Thursday, July 12, 2012

Keeping the "Settle" in "Global Settlement"

We’ve seen a couple of interesting cases lately involving global mass tort settlements and subsequent plaintiffs’ attempts to avoid them.  A few days ago we read Juris v. Inamed Corp., ___ F.3d ___, 2012 WL 2681445 (11th Cir. July 6, 2012) (slip op. here), where a plaintiff tried to get around the breast implant class action settlement.  Before that we took a look at In re Vioxx Products Liability Litigation (Plubell), ___ F. Supp.2d ___, 2012 WL 1397633 (E.D. La. April 23, 2012), where later plaintiffs sought to bring claims that were redundant of those settled by entities as part of the Vioxx non-class-action settlement.

Now we admit that we have qualms about some settlement-related mechanisms as they relate to mass torts.  We’ve sometimes found ourselves (and our clients) left a bit bloody from some of the cut corners.  And we also have a sense that, if some of these settlement mechanisms were not available (we still hate cy pres), some mass torts wouldn’t be brought in the first place.  But be that as it may … once a mass tort is settled, we have no problem whatever with the proposition that settled claims shouldn’t be resurrected.  That’s what the courts prevented in both Juris (great plaintiff’s name, by the way) and Plubell.

First, Juris. What a blast from the past.  It involves breast implants − and that mass tort settled more than a decade ago, back in 1999 when Bone Screw was still hot and heavy.  At the time we were afraid we might eventually be faced with something similar.  The particular breast implant defendant, Inamed, entered into a mandatory “limited fund” class action settlement in 1998.  2012 WL 2681445, at *3-4.  The details aren’t important, except that the class included all possible plaintiffs, both presently injured and those with supposed future risk of injury.

Notice of the mandatory settlement was by direct mail and by publication in various periodicals.  The Inamed settlement then went through the standard judicial approval process, including the resolution of the usual sorts of objections commonly made to such settlements.  The objectors to the Inamed limited fund breast implant settlement had no greater success than similar objectors (us, well Bexis) to a similar Bone Screw settlement a few years later − the settlement was approved and became final.  2012 WL 2681445, at *5-8.

Years later (eight, to be exact) along comes plaintiff Juris.  She files suit (in California state court) alleging precisely the types of injuries covered by the 1998 settlement.  Of course, she wasn’t injured back in 1998 (even though her implants dated from 1991) − her symptoms started in 2002 and only after her implants were removed in 2005 was the alleged cause confirmed (or so plaintiff claimed).  Id. at *9.

Anyway, defendant Inamed heads back to the MDL court (in Alabama) seeking to enjoin the California action as barred by the res judicata effect of the mandatory settlement.  There wasn’t much left of the old Breast Implant MDL by then − even the original judge (Sam Pointer) had died.  But the matter was resurrected and in the end the court entered an order enjoining plaintiff Juris from pursuing her settlement-barred claim.

Of course, plaintiff appealed, or we’d be talking about Vioxx by now.

The Eleventh Circuit affirmed the injunction.  The plaintiff was making a collateral attack on the finality of a long-settled settlement.  While she was entitled to do that, 2012 WL 2681445, at *12-13, the settlement withstood the attack.  Plaintiff’s due process challenges all failed.

Initially, the notice provided to the mandatory class, including notice by publication, satisfied Due Process, even though plaintiff was not personally notified.  Indeed, since plaintiff had not yet been injured, she could not be expected to respond to notice, whether or not actually received.  Cf. 2012 WL 2681445, at *15 n.21 (noting plaintiff’s unfortunate (we think it's a strong argument) abandonment of position that effective notice to uninjured future claimants is inherently impossible and can never comport with Due Process):

Where the notice afforded reaches a critical mass of putative class members, such that the facts underlying certification are contested and approached in a sufficiently adversarial manner, the due process pitfall . . . can be avoided.

Id. at *16.  That any particular plaintiff did not receive personal notice of the settlement class certification proceedings does not matter:

[W]hen a mandatory class is composed of plaintiffs with singular interests, and where the representatives and objectors reflect the interests of those who did not receive notice, failure to individually notify each class member will not equate to a constitutional violation. . . .  [Plaintiff] cannot point to a single objection that she would have raised that was not actually advanced by putative class members.

Id. at *17.

