In re Diet Drugs

• Decision Date: 08 October 2009
• Docket Number: No. 08-2387.,08-2387.
• Citation: 582 F.3d 524
• Parties: In re DIET DRUGS (Phentermine/Fenfluramine/Dexfenfluramine) Product Liability Litigation. Randy Hague, Jana L. Harris, and Brian S. Riepen, Esq., Appellants in 08-2363. Law Firms of Freedland, Farmer, Russo, Behren & Sheller and Raymond Valori, P. A., individually and on behalf of Diet Drugs clients represented, Appellants in 08-2387.
• Court: U.S. Court of Appeals — Third Circuit

582 F.3d 524

In re DIET DRUGS (Phentermine/Fenfluramine/Dexfenfluramine) Product Liability Litigation Randy Hague, Jana L. Harris, and Brian S. Riepen, Esq., Appellants in 08-2363 Law Firms of Freedland, Farmer, Russo, Behren & Sheller and Raymond Valori, P. A., individually and on behalf of Diet Drugs clients represented, Appellants in 08-2387.

No. 08-2387.

United States Court of Appeals, Third Circuit.

Argued July 8, 2009.

Filed October 8, 2009.

Howard J. Bashman, [Argued], Willow Grove, PA, Brian S. Riepen, [Argued], Dallas, TX for Appellants Randy Hague, Jana L. Harris, Brian S. Riepen.

Raymond W. Valori, [Argued], Raymond Valori, P.A., Weston, FL for Appellants Freedland Farmer Russo Behren & Sheller and Raymond Valori.

Sol H. Weiss, Anapol, Schwartz, Weiss, Cohan, Feldman & Smalley, Philadelphia, PA, Charles R. Parker, Locke Lord Bissell, & Liddell, Houston, TX, Class Counsel & Appellee.

Arnold Levin, Michael D. Fishbein, [Argued], Laurence S. Berman, Levin, Fishbein, Sedran & Berman, Philadelphia, PA, Class Counsel, Plaintiffs' Liaison Counsel & Plaintiffs' Co-Lead Counsel in MDL 1203 on behalf of Appellees.

Before: SLOVITER, AMBRO and JORDAN, Circuit Judges.

OPINION OF THE COURT

JORDAN, Circuit Judge.

Three law firms and some of their clients challenge the final award of attorneys' fees that the United States District Court for the Eastern District of Pennsylvania entered on behalf of class counsel in this landmark class action. For the following reasons, we will affirm the award.

I. Background

A. Diet Drugs Litigation and Settlement

This appeal arises from multidistrict mass tort litigation concerning the appetite suppressants fenfluramine, marketed as "Pondimin," and dexfenfluramine, marketed as "Redux." Over its decade-long course, the case¹ has generated nearly 8000 separate orders from the District Court and numerous prior rulings and opinions from this Court. E.g., In re Diet Drugs Prods. Liab. Litig., 543 F.3d 179 (3d Cir.2008); In re Diet Drugs Prods. Liab. Litig., 431 F.3d 141 (3d Cir.2005); In re Diet Drugs Prods. Liab. Litig., 418 F.3d 372 (3d Cir.2005); In re Diet Drugs Prods. Liab. Litig., 401 F.3d 143 (3d Cir.2005); In re Diet Drugs Prods. Liab. Litig., 385 F.3d 386 (3d Cir.2004); In re Diet Drugs Prods. Liab. Litig., 369 F.3d 293 (3d Cir.2004); In re Diet Drugs Prods. Liab. Litig., 282 F.3d 220 (3d Cir.2002). Although we have already set forth the background of the case and the class action settlement agreement more than once, see, e.g., Diet Drugs, 385 F.3d at 389-93; Diet Drugs, 282 F.3d at 225-29, we do so once more in order to provide context for our discussion of the fee award entered by the District Court.

Beginning in 1997, a tide of products liability lawsuits arose after researchers discovered an association between some commonly prescribed appetite suppressants and a series of disorders generally known as valvular heart disease ("VHD"). The drugs involved were "fen-phen," a diet drug regimen that paired fenfluramine with phentermine, and dexfenfluramine, which was developed to produce the same anorectic effects as fen-phen without the need for a drug pairing. Evidence of serious coronary side effects from these drugs prompted the United States Food and Drug Administration ("FDA") to issue a public health advisory alert, and the pharmaceutical company Wyeth,² which was responsible for the development and promotion of fenfluramine and dexfenfluramine, to withdraw the drugs from the market.³ Former fen-phen and dexfenfluramine users filed lawsuits and instituted class actions in numerous federal jurisdictions and state courts. Some of the earliest litigation took place in state courts in Texas, where attorneys, including Appellant Brian S. Riepen, brought numerous actions against Wyeth. Those suits generated extensive discovery, including the production by Wyeth of approximately three million pages of documents.

