IN THE UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
IN RE: ORTHOPEDIC BONE SCREW PRODUCTS LIABILITY LITIGATION
ALEXANDER SAMBOLIN, Appellant
Appeal from the United States District Court
for the Eastern District of Pennsylvania
BRIEF FOR APPELLANT ALEXANDER SAMBOLIN
Public Citizen Litigation Group
1600 20th Street, N.W.
Washington, D.C. 20009
Attorneys for Appellant
March 8, 2000
TABLE OF CONTENTS
STATEMENT OF SUBJECT MATTER AND APPELLATE JURISDICTION
STATEMENT OF ISSUE
STATEMENT OF THE CASE
I. The Settlement, the Notice to the Class, and the District Court's Approval of the Settlement.
A. The Settlement.
B. The Class Action Notice.
C. Proceedings In The District Court and Settlement Approval.
II. The Facts Concerning Mr. Sambolin, the Claims Process, and the Rejection of Mr. Sambolin's Claim.
A. Mr. Sambolin's Injuries.
B. Mr. Sambolin's Efforts To Obtain Redress.
C. The Responses To Mr. Sambolin's Claim By The Claims Administrator And The District Court.
STATEMENT OF RELATED CASES AND PROCEEDINGS
STANDARD OF REVIEW
SUMMARY OF ARGUMENT
I. THE DISTRICT COURT'S DECISION VIOLATES MR. SAMBOLIN'S RIGHT TO DUE PROCESS, BECAUSE HE FILED ALL INFORMATION NECESSARY TO THE EVALUATION OF HIS CLAIM LONG BEFORE THE CLAIMS PROCESS HAD GOTTEN UNDERWAY AND EARLIER THAN MANY OTHER CLAIMANTS WHOSE CLAIMS HAVE BEEN DEEMED TIMELY.
A. The Violation of Procedural Due Process.
B. The Violation of Equal Protection.
II. NEITHER THE FIRST-CLASS MAIL NOTICE NOR THE PUBLICATION NOTICE COMPORTED WITH RULE 23 OR DUE PROCESS, AND THEREFORE THE DISTRICT COURT'S IMPOSITION OF THE MAY 15, 1997 REGISTRATION DEADLINE VIOLATED MR. SAMBOLIN'S RIGHTS.
A. The First-Class Mail Notice Was Inadequate.
1. Actual Notice Was Constitutionally Required.
2. Even If Constructive Notice Is Appropriate In Some Circumstances, The First-Class Notice Program Here Was Unlawful.
B. The Publication Notice Was Also Inadequate.
STATEMENT OF SUBJECT MATTER AND APPELLATE JURISDICTION
The district court purported to exercise subject matter jurisdiction over the class action complaint in this case on the basis of diversity of citizenship under 28 U.S.C. 1332(a). Complaint in Fanning v. AcroMed Corp., No. 97-381 (E.D. Pa.), ¶ 1. The complaint was filed to effectuate a non-opt-out mass-tort settlement involving a defective medical device manufactured by defendant AcroMed Corporation.
This appeal seeks review of a November 29, 1999 post-judgment decision of the district court. Joint Appendix ("JA") 198 (¶ 2). That decision denied appellant Alexander Sambolin's motion for relief from an earlier district court order setting a deadline for class members to register with the settlement's Claims Administrator. The district court's ruling denied Mr. Sambolin any relief under the class action settlement approved by the district court in October 1997 (JA 66), and is a final decision on whether Mr. Sambolin's Rule 23 and due process rights were violated by holding him to the district court's registration deadline. Mr. Sambolin's notice of appeal was filed on December 27, 1991. JA 217. This Court has jurisdiction under 28 U.S.C. 1291.
STATEMENT OF THE ISSUE
In the implementation phase of this non-opt-out purported "limited fund" mass-tort class action settlement, did the district court's decision to reject as untimely a class member's claim for compensation violate Federal Rule of Civil Procedure 23 and deprive him of due process of law where:
(1) the class member did not have notice of the class action settlement at the time of the district court's cut-off date;
(2) no attempt was made to provide personal notice of the settlement to class members unless they had already filed individual suits against the defendant or their identity and whereabouts were otherwise already known to plaintiffs' class counsel;
(3) the only publication notice consisted of several small advertisements in national publications and a one-time Spanish-language advertisement on page 50 of a San Juan, Puerto Rico newspaper, none of which was seen by the class member in his home town of Luquillo, Puerto Rico; and
(4) the class member's purported failure to register by the registration deadline did not result in any delay in the implementation of the settlement, because he filed all materials necessary to evaluate his claim before the deadline for those materials and long before the Claims Administrator began assessing claims.
STATEMENT OF THE CASE
Appellant Alexander Sambolin never received the court-approved notice of the class action and its settlement. As a result, Mr. Sambolin, like hundreds of similarly-situated class members, had no inkling that he was required to register with the settlement's Claims Administrator by May 15, 1997 or lose all rights to compensation for injuries suffered as a result of the defendant's defective medical device. Mr. Sambolin lacked information about the settlement because the notice program approved by the district court was woefully inadequate and violated basic due process requirements and Federal Rule of Civil Procedure 23. In addition, the district court's decision irrationally denied Mr. Sambolin the right to have his claim heard on the merits, although that same right was granted to other similarly-situated class members, violating his right to equal protection of the laws under the Fifth Amendment's Due Process Clause.
Part I below describes the underlying litigation and the class action settlement, including its notice component. Part II describes Mr. Sambolin's injuries, his efforts to obtain compensation, and the decision below.
I.The Settlement, the Notice to the Class, and the District Court's Approval of the Settlement.
Since 1994, the district court has presided over MDL 1014, which involves personal-injury suits against various bone screw manufacturers, including defendant-appellee AcroMed Corporation. Because AcroMed and other manufacturers marketed these bones screws for implantation in the spine, or pedicle, the product is sometimes referred to as a "pedicle screw." In late 1996, AcroMed and the Plaintiffs' Legal Committee ("PLC") agreed to a classwide settlement. Thereafter, a class action complaint was filed solely for the purpose of providing a procedural mechanism for accomplishing the settlement. See Complaint in Fanning v. AcroMed Corporation, No. 97-381 (E.D. Pa.). The class included all people who had been implanted with AcroMed bone screw through December 31, 1996, but not those implanted afterwards. See In re Orthopedic Bone Screw Prod. Liab. Litig. ("Bone Screw"), 176 F.R.D. 158, 170-71 (E.D. Pa. 1997), JA 79-80.
The settlement set aside $100 million, plus an undetermined amount in disputed AcroMed insurance proceeds, id. at 166 & n.8, JA 68A & n.8, to pay for class members' personal-injury claims under a program to be run by a claims administrator. Id. at 176, JA 92. Class members wanting to share in the settlement proceeds were told to register with the claims administrator by May 1, 1997, JA 30 (Pretrial Order No. 724, ¶ 12), a deadline that was later extended to May 15, 1997 because of difficulties in the handling of registration forms in the PLC's office. JA 147-51. Moreover, the class members were not permitted to opt out on the theory that AcroMed's assets constituted a "limited fund." Bone Screw, 176 F.R.D. at 180-81, JA 104-06. Although AcroMed did not have the full $100 million in cash, it promised to fund most of the settlement by unsecured borrowing based on "cash flow," i.e., based on its future business prospects once the litigation had been put behind it. Id. at 168-70, JA 73-79.
As noted, under the settlement, AcroMed's liability was capped at $100 million. Thus, an early registration deadline did not serve any purpose, and certainly not the purpose such a deadline would serve in an ordinary, non-"limited fund" settlement, where the defendant's liability is limited only by the number of successful claimants. Nor was this an opt-out settlement under Rule 23(b)(3), where the registration deadline coincided with an opt-out date by which class members signalled to the defendant whether they would be seeking individual recoveries from the defendant over and above the class settlement. Rather, because AcroMed's liability was set at $100 million both inside and outside the settlement, AcroMed had no interest in an early registration deadline nor in limiting the number of registrants in any way.
The settlement also purported to release, on a non-opt-out basis, a wide range of claims against all doctors nationwide who had implanted the class members' AcroMed bone screws and all health care facilities where the surgeries had taken place. Id. at 166, JA 68B. These health care providers were not defendants in the class action, did not contribute financially to the settlement, and did not claim to be "limited funds."
B.The Class Action Notice.
