|IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF PENNSYLVANIA
IN RE ORTHOPEDIC BONE SCREW
NOTICE OF INTENT TO APPEAR
PRODUCTS LIABILITY LITIGATION
__________________________________ MDL Docket No. 1014
THIS DOCUMENT RELATES TO
Fanning, et al. v. AcroMed Corp.,
et al., and ALL ACTIONS
PLEASE TAKE NOTICE that class members Jesse Anderson, Michael Andrews and his wife Tina Andrews, Betty L. Angle and her husband Edgar Angle, Paul Bain and his wife Joan Bain, Kathy Bogle and her husband William Bogle, Elmer Boles and his wife Brenda Lee Boles, Richard W. Boussie and his wife Bokhui Boussie, Frank Davis, Floyd Evans, Teddy Glen Futrell and his wife Barbara Futrell, Mary Goble and her husband Fred Goble, Dorothy Goddess and her husband Ulyess Goddard, James Griswold and his wife Tammy Griswold, Flournoy Haislip and his wife Nancy Haislip, Rita Hamilton, Mae Hildreth and her husband Wilbur Hildreth, Ira Hoffman and his wife Ina Hoffman, Leslie Holt, Sammie McCallum and her husband Dennis McCallum, Anna McCord and her husband Robert McCord, Marion McCullough, Dorothy Moore and her husband James Moore, Rick O'Connor and his wife Tabetha O'Connor, Kathleen Pilkington, Barbara Radford, Nelline Saunders, Sable Scott, Carolyn Steele and her husband Charles Steele, Carol Stillings, Marvin Tabor and his wife Glenda Tabor, Billy Williams, Silvia Brown and her husband James Brown, Barbara Gregory and her husband W.C. Gregory, through undersigned counsel, intend to appear and present argument at the fairness hearing to beheld on April 23, 1997, in connection with the proposed class action settlement in the above-captioned case.
Dated: April 7, 1997 Respectfully submitted,
Allison M. Zieve
Public Citizen Litigation Group
G. Thomas Nebel
John B. Carlson
Williams/Nebel & Associates
Counsel for Objectors
Jesse Anderson, et al.
IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF PENNSYLVANIA
IN RE ORTHOPEDIC BONE SCREW
OBJECTIONS OF JESSE ANDERSON, ET AL., TO CLASS ACTION SETTLEMENT
PRODUCTS LIABILITY LITIGATION
__________________________________ MDL Docket No. 1014
THIS DOCUMENT RELATES TO
Fanning, et al. v. AcroMed Corp.,
et al., and ALL ACTIONS
Jesse Anderson, Michael Andrews and his wife Tina Andrews, Betty L. Angle and her husband Edgar Angle, Paul Bain and his wife Joan Bain, Kathy Bogle and her husband William Bogle, Elmer Boles and his wife Brenda Lee Boles, Richard W. Boussie and his wife Bokhui Boussie, Frank Davis, Floyd Evans, Teddy Glen Futrell and his wife Barbara Futrell, Mary Goble and her husband Fred Goble, Dorothy Goddess and her husband Ulyess Goddard, James Griswold and his wife Tammy Griswold, Flournoy Haislip and his wife Nancy Haislip, Rita Hamilton, Mae Hildreth and her husband Wilbur Hildreth, Ira Hoffman and his wife Ina Hoffman, Leslie Holt, Sammie McCallum and her husband Dennis McCallum, Anna McCord and her husband Robert McCord, Marion McCullough, Dorothy Moore and her husband James Moore, Rick O'Connor and his wife Tabetha O'Connor, Kathleen Pilkington, Barbara Radford, Nelline Saunders, Sable Scott, Carolyn Steele and her husband Charles Steele, Carol Stillings, Marvin Tabor and his wife Glenda Tabor, Billy Williams, Silvia Brown and her husband James Brown, Barbara Gregory and her husband W.C. Gregory ("Objectors") hereby object to the proposedclass action settlement with AcroMed Corp. in the above-captioned case. Objectors are not challenging the settlement as to AcroMed-- the claims released as to AcroMed or the fund to be provided by AcroMed to the class. Their objection is to the release of claims against third parties who are not named in the complaint and who will make no contribution to the settlement fund.
More specifically, the settlement's definition of "Settled Claims" is drawn far too broadly. That definition requires all class members to release malpractice claims based on any "product- liability related theory" or based on physicians' or hospitals' financial conflicts of interest. First, by including such claims in the release, the settlement requires class members to give up potentially valuable claims against physicians and hospitals that are not parties to the settlement and provide no consideration for the release. The settlement is thus fundamentally unfair.
