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In a huge victory for Fen-Phen plaintiffs who took advantage of an “intermediate opt-out” provision in the federal class action settlement to pursue their own lawsuits, the 3 rd U.S. Circuit Court of Appeals has ruled that although the federal judge overseeing the settlement has the power to prevent them from seeking punitive damages, he went too far when he issued a broad injunction that strictly limited the types of evidence they can present at trial. In its 33-page opinion in Re: Diet Drugs, a unanimous three-judge panel concluded that U.S. District Judge Harvey Bartle III erred by imposing evidentiary restrictions that were “overbroad” and “unduly entangled the [federal] court in the management of separate state court proceedings.” The decision vacates significant portions of Bartle’s order, but upholds those that prohibit the opt-out plaintiffs from offering evidence that would be relevant only to a claim for punitive damages. “We agree that the District Court had power under the All Writs Act to supervise and curtail the actions of intermediate opt-out class members in pursuing their individual claims,” U.S. Circuit Judge Michael Chertoff wrote. “But we believe that the injunctions imposed some restrictions not fairly comprehended within the terms of the settlement agreement and class notice and, in certain ways, transgressed the limits of federalism and prudence that confine the exercise of federal judicial authority,” Chertoff wrote in an opinion joined by Circuit Judges Thomas L. Ambro and Julio M. Fuentes. The decision is a victory for attorneys John G. Harkins Jr. and Steven A. Reed of Harkins Cunningham in Philadelphia, who handled the appeal for a group of plaintiffs’ lawyers from Texas and Mississippi. The appeal stemmed from a series of orders Bartle handed down last year after lawyers for Wyeth complained that some plaintiffs’ lawyers were ignoring the settlement’s provisions that said opt-out plaintiffs had given up the right to seek punitive damages. In the settlement, American Home Products (which has since changed its name to Wyeth) agreed to waive all statute of limitations issues so that plaintiffs could decide later whether to opt out and take their chances with a jury. But in return, the settlement also imposes a few strict conditions on the plaintiffs. Most important, the settlement papers said that such plaintiffs would give up their right to seek punitive damages and be required to limit the focus of their claims to two specific heart-valve conditions allegedly caused by Fen-Phen – “left-sided mitral valve regurgitation or pulmonary hypertension secondary to mitral valve regurgitation.” Siding with Wyeth, Bartle found that one Texas lawyer had avoided using the word “punitive,” but that his court papers showed he was planning a trial presentation designed to ask the jury to punish Wyeth. Bartle noted that, in his Orange County Court “bench brief,” attorney George M. Fleming noted that he intended to present evidence that “tens of thousands of people were injured” by Fen-Phen and that Wyeth “acted maliciously and with callous indifference.” The brief also accused Wyeth of “corporate avarice,” and acting with “the goal of increasing profits at the expense of human life.” Bartle concluded that “the language of the bench brief is the language of someone who intends to present a case seeking to punish Wyeth for malicious conduct under Texas law.” The battles over how the Texas case and other upcoming trials should be conducted stretched over several months. In March 2003, Bartle issued a comprehensive order that enforced a series of prophylactic prohibitions against introducing evidence that Bartle said would be relevant only to punitive damages or unfairly prejudicial when balanced against its probative value. The order forbid all opt-out plaintiffs to present evidence that Wyeth had allegedly destroyed documents, or “malicious, wanton or other similar conduct of Wyeth.” The order also barred evidence of Wyeth’s profits, size or financial condition; the amount or size of Wyeth’s sales of diet drugs or other products; Wyeth’s marketing or promotion of diet drugs to the extent that Wyeth placed marketing or promotion ahead of health or safety concerns; and any alleged involvement by Wyeth in the ghostwriting of certain medical review articles. Now the 3 rd Circuit has ruled that Bartle went too far by making a series of pre-trial evidentiary rulings for an upcoming state-court trial. “The order creates a highly intrusive and unworkable regulatory scheme,” Chertoff wrote. “The district court’s understandable effort to lock the door against impermissible attempts to obtain exemplary damages led to an order that seriously interferes with [the plaintiff's] rights to try her case.” Chertoff also found that Bartle’s order “disrupts the state court’s ability to manage its own judicial process” because it “would remove from the state judge a whole panoply of decisions that he or she would normally be authorized – indeed obliged – to make.” And by threatening to hold a lawyer in contempt for violating his order, Bartle also chilled the trial lawyer’s presentation, Chertoff found. “Here, a violation of the rule – a wrong guess – could result in a punitive sanction. There will be strong pressure on counsel to steer well clear of the line and possibly forego offering admissible evidence that [a plaintiff] would normally expect to get before the jury,” Chertoff wrote. Chertoff found that Wyeth was asking for too much when it pressed Bartle for broad evidentiary restrictions as a way to ensure that plaintiffs not seek punitive damages. In the settlement, Chertoff noted, the opt-out plaintiffs never gave