The district court preliminarily approved the settlement and adopted a notice plan that was carried out in January 1997. JA 23-31 (Pretrial Order No. 724, Preliminary Approval Order, Jan. 16, 1997). The notice was directed principally at people who had already claimed injury and had filed suit against AcroMed. Thus, a full notice package was sent to all settlement class members known to the PLC and all counsel of record for plaintiffs in MDL 1014. JA 37-48 ("Official Court Notice"). That notice package included the registration form that had to be returned to the Claims Administrator's office by May 1, 1997. JA 48. The PLC took this very limited approach to personal notice because it believed -- wrongly, as it turned out -- that "it is reasonable to expect that the vast majority of individuals who have compensable claims against AcroMed already initiated litigation against it." PLC's Mem. in Support of Jt. Motion For Approval of the Proposed Settlement Agreement, at 33 (Mar. 31, 1997) (Docket Entry No. 5372).
Thus, no effort was made to locate the names and addresses of individual class members and send them the full notice package. Significantly, no effort was made to notify surgeons who performed operations on class members, or to notify hospitals to which ArcoMed had sold its bone screws, so as to locate the names and addresses of class members. Nor were there any advertisements in general medical journals, or those concentrating on surgery, orthopedics, or orthopedic surgery, urging the physicians who read those journals to provide their patients who had been implanted with AcroMed bone screws with information about the settlement. See Bone Screw, 176 F.R.D. at 178, JA 100.
The only publication notice of the settlement consisted of a short-form advertisement appearing twice in the national edition of USA Today, once in TV Guide, once in Parade Magazine (a magazine inserted in many Sunday newspapers), and once on page 50 of a Spanish-language newspaper published in San Juan, Puerto Rico. Id., JA 100. These ads were published between late January and late February 1997. JA 33 (Affidavit of Mailing and Publication of Class Action Notice of Settlement). This notice provided very basic information about the class action, including the May 1, 1997, registration cut-off date, but it did not include a tear-off registration form often used in other class actions, nor did it even state that a registration form ought to be requested. Rather, it told class members that they "may request" a Settlement Notice and provided the PLC's address if they wanted to request one through the mail. See JA 55. Other forms of publication notice routinely used in other mass tort and consumer class actions were not pursued. Thus, there was no notice provided by TV or radio ads, no public service announcements, no notice via the internet (for instance, through AOL, Netscape, or some other major service provider), and no notices in local or regional newspapers in Puerto Rico or anywhere else for that matter.
Providing comprehensive notice to the class members would have been important for at least two reasons. First, notice would have given affected people an opportunity to obtain materials relating to the settlement and to file objections if they thought the settlement was unfair or unlawful. Second, and of critical relevance to this appeal, even if a class member did not want to object, registration with the Claims Administrator was a prerequisite to obtaining cash settlement benefits. Therefore, it was vital that class members receive complete notice of the settlement and its procedures well prior to the May 15, 1997 registration deadline.
C.Proceedings In The District Court and Settlement Approval.
The district court held a hearing over four days in April, June, and July 1997. Bone Screw, 176 F.R.D. at 167, JA 71. The court listened to evidence concerning the allegedly limited nature of AcroMed's assets and the terms of the settlement, and it heard legal argument in favor of and in opposition to the settlement.
On October 17, 1997, the district court approved the settlement as proposed by the parties. As part of its approval, the court held that the notice to the class met the requirements of Rule 23 and due process. Id. at 178-79, JA 100-01. It also certified the class on a non-opt-out basis under Federal Rule of Civil Procedure 23(b)(1)(B), on the ground that AcroMed was a "limited fund" unable to satisfy personal-injury claims asserted against it. Id. at 180, JA 104.
The district court's decision approving the "limited fund" settlement of $100 million was based in large part on the testimony and report of the PLC's expert, Harvey Rosen. Dr. Rosen valued the company at $104 million, which "reflects 'what a willing buyer would pay a willing seller for this company (the cash flows generated) without the financial constraints of the litigation costs and the uncertainty of litigation outcomes.'" Id. at 168 (relying on Rosen's testimony and quoting his expert report), JA 74. The district court specifically found that AcroMed's value was $104 million, absent the litigation (i.e., assuming the settlement were approved). Id., JA 74. Thus, to settle the class action, AcroMed was paying what the Court believed was virtually AcroMed's entire value. Id. at 170, JA 79.(1)
The court issued a judgment accompanying its opinion approving the settlement. Id. at 186-90, JA 123-32. That judgment contained an anti-suit injunction barring bone-screw related litigation against AcroMed and other "Released Parties," including the doctors who implanted AcroMed's bone screws and the hospitals at which the implant surgeries took place. Id. at 188, JA 127. This anti-suit injunction is important because, assuming that it is valid, it would bar Mr. Sambolin from suing AcroMed, his doctors, and the hospital at which the surgery was performed. The combined effect of the district court's ruling barring Mr. Sambolin from filing a claim in the class action settlement and the anti-suit injunction is to leave Mr. Sambolin without any remedy.
The district court's October 17, 1997 judgment did not become final until many months after it was entered. Certain class members appealed the district court's settlement approval to this Court. That appeal was voluntarily dismissed on February 12, 1998. See Order in No. 97-1840 (3d Cir. Feb. 12, 1998). The Settlement Agreement itself made clear that, with the exception of certain notice and administrative costs, no funds would be disbursed to evaluate or pay class members' injury claims before the settlement was "final" and that the settlement would not be "final" until all appeals were exhausted. See AcroMed Corporation Settlement Agreement, at 4, 15-16 (Docket Entry No. 5105, filed Jan. 16, 1997). Significantly, therefore, the settlement did not become effective until February 12, 1998 at the earliest, which, as discussed in more detail below, was approximately two months after Mr. Sambolin filed his Registration Form with the settlement's Claims Administrator.(2)
II.The Facts Concerning Mr. Sambolin, the Claims Process, and the Rejection of Mr. Sambolin's Claim.
A.Mr. Sambolin's Injuries.
Appellant Alexander Sambolin lives in the countryside not far from Luquillo, JA 221, 245, 249, a seaside village on the Northeast coast of Puerto Rico. Prior to his April 1995 back surgery, he "was an active individual," riding his bike almost daily "5 miles to and from town." He scuba dived, motor boated, and sailed "on a regular basis." JA 244. Nonetheless, Mr. Sambolin suffered back pain when he was required to sit or walk for long periods of time. After a dangerous incident, in which his back problems almost caused him to fall off his roof, Mr. Sambolin decided to have surgery. JA 244. On April 3, 1995, he was implanted with AcroMed pedicle screws at the University of Miami/Jackson Memorial Hospital ("University of Miami Hospital") in Miami, Florida. JA 221, 235, 244.
After the surgery, Mr. Sambolin followed doctor's orders by walking a mile-and-a-half a day. JA 245. For about six weeks, things went well. In Mr. Sambolin's words:
[T]hen it HIT me. The pain was so intense it didn't let me reach for a towel off the towel rack. I became an invalid and almost a total recluse. Because of the [later diagnosed] broken screw, I suffered pain that made me cry out and it lasted for more than a year.
Mr. Sambolin consulted physicians in Puerto Rico, who diagnosed the source of the severe pain: One of the bone screws had broken and another was loose. JA 238, 239, 236. Mr. Sambolin returned to the University of Miami, which confirmed the diagnosis and suggested that re-operation to remove the broken hardware was an option. JA 235-37. He decided to undergo the second operation. Again, in Mr. Sambolin's words:
I improved some, but because of the time I had to spend indoors [I could] not return to any semblance of my active life, and because I was not willing to continue living under those conditions, I accepted another operation. Because I felt I could die this time around, I put my affairs in order. The second operation was on 6/10/96.
After this one the nerves that control the urge to urinate were affected. I suffered at least 4 separate infections of my bladder as a result of having to "tube" myself to release the urine. I did this for 6 months after the operation. I still take medicacion [sic] (Hyprin) to help me urinate. The defective screw that broke approx. 6 weeks after the first operation put me through hell.
B.Mr. Sambolin's Efforts To Obtain Redress.
At the time of the class action settlement, Mr. Sambolin had not filed suit against AcroMed nor had he had any contact with the PLC. Therefore, he was not sent an individual notice packet informing him of the settlement and its May 1, 1997 registration deadline and providing him a Registration Form. JA 37-48 (official court notice). Nor did Mr. Sambolin see the one-time Spanish-language publication notice in Puerto Rico. JA 58 (small advertisement on page 50 of San Juan paper). In other words, Mr. Sambolin had no idea that his rights against AcroMed were being adjudicated in a purported "limited fund" settlement in Philadelphia.