Second, as a result of the broad release, the settlement fails to satisfy Federal Rule of Civil Procedure Rule 23(a). Commonality and typicality cannot be demonstrated as to malpractice claims against different physicians and hospitals subject to suit under the laws of different states. And the named plaintiffs are not adequate representatives of the class, for they have not even alleged claims against their health care providers. Moreover, because of the impossibility of certifying a limited fund as to claims against unidentified doctors and hospitals, the class would have been certifiable against those third parties, if at all, only under Rule 23(b)(3), which provides a right to opt-out and containsstringent certification criteria. Yet class treatment of state-law malpractice claims based on differing facts under different state laws meets neither the predominance nor the superiority requirements of Rule 23(b)(3).
Third, the broad definition of Settled Claims infringes on the due process rights of absent class members, such as Objectors.
Accordingly, the proposed settlement cannot be approved unless the definition of "Settled Claims" is revised to exclude claims against third-party health care providers.
I. THE OBJECTORS
Silvia Brown, James Brown, Teddy Glen Futrell, and Barbara Futrell are residents of Kentucky. Barbara Gregory and W.C. Gregory are residents of Georgia. The remaining Objectors are residents of Tennessee. Each of these individuals is an "AcroMed Orthopedic Bone Screw Recipient" (or his or her spouse) and a member of the "Settlement Class," as those terms are defined in the Settlement Agreement.
Except for the Futrells, each Objector has filed a case in state court in Tennessee against their physician, hospital, and AcroMed. The claims against the physician and the hospital are based on the health care providers' own duties to the individuals and their breach of those duties and are not dependent on the allegations against AcroMed. Nebel Decl. (Exh. 1 hereto) at ¶ 3 & Exh. A.
The Futrells are preparing to file a case in federal district court in Tennessee against Mr. Futrell's physician and the hospitals where the surgeries were performed. Nebel Decl. ¶ 5 & Exh. B (Futrell Complaint). Although some of the Futrells' causes of action relate to the regulatory status of the device and to the physician's financial conflict of interest, the claims are based on those defendants' own duties to the Futrells and their breach of those duties. AcroMed will not be named as a defendant in the Futrells' lawsuit.
II. THE PROPOSED SETTLEMENT IS NOT FAIR, ADEQUATE, AND REASONABLE.
A. The Scope Of The Parties And Claims Released Is Unreasonably Broad.
1. "Settled Claims"
As defined by the settlement agreement (at 7), "Settled Claims" released under the proposed settlement include claims against any "treating physician or institution" that
(A) rest in whole or in part on any product liability-related theory of recovery, including without limitation design or manufacturing defect, the regulatory status of any AcroMed Orthopedic Bone Screw, or alleged failure to warn, nondisclosure, or inaccurate or incomplete disclosure, of the regulatory status of any AcroMed Orthopedic Bone Screw or (B) have, as an element of the claim, either financial relationships with AcroMed and/or alleged conflict of interest based upon any such financial relationship (impeachment shall not be considered an element of a claim).
Significantly, this definition requires release not just of product liability claims, but of any claims based on "any product liability-related theory of recovery," including theories related to the regulatory status of AcroMed's bone screw. Because manymalpractice claims are based on allegations "related" in some sense to product liability, the settlement may require patients to release various malpractice claims against their doctors and hospitals. Although claims for negligence in the doctor's hands-on performance (such as for negligently performing the surgery) are preserved, pedicle screw malpractice cases are not generally about a doctor's hands-on negligence.
For example, objector Haislip's failure-to-warn claim against his physician and hospital is based on allegations that the product was defective or was unapproved for use in the spine, that the physician knew such facts, and that the physician failed to warn or to inform Mr. Haislip. Nebel Decl., Exh. A ¶¶ 30-31 (Haislip Complaint). Although this claim may be "related" to a product liability claim for failure to warn, the theory of this failure-to- warn claim is medical malpractice, not product liability. The claim as to the health care providers is not dependent on AcroMed's failure to warn and is not even susceptible to a cross-claim by the physician against AcroMed, since the claim is based on the physician's non-disclosure of facts that he knew and that he had a duty to disclose to Mr. Haislip. Nonetheless, the settlement may release such a claim. See also id. ¶ 91(c) (doctor's malpractice), ¶ 98 (hospital's malpractice), ¶ 103 (doctor's battery), ¶¶ 107-08 (informed consent as to doctor and hospital).
Similarly, in Daum v. Spinecare Medical Group, 61 Cal. Rptr. 2d 260 (Cal. App. 1997), the plaintiff brought a malpractice suit against his physician and Spinecare, the practice in which thephysician worked, based on the physician's failure to obtain informed consent for the implantation of a spinal fixation device. The theory of liability at trial focussed on the regulatory status of the device as investigational, yet the claim did not seek redress against the manufacturer. Although Daum involved a manufacturer other than AcroMed, the proposed settlement here would seem to preclude a comparable malpractice informed consent claim based on the investigational status of AcroMed's fixation device. See, e.g., Nebel Decl., Exh. A ¶ 91(c).
