Court Opinion

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Opinions of the United
2005 Decisions                                                                                                             States Court of Appeals
                                                                                                                              for the Third Circuit

11-30-2005

In Re: Diet Drugs
Precedential or Non-Precedential: Precedential

Docket No. 03-3401

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Recommended Citation
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http://digitalcommons.law.villanova.edu/thirdcircuit_2005/177

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                                PRECEDENTIAL

UNITED STATES COURT OF APPEALS
     FOR THE THIRD CIRCUIT

Nos. 03-3401, 03-3402, 03-4465 & 04-3661

 IN RE: DIET DRUGS (PHENTERMINE/
FENFLURAMINE/DEXFENFLURAMINE)
  PRODUCTS LIABILITY LITIGATION

  Clara Clark, Linda Smart and all other
  class members represented by Fleming
           & Associates, L.L.P.,

          Appellants in No. 03-3401

      Hariton & D'Angelo, LLP and
  Napoli, Kaiser, Bern & Associates, LLP,
     on behalf of themselves, claimant
    James Axford and similarly situated
     class members represented by the
  Hariton and Napoli Firms whose claims
  are affected by Pretrial Order No. 2929,

          Appellants in No. 03-3402

 Shanne Webb-Cochran, Renai Kuykendall,
      Willa Sartin, Dawn Stewart and
  Joanne Valenti, on behalf of themselves
       and all other class members who have
        ingested fen-phen and who suffer, or
        will suffer, from elevated pulmonary
       hypertension not secondary to valvular
                     heart disease,

              Appellants in No. 03-4465

             Doris Weller and Ellen Carey,
             whose claims are affected by
               Pretrial Order No. 3849,

               Appellants in No. 04-3661

   Appeals from the United States District Court
     for the Eastern District of Pennsylvania
                 (MDL No. 1203)
   District Judge: Honorable Harvey Bartle, III
              __________________

            Argued on April 22, 2005

Before: ROTH, FUENTES and STAPLETON, Circuit
                   Judges.

           (Filed: November 30, 2005)

    Thomas C. Goldstein, Esquire (ARGUED)
              Goldstein & Howe

                        2
       4607 Asbury Place, N.W.
       Washington, D.C. 20016

 Howard I. Langer, Esquire (ARGUED)
          Langer & Grogram
    1600 Market Street, Suite 2020
       Philadelphia, PA 19103

       Sylvia Davidow, Esquire
         Fleming & Associates
    1330 Post Oak Blvd., Suite 3030
          Houston, TX 77056

       Mario D’Angelo, Esquire
         Hariton & D’Angelo
   3500 Sunrise Highway, Suite T-207
        Great River, NY 11739

         Paul J. Napoli, Esquire
       Denise A. Rubin, Esquire
    Napoli, Kaiser, Bern & Associates
   3500 Sunrise Highway, Suite T-207
        Great River, NY 11739

         Counsel for Appellants

Robert D. Rosenbaum, Esquire (ARGUED)
             Arnold & Porter
           555 12 th Street, N.W.
         Washington, DC 20004

                   3
       Peter L. Zimroth, Esquire
           Arnold & Porter
           399 Park Avenue
      New York, NY 10022-4690

   John J. Cummings, III, Esquire
 Cummings, Cummings & Dudenhefer
         416 Gravier Street
      New Orleans, LA 70130

Samuel Issacharoff, Esquire (ARGUED)
  New York University Law School
    40 Washington Square South
        New York, NY 10012

Michael D. Fishbein, Esquire (ARGUED)
        Fred S. Longer, Esquire
         Arnold Levin, Esquire
   Levin, Fishbein, Sedran & Berman
     510 Walnut Street, Suite 500
        Philadelphia, PA 19106

        Counsel for Appellees

              OPINION

                  4
ROTH, Circuit Judge:

       These appeals arise from the District Court’s efforts to

oversee the Nationwide Class Action Settlement Agreement

in the multi-district (MDL) 1203 litigation between Wyeth 1

and a class comprising former users of Wyeth’s diet

medications, fenfluramine and dexfenfluramine. This appeal

is the consolidation of challenges by three different groups of

Appellants, all claiming that they should not be bound by the

Settlement Agreement. For the reasons discussed, we find

that all three groups of Appellants are bound by the

Settlement Agreement and we will affirm the District Court’s

decision.