Sometime in 1997, Mr. Sambolin sought advice from attorneys in Puerto Rico, who told him that they could not help him. JA 249 (Response to Order to Show Cause Order Regarding Untimely Registrants). They too apparently knew nothing about the class action. Mr. Sambolin then contacted John C. Ostrow, a Miami lawyer, who investigated the matter, learned of the class action and its procedures, and informed Mr. Sambolin. As soon as possible thereafter, on December 16, 1997, Mr. Sambolin signed the settlement's standard Registration Form and filed it with the Claims Administrator. JA 221 (Registration Form); see JA 249 ("It was not until immediately before my claim was filed that I learned of the class action"). As noted earlier, Mr. Sambolin filed the Registration Form at least two months before the settlement became final.
The Registration Form provided the settlement's Claims Administrator with very basic identifying information, such as Mr. Sambolin's name, address, social security number, the name of his lawyer, and the dates of his surgeries. The Registration Form was not intended to elicit information about any class member's injuries or provide any information in determining whether, or how much, a claimant will be compensated from the AcroMed settlement fund. To the contrary, the form required the claimant to state that "I understand that this is a Registration Form only and that I must complete a Claim Form and provide authorizations and all information required by the Claims Administrator to become an Eligible Claimant and to have a Claim considered for compensation." JA 221.
To our knowledge, during all of 1998 not a single claim was even considered, let alone paid, by the Claims Administrator. Indeed, it was not until January 6, 1999, more than a year after Mr. Sambolin filed his Registration Form, that the district court even approved the settlement's standard-form Release and Indemnity Agreement and Proof of Claim ("Proof of Claim"). JA 146A (Pretrial Order No. 1655). Shortly thereafter, on February 10, 1999, Mr. Sambolin filed his Proof of Claim form. JA 222-42. On that form, the claimant is asked to describe his or her bone-screw-related injuries in some detail and attach relevant medical records, see JA 231-32, which the Claims Administrator in turn uses to assess the strength of each claimant's claim. The Proof of Claim form filed by Mr. Sambolin indicated that it should be postmarked by April 15, 1999. JA 231. However, the Court later extended this due date to May 15, 1999, because of "delays in procuring medical records for a variety of reasons." JA 175 (Pretrial Order No. 1754, Apr. 6, 1999); see also JA 177 (letter from Claims Administrator advising claimants of extension). Later, in Pretrial Order No. 1802 (May 27, 1999), the Court again extended the deadline for filing a completed Proof of Claim to June 15, 1999, because up to "thirty to forty percent" of the claim forms "failed to document one or more items important to the evaluation of [the] claims." JA 191. By contrast, by submitting his Proof of Claim in February 1999, Mr. Sambolin provided the Claims Administrator with the substantive basis for his claim well before a very large number of other registrants had done so.
Mr. Sambolin's Proof of Claim explained, among other things, that he suffers severe neurological injuries from AcroMed's bone screws and that he is unable to walk more than two blocks on a long-term basis. He attached supporting medical evidence from his physicians in Puerto Rico and Miami. JA 222-46.(3)
C.The Responses To Mr. Sambolin's Claim By The Claims Administrator And The District Court.
At the time Mr. Sambolin filed his Proof of Claim, he was not informed that claimants who had registered after May 15, 1997 would be denied all compensation. To the contrary, the Claims Administrator stated that late registrants would still be eligible for compensation, but that any amount that they received would be reduced by 20%. See JA 143 (Proposed Plan for Settlement Administration, Exhibit A to Pretrial Order No. 1575, at 7, Sept. 16, 1998). Therefore, two days after filing his Proof of Claim, on February 12, 1999, Mr. Sambolin's counsel sent a letter to the Claims Administrator arguing against the 20% reduction because "[i]t certainly would not be fair to penalize [Mr. Sambolin] for late filing when he did not get notice." JA 243. Attached to counsel's letter was a letter from Mr. Sambolin explaining his lack of notice in more detail and asking that the 20% penalty not be imposed. JA 244-46.
The district court took a far harsher position than had the Claims Administrator regarding alleged tardiness. On February 19, 1999, the district court signed Pretrial Order No. 1722, which held "that class members who did 'not timely register were not entitled to share in the AcroMed settlement fund.'" JA 148 (quoting Pretrial Order No. 724). Less than two months later, on April 6, 1999, the Court reaffirmed that holding in Pretrial Order No. 1757, stating that "any claims received after May 15, 1997 will be deemed untimely for purposes of the administration of the AcroMed Settlement, rendering any such claim ineligible under the AcroMed Settlement." JA 152. The Court attached a list of hundreds of late registrants, including Mr. Sambolin, that had been prepared by the Claims Administrator. JA 155-74. The Court noted again that "[a]ny person whose claim is determined untimely may not participate in the settlement," and gave the individuals on the list the opportunity to show cause why their registrations were in fact timely. JA 152-53.(4)
Mr. Sambolin responded to the show cause order on April 17, 1999. In a one-page statement, he acknowledged that he had not met the deadline and explained again that he lives in "in the country outside the small town in Puerto Rico named Luguillo [sic]," and that he knew nothing of the class action until just before he filed his Registration Form. JA 249. On July 28, 1999, the Claims Administrator sent a form letter to Mr. Sambolin's attorney addressed to "Dear Claimant and/or Counsel," stating:
We have processed the claim you submitted in the above-reference litigation. We have determined that your
Claim Form is rejected for the following reason(s): Your registration form was not received by May 15, 1997. As per Pre-Trial Order No. 1722, any registrations received after this date are not eligible for inclusion in this litigation.
JA 247. The Claims Administrator made no mention of his prior 20% reduction policy.
Unsatisfied with this complete denial of his right to compensation, on September 13, 1999, Mr. Sambolin filed a motion asking the district court to relieve him of the time-bar. JA 193 (Motion for Relief from Pretrial Order No. 1722). He explained again that he did not have notice of the settlement and that imposition of the May 15, 1997 deadline violated his due process rights. JA 193-97. For legal authority, Mr. Sambolin relied, among other things, on the Supreme Court's recent decision in Ortiz v. Fibreboard Corp., 119 S. Ct. 2295 (1999). In rejecting a purported "limited fund" Rule 23(b)(1)(B) mass-tort settlement similar to the AcroMed settlement approved by the district court here, Ortiz forcefully reaffirmed that absent class members' rights may only be extinguished if they "receive notice plus an opportunity to be heard and participate in the litigation...." Id. at 2315 (quoting Phillips Petroleum Co. v. Shutts, 472 U.S. 797, 812 (1985). See JA 195. Mr. Sambolin also explained that there were many steps that the settling parties could have taken to effect personal notice on him, including contacting the University of Miami Hospital, which had purchased AcroMed's bone screws and which easily could have traced Mr. Sambolin to his current address since both of his surgeries had been performed at that hospital. JA 196.
The district court considered Mr. Sambolin's motion at a November 22, 1999 status conference. The court noted that it had "ma[d]e sure that there was a widespread and comprehensive notice of this settlement ... all over the country," and that "[t]he Court has just essentially taken the position that those claims are just late, we can't do anything about it. They are just late, they can't be included." Nov. 22, 1999 Tr. at 35-36. The district court did not refer to the Claims Administrator's supposed 20% reduction policy, nor did it explain why it was strictly enforcing the May 15, 1997 registration deadline, even though it had twice extended the deadline for filing Proofs of Claim, most recently through June 15, 1999. Shortly after the status conference, the court formally denied Mr. Sambolin's motion in a one-line order. JA 198 (Pretrial Order No. 1870, item #2). This appeal followed.
STATEMENT OF RELATED CASES AND PROCEEDINGS
To the best of appellant's knowledge, there is one case pending in this Court that may present issues related to those raised in this appeal. See Gwendolyn Coleman v. Robert E. Welsh, No. 99-2014.
STANDARD OF REVIEW
The question in this case -- whether the district court's determination that appellant's claim was untimely violates Federal Rule of Civil Procedure 23 and due process -- presents a question of law subject to plenary review. See Greenfield v. Village Indus., Inc., 483 F.3d 824 (3d Cir. 1973).
SUMMARY OF ARGUMENT
I.A. The district court's ruling violates due process with respect to claimants, like Mr. Sambolin, who did not file their Registration Forms by May 15, 1997, but timely filed their Proof of Claim Forms. For those claimants, it is irrational to deny them a hearing on the merits, because all information necessary to the evaluation of their claims was on file with the settlement's Claims Administrator well before any claims were to be considered, much less paid. The district court's decision therefore denied Mr. Sambolin's right to a "meaningful hearing" under the Due Process Clause. See, e.g., Logan v. Zimmerman Brush Co., 455 U.S. 422 (1982). Moreover, because (i) the district court's time-bar would abrogate a very significant property interest (Mr. Sambolin's cause of action against AcroMed), (ii) a hearing on the merits would greatly reduce the risk of an erroneous deprivation of that interest, and (iii) providing Mr. Sambolin a hearing would be costless to both AcroMed and the court system, the decision below also establishes a due process violation under the Mathews v. Eldridge, 424 U.S. 319 (1976), balancing test.