Again, such a claim is based on the actions and duties of health care providers to their patients, not on AcroMed's actions or duties. Therefore, the settling parties have no legitimate legal interest in securing a release of these claims. Nonetheless, physicians and institutions sued for malpractice will surely urge courts to interpret the term "Settled Claims" to release failure- to-warn claims asserted against them.
Similarly, the settlement seems to require release of claims against doctors for failing to warn about prior problems experienced by patients with pedicle screws. In this regard, the provision is most reasonably interpreted to limit the release of failure-to-warn and nondisclosure claims to claims related to the device's regulatory status. Even with such a limitation, however, the release is too broad. As in Daum, a claim related to regulatory status may be asserted against a physician or hospital on a malpractice theory, as opposed to against AcroMed on a product liability theory. In the Futrell complaint, for example, one claimagainst the physician alleges that the physician fraudulently misrepresented the regulatory status of the device. Nebel Decl., Exh. B ¶¶ 47-53. Moreover, it is unclear whether a claim against a doctor for negligently recommending use of a pedicle screw would be released. And as a consequence of the release, it is unclear whether a plaintiff who did not allege failure to warn about the device's regulatory status could put the doctor's knowledge of regulatory status in evidence as part of a claim that the doctor negligently prescribed use of the device. To the extent that the release would preclude class members from pursuing or making any of these claims or arguments in malpractice actions, it is unjustifiably broad.
As to part (B) of the definition of "Settled Claims," the parties have offered no justification as to why claims based on a doctor's conflict of interest are properly encompassed in this settlement. A claim based on a doctor's misconduct in putting his or her self-interest before the patient's is a malpractice claim in which the patient seeks no relief from AcroMed. See, e.g., Nebel Decl., Exh. B ¶ 83, ¶ 98 (Futrell Complaint).
2. "AcroMed" and the proposed Final Order
The settlement agreement (at 2) defines "AcroMed" to include, among other entities, all current and former employees, Medical Advisory Panel members, consultants, agents, and shareholders, "acting in their capacities as such and/or in connection with AcroMed or AcroMed Orthopedic Bone Screws" (emphasis added).
In the settlement agreement, this broad definition of "AcroMed" seems to be harmless, since the claims released against all parties, including AcroMed, appears to depend on the definition of "Settled Claims." In the proposed Final Order and Judgment, however, the release as to AcroMed and the Released Parties, see Exh. E to Settlement Agreement, goes beyond the scope of the Settled Claims. The proposed Final Order provides that all class members are "permanently barred, enjoined, and restrained from initiating, asserting, or prosecuting any Orthopedic Bone Screw Related actions against AcroMed or the Released Parties." See [Proposed] Final Order and Judgment, Exh. M to Settlement Agreement, at 7, ¶ 4. And the agreement defines "Orthopedic Bone Screw Related" to mean "arising out of, based upon, relating to, or involving Orthopedic Bone Screws." Settlement Agreement at 5.
In combination, the broad definition of "AcroMed" and the injunction in the proposed Final Order could result in a complete release from all possible claims related to AcroMed's pedicle screw--whether for product liability, malpractice, or some other theory--of any physician who was or is on AcroMed's Medical Advisory Panel, acted as a consultant, or owns shares in the company. For Objectors, this result would wipe out their malpractice claims against their physician, who was a member of the Medical Advisory Panel and on that basis is included within the definition of "AcroMed." See Nebel Decl. Exh. C.
AcroMed's attempt through settlement to protect individuals, such as members of the Medical Advisory Panel, consultants, andshareholders, from liability may be a nice gesture; but releasing those individuals from liability for independent conduct, not taken on behalf of the company AcroMed, is neither fair, adequate, nor reasonable.
B. A Class Settlement Cannot Release Third-Party Defendants Not Named In The Complaint.
The proposed settlement is not fair, adequate, and reasonable because the release goes outside the scope of the litigation to protect third-party defendants by releasing claims not asserted in the pleadings. As explained above, the class action complaint is based solely on product liability theories against manufacturers of pedicle screws. Yet the settlement requires patients to release claims that are not asserted in the pleadings and that would be assertable against non-parties to the complaint or the settlement-- physicians and hospitals. See Class Action Complaint, No. 97-381; Settlement Agreement at 1. The non-parties provide no consideration in exchange for the release. See In re General Motors Corp. Engine Interchange Litigation, 594 F.2d 1106, 1133 (7th Cir.) ("settlement is an agreement where both sides gain as well as lose something"), cert. denied 444 U.S. 870 (1979).