Many diet drug suits were also filed in federal courts. Pursuant to 28 U.S.C. § 1407, the Judicial Panel for Multidistrict Litigation transferred all of those cases, including more than 130 putative class actions, to the United States District Court for the Eastern District of Pennsylvania for coordinated and/or consolidated pretrial proceedings under MDL Docket No. 1203 (the "MDL"). Included among those actions were four cases filed by Riepen. Likewise, Appellants Freedland, Farmer, Russo, Behren & Sheller and Raymond Valori P.A. (collectively "Valori"⁴) represented approximately ten clients involved in the MDL.

The District Court appointed a plaintiffs' management committee (the "PMC") to oversee the litigation and to conduct discovery of general applicability to the MDL plaintiffs. The PMC began its discovery efforts in late 1998, and, by March 1999, it had taken 80 depositions and amassed approximately nine million pages of documents, from which it winnowed 5,000 documents that, the PMC claims, established Wyeth's liability. The PMC stored the discovery results in an electronic document depository and made it available to counsel for every plaintiff in the MDL. As part of the discovery process, representatives of the PMC attended regular status conferences held by a court-appointed special discovery master (the "Special Master") and prepared motions and responses regarding class-wide discovery, in addition to addressing a variety of other pre-trial issues.

Ultimately, the PMC filed a class action against Wyeth to pursue medical monitoring on behalf of former users of Wyeth's diet drugs. The PMC moved for class certification, and, on August 26, 1999, the Court granted the motion. By then, state courts in Illinois, New Jersey, New York, Pennsylvania, Texas, Washington, and West Virginia had also certified medical monitoring classes.⁵

In April 1999, Wyeth, the PMC, and a coalition of counsel involved in the state court class actions began to negotiate a nationwide settlement. On November 18, 1999, they executed an elaborate settlement agreement (the "Settlement Agreement") that contemplated a series of options for class members.⁶ At the outset, class members could obtain an echocardiogram at Wyeth's expense, to determine if they suffered from VHD, or they could exercise an initial opt-out from the settlement and pursue their claims in separate tort cases. Class members who chose not to take the initial opt-out and were diagnosed with VHD would have a second choice to make: they could receive a cash and medical services benefit or exercise an intermediate opt-out from the Settlement Agreement, which, again, would free them to turn to the tort system.⁷ Wyeth agreed to waive its statute-of-limitations defense against tort claims by those opting out at that point. In exchange, intermediate opt-out claimants were barred from seeking punitive damages against the company.

Class members who took the cash and medical services benefit and developed more serious VHD before 2015 could choose from yet a third pair of options. They could receive payment in accordance with a matrix of calculations that assigned compensation based on different levels of severity of medical conditions.⁸ The "matrix claims" would be processed based on the attestation of a physician, with Wyeth being able to test the foundations of the claims through an audit process permitting medical review of up to 15% of all such claims, unless the Court ordered an expanded audit for good cause shown. Alternatively, class members with worsening VHD could exercise a back-end opt-out so that they could pursue their claims in tort under the same conditions applicable to the intermediate opt-out claims.

To fund these various remedies, Wyeth agreed to create a $3.75 billion settlement fund to be administered by court-appointed trustees. The settlement fund was to be divided into two sub-funds: Fund A, into which $1 billion would be injected, would be designated for the payment of all non-matrix benefits. Fund B, which would receive $2.55 billion, would be designated for the payment of the matrix benefits. The remaining $200 million would go into an account denominated the "Fund A Legal Fees Escrow Account," from which attorneys who helped to create and implement the Settlement Agreement would be paid for services related to the non-matrix benefits.

On August 28, 2000, the District Court certified the settlement class and approved the Settlement Agreement. The settlement was hailed as an innovative departure from ordinary settlements requiring class members to make a "once-and-for-all choice" between a private remedy scheme and the tort system. Richard A. Nagareda, Autonomy, Peace, and Put Options in the Mass Tort Class Action, 115 Harv. L.Rev. 747, 796 (2002). Plaintiffs' counsel and Wyeth were praised in particular for creating the staged opt-out opportunities, which were viewed as a bold compromise between the competing concerns of individual autonomy for the class members and a comprehensive legal peace for the corporate defendant. See id. at 797-805.

By the summer of 2002, however, the number of matrix claims submitted to the trust and the number of class members who exercised their intermediate and back-end opt-out rights (collectively, "downstream opt-outs") had grown well beyond Wyeth's expectations. Doubting the veracity of many of these claims, Wyeth and the PMC sought, and were granted, an order directing the medical review of 100% of the claims submitted to the settlement trust. While the 100% audit helped to ensure the integrity of the claims review, it also increased the cost of trust administration. Between the influx of new claims and the heavy processing burden they created, Wyeth feared that it would not have sufficient funds to satisfy all of its diet drug liabilities. The District Court likewise concluded that the settlement was in jeopardy, commenting that "it is not unlikely, absent some curative amendment, that thousands of deserving class members may never receive any...