B. The district court's decision also violates the Due Process Clause's equal protection component. Because it is the Proof of Claim Form, not the Registration Form, that allows the Claims Administrator to assess class members' claims on their merits, the decision below treats as timely class members' claims that were filed well after Mr. Sambolin's claim. That result is utterly irrational and therefore violates Mr. Sambolin's right to equal protection.
II.A. The broader question in this case is whether the notice program violated Rule 23 and due process, such that the settlement and its registration deadline are not binding on class members who, like Mr. Sambolin, did not receive notice. Under recent Supreme Court decisions such as Ortiz v. Fibreboard Corp., 119 S. Ct. 2295, 2315 (1999), and Phillips Petroleum Co. v. Shutts, 472 U.S. 797, 810-13 (1985), and this Court's decision in Carlough v. Amchem Prods., Inc., 10 F.3d 189, 200 (3d Cir. 1993), Mr. Sambolin was entitled, under the Due Process Clause, to actual notice before being bound by the settlement or its registration deadline. Because Mr. Sambolin did not have actual notice until well after the registration deadline of May 15, 1997, and just before he filed the Registration Form, Mr. Sambolin's claim must be considered timely.
In any event, the settling parties' attempt to locate class members and notify them by first-class mail was non-existent. The only people who were sent notice by first-class mail were those who had already sued AcroMed or were already known to the lead plaintiffs' counsel in MDL 1014. No other effort was made to locate class members and notify them individually through the defendants' records, through hospitals where AcroMed bone screw surgeries took place, through medical professionals, or otherwise. This complete abdication of responsibility violated the due process and Rule 23 requirement that the notice be the "best practicable" under the circumstances. See, e.g., Mullane v. Central Hanover Bank and Trust Co., 339 U.S. 306 (1950); Hansberry v. Lee, 311 U.S. 32 (1940); Eisen v. Carlisle & Jacquelin, 417 U.S. 156 (1974); Greenfield v. Village Indus., Inc., 483 F.3d 824 (3d Cir. 1973).
B. The publication notice in this case also did not pass muster under Rule 23 or due process. The only publication notice was a small ad in several national publications and on page 50 of a Spanish-language paper in San Juan, Puerto Rico. As would be expected, Mr. Sambolin did not see the latter notice and, therefore, did not have notice of the settlement or its May 15, 1997 registration deadline until informed about them by his lawyer later that year. The settling parties did not undertake the kinds of publication notice used in similar mass-tort class actions -- for instance, publication in regional and local newspapers, TV and radio ads, internet notice, or even free public service announcements in the print and electronic media. All of these techniques are eminently "practicable," and thus the settling parties failure to use them violated Mr. Sambolin's rights under Rule 23 and the Due Process Clause.
I.THE DISTRICT COURT'S DECISION VIOLATES MR. SAMBOLIN'S RIGHT TO DUE PROCESS, BECAUSE HE FILED ALL INFORMATION NECESSARY TO THE EVALUATION OF HIS CLAIM LONG BEFORE THE CLAIMS PROCESS HAD GOTTEN UNDERWAY AND EARLIER THAN MANY OTHER CLAIMANTS WHOSE CLAIMS HAVE BEEN DEEMED TIMELY.
A.The Violation of Procedural Due Process.
Part II below shows that both components of the notice program in this class action violated Rule 23 and due process. First, the personal, first-class mail notice was constitutionally defective because there was no effort to identify and effect notice on class members other than those already known to the parties. Second, the publication notice was not reasonably calculated to reach class members who were not notified by first-class mail. If this Court agrees, the proper remedy would be renotification of the class. However, this Court need not make such a broad ruling to resolve Mr. Sambolin's appeal and the problem faced by other similarly-situated class members. Rather, the Court can avoid consideration of such broad relief by holding that it violates due process to impose a time bar on class members who, like Mr. Sambolin, timely filed their Proofs of Claim, even though they filed the one-page Registration Form after May 15, 1997.
A brief recapitulation of the salient facts illustrates this narrower due process violation. The settlement notice approved by the district court imposed a May 1, 1997 registration deadline, JA 37, which was later extended to May 15, 1997. JA 149. This date passed even before the fairness hearing concluded in July 1997 and a full five months prior to the district court's approval of the settlement. It is unclear why the district court or the parties wanted to impose such an early deadline. The settlement proposed by the parties and approved by the district court required the defendant to pay a flat $100 million regardless of the number of claimants. Thus, there was no need to obtain an early "count" of registrants.
In any event, Mr. Sambolin, like thousands of other class members who were not already known to the parties, did not receive formal notice of the settlement. Instead, he learned of the settlement's existence only when he was prompted by his bone-screw-related injuries to seek out a lawyer who told him of the settlement, and he registered immediately thereafter. JA 249; see also JA 189 (affidavit of counsel for class member attesting to immediate registration once client learned of settlement).
At this point, in late 1997, the claims process was still far off in the future. As noted earlier, it was not until more than a year later, on January 6, 1999, that the district court even approved the Proof of Claim form. See JA 146B (Pretrial Order No. 1655). The Claim Form specifically stated that it had to be postmarked by April 15, 1999. JA 231. Mr. Sambolin filed his Proof of Claim on or about February 10, 1999, well before that deadline. JA 228. Later, the district court twice extended the filing deadline, first to May 15, 1999, JA 176, and then to and June 15, 1999, noting that 30-40% of the claims were incomplete. JA 191.
With these facts in mind, we turn to the relevant due process principles. The district court's order challenged in this appeal would, if upheld, forever extinguish Mr. Sambolin's causes of action against AcroMed. Those causes of action are a form of "property" protected against arbitrary deprivation by the Due Process Clause of the Fifth Amendment. Logan v. Zimmerman Brush Co., 455 U.S. 422, 428 (1982). Before a person's property interest is extinguished, that person must be provided an opportunity to be heard at a meaningful time and place and in a meaningful manner. See, e.g., Barry v. Barchi, 443 U.S. 55, 66 (1979); Goldberg v. Kelly, 397 U.S. 254 (1970); Armstrong v. Manzo, 380 U.S. 545, 552 (1965). Here, Mr. Sambolin's opportunity to be heard was anything but meaningful; it was non-existent. See Logan, 455 U.S. at 433-37 (administrative time bar imposed on plaintiff's cause of action held to violate due process where deadline ran for reason's beyond plaintiff's control). Rather than hearing his claim on the merits, the Claims Administrator, and later the district court, simply denied the claim as untimely. Although time deadlines often serve rational purposes that comport with due process, id. at 437, the deadline here served no such purpose.
The time deadline set by the district court passed before the court's approval of the settlement, and thus before anyone possibly could have obtained any money from the settlement fund. Moreover, Mr. Sambolin filed his Registration Form months before the settlement became final, which occurred no earlier than February 1998. Under these circumstances, it would be utterly irrational to hold Mr. Sambolin to the earlier May 1997 registration deadline.(5)
Moreover, it is the Proof of Claim, not the Registration Form, that is the key document for purposes of settlement administration. It is the Proof of Claim form on which the claimants describe their medical conditions and submit their medical records, making it possible for the Claims Administrator to begin determining who should be paid and how much. As noted earlier, Mr. Sambolin filed his Proof of Claim shortly after he received it and more than two months prior to the original Proof of Claim deadline. The deadline was twice extended, apparently because many claimants were lax in filing Proofs of Claim and providing backup information to the Claims Administrator. Thus, some of the delay that has occurred in the claims process may be the fault of certain class members, but they are surely not Mr. Sambolin's fault. In sum, because there is no rational basis for rejecting Mr. Sambolin's claim on the ground of untimeliness, the decision below violated Mr. Sambolin's right to a meaningful hearing under the Due Process Clause.
Moreover, Mr. Sambolin also prevails here under Mathews v. Eldridge, 424 U.S. 319 (1976), a strain of the Supreme Court's due process jurisprudence that is often invoked in cases like this one involving alleged violations of procedural due process. In general, under Mathews, in determining what process is due before a person may be deprived of a constitutionally-protected property right, the court balances three factors: (i) the private interest that would be affected, (ii) "the risk of an erroneous deprivation of such interest through the procedures used, and the probable value, if any, of additional or substitute safeguards," and (iii) "the Government's interest, including the function involved and the fiscal and administrative burdens that the additional or substitute procedural requirement would entail." Id. at 335; see also Sullivan v. Barnett, 139 F.3d 158, 174-76 (3d Cir. 1998). In addition, because the underlying dispute here is between two private parties (Mr. Sambolin and AcroMed), not between a private party and the government, this Court should also focus on the costs that would be imposed on AcroMed if additional procedures are provided. See Connecticut v. Doehr, 501 U.S. 1, 11 (1991).
