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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 settlementto pursue their own lawsuits, the 3rd U.S. Circuit Court of Appeals hasruled that although the federal judge overseeing the settlement has thepower to prevent them from seeking punitive damages, he went too farwhen he issued a broad injunction that strictly limited the types ofevidence they can present at trial. In its 33-page opinion in Re: Diet Drugs, a unanimous three-judge panelconcluded that U.S. District Judge Harvey Bartle III erred by imposingevidentiary 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 upholdsthose that prohibit the opt-out plaintiffs from offering evidence thatwould be relevant only to a claim for punitive damages. “We agree that the District Court had power under the All Writs Act tosupervise and curtail the actions of intermediate opt-out class membersin pursuing their individual claims,” U.S. Circuit Judge MichaelChertoff wrote. “But we believe that the injunctions imposed some restrictions notfairly comprehended within the terms of the settlement agreement andclass notice and, in certain ways, transgressed the limits of federalismand prudence that confine the exercise of federal judicial authority,”Chertoff wrote in an opinion joined by Circuit Judges Thomas L. Ambroand Julio M. Fuentes. The decision is a victory for attorneys John G. Harkins Jr. and StevenA. Reed of Harkins Cunningham in Philadelphia, who handled the appealfor a group of plaintiffs’ lawyers from Texas and Mississippi. The appeal stemmed from a series of orders Bartle handed down last yearafter lawyers for Wyeth complained that some plaintiffs’ lawyers wereignoring the settlement’s provisions that said opt-out plaintiffs hadgiven up the right to seek punitive damages. In the settlement, American Home Products (which has since changed itsname to Wyeth) agreed to waive all statute of limitations issues so thatplaintiffs could decide later whether to opt out and take their chanceswith a jury. But in return, the settlement also imposes a few strictconditions on the plaintiffs. Most important, the settlement papers said that such plaintiffs wouldgive up their right to seek punitive damages and be required to limitthe focus of their claims to two specific heart-valve conditionsallegedly caused by fen-phen — “left-sided mitral valve regurgitation orpulmonary hypertension secondary to mitral valve regurgitation.” Siding with Wyeth, Bartle found that one Texas lawyer had avoided usingthe word “punitive,” but that his court papers showed he was planning atrial presentation designed to ask the jury to punish Wyeth. Bartle noted that, in his Orange County Court “bench brief,” attorneyGeorge M. Fleming noted that he intended to present evidence that “tensof thousands of people were injured” by fen-phen and that Wyeth “actedmaliciously 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 languageof someone who intends to present a case seeking to punish Wyeth formalicious conduct under Texas law.” The battles over how the Texas case and other upcoming trials should beconducted stretched over several months. In March 2003, Bartle issued a comprehensive order that enforced aseries of prophylactic prohibitions against introducing evidence thatBartle said would be relevant only to punitive damages or unfairlyprejudicial when balanced against its probative value. The order forbid all opt-out plaintiffs to present evidence that Wyethhad allegedly destroyed documents, or “malicious, wanton or othersimilar conduct of Wyeth.” The order also barred evidence of Wyeth’s profits, size or financialcondition; the amount or size of Wyeth’s sales of diet drugs or otherproducts; Wyeth’s marketing or promotion of diet drugs to the extentthat Wyeth placed marketing or promotion ahead of health or safetyconcerns; and any alleged involvement by Wyeth in the ghostwriting ofcertain medical review articles. Now the 3rd Circuit has ruled that Bartle went too far by making aseries of pre-trial evidentiary rulings for an upcoming state-courttrial. “The order creates a highly intrusive and unworkable regulatory scheme,”Chertoff wrote. “The district court’s understandable effort to lock thedoor against impermissible attempts to obtain exemplary damages led toan order that seriously interferes with [the plaintiff's] rights to tryher case.” Chertoff also found that Bartle’s order “disrupts the state court’sability to manage its own judicial process” because it “would removefrom the state judge a whole panoply of decisions that he or she wouldnormally 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 apunitive sanction. There will be strong pressure on counsel to steerwell clear of the line and possibly forego offering admissible evidencethat [a plaintiff] would normally expect to get before the jury,”Chertoff wrote. Chertoff found that Wyeth was asking for too much when it pressed Bartlefor broad