As we understand it, only a relatively small percentage of plaintiffs that have sued AcroMed have also sued their surgeons or hospitals. No matter how small the percentage of class members with claims against health care providers, however, the settlement cannot force those members to release malpractice claims. "An advantage to the class, no matter how great, simply cannot be bought by the uncompensated sacrifice of claims of members, whetherfew or many, which were not within the description of claims assertable by the class." National Super Spuds v. New York Mercantile Exchange, 660 F.2d 9, 19 (2d Cir. 1981) (disapproving settlement where agreement required release of claims based on liquidated and unliquidated contracts in return for compensation distributed solely to members who held liquidated contracts). "[C]onvenience and expediency cannot justify disregard of the individual rights of even a fraction of the class." In re General Motors Corp. Engine Interchange Litigation, 594 F.2d at 1133. Accordingly, the settlement cannot be approved.
C. Given The Breadth Of The Release, The Settlement Does Not Meet The Requirements Of Rule 23.
In this Circuit, a settlement class can be certified only if the case is triable as a class action under the requirements ofFederal Rule of Civil Procedure 23. Georgine v. Amchem Products, Inc., 83 F.3d 610, 625 (3d Cir.), cert. granted sub nom. Amchem Products, Inc. v. Windsor, 117 S. Ct. 379 (1996). Here, whether or not the class meets the requirements of Rule 23 vis-a-vis product liability claims against AcroMed, the class does not satisfy Rule 23 vis-a-vis claims against health care providers.
1. Rule 23(a)
As discussed above, the settlement proposes to release various malpractice claims against health care providers. In light of the release, this class action settlement cannot possibly satisfy Rule 23(a)'s requirements of commonality, typicality, and adequacy of representation of the named plaintiffs.
Commonality: In denying the plaintiffs' 1995 motion for class certification as to AcroMed, this Court found that, despite individual questions as to causation and injury, common questions existed on the issue of whether AcroMed's pedicle screws were defective products that were unreasonably dangerous. Pretrial Order No. 8 at 13. In regard to claims against doctors and institutions, however, the individual issues as to causation and injury are even more pronounced, while product liability claims for defective design are not at issue.
Each class member's claims against physicians and hospitals are very different, based on different sets of facts regarding the specific conduct and knowledge of different physicians and hospitals and the specific medical history and injury of each class member. Moreover, whereas some class members, such as Objectorshere, have asserted claims against health care providers, other class members, such as named plaintiff Fanning, see generally Class Action Complaint, No. 97-381, have not asserted such claims. By releasing numerous claims against physicians and institutions, the settlement would bar these Objectors and other class members who have claims against those entities "from asserting claims, distinct from those represented by the class plaintiffs, which depend not only upon a different legal theory but upon proof of further facts." National Super Spuds v. New York Mercantile Exchange, 660 F.2d 9, 18 n.7 (2d Cir. 1981); cf. Grimes v. Vitalink Communications Corp., 17 F.3d 1553, 1563-64 (3d Cir. 1994) (settlement may release claims based on different legal theory from that alleged in complaint only when claims "depend on the very same set of facts"), cert. denied, 115 S. Ct. 480 (1994). In fact, it is hard to conceive of any issue concerning the conduct of individual health care providers that would be common to the class. Moreover, because class members' claims would arise under the laws of many different states, "the proliferation of disparate factual and legal issues is compounded exponentially." Georgine, 83 F.3d at 627. Thus, the requirement of commonality is not satisfied.
Typicality: Rule 23(a)(3) requires that "the claims or defenses of the representative parties are typical of the claims or defenses of the class." The requirement is not satisfied here for two reasons.
First, the claims of the named plaintiffs are not typical of the claims of the class. Plaintiff Fanning is an AcroMed Bone Screw Recipient but he has not asserted claims against any health care provider. See Class Action Complaint, No. 97-381. And plaintiff Schmerling is a Non-AcroMed Bone Screw Recipient, who also has not asserted claims against physicians or institutions. Id. Thus, the claims of the named plaintiffs are not typical of the claims of class members who have malpractice claims. See Georgine, 83 F.3d at 632.
Second, even assuming there were a named plaintiff who asserted a medical malpractice claim, that plaintiff's claim would not be typical of the class because class members' malpractice claims against health care providers will vary from state to state. See In re American Medical Systems, 75 F.3d 1069, 1085 (6th Cir. 1996) (reversing class certification because, among other things, law of negligence differs from jurisdiction to jurisdiction). For instance, standards for strict liability and negligence vary from state to state. See In re Rhone-Poulenc Rorer, Inc., 51 F.3d 1293,1300-02 (7th Cir.), cert. denied, 116 S. Ct. 184 (1995). A claim against a physician for failure to warn of a device's regulatory status may be actionable is some states, see, e.g., Daum, 61 Cal. Rptr. 2d 260 (Cal. App. 1997), but not in others. See, e.g., Pretrial Order No. 266. And as to damages, state law varies tremendously from one jurisdiction to another, especially as to punitive damages, which some states allow without limitation, others impose caps, and others reject entirely. See generally Owen, A Punitive Damages Overview: Functions, Problems and Reform, 39 Vill. L. Rev. 363, 366-63 (1994) (reviewing various permutations and noting that law is in flux).