A review of the Mathews factors dramatically underscores the due process violation. First, the private interest at stake is enormous. As the description of Mr. Sambolin's injuries demonstrates, see supra at 12-13, Mr. Sambolin's product liability claims against AcroMed may be worth hundreds of thousands of dollars. See also JA 76-77 (average jury award in AcroMed bone screw cases was $561,500, and average settlement was approximately $131,000). In any event, the settlement's $100 million fund is itself a private interest that belongs to the settlement class members. In addition, because the settlement release also extinguishes Mr. Sambolin's claims against his doctors and hospital, see Bone Screw, 176 F.R.D. at 166, JA 68B, the private interest at stake goes beyond Mr. Sambolin's causes of action against AcroMed.
Second, the risk of an erroneous deprivation, i.e., the chance that the district court's time bar will result in the denial of an otherwise meritorious claim, is very high. The time bar imposed is absolute. Thus, this case is far more compelling than due process cases such as Mathews and Goldberg v. Kelly, 397 U.S. 254, where the constitutional question was when, not whether, the claimant would have a hearing on the merits. Here, there is no doubt that if the district court's decision is upheld, Mr. Sambolin will never see a penny from the AcroMed settlement fund. Moreover, the probable value of additional procedures, i.e. allowing Mr. Sambolin and similarly-situated claimants to have their claims heard on the merits, is very high. That is so because the full $100 million will go to claimants and there is no reason to believe that the claims of post-May 15, 1999 claimants are any less meritorious than those of claimants who registered by May 15, 1997.
Third, and finally, allowing Mr. Sambolin to be heard on the merits of his claim imposes no burden on the court system or on AcroMed. We doubt that the burden on the court system is a factor that can properly be weighed in the Mathews balance -- after all, it is the court's job to adjudicate fully and fairly the claims of all those who come before it. In any event, under this mass-tort ADR settlement, the district court generally has no role in resolving individual claims and thus its resources will not be affected if claimants like Mr. Sambolin are allowed to participate. If anything, requiring the Claims Administrator to review the merits of the claims of post-May 1, 1997 registrants may well preserve the court's resources because due process challenges such as Mr. Sambolin's will be avoided. As for AcroMed, it has no interest in denying any additional procedures, since its financial contribution under the settlement is already set at $100 million and it has no role in administering the claims process.
In sum, the Mathews v. Eldridge balance weighs heavily in favor of Mr. Sambolin, and the decision below should be reversed on that basis as well.(6)
B.The Violation of Equal Protection.
The facts here also demonstrate a violation of Mr. Sambolin's right to equal protection under the Fifth Amendment's Due Process Clause. "Equal protection analysis in the Fifth Amendment area is the same as that under the [Equal Protection Clause of the] Fourteenth Amendment." Buckley v. Valeo, 424 U.S. 1, 93 (1976). "The Equal Protection Clause ... commands that no State shall `deny any person within its jurisdiction equal protection of the laws,' which is essentially a direction that all persons similarly situated should be treated alike." City of Cleburne, Texas v. Cleburne Living Center, 473 U.S. 432, 439 (1985) (quoting Plyler v. Doe, 457 U.S. 202, 216 (1982)). Assuming arguendo that Mr. Sambolin's equal protection argument is subject to minimum, rational-basis scrutiny, equal protection has been violated here because, as shown below, the disparate treatment accorded Mr. Sambolin by the district court is irrational.
Mr. Sambolin's equal protection right has been violated because he is similarly-situated to claimants who registered prior to May 15, 1997, and who have since timely filed Proofs of Claim, but whose claims, unlike his, will be fairly considered on their merits. The following hypothetical illustrates our point. Assume that Sally Smith, a person known to the PLC, received a first-class mail notice in late January 1997. Ms. Smith registered shortly thereafter, and filed a Proof of Claim on February 12, 1999, the same day that Mr. Sambolin filed his Proof of Claim. Assume further that Ms. Smith has the same bone-screw-related injuries as Mr. Sambolin and has submitted medical records that are in all relevant respects identical to Mr. Sambolin's (i.e., both claimants are entitled to the same compensation "score" under the Claims Administrator's compensation criteria). For all purposes relevant to consideration of their claims, Mr. Sambolin and Mr. Smith are the same. Their medical information was made available to the Claims Administrator at the same time. Their claims are equally difficult (or easy) for the Claims Administrator to assess. And yet, if the district court's decision below stands, Ms. Smith has a good chance of obtaining relief (at least she has some chance), but Mr. Sambolin has no chance at all. This disparate treatment is wholly irrational and thus violates Mr. Sambolin's right to equal protection under the Fifth Amendment's Due Process Clause.
II.NEITHER THE FIRST-CLASS MAIL NOTICE NOR THE PUBLICATION NOTICE COMPORTED WITH RULE 23 OR DUE PROCESS, AND THEREFORE THE DISTRICT COURT'S IMPOSITION OF THE MAY 15, 1997 REGISTRATION DEADLINE VIOLATED MR. SAMBOLIN'S RIGHTS.
In Part I above, we urge this Court to take a narrow approach to the due process violation in this case and hold that the claims of individuals who timely filed Proofs of Claim must be considered on their merits, even if their Registration Forms were not filed by May 15, 1997. If the Court chooses not to take that narrow approach, it must decide whether the notice program comported with Rule 23 and due process. That issue, in turn, presents two distinct, but related, questions: (i) Was the program of first-class notice adequate?, and (ii) Was the publication notice reasonably calculated to apprise class members of the pendency of the action and its settlement? The answer to both questions is "no."
Before turning to those questions, we address two preliminary points. First, it is important to understand, in factual terms, just how poor the notice actually was and just how devastating the consequences are of the district court's uncompromising application of the May 15, 1997 registration deadline. Mr. Sambolin's situation is not an unfortunate, isolated problem. The Claims Administrator has denied all compensation to between 500 and 600 "late" registrants who did not receive notice. JA 199-216; see also Docket Entry Nos. 7516-7542, 7547, 7549-7552, 7554-7556, 7558-7559, 7561-7565, 7568, 7570-7571, 7574, 7579, 7582 (Appeals of Individual Class Members From Claims Administrator's Decision Denying All Compensation docketed on or before January 6, 2000). Like Mr. Sambolin, these class members allege serious injuries, but did not have notice of the class action or its settlement. No doubt there are others, like Melissa Lloyd, who were implanted with AcroMed's bone screws on or before December 31, 1996, but were not even injured at the time of the notice program, and for whom, therefore, the notice program was meaningless. JA 251-52 (Declaration of Melissa Lloyd); cf. Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 628 (1997) (severely questioning the constitutionality of binding "future" injury claimants to class action settlement).
Moreover, the MDL 1014 docket obviously does not reveal the extent of the notice problem. We will never know how many potential pro se claimants were simply told by personnel in the Claims Administrator's Office that "it's just too late to register," see JA 176 (district court order instructing Claims Administrator not even to accept, let alone consider, new Registration Forms); we will never know how many potential claimants consulted lawyers only to be told the same thing; and we will never know the number of "future" claimants, i.e. individuals implanted by December 31, 1996, but who have yet to manifest injury under state law. Suffice it to say that the hundreds of class members explicitly shut out of the settlement form the tip of the iceberg.(7)
Moreover, under the district court's ruling below, the consequences of "late" registration are enormous. This class action is not a small claims consumer case or a securities case involving a few dollars per share. Rather, this settlement purports to foreclose claims of grievous personal injury, such as that which has rendered Mr. Sambolin a near-invalid. JA 244-46 (describing Mr. Sambolin's injuries). As the district court noted, of the four bone-screw cases tried to verdict against AcroMed, two resulted in plaintiffs' victories averaging $561,000, with settlements averaging about $131,000. Bone Screw, 176 F.R.D. at 169-70, JA 76-77. Nor is this case like the asbestos personal-injury class actions rejected by this Court and the Supreme Court, where the lack of notice made it impossible to object (or, in Georgine, to opt out), but the claimants' rights to obtain compensation was preserved in perpetuity. See Ortiz, 119 S. Ct. at 2305; Georgine v. Amchem Prods., Inc., 83 F.3d 610, 620-21 (3d Cir. 1996) (noting settlement's waiver of any time-bar for future claims). Here, by contrast, unless reversed by this Court, the district court's denial of compensation is complete and irrevocable.