evidentiary restrictions as a way to ensure that plaintiffsnot seek punitive damages. In the settlement, Chertoff noted, the opt-out plaintiffs never gave uptheir right to prove Wyeth’s negligence and to seek compensation forpain, 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 liabilityat all.” In effect, Chertoff said, “Wyeth wants us to read this punitive damageslimitation as if it were a limit on the manner in which opt-outplaintiffs can pursue their claims for compensation.” Under Wyeth’s view, Chertoff said, a plaintiff “may show unreasonablebehavior to recover compensation for negligence, unless the behavior wasreally unreasonable (so that it might support punitive damages).” In other words, “Wyeth urges that very strong evidence of fault must bediluted 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 “noveltype of restriction,” Chertoff said, “we decline to construe theagreement to imply an evidence-dilution requirement for compensationclaims that are clearly preserved for the opt-out plaintiffs.” Chertoff also found that Bartle’s order was a sweeping one that wouldeffectively prohibit a plaintiff “from offering evidence that wasrelevant — indeed, highly probative — on issues of negligence andfailure to warn.” Bartle’s reasoning, Chertoff said, was that such evidence, “ifsuggestive as well of intentional misconduct, fell within the punitivedamages bar because it could support a punitive verdict or because itcould inflame the state jury.” The test Bartle seemed to employ, Chertoff said, was “to placeoff-limits evidence that was not necessary to prove a claim tocompensation. Under that approach, Chertoff said, Bartle excluded evidence that would”suggest malfeasance on the part of the company that goes beyond merenegligence,” or that “connotes more than negligence.” But Chertoff found that “intentional or reckless behavior may be highlyprobative of elements of negligence or defective design cases.” The failure to report adverse actions to the Food and DrugAdministration, whether accidental or intentional, “would be probativeof a failure to warn. And intentional or reckless behavior is oftenrelevant to showing conduct below the reasonable standard of carenecessary to make out a case of negligence,” Chertoff wrote. Likewise, Chertoff found that Bartle went too far in barring evidence ofside 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 forother purposes, such as to prove duty to warn,” Chertoff wrote. “Evidence of the totality of the risks of injury may be admissible understate law to show the scope of the duty to warn, even if the individualplaintiff has not sustained all the injuries in question.” Chertoff said Bartle also “categorically prohibited” the plaintiffs fromoffering evidence of “Wyeth’s marketing or promotion of diet drugs tothe extent that Wyeth placed marketing or promotion ahead of health orsafety concerns.” Bartle’s reasoning, he said, was that “such evidence and argument canhave 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 successfullymarket the diet drugs and make a profit selling them would not berelevant to show, for example, that Wyeth acted negligently. Butexcessive concern with the image and marketing of the diet drugs at theexpense of making efforts toward determining whether they were safecould be probative as to whether Wyeth breached a duty of care towardsthe plaintiffs,” Chertoff wrote. In effect, Chertoff said, Bartle “trimmed evidence that was probative,but that [he] viewed as unnecessary and so inculpatory that it mightinflame the jury to award damages that would punish Wyeth instead ofsimply compensating the plaintiffs.” As a result, Chertoff said, Bartle “effectively adopted the role of atrial judge balancing probative value against unfair prejudice. By doingthat, he moved beyond mere enforcement of the damages restriction, andaffected 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 topress against the damages restrictions to which intermediate opt-outsare bound.” But a federal court’s power, he said, “has to be exercised consistentwith the terms of the notice and agreement on which potential classmembers relied at the outset of the process. Moreover, it has to beapplied to the state courts with appropriate consideration forlimitations of equity, federalism, and comity.” In closing, Chertoff said the 3rd Circuit’s ruling “leaves the districtcourt free to consider other measures, aside from imposing evidentiaryrestraints, that will effectuate the limitations of the settlementagreement.” Bartle, he said, “might consider, for example, ordering language to beincluded in a stipulation or proposed jury instruction that would makeit clear to the jury that exemplary damages may not be awarded.” He also said Bartle was “not without recourse in the event that averdict is rendered that appears to grant punitive damages under theguise of some other damage category.”

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