Likewise, available defenses will vary by state. Tennessee law, for example, establishes a one-year statute of limitations for malpractice claims, with a three-year statute of repose, Tenn. Code Ann. § 29-26-116(a), while Pennsylvania law establishes a two-year statute of limitations and has no statute of repose. 42 Pa. Cons. Stat. Ann. § 5524. Moreover, in contrast to the "typicality" of claims against AcroMed, see Pretrial Order No. 8 at 14, doctors' and institutions' liability for each plaintiff's damages will depend on each class member's individualized circumstances--their prior back injury, their current injury, whether they gave informed consent to use of a product unapproved for use in the spine, the skill of their physician, the role of the hospital, their consequent lost wages, etc.
Adequacy of Representation: "The named plaintiffs in a class action . . . can represent a class of whom they are a part only tothe extent of the interests they possess in common with the class." National Super Spuds, 660 F.2d at 17. In National Super Spuds, the named plaintiffs had claims based only on liquidated contracts. The Settlement Agreement, however, also resolved claims based on unliquidated contracts. The Second Circuit, reversing the district court's approval of the settlement, held that the plaintiffs were "empowered to represent members of the class solely with respect to the contracts in which all members of the class had a common interest: liquidated contacts." Id.; see also Georgine, 83 F.3d at 631 (named plaintiffs cannot negotiate for interests of differently-situated class members).
Here, the Complaint in No. 97-381 shows that the class representative, Daniel Fanning, has not asserted claims against any physicians or institutions. Therefore, he lacks a common interest in malpractice claims. The other named plaintiff, Margaret Jane Schmerling, is a "Non-AcroMed Orthopedic Bone Screw recipient." Complaint, No. 97-381, ¶ 4.c. Ms. Schmerling also cannot represent Objectors here, all of whom have AcroMed bone screws or are the spouses of individuals with AcroMed bone screws. National Super Spuds, 660 F.2d at 17 (named plaintiffs "cannot represent a class of whom they are not a part") (quoting Bailey v. Patterson, 369 U.S. 31, 32-33 (1962)).
The intra-class conflicts between individuals without malpractice claims, such as Mr. Fanning, and individuals with such claims, such as Objectors, precludes the class from meeting the adequacy of representation requirement. In In re General MotorsCorp. Pick-up Truck Fuel Tank Products Liability Litigation, 55 F.3d 768 (3d Cir.), cert. denied, 116 S. Ct. 88 (1995), the named plaintiffs were individual owners of GM trucks, as opposed to fleet truck owners. In finding a lack of adequate representation, the Third Circuit was "concerned that the individual owners had no incentive to maximize the recovery of the government entities; they could skew the terms of the settlement to their own benefit." Id. at 801. Similarly here, the named plaintiffs had no incentive to protect the interests of class members with malpractice claims, as evidenced by the fact that the settlement provides no remedy for those claims and the released third parties make no contribution to the settlement fund. "The justification for permitting the representatives to sue on behalf of the class has no application to claims of class members in which the representatives have no interest and which, as shown here, they are willing to throw to the winds in order to settle their own claims." National Super Spuds, 660 F.2d at 17 n.6. Therefore, to the extent the settlement seeks to settle claims against physicians and institutions, Mr. Fanning is not an adequate representative of the class.
Thus, the class lacks common questions of law or fact, typicality of claims and defenses, and adequacy of representation by the named plaintiffs as to claims against physicians and hospitals. Whether or not the settlement satisfies Rule 23(a) as to AcroMed and the claims against it, the settlement does not satisfy Rule 23(a) as to health care providers.