Second, although under the doctrine of constitutional avoidance, this Court would ordinarily rule on Mr. Sambolin's Rule 23 challenge before reaching his due process challenge, we acknowledge that the standards governing both are the same. The notice to the class here was part of settlement implementation and thus can be construed as governed by Rule 23(e) or (d)(2), but in either case the Rule's standards are an outgrowth of due process principles established in landmark cases such as Mullane v. Central Hanover Bank and Trust Co., 339 U.S. 306 (1950), and Hansberry v. Lee, 311 U.S. 32 (1940). See also Eisen v. Carlisle & Jacquelin, 417 U.S. 156, 173 (1974); Greenfield v. Village Indus., Inc., 483 F.3d 824, 831 (3d Cir. 1973); Rules Advisory Committee Notes to 1966 Amendments to Rule 23, 39 F.R.D. 69, 106-07 (1966) ("This mandatory notice ... is designed to fulfill requirements of due process to which the class action procedure is of course subject" (citing, e.g., Hansberry, 311 U.S. 32)). Thus, the question here is whether the notice was reasonably calculated under all of the circumstances to apprise the class members that their rights would be foreclosed, Mullane, 339 U.S. at 314, and that standard applies under both the Rule and the Constitution.
A.The First-Class Mail Notice Was Inadequate.
1. Actual Notice Was Constitutionally Required.
The principal reason that the notice was unlawful is that it did not actually reach Mr. Sambolin. He never received the notice, including the Registration Form, and he was therefore unable to file it by the May 15, 1997 deadline. We acknowledge that there are many cases holding that a class action judgment may bind an absent class member who did not have actual notice as long as the overall notice plan is deemed constitutionally adequate. In such cases, courts have held that a constitutionally adequate notice plan amounts to "constructive" notice on the class members who were not actually notified. However, in recent years, the Supreme Court's and this Court's jurisprudence has evolved considerably to the point where actual notice is required before a court may bind absent class members, at least in the personal-injury mass-tort context involved here.
This evolution began with Phillips Petroleum Co. v. Shutts, 472 U.S. 797, 810-13 (1985), which held that, in order for a class action judgment to have binding effect, absent class members must be given notice and an opportunity to opt out, at least in class actions "wholly or predominately for money judgments." Id. at 812 n.3. To be sure, Shutts did not explicitly hold that actual notice is constitutionally required to bind class members in all class actions. Because the class was defined to exclude those class members to whom the notice could not be delivered by first-class mail, id. at 801, the only class members bound in Shutts had actual notice and the Court was not required to address the constructive notice issue. Nonetheless, Shutts did state explicitly that a person must "receive notice" before he or she may be bound, id. at 812 (emphasis added), which would, by its terms, reject any notion of constructive notice. Shutts' statement regarding notice did not appear out of nowhere, but arose from "a principle of general application in Anglo-American jurisprudence that one is not bound by a judgment in personam in a litigation in which he is not designated as a party or to which he has not been made a party by service of process," Martin v. Wilks, 490 U.S. 755, 762 (1989) (quoting Hansberry, 311 U.S. at 40), and our "deep-rooted historic tradition that everyone should have his own day in court." Martin, 490 U.S. at 762 (quotation omitted); accord Richards v. Jefferson County, Ala., 517 U.S. 793, 799-801 (1996).
Indeed, this Court appears to have read Shutts to require actual notice before absentees may be made parties to a class action settlement. In Carlough v. Amchem Prods., Inc., 10 F.3d 189, 200 (3d Cir. 1993), the Court held that a West Virginia class action filed for the purpose of disrupting the Georgine asbestos settlement could be enjoined, but only after the West Virginia class members were given notice and an opportunity to opt out. Id. at 200, 203-04. Elaborating the notice aspects of the Court's holding, Judge Mansmann noted the "emphasis by the Supreme Court [in Shutts] on the receipt of the opt out form") (emphasis in original). Id. at 200.
If Shutts and Carlough left any doubt on the actual notice question, it was put to rest by the Supreme Court last year in Ortiz v. Fibreboard Corp., 119 S. Ct. 2295. In that case, the Court rejected a Rule 23(b)(1)(B) non-opt-out mass-tort class action very similar to the one earlier approved by the district court here, holding that the class did not meet the requirements of the Rule, id. at 2316-23, and expressing serious doubts as to whether any in personam mass-tort class action is permissible under Rule 23, the Rules Enabling Act, due process, or the Seventh Amendment. Id. at 2308-15. In addressing the due process issue, the Court relied on Shutts and Martin v. Wilks, and held that absent class members may only be bound if they "'receive notice plus an opportunity to be heard and participate in the litigation....'" Id. at 2315 (quoting Shutts, 472 U.S. at 812 (1985)) (emphasis added). In sum, any argument that Mr. Sambolin had constructive notice of the registration deadline is irrelevant. Because Mr. Sambolin was not provided actual notice of the class action or its settlement, he is not bound by the May 15, 1997 registration date.(8)
2.Even If Constructive Notice Is Appropriate In Some Circumstances, The First-Class Notice Program Here Was Unlawful.
The full notice package, including the Registration Form, was sent to all settlement class members already known to the PLC and to all counsel for plaintiffs in individual suits in MDL 1014. No further attempt was made at first-class mail notice. As noted earlier, the PLC deemed this sufficient because of a basic misunderstanding: The lawyers for the class thought that "it is reasonable to expect that the vast majority of individuals who have compensable claims against AcroMed already initiated litigation against it." PLC's Mem. in Support of Jt. Motion For Approval of the Proposed Settlement Agreement, at 33 (Mar. 31, 1997) (Docket Entry No. 5372). As demonstrated by the hundreds of class members denied compensation because they lacked notice, JA 199-216, and the thousands of others who likely have still not received notice, the PLC's view was grievously wrong.
Because it is understood that publication notice is a poor substitute for individual notice, Mullane, 339 U.S. at 315, notice by first-class mail is preferred. The applicable legal standard is straightforward:
An elementary and fundamental requirement of due process in any proceeding which is to be accorded finality is notice reasonably calculated, under all the circumstances, to apprise interested parties of the pendency of the action and afford them an opportunity to present their objections.
Id. at 314. This standard means that potential claimants must be informed personally of the existence and ramifications of the action if their whereabouts can be ascertained with due diligence. Id. at 317-18; see also Eisen, 417 U.S. at 173, 175 (Rule 23(c)(2), incorporating Mullane due process standards, "leave[s] no doubt that individual notice who are identifiable through reasonable effort").
The first-class notice program here made a mockery of the "due diligence"/"reasonable effort" standard. The PLC made no effort to find its clients on an individual basis; instead, the PLC's Administrator simply sent the notice packet to individuals already known to the PLC, principally because those individuals had already filed suit. JA 32. Because the PLC thought that the "vast majority" of its worthy clients had already filed suit, the class action settlement was envisioned primarily as a form of mandatory joinder as to people who already had made claims against AcroMed. But because this mandatory joinder was accomplished in the form of a non-opt-out class action, it came with the gift of res judicata for AcroMed against all other people implanted with the company's bone screws, including Mr. Sambolin, whether or not they were lucky enough to have notice in time to meet the registration deadline.
Many tools were available to the settling parties that would have identified people who had not already sued AcroMed. For instance, the record does not reveal whether AcroMed maintained implant records of some (or all) of the people implanted with its bone screws. If so, that list should have been used to notify all implantees known to AcroMed, even those who had not yet sued the company.(9)
Moreover, the settling parties made absolutely no effort to contact institutions and others who would know the whereabouts of the class members. The most obvious source is AcroMed's customer list: the hospitals and/or doctors who purchased AcroMed's bone screws and who implanted them in the class members. As Mr. Sambolin explained to the lower court, the University of Miami Hospital, where both of his operations took place, had a record of Mr. Sambolin's whereabouts, JA 194, 196, as would be the case for any hospital with respect to patients who underwent major surgery there. If the notice program had required full notice packages to be sent to all of AcroMed's customers (or, at the very least, all of the hospitals at which surgeries took place), hundreds, if not thousands, of class members like Mr. Sambolin would have received notice and filled out the one-page Registration Form. This notice could have been accomplished in one of two ways: The hospitals could have provided the relevant names and addresses to a third party for transmittal of the notice packet to class members, or, if confidentiality concerns required it (which we doubt in this context), the PLC could have provided notice packages to the hospitals for dissemination to class members at the Fund's expense.(10)
Other efforts of identifying class members for first-class mail notice were also readily available. Again, one obvious option was through the medical community. A "Dear Doctor" letter explaining the settlement and enclosing the notice packet could have been sent, at a minimum, to orthopedists and orthopedic surgeons, but perhaps also to internists who would be following AcroMed patients in the months and years after surgery. A letter of this sort would urge those physicians to provide a copy of the notice package to their potentially affected patients and would also provide an address and phone number for the class member to contact for the full notice package.