Thus, the court turned to the most critical issue in the appeal − the adequacy of class representation.  The problems with the 1998 class action were largely due to its age.  It occurred right in the middle of the class action retrenchment required by the Supreme Court’s decisions in Ortiz v. Fibreboard Corp., 527 U.S. 815 (1999), and Amchem Products, Inc. v. Windsor, 521 U.S. 591 (1997), and thus didn’t have formal separate subclasses for presently injured class members and those (like plaintiff Juris) who were currently uninjured.  Juris, 2012 WL 2681445, at *20-21. The court in Juris didn't deny that today that would be a no-no that would have precluded certification.  However, Judge Pointer had at least done something.  The class representatives had included both types of plaintiffs, and a separate attorney had been engaged to represent the interests of future-only claimants, even if the class itself wasn’t formally divided.  Id. at *22.

That was enough, Juris concluded − at least in the context of a collateral attack launched long after the class action settlement had been finally approved:

The cases [Amchem and Ortiz] describe a requirement that there be structural assurances of adequate representation that protect against the conflicting goals of present and future injury class members. . . .  Although we need not rule definitively, Amchem and Ortiz appear to hold that Rule 23(a)(4) calls for some type of adequate structural protection, which would include, but may not necessarily require, formally designated subclasses.  Of course, both Amchem and Ortiz involved review on direct appeal . . ., as opposed to the collateral challenge context of our case in which [plaintiff] must show that her due process rights were violated.  In the context of this case, we are unwilling to hold that the due process concept of adequate representation is so rigid and inflexible as to demand formal subclasses in the case at bar.

2012 WL 2681445, at *21.  Although not having formal subclasses, the inclusion of “futures” class representatives and designation of counsel specifically to represent “futures” plaintiffs sufficed to satisfy Due Process.  Id. at *22.  Failure of anyone to appeal from the Inamed settlement was not indicative of inadequate representation, because nobody could have predicted what the Supreme Court later did in OrtizId. at *25-26.

The post-settlement plaintiff’s Due Process arguments thus failing, the District Court was within its powers to enjoin her from prosecuting an action that was barred by the settlement. Given that the settlement was of the limited fund variety, there were no constitutional problems with personal jurisdiction (plaintiff, a California resident, had no contacts with Alabama, the situs of the Breast Implant MDL).  The court’s power to act could be sustained by the court’s jurisdiction over the “res” of the limited fund itself:

In a limited fund class action, the presence within the jurisdiction of a res or fund that is the subject of the litigation resolves the personal jurisdiction objection of absent claimants. . . .  We hold that [the res] provided [the MDL] court with jurisdiction over the fund and all claimants to that fund, wherever located.

Juris, 2012 WL 2681445, at *27.  Because of this independent basis for jurisdiction, there was no need for opt-out rights as otherwise would be the case under Phillips Petroleum Co. v. Shutts, 472 U.S. 797 (1985).

After declining to evaluate the validity of mandatory class certification (a combination of waiver and disfavor of collateral attack, 2012 WL 2681445, at *29-30), the Juris court reached the core of the issue − the Anti-Injunction Act (the statute specifying when a federal court may enjoin prosecution of an action in a state court).  Was the settlement bar a proper basis for an injunction under this Act?  Juris held that it was.  In the first place, the action was “in aid of” the enjoining court’s jurisdiction:

[T]he “in aid of its jurisdiction” exception [may] be used to enjoin parallel state class action proceedings that might jeopardize a complex federal settlement and state in personam proceedings that threaten to make complex multidistrict litigation unmanageable.

Id. at *31 (citation and quotation marks omitted).  “[P]aradigmatically complex litigation” such as a mass tort MDL was “the virtual equivalent of a res.”  Id.

Moreover, the “protect or effectuate” provision − also known as the “relitigation exception” − applied, given the res judicata effect of the settlement itself:

[T]he relitigation exception empowers a federal court to be the final arbiter of the res judicata effects of its own judgments because it allows a litigant to seek an injunction from the federal court rather than arguing the res judicata defense in the state court. . . .  [A]n order approving a settlement agreement provides a final determination on the merits.

2012 WL 2681445, at *32.  Essentially, because the final order approving the settlement of the mass tort was a decision on the merits of the objections raised to class certification, it had res judicata effect on the members of the certified class.  Thus, res judicata supported an exception to the Anti-Injunction Act in the context of a mass tort action.

Second, Plubell, and the subsequent Juris decision illuminates the analysis.  In Plubell, some class action plaintiffs filed suit in Missouri state court seeking recovery of damages that the defendants argued were part and parcel of the settlement of the Vioxx MDL in federal court in Louisiana − because the same prescriptions had ultimately been paid (at least in part) by third-party payers (TPPs) who then settled their claims in the MDL. As in Juris, the affected defendant sought and obtained an injunction against the prosecution of the Missouri class action, which (given that it was in Missouri state court) had been certified.