2. Rule 23(b)
Even if Rule 23(a) were somehow satisfied, the settlement cannot be maintained under any prong of Rule 23(b). The settling parties, arguing that defendant AcroMed is a limited fund, seek approval of the entire settlement under Rule 23(b)(1)(B). There is, however, no evidence in the record to show the existence of a limited fund as to the Released Parties (listed in Exhibit E to the Settlement Agreement) or as to the unidentified and unascertainable number of additional institutions and physicians whom the settlement purports to release from liability through the definition of "Settled Claims." As to the institutions and physicians, certification would be proper, if at all, only under Rule 23(b)(3).
a. Rule 23(b)(1)(B): To establish a limited fund class under Rule 23(b)(1)(B), the settling parties must show "(1) the size of the fund available to pay all potential claims; and (2) that the potential claims likely to be offered exceed the available fund." 3 Newberg on Class Actions § 17.15 at 17-37 - 17-38 (3d ed. 1992). Here, the parties have produced evidence regarding the sizeof the fund available from AcroMed to pay potential claims and the volume of claims against AcroMed. See Exh. 10 to PLC's Memo. in Support of Joint Motion. Assuming that the settling parties' showing as to AcroMed's potential liability and ability to pay is sufficient to satisfy Rule 23(b)(1)(B), they have proven only that a limited fund class can be certified as to defendant AcroMed. The settling parties have made no showing as to (1) the assets available from each of the other entities whose liability would be released by the settlement and (2) the value of potential claims against those entities.
Moreover, as to class members who have viable claims against their surgeons and hospitals, an argument that the release is needed to protect AcroMed from incurring liability in excess of the limited fund through third-party claims for contribution fails. In many jurisdictions, a non-settling defendant has no right of contribution from a party who has settled with the plaintiff. 3 Newberg on Class Actions § 12.43 at 12-99 (22 states have adopted statutes establishing "settlement bar" against contribution claims against settling defendant). Of particular relevance here, Tenn.Code Ann. § 29-11-105 provides that a release given to one tort- feasor "discharges the tort-feasor to whom it is given from all liability for contribution to any other tort-feasor."
The settling parties suggest that the release of third parties is necessary to maintain the good will of AcroMed's customers and to enable AcroMed to finance the limited fund through its business. PLC's Memo. in Support of Joint Motion at 46. Not only is it impermissible for the settling parties to force class members to trade malpractice claims against third-parties for more money from AcroMed, see supra II.B., but such valuation of the "limited fund" is speculative. Critics of using Rule 23(b)(1)(B) as a substitute for bankruptcy have noted that the bankruptcy laws are far more capable of valuating the debtors' assets than is a court in an ordinary class action proceeding. See Coffee, supra, 95 Col. L. Rev. at 1459-61. That criticism rings all the more true here, where the defendant is asking the Court to ignore the value of the assets of the physicians and institutions based on a wholly conjectural claim regarding the impact of claims against health care providers on AcroMed's future profitability. (And the value of those assets is likely to be substantial, given malpractice insurance.)
Finally, the settling parties have offered no proof that releasing health care providers increases the value of AcroMed's "limited fund." Accordingly, without evidence as to the ability to pay of each of the entities released from liability under the settlement, the settling parties have failed to prove the existenceof a limited fund. The current settlement therefore cannot be certified under Rule 23(b)(1)(B).
b. Rule 23(b)(3): The only prong of Rule 23(b) arguably applicable to certification of claims against doctors and institutions is the third prong. Under Rule 23(b)(3),
the questions of law or fact common to the members of the class predominate over any questions affecting only individual members, and  a class action is superior to other available methods for the fair and efficient adjudication of the controversy.
Thus, Rule 23(b)(3) has two components: predominance and superiority. Plaintiffs seeking class certification have the burden of showing that both components are satisfied.
Predominance: In its 1995 order denying class certification of the products liability claims asserted against AcroMed, this Court concluded that "there are simply too many individual issues with respect to causation, liability and damages to justify certification under Rule 23(b)(3)." Pretrial Order No. 8 at 24-25. As to claims against physicians and institutions, this same conclusion is inescapable. Not only are there "too many individual issues," there are only individual issues. The Dalkon Shield case relied on by the Court in Pretrial Order No. 8 in the products liability context applies with even more force here:
In products liability actions, individual issues may outnumber common issues. No single happening or accident occurs to cause similar types of harm or property damage. No one set of operative facts establishes liability. No single proximate cause applies equally to each potential class member and each defendant. Furthermore, each alleged tortfeasor's affirmative defenses . . . may depend on facts peculiar to each plaintiff's case.
Pretrial Order No. 8 at 25 (citing In re Northern District of California Dalkon Shield IUD Products Liability Litigation, 693 F.2d 847, 853 (9th Cir. 1982), cert. denied, 459 U.S. 1171 (1983)); see also Advisory Notes to 1966 Amendment to Rule 23(b)(3), 39 F.R.D. 69, 103 (1966) (cautioning against certifying class actions in mass tort cases).