The purpose of taking these minimal steps would have been to create a database of personal information to effect first-class notice, similar to lists that are compiled in securities cases from stock transaction records. See Eisen, 417 U.S. at 166 n.5. In many of those cases, many shares are held in "street name" by brokers or other financial institutions and it is necessary to get notice to the beneficial owners of the stock whose rights are affected by the class action. In such cases, class counsel makes arrangements for the brokers to notify the class members or for the brokers to provide the names and addresses of the beneficial owners, so that class counsel can notify their clients. See Manual for Complex Litigation Third § 30.211, p. 226 (1995). That is exactly the sort of arrangement that should have taken place here with the class members' health care providers. Even assuming actual notice is not required, such efforts are "reasonably calculated" to identify class members and thus necessary to meet the bare minimum "due diligence" efforts required by Mullane.
The best evidence that these types of notification procedures are practicable, and thus required by due process, is that they are used on a regular basis in modern class action practice. As noted above, class counsel in securities cases regularly must contract with third parties to develop an accurate, comprehensive class list. So too, in automotive defect cases. Although a complete list of class members is available neither to the defendant nor the plaintiffs' counsel, the settling parties or their designee must investigate the records of all 50 states' motor vehicle registration departments to compile as complete a class list as possible. See In re General Motors Corp. Pickup Truck Fuel Tank Prod. Liab. Litig., 55 F.3d 768, 781 (3d Cir. 1995).
Similarly, in recent asbestos class actions, the settling parties undertook a campaign to enlist dozens of labor unions in identifying their members, who in turn would be sent the full notice packet by first-class mail. See Carlough v. Amchem Prods., Inc., 158 F.R.D. 314, 320-21 (E.D. Pa. 1993) (employing assistance of 50 national and international unions and 40 trade organizations whose current and retired members were likely to be class members, as well use of mailers to officials of union locals); see also id. at 323 (sending notification to attorneys to identify their clients); Ahearn v. Fibreboard Corp., 1995 U.S. Dist. Lexis 11532, *294 (¶ 422) (E.D. Tex. July 27, 1995) (notice to unions at the "national, regional, state, and local levels, whose memberships might include members of the Global Health Claimant Class, or whose members might be able to assist in the notification effort"); see also id. at *301 (¶ 130) (indicating that this outreach effort resulted in tens of thousands of notice packets going to potential class members, and a small notice advertisement being sent directly to 1.3 million union members).
Also illustrative of the practicability of outreach efforts that were ignored here is Bowling v. Pfizer, Inc., 143 F.R.D. 141 (S.D. Ohio 1992), which, like this case, involved class members implanted with a defective medical device (in that case, a mechanical heart valve). The settlement involved both domestic and foreign implantees. In terms of individual first-class mail notice to domestic and Canadian implantees, the district court permitted the notice to be sent only to those class members who had already filed suit or made a claim against the defendant and to other class members whose whereabouts was known to the defendant. Order Concerning Notice to the Settlement Class in Bowling v. Pfizer, No. C-1-91-256 (Docket Entry No. 44, Jan. 23, 1992), JA 262-63.(11) The court did so only because the defendant had contracted with the Medic Alert Foundation to assemble a list of implantees' names and addresses by contacting hospitals where the defendant's product had been used. JA 262-63 (district court order approving notice); see JA 431-35 (Affidavit of Bob Smith in Bowling v. Pfizer, No. C-1-91-256 (filed in Docket Entry No. 162, May 29, 1992)). Thus, a hospital-generated list of implantees greatly expanded the reach of the first-class notice to domestic implantees in Bowling; attempting to create such a list here was eminently practicable, but no attempt was made.
As for foreign implantees in Bowling, because there was no analogous Medic Alert list of implantees' names and addresses, the district court required extensive mailings to all U.S. embassies abroad, JA 332-73, and all international health ministries. JA 294-95, 375-91. In addition, mailings containing the court-approved notice specifically enlisted the support of foreign hospitals and cardiologists to encourage the class members to register for the settlement's benefits. Order [Amending Prior Order Re Notice] in Bowling v. Pfizer, No. C-1-91-256 (Docket Entry No. 56, Feb. 21, 1992), JA 415 (¶ 5); see also JA 420-21 (letter to hospitals and cardiologists). Relevant trade publications and associations in the area of cardiology and cardiovascular surgery were also targeted for notice to enlist their readers in the overall effort to identify class members. JA 294-95 (court-approved letter), JA 393-412 (list of organizations and journals). Cardiologists and cardiovascular surgeons and the publications that they read were identified as people who would help locate class members in Bowling, just as orthopedists and orthopedic surgeons could have been -- but were not -- identified here.(12)
As the results of the notice campaign here make clear, a far more comprehensive individualized notice was required to reach class members. Other steps "reasonably calculated" to reach class members were available and should have been used. The settling parties' failure to use those methods violated Rule 23 and due process.
B.The Publication Notice Was Also Inadequate.
The publication notice was just as inadequate as the efforts at individual notice, if not more so. Although the district court praised its own "widespread and comprehensive notice of this settlement ... all over the country," Nov. 22, 1999 Tr. at 35, with all respect, that praise does not square with reality. The "widespread and comprehensive" notice consisted of small advertisements of the settlement appearing twice in USA Today, once each in TV Guide and Parade Magazine, and once in a Spanish-language newspaper in San Juan, Puerto Rico. Nothing about the placement or size of these ads was likely to attract the attention of readers. Incredibly, the USA Today ad appeared in the "Marketplace" section of the paper, JA 54-55, which the reader would understandably assume contained ads for the sale of goods and services. And none of the ads contained a tear-off registration form that the Claims Administrator could have used to register claimants, which would have made registration far easier and may have called the notice to the attention of class members and/or their friends, family members, and doctors. Compare JA 287 (in Bowling class action settlement, newspaper notice contained simple tear-off form calling for name and address, which registered class members to share in cash settlement benefits).(13)
The paucity of Spanish-language notice in Puerto Rico, which is of particular concern to Mr. Sambolin, is truly appalling. The only notice was one small advertisement on page 50 of El Neuvo Dia, a paper in San Juan. JA 58. As Mr. Sambolin pointed out, he did not read the San Juan paper and no notice was published in his local paper. JA 249. Moreover, the size and placement of the El Nuevo Dia ad made it extremely unlikely that Mr. Sambolin's friends, family, or doctors would have seen and appreciated the advertisement, and they apparently did not, since he knew nothing of the class action until his lawyer informed him of the settlement in late 1997. JA 246, 249. To be blunt, the notice in Puerto Rico, like the other publication notices here, was a formality. The Supreme Court could have been speaking about this very case when it warned "when notice is a person's due, process which is a mere gesture is not due process." Mullane, 339 U.S. at 315; see also Greenfield v. Village Indus., Inc., 483 F.2d 824, 830 (3d Cir. 1973) (two-time publication notices in Wall Street Journal and Philadelphia Evening Bulletin "was insufficient notice under any standard of fairness, justice, or due process").
Despite these minimal procedures, the district court found them to be "the best notice practicable under the circumstances." JA 28 (Pretrial Order No. 724, ¶ 8(e)). But that finding is demonstrably incorrect. It was practicable to place notices in local and regional newspapers; it was practicable to place notices on the internet; it was practicable to run radio and television advertisements; and it was certainly practicable (and virtually costless) to undertake a free-media campaign involving public service announcements in the print media, radio, and/or television. And whatever one might think of the advisability of using all of these means of notification together, it certainly was inexcusable not to use some of them given the minimal notice that actually took place.
Once again, the practicability of additional publication notice is underscored by what is actually done in other mass-tort class actions. In the Georgine asbestos case, plaintiffs' counsel sponsored two rounds of advertisements in 292 newspapers serving 136 markets, 30-second television ads targeted to the class' demographics reaching 69% of all television households, press releases and public service announcements circulated through wire services, radio stations, and television outlets, and placement of a settlement notice in more than 40 trade publications and in hundreds of federal and state court buildings. Carlough, 158 F.R.D. at 321-23. Similarly, in the Fibreboard asbestos case, the court-approved notice program involved thousands of television ads in both national and local media markets (many in Spanish), and two-rounds of newspaper ads in hundreds of newspapers in over 150 markets, in addition to national newspapers and magazines such as the Wall Street Journal and Parade. See Ahearn, 1995 U.S. Dist. at *202-03 (¶¶ 431-33). The class counsel also undertook "an extensive free media campaign, including public service announcements concerning the proposed settlements via national wire services, national news radio stations, and in print, television and radio outlets in 151 media markets targeted for notification." Id. at *295 (¶ 422) (emphasis added). Although we recognize that the precise publication notice provided in the asbestos cases may not have been required here, the types of notification employed in those cases were certainly "practicable" here. Indeed, if the settling parties had merely attempted to place public service announcements in Puerto Rican electronic and print outlets it is quite possible that Mr. Sambolin would have received notice through court-approved procedures in January 1997, rather than through his lawyer in December 1997.