I.     The Settlement Agreement

       1
          In March 2002, the manufacturer of the drugs in
question changed its name from American Home Products to
Wyeth. We will refer to it as Wyeth.

                               5
       The history of this case is detailed in In re Diet Drugs

Prods. Liab. Litig., 282 F.3d 220, 225-29 (3d Cir. 2002) and

will only be briefly summarized here. In 1999, Wyeth

reached a settlement that provided a variety of remedies for

users and former users of its diet medications. The District

Court approved the plan in Pretrial Order 1415 and the

accompanying memorandum. The remedies provided

depended on whether the class members were ultimately

diagnosed with one of several heart conditions.

       Each class member was placed into one of five groups.

Class 1 consisted of class members who did not know

whether they had a condition termed FDA positive ventricular

heart disease (VHD) 2 , and was further subdivided into class

members who had used the diet drugs for more than 60 days

       2
         “FDA Positive VHD” refers to a severity of heart valve
regurgitation, as defined in the Settlement Agreement.

                               6
and class members who had used the drugs for less than 60

days. Class 2 consisted of class members who knew they had

FDA positive VHD and was also subdivided based on diet

drug usage of more or less than 60 days. Class 3 was

comprised of class members who did not know whether they

had FDA positive VHD at the time of settlement, but were

diagnosed with a less serious condition called mild mitral

regurgitation by the end of the settlement screening period.

       The settlement provided funding for screening tests to

determine whether class members had qualifying heart disease

and for compensation for the cost of the drugs and medical

treatment, depending on the ultimate diagnosis. The

Settlement Agreement expressly barred participating class

members from pursuing any settled claims against Wyeth.

       The settlement provided the option for class members

to opt out at the time of settlement (“initial opt outs”) or to be

                                7
bound by the Settlement Agreement. Those class members

diagnosed as having FDA positive VHD by a specified date

could either register for further benefits or exercise an

“intermediate opt out” and sue Wyeth in the state tort system.

In addition, those class members diagnosed as having a lesser

condition, mild mitral regurgitation, could either claim

compensation under the settlement or exercise a “back end

opt out” and sue Wyeth in the tort system. The class members

who exercised intermediate or back end opt outs are

collectively referred to as “downstream opt outs.” In

exchange for Wyeth’s waiver of a statute of limitations

defense, class members exercising downstream opt out rights

cannot sue for punitive damages.

       The Settlement Agreement explicitly excluded those

individuals with a more serious condition, primary pulmonary

hypertension (“PPH”), allowing them to sue Wyeth in the

                                8
state tort system. The settlement did not include any recovery

for plaintiffs alleging a variety of conditions, including

neurotoxicity and elevated pulmonary hypertension (“PH”),

because the District Court found that the evidence did not

support a connection between the use of diet drugs and these

conditions.

II.    Jurisdiction and Standard of Review

       We have jurisdiction over Pretrial Orders 2929, 3849

and 3085 because they are all final orders of the District Court

within the meaning of 28 U.S.C. § 1291.

       The District Court’s legal conclusions are subject to

plenary review. In re Prudential Ins. Co. of Am. Sales

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

the District Court’s determination of adequacy of

representation as an exercise of its discretionary authority in

class action proceedings for abuse of discretion. In re

                                9
Prudential Ins. Co. of Am. Sales Practices Litig., 148 F.3d

284, 299 (3d Cir. 1998). All underlying factual issues are

reviewed for clear error. Id.

III.   Due Process Protections for Class Members

       In all three appeals before us, Appellants argue that

they are not bound by the Settlement Agreement because their

due process rights were not upheld, either because of

inadequate notice or inadequate representation. A threshold

question in all three of these appeals is whether these

Appellants are entitled to bring a collateral attack on the

Settlement Agreement.

       A class member must have certain due process

protections in order to be bound by a class settlement

agreement. The general principle is that “there has been a

failure of due process only in those cases where it cannot be

                                10
said that the procedure adopted, fairly insures the protection

of the interests of absent parties who are to be bound by it.”

Hansberry v. Lee, 311 U.S. 32, 42 (1940). In a class where

opt out rights are afforded, these protections are adequate

representation by the class representatives, notice of the class

proceedings, and the opportunity to be heard and participate

in the class proceedings. Phillips Petroleum Co. v. Shutts,

472 U.S. 797, 811-12 (1985). The adequate representation

requirement “serves to uncover conflicts of interest between

named parties and the class they seek to represent.” Amchem

Products, Inc. v. Windsor, 521 U.S. 591, 625 (1997). This

requirement is codified in Fed. R. Civ. P. 23(a)(4), which

requires that “the representative parties will fairly and

adequately protect the interests of the class.”