up their right to prove Wyeth’s negligence and to seek compensation for pain, anguish and loss of consortium. By seeking such a broad limitation of allowable evidence, Chertoff said, “Wyeth’s logic would foreclose opt-out plaintiffs from proving liability at all.” In effect, Chertoff said, “Wyeth wants us to read this punitive damages limitation as if it were a limit on the manner in which opt-out plaintiffs can pursue their claims for compensation.” Under Wyeth’s view, Chertoff said, a plaintiff “may show unreasonable behavior to recover compensation for negligence, unless the behavior was really unreasonable (so that it might support punitive damages).” In other words, “Wyeth urges that very strong evidence of fault must be diluted so that it would not arouse the jury to award punitive damages, if punitive damages could be awarded – which they cannot be.” But since the settlement agreement itself did not describe such a “novel type of restriction,” Chertoff said, “we decline to construe the agreement to imply an evidence-dilution requirement for compensation claims that are clearly preserved for the opt-out plaintiffs.” Chertoff also found that Bartle’s order was a sweeping one that would effectively prohibit a plaintiff “from offering evidence that was relevant – indeed, highly probative – on issues of negligence and failure to warn.” Bartle’s reasoning, Chertoff said, was that such evidence, “if suggestive as well of intentional misconduct, fell within the punitive damages bar because it could support a punitive verdict or because it could inflame the state jury.” The test Bartle seemed to employ, Chertoff said, was “to place off-limits evidence that was not necessary to prove a claim to compensation. Under that approach, Chertoff said, Bartle excluded evidence that would “suggest malfeasance on the part of the company that goes beyond mere negligence,” or that “connotes more than negligence.” But Chertoff found that “intentional or reckless behavior may be highly probative of elements of negligence or defective design cases.” The failure to report adverse actions to the Food and Drug Administration, whether accidental or intentional, “would be probative of a failure to warn. And intentional or reckless behavior is often relevant to showing conduct below the reasonable standard of care necessary to make out a case of negligence,” Chertoff wrote. Likewise, Chertoff found that Bartle went too far in barring evidence of side effects from the drugs other than heart-valve disease. “This evidence was not offered to support claims for these side-effects, since plaintiffs did not suffer from them. Rather, they were offered for other purposes, such as to prove duty to warn,” Chertoff wrote. “Evidence of the totality of the risks of injury may be admissible under state law to show the scope of the duty to warn, even if the individual plaintiff has not sustained all the injuries in question.” Chertoff said Bartle also “categorically prohibited” the plaintiffs from offering evidence of “Wyeth’s marketing or promotion of diet drugs to the extent that Wyeth placed marketing or promotion ahead of health or safety concerns.” Bartle’s reasoning, he said, was that “such evidence and argument can have no other purpose than to obtain punitive damages.” But Chertoff found that such evidence could be admissible. “Evidence tending simply to show that Wyeth wanted to successfully market the diet drugs and make a profit selling them would not be relevant to show, for example, that Wyeth acted negligently. But excessive concern with the image and marketing of the diet drugs at the expense of making efforts toward determining whether they were safe could be probative as to whether Wyeth breached a duty of care towards the plaintiffs,” Chertoff wrote. In effect, Chertoff said, Bartle “trimmed evidence that was probative, but that [he] viewed as unnecessary and so inculpatory that it might inflame the jury to award damages that would punish Wyeth instead of simply compensating the plaintiffs.” As a result, Chertoff said, Bartle “effectively adopted the role of a trial judge balancing probative value against unfair prejudice. By doing that, he moved beyond mere enforcement of the damages restriction, and affected plaintiff’s right to try her permissible liability case.” Chertoff said he recognized that Bartle’s task was “a difficult one, particularly in light of the patent efforts by plaintiffs’ counsel to press against the damages restrictions to which intermediate opt-outs are bound.” But a federal court’s power, he said, “has to be exercised consistent with the terms of the notice and agreement on which potential class members relied at the outset of the process. Moreover, it has to be applied to the state courts with appropriate consideration for limitations of equity, federalism, and comity.” In closing, Chertoff said the 3 rd Circuit’s ruling “leaves the district court free to consider other measures, aside from imposing evidentiary restraints, that will effectuate the limitations of the settlement agreement.” Bartle, he said, “might consider, for example, ordering language to be included in a stipulation or proposed jury instruction that would make it clear to the jury that exemplary damages may not be awarded.” He also said Bartle was “not without recourse in the event that a verdict is rendered that appears to grant punitive damages under the guise of some other damage category.” (Copies of the 33-page opinion in Re: Diet Drugs , PICS No. 04-0815, are available from The Legal Intelligencer . Please call the Pennsylvania Instant Case Service at 800-276-PICS to order or for information. Some cases are not available until 1 p.m.)

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