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In re Orthopedic Bone Screw Products Liability Litigation

November 24, 2003

IN RE: ORTHOPEDIC BONE SCREW PRODUCTS LIABILITY LITIGATION (MDL NO. 1014)
DANIEL FANNING*, ON BEHALF OF HIMSELF AND ALL OTHERS SIMILARLY SITUATED; MARGARET SCHMERLING*, ON BEHALF OF HERSELF AND ALL OTHERS SIMILARLY SITUATED
v.
ACROMED CORPORATION*; GIBRALTER NATIONAL INSURANCE* (INTERVENOR IN DISTRICT COURT) (D.C. CIVIL NO. 97-CV-00381)* JOYCE CUSTER, ROBERT DENIKEN, REBECCA HILL, MARIE WELLS IACONO, KATHERINE D. MORRIS AND BRENDA WILLETTE, APPELLANTS
*(AMENDED IN ACCORDANCE WITH CLERK'S ORDER DATED 01/03/03)



On Appeal from the United States District Court for the Eastern District of Pennsylvania MDL No. 1014 and D.C. Civil Action No. 97-cv-00381 (Honorable Ronald L. Buckwalter)

Before: Scirica, Chief Judge, Rendell and Ambro, Circuit Judges

The opinion of the court was delivered by: Scirica, Chief Judge.

PRECEDENTIAL

Argued: July 29, 2003

OPINION OF THE COURT

At issue is application of an indemnification clause in a $100 million Fed. R. Civ. P. 23(b)(1)(B) class action settlement involving class members implanted with orthopedic bone screws. This is an appeal of a District Court order permitting defendant AcroMed Corporation to be indemnified, with money from a fixed settlement fund, for costs associated with related individual cases. We will affirm.

I.

A.

This appeal is brought by six class members—termed "Custer Objectors" after the first-listed appellant, Joyce Custer—who have valid claims for compensation from the settlement fund. The objectors challenge the application of an indemnity provision that was included in the class action settlement.

Appellee, AcroMed, is one of several bone screw manufacturers that were defendants in Multidistrict Litigation 1014. In 1996, AcroMed reached agreement with the Plaintiffs' Legal Committee. A class action complaint was filed together with the proposed settlement. In 1997, the District Court certified the class for settlement purposes and approved the settlement. In re Orthopedic Bone Screw Prod. Liab. Litig. (Fanning), 176 F.R.D. 158 (E.D. Pa. 1997). An appeal of the settlement was voluntarily dismissed, rendering the District Court's order final and unappealable.

The certified class included all persons having a claim against AcroMed relating to bone screws that were implanted anywhere in the United States before December 31, 1996. Finding that AcroMed's potential resources to settle claims were sufficiently restricted that they amounted to a "limited fund," the District Court certified the class under Fed. R. Civ. P. 23(b)(1)(B), as a non-opt-out class. The settlement provided the only avenue for recovery for class members subject to the settlement, who were enjoined from bringing individual actions.

The settlement specified $100 million, plus certain insurance proceeds, for payment of settled claims. The District Court approved this figure largely because of its finding that AcroMed was worth $104 million, based on what a willing buyer would pay for the company independent of the financial constraints and uncertainty associated with the bone screw litigation. The District Court found the $100 million fund amount to represent the upper limit of what AcroMed could afford.*fn1

The agreement included an indemnification provision, permitting AcroMed to request money from the settlement fund for defending certain related lawsuits. It provides:

AcroMed... will be indemnified by the AcroMed Settlement Fund, by appropriate petition to the Court, for all reasonable costs and services incurred in defending, settling, or satisfying judgments entered in any claims or proceedings involving Settled Claims of Settlement Class Members... that are not terminated as a ...


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