellants' motion for  permissive intervention is the same as the basis for its quest  for intervention as of right.  The two are in that respect  inextricably intertwined.

22
But there is uncertainty over whether standing is necessary for permissive intervention.  Compare EEOC v. National Children's Ctr., Inc., 146 F.3d 1042, 1045-46 (D.C. Cir.  1998) (recounting that Rule 24(b) requires would-be intervenors to have "an independent ground for subject matter  jurisdiction" on a claim or defense that shares a common  question with the claims of the original parties), and Diamond v. Charles, 476 U.S. 54, 76 (1986) (O'Connor, J., concurring) ("The words 'claim or defense' manifestly refer to the  kinds of claims or defenses that can be raised in courts of law as part of an actual or impending lawsuit");  with National  Children's Ctr., 146 F.3d at 1045-46 (noting that our circuit  precedent avoids "strict readings of the phrase 'claim or  defense,' allowing intervention even in 'situations where the  existence of any nominate 'claim' or 'defense' is difficult to  find.' " (quoting Nuesse, 385 F.2d at 704)).  And Steel Co.  precludes us from reaching merits issues in the absence of  jurisdiction.  See 523 U.S. at 94.  Of course if standing is  required, then what we have said above clearly precludes  appellants' success on this theory as well.  If it is not, then  appellants would have to show that the trial court abused its  discretion in denying intervention but granting them amicus  status--enabling them to elucidate the court on their position  with less risk of delaying the settlement.  In view of the  unresolved standing issue, however, we think it inappropriate  to exercise our pendent jurisdiction.

23
*  *  *

The district court's decision is

24
Affirmed.

Notes:

1
 We have no occasion to decide whether a party must remain  within the class to intervene for the purposes of challenging class  certification under Rule 23(a), (b), or settlement under 23(e).  Cf. In  re Brand Name Prescription Drugs Antitrust Litig., 115 F.3d 456,  457 (7th Cir. 1997);  3 Herbert Newberg & Alba Conte, Newberg on  Class Actions  16.18, at 16-99 to 16-100 (3d ed. 1992).