       There must be a process by which an individual class

member or group of class members can challenge whether

                               11
these due process protections were afforded to them. Grimes

v. Vitalink Comm’ns Corp., 17 F.3d 1553, 1558 (3d Cir.

1994). This challenge can take the form of an appeal of the

class certification itself, a collateral attack on an already-

certified class, or a Rule 60(b) motion. In re Real Estate Title

& Settlement Servs. Antitrust Litig., 869 F.2d 760, 767 (3d

Cir. 1989).

       Class members are not, however, entitled to unlimited

attacks on the class settlement. Once a court has decided that

the due process protections did occur for a particular class

member or group of class members, the issue may not be

relitigated. Appellants understandably rely heavily on

Stephenson v. Dow Chemical Co., 273 F.3d 249 (2d Cir.

2001), aff’d by equally divided Court, 539 U.S. 111 (2003), in

support of their insistence that they have a right to collaterally

attack the adequacy of representation determination of the

                                12
class action court. While Stephenson supports appellant’s

position on this issue, it is inconsistent with circuit case law

by which this panel is bound. In Carlough v. Amchem

Products, Inc., 10 F.3d 189 (3d Cir. 1993), we held that notice

and failure to exercise an opportunity to “opt out” constitutes

consent to the jurisdiction of the class action court by an

absent member of a plaintiff class even when that member

lacks minimum contact with the class action forum. Then, in

Grimes v. Vitalink Communications Corp., 17 F.3d 1553 (3d

Cir. 1994), we further held that, where the class action court

has jurisdiction over an absent member of a plaintiff class and

it litigates and determines the adequacy of the representation

of that member, the member is foreclosed from later

relitigating that issue. Thus, it follows that challenges to the

terms of a settlement agreement, itself, are not appropriate for

collateral review. See In re Orthopedic Bone Screw Products

                                13
Liab. Litig., 350 F.3d 360, 364-65 (3d Cir. 2003) (holding that

a “challenge to the propriety of the settlement agreement and

its terms” is foreclosed by the approval of the settlement

agreement in a final, unappealable order.)

IV.    Current Challenges to the Settlement Agreement

       The appeals before this Court are from three Pretrial

Orders of the District Court, all addressing variations on the

same situation. Pretrial Order 2929 (appeals docketed at 03-

3401 and 03-3402) was the denial of a motion made after

settlement by Appellants, all of whom were downstream opt

outs, arguing that their due process rights were violated by

inadequate representation at settlement. Pretrial Order 3085

(appeal docketed at 03-4465) was the denial of a motion made

after settlement by Appellants, all of whom had PH, a

condition not covered by the settlement, arguing that their due

process rights were violated by inadequate representation at

                               14
settlement.3 Pretrial Order 3849 (appeal docketed at 04-3661)

was the grant of a motion by Wyeth to enjoin Appellants, who

were not diagnosed by the settlement deadline, from bringing

suit in New York to challenge the adequacy of their notice

and representation at settlement.

       Applying due process protections to the facts of each

set of Appellants, we find that they have already received

adequate procedural protections. No collateral review is

available when class members have had a full and fair hearing

and have generally had their procedural rights protected

during the approval of the Settlement Agreement. Collateral

review is only available when class members are raising an

issue that was not properly considered by the District Court at

       3
          PTO 3085 also included class members who have PPH,
raising a challenge based on inadequate representation, but those
PPH-diagnosed class members are not part of this appeal.

                               15
an earlier stage in the litigation. Here, the District Court

carefully examined the adequacy of representation and

procedural protections at the fairness hearing, and that

examination duly covered the variations presented by the

appeals before us. Thus, the District Court was correct in

rejecting all three challenges. To illuminate this conclusion,

we will address the three appeals before us individually.

       A.     Downstream Opt Outs

       As to the first group of Appellants, the downstream opt

outs, it is clear that the issue of adequacy of representation

was explicitly addressed by the District Court at the fairness

hearing. See PTO 1415 Memorandum at 99-122.