State-law malpractice claims are particularly inappropriate for class treatment, much less treatment as a nationwide class. For example, here, the type of claims asserted against physicians and institutions would vary depending on the state in which the claims were brought, the conduct of the defendants, and the injury of the plaintiff. See In re Rhone-Poulenc Rorer, Inc., 51 F.3d at 1300-02 (reversing class certification in product liability case where, among other things, class action would require court to condense differing negligence law of 50 states and D.C. into a single jury instruction). Even as to similar claims, evidence, documents, witnesses, and the measure of damages would be different as to each person. As in Georgine, "the huge number of important individualized issues overwhelm any common issues." 83 F.3d at 630. See Castano v. American Tobacco Co., 84 F.3d 734, 743 (5th Cir. 1996) (reversing class certification where district court failed properly to consider effect of variations in state law on predominance); In re American Medical Systems, 75 F.3d at 1085 (where "the products are different, each plaintiff has a unique complaint, and each receives different information and assurances from his treating physician," common issues do not predominate). Accordingly, the proposed class action fails the predominance test of Rule 23(b)(3). See also Valentino v. Carter-Wallace, 97 F.3d 1227 (9th Cir. 1996) (in certifying personal injury case as class action, district court erred in failing to consider predominance requirement).
Superiority: The superiority requirement of Rule 23(b)(3) asks the court "to balance, in terms of fairness and efficiency, the merits of the class action against those of `alternative available methods' of adjudication." Georgine, 83 F.3d at 632 (quoting Katz v. Carte Blanche Corp., 496 F.2d 747, 757 (3d Cir. 1974) (en banc)).
In terms of efficiency, trying this case as a class as to all the claims encompassed in the release would present insurmountable case management difficulties. See Rule 23(b)(3)(D); Georgine, 83 F.3d at 632-33. A case involving the malpractice claims of individuals from all over the country who have different medical histories, different injuries, and different claims, and who were treated by different doctors at different hospitals, could not be tried.
In terms of fairness, the personal injury claims against physicians and institutions that the settlement seeks to release relate to events that have had significant impact on the individual plaintiffs' lives and could result in large damages awards. See Georgine, 83 F.3d at 633. Therefore, plaintiffs in malpractice actions have a substantial interest in making their own decisions on whether to settle. See Fed. R. Civ. P. 23(b)(3)(A). Inaddition, "the amounts at stake for individuals [are not] so small that separate suits would be impracticable." Advisory Notes to 1966 Amendments to Fed. R. Civ. P. 23(b)(3), 39 F.R.D. at 104. And plaintiffs will be bound to a settlement that releases malpractice claims, in all likelihood without their knowledge, since the published notice (once in Reader's Digest, once in Parade Magazine, and twice in USA Today) mentions only claims against AcroMed. Exh. 2 to Pretrial Order No. 724. Thus, class treatment is not a superior method of adjudicating the malpractice claims.
D. As A Result Of The Overbreadth Of The Release, The Settlement Violates Due Process.
The overbreadth of the release forces class members such as Objectors to forego the opportunity ever to go to court against physicians and institutions who are neither parties to the class action complaint, parties to the settlement, nor even part of the MDL proceedings. If the class were certifiable as to physicians and institutions under Rule 23(b)(3), the settlement at least would have to provide an opportunity for class members to opt out as to claims against those entities. Fed. R. Civ. P. 23(c)(2). But if, as the settling parties urge, the class members' claims against health care providers can be incorporated into a mandatory Rule23(b)(1)(B) settlement with AcroMed, that settlement would deprive class members with claims against third parties of a property right without due process of law. See Phillips Petroleum v. Shutts, 472 U.S. 797, 811-12 (1985); Martin v. Wilks, 490 U.S. 755, 762 (1989).
Likewise, due process prohibits a court from exercising personal jurisdiction over class members asserting claims for damages who lack minimum contacts with the forum state unless those class members have the opportunity to exclude themselves from the settlement. Phillips Petroleum v. Shutts, 472 U.S. at 811-12. In In re Real Estate Title & Settlement Services Antitrust Litigation, 869 F.2d 760 (3d Cir.), cert. denied, 493 U.S. 821 (1989), the Third Circuit held that the damages claims of objectors who lacked minimum contacts with the forum state could not be bound by a class action settlement certified as mandatory under Rule 23(b)(1) and (b)(2), where the objectors had not been given an opportunity to opt out. Id. at 769. Here, as in In re Real Estate, Objectors do not have minimum contacts with the Pennsylvania forum and have not been afforded the opportunity to opt out and to pursue their in personam claims for damages against physicians and institutions.
Although the Third Circuit has not addressed the due process requirements in a class action properly certified as a limited fund under Rule 23(b)(1)(B), see In re Real Estate, 869 F.2d at 768 n.8, this case does not present a true limited fund, since the assets of numerous parties whose liability is released under the agreement were not considered in assessing the size of the fund. See supra II.C.2.a. See also Brown v. Ticor Title Insurance Co., 982 F.2d386 (9th Cir. 1992) (absent plaintiffs not bound by class action for money damages certified under Rule 23(b)(1) and (b)(2) without opportunity to opt out), cert. dismissed as improvidently granted, 114 S. Ct. 1359 (1994). Therefore, the settlement violates class members' due process rights.