Just like the MDL in Juris, the Vioxx MDL had been long and complex, and that litigation had led to a similarly exquisitely complicated and difficult settlement − albeit not a class action (Amchem and Ortiz having since largely (perhaps totally) foreclosed that option).  The Missouri action plainly implicated moneys that had been the subject of the Vioxx settlement:

Plaintiffs intend to present expert testimony that calculates all money ever spent on Vioxx in Missouri by anyone, including individuals who have settled in the MDL or private TPPs (or, for that matter, state and federal Medicaid payments).  This poses a perceived threat of requiring [defendant] to pay again or at least account for Missouri PI and TPP claims that it has already settled in this MDL.

Plubell, 2012 WL 1397633, at *4.

The injunction in Plubell was sought under the same two exceptions to the Anti-Injunction Act as in Juris − the relitigation and in aid of jurisdiction exceptions.  2012 WL 1397633, at *5-6.  The court chose to act under “aid of jurisdiction” only.  Id.  Like Juris, the court found that the settlement of complex mass tort litigation was the moral equivalent of a “res”:

[C]omplex litigation cases are sufficiently similar to in rem proceedings so as to permit injunctions on cases actually in personam in nature.  The theory behind the in rem analogy is that when complex litigation has reached the point of sufficient advancement, and there has been substantial investment of time and resources, in essence, a res is created. . . .  [T]he “in aid of jurisdiction” exception should be applied to protect the federal complex litigation settlement process.  This justification is rooted in the concepts of both judicial efficiency and preventing interference with a federal court’s resolution of a case.  In practice . . . Courts have been most willing to uphold an injunction pursuant to the “in aid of jurisdiction” exception in the MDL or complex litigation context when settlement is complete or imminent in the federal court, and often after preliminary or final certification of a class.  At this stage the settlement because a res or at least a quasi- res and justifies the Court's protection.

2012 WL 1397633, at *6-7 (citations omitted).

It’s hard to point to any mass tort litigation more complex and developed than Vioxx, and that goes for the settlement as well, as the court pointed out.  Id. at *9.  So in Plubell the issue came down to extent to which the Missouri state class action in fact overlapped with what had been decided by (and was thus barred by) the Vioxx settlement.  The court held in Plubell that there was sufficient overlap to support an injunction − particularly given the effect of “over-inclusive” subsequent litigation on the ability to settle MDL litigation:

[A]s a practical matter, the manner in which Plaintiffs are attempting to prove their claims does encroach on the MDL settlements. . . .  [I]t would result in an impermissibly over-inclusive judgment and force [defendant] to account for or to pay twice on the same claims.  That is the friction at issue, and the Court concludes that it does threaten this Court’s jurisdiction and ability to supervise these MDL settlements enough to warrant an injunction.

2012 WL 1397633, at *9.  Such overly broad post-settlement state court litigation would deter and defeat the ability to settle mass tort litigation in the context of federal MDLs:

It is imperative that parties in MDL litigation be able to settle claims with plaintiffs and to rely on the peace they have bought through arms-length negotiation. . . .  [T]here is a meaningful risk under these circumstances that, absent an injunction, [defendant] would be required to pursue its indemnification rights against TPPs who are entitled to some of the damages reflected in the kind of judgment Plaintiffs are seeking. . . .  That prospect of reopening what was thought by all involved to be finished would undercut the TPP settlement and interfere with this Court’s flexibility and authority to keep the matter resolved.

Id. at *10.

Thus. the court in Plubell concluded that to let post-settlement litigation seeking duplicative and overlapping damages go forward would “set a dangerous precedent.”  2012 WL 1397633, at *10.  Any collateral litigation that “would require Defendants to pay twice” on the same claims “would severely hinder the incentive to settle . . . [t]hus, the “in aid of jurisdiction” exception” was “directly implicated.”  Id.

Keeping in mind the purposes of the Act, the Plubell court “narrowly tailored” the injunction.  It did not bar the litigation altogether (as did Juris) but rather precluded the state court plaintiffs only from introducing expert damages evidence “that does not sufficiently exclude damages attributable to claims already settled through the PI and TPP settlements” or from “executing any judgment obtained through admission of such evidence.”  2012 WL 1397633, at *11.  The effect of Plubell thus is primarily on the scope of allowable expert testimony in the state litigation.
We’ve been somewhat gun-shy about the Anti-Injunction Act in mass tort cases after Smith v. Bayer Corp., 131 S. Ct. 2368 (2011), which we blogged about here.  However, Smith did not involve a mass tort MDL settlement or any of the special considerations involving such settlements discussed in both Juris and Plubell.  After these two more recent decisions, we feel more confident that settlements at least cannot be undercut by subsequent state-court litigation involving claims that our clients have already paid good money to settle in the context of a federal MDL.