       The District Court specifically considered Appellants’

arguments regarding intraclass conflicts. The District Court

gave considerable treatment to the argument that this

Settlement Agreement had problems analogous to those in

                               16
Amchem Products, Inc. v. Windsor, 521 U.S. 591 (1997).

The District Court specifically found that there is no “futures”

problem with this Settlement Agreement because, unlike in

Amchem, where asbestos class members could not know of

their exposure or disease, potential class members are aware

of their exposure to diet drugs and any injuries from that

exposure are detectable in medical tests – the injuries will not

remain latent for 30 or 40 years. The District Court

specifically found that the medical evidence overwhelmingly

shows that the heart conditions caused by these diet drugs are

detectable shortly after use of the drugs ceases and that there

is no evidence that the conditions caused by these drugs are

latent. See PTO 1415 Memorandum at 105 (discussing

numerous medical studies).

       Further, the District Court also rejected the argument

that this Settlement Agreement lacks the structural protections

                               17
that doomed the settlement agreement in Amchem. The

District Court specifically found that this Settlement

Agreement includes structural protections to protect class

members with varying diagnoses, pointing to the ability of a

particular class member to “step up” to higher compensation

levels as their disease progresses. PTO 1415 Memorandum at

113-4.

         The District Court also considered the argument that

class members who would exercise downstream opt out rights

were subject to an improper trade-off during settlement

negotiations. After considering the relevant case law, the

District Court concluded:

               In sum, the court finds that Class
               Counsel’s agreement to waive
               punitive damage claims on
               intermediate and back end opt
               outs in exchange for protection
               against statute of limitations and
               claim splitting defenses represents

                               18
              a fair and wholly appropriate
              trade-off. These provisions do not
              represent an improper allocation,
              nor do they affect the procedural
              fairness of the settlement.

PTO 1415 Memorandum at 115.

       These Appellants argue that because the specific

individuals who are Appellants in this case were not the

specific individuals who raised objections at the fairness

hearing, they must have the opportunity to litigate the issue

themselves. This argument ignores the underpinnings of the

class action mechanism. If this argument were to be accepted,

each class member would be able to relitigate each issue,

rendering the class action mechanism pointless. While it is

true that the specific Appellants in this case did not,

themselves, litigate this issue at the fairness hearing, other

class members who are representative of them did litigate this

issue and the District Court considered all of the arguments

                                19
and evidence in that regard. Appellants were represented by

other class members at the fairness hearing and because the

District Court decided that the class was adequately

represented, the issue of adequate representation of

Appellants has already been fairly litigated.

       Appellants also argue that this Court has not yet

addressed the adequacy of representation because the appeal

from the approval of the class settlement was voluntarily

withdrawn due to settlement between Wyeth and the

individual class members filing that appeal. There is no

support for the proposition that because a party does not

pursue an appeal of a District Court’s order, that order does

not bind the class members or cannot be considered for its

preclusive effect. See Orthopedic Bone Screw, 350 F.3d at

361 (noting that “appeal of class settlement was voluntarily

dismissed, rendering the District Court’s order final and

                               20
unappealable.”)

       It is also worth noting that this Court has, in other

appeals from this class settlement, addressed the adequacy of

representation. See In re Diet Drugs, 282 F.3d 220, 231 (3d

Cir. 2002) (“That various subclasses in the Brown class could

find themselves in competition does not by itself establish an

actual conflict undermining adequacy of representation”), In

re Diet Drugs, 93 Fed. Appx. 338, 344 (3d Cir. 2004)

(observing “[t]hat certain class members were differently

situated with respect to filing deadlines should not be taken to

mean that their overall interests diverged from that of the

general class” and concluding that representation was

adequate).

       This first group of Appellants, the downstream opt

outs, were adequately represented at settlement and that same

issue has already been raised and litigated. These Appellants

                               21
have been afforded the due process protections necessary for

the Settlement Agreement to bind them. Therefore, these

Appellants cannot now challenge the adequacy of their

representation yet again by bringing this collateral attack.

       B.     Elevated Pulmonary Hypertension

       The second group of Appellants, those with PH, also

cannot bring a collateral attack on the class settlement at this

stage in the litigation. This is for the same fundamental

reason as the downstream opt outs – the issues raised here

were raised by class members at the fairness hearing and

rejected by the District Court. The District Court heard

extensive testimony concerning various conditions and their

connection to diet drug use and approved the exclusion of PH

from the Settlement Agreement. PTO 1415 Memorandum at

29-41. In fact, the District Court specifically treated PH as a

symptom of many heart conditions, rather than a separate

                               22
injury caused by diet drugs in its detailed discussion of the

medical evidence. PTO 1415 Memorandum at 28-9, 32, 37,

39. Further, the District Court approved the Settlement

Agreement’s definition of PPH, a serious lung disease that

these Appellants argue is based on a flawed definition that

wrongly excludes them. PTO 1415 Memorandum at 37-41.