The Bowling heart valve litigation is also instructive in this regard. In addition to the comprehensive search for individual names and addresses discussed above (at 47-49), the district court in that case required an extensive notification campaign. Thus, a court-approved notice, with its class-member-friendly tear-off registration form, was published in dozens of domestic and foreign newspapers and magazines, JA 263, 289-92, 314-30, and two different types of court-approved press releases were approved to take advantage of free-media announcements. JA 414-19. Nothing of that sort was done here, leaving Alexander Sambolin and hundreds of similarly-situated class members with no reasonable means of learning of the class action settlement in time to meet the district court's registration deadline. For that reason as well, the district court violated Mr. Sambolin's rights under Rule 23 and the Due Process Clause when it held that his claim was time-barred.
For the reasons stated above, the decision below should be reversed and the matter remanded with instructions that Mr. Sambolin's claim be considered on its merits.
Public Citizen Litigation Group
1600 20th Street, N.W.
Washington, DC 20009
Attorneys for Appellant
March 8, 2000
1. 1 As it turned out, this $104 million "limited fund" finding was almost certainly incorrect because the company was worth far more than $100 million. Approximately five months after the district court approved the settlement, DePuy, Inc. agreed to buy AcroMed for effectively four times the value on which the district court relied for its limited fund finding. See JA 254-56 (March 20, 1998 financial report of Janney Montgomery Scott indicating that the cost of acquiring AcroMed was approximately $325 million, plus assumption of the settlement liability, for an aggregate cost of approximately $425 million) (Exhibit 4 to Docket Entry No. 7517). The record does not reveal whether the sale of the company was in negotiation while the proposed class action settlement was pending before the district court, whether AcroMed had contacted an investment banker or other financial consultant about the sale value of the company at that time, or whether the PLC inquired into any of these critical matters at that time.
2. 2 We understand that there were one or more other appeals filed by health care insurers that may not have been resolved until after February 12, 1998. In any event, the salient point is that Mr. Sambolin filed his Registration Form prior to the settlement's effective date.
3. 3 It is clear that under the medical evaluation criteria proposed by the Claims Administrator, Mr. Sambolin would receive a substantial "point" score, entitling him to significant compensation. See JA 139-43 (Proposed Plan for Settlement Administration, Exhibit A to Pretrial Order No. 1575, at 3-7, Sept. 16, 1998).
4. 4 There is little doubt that many other claimants were shocked when they learned that the 20% penalty had been transformed into a 100% penalty. For instance, like Mr. Sambolin, AcroMed implantee David Moon did not receive notice of the class action settlement. Indeed, he was still convalescing from his March 18, 1997 bone-screw explant surgery when the May 15, 1997 registration deadline passed. JA 182 (Moons' Response to Show Cause Order, at 1, Apr. 28, 1999). After learning of the deadline, counsel for Mr. Moon and his wife, Rebecca Moon, filed a Registration Form. The Moons retained counsel who attended hearings on the Moons' behalf before the Claims Administrator. According to the Moons' counsel, the Claims Administrator represented that, although the Moons' registration was filed after May 15, 1997, his clients "were accepted Claimants in the Class Settlement and in the worst case scenario might receive a 20% settlement reduction." JA 189 (Affidavit of Claimant's Counsel, Michael A. Moriarty). Indeed, the Moons' counsel allowed the statute of limitations to pass on his clients' "state Common Law cause of action" because of the representations made concerning the maximum 20% reduction. Id.
5. 5 The district court's decision to approve the notice with an early deadline has undoubtedly led to many perverse results. For instance, class members who actually saw and understood the notice after May 1, 1997, but before the settlement was approved in October 1997, may have decided not to register believing they were too late. And yet the district court did not even approve the Proof of Claim form until January 1999. To our knowledge, the Claims Administrator has still not made a decision on any pending claim.
6. 6 Implicit in Mr. Sambolin's Motion for Relief from Pretrial Order No. 1722 is the argument that, as well as being a violation of due process, the district court abused its discretion in not extending the May 15, 1997 deadline. See JA 193-97. The same factors that support a Mathews v. Eldridge-type due process remedy here -- that AcroMed would not be required to pay more money, that waiver of the deadline would not cause delay for other class members, and that no money has been paid from the settlement fund -- also demonstrate that the decision below was an abuse of the district court's discretion, as a review of the relevant case law demonstrates. See, e.g., Zients v. LaMorte, 459 F.2d 628 (2d Cir. 1972); In re Crazy Eddie Securities Litig., 906 F. Supp. 840 (E.D.N.Y. 1995); Valente v. Pepsico, Inc., 89 F.R.D. 352 (D. Del. 1981); see also H. Newberg & A. Conte, Newberg on Class Actions, § 11.57, p. 8-119 (3rd ed. Dec. 1992) ("If a significant number of claims are filed late by diverse class members, then there may be just cause for the court to reexamine the initial response period allowed, to determine if it was fair and reasonable") (with "cf." citation to this Court's decision in Greenfield v. Village Indus., Inc., 483 F.3d 824 (3d Cir. 1973)). A holding from this Court that the district court abused its discretion would allow the Court to avoid the constitutional questions presented in this case.
7. 7 With respect to the "future" claims problem, it is important to appreciate the utter irrationality of the settlement's class definition. The class includes all people implanted with AcroMed's bone screws on or before December 31, 1997. JA 79. Therefore, a class member implanted with AcroMed's bone screws on January 2, 1997 who manifested injury the next week (or at any time) is free to sue the company in an ordinary civil lawsuit. However, a person implanted just prior to December 31, 1996, see JA 251, but whose injury manifests shortly after the notice program was completed in late February 1997 (for instance, in April 1997), is barred by the settlement from bringing suit and barred by the registration deadline from collecting a penny from the settlement fund.
8. 8 It is possible that in cases involving relatively small claims that actual notice might not be required. However, for the reasons stated in the text, where, as here, the claims of the individual absentee plaintiffs are quite large, due process requires actual notice. Put differently, when a person's "private interest" in a personal-injury mass tort is large, the Mathews v. Eldridge due process balance comes down on the side of actual notice. See 424 U.S. at 319.
9. 9 Assuming AcroMed had such lists, but they were incomplete (i.e., missing or incomplete addresses), information is available on the internet and elsewhere that generally would fill in the gaps. It would have been the PLC's duty to plug as many gaps as possible. See Eisen, 417 U.S. at 176-79.
10. 10 The need to identify individuals in this manner underscores the unreasonably short, and wholly unnecessary, registration deadline in this case. To identify class members through third parties, it would have been reasonable to allow additional time, especially since the class action settlement could not be expected to be approved until well after the deadline. In fact, as noted above, supra at 11 & note 2, the settlement was not final until almost a year after the registration deadline if not later. In light of the complete failure of outreach in this case, this Court need not reach the question of whether the length of time between dissemination of notice and the registration due date was itself unlawful. See Greenfield v. Village Indus., Inc., 483 F.3d 824, 833-34 (3d Cir. 1973).
11. 11 The notice orders and affidavit in Bowling are not published. For the Court's convenience, we have reproduced them at the end of the appendix.
12. 12 The Bowling court also required an extensive mailing to U.S. and Canadian medical journals and groups to help locate class members in those countries. JA 297-312.
13. 13 The actual content of the notice was also abysmal. Although the notice did include the registration deadline, it neither warned of the consequences of that deadline nor (incredibly) told class members how they could obtain the Registration Form. Indeed, the notice did not even mention the existence of a Registration Form, much less how to file one. The notice described the class action and settlement in the most general terms. The advertisement's only reference to the availability of additional information was contained in tiny print at the bottom of the notice, where readers were told that, if they had not received "the AcroMed Orthopedic Bone Screw Settlement Notice, you may request one by writing to the PLC, [address stated here]." See JA 55. The notice provided no telephone number to call for more information, let alone a toll-free "800" number, which is standard operating procedure in modern class action settlement practice. See, e.g., Carlough, 158 F.R.D. at 321; Ahearn, 1995 U.S. Dist. Lexis 11532, *294 (¶ 422); Parade Magazine, Mar. 5, 2000, at 6 (recent class action settlement notice providing three methods for obtaining full notice packet: toll-free number, website, or writing to the settlement administrator); cf. JA 287 (publication notice providing class members with address and fax number for sending in tear-off registration form in Bowling v. Pfizer class action settlement).