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The federal judge who was presiding over the settlement of the massive fen-phen diet drug class action did not overstep his authority when he blocked a group of Texas plaintiffs from staging a mass opt-out of the federal case in order to pursue claims in state court, the 3rd U.S. Circuit Court of Appeals has ruled. “The threat to the federal court’s jurisdiction posed by parallel state actions is particularly significant where there are conditional class certifications and impending settlements in federal actions,” Judge Anthony J. Scirica wrote in an opinion joined by Judges Morton I. Greenberg and Robert E. Cowen. “A federal court entertaining complex litigation, especially when it involves a substantial class of persons from multiple states, or represents a consolidation of cases from multiple districts, may appropriately enjoin state court proceedings in order to protect its jurisdiction,” Scirica wrote. The ruling upholds an injunction issued by Senior U.S. District Judge Louis C. Bechtle in Philadelphia that barred the Texas plaintiffs and their lawyers from pursuing their strategy of opting out of the federal settlement. Bechtle, who has since left the bench to join Conrad O’Brien Gellman & Rohn, was assigned to handle all the federal suits filed by users of the fen-phen drug combination. Both drugs are appetite suppressants. Fenfluramine was marketed as Pondimin and dexfenfluramine was marketed as Redux. Both drugs were in great demand. From 1995 to 1997, about 4 million took Pondimin and 2 million took Redux. In 1997, studies suggested a link between the drugs’ use and valvular heart disease. In July 1997, the U.S. Food and Drug Administration issued a public health alert, and, on Sept. 15, 1997, American Home Products, the maker and distributor, removed both drugs from the market. Following the FDA’s issuance of the public health warning, several lawsuits were filed. The number of lawsuits increased exponentially after American Home Products withdrew the drugs. About 18,000 individual lawsuits and more than 100 putative class actions were filed in federal and state courts around the country. American Home Products removed many of the state cases to the federal courts. In December 1997, the Judicial Panel for Multidistrict Litigation transferred all the federal actions to Bechtle. In April 1999, American Home Products began “global” settlement talks with plaintiffs in the federal action, together with several plaintiffs in similar state class actions. A tentative settlement was reached for a nationwide class in November 1999. Known as the Brown class, the proposed class included all individuals in the United States, as well as their representatives and dependents, who had ingested either or both diet drugs. The global settlement contemplated different kinds of relief, including medical care, medical screening, payments for injury, and refunds of the drugs’ purchase price. Bechtle conditionally certified a nationwide settlement class and preliminarily approved the settlement in November 1999. In August 2000, Bechtle entered a final order certifying the class and approving the settlement. The Texas court suit began in July 1997 — after the FDA warning but before American Home Products withdrew the drugs from the market. The suit, Gonzalez v. Medeva Pharmaceuticals Inc., et al., was one of the first cases filed and preceded the creation of the federal MDL case by several months. The proposed Gonzalez class included all Texas purchasers of the two diet drugs who were demanding actual purchase-price recovery only, together with treble damages under the Texas Deceptive Trade Practices Act-Consumer Protection Act. Although the Gonzalez suit did not allege a federal cause of action and the named parties were not diverse, American Home Products removed the case to federal court soon after the MDL was assigned to Bechtle. Lawyers for American Home Products argued that Medeva Pharmaceuticals was fraudulently joined for the sole purpose of defeating federal diversity jurisdiction. But Bechtle remanded the case to the Texas courts, finding that Medeva Pharmaceuticals was a proper defendant. In March 2000, a judge in Hidalgo County, Texas, certified the Gonzalez class — eight days before the end of the opt-out period for the Brown settlement. At this time, most members of the Gonzalez class were also members of the Brown class, except for those who had individually opted out. The Texas lawyers set out to erase the overlap in the two cases by moving, in Hidalgo County, for a court order opting out all the unnamed members of the Gonzalez class from the Brown class. In response, American Home Products asked Bechtle for a temporary restraining order to prevent the Gonzalez class from implementing a mass opt-out. Bechtle and the Texas judge held hearings on the same day, and both issued orders. The Texas judge entered an order partially opting out the Gonzalez class from the federal MDL case. But minutes later, Bechtle ordered the Texas plaintiffs and their lawyers to refrain from pursuing the opt-out. In their appeal, the Texas lawyers argued that Bechtle’s order violated the limitations on federal courts enjoining state court proceedings under the Anti-Injunction Act. They also argued that the order failed to afford the Texas order full faith and credit and that it violated the Rooker-Feldman doctrine’s prohibition on lower federal courts’ reviewing state court decisions. Now the 3rd Circuit has ruled that Bechtle was acting well within his power when he issued the injunction. “This case illustrates the remarkable extent to which lawsuits can be turned into procedural entanglements,” Scirica wrote. “One view of this may be that the actions taken here represent nothing more than astute lawyering. Another is that the legal jockeying employed by both sides exhibits a proclivity to attempt to manipulate the rules for immediate tactical advantage — a use at odds with the purposes of these rules, and one dissonant with the equitable nature of class action proceedings.” Turning to the merits of the Texas plaintiffs’ appeal, Scirica found that Bechtle’s order — which was issued under the All Writs Act — did not violate the Anti-Injunction Act. Although the Anti-Injunction Act prohibits most federal injunctions that have the effect of staying proceedings in a state court, Scirica found that Bechtle’s order qualified for an exception to the rule. “An injunction may issue … where the state court action threatens to frustrate proceedings and disrupt the orderly resolution of the federal litigation. … In other words, the state action must not simply threaten to reach judgment first, it must interfere with the federal court’s own path to judgment,” Scirica wrote. Scirica found that a federal judge’s interest in maintaining “the federal court’s flexibility and authority to decide” such complex nationwide cases “makes special demands on the court that may justify an injunction otherwise prohibited by the Anti-Injunction Act.” When complex cases are in the later stages, and especially when global settlement negotiations are under way, Scirica found that they “embody an enormous amount of time and expenditure of resources.” And when class certification or settlement has received conditional approval, Scirica said, “the challenges facing the overseeing court are such that it is likely that almost any parallel litigation in other fora presents a genuine threat to the jurisdiction of the federal court.” The fen-phen MDL case was just such a case, Scirica found. “There can be no doubt that keeping this enormously complicated settlement process on track required careful management by the district court. Any state court action that might interfere with the district court’s oversight of the settlement at that time, given the careful balancing it embodied, was a serious threat to the district court’s ability to manage the final stages of this complex litigation,” Scirica wrote.

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