For the foregoing reasons, this Court should deny final approval of the proposed class action settlement.
Dated: April 7, 1997 Respectfully submitted,
Allison M. Zieve
Public Citizen Litigation Group
G. Thomas Nebel
John B. Carlson
Williams/Nebel & Associates
Counsel for Objectors
Jesse Anderson, et al.
Section 524(e) of the bankruptcy code states that discharge of a debt does not affect the liability of any other entity on such debt, which forbids bankruptcy courts from eliminating the liability of third parties, such as corporate officers, for debts for which the corporation is principally liable. See United States v. Huckabee Auto Co., 783 F.2d 1546, 1549 (11th Cir. 1986) (rejecting as "irrelevant" the argument that the reorganization hinged on the debtor being free from indirect claims); Underhill v. Royal, 769 F.2d 1426, 1432 (9th Cir. 1985); Union Carbide Corp. v. Newboles, 686 F.2d 593 (7th Cir. 1982); see also United States v. Stribling Flying Service, 734 F.2d 221, 223 (5th Cir. 1984) (denying protection to corporate guarantors and discussing cases to same effect); but see Menard-Sanford v. A.H. Robins Co., 880 F.2d 694 (4th Cir. 1988).
If in the bankruptcy context, where the policy is to protect debtors from post-bankruptcy claims, it is impermissible to release claims against related but legally-distinct third parties, surely release of third-party liability is even less justifiable here, where the "limited fund" certification is arguably an improper end- run around bankruptcy and the relevant third parties are solvent individuals wholly unrelated to the defendant corporation. See In re Asbestos Litigation, 90 F.3d 963, 996 (5th Cir. 1996) (Smith, J., dissenting); Coffee, Class Wars: The Dilemma of the Mass Tort Class Action, 95 Col. L. Rev. 1343, 1458-61 (1995).
This Court, in its 1995 order considering class certification as to the product liability claims against AcroMed, held that "a single common question is sufficient to satisfy Rule 23(a)(2)." Pretrial Order No. 8 at 13 (citing In re School Asbestos Litigation, 104 F.R.D. 422, 429 (E.D. Pa. 1984)). Since then, the Third Circuit has distinguished In re School Asbestos, which involved property damage, from a class action settlement involving personal injury claims. Georgine, 83 F.3d at 627. The Third Circuit stated: "We believe that the commonality barrier is higher in a personal injury damages class action, like this one,
that seeks to resolve all issues, including uncommon issues, of liability and damages." Id. Although in Georgine the Third Circuit declined to establish a "high" threshold out of concern for repercussions in limited fund cases, it expressly rejected for personal injury cases the "low" threshold for commonality suggested by In re School Asbestos.
Certification under Rule 23(b)(1)(B) may be improper even as to AcroMed. See Ticor Title Insurance Co. v. Brown, 114 S. Ct. 1359, 1361 (1994) (dismissing cert. as improvidently granted) (per curiam) (noting "at least a substantial possibility" that "in actions seeking monetary damages, classes can be certified only under Rule 23(b)(3), which permits opt-outs, and not under Rules 23(b)(1) and (b)(2), which do not"); see also In re Asbestos Litigation, 90 F.3d 963, 1006 (5th Cir. 1996) (Smith, J., dissenting) (fact that case falls within scope of Rule 23(b)(1)(B) "does not immunize it from due process protections, including opt- out rights"), petition for cert. filed, Mar. 3, 1997 (U.S. No. 96- 1394).
Again, the settlement agreement (at 2) defines "AcroMed" to include, among other entities, all current and former employees, Medical Advisory Panel members, consultants, agents, and shareholders, "acting in their capacities as such and/or in connection with AcroMed or AcroMed Orthopedic Bone Screws" (emphasis added). Even if it were proper to include such physician panel members, consultants, and shareholders in the definition of AcroMed where they were not acting on AcroMed's behalf, but see supra II.A.2., the physicians' assets would have to be taken into account in assessing the existence of and amount of the purported limited fund. Otherwise, the limited fund of "AcroMed," as defined, would not be based on "AcroMed's" full assets.
A mailed notice was sent to class members who had already filed suit against AcroMed. Pretrial Order No. 724 at 5-6. Although that notice defines "Settled Claims" (on page 6) in the same manner as the settlement agreement, it states in all capital letters and in bold type (on page 3) that the settlement resolves "products liability-related claims of AcroMed recipients." Thus, many class members reading the mailed notice would also likely believe that their malpractice claims against physicians and institutions were not affected by the settlement.