       As discussed above, the District Court heard and

rejected arguments that representation was not adequate for

those with differing conditions. PTO 1415 Memorandum at

113-5. The District Court specifically found that class

members had “meaningful opt out rights,” unlike the class

members in Amchem. PTO 1415 Memorandum at 114. In

addition, beyond the District Court’s consideration of these

issues at the fairness hearing, the District Court has already

heard and rejected collateral challenges by various class

members based on these same arguments. See PTO 2383

                               23
(appointing special master to administer screening of class

members who meet requirements for PPH delineated in PTO

1415), PTO 2623 (concluding that moving class members do

not meet definition of PPH, denying argument that definition

of PPH should be expanded, and finding that class members’

due process rights were not violated by the Settlement

Agreement).

       Thus, the District Court not only addressed the issues

raised here by the PH Appellants at the fairness hearing, but

has also subsequently addressed the adequacy of their

representation and due process protections. As such, this

group of Appellants has received the due process protections

necessary for them to be bound by the class settlement and

cannot relitigate those issues here.

       C.     Post-Screening Deadline Diagnoses

       The third group of Appellants, who were diagnosed

                               24
after the screening deadline expired, face a similar problem as

the first two sets of Appellants. Again, fairness of notice and

adequacy of representation have already been litigated.4

       The District Court’s approval of the Settlement

Agreement concluded that the notice provided was more than

       4
          As a threshold matter, the jurisdiction of the District
Court over the third group of Appellants is disputed. The
Appellants argue that the District Court had no independent
basis of jurisdiction over them because they brought their suit
challenging the Settlement Agreement in New York. This
argument is without merit. Appellants brought suit in New York
state court and Wyeth removed the case to federal court. The
MDL panel then transferred the case to the District Court. The
case law, generally, supports the position that the MDL transfer
gave the District Court jurisdiction. See, e.g., In re Auto
Refinishing Paint Antitrust Litig., 358 F.3d 288, 197 n.11 (3d
Cir. 2004). PTO 1415 gives the District Court continuing
jurisdiction over “this action and each of the Parties, including
[Wyeth] and the class members, to administer, supervise,
interpret and enforce the settlement in accordance with its
terms.” PTO 1415 at 8. In addition, this Court has already
rejected a similar argument by other diet drugs class members.
See In re Diet Drugs, 282 F.3d 220, 230 (3d Cir. 2002),
(denying petition for writ of mandamus).

                               25
adequate. In fact, it appears from the record that these

Appellants received actual notice. In addition, these

Appellants are essentially relying on the same “futures”

argument that was thoroughly considered and rejected by the

District Court, as discussed above. PTO 1415 Memorandum

at 113-5. Also, as discussed above, the District Court

considered and rejected the suggestion that there were

disabling intraclass conflicts that compromised the adequacy

of representation. PTO 1415 Memorandum at 113-4.

       Finally, these Appellants are attempting to factually

challenge the District Court’s conclusion that VHD is not

latent. This challenge is clearly inappropriate as it is not a

component of a due process challenge, appropriate for

collateral attack. See Orthopedic Bone Screw, 350 F.3d at

364-65 (holding that a collateral challenge to class

settlement’s terms is foreclosed). This claim could be

                                26
properly raised in a Rule 60(b) motion with new evidence

supporting the claim, if such evidence exists. Appellants do

note that they have filed a Rule 60(b) motion with the District

Court, but that the motion has been stayed pending the

outcome of other litigation. Regardless of that fact, the

District Court’s finding regarding the non-latent nature of

VHD should not be considered in this appeal.

V.     Conclusion

       All three sets of Appellants have had a full and fair

opportunity to be heard and have already raised and litigated

the challenges they argue here. It can be said “that the

procedure adopted, fairly insures the protection of the

interests” of these parties, who are properly bound by the

Settlement Agreement. Hansberry, 311 U.S. at 42. Thus, all

three groups of Appellants cannot collaterally challenge the

class settlement here and the District Court will be affirmed.

                               27